Just sometimes a modicum of thought is required

Once again we’re told that Vienna is that housing nirvana:

Yet, it need not be this way. In Vienna, the majority of the city’s population live in high-quality subsidised housing.

Quite why the majority of the population should be subsidised is not explained. But still:

The city spends more than €570m (£502m) a year on its housing, including building new homes, paid for largely with a 1% levy on the salaries of every Viennese resident. Elements of the model have been adopted by many other European cities, from Barcelona to Helsinki.

What good housing requires, as Vienna shows, is political vision and will.

We’d be a little hesitant about lauding the triumph of political will in that place and country ourselves. But take that seriously. Vienna has just under 2 million inhabitants. They pay half a billion a year - so, who thinks that £250 a head per year in subsidy will solve Britain’s housing problems? A week’s rent each?

Quite, no one, not even the author of this piece in The Observer. So, there’s obviously something else going on as well, isn’t there? Some difficulty, difference, impediment, in the British system that doesn’t exist in the Viennese.

We’d suggest finding out what that is then changing the British system so that it doesn’t have it. Like blowing up the Town and Country Planning Act 1947 and successors. Proper blow up, kablooie.

After all, Vienna doesn’t have that, does it?

Free market capitalism just isn't for the birds

We have a complaint here about broiler hens. On a moral basis it might even be somewhere between fair and true. As economics it’s desperately unobservant.

“Frankenchickens”, as campaigners have dubbed them, reach maturity 12 weeks quicker and can be up to twice the size of a typical farmed bird 50 years ago. They can go from egg to slaughter in just 35 days.

The selective breeding has helped ensure Britain has plentiful cheap chicken to furnish dinner tables across the country.

Yet campaigners, who include TV presenter and environmentalist Chris Packham, argue the breeding practice is unnatural and leads to severe health issues for the animals. What's more, they claim all this has been done purely for profit.

“A lot of these industries are not driven by simply feeding people and making a bit of a profit on top,” poet Benjamin Zephaniah, who is supporting the legal challenge, told the Independent outside the High Court this week. “It’s making maximum profit. And I can’t really think of another word but greed.”

It is a characterisation that chicken farmers would scoff at.

Far from greedy profiteering, many farmers say they are struggling to make ends meet. In fact, the industry is now warning of potential chicken shortages as soaring costs push many to give up altogether.

Shelley might have had a point about legislation - so much of it does come to pass on a surge in rhetoric - but not about economics.

Zephaniah and Packham have a point about the producer greed for profit, sure they do. Humans are naturally greedy, humans do like a profit and will do things in order to gain one. But then comes that free market part of the system, the competition. Producers find that profit eaten by the competition - it then ends up with the consumer gaining near all the benefit.

As, you know, shown by that recent Nobel Laureate, Bill Nordhaus. The entrepreneurs (and yes, let us indeed recall that this is where Anthony Fisher’s money came from) manage to, on average, retain some 3% of the value created - the rest being passed on to consumers as a result of that competition.

Human greed as tempered by free market capitalism leads to a chicken in every pot. Maybe that is even beastly to the birds who are the product. But in the interaction among humans beings it’s quite clearly the consumers who benefit from the whole arrangement.

They've not shown that dope smoking makes you mad, no they haven't

Much shouting is about to happen as a report claims that smoking cannabis causes schizophrenia. Which isn’t what has been shown or proven at all - that is what has been assumed.

The Telegraph:

Almost a third of schizophrenia cases in young men triggered by cannabis use

One stage back is the NIH:

Young men with cannabis (marijuana) use disorder have an increased risk of developing schizophrenia,

That’s already a step back in the claim. And the actual paper itself:

At a population level, assuming causality, one-fifth of cases of schizophrenia among young males might be prevented by averting CUD.

We’ve long known that there’s a correlation with heavy dope smoking and getting schizophrenia. The bit we don’t know is whether those feeling the madness descend self-treat with lots of dope or whether the dope causes the descent of the madness.

There will be a lot of people shouting about this report, shouting that it proves the movement is from dope to mad. Which isn’t what was shown at all, that is what was assumed.

