Immigrants, they get the job done

The Government needs to rethink and improve their immigration plans to a more liberal system which reduces restrictions and allows a more free movement of migrants.

The UK has notoriously hostile immigration policies. This is hardly surprising for a Conservative government, but their hostility towards migrants were exacerbated during Theresa May’s tenure as Home Secretary: pledging to fulfil Cameron’s manifesto policy to reduce net migration by ‘tens of thousands’. This included the introduction of the Right to Rent Scheme and cutting fundamental services (including the NHS) to illegal immigrants. Since then, the Government has continued to commit to hostile immigration policies: restricting illegal immigrants in ways which have been unduly detrimental to legal asylum seekers and reducing low skilled migration.

Earlier this year, the UK introduced a points-based immigration system which required migrants to have a total of 70 points to be able to work in the UK. The characteristics however are unreasonably stringent and make it excessively difficult for ‘low skilled’ workers to migrate to the UK. Such characteristics include, for instance, having a relevant PhD, having a salary of at least £25,600, meeting English speaking requirements, having a secure job offer in a ‘highly skilled area’ and so on. At Conservative Party Conference, Suella Braverman made a speech in which she pledged ‘to deliver the kind of migration that grows our economy’ and believes the way to do this is by ‘not relying wholly on low skilled foreign workers’. It seems therefore that the Government will continue in their aim to reduce low skilled immigration. 

One of the most fundamental problems with this commitment is largely a result of the misconstrued economics behind their policies. The Government continuously declares themselves as a pro-growth party, but their dedication towards reducing the number of low skilled migrant workers is only restricting their ability to fulfil this. This is because low skilled migrants are needed to fill employment gaps. Despite there being a plentiful number of jobs available, due to the mismatch between these vacancies and the jobs people are looking for, these roles are not being filled. Persistent employment gaps can be hugely detrimental to the economy. This is partly a result of the increased wages firms have to offer to attract workers into these vacancies, ultimately leading to increased business costs which are then passed onto the consumer through higher prices. This then leads to less consumption in the economy as people restrict their spending, leading to economic contraction – going against the Government's initial aims to generate growth. As reported by the Financial Times, ‘UK businesses expect to raise their prices at the fastest pace since records began to offset higher wage costs driven by a tight labour market’. 

Despite these concerns, the Government continues in their justification that by creating a gap in the labour market, wages of workers will rise as companies compete for scarce labour. As a result, business costs will surge and companies will be incentivised to invest in capital rather than labour, thus increasing productivity. However, this assumes that all companies will be able to adapt to inflated wages and act accordingly. In reality, this is not the case. With soaring energy costs, supply chain problems and an increase in inflation, many companies no longer have the ability to pay employees higher wages. At best, this negatively impacts a company's ability to meet output demands and at worse, makes firms go bust. With these risks, businesses are less likely to invest, despite the government’s initial conceptions that with higher business costs, investment will increase. In addition to reduced investment, as firms go bust, job losses will become inevitable and consumers will face significantly less disposable income. This again will lead to a reduction in consumption in the economy. Once more, even when firms have the ability to invest, in certain sectors of the economy such as childcare, investment into capital isn’t cost-efficient as such jobs are difficult to automate. Thus the Government’s assumption that all firms will choose to innovate when wages increase is flawed. 

Moreover, in addition to price increases, job vacancies damage the economy as low skilled workers complement higher skilled workers. By complementing the existing workforce, low skilled immigrants allow for a more effective, functional economy. One such example of this complementarity is ‘the nanny effect’ – this is that low skilled workers provide childcare and house care services such as cleaning which allow high skilled workers the opportunity to return back to work after childbirth. Thus, where there are low skilled immigrants present, more high skilled workers can return to their roles in the labour market. 

It is clear therefore that low skilled immigration isn’t as detrimental to the economy as the Government makes it out to be- and the only benefit of introducing such anti-growth policies is because they believe it is what the British public want and thus, what will keep them in power. However, even this seems counterintuitive, particularly as statistics show a warming of public attitudes towards immigration. In fact, support for reducing immigration is at the lowest it has been since 2015 with only 4 in 10 people in the general public preferring a reduction in immigration. Moreover, latest findings conclude that 46% of people believe that immigration has had a positive impact on Britain, in contrast to a mere 29% of people believing it has had a negative impact.

