Misunderstanding why people tutor their children

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The latest horror to assail our civilisation is apparently the idea that parents might hire tutors for their children. No doubt it's the upper middle classes deploying their superior financial resources to make sure that their own special little snowflakes get ahead in the race to grasp the great big brass ring that status and position offer in our society.

In those circumstances, it matters that an ethnic divide is opening up.

Quite right: if those with an enhanced melanin content are being held back by the privileges going to the melanin deficient then this is indeed something we should act upon. Do something about even. Perhaps we should ban private tutorials? Or possibly even reform the education system itself so that none is needed?

We would go with that second option ourselves: all taxpayers cough up for the current publicly funded education system so, yes, all should benefit from the best it has to offer. Except there's one little wrinkle to this:

From the age of 11, as many as 22% of UK children are seeing tutors. But there is a big gap between, on the one hand white children (20%) and, on the other, black children (47%) and Chinese children (48%).

It is not those pinkish hued upper middle classes who are giving their snowflakes a leg up. Given the population distribution in the country, with ethnic minorities largely concentrated into the inner cities, it's actually the people suffering under the yoke of the inner city school systems that are attempting to make up for the deficiencies of those inner city school systems.

The answer thus is not to ban private tutoring but to set off more than a few rockets under those running the inner city school systems.

Although we agree, that's always an unlikely conclusion to a Guardian article....

Getting the effect of cash entirely wrong

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An amusing proof that it's possible to start from an interesting place and then fall over into complete nonsense. The point at issue being that the amount of cash floating around the British economy has increased in recent years. OK, well, why, and what, if anything, might we want to do about it?

The chief cashier of the Bank of England says that only about a quarter of the cash they put into circulation is used to buy and sell things. The rest of it is either shipped overseas – which we will put to one side for the moment – kept outside of the banking system ie (hoarded), or used to support the shadow economy (iestashed). In other words, not in circulation at all but stuffed under mattresses.

If you look at the trend growth of that cash “in circulation” over the last few years, it has accelerated past GDP growth as well as past the amount of money being taken out of ATM machines. And we also know that the use of cash in retailing has continued to fall steadily. That means the “cash gap”, between the small amount of cash that is used to support the needs of commerce and the large amounts of cash that are used for other purposes, has been growing. The interesting question is: why?

There are two pretty simple alternatives. If the amount of cash that is being hoarded has been growing, that would suggest people have lost confidence in formal financial services. Or, that they have so little knowledge of basic arithmetic that they are happy to have inflation eat away their store of value while forgoing the safety and security of bank deposits, no matter what value of the interest paid.

Well, no, not really, a bit of elementary economics would tell us that when interest rates are on the floor, as they have been "over the last few years", and inflation has been notable by its absence, then people will be more willing to hold cash, even just inert cash, than when they could have stuck it in the bank and got some interest to over the losses from inflation. So, actually, an increase in cash in circulation is just what we would have expected in recent years. And we've not even any evidence that this produces an increase in the financing of the grey or black economies: after all, our general analysis of monetary conditions currently is that the velocity of circulation has fallen. Meaning that we need more cash to finance the same amount of activity: just as we need more base money to finance the rest of the economy which is why QE.

So, the terrors are unproven. But what really boggles is this:

Charles and Jonathan estimate that the grey economy in the UK could have expanded by about 3% of UK GDP since the beginning of the current financial crisis. That means there are an awful lot of people not paying tax, and simple calculations will show that the tax lost that can be attributed to cash is vastly greater than the seigniorage earned by the Bank of England – the money the bank earns from issuing notes. Cash makes the government considerably worse off – and that means us.

It's that last phrase. We are not the government and the government is not us. It's not necessary to come over all entirely Mancur Olson to note this. If the government has insufficient money to defend the nation that might indeed impact us in a negative manner, if it's not got enough to finance Ed Miliband's pension then that's of less impact upon the rest of us.

And, clearly, if government is sucking less money out from our own economic activities to finance those of Ed Miliband then we are better off (even if Ed and Justine are not).

Another way of putting this is that it is not true that everything belongs to the government and we only get what is left after its exactions. Even if the grey and or black markets are expanding this does not make us worse off: it is, after all, difficult to see how an expansion of economic activity does make us worse off.

There is a deeper point behind all of this which is that there are those entirely seriously suggesting that in the near future the country should simply stop using cash. In order, so it is said, to crack down on the horrors that is tax evasion. Which is silly in one manner, because cash is simply a method of keeping score of who owes what to whom, as is all money. And if people are denied one method of doing so then another will be invented. But the part that horrifies us is this idea that the erasure of tax evasion would be worth the the erosion of the simple freedom to truck and barter as one wishes. Where all transactions, even the most minor, would be open to both the examination of the State and the payment of its tithe.

