A blow to the Nanny State

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It's a Daily Telegraph reader's worst nightmare of course – you could be fined if you don't register your nanny – but behind the headline there is a serious issue about the unintended consequences of policy actions.

It's all about the UK government's drive to get us all saving for retirement. A good start, they figured, would be to make employers set up pension schemes, so employees at least had a plan to pay in to. Workplace pensions used to be hugely successful – with the UK boasting more private pension savings than the rest of Europe put together – until Chancellor Gordon Brown killed it with stealth taxes and regulations.

So it seemed like a good idea at the time. Unfortunately, it's based on an outdated concept of 'employment' – a hangover from the mass-production age. People still think of employers as factory owners employing hundreds of people. But today's businesses are smaller, less structured, and less permanent: they are not based on fixed capital, but on mobile talent.

Gone are the days of entering the factory at 16 and retiring from the same place, with a cheap watch, at 65. People shift jobs much more, drift from employment to self-employment to entrepreneurship and back again, and work in different sectors through their lives. For many, their retirement nest egg is not their pension but their home, their investments, their business: forcing them to contribute to an outdated pension concept leaves them less able to invest in these other ways.

And Treasury rule-makers kill any good idea. They are petrified of losing revenue because of the tax breaks on pensions. And they like things neat. So now, even if you are only employing someone part time – and not necessarily as an employee for your business, but as a home help, say, or gardener or indeed nanny – you have to register the fact. And that's true even if the person is part time and you are not paying them enough to oblige you to pay into their pension plan anyway.

Daft, of course: it will make people reluctant to hire others, including part-time home helps and the rest. So less well off people will find it harder to get one of those starter jobs that give them the first step on the jobs ladder.

The point of government is to provide what the voters want, right?

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Yes, we know this is from the Mail and that it has to do with property prices. But still:

The row over ‘new’ grammar schools escalated yesterday after experts warned that many families could be priced out of areas where they are built. Estate agents said that the cost of homes near the new satellite school in Sevenoaks, Kent – which was controversially given the go-ahead last week – is expected to jump by ten per cent. A similar effect would be seen in other parts of the country where similar schools are expected to open, including Maidenhead in Berkshire and Aylesbury, Buckinghamshire.

We know very well that houses in the catchment areas of good schools are more expensive than those in the catchment areas of poor ones. It's part of our evidence kit that people desire schools to be good.

Here we are being offered evidence that the creation of a grammar school increases house prices. That is thus, again and as above, evidence that people desire there to be grammar schools.

Which leads to a small musing on that democracy thing. Which is that government is supposed to provide what the people want to have provided by government. That's rather the point of the whole exercise in fact. And thus if we have evidence that people desire grammar schools then government should be providing grammar schools. Because democracy.

We can in fact go further too. A refusal of government to provide the desired grammar schools is in fact a denial of democracy. All of which makes the continued rejection of such schools by the left somewhat problematic: for they are the ones who rail on about the values of democracy, aren't they?

What's really happening in the steel industry

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The Guardian worries about what is happening in Redcar and Scunthorpe to the steel industry of Britain:

Politics seems to have absented itself from the old industries. They still employ hundreds of thousands of people, support a highly skilled workforce and contribute millions of pounds in value to Britain’s exports, yet Mr Osborne, who made building the motif of his conference address and put the Northern Powerhouse as its geographical heartland, was speaking of Manchester, innovative science and new technologies. Nor did Mr McDonnell have anything to say about the old industries and their communities that return scores of Labour MPs and employ thousands of trade unionists (although he did say the fate of Redcar workers inspired his U-turn on the fiscal charter). His new team of economic advisers might talk, as the economist Mariana Mazzucato does, of the entrepreneurial state, but it is not the fate of steel workers that inspires their theories.

Steel is a foundation industry for any economy that is based on manufacturing. Closing the plant, supporting and retraining the workforce and cleaning up the site will cost hundreds of millions of pounds. The old industries need a new industrial strategy.

