The New Aristocrats: A cultural and economic analysis of the new status signalling

A new report, released today by the Adam Smith Institute, argues virtue signalling has made widely-held ideas like ‘keeping up with the Joneses' and conspicuous consumption completely outdated. Rather than trying to one-up one another by buying Bentleys, Rolexes and fur coats, the modern social climber is more likely to try and show their ‘authenticity’ with virtue signalling by having the correct opinions on music and politics and making sure their coffee is sourced ethically, the research says. The paper, The New Aristocrats: A cultural and economic analysis of the new status signalling by Prof. Ryan Murphy of Southern Methodist University in Texas, lays out how trends in status signalling—showing one’s self to be worthy of respect and privilege in the eyes of one’s group—have changed over recent decades.

While the conventional understanding holds that families are apt to buy ever-bigger cars and ever-bigger homes in the pursuit of higher social rank—a fruitless zero-sum competition that might well be tackled by luxury taxes—the new race for prestige is quite different.

A modern aspirant elitist would be better off getting an arts degree than buying a gas-guzzling four-by-four, Prof. Murphy points out, if they want to raise their profile in the eyes of their peers. This trend of ‘virtue signalling’ has been widely noted, but policy has not shifted with society.

Education is one policy where Murphy’s analysis is readily applicable. Though pursuing practical education, a STEM degree, or even building up work experience may be better for an individual’s earnings and society’s productivity, individuals may pick extended study of essentially useless degrees in pursuit of status.

This is enabled by an extensive system of subsidies, which actually, since the last reforms, made the terms for those expecting to earn very little—i.e. those pursuing degrees that barely enhanced their career potential—much more generous. Murphy’s analysis suggests these subsidies should be scaled back—we are only encouraging an endless arms race.

To read the full press release, click here.

To download the paper for free, click here.

Power Up: The framework for a new era of UK energy distribution

The UK's energy market is unfit for the modern age, a new report from the Adam Smith Institute argues. The report, Power Up: The framework for a new era of UK energy distribution, argues that new technologies such as smart grids and distributed energy production can revolutionise old models of energy distribution and pricing, in the same way that apps like Uber are disrupting traditional models of transport.

In a world of expensive of energy prices, the report suggests regulators should encourage experimentation with new technologies, rather than cutting them off at inception. Regulating the market too heavily - often justified by claims that consumers are being 'ripped off' or overwhelmed by the number of tariffs available - closes down consumer experimentation and prevents technological and economic progress, which keeps energy prices high.

The paper envisions a world of choices in the energy market; where smart meters that relay real-time price changes to encourage better energy use are just the beginning. The author, Dr Lynne Kiesling, imagines consumers being able to see where their energy is coming from, and to choose what kind of green-grey energy mix they want.

Most important, Dr Kiesling argues, is for OFGEM to adopt a structure of 'permissionless innovation' - which allows companies to experiment freely without being granted permission from regulators. In the early days of the internet, no-one envisioned a world of Amazon, iPhones and Uber; but these inventions were able to thrive, as there were not limited by regulatory barriers. OFGEM, Kiesling argues, needs to adopt a more relaxed regulatory structure that dismantles the barriers that have been created.

Read the full press release here.

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: kate@old.adamsmith.org | 07476 915072

Time for Time Limits

A new ASI report, Time for Time Limits: Why we should end permanent welfare, finds that a 5-year limit on Jobseekers’ Allowance (JSA) across workers’ lifetimes could save the Treasury £300-350m per year, as well as boosting labour markets and putting a break on self-fulfilling cycles of dependency. The paper, authored by Peter Hill, a lecturer at the University of Roehampton, reviews President Bill Clinton's 'Personal Responsibility and Work Opportunity Reconciliation Act' (PRWORA) which coincided with a massive decline in welfare rolls from 5 million to less than 2 million families by 2006. The act is credited for saving the US government over $50bn between 1996 and 2002.

In some states, there was a decrease in benefits caseloads of 96%, as well as an unprecedented drop in female unemployment and improvement in their financial status even in low paying jobs, and a drop in child poverty. Furthermore, comprehensive econometric analyses suggest that 6-7% of decreases in unemployment counts (and 12–13% of those in female-headed families) are as a result of the introduction of time limits. Although difficult to estimate the exact impact on the UK labour market ex ante, a similar effect on Claimant Count Unemployment could be expected; this translates to an estimated reduction in the benefit bill of £300–350 million based on current spending.

Though Universal Credit is innovative in tackling benefit withdrawal cliffs that make working very unattractive to some households, it does not put any limits on its unemployment insurance provisions. More radical reform like time limits has potential beyond the government's current schemes.

Just as the US ended welfare as an entitlement programme, the paper argues that the UK should also take the radical step of ending JSA being funded from general taxation and instead return to a form of ‘Unemployment Insurance’ funding from NICs. This would mean operating the welfare system as a genuine self-funding insurance scheme managed through the UK Government Actuary’s Department.

Click here for the full press release.

The answer isn’t blowing in the wind

Last week, EU leaders agreed to the next round of targets for reduction of carbon dioxide emissions: a headline target of a 40% reduction on 1990 by 2030. But rather than let the market decide how to reach this goal most efficiently, they also set a 27% target to add more renewable energy to the mix. In practice, this love affair with renewable energy means promoting wind and solar; there is little scope for new hydropower plants and large scale, practical wave and tidal power seems to be as far away as ever. There is no rational justification for this, but politicians seem to be incapable of fixing top level targets and providing a market framework to meet them.

Wind and solar power have been heavily promoted by the green lobby as the clean alternative to fossil fuels and policymakers have swallowed the bait enthusiastically. The more perceptive of them may already have realised that life is a lot more complicated than that but, for those who still need to see the light, I recommend they read a new report published by the Scientific Alliance and the Adam Smith Institute.

Wind Power Reassessed: A review of the UK wind resource for electricity generation will make uncomfortable reading for those who continue to put their faith in wind farms. The author, Dr Capell Aris, has analysed the data on wind speed and direction collected from a total of 43 sites across the UK (22), Ireland and northern Europe over a period of nine years. He then used this data to calculate the output of a fleet of wind farms.

The results will be no surprise to anyone who has looked at this topic in any detail: output is highly variable, and the entire fleet would only produce 80% or more of its rated output for about one week a year. The problem is that, however much we hear about wind being a free resource and the cost of equipment coming down, the effect of adding more and more wind turbines to the electricity grid is to push prices up with only a modest impact on carbon dioxide emissions (the whole reason for current policy) and no improvement in energy security.

If there were no arbitrary renewable energy target, governments would be free to focus on what most voters expect: providing a framework in which a secure and affordable energy supply can be delivered. If emissions are also to be reduced, the most effective measures currently would be a move from coal to gas and a programme of nuclear new build. In the meantime, the renewables industry continues to grow on a diet of subsidies, and we all pick up the tab. Getting out of this hole is not going to be easy, but it’s time the government started the process rather than continuing to dig deeper.

Martin Livermore is the Director of the Scientific Alliance.