Yes, we really are saying that some level of tax evasion is the only outcome consistent with the maintenance of the general liberty. And we'd rather have that general liberty than we would the payment of the supposedly proper tithes, thank you very much.

Maybe Cuban refugees did hurt unskilled Miamians after all

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How do refugees affect the wages of natives in the places they settle? I’ve written on the (few) studies of this effect that I’ve seen, but a new paper contradicts one of them. David Card’s 1990 study of the Mariel Boatlift, where 125,000 Cubans fled the Castro regime to settle mostly in Miami, found that there was no negative effect for unskilled natives. Card’s results suggested that the city’s existing garment and agricultural industries absorbed the extra workers and the influx did not cause downward pressure on the wages of unskilled workers already in Miami.

But a new working paper by Harvard’s George Borjas seems to undermine Card’s conclusions. Borjas looks at a particular sub-section of Miami’s unskilled workforce, high school dropouts, and compares Miami to a different set of cities to Card which, says Borjas, were more like Miami in terms of employment growth before the Boatlift took place.

When you do that, the Boatlift seems to have affected high school dropouts’ earnings very badly: they fell by between 10 and 30 percent, relative to the wages of high school graduates and college graduates. The gap between white and black workers’ wages grew substantially too – black workers’ wages fell by 20 percentage points.

The chart below shows the percentage difference in high school dropouts’ wages relative to college graduates’ wages during this period – the different ‘placebos’ show how dropouts’ wages performed in other samples of cities over the same period.

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Borjas concludes that the Boatlift put significant downward pressure on the wages of natives with skills similar to those of the migrants, which may also be the case with other similar influxes of immigrants.

It’s an important paper for anybody interested in the immigration debate. But there are also some important things that should make us cautious about extrapolating too much from this.

Most notably, the relative wages of high school dropouts recover entirely by 1990 – the effect Borjas has found only holds in the short-run. And Borjas's study shows that the impact was negative for people at the bottom, but Card's conclusions about the impact on native workers more generally still seem reasonably solid.

The Mariel immigrants were ‘exogenous’ to Miami’s economy – they did not come primarily to get jobs, but to escape Cuba. So the effect might not apply at all to economic migrants from other EU countries who are coming to the UK to work. But for refugees fleeing war, Borjas’s findings might well be repeated.

David Card may reply with some objections that throw doubt on some of Borjas’s choices, and as some people have pointed out a very influential paper by Borjas from 2003 was later undermined itself by replication and slight changes to assumptions. This doesn’t mean we should be skeptical of Borjas in particular, but it is a reminder to avoid drawing firm conclusions from just a couple of studies. Whatever their findings, more research like this can only be a good thing.

Should Britain emulate Venezuela’s economic policies?

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Some of the new Opposition leadership have been inspired by Latin America. They believe Venezuela provides a shining example of economic progress. Jeremy Corbyn has previously lauded Venezuela as “an example of what social justice can achieve”. Shadow Health Minister Dianne Abbott says Venezuela provides proof that “a better way is possible.” She’s a Patron of the Venezuela Solidarity Campaign, which aims “to defend the achievements of the Bolivarian Revolution”.

Without dwelling on the politics of Chavez and Maduro, or the accusations of tyranny, how has the economy performed? Should Britain emulate these policies? The short answer is no. Venezuela is one of the world’s worst managed economies. The policies have had tragic results.

Venezuela is poorer than its neighbours despite a wealth of oil, on which it is now extremely dependent. Chile, Argentina, Uruguay, and Panama all have higher per capita income.

It is in the midst of a deep recession. Inflation rates are amongst the world’s highest at over 100%. It holds the top spot globally for the Misery Index.

Venezuela is ranked 176th for Economic Freedom, just behind Zimbabwe and second last in the region. Ease of doing business is poor, property rights are insecureand investments are risky - entrepreneurs receive the lowest rates of return despite their efforts.

The Bolivar has massively devalued despite their currency restrictions. Price controls have resulted in severe shortages, long queues, and a black market for basic goods from toilet paper to milk, flour and medical supplies. Healthcare is in disarray, with crumbling hospitals and patients forced to search for drugs on the streets – hardly a model for our NHS either.

Even just focusing on equality, the case for Venezuelan polices is weak. Its Gini Coefficient, the traditional measure of wealth distribution, is less equal than that of the UK.

