Yes, more people are dying on the job in North Dakota

We don't and shouldn't welcome the news that more people are dying on the job (erm, while working is perhaps less amenable to teenage smuttery) in North Dakota than were doing so some years ago. However, it is rather important to work out why this is happening rather than just blaming it all on neoliberalism or the idea that no one cares about the working man. Sadly, people are failing to do that:

Life is cheap in North Dakota, where a new study (PDF) finds that workers are being killed on the job at five times the national rate. Deaths on the job in North Dakota more than doubled from 2007 to 2012, rising from 25 to 65, as reported by Al Jazeera America’s Renee Lewis. The reasons for this are deeply disturbing for what they say not only about industrial workplace safety, but about politics in 21st century America and how capital is favored over workers. The increase in deaths tracks the frenzied efforts to extract oil and natural gas from the rich Bakken fields, believed to hold more than $1 trillion in carbon-based fuels. There is so much money to be made quickly that companies are not even waiting for adequate infrastructure to move all the natural gas to market. Blaming the rising death toll on the oil companies, however, misses the real problem, which lies squarely with our elected officials.

And off he goes to blame those elected officials for not hring enough workplace inspectors and for, in general, just not giving a damn for these masses being killed.

Except there's something we should take note of here. We know that North Dakota is in the grip of a massive oil boom. And we also know that the oil industry as a whole, where ever it is based, has a higher death rate than most other industries. In fact, if we look at that PDF report that is being referred to, on page 49 we are told that oil and gas extraction has a death rate per 100,000 workers of some 16 pa. As opposed to one of 3.4 for the economy in general. Thus, if some 200,000 or so people had moved from other work into the oil and gas extraction industries then we would have explained that entire rise in the working death rate.

Nothing at all to do with political cowardice or malfeasance, simply a structural change in the make up of the workforce.

It's still entirely possible that the politicians of North Dakota are ignorant of their duties and incapable of carrying out those they do understand: no reason why the politicians of that fair State should be any different from politicians elsewhere. But we must always remain alert to the reasons why things happen, not just to noting that they do. Has the working death rate risen considerably in North Dakota? Most certainly, it has. And this is exactly what we would expect to happen when we see a large scale movement of labour into an industry notably more dangerous than those that preceeded it. It would be far far worse if he mocement had been into logging (129 deaths per 100,000) or fishing (120) and we would see a fall if everyone went off into educational and health servicres (0.7 per 100,000).

Working out why things have happened is better than just kicking out at the usual targets.

Gary Becker was right, part four: Immigration

Gary Becker proposed a remarkable  way of dealing with immigration.  He suggested selling the right to live and work in the US or the UK.  His proposal was that the countries should set a price ($50,000, for example), and admit foreigners prepared to pay it.  Of course certain categories such as terrorists or criminals would be excluded, but otherwise the doors would be open to those prepared to stump up the money.

His reasoning was that this would lead to the type of immigrants of most value to the recipient country.  Skilled people would be ready to pay because they would enjoy a bigger pay differential in moving from a poor country to a rich one than would poorer people.

Young people would be attracted because they would enjoy longer working lives in which to reap the benefit of their investment.  And those intending to settle permanently and make a commitment to the host country would have a longer time there to enjoy the benefits than those who intended to return to their own country.  All three categories make desirable immigrants.

Whether or not one agrees with the details, it is easy to agree with Becker on the principle that immigration should be encouraged where it is certain to make a positive contribution to the host country as well as to the immigrant.  Several countries already have schemes in place to achieve this.  St Kitts and Nevis offers citizenship as well as residence to those investing $250,000 in sugar industry diversification or $400,000 into real estate.  Dominica offers citizenship for an investment of $100,000.  The US will give a green card to someone investing $500,000 and creating 10 jobs for Americans, and Canada will let you in for 400,000 Canadian dollars.

The Becker proposal does deal with the objection that some raise about immigrants coming in and claiming welfare and health benefits.  The objection seems unlikely, in that most immigrants are young and healthy and seeking work, but we can be reasonably sure that no claimants would be coming in under Becker-type rules.  Many who oppose immigration are ready to make exceptions for skilled workers and those prepared to invest in their host country.  International businesses might well stump up the money required for them to transfer in skilled workers with none of the hassle and delays of conventional applications.