Science is, of course, a public good, it’s even good for the public. But it is necessary to just check what is actually being said by the science. This paper measures the size of the correlation between cannabis and schizophrenia. It doesn’t even attempt to decide upon the causality. Despite what varied prodnoses are going to shout at us.

People who quote statistics should understand them - discuss

We are told this:

Over a decade ago, the answer to increasing earnings might have been to work more hours or train for a better-paid job, but these days work no longer pays. Workers in the UK are £11,000 a year worse off after 15 years of wage stagnation.

It’s not just that it’s a non sequiter - whether work pays or not is a function of the returns to not working, not to some mythic standard - nor that it’s logically invalid. After all, wage stagnation would not mean a fall in wages, it would mean not a rise in them. What does matter is that it’s simply not true. Even though The Guardian says so:

Workers in the UK are £11,000 worse off a year after 15 years of “almost completely unprecedented” wage stagnation that signals a failure of recent economic policy, according to the Resolution Foundation.

No, that’s not what they did say. Rather, they said that if wages had carried on going up as they had done in the boom then wages would be higher now by £11,000. Nobody - well, OK, this writer at The G, The G itself are but they’re wrong - not even the Resolution Foundation, are stating that British workers are worse off. They’re just not as well off as if some trend had continued. After all, if real wages had continued to grow at the 3.7% rate of March 2015 (YonY) then we’d all be squiddledepop richer. And?

We can even back test the original claim. In 2008 average (from median to mean) wages were in the £20,000 to £25k range. If that had fallen by £11k then real living standards would have declined by 50%. Which, despite whines and whinges, really has not happened.

Just a little hint, those who do not understand an economic claim or statistic - even those who have trouble with numbers - should not try to misuse an economic number or statistic to bolster an argument.

Of course, it’s also logically possible that this is intentional, an attempt at misinformation. But that would be naughty and no one would do that, would they?

This isn't proof of a housing crisis

That we do have a housing problem is obvious. The reason we’ve got one is because the law - the Town and Country Planning Act 1947 and successors - makes it illegal to build houses Britons would like to live in where Britons would like to live. The solution is to blow up that Act, proper blow up, kablooie.

Return to the free market of the 1930s which is the last time that private housebuilding did meet demand.

We all know that.

However, we do also need to point out bad logic and bad evidence:

House-building alone won’t solve the crisis, but it will hugely contribute to some of the most urgent needs in this country – namely the 1.3 million people on English council house waiting lists in need of social rented homes, many of whom are privately renting and sliding into poverty.

Social housing is, by very definition, at less than market price. That there’s a queue for something at less than market price is not a proof of need. It’s a proof of that very human desire to get something on the cheap. If you start selling doughnuts at less than market price you’ll get a queue. Start selling pound coins for 50 p you’ll get a queue. The queue, the waiting list, is proof of below market price, nothing more.

The actual number of people without housing is that 8,000 or so annually (some 4,000 perhaps on any given night) across the country who are rough sleeping.

We cannot use the council or social housing waiting list as proof of the need for housing. We can - and should - use it as proof of that desire to gain something below market price.

Seriously, sell something cheap and what do you expect? That folk won’t line up for it?

Basic income and AI-induced unemployment

Authored by:

Connor Axiotes (Adam Smith Institute)

Nikhil Woodruff (UBI Centre & Policy Engine)

Scott Santens (Humanity Forward)

‘Automation has been transforming the labour market for decades and the development of generative AI is about to kick that into overdrive. We don't even need artificial general intelligence in order for a universal basic income to make sense. Market economies are fuelled by customers with discretionary income to spend, and the more people are unable to afford anything but their basic needs, the harder it is for employers to find customers to sustain their businesses. The need for UBI also goes beyond modernising welfare systems. It could be seen as a rightful dividend to those whose data provided the capital to train large generative transformers like GPT-4, which was all of us’ - Scott Santens, author, Basic Income researcher, and Senior Advisor to Andrew Yang’s Humanity Forward.