Venezuela’s performance has fluctuated over the years. It has done better when the market for oil is strong, and the profits have been partly directed towards social justice causes. Yet the overall picture is damning for this socialist paradise, regardless of the measure. The policies have failed with great cost. We should be very afraid of any proposals that wish to emulate their folly.

Now we've won, let's kill what works!

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The victory of Jezzbollah and the Corbynistas appears to be turning politics in a French direction. That is, let's not worry about whether something works of not, let's check that it conforms with theory. And so it is with the various market reforms in the NHS. As Kristian Niemietz points out:

So when Corbyn used his acceptance speech to congratulate the Welsh government for ending the “internal market” in the Welsh NHS, declaring that this is “something we want to do in the rest of Britain”, he was not setting out a new policy stance – he was merely expressing a fait accompli. It was not Corbyn who exorcised the ghost of NHS reforms past. His party did that before he was even nominated. Which is strange, because these reforms were a qualified success story.

Quite so, one of the things in recent years was that NHS England had rather more of that market reform than NHS Scotland or NHS Wales did. Entirely unsurprising to people like us NHS England also did rather better over those years than NHS Wales or NHS Scotland. But for Jezzbollah and fellow travellers markets are inefficient: so they must go, whether they worked or not:

The Scottish and the Welsh NHS are the closest thing to a counterfactual, because they are still more or less run like the old (and, if the Corbynistas get their way, the future) English NHS. Even though they are, in per capita terms, better funded and generally better staffed than their English counterpart, their performance lags on most measures. Rates of mortality amenable to healthcare are higher than in England, waiting times are longer, and hospital infections are more prevalent.

Niemietz has a fuller paper exploring the subject at that link.

It's entirely possible for people to paint our own love of markets as being simply ideological. Enough people do that enough of the time that of course it's possible. But our commitment to them is actually practical. We're entirely happy to admit that there are times when competitive markets are not the solution. We do know our history and that time of competing private armies was called the Wars of the Roses and it's not generally held to be a happy time. But we do support markets when they work.

As they do in the provision of health care to the populace. Those parts of the NHS system that have been flirting with markets provide more and better health care than those that don't. We really do not see this as evidence that markets should be removed from the provision of health care. However French and conformant to theory our politics becomes.

It's free speech that will defeat Islamist preachers in universities

https://www.youtube.com/watch?v=mi5da2AhDCY I suspect most readers of this blog will agree with Barack Obama's basic point in the video above, which is that by banning racist books and right-wing speakers to 'coddle' oversensitive types, universities are failing students.

This is a problem we have in the UK as well – Brendan O'Neill and Tim Stanley were barred from speaking at a debate about abortion they'd been invited to take part in at Oxford last November, and certain parts of the social justice movement have been waging a quiet war against 'trans-exclusionary' radical feminists (and vice-versa, perhaps) by having them barred from university conferences and events, heckling them when they speak, and so on. People like James Watson have been made untouchable for suggesting that there may be genetic differences in IQ between different races.

This is not entirely a left-wing phenomenon. Today David Cameron has 'named and shamed' universities 'that regularly give platforms to hate preachers who are determined to undermine British values'. It's not clear to me what 'British values' are, or what's so bad about wanting to undermine them. Is belief in the NHS a British value, making free marketeers dangerous too? Is belief in democracy, excluding Jacobite restorationists from campuses and the like?

The obvious response to this is that these people will not just 'undermine British values' but actively encourage students to kill other people. Of course we already have laws against incitement to violence (excessively strict ones, some would say) but perhaps these don't work here. A roundabout suggestion that the, ahem, Zionists are controlling the media and, you know, maybe these ISIS fellas aren't so bad after all is not – and should not be – illegal, but might plant a seed in enough people's minds to lead them to kill.

No doubt there is something rotten in British universities, but I wonder if part of the problem is that opponents of these speakers are heavily restricted by the sort of people Obama attacked yesterday.

How easy is it to oppose Islamism on university campuses? Being anti-abortion is unpopular, but Islamophobia is so forbidden that Ed Miliband proposed to make it a hate crime. Last year Plymouth University's Islamic Society tried to have a speaker from the anti-Islamist Quilliam banned from speaking there. The year before that, a mob of students blocked Israel's deputy Ambassador to Britain from giving a lecture at the University of Essex. There is no shortage of other examples either.

So perhaps institutionalised political correctness is allowing Islamists to get a free pass at universities without being challenged, as it has arguably contributed to child abuse in Rotherham and elsewhere. If feminist comedian Kate Smurthwaite is too edgy to be allowed to perform to Goldsmith University students, what hope do harsh critics of Islamism like Maajid Nawaz or Douglas Murray have?

