It's all the capitalists, the neoliberals, the CEOs and markets and, and, and

Mr Chakrabortty applies his well known economic perspicacity to the Royal Mail:

So this is how the Royal Mail ends: killed by lying politicians, lousy managers and ruthless moneymen

Aditya Chakrabortty

Barring the occasional rhetorical twist any one of us can predict how the other 1200 words go.

Sigh.

Now given that Royal Mail is politically, government, influenced we’re not going to argue that the issue has been perfectly managed. But the one bit - a really rather important bit we feel - that Aditya doesn’t remark upon is that all mail systems have exactly this same problem. We out here are simply sending fewer letters.

For Royal Mail, and from different data series so perhaps not entirely comparable, some 20 billion or so in 2004, 8 billion in 2021. No, the collapse did not come as a result of privatisation. Any chart wouldn’t, in fact, be able to visually spot the date of that privatisation. Rather, it tracks the rollout of broadband internet and then smartphones. The background technology has changed.

This produces a vast fiscal or economic problem. The cost of Royal Mail is near entirely the fixed cost of the network. The marginal cost of another letter is as close to zero as makes no difference. That also means that the marginal revenue loss of one less letter feeds near entirely through to the bottom line - the costs of the network have not fallen but revenue has.

Actual serious people have been chewing over this. Perhaps the overhead cost can be reduced by reducing that universal service obligation? Maybe. Or possibly the cost for each letter should triple to cover the lower volume. Maybe. Or some vast subsidy to retain the system. Maybe.

But this problem is not a feature of Royal Mail alone. Every postal system is facing exactly the same problem. It’s therefore not a point of the ownership or management structure of Royal Mail. Which is, sadly, exactly the one point which Mr. Chakrabortty does not examine nor explain, instead blaming everything upon the capitalists and privatisation and, and etc.

Which is a pity. It would have been possible to find out about this if he’d simply read his own newspaper. This is a good explainer for example. At which point we think someone should give Aditya a prize. Imagine, a Guardian column which could be factually improved merely by reading The Guardian?

A big number of a very big number is a small number

Apparently we’ve all got to be poorer. Well, yes, again, but this time it’s because:

The global extraction of raw materials is expected to increase by 60% by 2060, with calamitous consequences for the climate and the environment, according an unpublished UN analysis seen by the Guardian.

Natural resource extraction has soared by almost 400% since 1970 due to industrialisation, urbanisation and population growth, according to a presentation of the five-yearly UN Global Resource Outlook made to EU ministers last week.

To get a handle on the sort of size of number they’re talking about:

Each year, the world consumes more than 92b tonnes of materials – biomass (mostly food), metals, fossil fuels and minerals – and this figure is growing at the rate of 3.2% per year.

Of course we don’t, in fact, “consume”, we borrow for a bit. That old phrase of dust to dust, ashes to ashes, is true at the planetary system level. Say, the use of metals - we might dig them up out of one hole, use them then stick them back in another, mine to landfill, but we’ve not consumed them.

But OK, so 92 billion tonnes, call it 100bn. Up by 60%, let’s give them an inch and call it 200 billion tonnes. Big number.

Except: The lithosphere consists of sediments and crystalline rocks with a total mass of 23,000–24,000 × 10x15 metric tons.

24,000,000,000 billion tonnes.

200 billion is 0.0000008%

In a million years we’ll use under 1% of it (assuming we’ve got the right number of zeroes there all the way through).

This is such a problem that: ““Higher figures mean higher impacts,” he said. “In essence, there are no more safe spaces on Earth. We are already out of our safe operating space and if these trends continue, things will get worse. “ which we think might be a bit of an exaggeration. “The report prioritises equity and human wellbeing measurements over GDP growth alone and proposes action to reduce overall demand rather than simply increasing “green” production.” Ah, yes, we must be more equal and poorer as a solution. How did we guess that is what would be suggested? “Decarbonisation without decoupling economic growth and wellbeing from resource use and environmental impacts is not a convincing answer and the currently prevailing focus on cleaning the supply side needs to be complemented with demand-side measures,” Potočnik said.” That, again, means make everyone poorer.

