There might be a reason we don't allow the creatives near numbers

An attempt at describing the difference between machines and workers:

But Nicola Solomon, chief executive of the Society of Authors, warned such measures could have harmful consequences for humans and urged the Government to level the playing field.

She said: “If you buy in large amounts of machinery or software you will get capital allowances for that. If you take on real people, you have to pay their tax, their National Insurance and so on.

“So it actually becomes cheaper to buy and use machinery than to buy and use people, even if the base costs were the same.”

Umm, no. Not no as in the sense of not really, there’s a subtlety being missed here. No as in just no, wrong.

Under the old system the entire and whole costs of hiring people were allowable against tax - that is, they were costs deducted from revenues before profit calculated - in the year of the paying of the workers. The buying of machinery costs were only so allowed over time. Thus the machinery was more expensive by whatever the time value of that money was as set against the tax allowed depreciation schedule.

The new system, full expensing, treats paying for machines exactly the same as paying for workers. It is not a new bias in favour of machines, it’s the removal of an old bias against them.

Presumably there are members of the Society of Authors who understand tax, economics, equally presumably they’re off writing books about tax and or economics. Leaving no one who does to run the Society. Pity but there we are.

Of course, it gets worse:

The creative industries have called for an overhaul of the UK’s tax regime for the artificial intelligence (AI) era amid concerns it will be cheaper to buy machines than hire humans.

Err, yes, applying more machinery to human labour is also known as “increasing productivity”. True, as Paul Krugman has said, productivity isn’t everything. But in the long run it’s pretty much everything. That is the aim and purpose of all economic advance is to destroy jobs - to make it cheaper to hire machines than humans.

This isn't the way to decide things

Perhaps it’s important who owns the Telegraph group and perhaps it isn’t. We tend to go with the idea that a free press does mean that government doesn’t get to decide who can be part of that free press but maybe that’s just us.

However, we really don’t think this is the way that the decision should be taken:

A Whitehall battle over the sale of the Telegraph newspapers could break out owing to a power vacuum created by the absence of the cabinet secretary, the Guardian understands.

Efforts by the culture department to investigate an Abu Dhabi-backed bid for the newspaper group risk being steamrolled by the Foreign Office, which is eager to bolster Britain’s relations with the United Arab Emirates, sources said.

Senior figures at the Foreign Office had already sought to “take the edge off” a letter from Lucy Frazer, the culture secretary, in which she laid out her intention to have the bid examined by Ofcom, sources claimed.

But with no cabinet secretary to intervene in a potential squabble between departments, as Simon Case is on medical leave, scrutiny of the deal could “fall through the cracks”, it has been claimed.

A clash of competing egos really might not be that optimal decision making method.

But then that’s what politics is, isn’t it. Therefore, politics isn;t the optimal decision making method except forthose very few decisions that can be taken no other way. Like, say, deciding whow makes sure the bins get collected. Therefore the influence of politics, of government, which takes decisions in this manner should be limited to only those things that cannot be done any other way - like said bins.

The world would such a better place if only politics were put back into its box and limited to where it is actually necessary. The rest of it we can all get on with ourselves, free and at liberty. No?

To make the same old point again about income tax and the minimum wage

So, the national living wage is to rise in the spring to £11.44 an hour. With a 37.5 hour working week, about the average for a full time worker, this is £22,308 a year.

The income tax (and NI) allowance is £12,570. Roughly enough you pay 12% NI and 20% income tax on the gap between those two - 32%. Or £3,116.

Something we regard as monstrous. The entire point of the minimum wage - not that there should be one at all - is that this is the minimum just and righteous amount that someone should gain for their labour. Nicking three grand of it - or 15% or so of the total amount - is monstrous.

Or as Sophy Ridge has noted:

Number of people David Cameron’s Coalition Gvt took out of paying income tax: 3.2m (Treasury, 2015)

Number of people the current Gvt brought back into paying income tax: 4 million (OBR, today)

We spent the period 2004 to 2010 shouting about this and our shouting, along with more measured tones from the CPS, led to that personal allowance rising to this current £12,500. Which was, as our demand was, that the allowance and the full year minimum wage should be the same. The reason for that specific sum is that’s what the minimum wage was in the year the government announced the target.

Our original desire, our original insistence, was that the personal allowance and the minimum wage should be the same amount and that no Chancellor be allowed to diverge from that. We repeat that.

For here we are a decade later and someone on the minimum wage pays 15% of their income in incomes taxes. Further, someone working 22 hours a week - part time we’d call that - on that minimum wage is facing that dual burst of incomes taxation. Monstrous, stop it immediately.

