An entirely vain hope but here goes anyway

We are undoubtedly all going to have the most hugely enjoyable slanging matches over this upcoming European Union referendum. But would it be possible, we ask politely, that such arguments stay with what is in fact true rather than just wander off into whatever sort of nonsense makes rhetorical sense? For we do think that we're more likely to end up with a reasonable policy in the end if we do in fact continually refer to reality rather than whatever phantasms sell a particular position. And please note, some of us here have very definite opinions on this matter, perhaps opinions not to your taste. But we'd still prefer to walk through, talk through, what is rather than what is not.

Which brings us to this remarkable claim by Sir Victor Blank this morning:

As a member of the EU, our companies are able to sell, without barriers and tariffs, to a market on the UK’s doorstep of 500 million people. They need only abide by one set of regulations covering the entire, vast and complex region. Our biggest trading partner is the EU. As a non-member these same companies could be obliged to negotiate with each individual country they sell to within the EU. One set of rules would be replaced by a possible 27, not to mention payment of duties.

There is absolutely no truth to this whatsoever. The EU is a customs union. This means that once over the import rules into the EU, goods and services are then subject to just the one set of rules and regulations: those of the EU's single market.

Entirely true, Brexit might mean that UK exports to the EU then faced import duties, they would indeed need to meet the rules of those 27 countries. But those rules would be as they are today: instead of one set of rules covering 28 countries ourselves included, it would be one set of rules covering 27 countries not including ourselves. Our leaving will not break up that single market at all, even if it produces a hurdle that must be leapt before entering it.

As up at the top, various of us here have various views about the EU and all who sail in her. But could we please make sure that whatever arguments are used by either or any side actually have at least some grounding in reality?

The current rules about trade into the EU are governed by EU law, one law for all. This will remain so whether Britain stays or goes: there will still be just the one set of laws about who may trade what and how over the borders of the EU.

We really need to get this story about rivers and flooding straight

That there's terrible flooding in the North of England is true. But before we decide what we're going to do about prevention in the future we do need to work out why there is terrible flooding. And here there's two very different tales. One is that this is climate change and so we had all better stop driving anywhere and huddle in the gloaming of low wattage lamps as we proceed, full speed, to the middle ages. The other is that the bureaucrats have been deliberately designing the flow of rivers so that floods do occur. We are not so cynical that we would insist that the second explanation must be true just because bureaucrats. We are sufficiently cynical to think that it could be the correct explanation.

Here is one such bureaucrat on the BBC:

Speaking to Radio 4's Today programme, Mr Rooke said the UK was moving from a period of "known extremes" of weather to one of "unknown extremes" - something which a government review of flood defences would consider before reporting next summer. Asked if the UK needed a new response to flooding, he said: "I think we will need to have that complete rethink and I think we will need to move from not just providing better defences - and we've got a £2.3bn programme to do that over the next six years - but also looking at increasing resilience." This would mean "when properties do flood, that they have solid floors, waterproof plaster, more electrics up the wall - so that people can get into their houses and businesses more quickly".

Quite clearly, more flooding because climate change and we'd better just make waterproof houses and just live with it. There's also someone called Gaia Vince (surely a spoof name, this is Mr. Cable in retirement, no?) in The Guardian telling us much the same thing. We've also a Dutch expert telling us that we should be changing what we do with rivers:

When more than 1,800 people died in the wake of the 1953 North Sea flood in the Netherlands, the national reaction was: never again. The resulting Delta programme to close off the south-western river delta from the sea was so bold that its name became synonymous with dealing with a crisis. If an issue needs a major response, you can be sure that a Dutch politician will call for a “Delta plan to tackle X”. It is time that the UK took some of that attitude and got a Delta plan to tackle flooding.

Sounds like a plan really. We're on board with it. And then comes this, about the earlier Cumbria floods:

Amid all the devastation and recrimination over the floods in Cumbria hardly anybody mentions one factor that may not be the sole cause, but certainly hasn’t helped.

That is the almost complete cessation of dredging of our rivers since we were required to accept the European Water Framework Directive (EWF) into UK law in 2000.

Yet until then, for all of recorded history, it almost went without saying that a watercourse needed to be big enough to take any water that flowed into it, otherwise it would overflow and inundate the surrounding land and houses.

Every civilisation has known that, except apparently ours. It is just common sense. City authorities and, before them, manors and towns and villages, organised themselves to make sure their watercourses were cleansed, deepened and sometimes embanked to hold whatever water they had to carry away.

