Perhaps government isn't the efficient way to do things

From The Guardian:

It had already been stressful, and then the government said my son didn’t exist. After an initial administrative fiasco, we were all set to claim our “free” 15 hours of childcare for our two-year-old as part of the government’s expansion this April. But then another spanner hit the works.

We hadn’t been able to get our code due to a totally foreseeable government error, so, like the thousands of others affected, we’d been issued with a temporary one. But when our actual code was confirmed, meaning we then had two codes, the nursery was told he didn’t exist, and then that we couldn’t use the hours until next term, since our code had been issued in April. It’s as Kafkaesque as it sounds and, though it was eventually sorted out thanks to the brilliant nursery administrator, it’s another example of the confusion and chaos that has afflicted parents since the announcement that the already labyrinthine system would be expanded.

Erm, bureaucratic allocation ends up being complex and bureaucratic. Who would have thought, eh?

Is it possible to suggest a different, better, more efficient system? Musing on it, perhaps. What if everyone just had unconstrained ration vouchers? These could be swapped for, perhaps, this many hours of child care. Or that many hours of after school top up education. Or for food, or housing, or pints down the pub.

This would increase the utility of the voucher holders for they could then swap them for what most boosted their utility within their overall budget constraints. This would eliminate several to many layers of bureaucracy. It would also bring clarity to the overall costs - it’s easy to count the number of vouchers issued after all - of the system as a whole.

And what if we renamed those unconstrained ration vouchers money?

You know, we think there could be the beginnings of a plan there.

To whom? Expensive to whom?

The Resolution Foundation - them again - tells us that the system of Individual Savings Accounts is very expensive:

ISAs are expensive

Expensive to whom?

The starting point of their analysis is the logically - and morally - objectionable idea that all belongs to the government. That Tutto Nello Stato idea that we out here are lucky to be allowed to keep some of our hard earned and that allowing us to do so is a cost to government. This is, of course, incorrect - government is a cost to us out here and it is the impositions of tax itself which is that cost. A reduction in what is taken from us is therefore a saving, not a cost.

Oh, sure, government sometimes buys us pretty things and some parts of government are even worth having - those are the benefits of our having government. But those are the benefits, tax is the cost.

So, us keeping some of our money is a benefit, not a cost.

Any analysis that starts from something so obviously logically wrong - that tax reductions are a cost - is therefore clearly wrong.

We can go further, for of course we can. Investment itself is usually thought of as a pretty good thing. As people like the Resolution Foundation are wont to suggest in fact - we’re really sure we’ve seen reports of theirs bemoaning the low rate of investment in Britain.

That further is that the tax system should go further in encouraging saving and investment - the progressive consumption tax. Not that gains inside an ISA are untaxed, but that income placed into an ISA remains untaxed. Full exemption from income tax (and NI) for sums placed into something like an ISA. All income and gains inside an ISA - which remain inside an ISA - remain untaxed. It is at the point of extraction from the ISA to be spent upon consumption that the money gets taxed - at the full marginal income tax rate at the time of extraction.

Effectively we end up with something akin to a blend of an ISA and a pension. Income, from whatever source, which is then saved is untaxed. Gains within the tax wrapper are untaxed. Extraction from the tax wrapper carries income tax.

There is a logical argument against this. Which is that some to many will utilise such a system to save money. Thereby becoming bourgeois and so not requiring the intervention of the State in their lifestyles. But, you know, we think a bourgeois state where the people are rich enough not to require the State’s intervention in their lifestyles to be a pretty good thing. Even, a Good Thing. Something to be desired and even the system set up so as to produce it.

That is, not just the current system of ISAs alleviated of the impositions of taxation but all saving by all so alleviated. Action This Day etc.

Floating Nuclear Power Plants

Achieving net zero carbon emissions by 2050, a plan to which all our leading political parties are committed- except Reform- will require large scale use of low carbon energy sources, including nuclear power. 

Various studies confirm what is obvious: that nuclear power has a significant role to play in meeting increasing world energy demand and keeping carbon emissions low. However, that means that nuclear power will have to become a much more significant part of the energy mix than it is today. The UK government reckons that the country needs to increase its nuclear power capacity to 24 gigawatts by 2050 to meet its net zero targets. That would make it about a quarter of projected electricity demand, compared to about a seventh today.

