Panem et circenses

We think it's very nice of the Guardian's subeditors to offer us this opportunity to point to and giggle at Polly Toynbee:

Only the BBC could give us Bake Off and Strictly. We must protect it

Polly Toynbee

Because someone, somewhere, was always going to attach that headline above to it.

Yet there's more to this than just a giggle. For it betrays Polly's very patrician idea of what the State is for. It is to provide the entertainments, the diversions, which stop us plebs from rising up and throttling said patricians. Rather than our view of what said State is for, which is to do those few things which both must be done and can only be done by government.

And what really grates is that at least the Romans insisted that it was the patricians that paid for the bread and circuses, Polly's insistent that we must be charged for what she insists we must have:

If the BBC is to be truly independent, it should have written into its charter a permanent guarantee that it will always get a licence fee uprating to cover inflation – so as to keep off the interfering hands of governments, and all the threats and snarls that besiege it from Westminster.

In 100 pages, the BBC defends in detail its need to do the things heavily targeted by its enemies as ripe for selling off. But no commercial channel approaches Radio 1’s 65% new and live music, or the breadth of Radio 2’s specialist niche music. Radio 3 has depth and range but only 10% repeats, compared with unadventurous Classic FM’s 40%.

Read this document when it goes online at midday today and be amazed at what our public broadcaster does for so little cost. It’s a fine reminder of what you get for £12.13 a month,compared with Sky’s average bundle at £61 a month.

If we want it then we'll buy it, thank you so very much, Lady Bountiful.

Why Theresa May be wrong

Theresa May’s Conference speech on Tuesday made some… strong claims about the harms of immigration, and attracted an array of excellent critiques in the media. I want to highlight one flaw that these reactions didn’t discuss in detail. Her argument relied on a constant blurring of the difference between the volume of immigration and the size of net migration flows. The problems she highlighted with immigration fall into two categories – problems with net migration, which generalise to population growth of any kind, and problems with the level of immigration - an influx of foreigners into our society.

She talked about immigrants putting pressure on government finances and education systems. Conspicuously absent was any mention of the fact that (unlike those of us who are scroungers born-and-bred), the majority of immigrants are actually net contributors to the state. Nor did she extend her logic to the hordes of babies and children in the UK who are net burdens on government services – perhaps because, like the children of immigrants, those children will grow up and pay taxes in the future.

The main thrust of the speech, though, focused on the social impact of immigration – the difficulty of creating a ‘cohesive society’ in the face of the 641000-strong huddled masses that came to the UK in 2014. May’s treatment of empirical research on the social consequences of immigration also leaves something to be desired. (For a more nuanced review of the literature, you might be interested in James Dobson’s ASI paper The Ties That Bind).

Approximately 330000 people moved to London in 2013 (including newcomers from elsewhere in Britain, as well as abroad). This is much higher as a percentage of the population than the 485000 outsiders that came to the country as a whole, and a much larger rate of social churn than in, say, the average town in the North-East of England. And yet the collapse of the social fabric has spectacularly failed to materialise. Indeed, London’s schools are better than elsewhere in the country and improving more rapidly, and there is substantial reason to believe that immigrants have a positive influence on this trend.

No one ever seems to worry about a tide of Scots flooding in and diluting our culture, destroying our values. But are they really like us in some fundamental way that French, Spanish and Polish graduates aren’t? Is there something in the water that hardworking Nigerian cleaners have failed to absorb?

The other assumption that went unexamined in May’s speech was that immigration is ‘high.’ There is some level of immigration at which the costs begin to outweigh the benefits. But with every wave of immigration, such claims have been made. In the 1930s: “Thousands of Huguenots were assimilated, but that was over the course of decades – there’s no way the country can cope with tens of thousands of Jewish refugees!” Each time, British society has proved its resilience and tolerance. Why would there be a sudden tipping point when immigration reaches about 1% of total population? There aren’t any compelling reasons to suspect that this time will be different – which might go some way to explaining May’s failure to provide any.

In which we sympathise with a letter in the Telegraph

We find ourselves nodding in agreement at this letter:

Mr Walters said there are some benefits to being a member, but that the level of bureaucracy is a heavy burden on the state. “If we get ourselves out of the bureaucratic nightmare Europe creates, that would be beneficial. And the amount of money spent propping up that bureaucracy. There would be no worries about an exit.”

Because of course "Europe" is a political union with people who do this:

Four French bakers have been found guilty of working too much and hit with fines after sparking national debate over their desire to stay open seven days a week. A court in Dax, south-western France, handed €500 (£368) fines to the four from the town and nearby Saint-Paul-les-Dax saying they had flouted a 1999 prefectural order obliging any bakery to remain closed for at least one day per week.

