Good-oh! The water companies might go bust, how excellent!

Very serious people are being very serious about a very serious problem of great seriousness:

Heavily indebted water utilities are at greater risk of collapse as interest rates rise, the industry regulator has warned.

In a stark admission, Ofwat said companies that have piled on debt could go under, piling further pain on households at a time when bills are already soaring.

David Black, chief executive of Ofwat, said it was keeping a close eye on the impact of rapid rate increases from the Bank of England, which could heap costs on highly leveraged water companies.

The bit that’s being missed here - as everyone is being very serious - is that this is the point.

Capitalism does indeed produce returns for the capitalists if they get the process right. Capitalism also comes along and steals all their capital if they get it wrong. Which is the great glory of the capitalist system - screw up and you lose. Something which keeps folk on their toes trying not to screw up so that they don’t lose.

The system thereby contains two incentives which other systems don’t - rewards for getting it right, punishments for getting it wrong. Given how human beings work it’s therefore the system which pays more attention than any other to trying to get things right and not wrong.

If the water companies do go bust then the reservoirs, pipes, sewage plants will still exist. It’ll just be the capitalists owning the current legal wrapper - and employing the managements which led to the business collapse - who lose. Which is excellent, isn’t it?

A system whereby mismanaging the finances of the water system led to there being no water would, of course, be appalling. Which is why we’ve this circuit breaker in the system, the capitalists and their cash. They screw up they lose. Someone else then owns those assets and we can rinse (ahem) and repeat as necessary.

Or, as we can put it, yes there’s a serious problem here and we’ve already solved it. If the water companies go bust then great - that’s the point of the system we’ve installed to manage the water companies. You know, foolish management and their money are soon parted etc.

Polly Toynbee's Lament

Polly Toynbee has spent an entire lifetime shouting that we must all be more like Sweden. That she doesn’t know how Sweden works - more wealth inequality, a more viciously free market economy, than we have - hasn’t dimmed her enthusiasm. But here we get to the heart of her lament, in her words:

Taking the pulse of the world, Ipsos Mori finds us exceptionally mean-minded. Across the world, poverty and inequality come a close second in global public concerns, after inflation. How about the UK? Here we really don’t care much. We rank inflation as our top worry, but poverty and inequality are in a lowly joint fifth place in our concerns.

That’s who we are.

Britain is not Sweden, as we might put it. Or even, Britain is not a socially democratic nation, one that puts those poverty and inequality questions at the top of our worries. Therefore they shouldn’t be the things that politics concentrates upon simply because they’re not the things that we, the people, worry about.

This is a democracy, right?

Polly’s Lament also illustrates Polly’s Tragedy of course. She’s simply spent all of these decades lecturing the wrong nation. Others might have been more receptive to the message - but then equally, those other places which share her worries wouldn’t offer a position as lecturer for her, would they?

Blow up the Green Belt. Proper blow up. Entirely Kablooie

From James O’Malley on Twitter:

Something I didn’t fully realise until I saw this map just now is that the Green Belt doesn’t include most of the countryside - it’s actually almost laser-focused on strangling our most important cities.

It’s not just laser-focused, that’s the entire point.

It’s rather nice to be able to live looking out over rolling acres - without the cost of actually having to buy or own them - and still be able to commute into those vibrant city centres where upper middle class incomes are made. So, the law is there to ensure that upper middle class types may have that house looking out over rolling acres - without the costs of buying them - and still be able to commute into those vibrant city economies.

That the rest of us can’t live in housing we’d like to live in located where we’d like to live is just that collateral damage that has to be suffered to provide that rolling acre benefit to the few. What did you think this is, an economic democracy?

There is the obvious solution to this as well. Blow up the Town and County Planning Act 1947 and successors. Proper blow up, entirely Kablooie. At which point housing that Britons wish to live in can be built where Britons wish to live. Which is, we insist, rather the point of any sensible planning system to be applied to Britain.

Damn the would be gentry and blow up the Green Belt, proper blow up, entirely Kablooie.

Strokes and why the NHS isn't a good health care system

We’re told that the NHS doesn’t treat strokes well:

The procedure can reduce hospital stays by months. Some patients have been able to leave hospital the next day, instead of spending months in rehabilitation units.