Oddly enough, it was one of us here at the ASI, who explained what is going on with the steel industry. In an article. In the Guardian.

However, no one wants the two blast furnaces there which make up the other part of the plant, as we can now make our ingots of steel out of scrap. It's a standard assumption in the metals world that no one will ever again build a new blast furnace in the rich, industrialised countries. Not only do we not need them, we don't need all the ones we've already got.

So, as I say, that half of the Florange plant is closing because the hippies have won – as they should indeed have done on this one particular point.

Yes, there's high energy costs in the UK as a result of the green obsessions. Yes, Chinese made steel is cheap right now. But the real underlying point is that both Redcar and Scunthorpe are based upon blast furnaces and that's just a level of technology that we don't need very much in this country any more. As a result of everyone going off and doing what we've been urged to do for decades now, work out how to recycle things.

That is, the closing of blast furnaces is evidence of the success of an industrial strategy. Sure, might be a good strategy, might be a bad one, but it is the result of a quite deliberate strategy.

Recapitulation

As the not new saying goes, there's not much new in this world:

This week the firm disclosed "questionable practices" by its management, which had been overhauled last month, and which meant it had to freeze remaining capital.

It said: "the company has used lenders' capital without their permission", leaving a £3.5m deficit between the amount owed to lenders and the capital available to repay them.

The platform, which promised 12pc returns, has currently lent out £23m but said £2.9m of this had not been assigned to legitimate borrowers.

This is about a peer to peer lending firm called Trustbuddy. But there's nothing very new about what has allegedly happened. Absolutely every form of banking that anyone has ever devised has suffered, at one time or another, from the same problem. And that's of course something that we should all remember: absolutely every form of banking will suffer from exactly the same mistakes and scams as every other form of banking.

We watched with rather a lot of amusement as every such scam, mistake and confusion that banking has been prone to since the first goldsmiths started lending out their stock happened at warp speed in Bitcoin over the past few years. And we've no doubt at all that exactly the same will happen in peer to peer lending and any other form of banking that anyone tries.

This isn't to say that peer to peer, or any of the other possible arrangements, are bad ideas. Indeed we're absolutely delighted to see people at least attempting the disintermediation of banking. Civilisation cannot march on to ever greater wealth unless people are willing to try out the available technological space. But some of those being inventive will end up recapitulating past errors and crimes and for us one of the best guides to this brave new world will be a study of the history of how people have used banking to steal from us.

In this field at least, the past is going to be a very good guide to the future.

A few corrections for Brits talking about Democrats and US gun laws

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A few quick corrections for Nigel Farage, the Pierce/Maguire double act on Sky News’s paper reviews, and all the other British commentators out there these past few days who have been weighing in on America’s gun laws following the Democratic presidential debate on Tuesday night. If you watched Tuesday night’s debate, you'd probably think the biggest issue for Americans in the 2016 race is gun control. Firearms seemed to be the centerpiece of discussion in the two hour debate hosted by CNN.

But according to Gallup, gun control does not fall into even the top eight issues voters care about going into next November. The most important issue by a landslide is the economy, followed by "the way Government operates in Washington" (someone should e-mail Hillary Clinton to flag up this second one). That may not have been obvious on Tuesday, however, as America’s federal debt, deficit, growth numbers and unemployment figures were not mentioned. Not once.

But back to guns. Brits seem to have a real fascination with gun culture in America. (I don’t blame them – so do I.) But that fascination turns quickly to disbelief - disbelief that there could be any merit to living in a society with guns proliferated everywhere.