Banning hate preachers would mean we must also accept the principle of banning Maajid Nawaz for pushing back against them, Tim Stanley for opposing abortion, and Germaine Greer for showing insufficient respect to Caitlin Jenner. It concedes too much.

Open debate is too valuable to give up in places where it is supposed to thrive. It shouldn't be harder for Islamists to speak at universities – it should be easier for their enemies to contradict them. The problem is not what is being said, but what is not being said.

Proof that Britain is a profoundly conservative nation

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Do note that we do not mean that Britain is a Conservative nation, only a conservative one. And our proof comes from an unlikely source, George Monbiot:

Battered into passivity by the media’s misinformation machine, distracted by consumer culture and the celebrity circus, we live in a permanent fug of confusion about the sources of oppression, and of alienation from the means by which they might be addressed.It is tempting to assert that civic life in this country is dead – but it’s not true. Millions of people belong to NGOs, or volunteer for charities. Eerily, however, there seems to be no connection between this mass participation and political change.

That is, we let the politicians prance in their Westminster bubble and keep on keeping on ourselves. We can see that there are things that we can do, ourselves and without direction, to make our country, our nation, a better place.

So, we go do them. Without orders, without instruction, without central control or even an ideology to guide us upon our way. Those who train the guide dogs for the blind, raise money for the air ambulances, the hospices, those who rescue those in peril on the seas: volunteers all. Done not for the glory of anything, just for the humanity of having done it.

We could call this evidence of profound liberality, and in a sense it is. You want to pitch in to society then do so, you don't then don't. No one is forced to do anything but the system as a whole works well, better than many if not all others.

It is also profoundly conservative (again, not Conservative). This is Edmund Burke's little platoons of society just getting on with being society. We ourselves are generally radicals which is the complete antithesis of conservatism. And yet this is at least one aspect of the conservative society that is Britain, even modern day Britain, which we thoroughly approve of.

Civil society should carry on being just and only what it is, civil society, and don't let anyone tell us different.

Can we get this straight please? Obesity saves the NHS money

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We have the public health crew on the rampage again:

Britain's junk food diet has become the leading cause of death and ill-health, ahead of smoking, according to a study published in The Lancet. The research shows that 40 per cent of NHS resources are spent dealing with ills caused by potentially preventable lifestyle factors such as unhealthy eating habits, obesity, alcohol and smoking.

We might think that since everyone pays for the NHS then everyone gets treated by the NHS. That fit person who survives to get dementia, that fattie that keels over at 40 are all deserving of the same treatment, no?

Overall, researchers found that life expectancy rose by 6.4 years between 1990 and 2013, increasing from 75.9 to 81.3 years.

And obviously something is going right. Leading to the thought that perhaps some of this is that as we don't die of other things these days then lifestyle diseases are all that's left to shuffle us off this mortal coil. But there's a vast mistake in this analysis as well:

Simon Stevens, the head of the NHS, has said the health service could be bankrupted by the strain of weight-related disease if current trends are not reversed. One in five children is obese by the time they leave primary school, and two in three adults are overweight or obese. In June, Mr Stevens said parents and society were doing something “terribly wrong” in how the next generation was being brought up, which would fuel a tide of diseases. He called for a change in the nation’s habits to turn around current trends. “Cutting down on junk food diets, couch potato lifestyles, cigarettes and booze could make Britain one of the healthiest places to live in the world, while saving taxpayers billions on future NHS costs,” Mr Stevens said.

Someone who is the head of the NHS, someone responsible for spending £120 billion or so of our money, really should understand this following point. Fatties, boozers and gaspers save the NHS money, not cost it. We've mentioned this before around here:

The researchers found that from age 20 to 56, obese people racked up the most expensive health costs. But because both the smokers and the obese people died sooner than the healthy group, it cost less to treat them in the long run.

On average, healthy people lived 84 years. Smokers lived about 77 years and obese people lived about 80 years. Smokers and obese people tended to have more heart disease than the healthy people.

Cancer incidence, except for lung cancer, was the same in all three groups. Obese people had the most diabetes, and healthy people had the most strokes. Ultimately, the thin and healthy group cost the most, about $417,000, from age 20 on.

The cost of care for obese people was $371,000, and for smokers, about $326,000.

Here is a paper on that very point.

Having us all slim, svelte, sober and pure of lung into our 90s would cost the NHS very much more money than the current level of topers, smokers and lardbuckets does.