Odd to get this from a philosopher

Our memory of philosphy is that all the really hard work comes at the beginning, with the definition of terms. Only once it is clear that we are using words to describe things both accurately and precisely is it possible to then go on to use words to walk through a discussion of those things. Admittedly, some here have a deeper understanding of the subject than that but even so we really are sure that definitions are vital to the subject.

We are therefore surprised to see this from a philosopher:

Common to both approaches is a wrongheaded presumption that we can carry on growing while managing to hold off the floods and fires of growth-driven capitalism. Both also take it for granted that the consumerist lifestyle is essential to the wellbeing of rich societies and the ideal to which less developed economies should aspire.

It is true that measures to alleviate poverty will be an integral part of any national or international green transition. And some economic growth will be required in areas such as renewable energy, housing, care and education. But overall growth is not, as many of its advocates seem to presuppose, essential to any effective economy.

Nothing much wrong with that. Growth isn’t essential, it’s merely something humans desire. Of course we don’t want growth that then consumes us - sustainable growth is indeed a desire. And so on - we might not agree with what’s said there but it’s all defensible. This isn’t:

Conversely, there is much to recommend a slower-paced, less work-centred and more community-oriented way of living. A work culture less dominated by profit-driven ideas of efficiency would free time for other activities.

The first sentence, sure, why not? None of us do work every hour God gave therefore we all agree, to greater or lesser extent, with the idea. How much we agree, 70 hours a week or 10 is something probably best left to the individual - as long as they’re willing to accept the corollary, the living standard, rich though it is in other compensations, that will accompany the associated income.

The second sentence is simply nonsense. Profit is the value added in an activity. Inputs are this, outputs that, profit is the difference between them. The greater the efficiency with which we do things then yes, the greater the profit. But then that means that the greater the efficiency the more value we gain from any specific amount of effort or resource use. Which means, for any specific amount of value to be enjoyed by us all collectively, greater efficiency means more time for other activities.

Start this simply, we’re growing wheat for the daily bread. If we sow by hand, plough with a stick, scythe the stalks and hand sort the chaff then there’s an enormous amount of human effort in a slice. Effort that cannot be used for other activities at risk of not gaining our necessary 2k calories a day.

So, now we do this more efficiently. We spend less time on the bread, we have more time for everything else. As we’ve noted before it’s the invention of the tractor which allows civilisation - the NHS, ballet, libraries, schools, would not exist if 90% of all human labour had to be in fields.

Efficiency in the use of human time is exactly what allows all those other things which lead to a greater richness of human existence. Profit-driven efficiency is not what prevents us from having that richer and less grubbing life, it’s exactly the thing which allows it.

As we say, philosophy really does start with the definitions of terms. Profit, efficiency, these are desirable things. Clearly so, for without them we’d not have the societal surplus to enable the existence of philosophers emerita.

This seems fair enough to us

UK women aged 40 and older will not experience the closure of the gender pay gap until after they reach state pension age, according to a report by the Fawcett Society.

The Equal Pay Day 2023 report, “Making flexible working the default”, found that on average working women take home £574 a month less than men – or £6,888 a year.

Blaming a lack of flexible working in well-paid, high-quality jobs, the report found that women were forced to put up with less fair and less equal working arrangements in exchange for the flexibility required to balance their caring responsibilities.

Of course, this leaves us open to the charge of merely being misogynist brutes. Which we even could be.

But let us cast this complaint in a different way. Same meaning, just different words. Those who decide to live their lives in different ways get different jobs which pay different amounts of money. There, we’re sure we’re all shocked this happens in a free, liberal and market economy. We’re also entirely unsure about how this could ever not be so if we are to maintain that trinity of free, liberal and market.

After all, it is not necessary that women shoulder those caring responsibilities. Such things as househusbands do exist. Paternity leave is a thing - and we’re entirely happy to be identified as one of the sources for why it does.

To be liberal is to insist that all should have choices. To be free is to have choices. A market economy is the only form that actually works with our species. That some exercise those choices, freedoms, in a manner that leads to a fuller but lower paid life is, well, it’s just one of those things really. It’s not just the difficulty of what we might do about it, it’s the far more important question of why would we do anything at all?

We centrally, politically that is. For of course a possible solution is that women sort this out for themselves. As, we very strongly suspect, they already have. If women only mated with those who did shoulder at least half of those caring responsibilities - or even all of them - then this problem of the unequal burden and outcome would not exist. That it does might lead to assumptions about expressed preferences.

So ladies, the solution is in your well, hands isn’t quite the right physique part but….

This could be true Mr. Tugendhat, could be true

Too much of our pensions are invested in dead money - bonds - where they sit waiting for interest.

We need to see more invested in live money - equities - where they can support ideas and create jobs.

Not that corporate bonds are dead money of course, they finance companies just as much as equities do. A different layer of the stack possibly but still financing economic activity.

What is meant is that mountain of Gilts, that Treasury debt, which sits in British pensions funds.