Yes, sure, 200 billion is a big number even when speaking about government budgets and deficits. But the size of the Earth is a really, really, big number. Against which 200 billion is a grain of a smidgeon of a smear. It’s simply not an important nor relevant number nor percentage.

It’s a great excuse to impose perpetual poverty upon the population, of course it is. But it’s not a good reason. Because a big number of a very big number is a small number.

National Service - tempt, don't force

William Hague seems to think we should reinstate National Service:

The UK needs to move to the same reassertion of citizenship. The best model to draw on is also Scandinavian. Norway has a modern and highly successful form of National Service, keeping up with changes in society as well as the demands of national security. Every Norwegian 18-year-old, irrespective of gender, fills in a questionnaire on their health and motivation. About a quarter of them are chosen for interview, accompanied by physical and intelligence tests. In the latest year just under 10,000 were selected for military service, 17 per cent of the age cohort. They serve for 12 to 16 months.

There are huge advantages to this system. Although some people end up having to serve against their wishes, the majority are highly willing and proud of being selected. Many choose to serve for a longer period. They learn skills that are often of great value in later employment, while mixing with people from other regions and backgrounds all over their country. All of them become trained personnel who form a strong national reserve.

We’re with Milton Friedman on this:

General William Westmoreland, testifying before President Nixon's Commission on an All-Volunteer [Military] Force, denounced the idea, saying that he did not want to command an army of mercenaries.

Milton Friedman interrupted him: "General, would you rather command an army of slaves?" Westmoreland got angry: "I don't like to hear our patriotic draftees referred to as slaves."

And Friedman got rolling: "I don't like to hear our patriotic volunteers referred to as mercenaries. If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general." And he did not stop: "We are served by mercenary physicians, we use a mercenary lawyer, and we get our meat from a mercenary butcher".

In more detail:

TO MAN THE ARMY with volunteers would require making conditions of service more attractive—not only higher pay but also better housing facilities and improved amenities in other respects. It will be replied that money is not the only factor young men consider in choosing their careers. This is certainly true—and equally certainly irrelevant. Adequate pay alone may not attract, but inadequate pay can certainly deter. Military service has many non-monetary attractions to young men—the chance to serve one’s country, adventure, travel, opportunities for training, and so on. Not the least of the advantages of a volunteer army is that the military would have to improve their personnel policies and pay more attention to meeting the needs of the enlisted men. They now need pay little attention to them, since they can fill their ranks with conscripts serving under compulsion.

Conscription - even into this national service idea, only some of which is military - means that those doing the paying, in the wider sense of all the conditions not just money, don’t have to care very much about what is being paid. For what is offered to slaves can be very much less than what is necessary to attract mercenaries.

This idea of having a less than full time - or lifelong - but trained up reserve has its merits, of course. Which is why we already have one, The Army Reserve, what used to be called the Territorials. If Baron Hague - or anyone else - wishes to increase the number in that then they can fund it properly. Something British Governments have not been doing for decades.

It’s entirely true that there’s a cost to having a decent military. But the costs of enslaving people into it are higher than tempting them. So, tempt, don’t force.

Now they're marching down the street with a chamberpot on their head

Sigh:

Rishi Sunak has vowed to defy the Conservative right-wing by pushing ahead with vaping and smoking bans

It’s not the right wing of anything being defied here, it’s good sense.

We’ve made clear our views on vaping recently - it works in reducing both smoking and teen smoking. Banning, even just restricting it, is therefore the act of fools. No, there is no justification.

There’s an explanation, for of course there is. Hayek pointed it out in Road to Serfdom. Give it long enough and if politics provides healthcare, directly provides it, then politics will be used to control us and our health. That’s not exactly disproven as a thesis now, is it?

As Chris Snowdon points out in detail, this isn’t even going to benefit the health of the nation nor the populace - it’s going to increase the size of the black market, that’s all.

