As naked a call for your and my money as you'll see

The National Housing Association tells us that the housing benefit bill is now double what it used to be:

Private landlords in the UK received twice as much in housing benefit last year - £9.3bn - as they did a decade ago, a report says.

The National Housing Federation (NHF) study said the increase was due to a big rise in the number of private tenants claiming housing benefit.

This is really a rather naked call for the members of the NHF to get that money instead:

"It's more expensive to house people in the private rental sector than the social rented sector, because social rented properties on the whole have been subsidised when they are built. Private rental properties are bought on the open market," said Richard Lambert from the National Landlord Association.

"Unlike housing associations private landlords have to charge the kind of price that covers their costs and that inevitably means that private renting is going to be more expensive than social renting."

You pays your money and you gets to choose which sort of subidy you're forking out.

It's worth noting that social housing landlords also collect housing benefit through the rents that they charge. So this really is a shout that "Oi! We want that money!" rather than someone telling us how the nation's housing bill might be reduced.

Oh, yes, we should mention who the NHF are:

That’s why we represent the work of housing associations and campaign for better housing.

Actual campaigning for better housing would be campaigning to reduce the cost of housing. Rather than, as here, entirely partial campaigning that one group of people should be receiving the subsidy rather than another.

All of which makes us the only people actually camapigning for better housing of course. For it is the cost of the permission to build upon a piece of land which drives UK housing costs up. The solution to this is simply to blow up the Town And Country Planning Act 1948 and successors. As we recommend and as just about no one else does.

We agree that we're rather out on a limb on this idea but then that's because we're the only people taking the problem seriously. Everyone else is, as above, merely squabbling over who gets the subsidies. Our suggestion gets to the root of the problem and would abolish the need for subsidy altogether. Which is rather why none of those fighting over the subsidies is willing to agree to the actual and effective solution.

Finally, some decent figures on wealth inequality

As we've noted around here before the usual figures on wealth inequlity that are bandied about are pants. Those who shriek about them never really do quite come clean and tell us that much of it all is to do with the life cycle, most of us starting adult life in debt and gaining assets along the way. There's also the studious refusal to consider the effects of the things we do to reduce wealth inequality. For example, private pensions are counted as wealth, the state pension not.

At which point we hugely welcome the new ONS report:

The Office for National Statistics (ONS) said the average household was worth £225,100 in 2012-14, when it carried out its latest survey of the country’s assets.

Since the previous survey two years earlier, the top tenth of households had seen a 21% increase in their wealth, including property and shares. That was three times as fast as the increase over the same period for the poorest half of households, who saw their wealth rise by 7%.

It left the top tenth of households owning 45% of total wealth, while the bottom half were left to share just 9%. The poorest 1%, meanwhile, owned just 0.05% of wealth.

No, not that bit, that's just the Guardian chuntering along and ignoring the good bit of this new report:

The Office for National Statistics has calculated “human capital”, which puts a monetary value on a person’s qualifications, age, health, personality and skills, measuring the total potential future earnings of everyone in the labour market.

The value of the UK’s human capital increased by £890 billion to £19.2 trillion last year.

The average employed person had a “human capital stock” of £471,000 at the end of last year, a rise of £18,000 compared with 2014. Those with a degree are worth £628,000 while those with no qualifications £274,000.

As we've pointed out before human capital entirely dwarfs any other kind in a modern economy.

Britons are also getting wealthier. The total value of the UK, its homes, streets, pension funds, even its social clubs, is now £8.8 trillion — equivalent to an average of £135,000 per person, or £327,000 per household.

Human capital is very much less unevenly distributed than financial capital. And when we add in, on top, the effects of the things we already do to reduce wealth inequality (which we could largely call "the welfare state") we would find that wealth inequality is both very different and very much lower than we've been told.

Greenpeace demands that companies profit by doing unprofitable things

There's ever such a slight problem with this insistence from Greenpeace:

“Recycling isn’t the solution to the problem, but it is an essential step. In the future, companies need to reshape their business model to move towards a circular economy. They should make profit from good recycling, recovering materials and producing long-lasting batteries. Consumers need to make their demands heard.”

That being that recycling mobile phones isn't a profitable activity meaning that it would be very difficult indeed to make a profit by recycling mobile phones.

As an example, we are told that:A 2015 report on recycling e-waste noted that people tend to maintain old phones in their desk drawers but recycling lithium ion batteries could be a lucrative revenue stream for phone companies. It estimated cell phones would be worth €25 (£21) per kilo if recycled, with smart phones not far behind at €19 (£16) per kilo.

