It's important to work out what parking meters are for

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Before abolishing parking meters and charging for parking it's important to work out why we did this in the first place. It's an example of Chesterton's Fence: before you remove the obstacle you need to work out why it was placed there in the first place. Only then can you work out whether the reason is now obsolete, to that the fence is defunct. And the original point of parking meters wasn't to charge people for parking, nor to ration spaces by price, not at all:

Shoppers in small-town high streets should be allowed to park free, a minister has indicated, as figures show that councils are raising more money than ever from motorists. Marcus Jones, who was made high streets minister in David Cameron’s post-election reshuffle, suggested that small town centres could become “parking meter-free zones” in an effort to save shops from closure. The Government is growing increasingly concerned that punitive parking costs and fines are deterring shoppers from using their local high streets.

The original reason for parking meters was to increase the number of people using the area.

If parking is entirely free then some goodly number of people will use it all day and possibly every day. This takes up those scarce parking spaces. So, if you want to increase the number of people that pass through an area you want people to have free parking but only for some limited period of time. Then they will move on and others will be able to use the space to visit the area.

Thus, if your intention is to increase the human traffic through an area like a local High Street the answer is not to have free parking at all. It's to have free parking for some limited period of time. On the order of free for an hour, no return within an hour, those sorts of restrictions, rather than "park here all day for free". All of the parking meters and ticket machines needed are already in place. Just program them to issue the first hour's ticket for free.

From the Rockefeller Lancet report

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Only a minor little point but symptomatic of how people really don't quite get the basics sometimes. The Lancet has teamed up with the Rockefeller foundation bods to tell us all that we'd better have global environmental socialism real soon now or Aieee! We're All Gonna Die! We think we've been told this before really.

They talk about the joys of the circular economy and seem to miss rather an important point about it:

Several essential steps need to be taken to transform the economy to support planetary health. These steps include the reduction of waste through the production of products that are more durable and require lower quantities of materials and less energy to manufacture than those that are being produced at present; the incentivisation of recycling, re-use, and repair; and the substitution of hazardous materials with safer alternatives. These changes will necessitate innovations in design and manufacture that capitalise on the potential restorative powers of natural systems combined with strategies to reduce overall demand for resources that greatly damage the environment during the course of their extraction, production, use, or disposal—leading ultimately to the circular economy (panel 1; figure 19).11 Importantly, such a transformation could also bring benefits to health and wellbeing if occupational health standards are adhered to, including through reduced amounts of air, water, and soil pollution; increased employment opportunities; and changes in diet and physical activity.

It's that "increased employment opportunities". That's a synonym for "everyone has to work harder". And that's really not a development that we're happy about having. For the aim and point of this having an economy thing is that we minimise the amount of human labour that has to be performed thus maximising the amount of human leisure that can be enjoyed. The basic problem here being of course that all too many people don't realise that jobs, employment, these are not benefits of a plan, they are costs of one.

Yes, it's only one small point taken from a large and long report. But it is symptomatic of their lack of knowledge about how economics works. That lost more people are going to have to work reprocessing our rubbish is not a good part of their plan, it is a cost of their plan.

Housing the Homeless

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Homelessness in the UK is on the rise. 2014 figures show that 2,744 people slept rough on any one night in England, a 55 per cent rise on 2010. In London, there has been a rise of 16 per cent in a single year. Homelessness is a result of poverty and creates a downward spiral that is difficult to escape from. It is clear that it is an issue that needs to be tackled, particularly given the rising figures. The current policy on homelessness from the government centres on preventing long-term rough sleeping on the streets. The ‘No Second Night Out’ scheme has been successful in achieving this aim: its introduction led to 75 per cent of rough sleepers not spending a second night on the streets. An admirable success - but largely superficial.  It does not account for the ‘hidden homeless’, those who live in hostels, nor is it a lasting solution to homelessness. It is extremely difficult to build a life around inconsistent housing.