Today’s large-scale nuclear power plants are difficult, time-consuming and costly to build. But enterprising companies such as Rolls-Royce propose much smaller-scale plants — Small Modular Reactors or SMRs. They promise be much lower cost and much quicker to build. Even so, there is a lot of opposition to new nuclear construction (or indeed any sort of construction) from local residents; and the UK’s highly restrictive planning rules don’t make it any easier. (Nor, indeed, do the UK’s energy regulators.)

Maybe there is a solution, though: floating nuclear power plants. We site wind turbines offshore, so why not site nuclear power plants offshore too? Of course, it sounds like a cross between science fiction and fantasy, because we still have this idea that nuclear power plants need to be huge. But they don’t. Nuclear energy has been used in ships of 70 years. There are today 162 nuclear-powered vessels floating on or below the surface of the sea. Nuclear energy is used to power submarines and icebreakers, allowing them to remain operational for very long periods. So no, it is neither science fiction nor fantasy, and marine engineers are actively working on the proposal. Last August, academics from King’s College London delivered two workshops on floating nuclear power plants (FNPPs), in Jakarta and Manila. And the prominent marine engineer Stuart Bannantyne has also raised the same prospect in Australia. It’s a good place for it, since 92% of Australians live near the coast or by rivers. But the same is true of many countries.

Already, some countries have floating diesel- or gas-powered power stations in ports. The Russians were the first, in 2019, says Bannantyne. They placed a 70mw floating plant in the remote town of Vilyuchinsk. Since then the idea has spread. 

In November 2023, the International Atomic Energy Agency held an international conference on the idea of floating SMRs, looking to provide clean heat and power for remote coastal locations (and to replace carbon-based generators). The conference discussed all aspects of the option: licencing, regulation, safety, security and so on. Singapore, which suffers a lack of land space, is already thinking about the prospect in practical terms. A US shipping company is developing the concept of micro reactors on ships for shore-side locations. Floating reactors might even be a way to get power back to war-torn states once the shooting stops.

It is unlikely that floating nuclear power plants will replace onshore generation. But for remote locations and in times of trouble — well, watch this space.

Read Stuart Bannatyne’s article in Spectator Australiahttps://www.spectator.com.au/author/stuart-ballantyne/

Inverting the lesson to be learned

Not that we’ve actively got anything against John Naughton - or even The Observer - but this does seem to be an excellent example of taking the wrong lesson from events, even inverting it:

On Good Friday, a Microsoft engineer named Andres Freund noticed something peculiar. He was using a software tool called SSH for securely logging into remote computers on the internet, but the interactions with the distant machines were significantly slower than usual. So he did some digging and found malicious code embedded in a software package called XZ Utils that was running on his machine.

This then means that this open access software - which runs on pretty much every internet server in the world - is infected and poses a very great danger to us all, to civilisation and all that is right with the world.

This, however, is the wrong conclusion to draw from it:

Who knows? But two clear lessons can be drawn from what we know so far. The first is that we have constructed a whole new world on top of a technology that is intrinsically and fundamentally insecure. The second is that we are critically dependent on open-source software that is often maintained by volunteers who do it for love rather than money – and generally without support from either industry or government. We can’t go on like this, but we will. Those whom the Gods wish to destroy, they first make complacent.

Well, what’s the opposite to open source? Closed source, obviously. At which point a malicious actor might - imagine - introduce some similar malicious code into their proprietary software stack and we’d never know about it. Because we’d not be able to examine the source, not be able to see what they’d done. We’d just be victims without either knowing about it or being able to do anything about it.

Well, we might be able to do something about it we guess. If we knew about it. Which, actually, we just have done. We’ve ripped every Huawei chip out of the internet, haven’t we, on mere suspicion that this specific closed source manufacturer might do something like that?

Which is where we profess ourselves gobsmacked. Open source found the problem and a bit of software updating and we’re done. Closed source was merely suspected (No, Mr. Huawei, please don’t write in, we are not claiming you have or did) and we’ve had to physically rip kit out of the infrastructure. The gobsmacking coming from the conclusion reached, that closed source is therefore better and more secure?

Blimey.