Stroke specialists say a 24/7 service would save £73m a year due to the reduced costs of looking after people with stroke. But just 25% of thrombectomy centres operate as such, while 42% are only open from Monday to Friday during office hours, the report says, in part due to a lack of biplane suites, which contain specific radiology equipment.

Juliet Bouverie, the chief executive of the Stroke Association, said: “Thrombectomy is a miracle treatment that pulls patients back from near death and alleviates the worst effects of stroke.

The coverage rate is apparently some 0% in some areas outside London, up to 8% inside it.

It’s true that mechanical thrombectomy is a fairly new treatment, full trials showing effectiveness seem to have been completed in 2015 and 2018. But then this is exactly what ails the NHS - the length of time it takes new and better treatments to come into general use.

The American experience is of “The percent of patients with AIS receiving IAT increased from 1% in 2008 to 5.3% in 2018 (p>0.001).” They reached a much higher level ( yes, 5% of all is greater than the 0-8% range across Britain given that London isn’t by any means the majority of population) 5 years earlier than we did.

Which is exactly the NHS problem - productivity. Fortunately, we also know how to increase productivity. That comes from competition. No, it doesn’t have to be like the American health care system, it can still be tax paid, it’s that the organisations doing the actual work need to be competing to produce the finest results possible with the currently available technologies. That’s what does spark the adoption of the newly available and better - more productive - technologies over time. It’s also a self-sustaining process, it will apply to each and every new technology as one comes along.

That’s the argument for markets within the NHS. That they makes the system more productive, better, over time.

Or, even, markets in the NHS will stop some to many dying from mortality amenable to treatment, the one measure by which the NHS does appallingly in international comparisons.

Karl Popper, a philosopher of freedom

Exactly 120 years ago, on July 29th, 1902, one of the most remarkable and influential philosophers of the 20th Century, Karl Raimund Popper was born. As a teenager in Vienna, Popper was attracted by Marxism, and at one stage thought of himself as a Communist. What disillusioned him was the realization that none of the precepts of Marxism could be tested.

He formed the view that there was a difference between the ideas of Marx, Freud and Adler, and those of Einstein. Einstein’s theory of relativity could be tested by observation, and indeed was tested by Eddington’s experiments in 1919. By contrast, those of Marx, Freud and Adler could accommodate everything that happened; there was nothing that could happen in the observed world that could refute them.

This led Popper to the ideas he published in his 1934 “Logik der Forschung,” published in English in 1959 as “The Logic of Scientific Discovery.” Here Popper advanced his central notion of falsification. He said that although a theory could not be proved true, because an experiment might one day come along to refute it, it could be proved false if an experiment contradicted its predictions. Einstein’s theory could have been refuted, but wasn’t, whereas those of Marx, Freud and Adler could not be subjected to experiments that might refute them. They represented a determination to interpret the world in certain ways, rather than being capable of adding to our knowledge of it.

Popper solved Hume’s problem of induction. We expect the sun to rise each day because it has done so every day so far, although there are no causal links to explain why the past indicates the future, and why induction is valid. Popper replaced induction by conjecture and refutation. We form a theory that the sun will rise tomorrow, and test it each day. If one day it didn’t, then our conjecture would be refuted. Our scientific knowledge is thus not what we know to be true, but the collection of theories that we have been unable to refute. Theories that cannot be tested like this are not necessarily nonsense, but they are not scientific.

Popper’s other great influential work was his 1945 “The Open Society and its Enemies,” in which Vol 1 was “The Spell of Plato,” and Vol 2 was “Hegel and Marx.” Popper called it his “war book,” but it remains one of the most powerful demolitions of totalitarian ideology ever written. Far from being interested in “justice” and “virtue,” Plato was in fact justifying rule by the superior élite, and is profoundly anti-democratic and pro censorship and thought control. As Popper says, Plato’s idea of virtue is “the ruler rules, the worker works, and the slave slaves.” And Hegel and Marx enlist fanciful notions of where historical destiny is taking us to justify oppression and control. Popper opts instead for “piecemeal social engineering,” by which we gradually improve our circumstances by building on what has worked and making it better by removing some of its shortcomings. Democracy is not about choosing those best fitted to rule; it is about removing those who are bad or incompetent.