The root problem of homelessness is not achieved by taking people off the streets into temporary housing. It is only solved by people having places to live. And the current crisis in UK housing is not helping this. The severe lack of affordable housing is forcing people onto the streets and into homelessness. In 2013-2014, only 140,000 houses were built for the demand of 250,000, hardly enough to cover those who can afford to buy them, let alone those who live on the streets. Moreover, the cut to housing benefit announced in the July budget will not be conducive to preventing homelessness, instead, making it more difficult to combat it.

When examining the most successful solutions to homelessness, offering effective housing solutions is the best way. Preventative measures have been lauded, but these do not help those who are recurrently homeless. Schemes in America and Canada offering long-term housing have been hugely successful in turning around homelessness figures. Utah has dramatically reduced their homeless problem through their Housing First program that offers housing to homeless people with no strings attached. When given a stable home, rather than inconsistent halfway housing, people were able to effectively build their lives. Similar projects in cities across Canada have brought the same results, showing that it is also more cost effective to offer housing rather than pay for the upkeep of the homeless in temporary accommodation, particularly when we included costs accrued indirectly - such as healthcare.

But these solutions seem unlikely to be as effective in the UK while housing is at such a premium and remains as expensive.  Until then, the government will have to rely on preventative measures as its most effective solution until it can solve the real problem of housing.

 

This article was written by Benjamin Jackson, a Research Associate at the Adam Smith Institute. Benjamin is half-way through his Classics degree at the University of Edinburgh.

MPs in the dark about key policies helping entrepreneurs

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The Entrepreneurs Network has released its 2015 Parliamentary Snapshot, which provides insights into the views of MPs about entrepreneurship, and gives the entrepreneurial community a useful perspective on the legislative landscape. The first main finding is that many views on policy that would impact entrepreneurs are firmly set by party lines. Take, for example, membership of the EU: 58% of Conservative MPs think Brexit would be good for entrepreneurial activity, but only 1% of Labour MPs think likewise. This is a key finding with broader repercussions: some political commentators have claimed that Labour MPs are as Eurosceptic as Conservative MPs, but this suggests that Labour MPs see the benefits of continued membership while Conservative MPs see opportunities for leaving – at least when it comes to entrepreneurship. This is reinforced by MPs' views of the impact of EU business regulation: 90% of Conservative MPs think exempting the UK from EU business regulation would be positive for entrepreneurs, but only 10% of Labour MPs agree.

This isn't to say that Labour and Conservative MPs are at complete loggerheads when it comes to pro-entrepreneurial policy: 80% of Conservative MPs and 66% of Labour MPs agree that making it easier for entrepreneurs to move to the UK would benefit the UK's entrepreneurial landscape. In fact, this was the second most popular policy across the House of Commons.

The second main finding regards MPs knowledge of existing initiatives to support entrepreneurs in the UK. This year's Parliamentary Snapshot gives us a woeful image of an under-informed legislative body. Although Conservative MPs are in favour of tax cuts, most were unaware of the tax incentives already in place - for example, the Seed Enterprise Investment Scheme. Most Labour MPs support increased spending to support entrepreneurs, but are oblivious to initiatives, like Innovate UK, already in place.

This has consequences for MPs' sense of how effective these initiatives are. Many in the entrepreneurial community see the Enterprise Investment Scheme (EIS) as essential to the UK's entrepreneurial success – but Conservative MPs' support for the scheme dropped from 68% last year to 45% this year, with the remainder largely unaware of it. This policy is widely lauded by entrepreneurs who have raised funds to grow their business.

It's clear that entrepreneurs need to be more vocal about what works for them, so that MPs are better informed about the challenges the community faces and why supporting entrepreneurs is so essential to support the British economy. To this end, over the coming months and years, The Entrepreneurs Network will ensure that entrepreneurs' preferences are heard loud and clear in corridors of power and beyond. If MPs don't know what policies work best on the ground, there's a serious risk they'll scrap the policies that have made Britain one of the best places in the world to start a business.

