Government bans fracking in 25% of the country

The government has just announced that it’s pretty much going to ban fracking for oil and or gas in 25% of the country. This is not actually what they’ve said, of course not, but it is what they mean. For they’re saying that the rules will make fracking in national parks and or areas of outstanding natural beauty much more difficult. To the point that only if a deposit is of great economic importance will drilling be allowed.

We might think this is just fine: we’d not drill under Westminster Abbey after all and there might be parts of the country that are simply so beautiful that we wouldn’t want anyone to put a couple of shipping containers of equipment behind concealing hedges. That’s possible, even if unlikely.

However, the part that people will miss here is quite how much of the country this blocks off. Some 25% of it in fact.

National parks and other areas of important countryside will be protected from fracking, ministers will announce in a move that will head off anger in the Tory heartlands ahead of the election.

While stopping short of a total ban, the Government will unveil new planning guidance to make it harder to drill fracking wells in national parks and areas of outstanding natural beauty.

In a significant concession, the new rules state that fracking should only be allowed in the most precious areas of British countryside in “exceptional circumstances”.

Any will say “Oh, how sensible” to that. But then add in quite how much land this covers. National Parks cover some 10% of the country. Areas of Outstanding Natural Beauty a further 15%. People don’t seem to realise quite how much of the country is already being pickled in aspic.

There’re very definitely people who don’t want us to have access to this lovely cheap energy for whatever reason. Sadly, some of them are currently in government and making the rules.

A typically wise observation from Don Boudreaux

This is also a rather clever observation. We’re told that both wealth and income inequality are rising strongly, that this is of course terrible, and that this leads to rioting in the streets and the stringing up of plutocrats from lamp posts. Yet when we look out our windows we see a distressing lack of the wealth swinging gently in the breeze, all the Occupy folk have gone home to polish their nose rings and there just doesn’t seem to be a mass frustration with matters at all.

How can this be? When the clerisy tell us that the world should be in flames and yet it remains resolutely unburning? The answer is, as Boudreaux points out, that wealth and income inequality are a lot less important than we’re told they are:

One reason, I’m sure, is that rising inequality in monetary incomes or wealth is NOT the same thing as rising inequality in economic welfare (extra emphasis intentional). It’s not even close – although rare is the “Progressive” who acknowledges the reality that changes in income (or wealth) are not identical to changes in consumption-ability (that is, to changes in real economic well-being). Inequality of monetarily reckoned income or wealth can rise while inequality of consumption opportunities can fall.

We might want to worry about consumption inequality, if that does indeed become too extreme.But we’ve not particularly got very much of that in our current society. Sure, the plutocrats can have hot and cold running yachts and £10,000 bottles of champagne. But no one thinks that it’s particularly important that they can and we don’t. We’ve not particularly got a shortage of even a serious limitation on what we do care about the consumption of. A roof over our heads, decent food, nice clothes and so on and on. The rich may have nicer pants but they still put them on one leg at a time and they’re still only wearing one pair at a time too.

The economically important form of inequality is that of consumption opportunities. And one good reason why we’ve not got those riots in the streets is simply that we’ve got a lot less of that than we do income or wealth inequality.

At some point we really do need to tell certain politicians to just toddle off

And that point may have been reached for one of them:

“Supersized” food and drinks should be banned by law in a bid to combat Britain’s obesity epidemic, the new head of the Commons health select committee has said.

What? We’re going to have a law now where a willing purchaser cannot negotiate with a willing supplier to gain 600 calories in return for folding money instead of 400 calories for a smaller amount?

What?

Dr Sarah Wollaston, a Conservative MP and former GP, said the state had a “duty to intervene” to protect current and future generations from unhealthy habits threatening to shorten their lives.

This sort of proposed lawmaking does not bode well for the efficacy of open primaries, does it?

The former GP called for a direct ban on “supersized” foods and drinks, so that manufacturers would be restricted to producing chocolate bars, junk food meals and fizzy drinks in standard sizes.

She said: “Why aren’t we taking more direct steps around supersizing? You go into the cinema and someone will ask if you want to supersize for an extra 20p – we don’t need that.”

Here’s how things work in a free and liberal society: you don’t get to decide what we would like to have. We get to decide what we would like to have. And if we want more chopped gristle for a paltry extra sum of money then we are and should be perfectly at liberty to have that. As are people to be allowed to sell that to us.

That moral point being entirely aside from the practical issues of course. For we’re not all entirely stupid and if we want more than the Wollaston Burger we’ll order two.