And, well, OK. So, why do pensions funds carry those gilts? Why aren’t they in those equities - or corporate bonds. Equities and corporate bonds do carry higher returns, so we’d expect pensions maximising money managers to be in them. Why aren’t they?

Gordon Brown, basically.

He abolished the tax exemption on dividends. He - and the Major admin as well to some extent - also insisted that direct benefit pension funds must hold many more gilts. The two effects together meant that pensions funds did flow out of equities and into gilts. So, if we wish to reverse that process then we should reverse those two actions.

Great, that’s dealt with then.

We might also suggest this as a more general principle for government policy as well. It’s often useful to solve problems by unpicking the mistakes of past administrations. Actually, we think that could well be the most useful thing to be done. Not another layering on of a new and better set of mistakes, instead a removal of the errors of the last lot. Which there must have been, obviously, otherwise there wouldn’t have been that change of power at the last election, would there?

Someone's going to have to explain the word "populist" to us

The idea that someone standing for election should promise things that the populace might like to vote for seems to us to be rather the point of the system. And, as Mencken said, democracy means they then get it good and hard.

Milei, in Argentina, diagnosed that the entire Argentinian state, its economics, its management - in both senses, what is done and who is doing it - is rotten and needs to be swept away. He got elected. Of course, for all those others who are part of the management of other states this poses something of a risk. What if it works and then their own restive managees decide to do the same? We’d thus expect the establishments of everywhere else to not just denigrate but actively block anything Milei tries to do. As, of course, the domestic managerial class will also be trying to do the same.

We do indeed think that it’s possible for a place to be so badly run that only truly radical action will restore matters. We are not conservatives, we are classical liberals after all - neoliberals even.

But perhaps someone could explain this to us:

“Fiery right-wing populist Javier Milei wins Argentina’s presidency and promises ‘drastic’ changes”

Why is he being described as a populist? Other than in that manner of proposing things that the electorate might find popular that is?

For we’ve also had this in this same election:

Argentina will exempt millions of workers from paying income taxes, a dramatic attempt by Economy Minister Sergio Massa to improve his standings in next month’s presidential election at the risk of deepening the country’s fiscal hole.

Workers earning less than 1.7 million pesos ($4,857) per month won’t have to pay income taxes as of October, up from the previous threshold of about 700,000 pesos, Massa said Monday in Buenos Aires. The measure means only 90,000 top executives and high-ranking managers across the country will have to pay the tax, he said. That’s less than 1% of total registered workers.

The incumbent finance minister essentially abolishes income tax (not a bad idea!) and still loses. But it’s his opponent, the other guy, who is described as the populist?

Other than “populist” merely meaning someone the managerial class doesn’t like what does it actually mean?

The Invisible Hand and Social Order

In this 300th year after the birth of Adam Smith, much of the focus has been on Smith’s economics, as recorded in The Wealth of Nations (1776). But Smith’s ethical thinking was no less profound. Indeed, it was The Theory of Moral Sentiments (1759) that made him famous.

Like The Wealth of Nations, The Theory of Moral Sentiments (TMS) was a complete break from the thinking of the time. Ethics had until then been widely assumed to be based on God’s will, or the clerics’ interpretation of it; or something that could be deduced through abstract reason; or even something that could be felt through some ‘moral sense’ like touch or vision. Smith, by contrast, argued that morality stemmed from our human nature as social beings, and our natural empathy for others. 

This replaced speculative thinking by scientific method. Smith maintained that by observing ourselves and others, we could discern the principles of ethical behaviour. It was a matter of psychology: how we form judgements about ourselves and others, and the influence of customs, norms and culture upon those judgements. 

This scientific approach was very much in line with the Scottish Enlightenment, which stemmed in part from the exchange of ideas between Scotland and England following the 1707 Act of Union, and sought to apply observation and scientific method to the study of humankind. Old hierarchies were breaking down, with industrialisation replacing Scotland’s old feudal lifestyles, and with religious pluralism, leading to a more active debate on morals and virtues. New thinkers, like Francis Hutcheson and David Hume, were role models for Smith’s intellectual radicalism.

TMS argues that morality is rooted deeply in human psychology, especially the empathy we have for our fellow humans. By nature we understand, and even share the feelings of others. We want others to like us, and we strive to act so that they do. Even if there is no one else around to see our actions, we are still impelled to act honestly, as if an ‘impartial spectator’ is judging us at all time, setting the standard by which we judge ourselves and others. Every choice we have to make helps us see that standard more clearly and act according to it more consistently. All of which leads us, as if drawn by an invisible hand, to create a harmonious social order.

TMS is primarily a descriptive account of human moral action. It examines how people actually make moral choices, and the pressures on them to do so. But it also provides a guide on how we can cultivate our morality, emphasising the importance of self-reflection and self-improvement.