That's this report. Their method of calculation is, well, once we have recycled phones back into their component parts then those component elements would be worth £16 per kg.

What they don't even begin to think about is, well, what's the cost of recycling phones back into their component elements? Quite, that's like looking at a mountain and stating that it's worth billions. Without including the idea that it will take tens of billions to mine it.

Further, what Greenpeace is resolutely not talking about is that it costs money to collect items into piles that you can then apply a recycling process to.

At which point we really do need to become rather economic fundamentalist on their backsides. We have a system for working out whether it is worth doing something, recycling something. It's called the price system. If something costs more to do than the value of the output then this is not saving resources, this is wasting them. And, yes, collecting then recycling phones costs more than the metals extracted are worth. Which is why no one does do it as a profitable activity.

There are people who will accept phones that other people have collected, yes. But that's not taking into account a rather large part of the costs, is it? 

Can Channel 4 News stomach the unpalatable truth about quinoa?

Back in 2013, we reached peak Comment is Free when Joanna Blythman wrote "Can vegans stomach the unpalatable truth about quinoa?" She blamed everyone from vegans to fat cat exporters for pricing the superfood out of the reach of Andean peasants. Blythman's piece while strong on virtue signalling, was light on peer-reviewed research. In fact, since writing that piece two interesting papers have come out of the ether to show that her fears were unfounded. I hoped that the media had moved on from the Quinoa Guilt-Trip. 

Not so, sadly. Channel 4 News put out a sensationalist report suggesting that Western demand for Quinoa was fuelling a malnutrition crisis in the Andes (despite the fact malnutrition rates have halved since 2007). In fact, it's got so bad that some Peruvians are eating greasy fish and chips (the horror!). Bizarrely, in a rush to guilt trip vegans and hipsters, they seemed to ignore the real story. That Peru is experiencing its coldest winter in over 100 years, a winter that's killed over 100 people (not to mention thousands of Alpacas).

What reason do we have to doubt Channel 4's report? 

UC Berkeley economist Andrew Stevens looked into the diet of heavy Quinoa consuming regions of Peru. He found that Quinoa consumption was relatively unchanged in heavy consuming regions, and where there were shifts away from Quinoa consumption it was down to increased choice and changing tastes (maybe Andeans like fish and chips?) not price rises. In fact, Quinoa only made up about 4% of of a typical Peruvian household’s expenditure on food. 

Quinoa farmers are some of the poorest people in Peru, but according to a study by Marc Bellamare, Seth Gitter, and Johanna Fajardo-Gonzalez, Quinoa price rises have had massive financial benefits to them. They find that as prices rose between 2004 to 2013, it boosted farmers' income and increased their welfare (measured in goods and services) by 46%. And these benefits didn't just go to farmers. 

As Bellamare and Gitter write:

We find that increases in the purchase price of quinoa are associated with a significant increase in the welfare of the average household in areas where quinoa is consumed, which suggests that the quinoa price increase has had general equilibrium effects extending to non-producers. 

Hopefully, Channel 4 news will follow up on their report, and let their viewers know the real facts. But I wouldn't hold out hope - some people never learn.

At some point the public library will be obsolete

New figures out who us that at some point the public lending library will simply be obsolete:

The proportion of adults visiting public libraries in England has fallen by almost a third over the last decade, according to a new government report, although usage in the country’s most deprived areas has remained stable.

The Department of Culture, Media and Sport has measured the public’s usage of libraries in England since 2005. In the 12 months to March 2016, it reported that just 33.4% of adults had used a public library, compared with 48.2% of adults in 2005/2006, when the survey began. This marks a drop of 30.7% over the decade, and is the first time the government department has highlighted a “significant decrease” in the proportion of adults who used public libraries. In comparison, the proportion of adults visiting heritage sites, museums and galleries increased over the decade.

Please note that we are here referring to the lending libraries, not the reference ones.

There's other things to do these days, other ways to gain access to reading matter. Any PC, tablet or smartphone has access to tens of thousands of free titles. It simply becomes less necessary to have that publicly funded service.

At which point we're going to have a lovely example of the inherent conservatism of state provision. For even as and when true obsolesence is reached absolutely none of us believe that the political system is just going to say "Ah, yes, better stop spending money on that then". 

