How a poverty meme gets created

We're privileged to be at the birth of a new poverty meme. We can actually watch how it is done. First, you create your own definition of some form of poverty. As the Joseph Rowntree Foundation have done here. They define destitution as being the following:

The number of destitute people in the UK isn’t measured officially, despite growing concerns about rising use of food banks, homelessness and other indicators of severe poverty in recent years. In fact, when we started this research we found there wasn’t even a widely accepted definition of destitution which we could apply to everyone in the UK. The research team at Heriot-Watt University worked with experts to develop a robust definition, which was then tested with the general public.  Using this, we define destitution as being when someone lacks two or more basic essentials in one month, and so has experienced two or more of the following; slept rough, had one or no meals a day for two or more days, been unable to heat or to light their home for five or more days, gone without weather-appropriate clothes or gone without basic toiletries.

We agree, those are not things which should be happening to people in a rich country. We would also note that the major cause of all and any of these things is the incompetence of the anti-poverty bureaucracy run by the government. But do note that there is an important point about the numbers here:

This week we have published the first comprehensive study into destitution in the UK, which shows that 1.25 million people, including over 300,000 children, were destitute over the course of 2015. 

I any one month the number being failed by that State is some 100,000 people. 100,000 too many, of course, but it is 100,000 who experience perhaps a couple of days of that "destitution" in any one month.

And then, only a week later, see how this meme has subtly altered in the popular press (to the extent that The Guardian is popular of course):

This is what destitution looks like. More than 1 million people in the UK are so poor they can’t afford to eat properly, keep clean or stay warm and dry, according to new research by the Joseph Rowntree Foundation (JRF). What’s emerging in austerity Britain is a new level of class inequality: not simply between the wealthy and the poor, but between people who have enough money to buy toilet rolls and cook a hot meal and people who don’t.

They're referring to the very same report. And yet that meaning has hugely changed, hasn't it? From this destitution being a brief period for that 1 million over the course of a year to something that is happening to that 1 million all year.

And thus are memes created. Invent your own definition, however reasonable, attach a caveat, a qualification, and watch everyone run with the uncaveated, unqualified, extreme version. This has been done for decades now with the definition of poverty itself: the modern definition means "not as much as others" rather than the older meaning of poverty of "not much". 

We don't hold with it ourselves, think this is tantamount to lying to us all. But just look around, it's a very common tactic.

Naomi Klein just doesn't understand the real world

We've had our differences with Ms. Klein before. We recall a central tale in her most recent offering: she complained that the WTO's insistence on lifting local content rules on Canadian solar power reduced in some manner the fight against climate change. When, of course, allowing people to install cheaper Chinese made solar panels rather than more expensive Canadian made ones will, presumably, increase the number of such panels installed.

That is, there doesn't seem to be a great knowledge nor understanding of the real world in her oeuvre. and so it is with this claim: 

“There is no clean, safe way to run an economy built on fossil fuels. There is no peaceful way to do it ... If nations and people are regarded as other, it’s easier to wage wars and stage coups,” she said.

“We are running out of cheap ways to get to fossil fuels. This sees the rise of fracking which is now threatening some of the prettiest places in Britain.”

Now it's true that we don't see the problem with fracking and Ms. Klein obviously does have some problem with the technology. But imagine that you are against fossil fuel use, as she is. The one and really important observation you would have to make about said technology of fracking is that it is incredibly cheap.

It is this cheapness which is driving out the use of coal for energy production in the US for example. Where fracking has been widely deployed, as in said US, it is the cheapness of fracking which is driving the conversion of LNG import terminals into LNG export terminals. It is the very cheapness of fracking which is leading to convention gas production plans being put on ice.

We're also really rather confused as to how drilling a few holes in Lancashire is going to increase the number of wars or likely to produce a coup or two.

There simply doesn't seem to be any connection between Ms. Klein's observations and the real world out there. We therefore don't think she or her pontifications are a very good guide to what we should be doing. 

Whitehall should manage the what, not the how

BIS may not have noticed the British steel industry going to the wall but they at least deserve sustained applause for getting something right. For twenty years and more they have been assessing their International Trade Advisers on how they spent their time, not what they have achieved.  Critics have been suggesting that, as ITAs were supposed to be turning SMEs into exporters, maybe they should be assessed by the number of new exporters, or the value of exports they produced.  Now, UK Trade and Industry, under the leadership of the excellent Dr Catherine Raines, has done exactly that.
 
We taxpayers give Whitehall our money for things we could not otherwise achieve for ourselves. Is it not blindingly obvious that value for money should be assessed by what that money achieves, not by some contrived analysis of  how public servants spend their time?
 