I was never happy with Popper’s idea that things could be “proved” false, thinking it subject to the same flaws as “proving” them to be true. We can decide to discard theories that are less good than their rivals at enabling us to predict what we shall observe, but that is a conventional decision to reject them, not a “proof” that they are at odds with some objective reality. My 1978 “Trial & Error and the Idea of Progress” was about that.

I knew Popper, and once spent a pleasant day and a half pacing the streets and the beach at St Andrews in his company. He was, I think, the most intelligent person I have met, in a linear, logical, Newtonian way. Hayek was perhaps wiser, bringing a greater breadth of knowledge to his more considered answers. But the two were friends and saw eye to eye on almost everything.

Paying for the choo choos

A fairly emphatic statement in The Guardian:

The best railway in Europe is publicly owned, in Switzerland.

This all being part of a proof that public ownership is best. The thing is it’s possible to mumble something or other about the definition of “best”. For example, a quick look at the finances of SBB shows that 40 to 45% of the gross revenue of the system is taxpayer support. This is not a function of covid lockdowns, this is a permanent feature. CHF 4 billion to CHF 4.4 billion on CHF 9 billion and change turnover. Which is quite a lot of money from everyone flowing to those who buy train tickets.

By contrast (without the influence of covid) 99% of the operating costs of the British rail system are paid from ticket revenue.

Which leads to a fairly basic question. Who should be paying for the train system? Our insistence is that those who get to ride on the choo choos should pay for there being choo choos to ride upon. For that just seems eminently fair to us. Everyone using an alternative form of transport has to pay their own way, whether that be shoe leather, bicycle tyres or petrol for the car (and yes, to head that one off at the pass, fuel duty is vastly larger than the road building programme*).

Something like that Swiss level of subsidy would cost every man, woman and child in the UK around £150 a year. No, people can pay for their own transport, can’t they? After all, it is them getting transported….

*This is still true considering externalities of fossil fuel use. The IMF calculations are here. Chart on page 18.

Not that we're gold bugs and yet.....

There are those who insist that money, currency, should be based upon gold. That this then restricts money supply to the productivity of mining is taken to be a benefit. We disagree. Well, mostly we disagree:

A gold coin stamped with an image of Victoria Falls has been introduced by Zimbabwe in its latest eye-catching attempt to tame galloping inflation and prevent another collapse in Africa’s worst-performing currency.

The government hopes to curb the hoarding of US dollars and tangible assets such as house bricks by tempting investors with 22-carat, individually numbered coins which are being minted from locally mined ore.

This is, we think, the third time Zimbabwe has faced hyperinflation and the destruction of the currency in recent decades. The authorities seem incapable of restraining themselves from overproducing any monies that they have the ability to produce.

That is, when considering what money should be linked to - gold, a basket of commodities, something purely fiat, whatever - that question of Thomas Sowell’s is always important, “Compared to what?”

It is actually possible for this modern monetary theory idea - government should just print whatever money it needs then spend it - to reach the stage that tying the money supply to the productivity of the mining industry is a good idea. Or, perhaps, it is possible for governments to be so incompetent that it becomes that good idea.

Which brings to mind a slightly different quote when considering how money should be managed and by whom. “You’ve got to ask yourself, do I feel lucky? Well, do ya punk?” The truth being that electoral choices do not always turn out lucky….

Henry Ford and the $5 a day wages

Chris Snowdon tells us all in The Times of how Henry Ford really didn’t raise wages so that the workers could afford the cars they made:

The left-wing equivalent of the self-financing tax cut is the self-financing spending splurge. The idea is that if you pay teachers more, they will spend more and pay more tax. As proof of concept, it is sometimes claimed that Henry Ford gave his workers a pay rise in 1914 so they could afford to buy his cars.

Ford actually gave them a pay rise to deter them from leaving the company. Even if all his workers bought a Model-T, the cost of the higher wages would have exceeded the extra revenue, and most of them would have struggled to afford one anyway.

