We are all in favour of clothes banks to follow food banks

It's not just that we're in favour in fact, it's that we cannot find anything wrong with the idea at all:

Louise Cooke, a 46-year-old ex-teacher and community worker in Nottingham, has never been elected nor is her work funded by the taxpayer – but she is filling in the gaps left by the government.

For the past two years, volunteering out the back of her local church, Cooke has been running Sharewear – what, in austerity’s language, we could dub a “clothes bank”. This isn’t packets of pasta or boxes of veg but winter coats and children’s shoes. Cooke describes the people who come through the doors as in “crisis”: anyone from job seekers to Syrian refugees, from low-paid workers to people on benefits (“We have people coming in on disabled people’s behalf because they’re housebound,” she adds).

As Cooke says: “No one should have to walk around in smelly clothes just because they haven’t got enough money. No child should have to go to school in ripped clothes.”

We entirely agree with the sentiment: Britain is a rich country and those are things that can be solved in a rich country. However, it is important to note what the problem is: incompetent government. And this is not a new incompetence: government has not become more incompetent as the result of the election of the Conservatives, or the Coalition, or the defeat of New Labour. Government has always been this incompetent if not worse. As is the case with food banks: no one with a couple of decades of adult life under their belt is unaware of the manner in which the benefits payment system has always had great gaping holes in it.

That is, there is no new and sudden need for these charitable activities. Rather, it's that we've now this new technology (and yes, a method of organisation like a food bank is indeed a technology) enabling us to solve these problems. For which, of course, a rousing Hurrah!

But we need to note the important point about these solutions. It is the little platoons sorting out the incompetence of government that is working here. Given that this is so yes, most certainly, why not have more of such little platoons working to solve this problem but don't, whatever we do, try to hand over the solution to that government which is the original cause of the problem.

Nicky Morgan has proposed the worst possible way to calculate a gender pay gap

Back in July 2015, David Cameron announced he'd close the gender pay gap in the next decade. Proposing to take the first step by making larger firms publish their pay gap figures, I wrote up a response for the Spectator's Coffee House, arguing that this was an ill-conceived idea:

His plan to force businesses with 250+ employees to publish their ‘wage gap’ figures will create more bogus numbers and further perpetuate the myth. It is impossible to know simply by looking at the numbers on the spreadsheet why someone’s salary is a certain figure. One’s education or training, previous work experience, negotiation manoeuvres, and unique character traits will all contribute to their salary; Jack and Jill may be headed-on-up the career hill together, but they will be coming from two completely different paths.

The government launched an official consultation to determine how, exactly, they would make companies publish their 'pay gaps'. The ASI responded to the consultation, recommending that if the government were to go through with this policy, it absolutely must get companies to compare jobs like-for-like. Without a direct comparison of men and women doing the same job (and ideally for the same amount of time, with the same educational background, etc), it would be impossible to know if any income disparity was a result of employer-based sexism, or the many other factors that can contribute to one's overall salary.

Today we discovered that Woman's Minister Nicky Morgan did not take Ben's advice. Instead, she has implemented what is probably the worst way to calculate a gender pay gap.

In 2018, businesses with 250+ employees will be forced to publish on their websites the mean and median calculations of their male and female salaries, as well as the 'pay ranges' of men and women (i.e. who's at the top and who's at the bottom).

The problem? Simply calculating the mean and median of male and female salaries controls for absolutely nothing. Without calculating in hours worked, job, department, previous experience, flexibility of hours, and time taken off work, these figures tell us nothing about whether employers are actually paying female workers less than men for the same roles.

Evidence suggests employers are big advocates of women. Indeed, when you do control for factors like background, hours and job, women are often more likely to earn more than men, and are more likely to be promoted as well.

But now, thanks to the government, in a few years time we're going to have a bunch of false stats that help perpetuate the myth that women are victims of sexist employers, and will never be able to access the same opportunities as men. A great day for professional feminists, who have been running out of talking points as women shatter those alleged glass ceilings left, right and center. An unfortunate day for the rest of us, who will have to continue to explain why comparing the CEO's salary to a first-year employee doesn't do much to prove 'sexism'.

Rupert Myers is rather missing the point about market exchanges

As Voltaire didn't say*, we don't believe that creationism has any truth to it at all but we'll defend to the death your right to believe in any damn fool thing you want to. The limitation is only that whatever you do believe not cause direct harm to others. Thus nonsense about how we all got to be here is just fine, nonsense about how we treat the others with whom we share here is not, just as one example. All of which makes this complaint by Rupert Myers something we don't agree with:

Someone who is on the record as believing that the earth is flat would be an unlikely anchor of the BBC’s flagship breakfast news show. A news reporter who denied basic facts from the past such as the French revolution, the explosion of Mount Vesuvius, or the Holocaust would surely raise eyebrows at interview. Climate change denial, or a denial of heliocentrism, would be unlikely to find favour at the BBC. And yet they have just selected a creationist to front their Breakfast show.

