We know that richer people live longer: but is it because they are richer?

A standard part of the story here in this sceptered isle is that there is a causal relationship between economic inequality and health and lifespan inequality. Michael Marmot has been telling us this for decades now. That there is a correlation between wealth and lifespan is obviously true: but what's the causality? 

What we'd really like to do is look at people who have randomly gained wealth and see whether it has changed either health or lifespan. And just to be inclusive about this we'd like to look at the children of those this happens to. Fortunately the spread of lottery systems around the world gives us some number of people who have randomly become wealthy.

Via Marginal Revolution, the result? 

We use administrative data on Swedish lottery players to estimate the causal impact of substantial wealth shocks on players’ own health and their children’s health and developmental outcomes. Our estimation sample is large, virtually free of attrition, and allows us to control for the factors conditional on which the prizes were randomly assigned. In adults, we find no evidence that wealth impacts mortality or health care utilization, with the possible exception of a small reduction in the consumption of mental health drugs. Our estimates allow us to rule out effects on 10-year mortality one sixth as large as the cross-sectional wealth-mortality gradient. In our intergenerational analyses, we find that wealth increases children’s health care utilization in the years following the lottery and may also reduce obesity risk. The effects on most other child outcomes, including drug consumption, scholastic performance, and skills, can usually be bounded to a tight interval around zero. Overall, our findings suggest that in affluent countries with extensive social safety nets, causal effects of wealth are not a major source of the wealth-mortality gradients, nor of the observed relationships between child developmental outcomes and household income.

Doesn't seem to be the money itself, does it? And thus is won't be economic redistribution which solves the point either, will it? 

As we've been saying for some time now, health and mortality inequality is about migration

One of the stylised facts of the UK is that there's a large health and mortality gap. Michael Marmot and others continually tell us that this is because of social and economic inequality. We keep trying to point out that this is not quite so. For people are never measuring either the health nor lifespan of where people come from. Rather, mortality and lifespan are measured in the place where people drop dead. This has an obvious implication: given that people do migrate we are to some extent seeing people self-selecting into poor and richer areas. And we know very well that richer people live longer.

Interestingly, there's new evidence coming out about Glasgow. The poorer areas of that city are continually held up as evidence of Marmot's contention: economic inequality leads to that health inequality. However, this newer point rather supports our contention:

The mystery of Glasgow’s “sick man of Europe” status started to rear its head more than half a century ago. But now, for the first time, researchers from the Glasgow Centre for Population Health (GCPH) claim to have found hard evidence of a number of key factors that explain it.

In a new report, History, politics and vulnerability: explaining excess mortality, they claim a combination of the historic effects of overcrowding, poor city planning decisions throughout the 1960s, 70s and 80s and a democratic deficit – or lack of ability to control decisions that affect their lives – are among reasons why Glaswegians are vulnerable to premature death.

The research has been endorsed by some heavy hitters including Sir Harry Burns, formerly the chief medical officer for Scotland, Tom Devine, professor of history at Edinburgh University, and Oxford University geography professor Danny Dorling. But the findings are not about eating fewer chips and stopping smoking; they are deeply political.

According to Chik Collins, co-author of the report and professor of applied social sciences at the University of the West of Scotland, new research about “skimming the cream” of the city’s population to rehouse its “best” citizens in new towns, is particularly striking.

The research based on Scottish Office documents released under the 30-year rule shows new towns such as Cumbernauld, East Kilbride and Irvine were populated by Glasgow’s skilled workforce and young families, while the city was left with “the old, the very poor and the almost unemployable”.

One way to read this (and we do not insist that this is all of it but do insist that this is some of it) the mortality rates and lifespans of that total population haven't changed at all: or more likely have increased along with more general rates across the population. But that section of the population which always did have those lower lifespans has been left behind in those poorer areas and that which always had the longer have moved out.

This is much the same as noting that Bournemouth (and the archetype, Frinton On Sea) has a longer average lifespan than much of the country. But these are retirement towns, where many people only move there upon retirement. Those who are still alive at retirement age and also have the financial resources to move at that age do indeed have a longer lifespan than the population average.

We are equally certain that this explains at least some of the Case and Deaton finding about lifespans in America. Poor rural whites appear to have falling average lifespans, especially in Appalachia. Other studies of these areas point out that anyone who manages to get into college from these areas does so and then doesn't come back. The population is self-sorting into different geographic areas. With those staying being those who always did have the lower lifespans: but that's what we're now measuring in those areas. Andrew Gelman, who is investigating these numbers in detail tells us that this theory is not wrong but has not yet been shown to be right (or, if you prefer, has not yet been shown to be wrong).

We really are pretty sure that this is at least part of the explanation, as with Glasgow. Those who always did have longer average lifespans have left the area: the average lifespan of those remaining is no lower than it ever was, it just looks that way as we're now only measuring a subset of the original population.

