This is what will happen to solar tariffs everywhere, eventually

Interesting news from Nevada: the state now has solar feed in tariffs on a rational economic structure. It's still not all the way there but the structure is now sensible: and this is the way that all such tariffs will end up to. Simply because it's the only rational way, economically, to do it. Instead of getting the retail price for whatever electricity they feed into the grid, panel owners now get:

This summer, NV Energy, Nevada's largest utility and a subsidiary of Berkshire Hathaway , had asked for a rate structure that included a monthly service charge, a demand charge (based on a home's peak demand), and an electricity charge. For homes with solar, it proposed paying 5.5 cents per kWh for the electricity they send to the grid, well below the 11.6 cents per kWh that customers are paying for electricity.

This is simply the way that it has to be, in the end at least. Leave aside any concerns about whether it should be yet or not and consider the underlying economics of this. The grid needs to exist if we're to share power at all. And thus it needs to be paid for: a standing charge doesn't seem like a bad idea as a method of paying for such infrastructure. And the size of that charge needs to be determined by peak drawdown (or perhaps feed in to it) as that is what determines how the grid is built.

And then, yes, everyone should be paid the current value of what they are feeding into said grid. And with solar that's only ever going to go down. As there's more solar on the grid then of course there's more of the grid that is all producing at the same time: that's how sunshine works across geographic areas. In the end, instead of being paid the wholesale price for power people are going to be paid the marginal price for power at that time. Something that the more the technology becomes as a percentage of total supply is only ever going to go down.

This isn't just a "Har, Har, Hippies!" argument: the only economically rational manner, in the long run, of paying for a grid that contains solar, or indeed any other local and or intermittent source, is going to be this one. A charge for the grid, scaled to the size of the connection, with production gaining moment by moment marginal value, consumption possibly based again on that marginal value. It's really going to change how things are done: and if we don't move to something like this then the system is going to go bankrupt instead.

Thus, obviously, it is going to happen: the only question is when.

Isn't this just fascinating?

Just so surprising who it is that is complaining about business rates:

The archaic business rates system is putting off international companies from coming to Britain, the boss of the UK’s biggest shopping centre owner has argued. David Fischel, chief executive of Intu, has told the Telegraph that the business rates system is “absolutely putting off international retailers from coming to the UK”.

Actually, no, not surprising at all. Intu is a real estate investment trust. Essentially, it owns commercial property and pays out the income to investors. Given this structure it is those investors who actually bear the economic burden of business rates in lower payments from the company. Business rates are not perfect, the tax should be levied on the value of the undeveloped land plus whatever permissions there are to do something with that land, rather than the value of what is built upon it. But even so, they're still a close approximation to a land value tax and as such a pretty good tax. And they're incident upon the landlord, which is where such taxes should be incident.

So, there isn't actually all that much surprise: Mr. Fischel's call is "Don't tax my people, tax some other bugger".

Spanish fashion group Inditex has been introducing more of its brands to the UK market, such as Pull & Bear and Stradivarius, but the Zara owner is said to be looking carefully at its investment return, with business rates a rising cost.

Zara tends not to own property, but to lease it. Thus rates are not incident upon Zara, but upon the landlords from whom it leases. We can indeed prove this too: when business rates were reduced in Enterprise Zones rents went up to compensate. Or rather, as is the way of such things, currently rents are depressed by the tax take of those business rates. Which is, again, precisely where we would like the incidence of the tax to be.

Mr Fischel called the rates system “a monster – in essence it’s an inflation-linked Government bond attached to our property assets”.

Yes, yes, it is. And that's what it's supposed to be too. It's one of the few pieces of the tax system which actually does exactly what it says upon the tin. We must get our tax revenues from somewhere and land value taxation is the least distorting manner of doing so. Thus why we do, and should, tax in this manner. The rents being received by the shareholders in Intu are exactly what we are trying to tax. And they are also what we are taxing. Sure, obviously, it is Mr. Fischel's job to complain about this but that doesn't mean we should pay him any mind as he does so.

The law can be a funny thing

This is a fun little case, rather appropriate for today given last night's excesses. Yet there's something profoundly wrong about the final dispensation:

Drink driving charges against an American woman have been dismissed based on an unusual defence: her body is a brewery. The woman was arrested while driving with a blood-alcohol level more than four times the legal limit in New York state. She then discovered she had a rare condition called "auto-brewery syndrome", in which her digestive system converts ordinary food into alcohol, according to her lawyer, Joseph Marusak.