BBC hires someone with odd views is not exactly a surprise.

A belief in creationism may be a religious belief, and we must allow generous margins to the holding of such beliefs, but creationism falls beyond the spectrum. It should be consigned to the bin of unreasonable, untenable fact-allergic nonsense. Creationists cannot be trusted to report objectively, or to interact reasonably with their interviewees and with the public.

Not so and sadly it betrays a misapprehension about how market exchanges work. It is only in a society that does not operate markets that we have to consider whether someone is wholly acceptable in the round before allowing them to perform a task. If jobs are allocated on the basis of belief then obviously what those beliefs are is of importance. But a market society operates on the basis of "what can you do for me?" That's rather the joy of it. We don't have to know whether the window cleaner supports the wrong football team, has more traditional opinions on gender roles than we might be comfortable with or is insistent that the world popped into existence last Tuesday afternoon and all memory before that is simply a general hallucination. We care only about how well they clean windows and what they charge for doing so.

The same is true of all the other interactions which make up a market economy. We don't have to worry about the sexual preferences of the provider of our morning coffee, we care only about the coffee, the price, and perhaps the smile or not with which it is delivered. It is not necessary for the car mechanic to share our views on Che Guevara, whatever those might be, we want only that she can mechanic a car for us. And so it is with the pretty faces that mumble through the scripts to us on the television. We care only for the face and the mumble, not whatever beliefs occupy the void between their ears.

And no, this is not just some trivial matter. Humanity spent some millennia where only those who held the approved ideas on matters religious were allowed to perform certain jobs. It is only in this last century or two since the Enlightenment that this has changed and yes, it really is part of that liberal and market order which has so enriched us all. It is exactly the same thing that a creationist be allowed to read the news, a Jew to own land, an atheist to publish books and us all to be free to truck and barter across the society regardless of whatever damn fool beliefs we might have about anything at all.

* The "I disapprove of what you say" line is actually from a play about Voltaire, not from the man himself.

Yes, obviously industrial production is down

We cannot quite share this shock and horror at the news that industrial output is down:

Britain's industrial plight was laid bare today after official figures showed output at the end of 2015 fell faster than at any time over the past three years. Industrial production contracted by 1.1pc in December from the previous month, the biggest monthly drop since September 2012 and much worse than the 0.1pc decrease expected by economists.

And for manufacturing:

The ONS also revealed that manufacturing production fell 0.2pc in December, the third consecutive monthly decline. The last time the UK's manufacturing sector contracted for three months in a row was during the depths of the Great Recession in 2009. Compared with a year earlier, manufacturing output fell 1.7pc, against expectations for a 1.4pc decline.

One reason we're not all that worried is that manufacturing output is some 10% of GDP, meaning that a 2% fall in the sector is 0.2% of the economy as a whole. Industrial output is essentially energy and mining plus manufacturing and that's not much larger as a portion of the economy. And we have all noted that the prices of fuels have dropped recently, meaning that an index of the value of what is produced is going to fall whatever happens to the volume of what has been produced. Essentially, these are minor changes in a minor part of the economy.

A second reason we're not all that bovverd is that there isn't anything special about manufacturing or industrial output. Sure, they're nice things to have but they are no more valid or valuable than any other form of economic activity. The standard trope that making things you can drop on your foot is the only important form of production is simply wrong.

And the third reason we're not worried is this:

David Cameron has hailed Britain's technology sector as "extraordinary", after a report revealed companies are generating £161bn for the economy. According to the Tech Nation report, now in its second year, the digital economy grew 32pc faster than the rest of the economy between 2011 and 2014, and is creating new jobs at an unprecedented rate. The sector accounts for 1.56m jobs across the UK, with this workforce growing by more than 10pc over the three-year period - three times faster than the wider UK job market.

Yes, obviously, that's being bigged up by that quango but this is exactly what we would like to be happening. The current industrial revolution is in those digital thingies, those 1s and 0s being placed in precise rows. We Brits pioneered the first industrial revolution, rather lagged in the second and third, but seem to be doing well at the fourth. And just like doing well at the first made us relatively richer than everyone else, lagging at the next two led to a bit of relative poverty, getting this one right will lead to relative riches again.