Roland Smith reviews "Towards an Imperfect Union"

Over at Medium, ASI fellow Roland Smith, and author of the Liberal Case for Leave, Stuck in the Middle with EU, and Evolution, Not Revolution, has written a review of Dalibor Rohac's Towards an Imperfect Union: A Conservative Case for the EU. Rohac is a research fellow at the American Enterprise Institute and recently presented his book—and his case—in a lecture at the ASI.

He finds a lot to like in Rohac's book, but ultimately goes away disagreeing with his view as strongly as you might expect. A representative paragraph:

The more general and more important point that I think is glossed over in the book is that euroscepticism has partly arisen because the EU has gone too far ahead with integration. That point doesn’t really come out from the book and in true pro-EU fashion, Rohac sees the solution as a matter of working further with the existing EU design in order to get it right. Of course if one believes that the EU went off course around 1990 thanks to hubris, then one will also believe that such a redesign “back to original (Hayekian) principles” is possible.

Read the whole thing!

The art of electoral politics

There is an art to this whole idea of electoral politics. Which is to identify what certain sections of the voting public desire and then promise it to them. Identify enough such groups, promise them enough, and you will be elected. A lovely example of which just in from the Australian Green Party, who are suggesting that there should be a living wage for artists.:

If the Australian Greens have their way, the nation's creatives will be more likely to be able to afford food, rent and maybe even heating under its plan for a living wage for artists.

In more detail they're really saying two things:

Given the insecure nature of employment in the arts, many artists will at one point or another in their career find themselves unemployed and in need of income support. During these times, work done to perfect their craft will increase employability in the future, but it currently goes unrecognised by the social security system. Furthermore, the requirement to spend time complying with extensive Centrelink mutual obligation requirements leaves less time to develop skills.

Time spent doing art will qualify as seeking work for the purposes of being on the dole and:

The Greens have previously announced that we will support artists’ incomes by investing $20 million over four years into a fund so that organisations can pay artists fees for works that are publicly displayed, loaned to a non-selling exhibition or used on other occasions when art is shared with the public.

Artistic work that people will not voluntarily pay for should be paid for by a compulsory levy on all taxpayers.

Even in urban Australia we don't think that starving artists who wish to continue to bludge their way through life are a significant voting bloc but who knows? Still, this is a good delineation of that whole art of politics thing. Assemble enough such groups and promise them enough and you too can get elected to dine off the taxpayers' cash while distributing it to those who vote for you.

One point we would make though, one piece of advice. The real trick is to do this efficiently, to only bribe those who might but probably won't vote for you rather than waste resources on those who will come what may. And won't most of the low end artistic community be voting Green anyway? 

Thus this particular plan is a waste of money. Even from the political point of view.
 

The Dangers of Health-Fetishism

The ideology of the nanny state can perhaps be summarised as coercing people to be healthy. Complaints about the first half of this (coercion) are well known: people should be able to make their own choices even if this involves them opting to smoke or drink or eat sugar. However, most people would regard the second aspect (health) as uncontroversial. Whilst the means of nudging, taxing, banning, and regulating may be objectionable, the end of promoting health is obviously a ‘good thing’.

I’m not so sure that this is true. Obviously, health has its benefits. Most people would prefer to not have typhoid. A healthier population may also be more efficient and happier. And, if you enjoy your life, it’s rational to want it to last and to die at 80 rather than at 40.

This is, though, only in the aggregate and on average. What about at the margins? It is less clear that there is necessarily any welfare gain in extending your life from 65 to 75 at the cost of personal pleasures like cigars, whiskey, and red meat.

And there are, perhaps a small minority of, individuals who would quite happily die at a very young age if this gave them significant immediate benefits. The same is true at a social level. Whilst, say, a population consisting exclusively of obese binge drinkers would probably struggle to function, it is not obvious that GDP (let alone net happiness or preference satisfaction) would be maximised by a country of puritanical workaholics. Likewise, whilst smoking or obesity may create extra costs for the health service, this is at least partly offset by shorter lifespans.

In isolation, this point is probably insufficient to prove that paternalistic public health policy is usually a bad idea. However, it should be taken in the context of governments ineptly attacking healthier substitutes to harmful products (e-cigarettes), the inevitable flip-flops from using incomplete data (is fat or sugar the enemy?), the inevitable ineffectiveness of policies (minimum alcohol pricing), the creation of black markets (drugs), and hysteria developing around things that have no proven negative health implications (GMOs).

Combined with the implications of a nanny state culture for liberty and personal responsibility, recognising that health is not an unqualified good suggests that policing lifestyle choices will always tend to be bad policy.

As an aside, I suspect that one of the reasons that the UK in particular has embraced health fetishism to such a degree is that, as an expression of our faith in the national religion of #OURNHS, we have elevated doctors to having the status of priests.

Another reason to hate planning

Regular readers do not need another reason to despise Britain's complex planning system, they will of course know that it – increases rents massively, retards economic growth, and produces deeply ugly buildings. But like a balcony in a London new build, you're getting one whether you like it or not.