Christopher Booker and Owen Paterson have said much the same thing about the Somerset Levels floods of a couple of years back: given that that area is below sea level drainage and pumping is really rather important. So what's changed?

But all this changed with the creation of the Environment Agency in 1997 and when we adopted the European Water Framework Directive in 2000. No longer were the authorities charged with a duty to prevent flooding. Instead, the emphasis shifted, in an astonishing reversal of policy, to a primary obligation to achieve ‘good ecological status’ for our national rivers. This is defined as being as close as possible to ‘undisturbed natural conditions’.

‘Heavily modified waters’, which include rivers dredged or embanked to prevent flooding, cannot, by definition, ever satisfy the terms of the directive.

So, in order to comply with the obligations imposed on us by the EU we had to stop dredging and embanking and allow rivers to ‘re-connect with their floodplains’, as the currently fashionable jargon has it.

We don't claim that this is absolutely right as an explanation. We're willing to admit that there might be the occasional subject upon which we are not entirely perfectly informed. But we most certainly think that it is an entirely possible, could even be probable, explanation. Flood plain management changes, we get lots more floods. Not a huge logical leap to think that there might be a connection.

The solution might therefore be to go back to managing the landscape as our forefathers did. Oh, and stop building on flood plains as the current planning system encourages. That is, as is so often true, the correct solution to a problem that government claims it is trying to solve is to stop government doing the damn fool things it is already doing.

It's remarkable how often that is the correct answer.

Recycling costs an awful lot more than you think it does

As we have noted here many times before, society is in the grip of a collective mania. That we must recycle ever more. If recycling something makes a profit then of course, that should be done: making a profit is the very definition of adding value by your activities. Making a loss is equally, by definition, evidence that the activity is making everyone poorer. Yes, there's also cases where there are externalities, where some effect is not included in market prices. But there's also externalities to this insistence upon recycling everything:

Households have been warned they could end up in court if they fall for a growing criminal industry of “Facebook fly-tippers” who pose online as legitimate waste removal companies but then dump the rubbish on the streets. With fly-tipping rates rising, councils are bringing prosecutions against people who pay a man-with-a-van to remove bulky items of rubbish – only for it to be fly-tipped and then traced back to them. Households have been warned they could be fined up to £5,000 and left with a criminal record if they use what the Government has dubbed “waste cowboys” - even if they pay them in good faith.

All of that, the gangs of white van men, the council actions, the court fees, the bizarre notion of the State scrabbling through the rubbish, are costs of that recycling mania. By raising the costs, for no very good reason other than that mania, it creates, just as with the illegality of drugs leading to smuggling, high excise taxes leading to, err, smuggling, that reaction, of littering the countryside.

And we do not include those costs in our pricing of recycling but we should: just like we should include externalities in any environmental argument.

It should, of course, be possible to design a better system. In fact, at least one of us has seen such in a continental country. Household rubbish, including furniture, building rubble and the rest, is placed beside the usual collection bins beside the roads. People pick over that rubbish for whatever might be of value and recycle it. The rest of it is picked up by the local council and dumped in a hole in the ground.

We even know of one continental town where the mayor adamantly refuses to set up an EU approved recycling scheme. His argument being that they have one, essentially the modern day rag and bone men that perform the function in the private sector.

Government is not, as is sometimes said, the things we do together. It's the things that we do with the compulsion of the State. And where the compulsion is unnecessary, why bother to employ it? Especially where the compulsion raises costs so much that it exacerbates, not alleviates, the original problem?

"All the tradespeople we employ – builders, plumbers, electricians, carpet layers, gardeners, tree surgeons and more – should have a waste carrier licence to take away the rubbish and recycling from the work they do in our homes."

More holes, less recycling, that's what we need to beat fly tipping.

The perils of a country over run by cocaine fiends

Italy has just made a rather interesting discovery: the country has been over run by cocaine fiends for years now and no one has noticed in the slightest. Which does rather lead to a thought that if the consumption of cocaine doesn't in fact matter then why ban it, with all of the associated violence, murder and misery that the illegality causes? It was, of course, coca tea that was openly and brazenly upon sale. But with sufficient active ingredients that consumption of a cup one day would set off a cocaine test the next:

The company doctor, not wanting to see him suspended, asked him to bring two tea bags to his office, after which he made himself a brew and drank it.

The next day the doctor performed a drugs test on himself and tested positive for cocaine.