* * *

Sam Altman, the CEO of perhaps the most consequential artificial intelligence (AI) lab of the few years, OpenAI, imagines: “Artificial intelligence will create so much wealth that every adult in the United States could be paid $13,500 per year from its windfall as soon as 10 years from now.” He is referring to a Universal Basic Income (UBI) financed from the windfall profits of future AI systems. Altman believes that as  AI continues to advance it will become more economically productive than human labour, causing the latter to “fall towards zero.”

Why is AI different?

In order for the price of some labour to fall to zero, AI systems will have to reach a point of generality - meaning the AI can do any task that a human can do but to a superhuman level. Some call this artificial general intelligence (AGI). It is at this point we believe there is a non-negligible chance these systems could replace many domains of both physical (which to some extent has already started happening) and cognitive human labour. It is the chance of the latter occurring which is particularly concerning.

We also do not yet know what emergent properties might pop up which were not intended in the initial design of the AI system, which may present itself post-deployment of an AI system. In addition, some believe an AGI would also display agency. Agency in an AI system would mean an ability to plan and execute its own objectives and goals. Both emerging properties and agency have the potential to make this technology unusually likely to replace cognitive as well as physical labour, as human labour’s comparative advantage of brain power becomes less apparent.

Research by OpenAI in March 2023 found that ‘around 80% of the U.S. workforce could have at least 10% of their work tasks affected by the introduction of LLMs, while approximately 19% of workers may see at least 50% of their tasks impacted.’ Gulp. Their paper examines the potential labour market impact of large language models (LLMs), like OpenAI's GPT, focusing on the tasks they can perform and their implications for employment and wages. 

The authors emphasise that while LLMs have demonstrated remarkable capabilities, their real-world applications and overall impact on the labour market are still not fully understood. They work out that LLMs have the potential to directly impact approximately 32% of the US labour market, primarily in occupations that involve information processing and communication tasks.

But what if we are wrong... again? Technology doesn’t seem to cause lasting unemployment effects?

It seems as though transformative technologies have always complemented labour even if shorter-term employment shocks were experienced. Even when technology had made people unemployed in a specific sector, that pesky invisible hand of the market seemed to ensure industry elsewhere popped up and human labour was never very far from a job. So why would any other transformative technology be any different? Are we just another group of Luddite’s heading for the same egg-on-our-face fate?

We think this time it might be different

Due to the aforementioned properties and agency of AGI, we believe this time it will be different. Mainly because it will touch physical and cognitive labour with such efficiency, and leave humans with little comparative advantage with which to earn a proper market wage. 

And so, we proceed in this piece under the assumption that an AGI with superhuman abilities in all human tasks - and the agency to plan and execute its own strategies - will, we believe, have significant sticky unemployment effects on lower skilled occupations as a conservative minimum estimate. We assume the economy is static and no other jobs can replace - with a liveable income - the jobs formerly lost by the now relatively (compared to the AGIs) economically unproductive labour.

And so the question arises, how would a Government go about finding a policy that might mitigate these effects? At the Adam Smith Institute, we have advocated for this policy for years, initially with the aim of simplifying the welfare system and for being a more effective and less regressive form of redistribution: a basic income.

A cumbersome state and an agile problem

The difficulty with ensuring that the state is responsive to the impacts of AI is largely because we do not yet know in what form AI’s disruption will take. If it is to be large-scale unemployment, strengthened unemployment insurance might appear a natural response. Or if employment incomes fall but jobs remain, in-work benefits might bear the strain.

But both of these countermeasures have their weaknesses. Interacting with the bureaucracy around modern welfare systems is time-consuming and undignified - so much so that around a quarter of eligible recipients never make it through. Ironically, this failure to target intended recipients is seen almost exclusively in programs that impose income eligibility conditions in the very name of ‘targeting’: unconditional cash programs like the Child Benefit have almost perfect accuracy in reaching their targets.

Unconditional cash therefore (or specifically: a universal basic income) may represent the only mechanism to ensure income stability for those who need it, whatever form the AI intervention takes. Critics of UBI often point to the high cost of the cash payments, and the substantial broad-based rises in taxes we’d need to fund them, as disqualifying factors. But the notion that the current welfare system avoids this is an illusion. 