Economists Matthew Kahn and Edward Glaesar found that denser cities are greener cities. That is to say, when you add up the environmental costs of transport, heating and household electricity usage, densely packed cities New York and San Francisco impose dramatically fewer costs on the environment.

This graphic from a 2014 Washington Post article, illustrates the issue perfectly. Barcelona and Atlanta have comparable populations, yet Barcelona is able to cram that entire population into just 1/25th the total size of Atlanta. Leading to Barcelonans making fewer, shorter trips in cars and instead using public transit and cycling more frequently. As a result, Barcelona emits dramatically fewer tonnes of CO2 on transport. And it's not just Carbon Emissions that fall when cities become more dense, according to the World Resources Institute a move to denser cities could save $15tn in infrastructure spending.  

Unfortunately, the article presumes that the only way to achieve denser cities is by careful government planning. Yet, as Glaesar and Kahn show, it's often planning that's the biggest obstacle to greater density. The greenest parts of the US, were also the parts with the toughest land-use regulation, blocking development within green cities and pushing it to brown suburbs (San Francisco's restrictive planning laws deter local developments, but do nothing to prevent development across the US). 

Instead of subsidising renewable energy and dictating new energy efficiency standards, the Government could tackle climate change much more cheaply, by doing two simple things. First, radically simplify our planning system by scrapping most, if not all, restrictions on new developments that artificially limit the supply of housing. Second, encourage councils to allow more building by, once again, letting them fully retain their revenue from business rates and council tax, giving them a financial incentive to avoid using the planning system to block new developments.

Paul Krugman has gone too far this time: let’s re-train him as a cosmonaut

I admit it: I have never been a big fan of Paul Krugman. I do not care for his vulgar Keynesianism or his vulgar rhetoric. His humourless sanctimoniousness, his angry ad hominem attacks, his lack of courtesy and his cavalier attitude to the facts are not to my taste. 

All this said, I cannot deny that he plays a useful role in the economists’ ecosystem: everyone needs a bogeyman. His proposal in 2011 that we should solve the economic crisis by faking an alien space invasion was a hoot. But whereas sensible people had a laugh and took his proposal as the logical outcome of Keynesianism pushed ad absurdum, he really meant it. If he didn’t exist, we would have to make him up. 

However, his recent slurs against the Cato Institute are a step too far even by his standards. [Disclosure: I am an adjunct scholar at Cato.]

Were there any justice in this world, he would be drummed out of town. A harsher man than me would have him tarred and feathered. 

The proximate starting point in the story is a posting by David Glasner on his blog Uneasy Money on Friday, May 13. In this posting Glasner took a petulant swipe at Cato in general and against an unnamed senior Cato official (who was in fact Cato Vice President James A. Dorn) in particular. Let me quote from Glasner’s posting:

I have just posted a paper (“How ‘Natural’ Is the Government Monopoly over Money”) on SSRN. It’s a paper I wrote about 28 years ago, shortly after arriving in Washington to start working at the FTC, for a Cato Monetary Conference on Alternatives to [Government] Fiat Money.

Personal aside: The conference took place in February 1989. I was there and it was a very good conference. I also remember it because I had gotten married in Delray Beach a couple of days earlier and the conference interrupted my honeymoon. My mother gave me merry hell when I got home because I had only told her about my plans the evening before. But to continue with Glasner:

I was told that the conference papers would be published in a future edition of the Cato Journal. …

Unfortunately, my happy feelings about the experience were short-lived, being informed, not long after the conference by one of the conference organizers, that the original plans had been changed, so that my paper would not be published in the Cato Journal. 

That surprise was a bit annoying, but hardly devastating, because I simply assumed that what I had been told meant that I would just have to go through the tedious process of sending the paper out to be published in some economics journal. … So when I replied … that I would work on it some more before submitting it elsewhere for publication, I was totally unprepared for the response that was forthcoming: by accepting that four-figure honorarium for writing the paper for the Cato conference, I had relinquished to the Cato Institute all rights to the paper and that I was [not, sic] free to submit it to any publication or journal, and that Cato would take legal action against me and any publication that published the paper. …

Shocked at what had just happened I felt helpless and violated ..... Nor did I seek legal advice about challenging Cato’s conduct. I could have at least tried writing an article exposing how Cato – an institution whose “mission is to originate, disseminate, and increase understanding of public policies based on the principles of individual liberty, limited government, free markets, and peace” — was engaged in suppressing the original research that it had sponsored with no obvious justification.

After about 10 years passed, it occurred to me that the paper … would be worth updating ... Then, hoping that Cato might no longer care about the paper, I contacted the conference organizer … to inquire whether, after a lapse of 10 years, Cato still had objections to my submitting the paper for publication. The response I got was that, at least for the time being, Cato would not allow me to publish the paper, but might reconsider at some unspecified future time. At that point, I put the paper away, and forgot about it again, until I came across it recently, and decided that it was finally time to at least post it on the internet. If Cato wants to come after me for doing so, I guess they know how to find me.

