The perils of fake Fairtrade products

It’s just so difficult to be a properly concerned middle class social justice warrior these days, isn’t it?

Well-meaning shoppers may be wasting money on groceries bearing fake Fairtrade or organic logos, after police in Europe identified counterfeit food labels as one of the fastest growing frauds.

Fairtrade or organic bananas, vegetables, tea and other items are bought by millions of people concerned about the provenance of the food on their plates.

But the certification logos on packaging can be “easily replicated and affixed” by experienced counterfeiters, the Europol law enforcement agency said.

Its experts warn that organised crime groups have “joined forces” to run counterfeiting operations inside the EU.

They are forging quality labels on “everyday products” that can then be sold at a premium, as opposed to the traditional fake handbags and medicines.

As it happens we don’t think this is a particular problem. Fairtrade makes virtually no difference at all to those poor, third world, producers. It has a marginal value as a form of indoor relief for the dimmer scions of the upper middle class. But the real value gained from it is the near holy righteousness that a certain type of shopper feels as they proudly display their status by showing off the correct, socially approved, labels of “organic”, “Fairtrade” and so on. Given that this, the main effect of the system, still applies to fake labels it seems to be a most efficient way of achieving that main effect.

Greenpeace should be allowed to say it even if they’re wrong

We find ourselves a little bit conflicted here. That Greenpeace has been spouting lies making incorrect statements does not surprise. But we are rather absolutist on this free speech thing. Absent incitement to violence and libel we’re pretty sure that anyone should be allowed to say whatever they wish. And we’re most certainly not happy with some organ of the State deciding what it is that people may or may not say. Thus the conflict:

A Greenpeace advert opposing fracking has been banned for claiming experts agreed that the process would not cut energy bills.

The national press ad said: “Fracking threatens our climate, our countryside and our water. Yet experts agree – it won’t cut our energy bills.”

The Labour peer Lord Lipsey, who said he understood there was a range of views on the subject, complained that the ad was misleading for claiming experts were in agreement.

Greenpeace said the claim was made in the context of a public debate on Government policy, and cited quotes from David Cameron, who has repeatedly backed fracking and claimed that it could bring down energy bills.

The organisation provided quotes from 22 people, groups or organisations supporting the view that fracking would not reduce energy prices.

That Greenpeace are wrong is something we’ve proven here and elsewhere before. However, there is that free speech issue. And as we say, we don’t think that such speech should be banned.

Quite apart from anything else if people are banned from spouting obvious lies then how can we spot them when they’re being a bit more disingenuous and spouting non-obvious lies?

Whoda thunk it? A free market in banking means more competition!

Some economists, especially economic historians, have really consistently interesting CVs. You’ll look at their publication list because you’re interested in their work on the US experience of free banking, and you’ll end up finding interesting papers on genetic and cultural diversity on economic growth. Prof. Philipp Ager at the University of Southern Denmark turns out to be one of these types.

I came across Prof. Ager November 2013 working paper with Fabrizio Spargoli: “Bank Deregulation, Competition and Economic Growth: The US Free Banking Experience” (pdf) which has a very interesting finding that although US free banking led to more bank failures it also led to more competition and probably higher growth.

We exploit the introduction of free banking laws in US states during the 1837-1863 period to examine the impact of removing barriers to bank entry on bank competition and economic growth. As governments were not concerned about systemic stability in this period, we are able to isolate the effects of bank competition from those of state implicit guarantees.

We find that the introduction of free banking laws stimulated the creation of new banks and led to more bank failures. Our empirical evidence indicates that states adopting free banking laws experienced an increase in output per capita compared to the states that retained state bank chartering policies.

We argue that the fiercer bank competition following the introduction of free banking laws might have spurred economic growth by (1) increasing the money stock and the availability of credit; (2) leading to efficiency gains in the banking market. Our findings suggest that the more frequent bank failures occurring in a competitive banking market do not harm long-run economic growth in a system without public safety nets.

This is particularly interesting, because it suggests that even in a free banking system with fairly important regulations, free banking may outperform the alternative.

As Larry White details on the new blog alt-m most histories of US free banking miss out that many of the major distortions and problems in the US experience stemmed from regulatory interventions—especially restrictions on what kinds of collateral banks could accept and tight restrictions on branching, making banks much more vulnerable to idiosyncratic local risks.

My real issue here is not deciding what side is correct. Basically all of the thoughtful work concludes that free banking is better than the tightly restricted banking we have had outside of a few historical experiences. The ‘evidence’ I see against consists of stuff like this Philly Fed paper, i.e. nonsense.

My real issue is why this evidence isn’t breaking through? Why are so many smart, knowledgeable people opposed to free banking? Why is the ruling tendency now towards practically outlawing bank/debt finance altogether in favour of steps toward equity financing everything? I don’t have a good answer.