The full announcement is here. Over and above the already mentioned problems, this particularly strikes us:

Five million disposable vapes are thrown away each week, up from 1.3 million from last year. Over a year this is equivalent to the lithium batteries of 5,000 electric vehicles.  

That’s about 50 tonnes of lithium a year even if we are to agree that it could, feasibly, be a problem. So, to “save” the equivalent of two lorry loads a year, 50 tonnes in a 100,000 tonne a year market, of a metal so cheap that mines are closing because they’re losing money, we’re going to expand the black market, harm the health of Britons and severely curtail that basic civil liberty of being able to do what the hell you want with your own body?

This has passed beyond the stage of being fools, they’re marching down the middle of the street with a chamberpot upon their head singing “Woot! Woot!”

Where is that necessary care in the community to teach them that the pot needs to be emptied before being used as a hat?

Where will the UK’s electricity come from in 2050?

The sources of our future electricity are really quite simple but Whitehall, with the best of intentions, is doing their best to mess things up. Renewables, largely wind and solar, will provide the lion’s share at best value – or something close to that. But what about the rest?

In 2022, a record 41.5 per cent of electricity came from renewables. “Around 72 per cent of renewable fuels are used for electricity generation, a third of which is lost in the conversion process.” This illustrates the care that must be taken in distinguishing renewables’ capacity from contribution to demand. The former is the nameplate output from an energy source like wind, if the wind blew at an optimal level all year long and it could all be used for electricity generation with no wastage. Politicians, when discussing renewables, like to talk about capacity, which they can control by commissioning more windfarms, rather than share of demand which depends on weather and which they therefore cannot control.

Even estimating 2020 needs care: UK electricity demand fell 4.7% in 2020 to 281 TWh due to Covid and “UK total electricity generation in 2020 was 312 TWh” but the former figure is demand and the latter is generation. In 2019 “primary electricity” was 11.6 per cent of UK energy consumption so if total energy consumption in 2050 remains about the same but has become 100 per cent electricity, the electricity market will need to have grown by eight times. To maintain its 40 per cent share, renewables would need to match that growth.

An eightfold increase in the size of the 2050 electricity market may be too high. The Government estimates that the total electricity demand in 2050 could range from 370 TWh to 570 TWh, depending on the level of electrification and energy efficiency. This is clearly too low. McKinsey’s predicts that the electricity demand could reach 800 TWh. Nearer the mark.

National Grid ESO, in one of their future energy scenarios for 2050, think that the range of capacity required for electricity will be between 285 and 387 GW to deal with annual demand up to between 570 TWh and 726 TWh. They estimate that the wind and solar capacity will be between 149GW and 239GW which leaves between 135GW and 148GW to supplied by nuclear and fossil fuels with carbon capture.

That compares with government expectation that the 2050 electricity capacity will total 96GW with nuclear supplying 25 per cent of that. About 6.4GW of that will be provided by Hinkley Point C, approved 2016, and its twin Sizewell C, frequently announced but still not approved.  24GW is too small a target for nuclear and would leave over 100GW to be supplied by fossil fuels, deeply unpopular even with carbon capture. Industry sources, that cannot be quoted, reckon that 48GW would be a far more realistic target.

 Hinkley was supposed to be built by 2020 at a cost of £12 billion; the latest estimates are completion in 2031 and a £44.3 billion bill.  Apparently “there were 7,000 substantial design changes required by British regulations that needed to be made to the site, with 35% more steel and 25% more concrete needed than originally planned.” Of course we fully understand that, seven years after approval, the designers could have had little idea how much steel or concrete was required or what the regulations would be.

Sizewell C was touted as costing a mere £20 billion because of the savings from being the Hinkley Point C twin.  Professor Thomas of Greenwich University thinks £40 billion is more likely with a 10 – 12 year construction time, i.e. 2036 if a decision is made this year.

It is astonishing that the government is hell bent on continuing with these monsters. They are planning another six large reactors (albeit smaller at around 1 GW) after Hinkley and Sizewell. Assuming this plan for the larger reactors is implemented, then we would need about 120 SMRs @ £300 million each to be up and running by 2050.  No sign of that in government plans.