Damning stuff, you might think – except that none of his claims about Cato are true. 

It is important to set the record right. I quote the subsequent emails/postings at a little length below to make sure that the record is set straight once and for all. 

Glasner’s posting was then picked up by Paul Krugman on Sunday May 15 in a charmless posting entitled “Orwell does Cato” in his New York Times column, “Conscience of a Liberal.” Let me quote Krugman’s original posting in full:

David Glasner has an interesting post about how the Cato Institute suppressed an old paper of his, refusing either to publish it or release it for publication elsewhere, not for a few months, but for decades. What Glasner may not know or recall is that Cato has a long-standing habit of trying to send inconvenient history down the memory hole, in ways that — I’m sorry to say — are more consequential than the suppression of his thoughts on fiat money.

You see, back in the 1990s Cato had a long-standing project titled the Project on Social Security Privatization. Then they discovered that the term polled badly, and renamed it The Project on Social Security Choice. OK. But they also tried to pretend that they had never used the term privatization, which was clearly a liberal smear — and they went so far as to edit old web pages and records of old conferences to eliminate the term “privatization”, as if it had never been used. This was, by the way, in concert with the Bush administration, which was similarly trying to bully reporters into abandoning the term (with a fair bit of success).

I still sometimes run into people suggesting that Cato is a relatively honest if misguided operation, unlike the obvious hackery of [the] Heritage [Foundation]. But it ain’t so, and never was.

The afternoon of that same day, Jim Dorn emailed Glasner to clarify what had actually happened. The core of Dorn’s email goes as follows:

If you remember, the reason your article from the 1989 conference was not included in the Fall 1989 CJ (vol. 9, no. 2) was because I had deliberately omitted several conference papers from the CJ b/c Kluwer was going to co-publish a book with the title “Alternatives to Government Fiat Money” and wanted me to differentiate it from the CJ conference issue with the same title.  So the intention was to use your paper in the book (I sent you a letter to that effect of which I have a copy).  Unfortunately, my many other duties at Cato at that time, plus my full-time teaching schedule, put the book project on the back burner.  I accept full responsibility for that delay.

I wrote to you on December 1, 1999, apologizing for the delay in the book project and explicitly stated: “If you wish to withdraw your paper from consideration and use it elsewhere, go ahead.”  I also stated in a separate email on December 1, 1999, that “if you revise your paper, at your own pace, then as soon as I receive it, I will consider it for use in the Cato Journal.  Also, I will reserve the right to use it in the book, if the CJ comes out first.”  … And in a separate reply to my offer, you wrote (Dec. 1, 1999): “Sounds reasonable.  I’ll have to dredge up a copy of the paper and look it over again, before I give you a definite yes or no.  I’ll try to do that by Monday at the latest.”  As far as I can tell from my files, you never did get back to me.

David, I’m sorry that your paper did not see the light of day; I wish I had used it immediately in the conference issue of the CJ in 1989.

I did, however, give you permission to publish elsewhere, as noted above, albeit with a significant lag.  If you had sent me your revised paper when I requested it, I would have certainly used it in the CJ.  … Indeed, if you have revised your paper and would [still] like me to consider it for use in the CJ, I would be glad to do so.”

To settle any doubts, Dorn followed this up the next day by resending Glasner the letter he had sent him on 10 May 1990, some twenty six years earlier: in that earlier letter, Dorn had apologised for a delayed response and for not having included Glasner’s paper in the conference special issue of the Cato Journal. He had then added: “to rectify any misunderstanding, I am willing to consider using any of the omitted papers and comments in a future issue of the CJ, subject, of course, to the normal review process.”

So much for Cato’s ‘suppression’ of Glasner’s paper! 

To his credit, Glasner wrote back to Dorn on the evening of the Sunday, May 15 to concede that he (Glasner) had got his facts wrong. Glasner then updated his blog as follows: 

My account … of the events surrounding the writing of my paper elicited the following letter from James Dorn, the unnamed organizer of the conference on Alternatives to Government Fiat Money, to whom I refer in the post. His letter makes it clear that my recollection of the events I describe was inaccurate or incomplete in several respects and that, most important, Cato did not intend to suppress my paper. … Why I did not submit it to the Cato Journal or to another journal I am unable to say, but subsequently I somehow came under the impression that I had been discouraged from doing so by Cato. Evidently, my recollection was faulty. In any event, I should not have posted my recollections of how this paper came to languish unpublished for almost three decades without communicating with James Dorn. That, at least, is one lesson to be learned, I can also take some minimal comfort in learning that my own conduct was not quite as wimpy as I had thought. On the other hand, I must apologize to Brad DeLong and Paul Krugman, who linked to this post on their blogs, for having led them to into this discussion. All in all, not a great performance on my part.

Glasner’s humility is admirable, but I cannot help thinking that it would have been more appropriate to have offered his apology to Cato and Dorn, at whom he had directed his false accusations, rather than to DeLong [2] and Krugman, who had been only too happy to have gone along with them. 