And there’s an interesting legal point here as well. Clearly she thinks that we’re all too damn stupid to be allowed to decide what to put into our own bodies. Despite their being, you know, ours? OK, so she obviously does think that. But she’s an elected politician: one, clearly, elected by people too stupid to know what they’d like to eat. At which point she’s not really got all that much authority, does she?

Either she’s right and we’re all morons and thus she should have no power having been elected by said morons or we’re not morons and so she has a moral claim to power. But if we’re not morons then banning us from eating a handful of extra french fries isn’t necessary, is it?

Perhaps the best we can hope for is that Dr. Wollaston disappears in a puff of of her own self-contradictory logic as with some of Oolon Colluphid’s philosophical creations. but lord forbid that she ever gets to write the law for this country.

Are all macroeconomic models actually wrong?

An excellent little spot by Noah Smith on who uses what sort of economic model to do their forecasting:

Suppose you’re a macro investor. If all you want to do is make unconditional forecasts — say, GDP next quarter – then you can go ahead and use an old-style SEM model, because you only care about correlation, not causation. But suppose you want to make a forecast of the effect of a government policy change — for example, suppose you want to know how the Fed’s taper will affect growth. In that case, you need to understand causation — you need to know whether quantitative easing is actually changing people’s behavior in a predictable way, and how.

This is what DSGE models are supposed to do. This is why academic macroeconomists use these models. So why doesn’t anyone in the finance industry use them? Maybe industry is just slow to catch on. But with so many billions upon billions of dollars on the line, and so many DSGE models to choose from, you would think someone at some big bank or macro hedge fund somewhere would be running a DSGE model. And yet after asking around pretty extensively, I can’t find anybody who is.

One unsettling possibility is that the academic macroeconomists of the ’70s and ’80s simply bit off more than they could chew. Modeling a big thing (like the economy) as the outcome of a bunch of little things (like the decisions of consumers and companies) is a difficult task. Maybe no DSGE is going to do the job. And maybe finance industry people simply realize this.

And at this point we might be able to work out what’s wrong with academic macroeconomics. It’s not quite economics to simply shout “Follow the money!” but we can adapt that very useful idea of revealed preferences to tell us what’s going on here. That useful idea being that we shouldn’t look at what people say they’ll do but rather at what they actually do. And we can argue that academic economists are trying to successfully predict what is going to happen as a result of changes in government policy if we should so wish to. But combine that with that follow the money idea and we’d expect the financial markets economists to have been subjecting their models to more rigorous testing. After all, real money is at stake, not just whether you manage to get published in one or another journal.

We should admit that this does rather play to our prejudices here. We’re not great fans of macroeonomics at all, agreeing with Keynes that in the long run we’re all dead but adapting that to insist that in the long run it’s all microeconomics. Get incentives and the price system right and pretty much all other economic problems will either solve themselves or shrink to their not being problems that we want or need to worry about.

This of course enrages macroeconomists but as we don’t get invited to their parties anyway we can shoulder this burden well enough.

Underneath that jollity though there is a much more serious point. Macroeconomics is really a very under developed approach of looking at the world. We rather take the Hayekian line that it always will be, given the dispersed nature of information and the impossibility of having enough of it in real time to be able to do anything useful with it. But that there’s pretty much no one macro theory that you could get all macroeconomists to sign up to is another indication that it’s really just not ready for prime time yet.

And if it’s not ready for prime time then we really shouldn’t be using it to try and guide our actions on the economy. We should, therefore, concentrate our efforts on those areas where we do know we’ve largely got the appropriate and necessary knowledge, about those incentives and that price structure.

Remind us again why government should run all the schools

This story might cause a little pause for thought:

One of the most vivid arithmetic failings displayed by Americans occurred in the early 1980s, when the A&W restaurant chain released a new hamburger to rival the McDonald’s Quarter Pounder. With a third-pound of beef, the A&W burger had more meat than the Quarter Pounder; in taste tests, customers preferred A&W’s burger. And it was less expensive. A lavish A&W television and radio marketing campaign cited these benefits. Yet instead of leaping at the great value, customers snubbed it.

Only when the company held customer focus groups did it become clear why. The Third Pounder presented the American public with a test in fractions. And we failed. Misunderstanding the value of one-third, customers believed they were being overcharged. Why, they asked the researchers, should they pay the same amount for a third of a pound of meat as they did for a quarter-pound of meat at McDonald’s. The “4” in “¼,” larger than the “3” in “⅓,” led them astray.

That story’s too good to want to check if it’s actually true or not. But if it is then why would we continue with an education system that has had more than a century to try to get things right but has manifestly failed to do so?

Quite, Gove and others are onto the right sort of policy, freeing the education system as much as possible from that dead hand of said state.