Large reactors take at least 10 years to build and will be providing electricity to the Grid at a price which is estimated to be at least 50% more expensive than the forecast price for electricity from Small Modular Reactors (SMRs).  SMRs should take about 6 months to build in a factory or shipyards and about 2 years to install for the first unit of a multi-SMR facility with installation times falling to 12-18 months per subsequent unit. The reason Sizewell C took so long to gain approval was that no one but HM Treasury was stupid enough to invest in it. Even the French who own the EDF company responsible for Hinkley and Sizewell are trying to back out of paying for them.

SMRs will typically cost in the range £2.1 million to £3 million per MW to build compared with the current estimate of £14.4 million per MW for Hinkley point C. Thorcon quotes £800 million per GW, i.e.£240 million for a 300 MW SMR. Rolls Royce leads the UK race for reasons good and bad and is offering SMRs here for rather more than Thorcon’s offer. Poland has already ordered 30 SMRs. Yet this government plans not to make any decision on the first SMR until 2029, presumably to avoid having to undertake the required value for money comparison between SMRs and Sizewell C. It claims to be a world leader but actually it will be last in the queue. “To recover the UK’s global leadership in civil nuclear” could be irony or could be evidence that some distant corner of HMT has a sense of humour after all.                                                                 

Well, yes, we suppose so

To get to net zero, we may have to sell off the UK’s future

Something of a headline in The Observer there.

The observation is that getting to this Net Zero by 2050 target is going to be howlingly expensive. We might have to sell off all the assets owned by government to finance it.

What this tells us, of course, is that it’s the target which is wrong. As the Stern Review itself pointed out. The aim is to make us better off over time. Climate change will have costs, dealing with climate change will have costs. Dealing with climate change will have benefits, not having to spend on climate change has benefits. So, we need the finest balance of costs and benefits that we can reach.

That means, obviously, balancing costs and benefits. Not a target that must be reached at any cost. And the Stern Review is entirely clear on this - if those costs change, as is claimed here, then the amount of dealing with climate change that we do should also change. Which is exactly what people are not admitting, let alone doing.

Why, it’s almost as if people are using the Stern Review - and other such economic investigations - as excuses for what they desire to do anyway rather than as guides to good policy. That can’t possibly be true though, can it, for politics really never does work that way.

No, really. Never.

We're cynics, this might not be about the climate

We tend to think politics is best viewed through that cui bono lens. Yes, this is cynical, but by identifying who does benefit from a policy it might be, could be, possible to identify who is driving the policy. And, of course, who is simply a fig leaf for that policy.

Joe Biden has, at least for a while, defused a ticking carbon bomb. Climate activists and the fossil fuel industry are now left wondering how long it .will last.

The decision on Friday by the Biden administration to pause all pending export licenses for liquified national gas (LNG) to consider the climate impact of the projects has been hailed as a momentous shift in the status quo by those concerned by the unfolding climate crisis

It is obviously possible to see that cheerleading, yes. But that climate idea is a very disparate benefit - this being one of the problems in the policy area itself of course. Further, as we all know, it’s concentrated interests who really win in politics. Therefore:

Critics, however, point to evidence that boosting LNG exports drives up domestic gas prices for Americans…

Ah, yes. We recall this from the ban on crude oil exports. Then it was legal to export oil products but not oil. So, the ban on crude exports made crude cheaper for domestic refiners to buy while their output prices were still world ones. That is, the crude export ban boosted refiner margins at the expense of driller profits.

Yes, natural gas is an input, a major price input, into a number of industrial processes. Fertilisers, a large swathe of plastics and so on. A ban on - new as here - LNG exports will boost the margins of those industrial natural gas users while not limiting their own production exports nor affect the prices they gain for them. The people who lose profits will be those drilling for natural gas. The frackers out there tend to be smaller companies than the industrial users - disperse and concentrated political interests.