In the meantime, on the Sunday, May 15, 3:15 pm to be precise, Dorn had emailed Krugman at his CUNY email address, pkrugman@gc.cuny.edu. Dorn’s email was polite, dignified and to the point:

Dear Prof. Krugman,

    I think you should take a look at the letter I just sent to David Glasner to address the statements he made about Cato in his recent blog, which you cited in your NYT's column, "Orwell Does Cato."  I know you were basing your remarks on David's blog so I think it's important to get the facts straight. 

Respectfully,

Jim Dorn

Editor

Cato Journal

Krugman did not reply. 

Krugman’s other allegation against Cato – that Cato had behaved dishonestly with its project on Social Privatization – was dismissed by Jonathan Adler from Case Western Reserve University. As Adler wrote on his blog on May 19, “False accusations can travel throughout the blogosphere before the truth has even logged in.” He then continued:

I have no doubt that the Cato Institute may have adjusted its rhetoric in response to polling or focus group data. … But did Cato really try to “eliminate the term . . . as if it had never been used”? To check this claim, I went to the Cato site and ran a search for “social security privatization.” Lo and behold, I came up with hundreds of results, including work both before and after the alleged white-washing of history. So much for Cato’s alleged effort to “eliminate the term” from its website. Had Krugman bothered to run a simple website search, he would have discovered the same thing. Instead he accused Cato of “hackery.”

Perhaps coincidentally, yesterday Krugman blogged about those who have “a problem both in facing reality and in admitting mistakes.” According to Krugman, this is a “question of character.” Yes, yes, it is. 

In short, Krugman’s criticism of Cato’s Social Security Privatization project had the same factual basis as his criticism of Cato’s ‘suppression’ of Glasner’s paper, i.e., none.  

In the meantime, Krugman updated his posting (on May 15) and the key sentence in his update is this: 

Glasner has retracted, saying he got his facts wrong. Unfortunate. It has no bearing on what I wrote, however.

There, my friends, you have it straight from the horse’s mouth: the facts have no bearing! 

I can’t even attempt to satirise that. 

So let me stick to the facts, unlike Mr. Krugman. 

Krugman makes a bunch of calumnies against Cato, and indirectly, against Jim Dorn. These take the form of allegations of misbehaviour that were based on a set of alleged ‘facts’ that all turned out to be false. When confronted with Glasner’s retraction, Krugman’s response was not to issue a retraction, let alone to offer an apology, as common courtesy would have called for. But Krugman has no truck with such decency. On the contrary, his response was – to paraphrase - that even though he had been informed that had got his facts wrong, he still didn’t see any reason to change his position one little jot. 

Try defending such a position in a seminar on logic or ethics or even in a court of law: I make a case based on a set of ‘facts’ that I claim support my case. It is then revealed that I got all my facts wrong. Never mind, I insist, I see no reason to change my position. The truth and the facts be damned. 

Such unedifying behaviour demonstrates that Krugman is as logically as he is ethically challenged. I am minded to write to the Trustees of CUNY to invite them to invite him to a discussion with his University’s Ethics Committee.

Whether one agrees or disagrees with Cato or with anything that its scholars have written is beside the point. It’s all about integrity, character, courteousness, truthfulness, conscience even, and a willingness to admit mistakes - all virtues that Dorn exemplifies and Krugman does not. 

We should also remember that Krugman has form, lots of it. In a series of Huffington Post articles – here, here, here and here – and in a separate series of Forbes articles, Niall Ferguson and Ralph Benko respectively deliver Krugman a series of exquisite Glasgow kisses [3]. (I spell out Benko’s articles’ titles in full as the Forbes links are not always reliable. They are Much Bigger Than The Shutdown: Niall Ferguson's Public Flogging Of Paul Krugman, If Paul Krugman Didn't Exist, Republicans Would Have To Invent Him, Is Paul Krugman Leaving Princeton In Quiet Disgrace?, and The Science Fiction Behind Paul Krugman's Economics, Parts One and Two.) These postings are well worth reading and much better than anything I could have written: they lay bare Krugman’s many errors and inconsistencies, his false prophecies and U-turns, his contempt for those he disagrees with, and how he led his deluded acolytes up and down the hill and back again like the Grand Old Duke of York. To quote Ferguson:

For too long, Paul Krugman has exploited his authority as an award-winning economist and his power as a New York Times columnist to heap opprobrium on anyone who ventures to disagree with him. Along the way, he has acquired a claque of like-minded bloggers who play a sinister game of tag with him, endorsing his attacks and adding vitriol of their own. … Krugman and his acolytes evidently relish the viciousness of their attacks, priding themselves on the crassness of their language.

[But] even if Krugman had been “right about everything,” there would still be no justification for the numerous crude and often personal attacks he has made on those who disagree with him. Words like “cockroach,” “delusional,” “derp,” “dope,” “fool,” “knave,” “mendacious idiot,” and “zombie” have no place in civilized debate. I consider myself lucky that he has called me only a “poseur,” a “whiner,” “inane” – and, last week, a “troll.”