As all are noting, this tea had been on sale for years and no one thought anything about it at all. But the reaction is predictable:

Italian police have ordered that a Peruvian coca tea be removed from the shelves, after it was found to contain significant levels of cocaine.

So something that doesn't cause a problem must be banned. Because. As various people like Mill have pointed out the only justification for limiting the activities of a person are that such activities harm others. And there simply is no record of any harm here whatsoever, to anyone. As is actually true of pretty much all drugs all the time. There may be harm to those who take them, there's most certainly harm to the society as a whole from their illegality, thus the correct response is that they should be legal. Not necessarily on the grounds that an entire society tooting is all that great an idea but on the grounds that there are no moral or practical reasons as to why it should not be permitted, if that is what people wish to do.

We might even go further in this tale of our bus driver:

The discovery was made earlier this month after a 38-year old bus driver from Genoa named Roberto tested positive for the illegal stimulant after undergoing a routine drugs test, La Repubblica reported. The driver insisted he had not taken cocaine and had an exemplary 10 years of service at the Genovese transport authority, Amt. He told the company doctor that the only reason he might have failed his test was because the day before he had drunk a large cup of the tea, which he often brought from an ethnic food store in the centre of the city. He said he enjoyed the tea because it made him feel more alert at the wheel.

Coca tea manages the near impossible of getting an Italian bus driver to be alert and paying attention to the traffic around him? Hell, why aren't we subsidising it, never mind banning it?

Why students should pay their own darn university fees

We know very well that, on average, a university degree increases lifetime income well above the cost of gaining such an education. It's therefore not entirely absurd for us to suggest that those who capture that higher income should be the ones paying the fees to gain the certificate. We also know that part of the reason for greater household income inequality is assortative mating: now, more than was the case, the professionals classes marry other professionals and so on. At least part of that greater household inequality is coming from the fact that we're stratifying into two high earner households, two middle income earner households and so on, all the way to two no earner households, in a manner that hasn't been our historical experience at all.

What we weren't aware of is quite how closely these two points are related:

A study of Denmark by Gustaf Bruze, a researcher at the Karolinska Institute in Stockholm, showed that about half of the expected financial gain of attending college derived not from better job prospects but from the chance to meet and marry a higher-earning spouse.

Agreed, it is some time since we essayed forth into the dating market but we do believe that it's much the same as it ever was: people pay for the services of dating agencies. Given that universities now are functioning as dating agencies for those seeking a potentially high earning spouse it seems entirely reasonable to us that those seeking that higher income and economic status who should be paying for the service.

Why should the rest of us be paying tax to aid the ambitious in finding a highly paid spouse?

The FTSE 100 is entirely useful, as long as you know what you're using it for

It's entirely true that the FTSE100 is not a very good guide to the performance of the UK economy, as The Telegraph points out:

To some degree that might be telling us that the economy is not quite as strong as it might look on the surface. But, more significantly, it is telling us that the FTSE has become completely unfit for purpose. It no longer reflects what is happening in the British economy.

But then again, no one has ever claimed, or no one has ever sensibly claimed, that the FTSE100 is supposed to be a guide to the performance of the British economy. It's a guide to the performance of shares listed in London, not of companies doing business in the UK. As people have known and have been pointing out for many years:

Research by the Capital Group, which manages more than £750 billion of assets, has shown that more of the FTSE 100’s revenues are earned internationally than had previously been believed.

Previous consensus estimates had held that two-thirds of FTSE 100 companies’ turnover was derived from overseas sales.

But the new study has raised this to 77%. According to the Capital Group, 30% of the FTSE 100’s revenues now come from emerging markets, 19% from the US, 17% from Europe excluding the UK, 5% from Japan, 4% from the rest of developed Asia, and 2% from Canada.

Having an economic measure is just lovely. But it does help if one understands what is being measured. In this case, the economic performance of corporations who happen, for legal, historical, or just the general plain flat out honesty of the place, list their shares in The City. As that, it works just fine.

We always said this was a mad idea and almost certainly illegal

We've been saying ever since the idea first came up that minimum pricing on alcohol was a thoroughly silly idea and one that was almost certainly illegal to boot. Yet there were people who just insisted that it just must be introduced. That second, that it's illegal, has been confirmed:

The European Court of Justice (ECJ) has ruled that the Scottish Government’s plan for a minimum alcohol price would breach EU law if less restrictive tax measures could be introduced. Judges at the Luxembourg court concluded that the policy would restrict the market, which could be avoided by the introduction of an alternative tax measure designed to increase the price of alcohol.