Once again Becker has shown how economics can be applied to areas other than the economy.

Why we shouldn't let the prodnoses determine our diets

An amusing little coincidence of three stories that cross the desk here at Adam Smith Towers. Firstly, from Chris Blattman, the news that most published research is actually wrong:

Published medical science is deeply flawed. More often than not, when I’ve looked up a study claiming X, the statistics are deeply problematic. I suspect poor training and poor refereeing are proximately to blame, but there must be some deeper absence of incentives. It’s a shameful state of affairs.

The specific study that is being talked about here is the one that made everyone think that Omega 3 fatty acids were good for your heart. On hte basis that Inuit eaters of whale and seal blubber had less heart disease than everyone else. But they reached this conclusion without actually looking at the incidence of heart disease in Inuits who ate whale and seal blubber. something of a leap from evidence to conclusion there.

The second is about a new movie, "Fed Up", from the people who brtought you "An Inconvient Truth". Although Al Gore is a little porky to present this extravaganza, given that it's about how the modern food industry makes everyone obese.

The problem at hand, of course, is the standard American diet, especially in its current iteration, which took shape in the early 1980s after the commencement of the official “eat food lower in fat” recommendations. Those recommendations led to a 25 percent increase in the per-capita supply (and indeed consumption) of calories.

Yes, it is indeed a problem. But as Mark Bittman goes on, the rest of it is all to rail about the amount of sugar that is in the current diet. Which is again something of a problem, for here's our third piece of news:

Last week it fell to a floundering professor, Jeremy Pearson, from the British Heart Foundation to explain why it still adheres to the nutrition establishment's anti-saturated fat doctrine when evidence is stacking up to refute it. After examining 72 academic studies involving more than 600,000 participants, the study, funded by the foundation, found that saturated fat consumption was not associated with coronary disease risk. This assessment echoed a review in 2010 that concluded "there is no convincing evidence that saturated fat causes heart disease".

The sugar (and also the salt) is in all our foods because it's the only way to make it taste of anything if there's no animal fats around. So, let us assume that there is an epidemic of obesity (on the grounds that we should take peoples' arguments seriously, at the very least so that we can see where they lead) and that it is being caused by sugar in our food. Well, what caused that? The previous generation of prodnoses telling us all not to eat saturated fats.

At which point clearly we should tell them all to (mumble mumble) off and we'll get on with filling our bellies in our own manner, thank you very much. For they don't actually know what they're talking about.

Yes, that is my caramelised pork crackling over there......could you pass the butter? It's a tad dry...

Gary Becker was right, part three: Drugs

Last February Gary Becker wrote a post on the Becker-Posner blog calling for marijuana to be decriminalized.  Ten months earlier he publicly called for the legalization of a wide range of drugs.  He listed some of the advantages of decriminalizing marijuana, such as undercutting drug cartels, enabling those needing medical help to come forward, and saving costs on enforcement.

There is no doubt that the war on drugs has been a disaster.  It has led to a huge upsurge in crime in both the producer and consumer countries.  There have been murders by the tens of thousands, and the profits from the illegal drugs trade have corrupted the law in many countries.  Drug use has not deceased.  Any rational person would propose trying a different approach, yet most of those in legislatures and the media insist that we should do even more of what we already know does not work.

Becker is in accord with what the Adam Smith Institute has said.  We have called for addiction to be regarded as a medical problem rather than a criminal one.  We proposed that clinics be set up on High Streets manned by doctors and nurses.  Addicts would be able to go in and, subject to undergoing medical examination and receiving advice, should receive free supplies to be consumed on the premises.  Since people would not do this for recreational drugs, we proposed that cannabis, ecstasy and cocaine should be legalized.

The crime built up on the drugs trade would vanish.  Teenagers would no longer shoot each other on the streets in drug turf wars.  Prisons would find they had space again.  People would no longer find their habits set them against the law, regarding police and the courts as their enemies.  Control over quality would be established, and deaths from tainted doses or overdoses would diminish.

Yes, drug use might increase.  More young people might be tempted to give it a try, just as many do today with tobacco and alcohol.  But what we have at the moment is far worse.  We have a situation with drugs approximating to America's stint on prohibition of alcohol, with criminal gangs flourishing like weeds and lawlessness prevailing.  It is time to try it Becker's way instead.