And this is what an economy is supposed to do: over time move from doing that doesn't add very much value old stuff to the adding lots of value new stuff. Something we seem to be doing rather well. We wouldn't say that all is lovely in the rose garden but it's most certainly not doom and gloom.

Delusions on the NHS

Sadly, one of the reasons that the political conversation about health care in the UK is so difficult is that a number of people taking part in it simply do not know of what they speak. And example here in the Guardian:

Four flawed beliefs have dominated the actions of UK governments on healthcare over the past 25 years: personal responsibility for health supersedes government responsibility; markets drive efficiency; universal healthcare is ultimately unaffordable; and it is entirely legitimate to view healthcare as a business.

Responsibility is a moral argument and not really our point here: no one at all says that universal health care is unaffordable, only that all healthcare that everyone would conceivably like to get is unaffordable. But of course it is legitimate to regard healthcare as a business: there're inputs, there're outputs, there are people in the middle doing the transformation, that's a business. But that point about markets not driving efficiency is drivel: because this is the same NHS which is now separate organisations, NHS England, NHS Wales and NHS Scotland. And NHS England has had rather more of that market stuff applied to it. And NHS England has been getting more efficient more quickly than NHS Wales and Scotland too. The very subject under discussion disproves that assertion about markets.

But there's more too:

The 2014 Commonwealth Fund report on 11 wealthy countries shows that the UK spends least but ranks first in healthcare performance; the US spends most but ranks bottom.

Actually, no. Healthcare performance was only one of the things measured. Things like equitable access and so on were also measured and the NHS did very well on some of those measures (that the Commonwealth Fund agitates for single payer health care in the US is not a result of such studies, it is the cause of their measurement methods). On actual healthcare performance, mortality amenable to healthcare, it came near last. And oddly, we do think that how well a healthcare system is able to treat things that healthcare systems can treat is a pretty good measure of how good that healthcare system is. Or, for the NHS, not very.

In the US, one in six citizens has no health cover and inability to pay healthcare bills is the primary cause for personal bankruptcies, yet we are witnessing extraordinary, deliberate moves towards a failed US-style healthcare model.

Absolutely no one at all (and we are ourselves one of those voices shouting loudly for NHS reform) is calling for a US-like system. Instead we're calling for a system rather more like that of France, or Switzerland, or Singapore, all of whom have rather better healthcare systems than either we or the Americans do.

So why is this a problem if piffle like this appears in The Guardian?

Neena Modi is professor of neonatal medicine at Imperial College London, and president of the Royal College of Paediatrics and Child Health

Because this piffle is being spouted by people who really should know better.

Syrian Refugees in Jordan - What are they doing to the labour market?

With enormous numbers of refugees spilling of Syria due to the ongoing conflict, there has been a great deal of discussion around the effects of this displacement, particularly on the recipient countries. Although most of this discourse has focused on Europe, Syria’s neighbours, Jordan, Lebanon and Turkey have taken much larger numbers of refugees, in sheer numbers and as a % of the populations of the recipient countries. A recent paper “The Impact of Syrian Refugees on the Labor Market in Neighboring Countries: Empirical Evidence from Jordan” by Ali Fakih and May Ibrahim aimed to find out the effect of the 700,000 or so refugees on local wages and employment rates. According to Fakih and Ibrahim, there is “no relationship between the influx of Syrian refugees and the Jordanian labour market.” With Syrians barred from formal work in Jordan, the informal labour market becomes more important, with 160,000 Syrians estimated to be engaged in informal employment, in sectors like agriculture, construction and food services. If displacement has little to no adverse effects on the Jordanian informal market, one should look to other examples of refugee influenced increases in the labour market to find out if these lack of effects hold true; this is what we tend to see.

Evidence presented to the SOAS Policy Forum by Sam Bowman on a wide ranging talk about the effects of immigration suggested the effects of displacement were beneficial, with a small rise in native wages.Other research suggests that over the long term, the displacement is beneficial for both refugees and host countries. Data from Denmark and Miami, Florida, facing similar situations (in that large numbers of refugees were arriving because of political conflict. In the Miami example, the labour force was increased by 7% by refugees from Cuba) further suggests these effects are true.

Although the political situation in Jordan is complex, the huge cost ($1.7 billion) of hosting refugee’s (both, for the host country and the immigrants in refugee camps) should encourage the Jordanian Government to consider lowering restrictions on labour force participation for immigrants, or at least allow a framework of legal employment within the refugee camps to protect native workers from the small but politically contentious wage and unemployment effects that have affected other ‘developing nations’. A better solution would be work permits for employment in the economy generally This would also allow the Jordanian Government to face lesser fiscal pressures from the lowered cost of providing for Syrian refugees thus supporting themselves through employment..