This blog isn't trying to convince Brits to take up gun culture in the UK (I already did that here), nor is it meant to explain the better side of gun culture in America (if you're in the market for that, click here). This is simply a red flag, blowing lonely in the wind, to tell you to be wary of the rhetoric I've heard on guns the past few days:

Farage on LBC

“Well, you know, I have to say I think the U.S.A gun laws are insane and… and…and I, you know, I do actually think on this, Obama actually makes quite a lot of sense. I mean the idea that… the idea that you don't have to prove, you know, who you are or have some basic background check before buying a 20-round repeating rifle strikes me as being quite extraordinary.” - Nigel Farage (Transcript credit: LBC)

I'm curious to know what laws - or lack there of - Mr Farage was referring to. Besides two major federal laws on guns - one pertaining to most background checks and one pertaining to manufacturing and importing of guns - almost all gun laws are implemented on a state level.

But Mr Farage was clearly taking issue with the comparably small amount of gun purchases that take place through private sales in some states - but still, he would need to be more specific. In Vermont, for example, you can buy a rifle with no background checks, but this doesn't seem to be a problem whatsoever (more detail below).

We also know that the majority of mass shootings in the States would not have been thwarted with more rigorous background checks, as most guns were obtained legally with background checks or obtained completely illegally through theft.

It seems fair for Farage to flag up problems with gun laws in the US on two simple conditions. 1) He knows what even just a few of the state laws are and b) how those laws actually impact crime stats.

America loses 90 people a day from gun violence

This figure was mentioned this morning by the Pierce/Maguire team, who must have missed that CNN's fact-checker ranked this 'True, but Misleading'.

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According to CNN's fact checker, only one-third of the deaths Clinton sited were "violence-related deaths by homicide or legal intervention". (Emphasis mine.)

Of the remaining two-thirds, the majority were suicides - and it's not clear that preventing access to guns will reduce the number of suicides committed.

Bernie Sanders: your anti-gun, American hero

Sorry to break some left-wing hearts, but this claim is probably the most outlandish of them all.

As Senator of Vermont, Sanders has a strong record as a social democrat - except when it comes to gun control. The Law Center to Prevent Gun Violence gave him and his state an 'F' ranking in 2014 for not requiring background checks on private gun purchases, as well as allowing a host of other loose restrictions on firearms.

Of course, Sanders is on the right side of this issue, especially considering his state. Vermont is made up of a relatively high amount of rural gun owners, who value their hunting and protection rights. And despite having almost no gun control measures, Vermont remains one of the safest states in the country, with the least or second least amount of murders per year.

Americans are begging to have their guns taken away.

Americans are pretty sensible. Republicans and Democrats alike support background checks and general gun safety laws. The are also big supporters of gun ownership and the Second Amendment, and support for gun control continues to wain.

In hindsight, both Clinton and Sanders gave a spectacular performance on Tuesday in relation to guns; they talked big on gun control to excite the base, while managing to avoid the promotion of any policy that could be seen as a real imposition on gun owners.

This blog previously read that Bernie Sanders is the Governor of Vermont. This has been changed to Senator.

Well, this depends Dr. Chang, this depends

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Ha-Joon Chang wants to tell us that the government should permanently be running a budget deficit:

Like individuals, of course, a government can increase its means in the long run by borrowing to invest in things that will make the economy more productive, and thus increase the tax revenue. If a government invests in improving the transport system, it will make the country’s logistics industry more efficient. Or if it invests in healthcare and education, that will make the workers more productive.

We're not entirely certain whether this is either only potentially so or impossible.

For example, we could pay doctors more, an increase in spending upon health care, but not notably an increase in the productivity of either the populace or the general economy. And we could spend more on producing more PhDs in Womens' Studies but this is not synonymous with a more efficient economy. We could spend more on infrastructure: like the Swansea Barrage. But that project has a negative net present value meaning that that spending actually decreases the future wealth of the nation.

So we veer between two different thoughts here. The first being that it is potentially possible that if government spends a deficit on investment in productive projects then yes, perhaps a deficit for investment would be reasonable. Then we look at what British governments do spend "investments" on and decide that as the system cannot identify, nor invest in, productive schemes then the proposition fails.

We do worry though that we are being insufficiently cynical about the ability of government here.