The Government ought to understand that, however politically controversial they deem immigration to be amongst the electorate, there is no denying that it brings economic benefits. Now that the public don’t have particularly negative views on immigration, rather than pursuing a policy that reduces long term growth and living standards, the Government needs to rethink and improve their immigration plans to a more liberal system which reduces restrictions and allows a more free movement of migrants, including low skilled migrants. It would also be economically beneficial for the Government to better communicate the benefits of free movement to the British people rather than blaming migrants for Britain's economic downfalls, this in turn will further reduce people’s support for hostile immigration policies and thus will support economic growth aims.

Applications for Freedom Week 2016 are now OPEN!

 

Freedom Week is an annual, one-week seminar at Sidney Sussex College, Cambridge which teaches students about classical liberalism and free market economics. It is open to over-18s who are currently attending or about to start university. The event is jointly run by us and the IEA and will be held July 4th - 9th.

The week is entirely free to attend: there is no charge whatsoever for accommodation, food, tuition or materials.

If you are lucky enough to be successful in your application, you will spend the week immersed in talks from some of Britain's leading thinkers. Seminars will cover the foundations, history and underlying economic principles of classical liberalism, as well as discuss cutting-edge research and contemporary debate from within the movement.

As if that wasn't enough, there'll be as many evening activities as you can handle, including a BBQ, a drinks reception, several dinners in the College, trips to local pubs and a seriously fun pub quiz. Attendees will also be able to try their hand at ‘punting’ on the River Cam, and will have ample free time to explore Cambridge.

Still not convinced? Let our website cinch it for you: all this information and lots more can be found here.

Competition for the few highly coveted places is intense, so get your applications in ASAP before someone else does!

On interest rates

In his 2015 Ayn Rand Lecture, US investment banker Ken Moelis explained why low interest rates might be the new norm – and a perfectly rational one, rather than just a desperate attempt by central banks to keep things afloat. The reason he gave is that, thanks to capitalism, things are getting better and cheaper. If you don’t spend your money today, and put it under the mattress, it will buy even more in a year or so. And if you lend your money to someone and they repay you interest-free in a year’s time, your principal will buy you more than it could a year ago. In certain sectors – consumer electronics, for example – it buy you a lot more, so fast are prices falling. Thus a nominal interest rate of zero is actually a real, positive interest rate. Investors are willing to accept lower rates because falling prices boost their real returns.

This made me think more about falling prices – not prices that are falling because of inept, over-restrictive monetary policy, but prices that are falling because we are getting better and better at producing stuff. Specifically, I reckon that we are getting better and better at producing stuff at an accelerating rate.

Why? Well, we have been building up capital for a long time, so it is not surprising that production is getting more efficient. But something else has magnified that productivity. In the last 25 years, countries such as India, China and those in Eastern Europe have become part of the global economic system. And I think the economic network is a bit like a phone network – the more connections you add, the (exponentially) more useful it becomes. Add a fair chunk of the world population onto the capitalist network, and its performance rockets spectacularly too. New ideas, new resources, new competition – it sharply and disproportionately boosts the efficiency of the economic network, drives costs and prices down and quality up. And each improvement breeds others. So things get cheaper and cheaper, faster and faster.

Globalisation, in other words, is making our money go further at an increasing rate. We no longer need large nominal returns in order to do well by lending it out. Which is why nominal interest rates in the future are likely to be much lower than they have been in the past.

This is why we support a carbon tax of course

Every time we mention climate change around here we get rather a lot of stick. People insisting that it's not happening, it's just a front to impose the Forward to the Middle Ages movement on us all and so on. And it's even possible that those things are true. However, that's not actually how we look at it. There's a sufficient head of political steam under this process now that we know that people are going to do something about it. Our energy is thus concentrated on trying to make sure that people don't do stupid things about it:

One of Britain’s dozen remaining coal-fired power plants is to be converted to burn wood pellets shipped in from North America, after the European Commission approved a £1bn subsidy contract for the project. RWE's Lynemouth power station in Northumberland is due to close by the end of this year under environmental rules, but will now be resurrected as a biomass plant following EU state aid approval for the consumer-funded subsidies. The 420 megawatt plant, which produces enough electricity to power 450,000 homes, could be up and running again within 18 months, subject to a final investment decision early next year, RWE said.