Sure, we know things go wrong in open markets but closed designs for economies go wrong more expensively, for longer and worser……

Econ 101 for the win then

The Times gives us this headline and sub:

There has never been more music made — but most artists go hungry

Tech and streaming have made writing, recording and distributing a pop song easier than ever, yet reaching an audience of millions from your bedroom won’t necessarily make you rich

If only we had some form of human science that could explain this to us.

Ah, yes, that’s it, isn’t it? Supply and demand. Pages two and three (after the copyright page that is) of every introductory economics textbook ever. Econ 101 it’s called.

If there’s lots more supply - and if the cost of supply falls then there will be - then the price gained for that supply falls. A teen in a bedroom can now turn out a perfectly cromulent pop song on some few hundred pounds worth of equipment. We know this because some are indeed doing so.

Which is an interesting insight, no? Perhaps we should apply it to other things that we currently think are expensive in our society. Those that might, from those prices, be thought to be in short supply?

Houses? Make them cheaper to supply, see supply rise and prices fall.

We always did like the Sound of the Suburbs *

*No, not punk, competent musicians so disqualified

Everything, but everything, happens at the margin

Yes, yes, we know that neoclassical economics is just so out of style these days but the Marginalist Revolution was indeed correct - stuff happens at the margins:

It will cost jobs. It will harm the UK’s competitiveness. It will make the labour market less flexible. For those with long enough memories, the push back against Labour’s plans for a new deal for workers has a familiar ring to it. The same arguments were wheeled out before the national minimum wage was introduced a quarter of a century ago. All proved groundless.

Confounding the doomsters and gloomsters of the late 1990s, the minimum wage has raised the pay of millions of Britain’s lowest-paid workers by an average of £6,000 a year without lengthening dole queues. It has been described by one thinktank as the most successful economic policy in a generation.

It does rather depends upon the definition of success. As Chris Dillow pointed out back in 2005:

Tony Blair today announced plans to cut the jobs and hours of low-paid workers.

He’s going to raise the minimum wage, from £4.85 an hour to £5.05 in October. This as the Low Pay Commission recommends in its report today; it also recommends a rise to £5.35 in 2006.

The first rule of economics, of course, says that if you raise the price of something, you’ll reduce demand. And this means shorter hours and job losses for some of the low paid.

The Low Pay Commission pretends this won’t happen. Its chairman Adair Turner says: “Our analysis suggests that previous upratings [to the minimum wage] have largely been absorbed without adverse effects.”

Can I give Mr Turner some advice? Try reading your own report matey.

Now the effect is small at that labour price - the wage set back then might have cost perhaps 13,000 jobs, another estimate maybe 30,000.

Now, I’m not denying that some people will benefit from the higher minimum wage. Those who keep their jobs and hours will do so, at least marginally. And tax-payers will have a lower tax credit bill. But these gains come at a cost – of lower hours and jobs for some of the low-paid, and lower profits for many small businesses.

There’s no such thing as a free lunch. To pretend otherwise is either dishonest or economic illiteracy.

Now, perhaps that trade off is worth it to you - possibly less so to the 13,000 to 30,000 - but that’s an ethical matter and we can’t determine those for you.

The thing about those things that happen at the margins, those trade offs. At some point the balance swings to the deal being, on balance, more bad than good. The government went out and hired a respected minimum wage advocate - Arindrajit Dube - to tell them when this would be so with the rate of the minimum wage. That report is here. The answer is that when the minimum wage rises over 55% of median wage - and it’s the blended median, of full and part timers together - then on balance that rate is detrimental. No, not just detrimental to those poorest and least trained who are those who don’t get a job but detrimental to the society as a whole.

The current plan is to push the minimum wage up over 60% of the full time only median wage - very much higher than even advocates of higher minimum wages think optimal.

To adapt a commonly used metaphor - the government’s noted that jumping out of a ground floor window doesn't cause that much grief so they’ve decided to try it from the tenth.

Part of this is true, the conclusion is false on climate change

A mere 57 oil, gas, coal and cement producers are directly linked to 80% of the world’s greenhouse gas emissions since the 2016 Paris climate agreement, a study has shown.

We’ve not checked those numbers but perfectly willing to believe it, sure.