Note what happened when the public libraries displaced the paid lending ones - there're a couple of private sector ones occupying small niches but essentially the field shut up shop and went and did something else. Which is of course what should be done when the old manner of doing whatever it is is superceded.  As we say, absolutely none of us expect this to end up being true of a public service.

Which is one of the major problems with having public services in the first place. The lumbering state isn't very good at picking up the new things which need to be done. It's not very bad and not very good at doing things we all agree should be done in a static manner. And it's absolutely terrible at stopping doing the things which no longer need to be done.

And yet, as technology moves on there're always things that we should stop doing. One of the things we really must work on rather more is making government better at recognising when it should simply stop doing something.

Central planning is bad. Olympic Edition

Is Britain's recent Olympic success a triumph of central planning?

The Guardian certainly thinks so.

I disagree. Britain's whopping great medal haul reveals exactly what central planning is good at and exactly why central planning is undesirable. When it comes to meeting specific production targets central planning tends to get you over the finishing line (at least in the short term), but when it comes to actually giving people what they want central planning falls short of the mark. You can find a good example of this in Jose Ricon's post on food production in the Soviet Union. The Soviets produced nearly as much food as the Americans, but what they made was completely out of whack with what consumers actually wanted.

Similarly, while the Government's massive investments in elite sport (some £547m over 4 years), certainly has netted medals, those medals aren't turning into increased participation for your average joes. At least that's according to a paper by Weed et al, who found little evidence that elite sport lead to increased sporting participation. In fact, sporting participation actually fell following the 2012 Olympics.

Now there is an alternative and it sits at the very top of the medal table – the United States. Unlike its competitors, the United States Olympic Team receives almost* no state funding. Instead, they rely on a mix of charitable donations and corporate sponsorship. They show that it's possible to fund a successful Olympic team without leaving the taxpayer** on the hook.

Centrally planned UK Sport might have delivered the goods in Rio, but investing in elite sport is a bad deal for the taxpayer. We'd be better off copying the best and taking America's lead with a privately funded Olympic team.

* There's a bit of money on offer for veterans to compete at the Paralympics.

** Most UK Olympics funding comes from the National Lottery (a tax on the innumerate perhaps), but a substantial amount does come from general taxation.

There will be no fines for tax avoidance advice

Reports that City and accounting forms will be prosecuted and fined for offering tax avoidance advice:

City firms that help businesses run tax avoidance schemes could face huge financial penalties under fresh Government proposals.

This is not going to happen.

Banks, accountancy firms and lawyers could be forced to hand over underpaid tax if they are found to have broken the law. 

That might.

But we think it hugely important that everyone understand the basic point here. There is no such thing as tax avoidance. There are efforts to avoid tax, that's most certainly true and it's everyone's right to do so. However, there is no such thing which can be finally determined to be tax avoidance.

To put it in simplistic terms. One can simply pay tax - tax correctness perhaps. One can simply refuse to pay tax - tax evasion. And one can attempt to wriggle - that tax avoidance. But tax avoidance is not a state or a thing, it's that attempt. And when examined it collapses down into one of the two possible end states.

The attempt at avoidance, that wriggling, is declared legal and thus it is also known as "paying the correct amount of tax". It is declared to be illegal and it is thus tax evasion. There is no room left in our definitions for something that remains tax avoidance after it has been examined.

Thus our rather bold statement at the top. No one is going to be fined or punished for offering advice on how to pay the correct amount of tax. People who advise on how to break the law through tax evasion may well face fiercer penalties than they do now. But given that the interim activity, tax avoidance is not illegal and cannot be made illegal then therefore neither will advice about it.

 

Entirely arglebargle from Compass here

We do not generally look to Compass, the political groupuscule, for fine economics ideas - that's not their function. They're  more a kaffeeklatsch for the wibbling middle classes in general. However, we do think we ought to mention that their latest idea is simply nonsense, entire arglebargle.

The set up is that as the machines do more then fewer people will be working and gaining incomes from having done so. As the income tax is a major pillar of the tax system this means we must tax the machines to make up for the losses of that income tax.

This is, as we say, arglebargle, complete piffle

An alternative source of tax revenue is needed. Where personal tax has been collected for over two hundred years on the backs of men and women working, now a change is necessary. Where the fruits of labour have resulted in personal tax revenues, I suggest that we now consider taxing the labour of machines, because it is machines that are increasingly producing income now. Working out how to tax machines would not be easy and implementing such a policy would be harder. The details do not need to be discussed here. They will be worked out later. Taxation could be levied on a simple unitary system and on an annual basis. Where an automatic welding machine is being used in car manufacturing it would be relatively easy to determine how many manual welders have been displaced and a level of taxation calculated.  It would be much more difficult to tax a combine harvester. How to tax an automated telephone system? How to tax a launderette? I have an abiding vision of rows and rows of copy typists in an office in the 1950s but they have all been replaced now. But difficulties should not deter a consideration of the idea. 