Note that this is not about giving the staff (nor even the boss) a day off or two. This is an insistence that the actual premises must close for one day a week. Supposedly so:

Jean-Pierre Crouzet, head of the national baker's and confectioner's confederation backed the status quo, saying it encouraged competition by obliging people to buy bread elsewhere at least once a week.

That is, in the view of the French Bakers' union, the French people are too stupid to understand the concept of shopping around. A problem which can only be solved by having one seventh of the country's bread, confectionery and patisseries plant and capital inoperative on any single day.

We really are of the opinion that this is something that the market unaided can solve. And, further, should be left to solve.

The EU closes the shop again

The bureaucrats in Brussels do not care for the constructive way Britain has fostered vital, young entrepreneurial businesses and their financing.  Their latest move is to specify how small companies can use the financial support they receive.  In a free and fair market, you might imagine that SMEs should be able to use their funding in any way the funders agree.  UK Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) legislation broadly does this. Nanny Brussels knows better and has decided that these funds may not be used for “replacement capital”, e.g. one generation of SME owners selling out to the next, and company acquisitions. Continental countries, notably Germany, do not use the financial market so much as state handouts which you might think more reprehensible, but oh no.  If you did not know for whose benefit the EU operates, wake up now.  If there was any doubt, the Association of Investment Companies reports that the Commission has warned HM Treasury that they will be watching the UK implementation quite specifically.

Fresh financing often involves an element of replacement capital, whether the entrepreneur wishes to sell the business, or reduce his personal financial risk, or simply grow the business. Using the financial services market to grow the wider economy is precisely what the EU should want. Releasing some equity may be the only way that an entrepreneur can develop the business.

As a company grows and develops, its financial profile changes and so does that of the management team. Replacement capital is crucial for facilitating such development.

Business growth must not be limited to the organic. Sales and acquisitions are vital for a healthy market.  The weak are reinvigorated by the strong.  This is where value comes from, notably for consumers who will be short-changed by the Brussels meddling.

To differentiate between growth capital and acquisition finance is, in many instances, completely artificial. VCT and EIS finance are major sources of capital in an investee company.  Outlawing such activity, often their main source of funds, will certainly reduce growth at a time when most commentators think that growth is what the EU most needs. A company, like any organism, is constantly evolving; many grow, some shrink, but as they change, so do their finance needs develop and alter.

In the UK version of the legislation in the Draft Finance Bill 2015-2016, HM Treasury has sought to water down the prohibition through negotiation with Brussels.  Needless to say, that compromise was ineffective and does not solve the problem. We should not have to play this off the back foot anyway:  the EU’s position is simply anti-competitive.

A guest worker programme for Syria's women

I have previously written that we should let Syrians come to work in Britain through a guest worker scheme, arguing that the effects for natives are unlikely to be very bad, and I suspect may well be positive. But how might such a scheme work? Typically guest worker programmes are seasonal, allowing workers to migrate during harvests to work in agriculture. The UK ended its Seasonal Agricultural Workers schemes in 2013 when it was scrapped alongside work restrictions on Romanians and Bulgarians being lifted. New Zealand’s programme has supplied workers for its growing wine industry, which quadrupled in size between 2004 and 2012 (from NZ$300 million to NZ$1.2 billion).

Britain’s agriculture sector is growing less quickly, and shows less of an obvious need for new workers. But we do have a problem with high childcare costs and, perhaps relatedly, low native fertility rates leading to an older population.

So I suggest we set up a guest worker programme for Syrians to come and work in the childcare sector here. This would reduce costs – labour costs account for around 78% of total childcare costs, in part because we have such tight regulations about things like staff:child ratios compared to most other Western European countries.

But interestingly, this could have a significant knock-on effect on fertility. A paper released last year found that, by reducing childcare costs, immigrant inflows can boost the fertility rate of high-skilled native women. By reducing the cost of having children, highly-educated women are able to have more of them (and may be less inclined to leave the workforce when they do have kids.)

Virtually all childcarers – 98% of them – are women, so the visa programme could be opened to women only without distorting the existing shape of the UK labour force.

This would have the added benefit of avoiding most of the crime that people (possibly exaggeratedly) worry about immigrants causing – the UK’s male prison population is about nineteen times the size of the female one (i.e., women account for 4.6% of the prison population). Of course we could require that applicants have English language skills as well.