Where I come from [Glasgow, in fact] … we do not fear bullies. We despise them. And we do so because we understand that what motivates their bullying is a deep sense of insecurity. Unfortunately for Krugtron the Invincible, his ultimate nightmare has just become a reality. By applying the methods of the historian – by quoting and contextualizing his own published words – I believe I have now made him what he richly deserves to be: a figure of fun, whose predictions (and proscriptions) no one should ever again take seriously.

And to quote Benko:

Krugman’s horns now forever will show under his dislodged faux halo. For this the world will prove a safer, and much more decent, place.

Maybe the Great Krugtron should be invited to go on a long space trip to check out how his alien friends’ invasion plans are progressing. It would be a costly undertaking, but I am sure it would be worth it.

End Notes

[1] Kevin Dowd is professor of finance and economics at Durham University. Email: kevin.dowd@outlook.com or kevin.dowd@durham.ac.uk.

[2] Brad DeLong had also picked up on Glasner’s posting to make false allegations of his own against Cato. Adler ably dismisses those allegations in his posting. Here, however, I prefer to fry the big fish. Or to mix with Niall Ferguson’s more colourful metaphor, I prefer to fry the Nile crocodile rather than its plover. 

[3] A Glasgow kiss is defined here. I reproduce the short version: ”A headbutt. Within Glasgow itself the term 'Gorbals kiss' is often used, referring to the most dangerous area of Glasgow. It is hypothesised that within Gorbals it is known as a Crown Street kiss; and on Crown Street it is called a Number 73 kiss; and at Number 73 it is known as Steve's kiss. Steve, however, calls it whatever the fuck he wants to.”

How Negative Income Tax could lead us towards material abundance

120 years ago American factories electrified their operations, triggering the Second Industrial Revolution in which steam engines were replaced with motors. This general purpose technology (GPT) – a technology that can affect an entire economy, usually at a national or global level – created new advantages for factories and prompted the invention of new work processes, allowing for increased growth and productivity. Innovation researcher Erik Brynjolfsson outlines three major GPT since the 18th century: the steam engine, electricity, and the internet, and along with Andrew McAfee, has coined this era The New Machine Age and produced a highly praised book of the same name. In this New Machine Era, they identify growing decoupling of productivity and employment: productivity is growing, but employment is decreasing. Correspondingly, wealth is increasing, but work is decreasing.

Ideas about brain emulations, or ems, set forth by economics professor Robin Hanson, provide one view of the future relationship between employment and increased technology, focusing on the role of robots. He suggests that in the future, truly smart robots will be created by emulating the brains of the ‘best humans.’ Those robots can then be multiplied to perform a certain job, which may lead to humans being displaced within a century. The professor further suggests that a new emulation economy will be very competitive, wages will fall to the cost of making new machines, and in doing so, fall to subsistence level.

As per usual, somewhat contradicting statistics have emerged as to the economic impact of increased use of robots. A paper from the Centre of Economic Performance at the LSE, ‘Robots at Work’, uses data from industries in 17 developed countries, concluding that ‘robot densification’ has a statistically negligible effect on total hours worked, while increasing both labour productivity and value added. This would suggest that robots are not, in fact, decreasing humans’ potential for employment. However, the paper also states that the use of robots reduced the hours of low-skilled workers, as well as (to a lesser extent) middle-skilled workers. This corresponds to the findings of Brynjolfsson and McAfee: of increased decoupling of productivity and employment, particularly for low/middle-skilled workers. This is also in line with professor Hanson’s predictions, depicting the future displacement of humans as not just a wild prediction but rather an actual possibility that we may be progressing towards.

In the past, the two industrial revolutions have given rise to structural unemployment – temporary unemployment caused by a mismatch between workers’ skills and the skills’ demanded by producers. However, with the arrival of robots, many fear that the unemployment will become permanent, technological unemployment. Despite debate regarding the imminence, gravity, or even existence, of the threat posed by this development, it does prompt us to rethink our current economic system (perhaps, at this point in time, only in theoretical terms). 

Authors Gary Marchant, Yvonne Stevens and James Hennessy in the Journal of Evolution and Technology propose multiple policy options to tackle this problem, one of which is particularly striking as falling into the trap we must all be careful of: employing “legal interventions to protect jobs that might otherwise be lost due to technology, innovation, and development.” Such measures would, without a doubt, do more harm than good as they would stifle innovation, keep prices up, and, as twisted as it sounds, make efficiency illegal. Marchant et al. do recognise this, stressing their “counter-productive” nature and the unsuccessful track record of “stopping progress” strategies.

Another approach would be to re-evaluate the welfare system by introducing the Negative Income Tax (or Basic Income), which could not only address key problems of today, but also those that are underway with the changing labour market and the prospect of technological unemployment.