This is what many policy makers in the EU and Western World have been calling for, but this must be supported by trade concessions and increased global aid. The latter is being provided by the UK, to enable Jordan to mitigate political consequences of refugee influx. If allowing refugees to work has minimal effects on local labour markets, this should not only be a policy prescription for Jordan, but also for western leaders with much lower refugee populations.

The two unions

The European Union consists of two parts: an economic union and a political union. The economic union has a single market with the same rules applying to all member states. Non-members of the EU who export to the EU must comply with those rules for their goods, but not for goods they trade outside the EU. The economic union features a common customs tariff for goods entering the EU, but none on trade between EU members. The political union has an elected Parliament with some legislative and budgetary powers; so does the Council of Ministers, composed of 28 ministers (one per member state). The European Council, composed of the 28 heads of state or government defines the EU's policy agenda, and the European Commission is the executive, dealing with the day-to-day running of the EU and enforcing its treaties. It has one commissioner appointed by each state. The aim of the political union is "ever closer union," increasingly giving the EU the characteristics of a unitary state. The aim of many of its adherents is a European state with its own army, embassies, and laws.

Several states outside the EU have negotiated trade deals with it giving them access to the economic union's single market, without becoming part of its political union. If the UK were to leave the EU's political union, it would certainly do the same, since this would be hugely to the advantage of both the UK and the EU. Similarly several non-EU states have agreed visa-free travel with the EU, though of course non-members have to pass through passport and customs controls, as UK travellers currently do.

The case for the UK's leaving the EU amounts to advocating that the UK retains the advantages of the economic union, with access to the single market, and with EU access to its own market, while withdrawing from the political union that gives EU bodies powers over it.

The case for remaining in the EU ought to be about continuing to be a part of a developing political entity, pointing to any gains that derive from this. Instead it has thus far been almost entirely based on the fear of adverse economic consequences, many of them based on the utterly false assumption that the UK would not negotiate an agreement that kept it closely integrated with the EU's economic union.

The UK's citizenry has never wholeheartedly endorsed the political union. When it voted in the 1975 referendum to endorse the legislative decision to join, the arguments were almost entirely about the economic advantages of doing so. The case for remaining in the political union has never really been put to the test, and is not now being done. A vote to leave would be one to reject the political union, while remaining closely integrated with the EU's economic union.

New Report: Migration and Development

The best international development policy would be to let in more workers from the third world in to work in Britain, according to a new paper from the Adam Smith Institute. Politicians should stop trying to save entire countries with foreign aid programmes and instead help their inhabitants by letting them move to developed countries, it says. The report Migration and Development argues that doling out billions in foreign aid risks propping up corrupt kleptocratic governments and having little impact on development; letting people move to where they can be most productive is a reform that really works.

The paper, authored by Swedish policy analyst Fredrik Segerfeldt, suggests an immigration target, modelled on the 0.7% of GDP foreign aid target, in order to boost the welfare of the global poor.

Not only would this help the migrants themselves, but it would even help their source countries to develop, Segerfeldt says. Migrants send around three times as much home in remittances as governments send in foreign aid, and this private development aid is far better targeted, going directly to those in need and not through flawed institutions. The money is often used by developing country citizens to educate themselves and raise their human capital, helping to create a virtuous development cycle.

To assuage worries that migrants will empty the state’s coffers as a fiscal burden on the state, Segerfeldt advocates both that migrant work permits be temporary, and that the full suite of benefits would only be available to natives.

To access the full press release, click here.

To download the report for free, click here.

GDP is becoming an ever worse measure of how we're doing

That GDP isn't a very good measure of how we're doing has been known since the concept was first pushed by Simon Kuznets coming on a century ago. It only includes monetised transactions, includes government at what it costs rather than the value it adds, doesn't discuss the distribution of income or consumption, only the gross amount and so on and on. It has its merits, in that it is also reasonably easy to calculate, something that isn't true of all of the potentially better alternatives. The really important thing to understand though is that it is not actually a measure of how well we're doing. It's a proxy for how well we're doing. And unfortunately it is becoming an ever less accurate proxy, as this new paper details:

It is also the case that zero-priced digital goods are – by definition – not counted in GDP. Some of these are advertising funded, rather than subscription funded, so the business model choice affects measured GDP – although the invariance could be restored by taking account of the imputed cost to consumers of the unwanted adverts (Nakamura and Soloveichik 2015). Zero prices and the prices of digital bundles are not accounted for in the consumer price deflators either, leading to an understatement of real growth.

