But jobs and exports are a cost

We do think it would help if people grasped the very basics of economics before proposing economic plans. We have no problem with renewable energy - as long as it has to pass all the usual economic tests of being worth it and so on. But this strikes us as simply being wrong:

UK could unlock £70bn a year in renewable energy, report claims

Plausible for UK to become global clean energy superpower if investment is ramped up

Well, OK, so what is it they’re suggesting?

The UK could unlock £70bn every year by generating enough clean electricity to become a major exporter of energy to mainland Europe, according to a former government economist.

A new report has found that by increasing Britain’s clean electricity generation 50% above its current projections for 2050 it could become a clean energy superpower capable of exporting £17bn of green electricity to Europe a year.

The ambition to generate more green electricity than needed to meet the UK’s climate targets could also create an additional 279,000 British jobs, and support a total of 654,000 British jobs, across the UK’s clean energy industries, according to the report.

Ah, no, that’s not passing the basic economic tests, not at all.

Investment is clearly a cost. We’ve got to - at best - defer consumption in order to devote resources to building these whatever they are. That’s a cost. Jobs are a cost of doing something, so creating 279k. or 654k jobs, is a cost. We can have less NHS, or ballet, or performance poetry, food, housing and whatever because all that human labour is being devoted to renewables. Finally, exports are a cost - that’s our labour that is sent off for Johnny Foreigner to enjoy the fruits of. Sure, exporting so we can buy the fruits of J Foreign’s labour is just fine, but that’s the benefit - it’s still true that exports are the cost.

So, what this report is actually saying is that we should carry the cost of investment in order to also be able to enjoy the costs of jobs and exports. Which does seem to be missing something really rather important - what’s the benefit of this trio of costs?

The analysis by former government economist Chris Walker for the UK Business Council for Sustainable Development

Might we, ever so gently, suggest that these sums get done again? With the right plus/minus signs in front of each of the costs and each of the benefits? At which point it would be possible to actually evaluate this idea.

What an excellent argument for the free market this is

Sonia Sodha tells us that:

If the price of a supermarket chicken had risen at the same rate as house prices since the 1960s, it would today cost more than £50

OK. So why doesn’t a chicken cost that? Actually, a free range, organic, heritage breed probably does cost about that at some achingly trendy food purveyor. Or at least closer to that than the price most of us do pay. So the answer about the chicken is that we’re not stuck with only the old-style free range, organic heritage breed. We’ve had, over this time period, a technological revolution in chicken. As we’ve noted before people complain about how cheap chicken is in fact, what with broilers, vast raising sheds and all the rest.

So, why have we had that revolution? Sir Anthony Fisher is a part of it, certainly. Importing that new tech from the US in the post-war years. We never really did have EU stupidities on chicken and eggs as we did beef, butter, wine and olive oil - it wasn’t a traditional peasant occupation, d’ye see? Not in the same way at least. Therefore we never did get quite the same level of planning, government attention and, ahem, better than free market outcomes.

We got, to a very great extent, the free market able to get on with that technological revolution. Most chicken farmers scrape by, there are no excess profits in the system. And we consumers gain cheap chicken for the first time in millennia.

Free markets work.

So, why have house prices risen so much as compared with the cost of chicken? Because we’ve not had a free market in housing, we’ve got all that planning and all that bureaucratic effort to try to reach, ahem, a better than free market outcome. Which clearly and obviously hasn’t worked, has it?

Not free markets don’t work.

The current cultural insistence is that we’ve got to increase the price of food by not having a free market in the production of food. We have a better idea - why not have a free market in housing so as to decrease the cost of that? Blow up the Town and Country Planning Act 1947 and successors. Proper blow up. Kablooie.

Anything else is just for the birds.

There is a reason for the private ownership of property

Excessive foraging for wild garlic and mushrooms in UK ‘a risk to wildlife’

Experts say foragers taking too much, selling the goods commercially and harming fragile ecosystems

This was explored by Garrett Hardin in his Tragedy of the Commons essay. True, he tried to apply it to population where it doesn’t actually work. It’s also true that Elinor Ostrom gained her Nobel for noting how within smaller societies social pressure is a possible third management technique. But the base idea still stands.