Are the big banks simply paying efficiency wages?

We all know that top bankers at large banks get paid vast sums of money. But quite why is still a matter for discussion. It isn't, cannot be, simply because bankers are greedy. We know that everyone's greedy so that's not an explanation of why some and only some are getting the big bucks. An interesting piece of research gives us further insight:

The next step is to look at executive pay. Unsurprisingly, the chief executives of the big banks come out on top. Between 2010 and 2013, the median total pay, including cash and stock awards, of the CEO of a large bank was more than $57 million, $22 million above the median compensation for the chiefs of smaller firms, according to Mr. Cannon’s research. What drove these paychecks? Not performance but size. Mr. Cannon found no apparent links between compensation and shareholder returns, but he did discover a robust connection between a bank’s assets and its officers’ pay. “There is strong evidence that size has been the key driver of bank executive compensation since the financial crisis,” his note concludes.

People who run larger banks get more money than those who run smaller ones. And that's just about only connection to pay that we can see.

So, if you want to reduce top bankers' pay then reduce the size of the top banks: and since we want to do that anyway, to get rid of the whole idea of too big to fail, why not?

But what this is also telling us is that in the current system the banks are behaving entirely rationally. Or at least potentially so according to the idea of efficiency wages. This is often put forward by Chris Dillow, the thinking man's Marxist. The larger the organisation, and the less detailed oversight it is possible to have of the people running it, the higher the efficient level of wages to pay to those running it. Simply because there's more shareholder value for them to lose if they mess up, and there's more for them to steal if they're that way inclined. We could describe it as bribing them to stay attentive and honest and if that's the way you want to describe it then fine. But it is also efficient, which is why perhaps people do it.

Gary Becker was right, part two: Cuba

For many years Gary Becker wrote a blog with Richard Posner.  In the last entry, shortly before his death at age 83, Becker wrote one entitled "The Embargo of Cuba – Time to Go."  The US embargo of Cuba, began in 1960, was designed to put pressure on Castro's communist government, and if possible to persuade Cubans to overthrow it.  It did not achieve that objective, but it did give Cuba a fig-leaf excuse to explain away the economic failure of communism.

In 1959 Cuban, exporting tobacco and sugar, was richer per head than Taiwan, exporting rice and sugar.  Nowadays Taiwan has a modern, open market economy trading globally, and has a per capita income over five times that of Cuba, where tobacco and sugar are still important exports.  Becker wrote:

Since Cuba no longer provides any significant threat to American interests, there is no sense in continuing to punish the Cuban people with an embargo on trade, nor to provide excuses to its leaders for the poor performance of the Cuban economy.

This is one of the main objections to embargoes: they punish the wrong people.  General embargoes hit the living standards of poor people in countries subjected to them.  Those people are denied access to global goods, and cannot sell what they produce on world markets.  They also hurt the countries that impose them.  The US International Trade Commission estimates that its embargo on Cuba costs America $1.2bn annually, largely through lost potential gains in tourism, agriculture and other industries.

Becker recommended that "free trade is a principle that the United States should follow except in extraordinary circumstances," a sentiment most free market supporters would endorse.  Richard Cobden thought that free trade between nations would eventually lead to peace, and it is true to a large extent that nations which trade with each other learn to negotiate with each other and settle disputes peaceably.  Furthermore, trading nations begin to see each other as partners, to depend on each other for goods, and for their peoples to learn more about each other.

Becker is right.  Raising the Cuban embargo would bring immediate benefit to the people there, and would probably speed up that country's retreat from communism and its entry into the modern world.

Talkin' Bout a Revolution

Well, you know, if you say you want a revolution then you do need to understand what the others who might revolt with you are revolting against. And contrary to a popular misconception it isn't true that all who are willing to revolt against the current order are doing so for the same reasons you are. Or even trying to revolt in the same direction you are. We here at the ASI are of course in the vanguard of the neoliberal revolution, railing against the manner in which the State is captured by special interests, the way that regulatory capture depresses the economy, the way that civil liberties are whittled away in favour of a soft authoritarianism. I, Tim Worstall, am of course an extremist even by our local standards at Great Smith Street (one editor recently dismissed me from a publication on the grounds that I am a "hyperneoliberal" which by the genteel standards of American journalism I might well be). All of which is what makes this analysis in The Guardian so amusing to both I and us:

In the twilight of neoliberalism it's comics such as Russell Brand and Beppe Grillo who puncture establishment thinking.