The current system creates perverse social incentives and features a piecemeal provision of benefits, consisting of working tax credits, means-tested housing benefits, and a number of other smaller benefits including council tax relief and skills training. On the other side of this is the Department for Work and Pensions, employing 34,000 people and spending 5.3 billion pounds on administration (in 2011-12 – 6.1 billion in today’s money). The system also disincentivises work due to high marginal withdrawal rates. Despite attempts to relieve these problems through Universal Credit, its design as a single monthly payment to the highest earner of the household has negative implications for women and children, in addition to the fact that it has not come close to reaching its target of 1 million claimants and has cost £612 million in administration costs. Hence, we are in need of a cheaper, administratively simpler and less dis-incentivising system – namely, a Negative Income Tax.

The Negative Income Tax is a policy that replaces all major means-tested cash benefits and guarantees a universal basic income by paying individuals directly. As a person earns more, the benefit is steadily withdrawn, ideally at a rate that will always make increasing work and reducing leisure worthwhile. An example of a NIT would be a £5,000 basic payment at a 50% marginal withdrawal rate (for every additional pound earned, the worker will receive 50p less in NIT payments). Someone with an income of zero would receive an NIT payment of £5,000, or just under £100/week. If they took a job that paid £5,000/year, they would receive a top-up of £2,500/year; if they took a job that paid £7,500, they would receive a top-up of £1,250/year. Once they reached £10,000/year, they would receive nothing in NIT and the citizen would become a net tax contributor. This policy enjoys substantial support from free marketeers and has been advocated by Nobel prize winning economists Milton Friedman and Friedrich Hayek. 

The economic benefits of a NIT in this day and age are thus substantial, slashing bureaucratic costs, in addition to the political and social benefits of decreasing the size of government and promoting individual liberty. However, as unemployment rises, the political and social benefits brought about by a NIT will become even more important for society as a whole. The fact of the matter is: as more people become unemployed due to robot’s impact on the labour market, the strain on the welfare system will increase. That will, in effect, expose its inefficiencies and disenfranchising characteristics. Hence, a greater proportion of the population will be told how to live their lives through the government’s welfare schemes, which, as Sam Bowman puts it, “is a bad idea because the government is extremely ignorant, and that ignorance does not change just because the person being told what to do is on benefits.”

With a NIT, on the other hand, these problems can be counteracted. First of all, it would become the chief means by which consumption, the sole end and purpose of all production according to Adam Smith, can be kept alive, without the dictation of the government as a middleman. Similarly, those who fear that the ‘capitalist exploiters’ who own the robots will own all the wealth will be happy to realise that only 3% of the benefit of Schumpeterian profits (profits arising from innovative activity) goes to the entrepreneur: the other 97% goes to the consumer. An NIT would thus ensure that also the unemployed would benefit from these advancements by giving them the means to continue to be autonomous consumers. Ideally, the increased availability of robots, and increasingly perfect information due to other technologies, will make more and more markets perfectly competitive, again, much to the benefit of the consumer as opposed to the capitalist robot-owners. Furthermore, with the eventual material abundance that increased robot productivity will bring about, the basic income will be increasingly fundable, as prices will fall significantly and the ‘real’ basic income will increase. 

With the rise of technological unemployment, the transformation of society, and diminishing of the labour market, the changes to the welfare system in response to these changing circumstances will become decisive. Do we want to move towards an ever bigger government, as more people become dependent on the welfare system, losing their power as consumers as their needs are taken care of by a paternalistic state welfare scheme? Or, do we want an administratively simple system that gives the unemployed the freedom to enjoy the material abundance and fruits of centuries of intellectual labour, reflected in lower prices brought about by the robots’ increased productivity? I think the latter is infinitely more attractive.

However, accurately predicting the future is tricky, so the future effect of robots remains an intellectual game. As the study at LSE showed, ‘robot densification’ has had a statistically negligible effect on total hours worked in 17 developed countries. Furthermore, using the UK’s 30 million jobs as an example, 10% of jobs are destroyed every year, yet the economy also creates about 3 million. In fact, the majority of jobs are created by small, new companies – not the large ones that would employ robots. Hence, another solution would be to encourage small businesses, through deregulation, to enter markets and thus generate jobs for which they would employ humans (that is, assuming that robots have not become more accessible than human labour). Furthermore, as we have seen with the invention of past GPTs, the increased productivity has increased wealth, which has, in return, generated more jobs. Hence, we may simply be looking at prospective structural unemployment that will, with time, be solved with the creation of jobs unthinkable to us today, just as the idea of a computer scientist was in the 19th century.

As mentioned earlier, professor Hanson predicts that robots will displace humans in most jobs within a century. However, history suggests that new, some unimaginable, opportunities for employment will arise following such a development. Whichever prediction one chooses to believe, two things can be concluded. With the rise of robots, the lower input costs will make products cheaper and we will all become richer. It might even, as Keynes prophesised, solve the fundamental economic problem of scarcity that has characterised our endeavours as humans. Second, the effects of this technological progress on employment may be (and according to Brynjolfsson and McAfee already has been) negative, whether that be permanently or until new jobs emerge. Some version of a Negative Income Tax might be the ideal way to protect those affected by this transition, enjoy our progression towards material abundance and free ourselves to make our own decisions in such a world.