Yet department after department has not got the message.  The Department of Health thinks it knows how to be a doctor better than doctors do.  Education likewise thinks it knows how to run schools better than teachers do.  The most disgraceful, perhaps, example is safeguarding children, or perhaps failing to do so.  The Department’s response to each child abuse scandal is to commission another enquiry.  This then further complicates the way child workers are supposed to spend their time which in turn leads to more safeguarding failures and so it goes.  Rotherham at 1,400 abused children and counting may prove an all time high but child workers are so busy with redundant admin that you can bet the abuse continues willy nilly. 
 
One such enquiry was headed by Lord Laming who, in 2003, said:
 
 “17.65 There was no doubt that the work of each of the key agencies supporting children and families should be rigorously monitored. In the past, the tendency has been to concentrate on the measurement of inputs; for example, the size of the budget, the number of staff, or the range of equipment used. This approach is of limited value and does not address the more important question of what is actually being achieved, and whether the lives of children and families are being improved by the investment.”
 
13 years later that attitude has not changed. This summer we are expecting another “Single Inspection Framework” from Ofsted setting out how social services should spend their time to please Ofsted, not how outcomes should be measured, still less how they should be used to assess child workers’ achievements.
 
When the Minister’s attention was drawn, again, to the need to monitor outcomes, the response (19th April 2016) was, if the status quo was inadequate, to consider “alternative models of delivery”, i.e. having child workers spend their time differently and, no doubt, confusing them further thereby.  Please, Minister, just establish the required outcomes and let child workers get on with it.  

No wonder housing in London is so expensive

We're continually told that housing in London is expensive just because there's no land to build upon. And of course we can't let the place expand outwards because green belt. Thus, well, everyone should just get used to it. It's not entirely obvious that this is the true cause as this little story shows:

Anyway, once seen, the beauty of the wetlands turns you swiftly soppy: 11 hectares of reedy heaven, all cherry trees and tufted grebes, warblers and thrilling mid-air dust-ups between gulls and geese. Plus an education centre and nice caff in the former dining room of Thames Water’s staff.

The wetlands are the fruit of the labours of more than 50 local volunteers spearheaded by the London Wildlife Trust, whose representatives showed round the press and the project’s patron, David Attenborough, on Saturday. And the bill?About £1.3m, half of which was met by lottery money, with Berkeley Homes and reservoir landlord Thames Water chipping in about 20% each, and Hackney council 10%. Just to reiterate: the company whose skyscrapers overlook the wetlands, whose newly released range of apartments is called the Nature Collection, and are billed as being “set on the banks of an abundant nature reserve and animated by urban wildlife year-round” has contributed about half the cost of one of its cheapest flats – which apparently paid for the boardwalk.

Is it naive of me to assume that companies whose coffers are set to swell enormously might have an obligation to invest in the surrounding landscape for everyone? The initial stages of the redevelopment were signed off years ago, and did involve the fulfilment of various section 106 agreements – the bargaining chips for greater-good improvement councils can demand in return for consent.

11 hectares of that oh so expensive land in the middle on one of the world's great cities must be a wildlife haven? More than that, the people building the houses on other land must cough up to pay for it? 

If you further restrict the supply of land and then load the costs of non-housing related issues onto housing itself then housing is only going to become more expensive, isn't it? And yet the argument now is that we should demand even more of these things in order to what? In order to make housing cheap again?

How to make East Africa poorer: ban imports

This really does have to be one of the sillier pieces of economic policy now being tried out. The East African Community has proposed banning the import of second hand clothes.

In February, however, the East African Community (EAC), an intergovernmental organisation, proposed a ban on imported used clothes and shoes. The aim is to encourage local production and development within member countries: Burundi, Kenya, Rwanda, Tanzania and Uganda.

The problem here is that people are not understanding the most basic point about trade, poverty and jobs. Imports are the purpose of trade, poverty is the inability to consume and jobs are a cost of doing something. Thus this is nonsense:

Many orthodox economists disagree with banning imports because it goes against the principles of free trade. Rather than having the freedom to choose imported used clothing, east African consumers will have to buy higher priced local goods or new clothes imported from Asia. 

Increasing the cost of clothing will hit east Africa’s many low-income consumers, but the shock effect could be reduced if a ban was imposed gradually. If a tax on used clothing imports was introduced before an outright ban, this could subsidise local production and increase local manufacturing capacity.

A revitalised local market would ultimately boost the EAC’s economy by providing more jobs than the second-hand sector while retaining money that currently goes to Europe and the US to pay for second-hand imports.