This powerful cohort of state-controlled corporations and shareholder-owned multinationals are the leading drivers of the climate crisis, according to the Carbon Majors Database, which is compiled by world-renowned researchers.

That’s bunk, even bunkum.

For the claim is that climate change is somethiing they are doing to us. If only those ghastly capitalists - and states actinfg as capitalists - were to wave their magic technological wands then the whole problem would disappear. Which is to entirely misunderstand what the problem is.

The actual problem is that we humans like being warm and toasty, enjoy travelling, being able to cook food and, in the case of cement, have some form of habitation to be warm and toasty in, in which to cook food and that place to travel to and from.

For all the claims that solar is really cheap, or that wind is, they’re not, not at all, not in the sense of being able to warm us, cook for us or transport us as and when we desire those things to be done. This is why energy prices continue to go skywards as we add more renewables to the mix.

As should also be obvious, if non-emittive forms of energy were in fact cheaper then we’d not have a climate change problem in the first place as we’d all have switched already. As that hasn’t happened then…..

The reason emissions exist, they continue, is not because 57 corporations are doing us down. It’s because 8 billion of us have a sharp eye for what produces what we desire. Therefore we buy these things.

It’s terribly human to go around insisting that the wotld’s not perfect because of them. They are doing this to us but it’s no more true about fossil fuel companies than it ever has been about the Rosicrucians, Trilateral Commission or the Illuminati. It us and our desires - toasty habitations and toasted food - causing the problem. So, it’s us that has to do something about it rather than piling the blame and the responsibility for action onto the capitalist scapegoats.

Perhaps we should pay less attention to the public health folks then?

Yes, yes, OK, this is something of a cheap shot, this is in The Guardian after all. Further, it’s by Devi Sridhar, so v cheap. But still:

For the past 75 years in global public health, one of the major priorities has been exponential population growth and Malthusian concerns that the supply of food on the planet won’t be able to keep up. In 1951, the world’s population was 2.5 billion, which increased to 4 billion by 1975, 6.1 billion by 2000, and 8 billion by 2023. Governments in the two most populous countries, India and China, even implemented, respectively, draconian policies such as forced sterilisation and a one-child restriction.

So global public health has concentrated, for the best part of a century, on being wholly, exactly and precisely wrong then?

How they went wrong is, of course, that they ignored economics. The Malthusian concern was wrong because they didn’t bother to look at agricultural productivity. Which increased faster than the population did - that’s why we’ve now 8 billion in a world awash with food. The exponential population growth was wrong because they didn’t understand the impact of both wealth itself and the economic liberation of women (two closely linked issues of course). The two, together, leading to the collapse in fertility rates.

No, really, it’s not contraception and it’s not abortion either. It is desired fertility that has fallen. As a result of that richer world - and greater liberation - leading to there being more things to do in a life. Therefore any one of them gets done less. That’s the flip side of opportunity costs and if we’re not going to include opportunity costs in our analysis then we might be doing something but it won’t be anything sensible.

So, if global public health has been majorly wrong pretty much since the inception of the field then how much weight should we put upon current obsession in the field?

As, yes, they’re trying to ban vaping so that more people will smoke cigarettes, aren’t they?

Which does lead to an interesting question. Is there any other example of a science getting worse a century in from its inception?

Defence Spending vs Tax Cuts?

Baroness (Pauline) Neville-Jones has issued a chilling warning about the ‘growing’ security threats and has called for the UK to spend 2.5% of GDP — even at the expense of tax cuts.

It’s a call to be taken seriously. She is a Conservative peer and former civil servant who chaired the Joint Intelligence Committee in the 1990s, served on the National Security Council, and was Minister for Security and Counter Terrorism in 2010-2011. She was also the first to argue that the UK needed to help Ukraine after Russia's 2014 attack on the Crimea. Ministry of Defence officials scoffed at the idea that Russia might have grander ambitions in the region. Now, the ongoing war makes that look recklessly optimistic.

In addition to Ukraine, there is currently an active war in Gaza, which could even escalate to Iran and elsewhere, plus over 35 major armed conflicts in Africa (including Burkina Faso, Cameroon, the Central African Republic, the Congo, Ethiopia, Mali, Mozambique, Nigeria, Senegal, Somalia, South Sudan and Sudan. . And China is throwing its military weight around in the South China Sea, the Pacific and the Indian Ocean.

