Biofuel regulations and subsidies

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The intellectual premise upon which the latest Policy Exchange report is sound enough:

Aviation is, amongst other things, a fundamental part of the global economy and facilitates inter-cultural exchange. Moreover, people throughout the world want to travel. As a result, we must promote methods that can reduce emissions from those flights that do take place.

Yet the substance leaves a lot to be desired, as Martin Livermore has discussed previously on this blog.

Green Skies Thinking argues for the EU and UK polities to promote the development and commercialization of sustainable bio-jet fuels, complaining that at present “there are no specific policies within Europe to create that aim." The policy suggestion is built upon the creation of an EU Sustainable Biofuels Mandate, that if introduced would require planes to be run on 20% bio-jet fuel by 2020, rising to 80% by 2050.

If as this report suggests there is commercial viability for bio-jet fuel, then there is no need to upload airline energy policy to EU. Competition, not subsidy is the only sustainable energy policy. Of course there are financial risks involved, but this will not deter the entrepreneur. And it is much better that they take on this risk, as opposed to European taxpayers.

The argument for regulations and subsidies for investment are never a sensible move for the defenders of free markets. Even if you happen to make the right call on the technological path (hard enough in itself), overturning the regulations and turning off the subsidy tap becomes increasingly difficult.

Although the political capital of climate change gives think tanks an opportunity to cash in and exert influence over government policy, those usually on the right side of the debate should tread with caution. The policy suggestions contained in this paper put politics before markets and upload key aspects of private company and national energy policy to the European level.

Tax freedom day in Sweden

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If you think the UK is bad...

Ignoring the wood for the trees

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Compass has a report out about the state of the housing market. Dire they say, there should be lots more, well, essentially, lots more of the things that Compass likes. State intervention, more taxpayers' money being spent, more social housing and, by the way, can we get the bankers out of the whole thing? It isn't all bad, it has to be said, they come out in favour of land value taxation which as has been pointed out here before is a thoroughly good idea.

However, they seem incapable of, while discussing which shade the bark on the trees should be, of understanding the wood which is our real problem in the housing market.

The need to understand notoriously opaque land markets and the complexities of the planning process also make housebuilding an extremely difficult industry for new competitors to enter, reducing competitive pressure further. The result is a business model that does not deliver the homes we need, but is very difficult to change.

Now someone like me would say, OK, then we should be looking at changing the planning system if that's one of the major problems. And of course, the planning system is. They note that in recent years we've been building flats on brownfield sites, the houses that do get through are rabbit hutches crammed together: and yet they fail to note that this is exactly what the planning system, in all its complexity, has been demanding. If you don't put 14 houses on a hectare you won't get permission. The extraordinary price of housing is not because houses are expensive to build, nor is land: what is expensive is the licence that allows you to build a house on a certain piece of land.

There have been solutions proposed to this of course: if the planning system is the problem then let's change the planning system. But of this sensible sort of thinking we get none from Compass: despite their approval of LVT showing that they have at least one rational individual within their ranks.

Still, at least they are not quite as crazed as the current government was with the Pathfinder scheme. This baby of John Prescott's was going to solve the shortage of affordable housing by knocking down hundreds of thousands of cheap houses: you can imagine how well that worked.

A maximum wage

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In Friday’s Guardian, Andrew Simms resurrects the idea of a maximum wage to “tackle inequality". The actual consequence: employers would no longer be able to attract the best workers by offering them higher salaries, so would instead offer them more perks and less hours. That is, the most productive workers (not just bankers, but doctors, business owners, and Guardian editors) would work less. Many others would move abroad.

All it would achieve is a fall in the level of economic activity, and a corresponding fall in tax revenue and trickle-down spending. This is the nonsense of equality by levelling down: dragging down the rich, out of sheer envy, to the detriment of everyone.

But his argument avoids this sort of practical concern for what the actual effects of the measure would be, relying instead on bashing ‘the market’. He complains that the market “interferes with life, the universe and everything else," and that after government saved the banks, “there must be a serious quid pro quo" from the market. This is nonsense: the market is the structure that allows the buying and selling of goods and services. It’s a system permitting voluntary exchange. It isn’t an agent - it doesn’t interfere with anything, and it can’t owe anything. Perhaps Simms means that the banking industry interferes in our lives, and owes society something: if so, he should say that, but it will not sustain the argument he tries to make.