Having identified the winners we then make the leap to the assumption that they are driving the policy. While that is indeed cynical our view of politics is that it is not excessively so. For being too cynical is indeed to be sad, but the correct question about politics is always “Am I being cynical enough?”

These people are insane, truly so

This can be described as a Brexit problem (or even, for those who wish to be arch, a “Brexit Benefit”). The correct description is insanity:

A post-Brexit trade deal with Canada has collapsed after negotiations lasting more than two years were halted by a row over meat and cheese exports.

Diplomats paused talks on Thursday with each side accusing the other of obstructing progress.

The major sticking points in the deal are understood to be exports of British cheese and imports of beef from Canada to the UK.

The naive might think that this means the Canadians are refusing to send their cheap (and Yummy!) beef to Britain, while we Brits are cruelly denying the Canucks our wondrous (and Yummy!) cheeses. To think that is to entirely misunderstand how politics views trade - which is through that lens of insanity.

Canada has been pushing for more UK access for its beef and pork producers and also wants the UK to relax a ban on beef treated with hormones.

Mr Trudeau, Canada’s prime minister, meanwhile, had promised his dairy farmers no more foreign cheese imports under its strict dairy supply management system, after making concessions to the United States in a North American free trade agreement.

See? Insane. The Canadian government is denying Canadians our super cheeses, our own government is denying us that lovely beef and pork (Canadian bacon is indeed the only North American version of that comestible worth eating). They are, as we say, insane:

The popular view that free trade is all very well so long as all nations are free-traders, but that when other nations erect tariffs we must erect tariffs too, is countered by the argument that it would be just as sensible to drop rocks into our harbours because other nations have rocky coasts.

Professor Robinson is echoing M. Bastiat there and is therefore correct. She is also correct in that politics inverts this - which is, again, why politics is an insane way of dealing with trade.

To recap. Mr. Britishploddingbureaucrattradenegotiator sits in front of Johnny Foreigner and insists that “If the Brothers McKenzie cannot have a stiltonburger then I will punish my people, Britons, by refusing them cheap beef and round bacon. Take that, dastard.” We also have to pay, at gunpoint, Mr. Bpbtn a very fine salary* for making us poorer in this manner.

This system is insane. The only logical attitude to have is unilateral free trade. So, let’s do that then.

*Plus the finest pension plan in the country and likely the kids’ school fees. Diplomatic Service gets full freight at Eton paid for all kids. We’ll also probably have to mint a CMG or the like for them at some stage. Which is rather rubbing it in we feel.

Since vapes work the fools want to ban them

There are those days when the entire idea of government is called into question - given how hard it seems to gain good government:

Half of young people using disposable vapes were not smokers, research has shown, as ministers consider a ban.

The UK study of almost 70,000 people shows a steep rise in the number of adults using the products.

Overall, the study found that from January 2021 to August 2023, the prevalence of disposable e-cigarette use grew from 0.1 per cent to 4.9 per cent of the adult population.

The figures show that among those aged 18 to 24, the proportion using disposable vapes is significantly higher. In total, 14.4 per cent of this age group used the devices, including 7.1 per cent who used them despite not having a history of smoking tobacco.

That all sounds to us like excellent news. We know that tobacco smoking is injurious to health, vaping is a vastly less damaging substitute, more vaping and less smoking seems like a damn good idea.

This is not, however, how government seems to see it:

The Government is considering banning disposable vapes, as part of efforts to prevent youth vaping.

Given the difference in health effects the correct reaction to the evidence so far would be to subsidise vaping, not ban it.

The charity said ministers faced a “complex balancing act” to keep vapes out of the hands of children and those who have never smoked, while ensuring help was available for those trying to quit smoking.

Why try to stop people who don’t smoke from vaping? This is the very thing desired, that people don’t smoke, yes? So, if people vape instead of smoke then they’re not smoking - job done.

