GDP really only is a proxy, not actually how well we're doing


There are those who criticise the concentration on GDP as a measure of how well we're doing. And they're right: although not quite for the reason that they think they are. To say that it doesn't matter that we're all getting richer, that we should just be content, is nonsense of the most arrant sort. Any casual glance around the world will show that there are still outrages such as absolute poverty which greater wealth could solve: thus we do indeed want to get richer. However, the argument that GDP isn't a very good measurement of how much richer we're getting is entirely true. As this little story tells us:

While global economic problems have taken much of the blame for tightened tech spending lately, another culprit may be afoot: computing on demand delivered over the Internet.

The idea is that instead of capital spending on equipment people now rent it by the month. This plays merry hell with our GDP statistics. For people do indeed look at something like business investment in computing as a measure of how much, well, how much is being invested and thus likely how rich the future will be. But investment is defined as what gets written off over longer than one year. And renting the cloud kit is current expenditure. That's not investment: and thus those reading the runes on business computing investment are going to be fooled by this. For we've still the same amount of computing, still, at least possibly, the same amount spent upon it too. We've just changed the classification of that spending.

But that's not all:

Take Ted Ross, CIO of the city of Los Angeles. He needed to upgrade the technology that powers the city’s Business Assistance Virtual Network, the site where vendors bid for projects from various city agencies. Mr. Ross considered buying new blade servers to host the site. Instead, he decided to run the site on Microsoft’s Azure technology. He’ll halve his costs, and the migration should take four to six weeks, he said.

Actually spending less while still getting the same amount of computing done? That's something that makes us all richer. And yet one of the things we also know about GDP accounting is that it doesn't deal well with these "hedonic" improvements. Either the improvement in performance at the same price, or the availability of that same performance for a lower price.

We do want the world to be becoming generally richer, yes we do. And that means we do want GDP to rise: it's a measure of the resources we have available to solve problems and while the world still contains problems we'd like our ability to solve them to rise too. However, we must always remember that GDP is a proxy for that increasing wealth and that we shouldn't set it up upon a pedestal as being the only goal.

Small businesses needn't fret about relaxed Sunday trading laws


In a column for the Huffington Post, I’ve asked whether small business outcry over changes to Sunday Trading Laws is justified. From Autumn 2016, prohibitions limiting large stores (with a floor space of over 3,000 sq ft) from opening on Sundays for more than six hours will be lifted – an announcement which has led to claims that this will only see more trade moving to larger stores at the expense of smaller shops. Yet the evidence (research, polls and local borough reports), does not suggest that small businesses will suffer from their larger rivals opening for longer. One Australian study, for example, “found no relationship between the proportion of small retail businesses and the stringency of trading hours regulation in each state”. A fifth of consumers have said they would do more shopping on a Sunday were the changes implemented, meaning more customers for everyone – and another way for bricks-and-mortar stores to compete with online retailers.

And rather than wishing the competition be banned from trading, small business owners – many of whom are disruptive by nature – should view this proposal as an opportunity to find new ways to innovate and outsmart their larger rivals.

Read the whole thing here.

Safe standing vs unsafe standing


In a video interview in 2014, West Ham chairman David Gold said:

I am a great supporter of safe standing, it is interesting that for many years we have had unsafe standing, we do have that, I don’t think there is a ground in the country that are all seater stadium that don’t have their fans in some area of the ground standing.

Right now in most football grounds, many of the most enthusiastic fans will stand throughout the match, notwithstanding the all-seater nature of Premier League and Championship stadia. There are regular squabbles with security stewards but staff mostly turn a blind eye. As Gold points out, this is dangerous, as supporters will regularly fall over the seats in front of them into the next row.

It also causes steady, attritional damage, especially when particularly exuberant away supporters visit—as with a recent cup tie that brought Manchester United to Derby:

United will be asked to compensate Derby County after a significant number of seats were damaged in the away end when the teams met in the FA Cup fourth-round at the end of last month, resulting in a 3-1 win for Louis van Gaal’s team.

Derby have already informed United about what their groundstaff found on the morning after the match and intend to charge them for the relevant repairs, claiming that more than 300 seats were broken or pulled off whole.

Each match can cost thousands—peanuts in Premier League money but still a cost worth considering, especially when there's an alternative. Safe standing alternatives such as rail seats do not have breakages that require replacements every week; the seat is tucked away, clipped off or much harder to break.

Of course this isn't the main reason to favour a relaxation of the rules, allowing clubs in the top two tiers to emulate Germany, Sweden, Austria and the lower tiers, where standing has been safely allowed. Fans cite the more intense atmosphere that standing allows for (just look at the Yellow Wall above).