This isn't a surprise

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Geoffrey Lean gets all excited over in The Telegraph:

Spread the good news: growth does not have to mean destroying our climate A new report shows Britain achieved the greatest cuts in carbon per unit of GDP ever recorded by any country. There is hope for our planet

Well, yes, anyone who had been paying attention knew this already.

Nevertheless, we may yet look back on 2014 as the turning point, the moment that it became clear – beyond doubt – that economic growth need not endanger the climate. In truth – despite commentators' almost unanimous, if erroneous, assumption – growth does not depend on using more energy. Indeed, he British economy has grown by some 270 per cent since 1965, but at the same time its energy use actually fell - from 196.8 million tonnes of oil equivalent then, to 187.9 million now. Yet, in that half century, the number of cars on our roads has almost doubled, while the array of electric gadgets in our homes has proliferated.

The reason we know this already is because it's an assumption that is made in the models that tell us about climate change.

Just to recap. All of the computer models the scientists are using lie atop an economic model. It is necessary to guess at how many people there will be in the future, how rich they will be and what energy sources they are using to power that civilisation. Only then can any calculation of what emissions will be happen, the results of which can be fed into those computer models. And the originals of those models were the SRES. One the families of possible outcomes assumes this:

The global economy expands at an average annual rate of about 3% to 2100, reaching around US$550 trillion (all dollar amounts herein are expressed in 1990 dollars, unless stated otherwise). This is approximately the same as average global growth since 1850, although the conditions that lead to this global growth in productivity and per capita incomes in the scenario are unparalleled in history. Global average income per capita reaches about US$21,000 by 2050. While the high average level of income per capita contributes to a great improvement in the overall health and social conditions of the majority of people, this world is not necessarily devoid of problems. In particular, many communities could face some of the problems of social exclusion encountered in the wealthiest countries during the 20 th century, and in many places income growth could produce increased pressure on the global commons. Energy and mineral resources are abundant in this scenario family because of rapid technical progress, which both reduces the resources needed to produce a given level of output and increases the economically recoverable reserves. Final energy intensity (energy use per unit of GDP) decreases at an average annual rate of 1.3%.

Decent economic growth combined with a decline in energy intensity. Exactly the process that Lean is getting so excited about. The underlying economic processes in this family of models are that of continued roughly capitalist and roughly free market globalisation. That is, the continuation of the trends of the second half of the 20th century throughout the 21st. And those growth and energy intensity rates are simply straight line projections into the future of what happened in the past: straight line projections being usually the most accurate economic forecasts. Tomorrow will be much like today and so on.

And the projections go further. In this assumed world, if we start to double the portion of energy that we get from coal (an absurd assumption even on the face of it) then we are in A1FI, a world where climate change is a large problem. And if we continue to develop and adopt renewables, at roughly the same speed as we did in the late 20th century (note, it does not need to be as fast as in the past 20 years) then we are in A1T and climate change simply isn't a problem.

That is, we assumed, predicted, calculated even, 25 years ago that globalised capitalism plus a bit of technological advance would mean that climate change was not a problem. Lean is now getting all excited because globalised capitalism plus a bit of technological advance is going to make climate change not much of a problem.

It would have helped if he'd been paying attention from the beginning really.

Do also note the implication of this. This meeting of all the grand Pooh Bahs coming up in Paris doesn't matter a damn. Because the problem is already being solved by globalised capitalism plus a bit of technological advance: as the entire climate change juggernaut actually assumed it would 25 years ago.

London is hard hit by the housing crisis

The cost of the housing shortage to London's economy is well over £1bn, says this week's report from Fifty Thousand Homes, a new campaign backed by over 100 business leaders and supported by organizations as diverse as London First, CBI London, and Shelter.  They publish data compiled by the Centre for Economics and Business Research (CEBR), data that shows the annual wage premium caused by high housing costs is currently £5.4bn annually, and will rise to £6.1bn by 2020 unless action is taken.  Furthermore, the unnecessarily high cost of housing is diverting an estimated £2.7bn from annual consumer spending, a sum that could be creating many thousand jobs in the capital. The ASI has repeatedly called for planning changes to make house-building in cities easier, including our most recent paper, "The Green Noose."  David Cameron's conference pledge of a national crusade to build 200,000 affordable new homes will be no more than a pious intent unless it is backed by real changes to make new housing possible in and at the edge of cities - the places where people want to live.