There might well be very good reasons to advise people that the private costs of their behaviour, the years of life they will lose through their habits, might well not be worth it. But the public costs of their actions are the other way around from what is being assumed here.

And really, we do think that someone in charge of £120 billion of our money should know the difference between a positive and negative sign in front of an influence upon his budget. That's not, even in this day and age, too much to hope for, is it?

Seriously, don't worry about Iran's new uranium discoveries

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Apparently Iran has discovered new sources or uranium within its own borders:

The Iranian government has found a surprise uranium reserve which could allow the country to fuel its nuclear programme without having to look abroad. It was previously thought that Iran would have to import uranium from other countries in order to power its nuclear plants, which would have made it easier for the West to monitor the develop of the controversial project.

This is not, not at all, what it appears to be:

Some Western analysts have previously said that Iran was close to exhausting its supply of yellowcake - or raw uranium - and that mining it domestically was not cost-efficient. A report published in 2013 by U.S. think-tanks Carnegie Endowment and the Federation of American Scientists said the scarcity and low quality of Iran's uranium resources compelled it 'to rely on external sources of natural and processed uranium'. It added: 'Despite the Iranian leadership's assertions to the contrary, Iran's estimated uranium endowments are nowhere near sufficient to supply its planned nuclear programme.'

The point about reserves, about mineral reserves, is that they are entirely dependent upon cost of extraction. Something that we pointed out here in this handy .pdf. That Iran has uranium within its borders simply is not a surprise to anyone at all. It would be entirely possible, just as an example, to run a nuclear weapons and or power program simply by grinding up pieces of Cornwall. Or, in fact, the back gardens of suburban England. The question is, at what cost?

What Iran has announced is that it's found uranium. What it hasn't announced is that it has uranium which it is economic to extract. Therefore nothing at all has changed: for we all always knew that Iran had uranium, just as every country, city and hedgerow does.

Six points about the Trade Union Bill

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  1. Making striking more difficult might be a good thing. The most controversial part of the bill is the part requiring at least 50% turnout in strikes overall (so 25% of members must vote in favour), and for public sector strikes the backing of at least 40% of those eligible to vote. This certainly does make striking less easy, but it hardly makes it impossible. If workers really feel that they need to strike, they can still do so, provided they get 25% or 40% of total members (for private and public sector workers respectively) to agree with them. This does make it harder for people like Len McCluskey and Mark Serwotka to call strikes that most union members don’t want, though.
  2. Most workers aren’t in a union. Only 14% of private sector workers and 54% of public sector workers – 25% overall – are in a union. That means that strikes, even if they are good for union workers, only benefit a small number of workers. And everyone else is inconvenienced by them: strikes can be costly and time-consuming for people who use the services that the striking workers provide.
  3. People who are in a union are generally middle-income workers. According to the ONS, “Middle-income earners were more likely to be trade union members than either high or low paid employees. About 38 per cent of employees who earned between £500 and £999 were members of a trade union, compared with 21 per cent of employees earning £1,000 or more. The proportion of employees earning less than £250 who were trade union members was 15 per cent.” Also, “Employees in professional occupations are more likely to be trade union members” (this includes jobs like nurses).
  4. Why shouldn’t firms be allowed to hire agency workers to fill in for striking workers? Workers who take part in official strikes (as defined here) are protected from being fired, except after 12 weeks of striking if the employer has tried to settle the dispute. This privilege is popular but if the only reason to stop firms from hiring replacement workers is that it makes strikes less powerful it’s not clear why this is a bad thing.
  5. Some parts of the bill do seem draconian. Making strikers wear armbands may be justifiable if there is a problem with identifying workers who are actually working and who are taking part in the strike – I don’t know if this is the case. Requiring picketers to give their names to the police seems entirely overboard, though, and David Davis is probably right that it’s unnecessary.
  6. Strikes do cost money, though some might have a surprising upside too. Between 2011 and 2014 (inclusive) about 3 million days worth of labour were lost directly because of strikes. That's costly and does not include the time lost from people working from home, leaving work early, coming in late, etc. (Giles Wilkes points out that over the same period 520 million days were lost to illness. With that context, 3 million doesn't sound very high.) But there may be surprising upside too – a Cambridge paper released today says that the February 2014 tube strike was a net positives in efficiency terms, because 1 in 20 people who found a new route to work stuck with it after that, and the long-term savings to them from that outweigh the daily losses to the other 19 in 20 workers. I'm not sure if that scales to other strikes, but it's quite a nifty finding either way. (NB: I haven't read the full paper yet, so I can't vouch for it.)