Shipping a million or more tonnes a year of low energy density wood pellets across the North Atlantic in the name of lower emissions just isn't sensible. In fact, it's stupid. But this is the sort of thing that happens when no one does in fact impose the correct solution to climate change if any solution is in fact needed. That correct solution being the carbon tax which we have been shouting about for this past decade.

The subsidy to this adventure will come in the form of the feed in tariff, at £105 per MWhr. That's more than the subsidy to either wind power or solar for goodness sake. And they don't even have to build the power station to get it, just convert already sunk capital.

This is not, in fact, just stupid, it's insane. And it's exactly the sort of uselessness that a carbon tax would stop. Stick the social cost of carbon into the price system and allow the market to work out what is the cheapest manner to provide the energy that people desire at that price. Rather than politicians and bureaucrats spraying our money around on things that patently are insane.

Protecting home industry is not a steel

The amount we've heard from politicians and social commentators this week on how unfortunate the UK steel industry job losses are only goes to show how many people are still unapprised of even the basics of economics. Yes it's true, because China can produce and sell steel so much more cheaply than us, it will have a negative effect on our steel industry. But overall that's a good thing - short of wanting buyers to pay inflated prices for UK steel rather than more competitive prices for Chinese steel - which, frankly, only the most narrow Anglo-centric person could desire - it has to be realised that this is just the market's way of signalling that UK steel production is now less efficient than production in other countries, and that the people in the UK steel industry either need to be more competitive or look to do something else. But even if you can't make that argument fly - and goodness only knows why you couldn't - here's something else you should know: artificially protecting UK  industries to stave off foreign competition hurts other UK industries in the process. This was the wisdom of international trade laid down most famously by David Ricardo. Let me illustrate how impeding the process of free international trade actually harms the people the government wants to protect – its own industry (and thus, its own citizens).

Let’s suppose there is a car factory in Newcastle that isn’t doing as well as the executives or the government would like, due to consumers’ preference for cars in Japan. The government introduces a policy that favours car production in Newcastle over car imports from Japan. How on Earth could that not be good for the British economy – Britain’s gain is Japan’s loss, right? Wrong. Quite simply, what you put into the pockets of the car factory in Newcastle you take out of someone else’s pockets elsewhere in Britain (as well as having people probably paying more for their cars). Consider Slough’s boiler factory; what you don’t see is an almost invisible chain of events; the boilers made in Slough are shipped off to Japan and sold to a company that makes its money producing nuclear reactors, the buyers of which are companies who trade in mineral oils, and those companies deal with companies who make cars in Japan and ship them to Britain.

In other words, there is a complex economic process that is going on outside of your peripheral vision, whereby both the car factory in Newcastle and the boiler factory in Slough are both bringing cars into Britain. That is to say, if you protect the car factory in Newcastle from competition you must damage Slough’s boiler factory because somewhere down the line they are the competition.

The Newcastle car illustration is precisely how the argument should be applied to steel in Scunthorpe and Lanarkshire. So the next time you hear a politician announcing how much he or she wants to do to protect British producers in one industry from foreign competition, be aware that he or she is unknowingly proposing an action that hurts other industries in Britain, and amounts to a net loss in economic efficiency.

Freedom fighter John Von Kannon

We are sad to report the death, at 66, of John Von Kannon, a friend and leading figure in the freedom movement in Washington DC. He was Vice President of the Heritage Foundation, which he had served since 1980 as a thinker, doer and fundraiser – one of the founding generation that included Ed Feulner, Phil Truluck and Stuart Butler. John – nicknamed "The Baron" – Von Kannon was one of the founders of The American Spectator where he learnt the art of raising money. Blessed with great humour, an easygoing manner but also great focus and determination, he helped raise the Heritage Foundation's budget from $4m to over $90m. He was also instrumental in building up conservative and free-market think-tanks and campaign groups into an effective national network.