As we have said before, significant parts of the green belt are by no means green or environmentally friendly.  Building homes on some of this non-verdant land will save many middle and low income workers the long and expensive commute which high housing costs impose upon them.

Now that good economic data has emerged revealing some of the economic costs of poor housing policy, the case for change becomes overwhelming.

 

TfL’s proposals were filled with nonsense, but what could they do instead?

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MadsenSamCharlotte and I have already scrutinised TfL’s recently leaked consultation. The regulations would hammer innovative businesses, reduce competition, raise prices and worsen the quality of transport Londoners receive. The proposals are a conspiracy against the public. Over 130,000 have signed the counter petition. So, what could TfL consult on instead? TfL should be looking for policies that will improve the experience and lower the costs of travel in London. To do this they will need to encourage investment, cut regulation, and harness new technology. Some ideas to get them started include:

Reconsider ‘The Knowledge’ requirement – could drivers who have it certify and prominently advertise this unique selling point? Could others also drive registered hailed cars? Many drivers use mapping apps like Google Maps or Waze, which usually know where to go. These apps can also model a journey based on real-time traffic conditions.

Cut regulations on taxis – reduce the many fees taxi drivers need to pay. Support a more regular dialogue about fares. Allow a greater range of vehicles, which are cheaper and more environmental.

Support car-pooling – rather than hindering innovations, it should be encouraged. Costs are lower for passengers going the same way. It is better for air quality too.

Reconsider tolls and charges – scrap the one-size-fits all barriers of the Congestion Charge. It could be more sophisticated with micro payments based on your actual journey time, location, and number of passengers. Explore privatising major roads and the use of tolls.

Make London the world’s first true driverless car city – a vehicle revolution is coming. Driverless cars will save lives, money and time. We should allow trials on our roads and facilitate the introduction of fully automated vehicles before any other major city.

Push the button on fully automated trains – the Victoria Line pioneered the technology and the DLR operates without a driver at all. Staff could be redirected to supporting passengers.

Fix the basics – trains and the Underground shouldn’t be hurt by faulty signals, bad weather, and a few flakes of snow. When things go wrong, getting a refund could be automatic. In summer, water fountains in stations and air conditioning on trains should keep passengers cool. Barriers on the platform (like in Westminster) should stop people falling or tragically taking their own lives.

Enable drone deliveries – innovators like Amazon are testing drones to deliver packages. Regulations are going to be the biggest hurdle, not technology. Test it out and make it happen first.

Invest in transport by renting prime estate – advertising is not enough. Many transport networks are heavily subsidised by providing space for offices and retail. Hong Kong’s MTR own 13 shopping malls and is filled with underground outlets.

It's remarkable how politics can be driven by simple untruths

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We think we're all onboard with the idea that something dreadful is happening to rents in London? They're vast, much too high, soaring ever higher and becoming increasingly unaffordable? Therefore something needs to be done. Possibly rent controls, maybe throw up a couple of hundred thousand prefabs, possibly crucify buy to let landlords or something?

The problem is that the basic original fact is wrong.

The London Assembly asked the Cambridge Centre for Housing and Planning Research to study the possible effects of various restrictions and new tenancy contracts. Including, obviously, some forms of rent control. Said study pointing out the following:

As can be seen private rents have actually risen below wages or CPI on average during the period 2006-2013. This is true both in London and in England as a whole.

Rents are not rising faster than either inflation or wages.

We do not, therefore, have a problem.

And hands up everyone who thinks that the revelation that we do not have a problem will stop people demanding a solution?

Yes, quite.....