When we have Marxian - open - access to a resource and demand rises above the regenerative capability of that resource then we need to have a management system. Which can be a capitalist, or private property solution. Or, a regulatory, rules based or as Hardin called it socialist, solution. Which works better will depend upon the specifics of the thing that is to be regulated. There is no in theory correct answer which applies to all things. We’re back in that most common of economic answers, “It Depends”.

As it turns out with land itself private property seems to work best. Access to the resource being controlled by the owner of that land. Invoking some medieval idea of the “commons” doesn’t work here as they were not open access in the slightest; those libraries full of manorial records are in fact records of who did have - and who did not - the right of access to the resource.

As a society we’ve faced this problem before and know how to solve it.

Gerrof moi land is that solution. We should apply it again.

Can we say the same about British low end housing?

Marginal Revolution points to a new paper on US housing for the poor:

This study analyzes patterns of housing consumption and expenditures among social safety net recipients since 1985. For safety net recipients, including Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) and cash welfare (AFDC/TANF), monthly housing expenditures have risen from $692 to $1,341. However, these increased expenditures partially reflect housing quantity improvements, including more square footage, more rooms, and larger lot sizes. The data also show a marked improvement in housing quality, such as fewer sagging roofs, broken appliances, rodents, and peeling paint. The housing quality for social safety net recipients improved across 35 indicators. These quality improvements equate to a 35 to 44 percent increase in housing consumption and suggest that a typical safety net recipient in 2021 experiences housing consumption equivalent to the average national household in 1985. Though relative housing consumption has remained similar for safety net recipients, this “rising tide” of housing quality may have additional benefits for the health and well being of families and children living in better housing.

US housing is as unequal as it was but at the low end the quality has risen to the population average of 40 years ago. It’s possible to say that’s not good enough but it’s certainly better than it was. Can we say the same about British housing?

By at least one of those measures - the space available to a household - of course entirely the opposite is true. Britain now produces the smallest new housing in Europe at something like 76 square meters. That’s a result of all that lovely planning and Green Belt and social housing that we do - instead of the American system of having something more akin to a free market in housing.

Given that British housing has got worse with planning, American housing - even at that bottom end - without it, perhaps we should be reconsidering our devotion to the planning of housing? On the fairly simple grounds that planning makes things worse?

Do we now get to fire them all?

An interesting way of defining the size of the public sector:

Although these workers and their employers might not consider themselves public sector staff, he said, they are nonetheless funded by the taxpayer and working for the state.

Mr Mortimer-Lee said: “If it looks like a public sector job, smells like a public sector job and has the same terms and conditions as a public sector job, then it's probably a public sector job.

“Whatever the government statisticians say, this is a better way of measuring it. They think [their way] is a better way of measuring it because it gives a lower number.”

The result of this different way of counting?

Analysis by the National Institute of Economic and Social Research (Niesr) suggests that around 10.6m people are employed by the state – far more than the 5.7m typically cited by the Government.

One in three workers are now in the public sector, according to Niesr analysis, up from 25pc when Tony Blair came to power in 1997, with the rise continuing steadily after David Cameron took over and despite the austerity policies of then-Chancellor George Osborne.

Which is an interesting result. We’re not wholly certain that we’d 100% agree with and wholly rely upon this new method and result but it is indeed interesting.

What’s even more so is the logical result of this. We’re told that British productivity growth has been weak at best these past couple of decades. Therefore we must change economic tack. Which seems fair enough. But that change in tack is then usually claimed to be stopping the austerity, stopping the neoliberal insistence upon markets and going back to a more intrusive and extensive state.

But if this analysis is true then reality is that we’ve been having the more intrusive and extensive state this past couple of decades which is what produces the weak productivity performance. Thus that’s the thing that has to be changed.

In short, bring on the neoliberal revolution and let’s start firing swathes of those public sector employees. They are, after all, making us all poorer than we need to be. Whether it will actually work, doing so, is dependent upon the accuracy of this analysis. But it’ll be fun too so why not do it just on the off-chance?

Who's in charge around here, Secretary?