This is indeed true, as one of us pointed out in detail for those who would like to check the numbers:

We can go further too. As we've seen the rise in the daily wage was from $2.25 to $5 (including the bonuses etc). Say 240 working days in the year and 14,000 workers and we get a rise in the pay bill of $9 1/4 million over the year. A Model T cost between $550 and $450 (depends on which year we're talking about). 14,000 cars sold at that price gives us $7 3/4 million to $6 1/4 million in income to the company.

It should be obvious that paying the workforce an extra $9 million so that they can then buy $7 million's worth of company production just isn't a way to increase your profits. It's a great way to increase your losses though.

The reason for the pay rise was not as some of our contemporaries seem to think it was. It was nothing at all to do with creating a workforce that could afford to buy the products. It was to cut the turnover and training time of the labour force: for, yes, in certain circumstances, raising wages can reduce total labour costs.

The story that Henry Ford raised wages to sell cars to his own workforce not only isn’t true it’s innumerate. So perhaps folk would like to stop parading their ignorance by repeating it?

A quite possibly interesting question

One to which we don’t know the answer:

Britain's biggest banks are demanding that Facebook, Google and telecom giants pay hundreds of millions of pounds to help reimburse victims taken in by scammers on social media. Barclays, TSB, Lloyds and Santander have warned that technology companies are not shouldering their share of the burden from the wave of online fraud gripping Britain.

They are backing a so-called "polluter pays" principle in which tech companies would be required to contribute to a compensation war chest for victims.

If a scam takes place through the Royal Mail does the Royal Mail contribute to the compensation? Or BT over telephones?

If a scam propagates through advertisements in the newspaper - this certainly has happened, whether it does now is another matter - then does the newspaper which carried the ad contribute to the compensation?

We rather assume that a newspaper doesn’t, we also rather assume that if such liability were being talked about then newspapers would be less likely to report approvingly on the idea.

We are, of course, aware that such scams do happen. One of us advised against one of them a decade back, before it had even launched. Then some years later gave evidence in a number of trials which jailed those who had run the scam. Financial, fiscal and investment scams abound.

We’d not, even, be averse to the idea that those who aid in propagating such a scam be liable for the compensation. However, that rule of law thing - any such system must be all who aid in propagating, not just one particular technological form of it. Nor, as we suspect is the case here, just those with deep pockets.

Which leads to that interesting question. Do other propagators face such costs, if not, will this new idea impose them upon all or just the disfavored few?

Australian restaurants teach us how to deal with climate change

Assume that all we’re told about climate change is true. No, go on, assume. The question then is, well, what to do about it? The secret of that is illustrated in this little tale from The Guardian:

Restaurants and cafes are constantly adapting their menus to try to mitigate the rising cost of produce and cutting staff hours, as inflation hits profit margins in the hospitality sector.

Jackie Middleton, who co-owns Earl Canteen, a small sandwich chain in Melbourne, and Dame, a high-end cafe on Collins Street, says not a single day goes by when she doesn’t get an email saying the price of a product has increased.

To handle it they are adapting their menus, substituting expensive vegetables with cheaper ones and finding inventive ways to use seasonal produce.

As the insistence is, in the face of climate change everything must change. So, how do we change everything?

As we can see here from Oz, a change in relative prices means that every supplier - and on the demand side, every consumer - is thinking about how to deal with that change in relative prices. How much lettuce is on a plate, which type of lettuce, the presence of lettuce at all. Change prices and the entire society, at the most microscopic level, includes those costs and benefits in each and every decision.

At a level which not even the most demented and powerful planner could ever reach of course.

So, if we wish to embed climate change into each and every decision in the society, at the most microscopic level, then we’ve got to change prices. If everything must change then we want the consideration of change to be within the decision making incentives of everyone, on every decision.

This means that the solution to climate change is the carbon tax - which embeds those costs and benefits in every decision made by everyone at the most microscopic level. That this also frees us from the power of planners, including the demented ones, is in itself a benefit, but even without that the point still stands.

If you’re in favour of doing something about climate change but not in favour of the carbon tax then you’re simply not being serious. Or, obviously, are a demented planner.