Great big fat lies
It was Hayek who pointed out that a tax funded and politically run health service was going to lead to serfdom. Not, as he himself pointed out, because free at the point of use health care made you or us a slave but because that political involvement would lead to, well, political involvement.
Which it has and is:
This apparent conversion is welcome, but only if it results in a radical shift in the government’s approach, away from reliance on an ill-conceived notion of personal responsibility and towards recognition that much tougher regulation is required....
Obesity means that we must stop doing as we wish and must be forced into doing as they insist. Serfdom that is.
We need to see the compulsory reformulation of processed and convenience foods to reduce sugar and fat as well as salt levels, and, as the King’s Fund argues in today’s Observer, we need a comprehensive ban on junk food advertising, regulation to eliminate unhealthy food being sold as a loss leader by supermarkets and beefed-up powers to enable local authorities to maintain the area around schools as fast food-free zones.
The recipes of our food must be determined - enforced - by the illuminati, freedom of commercial speech be damned and given the way that schools are spread around urban areas - for the obvious reason that so are people and thus children - fast food banned from the cities.
There being various problems with all of this even after we ponder what right do these people have to rule our lives in this manner?
One in three leaves primary school overweight or obese,
That’s not true in the slightest.
it brings a huge cost of around £6bn a year for the NHS as obesity-related hospital admissions continue to rise.
Nor is that. To the extent that obesity does cause health problems it shortens lives and thus reduces the bill to the NHS of lifetime health care.
There is, also, the rather obvious point that the last few decades of government dietary advice seem to have been totally wrong and no one is all that confident that they’re right this time around.
But back to Hayek’s point. They are currently insisting that the NHS requires them to determine the price a supermarket may charge you for a pizza. No BOGOFs on junk food, recall? How far you must travel to buy a bag of chips - nothing near schools. They’re even insisting that the existence and needs of the health care system mean that they, the bureaucrats, should control the recipe books of the nation.
True, it’s not quite what Chekhov, Gogol or Tolstoy would have called serfdom but Hayek’s point is becoming more and more apparent, isn’t it?
How to make medical care cheaper
A couple of little lessons from a hospital chain in India - probably the world’s cheapest first class hospitals.
To American eyes, Narayana’s prices look as if they must be missing at least one zero, even as outcomes for patients meet or exceed international benchmarks. Surgery for head and neck cancers starts at $700. Endoscopy is $14; a lung transplant, $7,000. Even a heart transplant will set a patient back only about $11,000. Narayana is dirt cheap even by Indian standards, with the investment bank Jefferies estimating that it can profitably offer some major surgeries for as little as half what domestic rivals charge.
Those are prices that would make the NHS blush too and as the above shows it’s not just about lower prices for skilled labour in India. This chain is doing something different:
In the mid-1990s, Shetty began experimenting with a business school concept alternately called upskilling or task-shifting. The idea is for everyone involved in a complex process to work only at the top of his qualification, leaving simpler tasks to lower-paid workers. In a hospital, this might mean that the costliest staff—experienced surgeons—enter the operating theater only to complete the most difficult part of a procedure, leaving everything else to junior doctors or well-trained nurses. Then they move to the next theater to perform the same task again.
The division and specialisation of labour taken a step or three further forward.
By working at this pace, the average Narayana surgeon performs as many as six times more procedures annually than an American counterpart.
Hmm.
The Shettys see further savings coming not from any single reform, but from thousands of little tweaks at every stage of treatment.
And that’s how productivity advances. Not grandiose leaps into the future but shavings at the edges but at every edge.
The big question being, well, how do we get this concentration upon doing things cheaper - because cheaper means it is possible to do more - into our own health care system?
The answer being that we need to copy the incentive structure this chain operates under. It’s working in a market and trying to make a profit while doing so. Even as government takes over more of the financing it is still working in that market which provides those incentives.
Hey, perhaps we should try it?