Among other awards for his work for liberty, he received the Heritage Foundation's highest honour, the Clare Booth Luce award – previous winners included Ronald Reagan and Margaret Thatcher – and Ashland University's John Ashbrook award. He was also elected a 'distinguished member' of the Philadelphia Society. He was a trustee of the Foundation for Research on the Economics of the Environment and Vice President of the Pacific Legal Foundation, a leading public interest law foundation.

John was charming, funny, effective and constant. He will be sorely missed by all who knew him.

Opposing environment-friendly rice with higher yields

The MIT Technology Review reports that scientists have produced a genetically modified rice strain that emits far less methane than traditional varieties.  It emits one thirtieth as much in summer and half as much in winter.  It does this because a single gene from barley has been inserted to make the plant yield 43% more grain per plant, so less carbon goes into the roots and the soil to be converted by microbes into methane.

Despite its enhanced yield and lower greenhouse gas emission, it is estimated that it could be 10-20 years before it becomes available to farmers.  This is because scientists will have to use traditional breeding methods to produce a rice that is scientifically the same, including the same gene.  As Chuanxin Sun, the report's senior author, puts it: 

“Right now of course it’s a GMO issue, and we cannot deliver this variety directly to farmers. We have to use traditional breeding methods and breed the new, society-acceptable variety for farmers.”

It is thanks to completely unwarranted scare stories from environmental groups that progress in genetic modification has been held back.  Millions of children have suffered blindness or death because of opposition to 'golden rice' modified to biosynthesize beta-carotene, a precursor of vitamin A, to combat a shortage of dietary vitamin A in some areas.

Millions more live at precarious subsistence levels because they are denied access to GM crops with enhanced yield or greater saline or drought resistance.  Innumerable field tests have failed to show adverse effects on humans, yet many in the environmental lobby campaign for all GMOs to be rejected.  They do not hesitate to trample down experimental crops planted with the support of democratically elected governments.

Many of the NGOs will undoubtedly oppose the new rice, despite its hugely increased yield and smaller environmental footprint.  Scare stories are what they do, and they keep the subscriptions and donations rolling in.

In memoriam: John Nash

It is with great sorrow we hear that one of the greatest minds in human history died this weekend in a car crash with his wife while they were returning home from an airport. John Forbes Nash Jr., was widely known as one of the founders of cooperative game theory whose life story was captured by the 2001 film "A Beautiful Mind", is truly one of the greatest mathematicians of all time. His contributions in the field of game theory revolutionized the way we think about economics today, in addition to a whole number of fields - from evolutionary biology to mathematics, computer science to political science. 

John Nash was born in 1928 in Bluefield, West Virgina. Even as a child he showed great potential and was taking advanced math courses in a local community college in his final year of high school. In 1945 he enrolled as an undergraduate mathematics major at the Carnegie Institute of Technology (today Carnegie Mellon). He graduated in 1948 obtaining both a B.S. and an M.S. in mathematics and continued onto a PhD at the Department of Mathematics at Princeton University. There's a famous anecdote from that time where his CIT professor Richard Duffin wrote him a letter of recommendation containing a single sentence: "This man is a genius". Even though he got accepted into Harvard as well, he got a full scholarship from Princeton which convinced him that Princeton valued him more. 

While at Princeton, already on his first year (in 1949) he finished a paper called "Equilibrium Points in n-Person Games" (it's a single-page paper!) that got published in the Proceedings of the National Academy of Sciences (in January 1950). The next year he completed his PhD thesis entitled "Non-Cooperative Games", 28 pages in length, where he introduced the equilibrium notion that we now know as the Nash equilibrium, and for which he will be awarded the Nobel Prize 34 years later. It took him only 18 months to get a PhD: he was 22 at the time. 

While at Princeton he finished another seminal paper "The Bargaining Problem" (published in Econometrica in April 1950), the idea for which he got from an undergraduate elective course he took back at CIT. It was Oskar Morgenstern (the co-founder of game theory and the co-author of the von Neumann & Morgenstern (1944) Theory of Games and Economic Behavior) who convinced him to publish that bargaining paper. The finding from this paper will later be known as the Nash bargaining solution.  At Princeton he sought out Albert Einstein to discuss physics with him (as physics was also one of his interests). Einstein reportedly told him that he should study physics after Nash presented his ideas on gravity, friction and radiation. 