We are aware that this can indeed happen.

The rare condition, also known as gut fermentation syndrome, was first documented in the 1970s in Japan, and medical and legal experts in the US say it is being used more frequently in drink driving cases.

We're even aware that that first known case concerned an American man in Japan and boy, didn't he have a hard time proving it.

During the long wait for a diagnosis appointment, Mr Marusak arranged to have nurses monitor his client for a day to document she drank no alcohol, and to take several blood samples for testing. "At the end of the day, she had a blood-alcohol content of .36 without drinking any alcoholic beverages," he said. He added the woman also bought a Breathalyser and blew into it every night for 18 days, registering around .20 every time.

Clearly, this is not the woman's fault so yes, we entirely agree with the idea that all charges should be dismissed. We are rather in favour of the idea of mens rea after all. However, this to us seems entirely wrong:

The woman is now free to drive without restrictions

Because we don't in fact have laws against drinking before you drive. This is not some puritan (however often people seem keen to take it in that direction) restriction of the joys of booze. This is law against driving while drunk, on the very sensible Millian grounds that in doing so you are a danger to others. And it doesn't matter how one becomes drunk, one is still that danger.

So the correct answer here is that, without fault of course there should be no punishment. But if ingesting carbohydrates is going to get someone pissed (which is the specific problem here) then someone to whom this happens should not drive: because they're pissed.

Someone could have gone blind from indulging too much in teenage manipulation, they could have gone blind as a result of unsuccessfully defusing a terrorist bomb and saving many lives in doing so. We still don't let them drive: because they're blind. They why is not the point, the danger is.

It would appear that our Chancellor does not understand microeconomics

This should not be taken as a good sign really. Evidence that the person setting the economic policy for the Kingdom doesn't quite understand economics shouldn't be so taken:

Airport retailers could be forced to pass on millions in VAT discounts on duty free to passengers under a review announced by George Osborne. The Chancellor said that it is "simply unacceptable" that some retailers are failing to pass on savings to customers and instead using VAT relief as a "windfall gain".

For the shops don't end up with that extra cash as a windfall or profit. It actually all flows through to the landlord in rent. As it will in any such situation of course.

In fact, it's been said that Heathrow should actually be paying planes to land there they make, as an airport, so much money from funneling people through the shopping areas.

That there's a tax discount, or should be, is true, but given that it is only available on a few select pieces of land then the benefit of it is going to flow through to those who own those few select pieces of land. David Ricardo published 198 years ago: we should all understand this by now.

Steve Masty: an obituary

Stephen J Masty, a longtime friend of the ASI, died on December 26th in London. He was one of the first friends I made when I taught philosophy and logic at Hillsdale, and was one of my most engaging and witty students. He went on to study at the University of St Andrews, and came down to help us out in the early days of the Institute. He was a talented cartoonist, and designed some of our graphics.

He moved to D.C. to work as a columnist with the Washington Times and as a speechwriter to several key Republican leaders. He was noted in the D.C. political and media community as a talented writer and witty raconteur.

He did a spell in Afghanistan with the Mercy Fund, producing leaflets and cartoons to help people, especially children, cope safely with the dangerous debris left after the Soviet withdrawal. He went on to spend much of his adult life as a development expert, working on projects in South Asia and Africa, as well as in the Middle East. He wrote and directed development movies, and one of his privatization video songs, recorded by local celebrity Captain John Komba, reached the top of the Tanzanian music charts!

In the early 1990s he managed the American Club in Peshawar, accompanying on his guitar some of the satirical songs he had written. He became a legend in the region, as he later did in Kathmandu, for his eccentric charm and bonhomie.

When in the UK, he made the Savile Club his home, and was well known and well liked by the other members. Some of his cartoons of them adorn the Club's walls, alongside pictures by Augustus John and others. He wrote novels, children's cartoon books, and movie scripts, and eventually took out British citizenship. It was characteristic of him that he had a letter in the Times that very week complaining about "foreigners coming to take our jobs!"

He led a colourful life, surviving a Taliban siege of Kabul and an earthquake in Kathmandu. He leaves us with many fond memories of good times spent together. The ASI has lost a talented and valued friend.

(the photo shows Steve in DC between two other ASI supporters)

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?