I worry when I read stories like the business secretary Kemi Badenoch complaining that she cannot deliver her party’s manifesto plans to scrap all EU laws due to Whitehall intransigence. It makes me wonder who exactly is in charge of public policy: elected ministers or their unelected officials? 

There is an attitude among senior officials that they know better than these' here-today-gone-tomorrow' ministers. The old dictum of ‘advisers advise, ministers decide’ seems reversed. We have unintentionally ended up with a self-propagating bureaucracy who are either averse to change, or who feel they are above the democratic decision-making process. 

Past governments are much to blame, of course. It’s nice to create new ministries that give your colleagues nice jobs and chauffer-driven cars. It’s easy to create new quangos and agencies, with their associated bureaucracy, to address every new issue that the media get agitated about. But if ministers are going to manage the bureaucracy, they need principle and long-term vision.

Luckily we have such a plan, in the shape of a new book, Shrinking Whitehall by management guru Tim Ambler. He recommends that Whitehall departments should have a small core group dealing with policy, plus as many executive agencies as needed to deliver those policies. That was, indeed, the Next Steps plan created in the 1980. But decades of bureaucratic drift, the civil service has morphed into an unfocused blob of confused structures, functions and priorities.

At the last count, there were 636,786 UK civil and public servants. Of those, says Ambler, 105,291 belong in public corporations, since they work in things like museums, the BBC and other units which are not part of governing at all.

Scrapping all quangos — ministers can take advice from whoever they like, without needing permanent bureaucracies to advise them — and ending duplication in both policy and executive functions, means another 193,998 of the remaining posts could be lost, as and when their present occupants retire. That would shrink Whitehall numbers by 53%, cut the number of departments from 43 to 11, and reduce the size of the cabinet by a third. 

Saving staff and costs would be welcomed by over-taxed citizens but Ambler's recommendations are more important than that: government need to re-focus on what it really needs to do and re-structure to deliver it.

Then, perhaps, ministers might be able to get a grip on this turbulent beast.

Buy Shrinking Whitehall here.

So requiring degrees for nurses didn't work out then?

Back when the requirement for nurses to take a degree course came in (all the way back in 2009) we muttered more than a little about how this wasn’t in fact a good idea. And so it has turned out:

School leavers will be able to start working as doctors without going to university, under new NHS plans to fix the growing staff crisis.

The apprenticeship scheme could allow one in 10 doctors to start work without a traditional medical degree, straight after their A-levels. A third of nurses are also expected to be trained under the "radical new approach".

It might be an approach but it’s neither radical nor new. It is, in fact, profoundly conservative. It’s an acknowledgement that one of those bright ideas of the Blair years wasn’t bright and is therefore to be reversed.

Don’t forget, nursing training used to be a couple of days of learning how to wash your hands properly then several years apprenticeship on the wards. Which is apparently what we’re to go back to.

The only pity is that the planners decided to take us on this decade and a half diversion. All hail planning, eh?

Oh, and expect the Royal College of Nursing to be spitting feathers - they were so proud of becoming an all graduate profession.

Abolish inheritance tax because wealth inequality doesn't, in fact, matter

A good suggestion from Eir Nolsøe, let’s just abolish inheritance tax. It’s - by far - the most hated tax in the country, doesn’t bring in much revenue compared to the spending micturation of the political classes so why bother? Why not just tax people on the profit of the whatever it is if they sell it after inheritance? Why make death one of those things that crystallises profit into a taxable event?

But there’s one more line of argument here. Wealth inequality doesn’t actually matter very much. Both Norway and Sweden have greater wealth inequality than the UK. Both Sweden and Norway have lower income inequality than the UK. Of course, consumption inequality - the thing that really counts - is lower everywhere than either of those two numbers. But it is in fact true that wealth inequality does not feed through into a greater inequality in how people live their lives - that income which can be expended.

So the reducing inequality argument doesn’t even work - so why persist with a hated, damaging, light revenue raising tax?

We assume that it’s because lots of our fellow Britons are consumed by the green eyed God of jealousy. But that’s not a rational basis for a system of taxation now, is it? Or perhaps it is but that’s a Britain that we’d prefer didn’t happen.