It is no exaggeration to say that TMS laid the foundations for the subsequent development of psychology, sociology and economics, helping establish them as distinct subjects of scientific enquiry. His idea that self-interested actions—wanting to be liked by others, or exchanging things we value less for others’ things we value more—had a profound effect on the rise of liberal thought. 

Smith’s approach is just as relevant today as it was in 1759. Through self-reflection, we can make better moral choices. By sharing the feelings of others, we can foster understanding between individuals and groups and create a more peaceful humanity. By understanding our shared interests we can live and work and collaborate together for the mutual benefit of us all, both in economics and in life in general.

We'd just like to point out a certain economic detail

Given that this is from Willy Hutton of course it’s somewhere between misleading and wrong. But why is it?

Britain is suffering from an intensifying four-decade-long investment drought in the public and private sectors – the root cause of the crisis in stagnating productivity and living standards that shapes our politics and daily lives.

Whether or not the gross amount of investment is too high, low, about right, is not our point. Rather, where it’s going is. For where whelpingly massive amounts of what investment that does happen are going does, by definition, reduce recorded productivity.

We would also argue, quite a lot, about living standards and even GDP. Living standards are determined by GDP plus the consumer surplus, not by GDP alone. Much of the technological development of the past few decades has vastly increased that consumer surplus which also either not being fully included in GDP or sometimes even reducing it.

There are those estimates that Google and free email are worth $18,000 a year per head of population, that Facebook is valued at $800. As Hal Varian has been known to point out, GDP doesn’t deal well with free. The consumer surplus is there in such things but not the GDP (which is actually just the advertising on those things, not the value of the things themselves). We’d also use the example of WhatsApp. This has no revenue associated with it at all, no ads, no subscription. There is therefore no output measure at all in GDP. Yet there are costs of course - a couple of hundred engineers in Facebook last time we asked them. That means - labour costs, no associated measured output - that WhatsApp is in economic statistics as a reduction in productivity. Despite 1 billion people gaining some or all of their telecoms from it - for free.

But we can and should go further than that. We all know there’s a vast amount of investment happening in this going green stuff. Maybe that’s a good idea, maybe not, that’s for another day. But the point of what is being done is to address an externality - those environmental damages, costs of emissions, which do not show up in prices and therefore are, again, not in GDP. So, we solve those externalities - and maybe we should! - and we create green jobs while doing so.

Cool. So, now we have the same output - say a GW of ‘leccie, even a GWhr - with the same value as before but we’ve used more human labour to produce it - those green jobs that the energy transition creates. By definition productivity has declined. Again, by definition productivity has declined.

Investing in not boiling the planet seems fine to us. An increase in the consumer surplus pleases us, not worries. But one thing you simply do not get to do is insist that we solve externalities then worry that GDP is not moving as a result. That’s just a fact of solving externalities, things that are not measured in the price system. Further, if we create lots of jobs to do things in non-polluting ways - again, not something that we’re necessarily against - then you don’t get to complain about falling productivity. Because that’s the outcome of the very thing you’re demanding we do. Creating jobs is reducing productivity, they mean exactly the same thing.

Yes, we know, here’s no excuse for Willy Hutton. But we do still wish for even a little intellectual clarity on these simple economic points. Going green reduces labour productivity. The country’s been investing vast amounts on going green. Yet people then wonder why labour productivity’s not rising?

Sheesh guys, try reading a book.

Could we hope for sentience?

No, this isn’t about AI, this is about the housing debate. Where we should hope for something better than we’re getting. Perhaps not sensibility, or good sense, but how about we start by hoping for sentience?

To start with, this defines the crisis, wrongly, as being exclusively about the quantity of homes available. But (and leaving aside the fact we have 1.5 million more dwellings than households: ONS/census data), the crisis is actually about the cripplingly high cost of buying or renting a home and the short supply of social housing – very different to ‘not enough homes’.

Dig a little deeper and you get the ‘supply and demand’ argument: ‘increasing housing supply will bring prices down’. But this logic doesn’t work if demand stays high.

Yes, there’s much else wrong with that piece from the Campaign for the Protection of Rural England.

But our hope - not even a demand, merely a hope - that we might be able to observe a little economic sentience when matters economic are being discussed?

Leave aside that ignorance of the really basic stuff about supply and demand and focus on that last - “if demand remains high”. But if demand remains high then that’s the reason itself to build more houses. People want there to be more houses - that’s high demand. Therefore there should be more houses because that’s what people want. They’re actually insisting that because people want more houses therefore they shouldn’t be allowed.

As we say, sentience in the debate would be useful. But what really worries us is that CPRE has an input into housing policy. How did we end up with the economic understanding of this level being an input into public policy formation on matters economic?