We do get the basic contention of the puritan prodnoses behind this. If something is more expensive then people will presumably consume less of it. Yes, demand curves do slope downwards. But why on Earth you'd do this via minimum prices, rather than simply a generally higher excise duty on alcohol is something that's never been explained in any satisfactory manner. Because all you do with a mandated minimum price is fatten the profit margins of the people who make the cheap grot. And since when has that ever been a valid goal of public policy?

We're not, around here, and this writer especially, great fans of the European Union. But woe for national politics is that's the last defence against this sort of foolishness.

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.

The case against Minimum Alcohol Pricing

The EU seems to have killed Minimum Alcohol Pricing, for now at least. That's good news, but the case against it will still need to be made as its advocates push for it despite its illegality. Last week I went on Ireland's flagship news programme, Prime Time, to argue against it. In Ireland, the price floor being proposed is €1 per 10g of alcohol, which is 12.7ml – so a can of beer with 20g of alcohol must be sold for at least €2.00, a 14% ABV bottle of wine with 85g of alcohol for at least €8.50, and so on. Drinks that are already priced above this floor will be unaffected.

Minimum Alcohol Pricing does not even succeed on its own terms, for two reasons. One, it is extremely regressive. And two, it will probably not affect problem drinkers as much as moderate drinkers.

1. Minimum alcohol pricing is regressive.

Galahad lager is Aldi’s own brand beer here in Ireland, and you can buy normally buy twelve cans of it for €9 – 75¢ per can. It contains 16g of alcohol per 500ml can, so its price floor under Minimum Pricing would have to rise to €1.60 per can. A man and a woman who drink within the recommended amounts (which are very low – more than three pints in a day is defined as being ‘binge drinking’) can drink 170g and 110g of alcohol respectively, 280g in total, per week. This equivalent to 17.5 cans between two people per week – just over one can a day each. Almost everybody would agree that these are moderate drinkers.

At the moment, they can do this for €13.13 per week (if they buy a couple of weeks’ worth at a time). Under Minimum Alcohol Pricing, this rises to €28.00 per week, a difference of €14.87. Over the course of a year this means that a couple who drink within the very low recommended limit at home would be €773.24 worse off under Minimum Pricing.

When I put this to Dr Steven Stewart, an advocate of Minimum Pricing, on Prime Time he said this was “just wrong” and the true figure was 70¢ per week (€36.40 per year) per person. That might be true of someone who drinks a quarter of a bottle of wine a week, or for someone who buys more expensive brand name beer, but it is not true for people who shop at Aldi or buy other budget lagers and wines.

The impact of Minimum Pricing is not felt disproportionately by people on tight budgets, it is felt exclusively by them. Not only is this regressive, it is misplaced – alcohol consumption rises with income, as does drinking large quantities of alcohol. So we’re hammering the poor even though the poor don’t actually seem to be the problem.

2. Minimum alcohol pricing doesn’t deter problem drinking, and the health benefits are overblown.

As we demonstrated in our 2012 report by former NHS statistician and epidemiologist John Duffy, “The minimal evidence for minimum pricing”, the model that Minimum Pricing advocates use is deeply flawed. Among the assumptions it relies on is that alcoholics and other problem users are more sensitive to price than moderate drinkers. That is, when the price of booze goes up, alcoholics are more likely to drink less than people who don’t drink very much.

This assumption is based on a misinterpretation of data. When the price of one brand of alcohol goes up, alcoholics are the most likely to switch to another brand – they are indeed price sensitive in regard to the type of alcohol they drink. But they are actually the least likely to reduce their consumption of alcohol in general – as meta-analyses of the evidence have shown. For the heaviest drinkers, price elasticity of demand is “not significantly different from zero” – they won’t drink less almost no matter how high the price goes.

Advocates of Minimum Pricing typically point to Canada’s success in reducing deaths from alcohol abuse after introducing minimum pricing. But the studies that show this are typically quite bad – most lack any control group which is essential in a situation where alcohol consumption has been falling anyway, almost across the Western world. Apart from this, the research is dubious:

The key finding was that over the period 2002–2009, “a 10% increase in minimum price for all alcoholic beverages was associated with a 31.72% reduction in wholly alcohol attributable deaths”. Whilst this study was greeted as a breakthrough by public health lobbyists, independent statisticians have demurred.