Many also recoil at the notion of a 50 percent flat tax, but see no issue with our 55 percent rate on income paid by some Universal Credit recipients. Means-tested benefits are not the magically targeted free-lunch that they might appear to be: they are by definition equivalent unconditional cash payments combined with a very high tax rate paid exclusively by some welfare recipients.

If the government proposed a large UBI funded by raising the National Insurance main tax rate from 12 percent to 55 percent, public support might not be very forthcoming. But that’s almost a mirror image of what Universal Credit is. The only difference is that UBI is administratively far more efficient. 

But if a UBI were to be introduced, this should only be done with the abolition of much of the current welfare and benefit system in the UK and over a period of 5 to 10 years; total benefit spending is forecast to be £255 billion in 2023-24.

Broad tax rises on income could be one way to fund these cash payments, though critics would rightly point to negative labour supply responses. Taxes on natural commons could present an alternative: a 1% land value tax could raise enough to fund a £24 per week dividend.

(Impact of a 1% land value tax funding a £24 per week UBI. Source: PolicyEngine)

Alternatively, a price on carbon could raise enough revenue to fund cash transfers. Distributing the revenue as an equal dividend would lower poverty rates for children, adults and seniors alike.

(Impact of a £100 per tonne carbon tax funding an £11 per week UBI. Source: PolicyEngine)

Both of these have their own political challenges: the asset-rich cash-poor older generation is a significant bloc, and carbon taxes, like other consumption taxes, have a more regressive impact than income taxes when measured as a percentage of income. But in all of these tax bases, cash is more progressive than the tax base is regressive: a tax-funded UBI nearly always reduces poverty.

Conclusion

1. We are pretty confident that future AGI systems will have superhuman labour abilities, generality, and agency. 

2. We are also pretty confident that upon the creation of such an AGI, we will see a significant structural and sticky proportion of human labour unemployed of the likes we have not seen with other transformative technologies.

3. At such a time, the UK might seek to address this novel issue through the introduction of a UBI. We should start preparing for this scenario sooner rather than later, to allow the Department for Work and Pensions to get up to speed with the policy detail.

   * * *

   Previous Basic Income (or NIT) research by the Adam Smith Institute

   • Basic Income Around the World, (2018), https://www.adamsmith.org/news/rising-evidence-basic-income

   • Nine Arguments Against Basic Income Debunked, (2018), https://www.adamsmith.org/blog/nine-arguments-against-a-basic-income-system-debunked

   • Schrodinger’s Basic Income: what does the Finnish UBI experiment really show, (2019), https://www.adamsmith.org/blog/schrdingers-basic-income-what-does-the-finnish-ubi-experiment-really-show

   • Welfare shouldn’t be complicated, (2023), https://www.adamsmith.org/blog/welfare-shouldnt-be-complicated

   • Lifting the next 800 million people out of poverty, (2023), https://www.adamsmith.org/blog/liftingpeopleoutofpoverty

So the chicken market seems to be working just perfectly then

We’re told that chicken farmers are having a very hard time of it. To which the correct response is good:

‘It’s absolutely dire’: why UK chicken farmers want to call it a day

Bird flu, higher costs and the rise of meat-free options are pushing poultry producers to reduce flocks or give up entirely

We desire some system that can balance out these changes. The cost of producing something goes up - OK. So that means that fewer people will demand that thing as the price necessarily rises. Or, as here, people aren’t willing to pay that higher price and so demand falls. Equally, we’ve substitutes arriving. Both those plant based chicken alternatives and also presumably some sort of expansion of vegans, vegetarians and other dietary kinks. So, demand falls again.

We require some system to deal with these variations. We’ve got one, that price system. Things change and chicken farmers go bust. Not pleasant, of course, but it is the only way anyone has ever found to keep that supply and demand balance.

Of course, because it works The Guardian complains about it. But then that’s pretty normal too.

The World Economic Forum isn't quite right here

Technology and slow economic growth will destroy 14 million jobs around the world by 2027 with secretaries and bank workers facing the biggest losses, economists have warned.