But perhaps more important is simply allowing for higher attendances. The recent Kop walkout over ticket prices was just the latest example of the rising fervour against the ticket prices Premier League clubs charge. Terraces can fit in as many as 1.8x times as many spectators—safely. Not only could greater total supply bring down ticket prices overall, but more variation in the 'products' that clubs can offer fans means they can price discriminate. Well-heeled neutrals and tourists can pay hundreds to sit; core fans can be offered cheaper season tickets.

But either way, after a long hiatus, it may be that safe standing in stadia is an idea whose time has come again.

Of course being good at business doesn't make you good at economics


Don Boudreaux makes an important and underappreciated point here:

Here’s a refrain that I’m being bombarded with by e-mail and on Facebook; this particular version is a Facebook comment by someone named Thomas Marise (whom I don’t know):

Trump has proven time and again he knows his stuff when it comes to economics. He has a personal wealth of $10Billion proving his understanding. Hard to argue with results.

Such a claim is illogical, even if we assume – falsely – that Trump earned every cent of his monetary fortune honestly rather that at least some of it through government-orchestrated theft.

Knowing how to run a business is not the same thing as knowing economics.

It's worse than just that they're not things being measured along the same axis of human endeavour. It's actually that rather a large amount of knowing how to run a business is in managing to avoid the things that economics, and economic policy, would like to do to that business.

Think it through for a moment: every business would love to make excess profits, profits above the average cost of capital. And much of business itself is trying to work out how to do so. but at the level of the economy we don't want anyone to be making excess profits: we don't want anyone to be making more than the average return to capital. And that's rather the difference between markets and capitalism as well as between business success and economics.

Sure, business is capitalism, let's make the profits where and when we can for private benefit. But it's markets that curb this tendency, markets which force only those pushing the technological boundaries capable of making those super-profits. It's also markets which compete away those excess profits as other producers catch up with that boundary pushing. Finally, it's economics which explains both why the markets are desirable and why they work.

Much of business is trying to avoid market forces, much of economics is discussing how much we've got to insist that market forces be allowed to work. They really are two very different subjects and success at one, knowledge of one, by no means even implies success at the other.

We regard this as something of a victory actually


People are throwing around the latest global mortality statistics to show that we've got some grand problem that we've got to deal with. And we're certainly amenable to the argument that things could be better. However, we would also still insist that this is a victory, not a defeat:

Now new research has found that air pollution is the leading environmental risk factor for disease, and the fourth highest risk factor for death. The data is the newest addition to the Global Burden of Diseases, Injuries, and Risk Factors Study, the most comprehensive international effort to measure epidemiological trends worldwide.

Yes, a victory:

According to the Global Burden of Disease Study, air pollution causes more deaths than malnutrition, obesity, alcohol and drug abuse, and unsafe sex. Cardiovascular and pulmonary diseases, as wells as respiratory infections, account for the majority of deaths from air pollution.

Historically human beings have died either from infectious disease or malnutrition. They're the two that have carved great swathes through the population repeatedly. Both are, while not entirely solved, at least under control to a great extent.

Which leads to two further things: the first being that if we don't die of one of those two then we're obviously going to die of something else. And given that life expectancies do keep on growing we are indeed living long enough to die of those other things. But much more specifically to this point, the pollution that is being complained about here is that air pollution. That air pollution which is the result of having a modern economy that is able to be clean enough not to be rife with infectious disease and which also produces enough food that we don't all starve. The poor world has a slightly different problem, in that it's indoor air pollution killing them, from wood cooking fires mostly, something we stopped doing many generations ago.

So, yes, we do regard this as a victory, even if not a complete one. Sure, we could and we will make things rather better as technology improves but that we are all living long enough to die of the side effects of the system that allows us all not to starve to death earlier is indeed a victory.

We rather like this from Antonin Scalia


June 1996, United States v. Virginia:

"If it were impossible for individual human beings (or groups of human beings) to act autonomously in effective pursuit of a common goal, the game of soccer would not exist."

There will of course be those who insist that this point only details the need for the state to be the neutral arbiter, the referee. And yet that's not actually true. For the vast majority of the world's soccer is played without a referee. Without in fact there even being lines for a pitch let alone linesmen, piles of jumpers for the goal posts and so on. Although, obviously, there is always the kid who insists that it's his ball and he's taking it home with him unless...

Most certainly, there are arguments, there are even unfairnesses, in such autonomous pursuits but they do by and large get sorted out by the participants in the pursuit. Soccer games being, as so much of life is, an iteration of repeated games among much the same players. Meaning that those who do cheat rapidly become excluded from the game being played. Whether this be the soccer game on the wasteland or the bankrupt company in the marketplace.