And the thing is, alongside the rise in vaping over the years there’s been a collapse in the number of young and teen smokers. “Smoking rates among 16-24 year olds have only fallen by a half since 2000, from 32.9% in 2000 to 15.7% in 2020.” and “Regular smoking among males and females aged 15 in England has fallen steadily since 2011, from 11.0% for both sexes to 4.9% and 5.3% in 2018 respectively” and “The proportion of children who have ever smoked continues to decline. In 2018, 16% of 11-15 year olds (23% in 2012) had smoked at least once; the lowest proportion since the survey began in 1982, when 53% had tried smoking.” Different measures in different years provide different numbers of course.

We can even test this against the experience of other places:

The proportion of teenagers smoking has increased for the first time in 25 years in a situation health experts have labelled “alarming”.

Data analysed by Cancer Council Victoria’s Centre for Behavioural Research in Cancer (CBRC) has revealed a threefold increase in the proportion of 14 to 17-year-olds smoking tobacco in the past four years, from 2.1% in 2018 to 6.7% in 2022.

So, why might that be?

It is illegal to purchase any e-liquids or vaping products containing nicotine for personal use from any Australian retailer as it is classified as a schedule 7 – dangerous poision under the National Poisons Standard. The use of Nicotine is regulated by the Federal Government under the Theraputic Goods Act 1989. However, if the e-cigarette is for therapeutic purposes such as smoking cessation or alleviation of nicotine withdrawal, the e-cigarette must be registered by the TGA in order to be lawfully sold. This is only available by a doctor as a schedule 4 prescription only medicine under the National Poisons Standard.

Putting vapes - containing nicotine at least - on prescription only increases the teen smoking rate. Or, at least, is strongly correlated with it rising.

Britain has nicotine vapes widely available and a low and falling teen smoking rate. Australia has nicotine vapes on prescription only and a high and rising teen smoking rate. Therefore the British government is to control teen access to nicotine vapes in order to reduce the teen smoking rate.

Currently the UK government takes 37% of all economic effort by everyone in the country. Clearly too much of that is spent upon fools. The correct solution to government losing its mind is to have less government, obviously.

Yes, this is the correct answer

Electric cars will never account for more than a third of the market and consumers should not be forced to buy them, the boss of Toyota has said.

Akio Toyoda, chairman of the world’s biggest carmaker by sales, said that electric vehicles (EVs) should not be developed to the exclusion of other technologies such as the hybrid and hydrogen-powered cars that his company has focused on.

Speaking to employees in a question and answer session, Mr Toyoda called for a “multi-pathway approach”, adding: “The enemy is CO2.”

Well, that very first assertion might not be correct. We certainly don’t know and we’d not try to impose our ignorance upon everyone else either. Which is exactly what our actual governors have forgotten. No one does know what is going to be the correctly different technology other than the internal combustion engine. It could even be that the ICE remains but powered by manufactured petrol from renewables derived hydrogen. Again, we don’t say it will be but it’s a viable technological path.

Among us here we know alarmingly large amounts about the lithium for batteries market, have actually worked in the supply chain of the fuel cells for those hydrogen cars, are up to date on renewables and Fischer Tropsch and so on - and we still don’t know.

Except we do know the right way for the decision to be made. Which is to have the one, technology independent intervention to deal with the externality. Then leave the market be to sort through all the potentially viable alternatives and see which one wins. Instead of the current system of people with a great deal less knowledge than we’ve got picking the loser.

We can tell it’s the losing technology by the insistence upon its imposition - no law is necessary to force people to use a winner.

We’re even fortunate enough to not have to impose a new insistence or penalty. As repeated investigations from the likes of the IMF and so on point out the current UK level of petrol/diesel taxation is at or above the Stern Review carbon tax level. We’ve already done everything necessary as an intervention, now we just have to wait and see.

Or rather, we’ve already done far too much for as well as the correct carbon tax we’ve that legal insistence on most of the solutions not being allowed. Which is the error of course.

Markets do work and one of the times when they really, really, work is when we face technological uncertainty. Create the incentive to replace, sure, but then leave be to see what wins that replacement battle. The real and underlying logic to that being that we don’t, in fact, know what us the people want from the replacement. Therefore how can any planner possibly provide what is unknown? We need the period of market experimentation to find out…..