We'd better get building those spaceships then
A new - another - report telling us that we’ll all have to stop eating like we desire to:
Another six planets needed to eat like most meat-loving countries
Well, that’s if we all wish to eat like the Argentinians do. From the report itself:
Dietary choices in G20 countries are destroying the planet.
Global adoption of current G20 food consumption patterns by 2050 would exceed the planetary boundary for food-related GHG emissions by 263%. This would require between one to seven Earths to support.
We’d better get building those spaceships therefore.
The point being that the existence of an economy, of a civilisation even, is so that we humans get to do more of what we humans like to do. That these eating patterns are common across the G-20 tells us that they’re fairly basic humans desires. Very different cultures, different historical paths, but once anywhere gets rich enough to be able to do so it eats in this manner.
We the people like doing this, our aim is that we the people get to do more of being we the people. Thus spaceships, not rationing.
Spaceship here meaning actual steel ships only in partial jest. For there is the alternative method we’ve been using for some 8,000 years now. Which is to use technology to create new Earths right here right now. This goes under the more common name of “agriculture”.
Every time we increase the productivity of some part of the food production system we’ve done just that, created more land. If this acre could, formerly, support 2 cows and now 4 then that means we need half the amount of land to have 4 cows. Or, obviously, we can have 8 on our original two acres. This is the process we’ve been following since Ur of the Chaldees. Making the land more productive, thus allowing ourselves to either use less of it for the same output or to enjoy greater output.
There is no obvious limit to this increase in productivity, Sure, we can all think of hard limits - say, the level of insolation - but we’re nowhere near any of those at present. In our immediate technological future we can see low methane cattle, lab grown meat just to take two examples from the current newspapers. Either and both and the myriad other experiments being conducted are all usefully described as building spaceships, or at least creating new Earths to feed us.
Without agriculture the carrying capacity of the Earth if we’re all hunter gatherers is perhaps 10 million souls. OK, maybe 50, we’ll even grant 100 million if you really insist. There are rather more of us than that presently and we are producing enough food for all even if distribution is less than perfect.
We know how to build those spaceships, we’ve been doing it for millennia. We’ve found new Earths. The general name for the process being “industrial agriculture” so the solution is a bit more of that, isn’t it?
Goodbye from Julia
As my time at the ASI draws to a close all I can do is feel extremely grateful. Despite knowing that I wanted to spend my gap year at the ASI for a while, I wasn’t able to appreciate just how great the opportunity is. You would think a global pandemic causing the country to lock down for months on end would put a damper on things but I don’t think I could be happier with how I have spent my gap year.
The gap year internship is a fairly unusual experience. I have been able to help the ASI with its work and feel like a truly valued part of the team. I have now helped to research any number of topics and helped to sort out countless footnotes to the point where university seems like it will be a breeze.
Working at the ASI is different from working a typical office job and that is not just because the office opens at 10. Where else could I say that I believe we should be able to sell our organs and be met by understanding nods. Everyone at the ASI is great at ensuring you are able to back up your claim however whacky it may be. I am even surprised to find people who share my questionable taste in music and interest in languages.
The work that you do is a healthy balance between pouring drinks for TNGs and writing comments for newspapers, between logging RSVPs and writing blogs for a range of sites, between franking parcels and speaking at events, even travelling to foreign countries.
While your friends may not understand what exactly it is you do (get ready to explain what a think tank is endlessly), they will appreciate the tiktoks, insta stories and memes you make for the ASI or other social media posts. And if you’re lucky, even a Telegraph Snapchat appearance.
Spending your gap year at the UK’s best domestic and international economic policy think tank (University of Pennsylvania) doesn’t mean sitting in a stuffy office in Westminster all year. The ASI went to Manchester for Conservative Party conference. We travelled to Gibraltar and Morocco for our AGM. And Matthew Lesh and I were able to pop over to Madrid to speak at LibertyCon (not bad for a year in which we couldn’t travel in the latter half). The ASI was even flexible enough to allow me to take time off, when a friend that I had made through the ASI encouraged me to volunteer as part of one of the Prime Minister’s operations teams planning his and other cabinet ministers’ visits across the country. Upon returning to Westminster on election night it was great to reunite with my colleagues knowing I had a once in a lifetime opportunity to contribute to achieving a more liberal government.