It's entirely true that Beppe and Brand are railing against the current establishment.

Brand is not an isolated figure. In Italy the comedian Beppe Grillo has been the catalyst for the Movimento Cinque Stelle (Five Star Movement), a populist, anti-corruption organisation which has tried to position itself outside of the traditional left-right paradigm.

Quite so. But to lump Brand and Grillo together is to entirely misunderstand what each is attempting to say. As far as Brand is concerned we seem to have the standard Teenage Trotskyism that most of us grow out of around our 16 th birhday and the discovery of the opposite sex. Beppe Grillo is a far more complex and interesting phenomenon.

For Beppe has been known to tweet on to his followers (the Movimento 5 Star operates largely through social media) pieces from myself, that hyperneoliberal. And anything more than a cursory glance at the movement's desires and policies show that they wish to move Italian society in a more neoliberal, or even just a more classically liberal, direction. They wish to cull parts of the State, kill off some of those special interests, revive civil liberties and reduce the regulatory capture that plagues Italy.

Just because some ponderous theorists decry neoliberalism it doesn't mean that all revolting against the current order share that analysis. It can be, indeed it is, true that some similarly decry the current state of affairs but are arguing for more of what the theorists decry. Grillo is outside the traditional left/right divide in Italian politics just as we here at the ASI are outside that traditional divide in British. We're both arguing that classical liberal polity, that set of policies that doesn't actually have a home in any of the traditional parties.

We might all be talkin' 'bout a revolution but it's not necessarily the same tables that we want to turn.

Piracy deal ahoy!

After years of impasse, UK Internet Service Providers and the copyright holders of the entertainment world look set to sign off an agreement on internet piracy. According to the Beeb  a 'voluntary copyright alert programme' is to be agreed. Under this, ISPs will identify the IP addresses of alleged copyright offenders and send them ‘educational’ letters on copyright violation and legal alternatives to piracy. Whilst a similar ‘six strikes’ scheme in America sees ISPs able to impose sanctions (such as slowed internet speeds) on persistent offenders, the UK scheme does not. The amount of letters that ISPs can send is capped, and no individual will receive more than 4 letters. Following these, no further action will be taken.

This voluntary agreement breaks a deadlock between content giants, the government and ISPs caused by the Digital Economy Act (DEA). Rushed through in the parliamentary wash-up of 2010, the DEA's copyright provisions instruct ISPs to keep a database of persistent downloaders, and to restrict then finally suspend internet access to those who ignore written warnings.

These provisions are deeply problematic. They force ISPs to police their own customers, burden the companies with compliance costs and ask them to protect another’s intellectual property. Punishing alleged copyright infringers without judicial involvement also undermines the rule of law. Criticized by many politicians, civil liberties groups and the ISPs themselves, none of the Act has been actually implemented.

On the face of it, it’s good that the new agreement is such a watered-down version of earlier proposals. It’s certainly a far cry from what the content industries really want: effective barriers to piracy and access to a list of infringers to hit with ‘compensatory’ legal action. Advocates of internet freedom should be pleased. That said, the agreement doesn’t change the power of copyright holders- they can still get infringing content removed and websites blocked under existing legislation.

Furthermore, skeptics might think that the entertainment industry’s acceptance of the new scheme is just them playing the long game. The programme is meant to run for 3 years but be regularly reviewed. Rights holders have warned that should the scheme prove ineffective they will push for the “rapid implementation” of measures in the DEA.

If the objective is to deter piracy it’s obvious that the scheme will be next to useless: sending ‘educational’ letters will do little to change the behavior of serial downloaders. What it does do, however, is let the entertainment industry claim that a soft approach doesn’t work, and gets ISPs creating a database of copyright infringers that rights holders might win access to in the future. Playing ball now gives the copyright giants credibility to push for more extreme measures later on.