Energy efficiency isn't quite as efficient as it's cracked up to be

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It's true that this information is from the US. It's also true that this shows more than a dash of Hayek's "fatal conceit". The idea that the clever people can plan things for us and we'll all go off and do them just as we're planned to do. Human beings don't really work like that which is why planning so often fails. But to the information itself: energy efficiency programmes don't have the effects the planners thought they would:

Conventional wisdom suggests that energy efficiency (EE) policies are beneficial because they induce investments that pay for themselves and lead to emissions reductions. However, this belief is primarily based on projections from engineering models. This paper reports on the results of an experimental evaluation of the nation’s largest residential EE program conducted on a sample of more than 30,000 households. The findings suggest that the upfront investment costs are about twice the actual energy savings. Further, the model-projected savings are roughly 2.5 times the actual savings. While this might be attributed to the “rebound” effect – when demand for energy end uses increases as a result of greater efficiency – the paper fails to find evidence of significantly higher indoor temperatures at weatherized homes. Even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.

What we are looking for in an investment is a positive rate of return of course. The idea that the outputs of whatever it is that we do are worth more than the original value of the resources we have to put into doing it. A negative rate of return is evidence that we shouldn't be doing this, whatever it is, because it is making us poorer.

Which is why, if action to deal with climate change there is going to be we have always insisted that that action should be a carbon tax. It's analagous to the argument over Greece and the euro. The horrendous economic pain there is because they must go through internal devaluation. That austerity: in order to screw down the price level for local labour. It's far easier, and there's a great deal less pain, if just the one price, the exchange rate, can be changed and thus realign the economy in a much simpler manner. So it is with the carbon tax and climate change. By changing that one price we make it rational to perform those tasks where the savings are greater than the costs. Including, of course, those social costs of carbon emissions.

We thus don't need to have armies of engineers making plans where the outcomes aren't going to live up to the hype. It becomes in the rational self-interest of each consumer to do those things which help and not to do those things which don't. So, consumers do those beneficial things.

We're generally of the view that government is best kept out of the operation of the economy. Yet even we agree that sometimes intervention is necessary. But when intervening, keep that intervention to the simplest action that will achieve the task: in both of these cases that means just the one single change to the price level and then let the market calculate out the implications of it.

Where is David Cameron getting his information from?

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It's distinctly uncomfortable to find the country being run by someone who is not well informed. Worrying even. And David Cameron does seem to be remarkably ill informed on the subject of the gender pay gap:

“Today I’m announcing a really big move: we will make every single company with 250 employees or more publish the gap between average female earnings and average male earnings. "That will cast sunlight on the discrepancies and create the pressure we need for change, driving women’s wages up."

For, as we've explained many a time here we don't really have a gender pay gap. There's a motherhood pay gap, most certainly. And men and women do tend to cluster into specific professions and jobs: pay not being equal between all jobs of course. And that's about it. Once anyone takes a close look we can't find any difference at all (perhaps, maybe, a one or three percentage point residual) between wages of men and women simply on the grounds of their being men and women. The rest of the difference is explained by job choices, hours worked, qualifications, education and so on.

We can even show that it's a motherhood pay gap, not a gender one. For there's a point at which women go from earning more than men to earning less. And that point, that age of life, has been advancing pretty much in lock step over the decades with the average age of primagravidae. And let us be honest about this. In a viviparous mammalian species we're really just not that surprised that there's some gender differentiation in the care and raising of the next generation, are we?

And there's something more worrying too:

However, women on average still earn 19.1 per cent less than men - equivalent to 80p for every pound earned by a man.

That is using mean wages and not median. And Harriet Harman was rapped over the knuckles by the Statistics Commissioner for doing that. Medians are what we should be using here, that use of the mean is grossly misleading.

And, well, you know, surely we can expect a Prime Minister to better than Harriet can't we?

The "Helpless" Poor

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In 1985, Bob Geldof, struck by the poverty in Africa, produced ‘Live Aid’, an artistic extravaganza designed to invoke compassion, charity and pity for African people living in dire conditions. It branded an entire continent with a single image of pervasive and inescapable poverty created by poor geographical factors, that could be addressed if only the rich Western world wrote a large enough cheque. It may have started with Live Aid but as we saw with Band Aid 30 last year, there is no tragedy that people on the African continent can suffer with dignity.

Some musicians dropped out of the Band Aid 30 Ebola single. Fuse ODG wrote that the Africa which Bono invoked in his lyrics “did not reflect what Africa is truly about”.