Throughout the lockdown, the weekly Zoom staff meetings have meant that we still feel like a team even while apart so don’t let remote working put you off. I cannot recommend a gap year at the ASI highly enough.
The Adam Smith Institute’s Gap Year programme is open to applications now.
This is an interesting justification for higher wealth tax rates
There are, of course there are, those who just want more people to be paying more in tax. Which brings us to this interesting supposed justification for higher capital gains tax rates:
It said the Treasury was likely to suffer steep falls in capital gains tax (CGT) receipts over the next two years as property and other assets slump in value, adding further pressure on Sunak to increase tax rates to fill the gap.
Those rich people are making less money therefore they should pay more in tax?
As is so often true it’s possible to invert the argument to see if it sounds ridiculous. So, let us do that. Imagine a roaring economy with capital gains mounting up as far as the eye can see. Would we - anyone in fact - then accept the argument that capital gains taxes should fall?
To ask the question is to know how such a suggestion would be received. Thus the initial claim is invalid as well. Some people just want MOAR TAX and any excuse will do that is.
Adam Smith's Anniversary
If you had been standing on this spot in the late eighteenth century, you would have seen a plume of smoke rising up from this house here. It was Adam Smith’s executors burning his papers, just as he directed before he died on this day in 1790.
Though it seems odd to us—and is a great loss to later generations—that was quite normal among prominent people at the time. They did not want to be judged on their personal letters and their sketches of half-thought-out ideas.
And Adam Smith was a prominent person. He had risen to fame in his mid-thirties, having published The Theory of Moral Sentiments, a book that tore up the ethical theories of the time and explained morality in terms of social psychology. It landed him a plum job—personal tutor to the teenage Duke of Buccleuch, with a salary of £300 a year—for life!
That income gave him the freedom to research and write his next book, published 17 years later—Smith never did anything without a great deal of deliberation. This was The Wealth of Nations, his revolutionary work in economics, for which he is best known today.
Smith loved discussion and debate with friends. In that July of 1790, during one of many such evenings at his home in Edinburgh, Smith felt tired, and retired to bed, saying—so we are told—that the discussion would need to continue in some other place.
He died a few days later and was buried under a generous but restrained monument in the churchyard near his home.
The VAT cut and a natural experiment in economics
There is a VAT cut coming on certain items and services. There is a claim that not all of this will be passed on to consumers. This provides us with a nice natural experiment - which sectors of the economy are fully and properly competitive:
Shoppers and tourists expecting to see a cut in prices on Wednesday following the chancellor’s decision to slash VAT on hospitality could be in for disappointment as some organisations pocket the saving rather than pass it on to consumers.
Last week Rishi Sunak announced that the tax, which is charged on most goods and services, would be cut from 20% to 5% from 15 July until 12 January 2021 for entrance to restaurants, cafes, hotels and attractions such as zoos and cinemas.
The standard analysis says that VAT is a tax upon consumers. Which, in a competitive market, it will be. We can run this in reverse too - those sectors where the cut is passed on in full are competitive. Those where it is not are showing a sign of pricing power on the part of the producers.
So, here we have one of those nice natural experiments. We can assume, even though it’s not absolute and total proof, that those sectors where the VAT cut is passed along are indeed competitive. This being something we’d really like to know too.
For the argument in favour of the minimum wage is that producers do have pricing power and thus increasing wages by fiat reduces their profit margins rather than stings the consumer. Something which doesn’t happen in one of those competitive markets.
Our own intuition is that precisely those areas that are affected substantially by the minimum wage are those where the producers don’t have that market power and therefore are where the VAT cut will be passed along. Which does rather kill the intellectual base for that minimum wage. But that is only our intuition at this point - it’ll be nice to find out, won’t it?