Illness and impact

After graduating he took an academic position at MIT, also in the Department of Mathematics, while simultaneously taking a consultant position at a cold war think tank, the RAND Corporation. He continued to publish remarkable papers (his PhD thesis in The Annals of Mathematics in 1951, another paper called "Two-Person Cooperative Games" in Econometrica in 1953, along with a few math papers). He was given a tenured position at MIT in 1958 (at the age of 30), where he met and later married his wife Alicia. However, things started to go wrong from that point on in his personal life and career. In 1959 he was diagnosed with paranoid schizophrenia, forcing him to resign from MIT. He spent the next decade in and out of mental hospitals. Even though he and his wife divorced in 1963, she took him in to live with her after his final hospital discharge in 1970. 

Nash spent the next two decades in relative obscurity, but his work was becoming more and more prominent. Textbooks and journal articles using and applying the Nash equilibrium concept were flying out during that period, while most scholars that built upon his work thought he was dead. It was not only the field of economics - where the concepts of game theory were crucial in developing the theory of industrial organizations, the public choice school and the field of experimental economics (among many other applications) - it was a whole range of fields; biology, mathematics, political science, international relations, philosophy, sociology, computer science, etc. The applications went far beyond the academia; governments started auctioning public goods at the advice of game theorists, business schools used it to teach management strategies. 

Arguably the most famous applications were to the cold war games of deterrence that explain to us why the US and Russia kept on building more and more weapons. The Nash equilibrium concept explains it very simply - it all comes down to a credible threat. If Russia attacks the US it must know that the US will retaliate. And if it does, it will most likely retaliate with the same fire-power Russia has. Which will lead to mutual destruction of both countries. In order to prevent a full-scale nuclear war (i.e. in order to prevent the other country from attacking), the optimal strategy for both countries is to build up as much nuclear weapons as they can to signal to the other player what they're capable of. This will prevent the other player from attacking. If they are both rational (i.e. if they want to avoid a nuclear war and total destruction) they will both play the same strategy and no one will attack. Paradoxically, peace was actually a Nash equilibrium of the arms race!

Long-overdue recognition 

Little did Nash have from all this. He had no income, no University affiliation and hardly any recognition for his work. But this all changed in the 1990s when he was finally awarded an overdue Nobel Prize in Economics in 1994, with fellow game theorists John Harsanyi and Reinhard Selten "for their pioneering analysis of equilibria in the theory of non-cooperative games". 

His remarkable and actually very painful life story was perfectly depicted by his autobiographer and journalist Sylvia Nasar in her two books; "A Beautiful Mind" (on which the subsequent motion picture was based) and  "The Essential John Nash", which she co-edited with Nash's friend from college Harold Kuhn (also a renowned mathematician). As Chris Giles from the FT said in his praise of the latter: "If you want to see a sugary Hollywood depiction of John Nash's life, go to the cinema. Afterwards, if you are curious about his insights, pick up a new book that explains his work and reprints his most famous papers. It is just as amazing as his personal story." The book contains a facsimile of his original PhD thesis, along with eight of his most important papers (from game theory and mathematics) reprinted. 

After the Nobel Prize success things got better for Nash. By 1995 he recovered completely from his "dream-like delusional hypotheses", stating that he was "thinking rationally again in the style that is characteristic of scientists." Refusing medical treatment since his last hospital intake, he claimed to have beaten his delusions by gradually, intellectually rejecting their influence over him. He rejected the politically-oriented thinking as "a hopeless waste of intellectual effort". In 2001 he remarried his wife Alicia and started teaching again at Princeton, where he continued his work in advanced game theory and has moved to the fields of cosmology and gravitation. 

The Phantom of Fine Hall, as they used to call him in Princeton due to his mystique and the fact that he used to leave obscure math equations on blackboards in the middle of the night, will never cease to raise interest, praise and awe. Nash was another perfect example of a thin line between a genius and a madman. Luckily, in the end, his genius prevailed. 

So what is the Nash equilibrium? 