Nearly a quarter of jobs around the world will change in the next four years as tech and the green transition disrupt labour markets, according to new research by the World Economic Forum.

Well, yes, that will happen.

Digitisation will also create massive labour market churn. Nearly half of an individual worker’s skills will need to be updated for the modern labour force.

In the UK, more than a fifth (21pc) of all jobs will change. This will be slightly lower than the 23pc global average.

That too. But the not quite right bit is to think that this is anything unusual. When, in fact, this always happens. This is just normality.

The bit that people forget. Some 10% of all jobs in the economy - so, for Britain, about 3 million - are destroyed each year. Some 10% of all jobs are newly created each year too. Unemployment is the stock of people who get stuck in that state as part of that flow.

So, over the 4 years to 2027 we expect 40% of all British jobs to disappear and be recreated. That’s just normality.

This is also how technological change happens - each new job is going to be slightly different from each old one. It’s not that people leap from being a bank worker to a ballet dancer, but that each job change will be a modest shift - which might well result in one less bank worker and one more ballet dancer but it will be the whole process that achieves that, not one single jete from the counter to the stage.

So the WEF is correct, this is going to happen, but not quite right in that they seem to think it’s anything other than business as entirely usual.

The example of the Aston Martin Cygnet

One of the truly stupid transport options of recent decades is the Aston Martin Cygnet. Aston, as we know, is a car brand with a history of going bust (8 times so far we believe) while attempting to make large engined sports cars for the discerning. The authorities, in their wisdom, decided that emissions should be decided across the fleets sold by a manufacturer. So, someone who only made, as specialists, large engined cars would be driven out of business. Thus the production of a 1.33 litre car to lower those average emissions.

Given the insanity of the outcome here obviously the authorities would not impose such heinously stupid targets again, would they?

At least 22 per cent of the cars manufacturers sell next year will have to be electric – or they could face fines of up to £15,000 per car they miss their target by.

That’s if the latest government proposals get the go ahead. Ministers have today announced proposed new targets as part of a major green agenda which details tough goals and punitive measures for car makers.

Har, har, har. gotcha there. For of course what the authorities have done is look at the Cygnet and insist that we should have much more of that.

When we all hope that people will learn from their mistakes that wish is that people will not repeat them - instead of using error as the template for the next action. But that’s not how government works, is it?

But Vandana Shiva's ideas don't work

One of the advantages of the market based economic system is that people try out all sorts of things. We can then look at the results of what they’ve done, copy those that work well and abandon those that don’t. Persisting in advocating those that don’t work is often referred to as religion - or perhaps Einstein’s definition of insanity, repeating the same mistakes and expecting a different result.

All of which is something to keep in mind when considering Vandana Shiva’s approach to farming. The Guardian provides something of a hagiography - to repeat the allusion to religion - in this interview.

The formidable Indian environmentalist discusses her 50-year struggle to protect seeds and farmers from the ‘poison cartel’ of corporate agriculture

Well, yes, we can see why fight The Man would appeal to those with comfy office jobs and who have never had to struggle with the soil for their daily bread.

For Shiva, the global crisis facing agriculture will not be solved by the “poison cartel” nor a continuation of fossil fuel-guzzling, industrialised farming, but instead a return to local, small-scale farming no longer reliant on agrochemicals.

Local, small-scale farming has another name - peasantry. To remove technology - and capitalism, globalisation and markets - from farming would be to condemn all of humanity to permanent peasantry. We think that’s a bad idea.

But more than that, the thing The Guardian doesn’t mention. Shiva’s ideas have been tried. Just recently, in Sri Lanka. She herself has said so. As many have noted the results were, umm, not good. Like the collapse of yields, imminent starvation and the ruination of the entire economy, the bankruptcy of the State.

We do think it would have been useful for The Guardian to point this out. The ideas have been tried and they don’t work. But then those with the comfy office jobs always do think that they’ll retain those in that New World Order, that it’ll not be them sent out to be that new peasantry. Kip Esquire’s Law is one of those ideas that has been tested and found to be true.