Incentives matter, d'ye see?

We would put much less weight on this statistic than many others. In fact, we’d put near no weight on it at all:

Back in the 1990s just over a third of those living in poverty (or to put it another way, towards the very bottom of the income distribution) were living in a household in which someone was in work. That fraction has now reached something like 60 per cent. The majority of the poor are in work or live in a household where someone is working.

The reason we think it’s unimportant - in the sense of being some horror that requires a solution - is that we changed the benefit system over that period of time. For certain benefits - working tax credits for example - it’s necessary to work 16 hours a week. Which isn’t enough to climb out of poverty. But someone working 16 hours a week to gain access to that benefit is someone described as “being in work”. We’re absolutely certain that if we went back to the benefits structure of those 1990s then we’d see the level of poverty in families with someone in work return to those 1990s levels.

Incentives do matter, d’ye see?

The other reason we’d not change anything to deal with this perceived problem is that at least something has already been done. Universal Credit shakes up those incentives and we really should wait and see how people react to those changes.

That change in the number of “working families” who are in poverty is driven at least in part by the changes made to the welfare system. Not, as all too many are assuming, by the structure of the underlying economy. Even if we did insist that this was some problem that must be dealt with the changes should therefore be in the welfare system, not the economy.

Hayek's 124th

On this day, in 1899, the Nobel economist and social theorist Friedrich Hayek was born. He was, in the words of Robert Skidelsky, “the dominant intellectual influence of the last quarter of the twentieth century”.

Hayek was the driving force that kept alive the spirit of personal and economic freedom that had been crushed by the Second World War and the Keynesian economic experiment that followed it. Those who think they can rationally design a better society, he argued, suffer from the ‘fatal conceit’ that we know far more about how society works than we really do.

Governments simply could not collect and process all the information needed to run a functioning economy, because that information is dispersed, diffuse, incomplete and personal. The socialist dream would always be frustrated by reality; and as socialists struggled to control things, we would be drawn down a road to serfdom.

Societies do not need to be planned in order to be rational and functional. Their rules and customs contain a ‘wisdom’ that has stood the test of time. A wisdom that we cannot even understand, never mind control. The price system, for example, allocates resources to their most urgent uses, with a speed and efficiency that defies any government planners. Such ‘spontaneous orders’ (including not just markets but language, justice and much else) were, said Hayek, products of social evolution, not rational design. Trying to replace them with some planned ‘rational’ alternative always ends in disappointment and chaos.

Hayek influenced a generation of economists, including many others who would also win the Nobel Prize, such as Milton Friedman, George Stigler, Maurice Allais, James Buchanan, Vernon Smith, Gary Becker, Ronald Coase and Elinor Ostrom. His ideas also enthused intellectuals who in turn disseminated his ideas even more widely. Among them were Henry Hazlitt, journalist and co-founder of the Foundation for Economic Education; Ralph (later Lord) Harris and Arthur Seldon who ran the Institute of Economic Affairs; F A (“Baldy”) Harper who founded the Institute for Humane Studies, Eamonn Butler and Madsen Pirie of the Adam Smith Institute.

These thinkers and activists gave Hayek’s ideas a real political effect. Margaret Thatcher and Ronald Reagan owed much to his thinking, as did Mart Laar and Vaclav Klaus, who became political leaders in Eastern Europe after the fall of the Soviet system. “No person,” concluded Milton Friedman, “had more of an influence on the intellectuals behind the Iron Curtain than Friedrich Hayek.”

Hayek remains an inspiration to lovers of individual freedom all over the world. Think tanks promote his view; student groups name themselves after him; college programmes take his name; economists and journalists cite him; his views are analysed in books, papers and blogs. Millions of ordinary people around the world owe to Hayek their enjoyment of the fruits of personal and academic freedom, even though they may not realise it; but then as Hayek pointed out, knowledge is not always obvious.

Eamonn Butler is author of Friedrich Hayek: The Ideas and Influence of the Libertarian Economist (Harriman Economics Essentials).

https://www.amazon.co.uk/Friedrich-Hayek-influence-libertarian-Essentials/dp/0857191756