The reason why this concept was so revolutionary was because it significantly widened the scope of game theory at the time. In the beginning, following the von Neuman and Morgenstern setting, game theory was focused mostly on competitive games (when the players' interests are strictly opposed one to another). These types of games were known as zero-sum games, limiting to a significant extent the scope of game theory. Nash changed that by introducing his solution concept so that any strategic interaction between two or more individuals can be modelled using game theory, where the most unique solution concept is the Nash equilibrium. Games are not zero-sum, they aren't pure cooperation nor pure competition. They are a mixture of both. 

The idea of the Nash equilibrium resonates from the simple assumption of rationality in economics. The term rationality in economics is not the same as common sense rationality we all think about upon hearing this term. It refers to the idea that each individual will act to achieve his or her own objective (maximize their utility), with respect to the information the person has at his/her disposal. The concept of rationality in economics is therefore idiosyncratic - it depends on whatever a particular individual deems rational for themselves at a given point of time. It rests upon the idea that a person will never apply an action that hurts him/her in any way (lowers his/her utility). 

The Nash equilibrium is the most general application of this idea. A non-cooperative game, according to Nash, is "a configuration of strategies, such that no player acting on his own can change his strategy to achieve a better outcome for himself". In other words, if there exists another strategy that can make an at least one individual better off, then the outcome does not satisfy the condition for a Nash equilibrium. 

Let's look at an example. The most simplified example of how a Nash equilibrium solution concept works is the Prisoner's Dilemma game. Consider two robbers arrested for a crime. They are both being interrogated by the police in separate rooms. They are presented with two options (strategies): keep quiet (silent) or betray the other guy (betray). If they both remain silent, they both only get a light sentence of a year in prison for obstructing justice. If one betrays the other and the other guy keeps silent, the betrayer is released with zero imprisonment, and the other guy gets pinned for the whole crime and gets nine years in prison. If they both betray each other, they both get six years in prison. What's the optimal thing to do?

Applying the Nash equilibrium concept we need to find a strategy that is the best response of one player to whatever the other player may decide. When no players have any incentive to deviate from a set of strategies (strategies are always a pair in two-person games) we can say that this set of strategies is a Nash equilibrium. 

Consider the game depicted in the table below:

It would seem that the best strategy they can apply is for both to keep silent. If they do, they both get only a light sentence. However this strategy set (-1,-1) is not a Nash equilibrium since at least one person has an incentive to deviate. In fact, they both do. If Prisoner 1 decides to defect and betray Prisoner 2, he gets 0 years in prison, while Prisoner 2 gets 9 years (third cell, with payoffs 0,-9). Prisoner 2 applies the exact same reasoning (second cell with payoffs -9,0). In the end since the better strategy is always to betray, they both play the same strategy (betray, betray) and end up with payoffs (-6,-6) which is the Nash equilibrium of this game. From this point no player can deviate and make himself better off. If Prisoner 1 decides to go for silent he risks getting 9 years in prison instead of 6. There is no way for them to reach a cooperative equilibrium in this simplified scenario.

Naturally, cooperative games do exist and they help us understand how game theory solves for example the free rider and the collective action problem. It was Elinor Ostrom (1990) who applied these concepts to reach her optimal solutions in solving the common pool resource problem in small groups with persistent interactions. Robert Axelrod (1984) is another, finding that even though the defection strategy is more rational, sometimes various other factors will result in a cooperative outcome between the players. The Nash equilibrium helped initiate a huge amount of research on these and many other problems within and outside the academia. The reason game theory is usually considered as the most applicable economic theory - in that it can be used to solve real-life problems - is purely thanks to John Nash. 

Rest in peace. 

Most notable papers: 

"Equilibrium Points in N-person Games". Proceedings of the National Academy of Sciences 36 (36): 48–9. (1950)

"The Bargaining Problem". Econometrica (18): 155–62. (1950)

"Non-Cooperative Games". Annals of Mathematics 54 (54): 286–95. (1951)

"Real Algebraic Manifolds". Annals of Mathematics (56): 405–21. (1952)

"Two-Person Cooperative Games". Econometrica (21): 128–40. (1953)

"The Imbedding Problem for Riemannian Manifolds". Annals of Mathematics (63): (1956).