This would also significantly boost the incomes of Syrians back home or in refugee camps – the New Zealand guest worker programme led to per-capita income gains of 30-40% in countries like Tonga and Vanautu with per capita GDPs significantly higher than Syria’s.

I have heard objections to this that Syrian women would simply not be allowed to come by their families, which seems to me to be a misreading of the strictness of Syria’s religious culture. But even if I’m wrong and there’s not much take-up, the few people who do come would still be made better off. The main downside might be what would happen to the men in Syria if the gender ratio became significantly lopsided – an argument against doing this on a massive scale, perhaps, but not against taking an extra twenty or thirty thousand people.

A programme like this is obviously going to be limited in scope. It won’t solve the Syrian crisis, but it could be very good for the people who take part. And it would have the nice bonus of reducing costs for British families and boosting the birth rate among high-achieving British women. So what are we waiting for?

We would blame central heating ourselves

Science has discovered a mystery:

It may be the final straw that kicks off intergenerational war. Hard-pressed millennials already resent their parents’ generation for their free university education, generous pensions, higher employment rates and ownership of mansions they bought for £18.50.

Now it turns out baby boomers even had it easier when it came to dieting. A new study has found those consuming a given number of calories were 10% heavier in 2008 than 1971.

The difference, it turns out, is not down to Generation Y spending all its time sat on their well-padded nether regions playing computer games and sexting. Those with the same calorie intake and physical activity levels had an average body mass index 2.3kg/m⁲ higher in 2006 than in 1988. While average food and energy intake around the world has risen in recent decades, research has undermined the notion that weight gain is simply the result of people consuming more calories than they expend.

Well, actually, calorie intake in the UK has declined over that period. But this paper is specifically looking at the US:

Between 1971 and 2008, BMI, total caloric intake and carbohydrate intake increased 10–14%, and fat and protein intake decreased 5–9%. Between 1988 and 2006, frequency of leisure time physical activity increased 47–120%. However, for a given amount of caloric intake, macronutrient intake or leisure time physical activity, the predicted BMI was up to 2.3 kg/m2 higher in 2006 that in 1988 in the mutually adjusted model (P < 0.05).

If that were a British result we would immediately "blame" central heating. Something unusual in 1971 and near universal now. As an American result we're less certain.

Factors other than diet and physical activity may be contributing to the increase in BMI over time. Further research is necessary to identify these factors and to determine the mechanisms through which they affect body weight.

But that is the first thing we would go and look at. Given that we are, in fact, mammals. And that the major use of calories in mammals is the regulation of body temperature?

Rather than, say, blaming the food industry for advertising yummy things to us which we regard as the inevitable outcome of this current approach.

Transport for London could dissipate its goodwill

Transport for London has quite a good record. There have been significant improvements in London's transport, and TfL can take credit for some of them. We have the new Routemaster buses with the open back that you can hop off in a traffic jam, or hop on or off at traffic lights. There are the new wide tube train carriages that allow you to talk from one carriage into another in search of a seat. We are soon to have all-night tube services on some lines. The new traffic lights that tell pedestrians how long they have to cross are a good innovation, as is the reconfiguration of some congested crossings that were previously more dangerous to pedestrians. TfL took part in some of the consultations that led to these and other improvements.

The leaked proposals under consideration on Uber could dissipate all of the goodwill TfL has earned, however. There is no conceivable benefit to Londoners in having to wait 5 minutes before a car can pick them up, or in preventing them from seeing which cars are nearby. This is typical corrupt rent-seeking, trying to hobble competition through political lobbying in order to protect incumbents and keep up prices.

Uber has provided Londoners with a service that is more flexible, more convenient and less costly. An estimated 1.2m users have taken to it. They do so because it is of value to them. Black cabs provide a good service, too. Most cabbies are cheerful and helpful, and they know the shortcuts. There is room in London for both types of service. The way to benefit most Londoners would be to ease the regulations and costs of the black cabs, rather than to legislate away the benefits that Uber brings.

The black cab drivers' association and those representing licensed minicabs boast openly that they were behind the now-public consultation proposals, and influenced TfL to take them on board. TfL should now ditch those proposals as ones bringing no benefit and great disadvantages to Londoners. Unless they do so, they will rapidly lose all of the goodwill gained by their other, more sensible, innovations.

The best part of Britain's health care

This is a slightly strange thing for the Guardian to be trumpeting:

The UK is the best place in the world in which to die, according to a study comparing end-of-life care in 80 countries.

The integration of palliative care into the NHS, a strong hospice movement largely funded by the charitable sector, specialised staff and deep community engagement are among the reasons cited by the Economist Intelligence Unit (EIU).