Simms goes on to attack the “failed neoliberal economic model", blame inequality for “most social problems", and claim that “we know now all too well how destructive are the forces of seeking profit and pay maximization for their own sake." If he had a memory longer than a year or two, or a field of vision wider than the prosperous West, Simms would reach very different conclusions. The neoliberal economic model of free market capitalism is not a failure, it is the most successful model in human history for improving standards of living and lifting people out of real poverty. It’s not inequality that’s responsible for most social problems, but tyranny, corruption and theft. And it’s been people seeking profit and pay who have driven the economic miracle that provides him with everything from the clothes on his back, to the keyboard on which he types this drivel.

The wrong kind of healthcare reform

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Most people in the US think their healthcare is good. So why is Obama pushing for a more socialized system?

The problem with organic farming is...

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That even those who claim to be its champions seem not to understand the implications of what they're actually proposing.

Take Geoffrey Lean's piece in the Telegraph. Organic farming for us here in the rich world is indeed more productive that conventional, but look, look, organic farming in the Third World produces jobs!

Again, a switch to organic agriculture can help, for it employs many more people, creating more than 170,000 jobs in 2007 in Mexico alone.

Well, yes, quite, as I have been shouting for some time, jobs are a cost of a scheme, not a benefit.

In more detail, I'm perfectly willing to agree that certain organic methods could raise the productivity per acre of certain Third World farms. That's because I'm perfectly willing to agree that just about any structured method is going to improve such productivity. I can also see that the high cost of conventional inputs might deter some poor farmers from using them and thus simply better management of the resources they have being the optimal path for them.

However, what strikes me most is the way that Lean (and many others of his ilk) ignore the real point at issue here. What we really want to do is increase the standard of living of some hundreds of millions, if not billions, of our fellow human beings. This move to organic agriculture in Mexico for instance: yes, 170,000 jobs were created. That's 170,000 people in one year alone who were condemned to a life of staring at the southern end of an ox going northwards.

This isn't what we would desire for ourselves, this isn't something that we would be prepared to do, it's actually something that we're not prepared to do as a quick look around the country shows you. So why is it a good idea that 170,000 Mexicans have to do it?

We could of course ask the same question of sweatshops, we're not prepared to do that so why do people like me cheer on those who open them? Because that's the way our great grandparents got a start, how this incredibly rich world we now live in began to develop. Coming off the land and into the factories is what leads to our current siuation, one in which we all do far less work and have hugely more opportunities and wealth than any other group of people in the entire history of the species.

In short, what's wrong with organic farming is that it's proponents of it as a solution to Third World poverty seem to forget that any form of peasant farming requires peasants to do that farming. Whether they're using dung or ammonium nitrate as the fertiliser doesn't change that basic fact: moving people back into small scale farming is just condemning them to the lifestyle which we are all so grateful our own ancestors escaped from.

What type of MP do we want?

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In the light of the recent selection of Sarah Wollaston, a local GP, by an open primary in Totnes, a debate has re-emerged that I feel is crucial to the medium-term direction of our Parliament and political system more broadly. The main reason people seemed to have selected her was that she was not a "career politician". Whilst I agree that the open primary system is a brilliant way of encouraging greater participation in politics, and accept the need for candidates who constituents feel are in tune with local issues, the blanket idea that it is better if a prospective MP has no previous political experience seems questionable. The implicit assumption by some parts of the press is seemingly that anyone previously involved in politics has been tarnished and corrupted by the system, is on the make, and is not to be trusted, whereas anyone entering it afresh is incorruptible.

Of course the absurd level of expenses claims occurred because of greed, but also because the system encouraged them. Because MPs assumed that raising their salaries would be damaging to the public's perception of them, they compensated with an expenses culture. In my opinion, we therefore need to decide whether we want full time MPs, who dedicate their time to the political process, or people who retain another job, albeit on a part time basis. The former might well be preferable, providing they have some life experience outside of conventional politics.