And we're quite happy with the idea that at times this self organisation isn't quite enough, that there does indeed need to be that neutral arbiter, that referee. We're even happy with the thought that at times that's going to be the State. We would just emphasise that that's the exception, the vast majority of the time self-organisation does just fine, if not better.

New report: The UK and the World in 2050


Britain will use fast-growing trees to capture and store atmospheric carbon dioxide by 2050 and most of Britain’s energy needs will come from gas, solar and nuclear power, not wind, according to a new monograph released today (Monday) by the Adam Smith Institute. The paper, Britain and the World in 2050, by Adam Smith Institute President Dr Madsen Pirie, looks at trends in scientific research and makes predictions about how new technology will change how ordinary Britons live their lives and solve the energy, environmental and health problems currently facing Britons.

People in the UK will be earn twice as much in real terms by 2050 as they do today.  An average 2% annual growth rate will achieve this.  The people of 2050 will live at the standard of today's millionaires.

Agriculture will have experienced a green revolution, with genetically modified crops that are self-fertilizing, pest-resistant, saline tolerant, drought resistant, altitude capable, heat tolerant and cold tolerant, and ones that can grow on land previous thought insufficiently fertile.  Many of these will be developed in UK laboratories and universities, as will trees that can mature in 6 years instead of 50. Tree cover will be many times what it is today.

New genetically hybridized vegetables will be available to eat, the paper says, as will inexpensive lab-grown meats, bringing an end to factory farming as we know it and delivering substantial environmental gains, as well as freeing up large amounts of land for recreational use. Micro-organisms will be developed to produce nourishing food very cheaply and in abundance.

Looking at healthcare, the paper suggests that the NHS will have been radically reformed by 2050. The state will own no hospitals outright, nor employ any doctors or nurses.  People will choose state-funded healthcare from a variety of private institutions, many non-profit and some for profit.

Driverless electric vehicles will be the norm, with petrol and diesel engines banned from cities.  They will be free to re-charge.  Inside they will not have two rows of forward-facing seats, but some will be customized as extensions of the home or office, some even with folding beds.  People will be prepared to commute longer, given such comforts, and this might make city housing less attractive and therefore less expensive.

The paper argues that behavioural change is secondary in solving social problems after technological adaptation. Environmental challenges are better overcome by investing in new technologies than in trying to make people consume less, the paper says.

Commenting on the paper, the Executive Director of the Adam Smith Institute Sam Bowman said:

“Futurology can often tell us as much about the present as it does about the future. In this paper we have shown just how many of our current problems are on their way to being solved, not by changing people, but by changing the world around us. Dr Pirie’s vision for the future is an optimistic one that sees human ingenuity as the key to improving people’s lives around the world. The future often looks bleak because we focus on the negatives – but the reality is that things are getting better, much better, all the time.”

Read the paper here.

It's not that you shouldn't ban cash it's that you can not ban cash


Allister Heath is quite right here, there's those who would ban cash and we shouldn't allow them to get away with it:

The problem is that this will embolden those officials who wish to abolish cash altogether, and switch entirely to electronic and digital money. If savers were forced to keep their money in the bank, the argument goes, then they would be forced to put up with even huge negative rates. They would have no choice - and central banks would be able to engage in monetary easing even in a world of zero or negative inflation. They would not be forced to resort to quantitative easing or “helicopter money”.

The various bansturbators are already greeting the idea with glee: how can people tax evade, save without being seen, conduct themselves as they wish if all money is electronic and recorded? And for the very obvious reasons of liberty and choice we should not allow them to get away with it.

However, that's not the half of it. It's not just that you shouldn't ban cash, it's that you cannot. And people today are making a mistake when they think that they can.

For yes, it is true that money today is fiat money, it's just something that government says is worth x and so we use it as if it is worth x. The assumption is that if the pieces of paper are taken away then we'll be without something worth x to exchange. But that is to believe that governments created money, rather than that we've found that government created money is convenient to us. And historically this simply has not been true, there have been all sorts of variations upon money. Private bank notes were privately created money, the stones of Yap were culturally created money and so on and so on. And if the government declines to issue tokens that can be used in exchange then we'll all come up with something else that we can use. We've even heard that expensive paintings are used in this manner in the illegal drugs trade these days. No one ever intends converting them into cash, they're simply a conveniently high value piece of collateral.

Yes, it's entirely true that fiat money is created by governments, they produce a certain value to it by insisting that we can pay taxes with it. But that's not the definition of money at all.

To approach the point using a subject we care deeply about: beer and pubs. In the US, generally, you go down to the corner bar to meet the guys and you buy your own beer. In Britain you toddle off to meet the chaps and you buy in rounds. In the Czech Republic you buy your own beer but order the shots in rounds. And there's no law, no tax collecting authority, insisting upon the tit for tat of rounds but there's a heck of an amount of social pressure keeping everyone in line. And that buying of the round for round is a financial transaction, it's just one that is not mediated by cash at all, it's mediated by that social pressure.