Not that most of us tend to like thinking about it but yes, death is an inevitable part of any health care system. And here we've got an analysis of the one part of health care where Britain really is the world leader. Which is very interesting, of course it is, to know that we are still, at times, world beaters.

But what's even more interesting is that this one world beating part of the overall health care service is the one part of it not run by the NHS and not financed through taxation: that hospice movement. Which is rather food for thought about how we might look to organise, run and finance other parts of that health care system, isn't it?

Perhaps, even, the original decision to amalgamate all of the private, charitable, municipal health care systems into that tax funded NHS wasn't the quite the right thing to have done even?

Yes of course Donald Trump is wrong about Nafta

More interesting is why Trump is wrong about Nafta:

Recently, Donald Trump made a strong claim about the North American Free Trade Agreement (NAFTA) in an interview on CBS 60 Minutes:

"It's a disaster. ... We will either renegotiate it, or we will break it. Because, you know, every agreement has an end. ... Every agreement has to be fair. Every agreement has a defraud clause. We're being defrauded by all these countries."

And we have an, admittedly incomplete as yet, theory for why we think businessmen are often quite as bad as they are at economics. We would expect them, given that they are usually playing in the private sector, to be rather better than they are at how private markets work. And certainly someone in Trump's industry should understand public choice arguments.

But our theory is that so much of what a business actually does is trying to beat economics that the knowledge of the underlying theory rather gets missed. Just as one example, every business is trying to gain market power, the ability to set prices. From the economic theory point of view this is a very bad idea: and it's the competition that markets provide that stops every business from gaining that market power.

And something similar happens with trade: when running a business you are obviously going to try to reduce your inputs. Of anything: one of the ways to succeed is to minimise inputs. And yet when we talk about the whole economy, about trade, the aim and point of the entire exercise is to maximise those imports, those inputs. That's why we're doing it, to gain the maximal amount possible of the resources and labour of foreigners that our people get to consume.

So, much of the time, running a business is trying to beat economics. Thus a businessman can often have a distorted idea of what desirable economic policy is.

There are those who will make the leap from this claim to the one that therefore we must regulate businesses because they are "anti-economic". To which we would respond yes, of course , we must do so. And we do do so, we insist on competitive markets which is exactly the correct antidote to such attempted behaviour.

EU Inners and Outers

The City Corporation hosted a gathering at the Guildhall last Thursday to discuss, from a financial services perspective, what the Prime Minister should be seeking in his EU negotiations and the consequences of Brexit, should that come about.  The eight invited speakers were supposed to be balanced between those leaning towards staying, the Inners, and those leaning towards leaving, the Outers.  Given the funding, it was no surprise that the majority were Inners.  Indeed, according to Mark Boleat, Chairman of the Corporation’s Policy and Resources Committee, who introduced the conference, the status quo is well-nigh perfect so far as the City is concerned.  Apparently, the Brussels regulators now follow the City’s advice like lambs following their shepherd. Perhaps the single market for financial services could be hastened a little but the important thing, we were told, was to remain within it.  Dr. Pangloss would have been proud. Interestingly, the few words of dissent from the Outers produced more applause than anything from the Inners.  But this was shadow boxing. There was little attempt to answer the questions: just the ritual “leaving is too risky” and “Europe will drag the UK down in global terms” arguments from the two sides.  The only speaker to land a punch was David Campbell Bannerman, ex-UKIP and now Tory MEP, speaking from the floor and dismissing one speaker’s contribution as undiluted self interest.

In essence, the big companies and organisations, City Corporation, CBI, unions, Whitehall, are mostly Inners whereas SMEs, including those in the City, and their representatives, IoD, Chambers of Commerce, are mostly Outers.  Some portray that as the old guard versus the future.

There is a vague wish that the UK government can protect the City in the way the French protect the Common Agricultural Policy but no one suggested how that could be done.

The most substantial issue proved to be the Euro.  The double majority rule that protects the non-Eurozone countries from being out-voted by the Eurozone ceases to apply once the current seven of the former shrink to three.  Furthermore, the other EU members have made it clear that they dislike the principle and even Lord Hill, the UK Commissioner, would not support it being extended to non-financial matters.  Since, when the current troubles subside, it is a racing certainty most of the current outsiders will join the Eurozone, the UK can look forward to being out-voted on almost everything and losing out, as we now do, in the EU Court of Justice.

So the bottom line, whatever the outcome of the referendum, seems to be that the UK must, in the longer term, accept the Euro or leave the EU.  A stark choice.