What is being missed is the most basic part of GDP accounting. The value of all that is produced equals the value of all that is consumed. And the value of either or both individually is the incomes of everyone.

From the first we want to have that increased production as that means that consumption can rise. Hurrah, we're richer! We thus welcome the machines as they increase production and thus make us richer, Hurrah! again.

What Compass is missing is that that increased production and or consumption is also, by accounting identity, the same as the increased incomes of all of the people. Those incomes might come as rent, as interest, as profits, as what we think of as normal income income. Thus, by definition, if production is increasing, consumption is, then so also are incomes increasing.

It therefore cannot be that there will be a tax shortfall as a result of production increasing and incomes falling. Because it is not possible for production to increase and incomes to fall. Because all aggregate production is equal to all aggregate income.

Another way to put this is that they're quite right, the machines don't get paid for producing. But someone, somewhere, does get the income from the machines' production. It might well be true that we'll not be getting the income tax from the worker (even though their contention that the displaced worker will not be working at something is wrong) but that income will be income to someone and we really do tax all incomes already.

By not understanding this, something which is explained in every A level text book, Compass have managed to recommend taxing the very thing which makes us all richer, automation. Maybe your only wibbling over the coffee cups, rather than proposing economic policy, would be safer for all of us....

 

We wouldn't use this argument ourselves, we really wouldn't

The intention behind the argument is just fine - let's not be protectionist over who owns companies. But we have to admit that we're not very much taken with the argument itself:

Those bloody foreigners, they come over here nicking our companies. For critics of foreign takeovers, 2016 has been the stuff of nightmares.

First brewing giant SAB Miller was snapped up by an overseas rival, and now the London stock exchange and chip-maker Arm look destined for foreign hands, much to the fury of those who believe such a fate tends to be negative for businesses and the economy.

Critics like to pretend that overseas buyers pillage Britain’s best silverware, gobbling up prized technology and scientific and industrial know-how, while shutting down factories, firing workers and eventually scampering back to their homeland with the best bits of British plc.

It doesn’t take a genius to realise that such bashing doesn’t stand up to scrutiny.

ARM was majority foreign owned before Softbank appeared. From memory some 43% US and 15% European share ownership, although this is complicated by not knowing who owns the funds that own the shares. By whatever standard we might use about foreign ownership it was thus already a foreign company.

SAB Miller is a rather different case. That's a company that was listed in London, yes, but it's not obvious that the company has anything other than the most passing interest in the British economy. The major subsidiaries are:

Bavaria Brewery
Foster's Group
Kompania Piwowarska
Miller Brewing Company
South African Breweries
Pilsner Urquell Brewery

A more detailed look at regions of operation show nothing at all in the UK. And no, UK Fosters is brewed, we're told, by someone else under licence. 

The argument we would have used is that you can't go around complaining about foreigners buying a British company which owns lots of foreign companies. For your current complaint is that the British company should never have bought those foreign ones in the first place. At which point protectionism about ownership dissolves in its own contradictions. 

This seems entirely sensible to us

Entirely sensible, that is, if we change one word of this Times headline:

Rail commuters to pay more despite overcrowding and disruption

For we really do think that would be sensible if it read "Rail commuters to pay more because of overcrowding". That being the manner in which that marvelous price system reacts to changes in supply and or demand. We would also note that we have no other method of managing, or even calculating or understanding, the interaction of the billions of objects and people within an economy than that price system itself.

More than £40 will be added to the cost of the average annual rail season ticket next year as the government prepares to increase fares despite serious overcrowding and chaos caused by striking unions.

The striking unions are a different problem but the overcrowding should be met with prices rises.

In the short term rail capacity is inelastic. Thus the solution to overcrowding cannot be the instant expansion of supply. Price rises will aid in curtailing demand, thus lifting by some amount that overcrowding. In the longer term of course everything is elastic. And price rises will increase the incentive to expand capacity and provide the finance to do so as well. Thus again reducing the overcrowding.

Rising fares in the face of overcrowding are not thus some distressing but or despite, they are the solution.