It's not that economists oppose this in order to support free trade. It's that economists understand all three of those points. Poverty is reduced when people can consume more in return for less of their labour. This ban will lead to more jobs locally, yes it will. But it will also lead to all local people having to expend more of their labour in return for being clothed:

It is important to emphasise, however, that turning off the supply of used clothing alone will not enable the growth of local manufacturing. The proposed ban on imports doesn’t include new clothing imports from outside the EAC. While foreign garments will be more expensive than used clothes, they are likely to be cheaper than locally manufactured clothes as has been found in South Africa.Efforts to ban used clothing imports are therefore unlikely to be beneficial for the local economy unless there are similar controls on new clothing imports. This would require the strengthening of customs and borders.

That is, all people in the EAC will have to labour more hours in order to gain the same amount of clothing. Or, if you prefer, they will have less clothing for the same amount of labour. That is, they will be poorer.

And no, it's not the correct goal of economic policy to make some of the poorest people in the world poorer. 

If banning imports did make people richer then places with very few to no imports would be rich places, wouldn't they? And the examples of Cuba and North Korea don't seem to bear that out. This is a ludicrous idea and they really, really, shouldn't do it.

Can National Pay Bargaining in the NHS Kill?

Pay for NHS clinical staff (nurses and physicians) is set nationally, with very little variation to take into account local labour market conditions. This is a problem because in the UK regional pay differences are high, even when you control for things like education and skills. As a result, there are large differences in the UK between wages inside and outside sectors where pay is strictly regulated like the NHS. In some regions NHS clinical staff are overpaid relative to local labour market conditions, while in others (London and the South East) clinical staff are underpaid and would get higher pay if they left the NHS for the private sector.

This leads to worse outcomes for patients according to a 2010 paper from Propper and Van Reenen. Looking at the hospital death rate for heart attacks alone, they find that national pay setting for NHS clinical staff (nurses in particular) leads to 366 extra deaths every year.

In effect, national pay setting in the NHS for nurses acts as a price ceiling in high wage regions, which in the absence of other countervailing factors should generally lead to an undersupply.

There are two major predictable effects of this defacto price ceiling.  First, we should expect nurses to move from areas where their wages are relatively low (London and the South-East) to areas where their wages are relatively high (South-West and the North-East). Second, we should expect nurses in London and the South East to leave the regulated sector (NHS) for the unregulated sector (private nursing homes) where they can expect higher pay. Put simply, we should expect the NHS to get better in low wage regions, and get worse in high wage regions. 

Now this alone doesn’t really tell us much about the overall effect of setting pay nationally in the NHS. Perhaps the benefits of better service in the North-East outweigh the harm of worse service in London.

However, the data implies that regulating pay leads to worse outcome across the NHS on balance. Part of the problem is that people have strong area-based preferences: they aren’t willing to just up sticks and move across the country unless they’re getting a serious jump in wages. So instead they’ll be more likely to stay in the high wage region and just leave the NHS altogether to move into the nursing home sector where pay isn’t set nationally. 

On balance, this leads to 366 extra heart attack deaths each year across the NHS. But the authors suggest this figure might, if anything, be understating the harms of national pay setting:

If we were able to calculate the fall in quality across a much wider range of illnesses (deaths and more minor loss of quality of life), we would scale up the social loss by a very large amount.

If we devolved pay negotiation and hiring powers to trusts, we could raise standards across the NHS and most importantly, save lives!

New paper: Evolution not revolution

The ASI has a new paper out today from our Brexit unit, written by Brexit unit head Roland Smith, aka "White Wednesday". In this paper he makes a positive case for Brexit—based on Britain's liberal tradition and how it clashes with the EU—and explains why, if we leave, the EEA is the only attractive option. We should aim for 'evolution, not revolution'.

Read the paper online here.

Download the paper here.

On the EU and mobile roaming charges

We've been barraged in recent days with the propaganda about how the European Union has reduced mobile roaming charges for us all. This, obviously (and one minister has expressly stated this) is meant to be taken as evidence of how wonderful it is to be a member of the European Union. Perish the thought that it might be just propaganda to sway the upcoming vote.

Roaming charges across the European Union has been capped, meaning UK consumers can expect to spend much less when using their mobile phones in mainland Europe.

“Roughly a million Brits stay the night in Europe every day, and they spend around £350m a year on roaming charges,” said Ed Vaizey, the minister for the digital economy.

“So by realising these changes, we’re going to save British consumers millions of pounds a year.”

And yet that's not in fact the whole and absolute truth. Here is that truth, an examination of roaming charges by the international body that actually deals with such things, the ITU.

Countries that are not in the EU have managed to reduce or eliminate such charges. Further, countries that make no determination on such matters have companies within them that do eliminate roaming charges and other that do not. That is, consumer choice is increased by not regulating.