And we all take part in exactly those sorts of transactions all the time: a promise to do something is a transaction, we make those all the time. The absence of cash as paper would simply expand the areas of life where we use reputation as the currency.

Yes, government created fiat cash money is very useful: and we don't want them to try and ban it for that reason alone. But a ban wouldn't work anyway, as we humans have found the basic idea too useful and every society has come up with some method of keeping tabs on who owes what to whom. That's not going to go away whether we've got notes with a piccie of the Monarch on them or not.

We are all in favour of clothes banks to follow food banks


It's not just that we're in favour in fact, it's that we cannot find anything wrong with the idea at all:

Louise Cooke, a 46-year-old ex-teacher and community worker in Nottingham, has never been elected nor is her work funded by the taxpayer – but she is filling in the gaps left by the government.

For the past two years, volunteering out the back of her local church, Cooke has been running Sharewear – what, in austerity’s language, we could dub a “clothes bank”. This isn’t packets of pasta or boxes of veg but winter coats and children’s shoes. Cooke describes the people who come through the doors as in “crisis”: anyone from job seekers to Syrian refugees, from low-paid workers to people on benefits (“We have people coming in on disabled people’s behalf because they’re housebound,” she adds).

As Cooke says: “No one should have to walk around in smelly clothes just because they haven’t got enough money. No child should have to go to school in ripped clothes.”

We entirely agree with the sentiment: Britain is a rich country and those are things that can be solved in a rich country. However, it is important to note what the problem is: incompetent government. And this is not a new incompetence: government has not become more incompetent as the result of the election of the Conservatives, or the Coalition, or the defeat of New Labour. Government has always been this incompetent if not worse. As is the case with food banks: no one with a couple of decades of adult life under their belt is unaware of the manner in which the benefits payment system has always had great gaping holes in it.

That is, there is no new and sudden need for these charitable activities. Rather, it's that we've now this new technology (and yes, a method of organisation like a food bank is indeed a technology) enabling us to solve these problems. For which, of course, a rousing Hurrah!

But we need to note the important point about these solutions. It is the little platoons sorting out the incompetence of government that is working here. Given that this is so yes, most certainly, why not have more of such little platoons working to solve this problem but don't, whatever we do, try to hand over the solution to that government which is the original cause of the problem.

Nicky Morgan has proposed the worst possible way to calculate a gender pay gap


Back in July 2015, David Cameron announced he'd close the gender pay gap in the next decade. Proposing to take the first step by making larger firms publish their pay gap figures, I wrote up a response for the Spectator's Coffee House, arguing that this was an ill-conceived idea:

His plan to force businesses with 250+ employees to publish their ‘wage gap’ figures will create more bogus numbers and further perpetuate the myth. It is impossible to know simply by looking at the numbers on the spreadsheet why someone’s salary is a certain figure. One’s education or training, previous work experience, negotiation manoeuvres, and unique character traits will all contribute to their salary; Jack and Jill may be headed-on-up the career hill together, but they will be coming from two completely different paths.

The government launched an official consultation to determine how, exactly, they would make companies publish their 'pay gaps'. The ASI responded to the consultation, recommending that if the government were to go through with this policy, it absolutely must get companies to compare jobs like-for-like. Without a direct comparison of men and women doing the same job (and ideally for the same amount of time, with the same educational background, etc), it would be impossible to know if any income disparity was a result of employer-based sexism, or the many other factors that can contribute to one's overall salary.

Today we discovered that Woman's Minister Nicky Morgan did not take Ben's advice. Instead, she has implemented what is probably the worst way to calculate a gender pay gap.

In 2018, businesses with 250+ employees will be forced to publish on their websites the mean and median calculations of their male and female salaries, as well as the 'pay ranges' of men and women (i.e. who's at the top and who's at the bottom).

The problem? Simply calculating the mean and median of male and female salaries controls for absolutely nothing. Without calculating in hours worked, job, department, previous experience, flexibility of hours, and time taken off work, these figures tell us nothing about whether employers are actually paying female workers less than men for the same roles.

Evidence suggests employers are big advocates of women. Indeed, when you do control for factors like background, hours and job, women are often more likely to earn more than men, and are more likely to be promoted as well.

But now, thanks to the government, in a few years time we're going to have a bunch of false stats that help perpetuate the myth that women are victims of sexist employers, and will never be able to access the same opportunities as men. A great day for professional feminists, who have been running out of talking points as women shatter those alleged glass ceilings left, right and center. An unfortunate day for the rest of us, who will have to continue to explain why comparing the CEO's salary to a first-year employee doesn't do much to prove 'sexism'.