Some zero-priced goods – not only products such as software, blogs, and videos, but also ‘sharing economy’ services such as house swaps or shared meals – could be considered voluntary activities, analogous to reading to children in the local school or volunteering in a charity shop. These volunteer activities are outside the conventional production boundary, just like household services.

The importance here (and the paper discusses many other reasons why GDP is getting less good as a measure) is that we're not in fact interested in production at market prices, nor cconsumption at them, at all. What we're truly interested in is how much people can consume. With physical goods we have a rough rule of thumb: the consumer surplus (that is, the value the consumer gets but which they don't have to pay for) is 100% of GDP. So, if GDP is £1.5 trillion, roughly right for the UK, we're really saying that we think that the value of all consumption, to those doing the actual consumption, is some £3 trillion. But those digital goods skew this horribly.

We measure, for example, Google's addition to GDP as being the advertising they sell here. Which, given that they sell it all from Ireland means no addition to UK GDP at all (well, OK, the wages of their support engineers do count but). But absolutely no one at all thinks that the consumption value to all of us of Google's existence is zero. Thus GDP is getting ever further out of whack with what we really want to measure, which is total consumption.

It's also true that there's no very easy answer to this either. But we should be aware of it. And for two very good reasons. Firstly, economic growth is not as slow as the standard GDP figures show us. And secondly, inequality is rather less than most think. You and I have just as much access to, and at the same price, the services of Facebook, Google and so on as Gerry Grosvenor, something that does indeed reduce the gap between the richest man in the Kingdom and us working stiffs.

People prefer neo-traditional buildings

It seems obvious to me—and I think to most people—that housing built since the 1930s is by and large much less attractive than housing built before. But if this is true, and if we are much richer now than we were in the 1930s and before, then why would we build, buy and live in housing we don't like? We have some sort of market in housing; surely if we really all preferred traditional housing styles we'd just buy it.

A new paper (slides) provides the answer—at least if we can assume the UK and the Netherlands are similar in this respect. The authors look at a large database of new-builds and sales and compare similar neo-traditional houses to houses with some traditional features and those with none. They find that, even controlling for a wide range of features, fully neo-traditional houses sell for 15% more than fully non-traditional houses. Houses with references to tradition sell for 5% more. We might reasonably speculate that truly traditional houses sell for yet more.

In their words:

Popular reports on the housing market often refer to attractive style characteristics of houses. In the case of the Netherlands specifically housing from the 1930s is very popular. It is, however, difficult to disentangle the attractive vintage effects of the dwelling from (often inner city) locational amenities.

This paper studies exactly these attractive physical features without the confounding influence of age and location effects by studying newly built houses in newly developed neighborhoods only. A rich data set of housing transactions in the Netherlands is enriched with style characteristics of houses on 86 (Vinex) housing estates across the Netherlands. This resulted in over 60,000 transactions between 1995, the starting point of the development of these sites, and 2014.

The hedonic price model that has been estimated shows a significant price premium of 15% for pure neo-traditional styles and 5% for referring to traditional styles. Various robustness checks confirm that these results are partly, but not entirely, driven by, e.g., unobserved differences in quality between houses with different building styles.

The riddle is why—if this premium exists—do developers not build mainly or purely in the neo-traditional style, to reap profits from satisfying market demand. Why do developers only build neo-traditionally—why don't they really try and ape the creations of the past? The authors blame tight regulation of both the volume of production and the inputs; local authorities effectively prescribe modern styles and proscribe prerequisites for traditional design. They find that construction cost has only a marginal or negligible impact, by contrast.

This research is especially plausible, as it turns out London and the Netherlands probably are similar in the relevant respect: some of our housing problems are caused by similar factors. Everyone wants to live in beautiful terraces, right? But new housing usually looks nothing like the most popular existing stock.

Nicholas Boys Smith and Create Streets provide an elegant explanation (pdf): building codes in London make popular traditional housing—which is very dense and could be sold very profitably—near-impossible. They blame six key barriers including: bans on recycling dead space between buildings into gardens; universal lift requirements; illogical value calculations; staircase width rules; and excessive wheelchair requirements; as well as many others with smaller individual impacts.

Top-down planning ruins cities, wherever it is tried. If we loosened regulations on the volume of building, and the type of buildings that could be built, then we could massively increase London's density while simultaneously providing the sorts of dwellings people actually want to live in.