The basic salary for MPs now is £64,766, but this has been made up with benefits, allowances and the system, meaning that each MP effectively costs the taxpayer £247,000 a year. I would therefore replace all of this with an agreed salary (staff paid for outside of this), with a reduced salary plus payment for renting an apartment in London, for those who live too far from Westminster. This would result in more productive MPs, with a transparent and competitive system of renumeration, and at a lower net cost to the taxpayer.

Why QE is not a good idea

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For much of the last decade, the bubble in equity markets was sustained by what was known on Wall Street as the 'Greenspan put'. Put simply, the rule stated that it was perfectly safe to invest in equities, since if they fell, former Fed chairman Alan Greenspan would always wade into the markets with a series of interest-rate cuts to bail them out. Now we have something that looks like a QE put – when markets collapse, central bankers will print more and more money until they get them moving again.

Matthew Lynn, Central Bankers are Just Blowing up Another Investment Bubble, MoneyWeek

Decarbonization and protectionism

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Adam Buckley, Ben Caldecott and Gavin Dick from The Conservative Environment Network (CEN) have written a short piece on ConservativeHome on the benefits of decarbonization.

CEN’s argument is entirely objectionable:

CEN believes that we should consider climate change a significant risk and decarbonise accordingly. But even without the very real and obvious risks associated with climate change, decarbonisation has other profound benefits. In a world without climate change it would still make sense, if done in a cost-effective way, for Britain to save energy, use less foreign fossil fuels, and develop indigenous sources of low carbon energy.

Ignoring the well-trodden territory of their position on climate change, much of the argument from CEN is based upon the failed economics of protectionist policies and state dirrection and control of industries.

In arguing that we should use less energy, CEN suggest that we need to tackle “market failures that prevent people and organisations from improving their energy efficiency". These failures are they believe down to access to capital and the “hassle" factor. However, in the real world individuals and organisations do not improve energy efficiency when it will not save them money and given the failure of the climate change predictions to come to fruition, people see no practical and moral reason to waste their money. How is that a market failure?

If – and it is a very big ‘if’ – CEN are right about the bleak future for hydrocarbon fuels, then the market mechanism will ensure that alternative energy production will be put into effect. And with an unmolested market, some entrepreneurs will take risks at the right moment and cash in on this shift. For the government to do so now is bad economic policy.

The last and most surprising argument that CEN put forward in favour of decarbonization is as follows:

Additionally, we can send less money abroad.  The issue of balance of trade has become unfashionable, but is another important reason why decarbonisation should be desirable regardless of the risks associated with climate change.

CEN tie this in with arguments to invest (read tax and spend) and protect UK energy production. As an antidote to all this nonsense, I suggest the authors start by reading this from Milton and Rose D. Friedman:

"Protection" really means exploiting the consumer. A "favorable balance of trade" really means exporting more than we import, sending abroad goods of greater total value than the goods we get from abroad. In your private household, you would surely prefer to pay less for more rather than the other way around, yet that would be termed an "unfavorable balance of payments" in foreign trade.

Privatized policing

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Residents in a leafy suburb of Southampton have clubbed together to purchase security from a private firm. The 'local' police force have failed to protect the community and left people feeling unsafe. Thus, with an opening in the market place a private company is now giving the residents peace of mind by protecting them from crime. Atraks offers a 'first response' to crime and is independent of the police and local councils, and is cheap at just £3.15 per week.

This country has reached the point where the police force has become a centralized, uniformed arm of the state, directed by government not for the people's benefit but for their own. They are no longer protecting us as a visible deterrent on the streets, they are little more than a criminal investigation bureau. The modern police force offers little value for money, the cost per capita is the highest among OECD countries and yet despite this crime and the 'fear' of crime remains stubbornly high. If the approach of financially saturating the oversized police forces isn't working perhaps a different approach is needed.

This private service is the reproach that government needs, as they may realize that their current meddling in how the police operate has achieved little. What people demand is that the police patrol the streets, protect property and handle any crime that does occur swiftly, backed fully by a strong judicial system. The shift to private police forces will undoubtedly grow as the state continually identifies only national strategies towards policing. The people require local approaches as this is the only way they can ensure that their demands are sufficiently met. If the police forces of Britain had any sense they would be calling for themselves to be privatized, if only to cut down on the demandingly wasteful paperwork they have to complete.