What just about everyone is getting wrong about climate change

The Telegraph has an interesting report today on the costs of decarbonising Britain’s electricity generation system over the next 15 years. It’s vast and it’s not a sensible thing to do. But in their discussion there’s this, which shows just how badly everyone is approaching this question:

All political parties (apart from Ukip) support the 2008 Climate Change Act which commits Britain to reduce emissions by at least 80pc from 1990 levels by 2050. Analysis by the Department of Energy and Climate Change has shown that, to hit those targets, there must be significant decarbonisation of the power sector by 2030. The Committee on Climate Change has set a target of reducing carbon intensity from 450g of carbon dioxide per kilowatt hour to 50g by 2030.

This is entirely the wrong way around.

Let’s not get into the science of this, that’s always a boring and unproductive shouting match. Instead, let’s just say the IPCC is correct and then look at the economics of it. And there we find that this approach is *still* wrong. Because it is not correct to announce a target for emissions: it is correct to announce a cost that we’re willing to pay to reduce them.

This is the Stern Review argument. There’s some future damage to come from emissions. How much should we be willing to spend now to reduce such damages? We reach our answer (which translates into that $80 per tonne carbon tax) and that’s it. We should not spend more than that to reduce emissions. We should not have a target for emissions: we should be targeting only those emissions that we can reduce below that cost.

And yet every political party except Ukip is targeting the emissions number. This is simply wrong, it’s an entire misreading of what the settled science on this issue is. The settled economic science as laid out in that Stern Review and backed up by every other economist who looks at it (Nordhaus, Tol and so on). We set the price of the actions we’re prepared to undertake and go and do those things that cost less than that to do.

The reason for this is that the actual logic that says we should be doing anything rests upon that estimation of the cost of future damages. Spending more than that cost makes the future poorer than it could or should be. It is quite literally impoverishing our grandchildren.

It’s not the first time this has happened of course. When the political classes have entirely misunderstood the entirely reasonable (please note, economists might differ on what the price of emissions should be but not on the logical approach itself) result of economic research and so garbled the implementation as to end up doing the opposite of what they should be doing. But it’s impressive to see them doing so all the same.

Charter schools and the aspiring classes

There is significant research concluding that the ever-spreading charter schools in the U.S. are markedly improving pupils’ performance. Charter schools are free to attend, open to all children and publicly funded but independently run – the most similar comparison close to home being the Free Schools Programme in England. Since the first charter school law passed in Minnesota in 1991, almost seven thousand have opened with two and a half million children now being educated in a charter school.

Previous studies have looked at lottery estimates. These compare how charter applicants perform when admitted to a charter school with how they would have performed had they attended a state school as the randomness ensures there are no systematic differences between those selected and not selected. But these studies do not account for pupils who never applied to a charter school and ended up attending one. Or for pupils attending charter schools for which demand is weak.

A new discussion paper (pdf) by Atila Abdulkadiroglu, Joshua D. Angrist, Peter D. Hull, and Parag A. Pathak does just this by testing the treatment effects of charter school attendance on middle-schoolers that are part of the new takeovers in New Orleans and Boston.

Takeovers see traditional state schools closed and then re-opened as charter schools. Students enrolled in schools designated for closure are eligible to be ‘grandfathered’ into the newly-opened charter schools. This means that they are guaranteed a place.

What this new paper finds is that highly disadvantaged students have experienced substantial gains in their achievement after enrolling in takeovers passively. It was previously believed that urban charter lottery applicants enjoy an unrepresentatively large benefit from charter attendance because they are either highly motivated or uniquely primed to benefit from the education these schools offer. Now we have both estimates from grandfathering and lottery-based research that weigh against this view.

These successes have also prompted similar approaches to be explored in Michigan, Pennsylvania, and Tennessee despite the controversy caused by the proliferation of charter takeovers in New Orleans, Boston and elsewhere.

Charters Without Lotteries: Testing Takeovers in New Orleans and Boston is one report of what is becoming a substantial compilation of literature on why charter schools are working. They are some of the top-performing schools in the country with a higher percentage of charter school students accepted into a college or university. They are raising the bar of what is possible and should be expected in public education.

Teachers in charter schools are given the freedom to innovate and have more powers to explore the best practices. The schools can adopt themes and focus on specific fields like STEM subjects, performing arts or meeting the special needs, for example, of autistic children.

How charter schools are quickly extending choice to the poorest is exciting. And crucial. It is not widely recognised that choice already exists – but for the wealthiest. The most privileged can not only afford private schools but through the state school catchment system the housing market is the market for schools. An accepted way of boosting real estate is by improving schools as families want to buy houses in areas with good schools. School choice gives the poor a way to access the already existing market.

The disadvantaged are on the rise and benefiting more than ever from state education as a result of what is the best prominent educational movement in the U.S right now.