This might seem cynical, but the established entertainment bodies are reluctant to let go of their increasingly outdated business models. Returning to the DEA also gets governments back in the picture, whom copyright bodies often have great success in lobbying. From the ‘Mickey Mouse Protection Act’ of 1998 to the recent EU extension of the copyright in sound recordings, entertainment groups have a knack of preventing their goods from falling into the public domain, and ensuring that governments favor their industry’s profits over actual economic sense.

Understandably, media groups want people to stop illegally sharing their stuff. But instead of lobbying for legislation and slapping fines around the most effective deterrent is to understand consumer’s preferences and offer them valuable alternatives to piracy. Whilst movie bodies get angry at Google for linking to copyrighted material without really tackling their problem themselves, Spotify’s quite probably done more to combat music piracy than blocking The Pirate Bay ever has. However, instead of evolving the copyright industry seems to go out of its way to antagonize consumers, rent-seeking and objecting to even the most eminently sensible of copyright reforms.

Given the entertainment industry’s determination to protect their intellectual property, it’s unlikely that efforts to tackle piracy will end with a voluntary alert system. Whilst innovating companies will continue to find new ways of sharing and monetizing content, for the time being the copyright-holding giants of the entertainment world will remain preoccupied with the wrong prescriptions for piracy.

Gary Becker was right, part one: Crime

Gary Becker famously applied economic thinking to whole areas of activity that lie beyond the realm of narrow economic transactions.  One such area is crime.  The prevailing thinking of the day was that criminal activity derived from mental aberration or from social repression, and might be tackled by measures to improve mental health or to upgrade social conditions. In his paper "Crime and Punishment – An Economic Approach" (1968) and in subsequent publications, Becker advanced the alternative view that criminals were basically rent-seeking, trying to secure more of the resources that others produced instead of contributing to economic growth themselves.  He posited that criminals are rational, performing a kind of cost-benefit analysis in which they set the gains they stand to make from a crime against the likelihood of being caught and facing a penalty.

Society can alter that cost-benefit equation in two ways, by increasing the likelihood of detection, or by increasing the penalties faced upon conviction.  Increased police presence is by far the costlier of the two options, while jacking up the penalties can be relatively less costly to do.

Becker's insights have altered the way in which authorities tackle crime.  Zero tolerance, for example, proposes that pursuit of minor offences ("broken windows") can create a climate in which potential criminals feel they are more likely to be caught.  The use of CCTV to identify criminals by recording them in the act is similarly intended to raise the stakes of crime by making its detection seem more likely.  On the other side of the equation the use of longer prison sentences also increases the costs that the potential criminal has to set against the benefits.

It was entirely typical of Becker, and part of his great contribution, that he took economics out from the economy itself and into the activities and relationships in society at large.  Crime was one such area.

There's plenty of brownfield land but perhaps we don't want to build on it

A standard trope in the current arguments about planning permission is that we don't need or want to build on green belt land, or even unproductive agricultural land, because there's so much brownfield land lying around and available. Well, yes, this could be true but why would we want to poison people by sticking houses ontocontaminated land?

Hundreds of homeowners have been told their £400,000 properties could have been built on 'contaminated' land - and it's not safe for their children to play in the area. Environment officers at Tunbridge Wells Borough Council have warned residents of three streets in Paddock Wood, Kent, they may be at risk. They say 'potentially dangerous' chemicals including asbestos and creosote could have seeped in to the ground. The substances could have 'an impact on human health', they added.

This is land that used to be a timber treatment works. And a great deal of such brownfield land lying around the place is contaminated with one thing or another that we now think isn't all that wise to have lying around in a garden.

Fortunately, we do have a solution to this sort of problem. It involves that complex thing called "price". Along with the mystifying to many interactions of "markets".

We could, for example, have a rational and sensible system of planning to allow low density building where people actually want to live, as we outlined in Land Economy. There would then be that magical "price" stuff happening. Brownfield land that was, by virtue of location or ease of cleaning up, worth more than more rural land for building upon would get built upon. That which is not worth more than the costs of clean up would not. And so, by that miracle of "markets" we would be creating the most value possible by creating that valuable housing at the least cost. And, of course, the synonym for "creating the most value" is "making us all richer".

Plus we'd avoid the possibility of poisoning an entire generation of children by insisting that they live in houses built on polluted land.

Amazing what markets unconstrained by ridiculous regulation can achieve really.