In fact, the actual finding was that a 1% increase in pricing gives an estimated 3.172% decrease in wholly alcohol attributable deaths. Despite the complex statistical analysis used elsewhere in the paper, the authors then used a simple multiplication factor to estimate that a 10% increase in prices would therefore give a 31.72% decrease in mortality rates. Even this lawyer can see that a simple linear relationship cannot hold true. If it did, a 33% increase in price would reduce the estimated level of deaths by over 100%!

Got that? They found that a 1% rise in the minimum price led to a 3% fall in deaths and then just multiplied that by ten. This is sloppy in the extreme, obviously wrong to anyone with even a basic understanding of the issue, and advocates of Minimum Pricing should treat it and the researchers who produced it with caution.

Other points

There are other points to be made against Minimum Alcohol Pricing. It is not justifiable on cost grounds – unlike excise duties, it does not raise any more money for the government, only for supermarkets. Ireland has the second highest alcohol taxes in the EU already and, morbid as it may be, because heavy drinkers die young they usually end up saving the state money on other healthcare, social care and pensions costs.

We don’t really need to do more to curb drinking, despite what doctors like to tell us. Under-age drinking has fallen by 25 percent in the last ten years, and alcohol consumption across the board has been falling for decades.

The Irish health minister, Leo Varadkar, likes to point out that Ireland consumes much more alcohol than the OECD average. But the OECD average is skewed because it includes large countries where large sections of the population barely drink at all, like Turkey, Japan and the United States (where a third of adults don’t drink alcohol at all). In fact, Ireland is behind Austria and France and just barely ahead of Germany in terms of alcohol consumption – countries not exactly known for their sobriety, but not problem cases either.

People drink alcohol because they enjoy it. Being drunk can be fun, and having a beer or a glass of wine after work can help us unwind and relax. Everybody knows this, yet the debate that is taking place seems to ignore this fact altogether.

Doctors advocating this should back off – they are here to give us advice about how to live healthily, not force healthy lives upon us through the law.

But you don’t need to be a liberal to oppose Minimum Pricing – the case in favour of it is paper-thin even on its own terms. It will not affect problem drinkers, but it will give a kicking to any moderate drinker living on a tight budget. For once, thank goodness for the EU.

Among the things this capitalist free market thing can deal with

We admit it, guilty as charged. Among the things we have never considered is the pernicious effect upon the malleable minds of young children of Lego not having any disabled figurines in their range. Fortunately, in this capitalist and free market world we live in, one that allows that division and specialisation of labour that Adam Smith so lauded, others have:

But the brand continues to exclude 150 million disabled children worldwide by failing to positively represent them in its products.

We'd say that's a rather strong statement of whatever problem there might be but this is the opinion of another and opinions, well, as with fundaments, everyones' got one. Apparently there's a reasonable number of people who feel the same way:

In response to a 19,000-strong change.org petition calling on Lego to act, Lego said: “The beauty of the Lego system is that children may choose how to use the pieces we offer to build their own stories.”

So, they can rally 19,000 people to their cause. Excellent: so why is it that change has not already happened?

The practicalities of capitalist market forces, the need to make a profit, perhaps determine this exclusion.

Ah, yes, capitalism, possibly even neoliberal sophistry, must be causing this. So, why is it that this mixture of capitalism and free marketry that we have not offer a route to solve such problems? The answer being that it does. For as the article concludes:

Vote for the #ToyLikeMe Wheelchair Santa on Lego Ideas. If it receives 10,000 votes Lego will consider it for production.

That capitalist and free market competing organisation, Lego, actually has a system set up to aid people in advising the company of the products they would like to see being made.

But, of course, the blame needs to be laid at capitalism's feet, as the article does indeed do. At which point I think we might argue that this is Peak Guardian. No, not because of the actual subject matter itself, although whining about what toys aren't being made does seem a pretty strange occupation for an adult. Rather that blame being laid upon capitalism: when firstly, capitalism provides exactly the communications channel they desire and secondly, the only reason it hasn't worked as yet is because those protestors have been sending their letters to the wrong place. To change.whatever it is instead of to Lego.

We really cannot see that an inability to select the correct address is a problem of capitalism, neoliberal or not. And it's most definitely something even more blitheringly stupid that any of Polly's output. Thus, Peak Guardian.

Or at least we can hope so. Otherwise we fear something like division by zero, or searching for Google in Google, the universe collapsing down to a point under the weight of the accumulated idiocy.