Once bitten twice shy baby, once bitten twice shy
A certain portion of economics is just the observation of what we humans do written up into expensive language. There should be little surprise at this given that economics attempts to describe what we humans do and we humans are, by necessity, pretty good observers of what our fellows are likely to do. How else would we know how to interact with each other?
At which point Ian Hunter explains a matter of the macroeconomics of debt to us. Americans will be more familiar with Great White doing the same. Hunter having repeated the point more recently.
Or in that more expensive language:
Britain should not kid itself that soaring national debt can be addressed by high inflation because roughly a third of the £2 trillion debt stock is linked to the retail prices index, the incoming chairman of the Office for Budget Responsibility has said.
Richard Hughes, a former Treasury official who has been nominated to succeed Robert Chote, told MPs that UK public finances had a peculiar vulnerability to inflation because about 30 per cent of gilts were inflation indexed.
“There has been a lot of somewhat idle chat about the prospect of inflating our debt away, that we don’t have to worry about elevated levels of debt because we can pull the same trick as in the 1950s and 60s of using inflation to erode the real value of our debt,” he said. “That is not going to work. We have lost one tool we have used in the past.”
Why is so much of the debt index linked? Because that dispossession of investors through inflation is something we recall, remember. Therefore once the trick had been used there was a certain difficulty in financing government debt without removing that inflation risk. So, it is inflation linked and thus it cannot be inflated away.
Sure, Ian Hunter’s singing about groupies but that lesson clearly applies to investors too. My, my, my, humans actually learn through experience - once bitten twice shy baby, once bitten twice shy.
Of course is isn't communism, it's the Solow Residual
A gentleman running a rent out what you already own company assures us that this isn’t communism. Of course it isn’t, it’s the Solow Residual:
The new app that lets users rent strangers’ stuff. ‘This isn’t about communism,’ says founder
Quite so. The essential idea is that there are many - say - lawnmowers out there and most of them are not in use at any one time. So, rent out some of those that do exist during their downtime.
This has the effect, obviously enough, of reducing sales of lawnmowers which will not be to the taste of lawnmower manufacturers. But it’s not communism - the intermediation is being done by a paid market which doesn’t sound very communist - for it’s making the society richer which isn’t a great feature of that socioeconomic system.
Why this makes us all richer is the Solow Residual. That’s the increase in output that comes from whatever it is other than an increase in capital and or labour going into the system. Productivity increases for example.
The lawnmower here is the capital, by having the one for many lawns we get many lawns mowed for the use of one dose of the capital. It’s a pure increase in the productivity of lawnmowers that is.
The same is true of all of these different schemes that do this. By more efficiently using the things that already exist we gain more output from the current capital base. We’re richer.
It’s also nothing at all to do with such hippy dippy concepts as the sharing economy etc. It’s also not new economics or anything droll like that. Which is why we’ve already got the description of what’s going on in the textbooks of course.
An interesting question concerning Boohoo and the Leicester factories
This might sound a little off the wall but we should take our economic illumination where we can find it. There have been claims of subcontracting factories in Leicester paying less than minimum wage. As we’ve already noted we think this is more about workers without work permits than anything else. But The Observer asks an interesting question:
Rival retailers ask a good question: how is it possible to make a profit from £8 dresses in the minimum-wage UK?
Think on the assumed answer to that question - that it isn’t. What does that tell us about the minimum wage?
What it tells us is who carries the burden of the minimum wage. For things which are not profitable are things that don’t get done in a capitalist economy. Thus if it is not possible to sell £8 dresses at a profit in a minimum wage economy then £8 dresses don’t exist as a result of the minimum wage. It is thus the consumer who pays for the minimum wage through having to pay £10, or £15, or whatever it is, as a result of that minimum wage.
The burden of the minimum wage lies on the consumers’ shoulders. Something that makes it harder to support that minimum wage.