Things are now striking very close to home. UK and European supply chains are being disrupted in the Red Sea and Straits of Hormuz. The UK’s National Cyber Security Centre has warned that the threat to vital UK internet systems is ‘enduring and significant’, with a rise in aggressive state-sponsored cyber-terrorism. And other western nations face the same threats.

It does indeed look like a very dangerous world. So are we doing enough about it? The international comparisons suggest not. For the first time in its history, the Russian government’s 2024 budget will set military and defence spending at 6% of GDP — more than goes on social spending. At the 14th National People’s Congress last month, China announced it would be raising its military budget by 7.2%. Not only does the world look very unsafe, it looks increasingly unsafe.

And all this is coming at the worst possible time. Donald Trump, who looks set to re-enter the White House at the end of the year, has already announced that he would turn off US support to Ukraine, and he has hinted that the US will not even suppose NATO countries unless they start spending more on their own protection. Meanwhile, the UK (like many other European countries) is deep in debt, thanks to a string of governments (including Conservative ones) that have put tax-and-spend and costly regulation ahead of entrepreneurship and economic growth,

Given the geopolitical and military threats around, that is not a great position to be in. And now, senior Conservatives like Neville-Jones are talking about strengthening defence even if it means sacrificing any growth-stimulating tax cuts. If only our governments had listened to the pro-growth, low-tax, balanced budget arguments much earlier.

If diversity increases profits then capitalists'll do it already

To remind of that idea derived from Adam Smith - capitalists are lazy, dumb and greedy. Not that he put it in quite those terms. Dumb in that finding the new profitable idea is difficult, lazy in that it’s an effort, greedy in that if someone else finds one then they’ll all copy it. This is, after all, why we have patents.

We also have Gary Becker telling us that taste discrimination - that’s the kind that’s just based upon gender, skin colour, prejudice in fact - is a money loser. It’s leaving rare and scarce talent on the table for someone else to use as a result of the prejudice of the discriminator.

So, we’d expect capitalists to not practice taste discrimination. For it’ll quickly become obvious that it’s a money loser, people ‘ll stop doing it. Obe of the proofs of this is the Jim Crow laws in the US last century. Those with the political power wanted to enforce discrimination. But to do so it was necessary to stop capitalists not doing so on the grounds of profit making.

More recently we’ve been told that greater diversity is in itself profitable. Further, that business needs to be between cajoled and forced into anti-taste discrimination and it’s for their own good. Despite all of the above the lazy dim and greedy are leaving money on the table.

Hmm:

In a series of very influential studies, McKinsey (2015; 2018; 2020; 2023) reports finding statistically significant positive relations between the industry-adjusted earnings before interest and taxes margins of global McKinsey-chosen sets of large public firms and the racial/ethnic diversity of their executives. However, when we revisit McKinsey’s tests using data for firms in the publicly observable S&P 500® as of 12/31/2019, we do not find statistically significant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity at mid-2020 and either industry-adjusted earnings before interest and taxes margin or industry-adjusted sales growth, gross margin, return on assets, return on equity, and total shareholder return over the prior five years 2015–2019. Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives.

Ah, so, one of those ideas that doesn’t survive actual examination then.

It’s worth noting what Becker is insisting is the driving force - competition for labour and talent. That is, this is an effect we’d only expect to see in a market system for labour. One of us was there to see and work in the tail end of the Soviet system. Which was, as we all know a monopsony - the state was the single buyer of labour. In that system your nationality was listed in your passport, one of those possbile nationalities was “Jew”. To our certain knowledge the graduates of one of the Mosow computing institutes who had that nationality were not offered jobs in any of the nice areas of the country nor in any of the interesting jobs. Instead, and specifically because of their nationality, very boring heavy industry out in the boondocks of those newly created industrial towns. Come the failure of the revolution of course all that changed markedly and people got hired by talent again.

Such taste dscrimination will really only happen in such a monopsony. In a market system the benefits to the individual of not doing so are too great for it to persist. Which neatly explains the absence of replicability of the McKinsey results. Everyone is already hiring on talent therefore - given that talent is not racially nor ethnically linked - there is no link between race or ethnicity and financial results.#

Markets for the win once again.