"Continuity of Solutions of Parabolic and Elliptic Equations". American Journal of Mathematics 80 (4): 931-954. (1958)

It was the Yanks wot won it

This isn't the result we usually think of. It's more likely that we'll think that the terrible loss of life by the Soviets, or perhaps plucky little Britain, fighting on alone, is really what won the battle against the Nazis. but the wisdom of the crowds has it right again:

As the world celebrates the 70th anniversary of Allied victory in Europe, millions in the UK will honour the role played by British forces in the defeating Nazi Germany.

According to a new poll, however, most other countries look to the United States as the country that did the most to vanquish Adolf Hitler.

A YouGov survey asked respondents from the US, Britain, and several European countries who they thought was most essential to defeating Germany in the Second World War and the US was the top choice in all but the UK and Norway.

Modern war isn't won by battles. It's won by winning the war. And that's more a matter of logistics than anything else. And it's at that point that America becomes so important. The vast productive capacity of the American economy meant that Germany was going to be defeated, whatever else happened, in the end. Once, that is, that the United States had come into the war on the side against Germany.

We can talk a lot about tactics, battles, who suffered most (that has an easy answer, those inbetween Germany and Russia, those in the Bloodlands) but the eventual outcome was never really in doubt. Not once the American economy entered on the one side.

The Lord's Digital Agenda

On Tuesday the House of Lords Select Committee on Digital Skills released the 144-page report ‘Make or Break: The UK’s Digital Future’. It’s a typical government report, calling for ‘immediate and extensive action’ in something or other — and in this case, unifying government's current, disjointed digital initiatives with the launch of a grand ‘Digital Agenda’. (This masterplan includes such fabulous ideas as the middle-aged men in central government ‘future-proofing our young people’ through things like bolting-on a digital element to all apprenticeship schemes.) One of the report’s most newsworthy findings was London’s poor broadband speed, comparative to other European capitals. In a ranking of their average download speed London came 26^{th —} nestled between Warsaw & Minsk —whilst the likes of Bucharest, Paris and Stockholm topped the chart. London also came 38^th in a rating of the UK's cities’ speeds (although it's worth noting that Bolton, the UK’s fastest city, would make the European capital ranking’s Top 10). The Lord's report is also concerned with the persistence of internet ‘not spots’ in urban areas, universal internet coverage and the rollout of superfast broadband. In response, it calls on the government to classify the internet as a utility service, with the desirable goal of universal online access.

It goes without saying how vital digital connectivity is to the modern economy, as well as the importance of staying internationally competitive. However, a new, centrally-dictated ‘Digital Agenda’ is probably quite an ineffectual and expensive way of boosting the digital economy.

Despite the House of Lords' fears about the speed of superfast broadband rollout, coverage has increased from 55-60% of the UK in 2013, to 70-75% in 2014. And, whilst the report holds up Cape Town as an example of a city providing universal broadband, this won’t be ready until 2030. In the time it takes for the state to roll out the chosen digital infrastructure, it may already be out of date. Whilst many are still choosing between regular or fibre optic broadband,  landline-free 4G home broadband is the latest offering to hit London. At the same time, eyes are already on  5G, and the new capabilities it can bring.

Treating the internet as a public utility is also problematic from a free-market standpoint. Doing so could, for example, lead to calls for more government involvement in the deployment and update of internet infrastructure. However, a study by the Mercatus Centre looked at American municipal government investment in broadband networks across 80 cities, and found that for the billions of dollars of public money spent, there was little community or economic benefit.

It’s also the type of thinking which has led to America's ‘Net Neutrality’ debate, where, on the behest of Obama, the Federal Communications Commission has proposed to regulate internet service providers as 'common carriers', and in doing so, subject the net to a 20^th century public utility law originally devised to deal with the telephone monopoly. Ostensibly designed to protect consumers from the creation of ‘anti-competitive’ internet fast lanes for big content producers, Net Neutrality legislation threatens not only the speed, price and quality of internet provision, but the autonomy of ISPs and investment at the core of the net.

Whilst the Lord's proposed 'Digital Agenda' might seem far-removed from such heavy-handed state activity, a government who considers it their duty to take online and 'digitally educate' every single citizen risks heading down an increasingly interventionist and expensive path.