By Halla Mathiesen

Regulation kills people

Of course it's also true that an entire absence of regulation will kill people too. The trick thus is to get the level of regulation correct. This is something that does not, to put it mildly, always happen:

Tens of thousands of cancer patients are being denied life-extending drugs because of EU bureaucracy, experts have warned. 

Trial results presented at the world’s largest cancer conference, in Chicago, showed palbociclib almost doubled the amount of time that the disease was stalled.

On average, the terminally ill women were able to fend off the diseasefor an extra 10 months.

Almost 30,000 women in the United States have been able to access the drug since March, after the Food and Drug Administration (FDA) fast-tracked approval of the drug in just six months.

But the groundbreaking treatment is being denied to British patients because European regulators work far more slowly.  

They're taking an extra year or two to read the papers and have a few gabfests. However, much as we love an opportunity to bash the EU and all who sail in her this isn't something specific to that organisation. Rather, it's about scale, the level of regulation.

Yes, obviously, it's more efficient to have just the one body that approves drugs: we might suggest the FDA in fact. But if that won't hold then sure, better to have just the one for Europe rather than 28. However, as we all really should know there are diseconomies of scale as well as economies.

And the major contributor to diseconomies of scale is that the organisation itself simply becomes too remote from any form of incentivisation by or on behalf of consumers. Imagine we had a properly "independent" drug regulator for the UK. OK, it's independent: but it would still be amenable to generalised pressure. Why is it taking you two years longer than the US to approve a drug? 

You can actually visualise the sweating bureaucrat mumbling to one or another committee of the Commons on this. But once we push this up another level or two that accountability simply vanishes. Who either can or will scream at them on our behalf? 

And that's rather the problem with this style of regulation. We end up with no way of ensuring they pull their thumbs out: and people thus die as a result.

The year of the insurrectionists

This is very much the year of the outsider, and the year in which the establishment machine politicians are rejected by angry voters.  Donald Trump is a complete outsider, yet in a series of bruising battles that make up US primaries, he has seen off every single establishment party-machine politician ranged against him.  Now there is only one more left against him, and that is Hillary Clinton whom he now faces in November. 

She is almost the embodiment of machine politics, and has the misfortune to face a populist outsider in a year when conventional politicians are mistrusted.  Furthermore, she is tainted as well as mistrusted, with enough doubts about her probity to dampen her support.  The chances must be very high that come November, Donald Trump will be elected the 45th President of the United States.

His popularity extends across normal party lines, and while he is despised and derided by liberal elites, he touches raw nerves among working Americans who feel they've been left behind or left out, and that economic advance has passed them by.  It is a mark of his skill that a multi-billionaire is seen by low-paid Americans as someone likely to represent their interests.
 
Hillary Clinton's double-digit poll lead has faded into nothing, and Trump is showing well in the working-class swing states he must carry to take the presidency.  It looks increasing likely that blue-collar Democrats will plump for the rough and ready, hard-talking, hard-dealing businessman rather than for the smooth and manicured professional politician who opposes him.

It is on an international scale that the insurrectionists have made inroads.  Trump has astutely tapped into a mood that has swept across Europe.  As a reaction to the way conventional parties handled the Financial Crisis and the economic slowdown that followed, people have turned to outsiders.  In Greece and Spain these new parties have become a force to be reckoned with.  The populist Freedom Party candidate, Nobert Hofer, lost the Austrian presidential election by a whisker.  It is a sign of the times that people, discontented by establishments, are looking outside the box.  It could be argued that this mood was behind the upset that saw Jeremy Corbyn elected as Labour leader instead of more conventional mainstream candidates.  That same anti-establishment mood might well see UK referendum voters overturn conventional thinking with an insurrectionist Brexit vote.

Trump has tapped into similar discontents in America.  Against a polished Republican politician, Hillary linton could have positioned herself as champion of the underdog, but there is no way she can take that position against Donald Trump.  He is already there, voicing their concerns, speaking up for their values, promising to meet their aspirations.  Although people in Europe, as well as in the liberal media of America's East and West coasts, mock Trump for his lack of polish and preparation, the same is not true of heartland America, and commentators who assumed Clinton would coast home against an opponent they see only as a buffoon, might well wake up with a sinking feeling on Wednesday November 9th when it will all be over and Trump sets about preparing his transition team.

Although the prospect scares some people, they can take comfort from the fact that Trump has no party.  He will have no majority behind him in either the House of Representatives or the Senate. To get anything through he will need to bargain and strike deals, to compromise and to moderate. Clinton, by contrast, would probably have had a Democrat majority in the House to back her and strong support in the Senate.

Trump is nowhere nearly as bad as he has been painted, which is just as well because he is a fact of life that we are all going to have to grow used to and learn to live with.  He is probably going to win the presidency.