For of course, the elimination of roaming charges means that companies are likely to tweak their solely domestic charges to compensate. And those who would gain from the lower prices of solely domestic patterns of use will now not benefit. We would thus regard this regulation of the market as being a cost to consumers, not a benefit.

But the rather more important point is that just because something is coming from the EU does not mean that it is necessary to have the EU to gain that thing. Sr. Barroso has told us that the point and purpose of the EU is to stop Germany invading France. Again. The invasion hasn't happened, this is true, and the EU exists. But we're deeply, deeply, unconvinced that the EU is the reason the invasion hasn't happened.

So it is with much of what is claimed as being benefits of the EU. The argument is not and should not be whether these are nice things to have. It's whether it is necessary to be in the EU to get them.

Quite so, let's blow up the Town and Country Planning Acts

It's interesting to see someone getting the analysis correct and then the conclusion entirely wrong. So it is with this piece about housing and the planning system:

There were two periods in the 20th century when housing supply did a reasonable job of meeting housing demand and need. The first was between the wars, when cities expanded horizontally into the suburban development of green fields and, assisted by government incentives, builders could offer affordable homeownership to people on middle-to-low incomes. The second was in the decades after the second world war, when publicly funded council housing accounted for roughly half of all homes built.

The first was largely ended by the nationwide introduction of green belts from the 1940s onwards, the second by Margaret Thatcher’s termination of local authorities’ power to build housing. 

We're happy enough with that as a pencil sketch of the situation, yes. Where we disagree is here, in the solution:

This sluggishness is despite successive governments’ attempts to liberalise the restrictive planning that they say is to blame for poor supply. Short of a return to a 1930s free-for-all, and possibly not even then, the evidence seems conclusive that the market will not on its own provide.

Why not return to that free for all, that free market, to allow the market to solve the problem?

It is now a reasonable question whether well-planned development in the nation’s green belt should always and in all circumstances be ruled out, but no one in their right minds wants to return to the land-eating, unsustainable sprawl of the 1930s.

Yes, we do want to return to that. We can solve the British housing problem at a stroke. Just blow up, repeal in their entirety, the Town and Country Planning Acts. Job done.

Our problems are caused by the current regulation of who may build what where. 
The solution to our problems is thus to change who may build what and where. and given that the only time that market did solve this problem it was by being allowed to build where people actually wanted to live then that should be the system we return to. Other countries have much this system and do not have problems with their housing. So, we should too.

The government is killing 80,000 people a year apparently

And it's all because of austerity, privatisation and the distressing lack of Environmental Health Officers. No, really, that is the claim:

Thousands of people are dying each year because of the government’s failure to tackle food poisoning, health and safety breaches and pollution, a thinktank is warning.

A new report from the Centre for Crime and Justice Studies (CCJS) claims that lax regulation and weak enforcement are failing to hold businesses in check and are tantamount to state-facilitated “social murder”.

The report, by Professor Steve Tombs, head of social policy and criminology at the Open University, claims that some 29,000 deaths in the UK are attributable toairborne pollution alone. A further 50,000 people die as a result of injuries or health problems originating in the workplace. Each year food poisoning results in 20,000 people being hospitalised and 500 deaths.

The report itself is here. There's ever so slightly a logical problem with the claim though. Let us assume that the evidence presented to us is correct. There are fewer inspections being carried out by those Local Authority employed EHOs. There is also that number of deaths from those causes. This is the result of Tory austerity and Yah! Boo! How Terrible!

However, the important thing we need to consider is whether this change in the regulatory regime is leading to more deaths from these causes or fewer. It is possible that having more private sector inspectors, more industry involvement and less LA, is improving the system, not making it worse. We don't say it is doing so you understand, only that it is at least potentially feasible. Just as the case being made, that less LA involvement is making the system worse is feasible. But that is the case that needs to be studied. Is the new system increasing or reducing the number of people dying from these causes? 

We don't know and on a Sunday morning we're not inclined to go look it all up. Which is why we would rather hope that a report trying to make the case one way or the other would provide some evidence. Which this report does not. It doesn't even begin to discuss the subject. It simply states that there's less LA and EHO involvement and also that this number of people are dying. There isn't even a start to an examination of whether those numbers of deaths are rising or falling.

The paper thus fails the most basic logical test of its own assertions. We're not very interested (not unless we're the union that EHOs belong to) in how many EHOs there are: we're interested in how good the regulatory regime is. Which is the one thing not considered in the slightest here.

Seriously, measuring the effectiveness of regulation by the number of bureaucrats employed to regulate isn't the way to do it. Must try harder, F - is your grade, see me after class.