These philanthropic efforts have shaped how we perceive the Global South today. In 2001, 16 years after Live Aid, a survey by VSO demonstrated that 80% of British people “strongly associate[d] the developing world with doom-laden images of famine, disaster and Western aid”. 74% of people believed that the developing world depended on the Western world to progress. Live Aid was for Ethiopia, and Band Aid 30 for fighting Ebola, and yet the brand that these efforts used was ‘Africa’ and to consumers, this became ‘the developing countries’.

What impact has this had on the attitude people harbour towards the developing world? According to Shah, Hall and Carr (2014):

“A side effect of this effort, however, is the perpetuation of long-held views of “the developing” as helpless and trapped, awaiting rescue that justify more and better interventions on their behalf.”

This ‘helpless’ poor narrative is wrong, and it’s harmful.

In ‘The Beautiful Tree’, James Tooley writes of his experiences in researching private (fee-paying) schools used by the poor in India and some African countries. Tooley finds that the poor in many nations rebuff the government-run, free, public schools, where teachers often did not turn up to class. International organisations either ignore or dismiss these schools (they are not ‘pro-poor’ and ‘exploit’ the poor, say some). He writes:

“It appeared that these private schools, while operating as businesses, also provided philanthropy to their communities. The owners were explicit about this. They were business people, true, but they also wanted to be viewed as “social workers”, giving something back to their communities. They wanted to be respected as well as successful. A major motivation - many of the owners had a similar story - was their status in society. Khurrum told me: “I have an ambition of running a school, of giving good knowledge, and of building good character, good citizens, good people. We have status, as leaders of schools, people respect us, and we respect ourselves.”

This is aspiration and self-respect - both attributes sorely missing in the current narrative. He gives the example of these private schools offering scholarships as examples of the ‘poor subsidising the poorest’. These are not people waiting for rescue. These are people who work to ensure their children do better - living proof that the ‘helpless’ rhetoric is misguided, at best.

The problem isn’t just the misrepresentation of large swathes of the global population. It’s that this mischaracterisation of the countries is harmful to the countries affected. As Fuse OBG points out, many people who are willing to pay £2 to raise funds for a killer disease will, nevertheless, not visit Africa on holiday. Why? Because we have internalised this image of Africa as dirty, poor, dangerous. It means Africa, as a continent, doesn’t receive as much investment, which is one of the tools by which countries can improve their lot.

In the case of Live Aid, the consequences were more pernicious. By framing the Ethiopian famine as one of geography and lack of Western political will, the real perpetrators of the continued famine went unchecked. According to de Waal (2008):

“The fact that the famine was a crime perpetrated by the Ethiopian government under President Mengistu Haile Mariam, and that relief agencies could become accomplices to that crime, were swept aside in a simplistic rush. The Ethiopian rebels, who ultimately won the civil war in 1991, estimate that the indiscriminate supply of humanitarian aid to the Mengistu government prolonged the war by at least a year.”

Yesterday, the third Financing for Development summit started. I wrote about some of the recent literature that supports moving away from development aid. But the other problem plaguing our discussion of development is, simply, the language we use. Sensationalist chat might get the dollars rolling in, but it does nothing for the long-term growth and dignity of the countries we’re talking about.

Why does George Osborne hate women and Northerners?

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George Osborne is actually boasting about how it will be women and Northerners who lose their jobs as a result of his national living wage:

The chancellor, George Osborne, will respond to claims his budget welfare reforms hit the poor hardest by saying women and those based outside London and the south-east will be the main beneficiaries of the government’s new national living wage.

The point being, in other words, that a rise in the minimum wage can only affect the incomes of those upon whom it is binding. And a rise in the minimum wage is also only going to cost the jobs of some of those upon whom it is binding. Thus the claim that the incomes of specific groups will rise, women and Northerners, is the same as stating that the rise in the minimum wage will cost someone women and Northerners their jobs.

The general rule of thumb is that a minimum wage of over 50% of median wage starts to have significant unemployment effects. And it's not just the general median wage either: it's of the wages of whichever group is under discussion. Wages in the North are rather lower than they are in the SE: thus the jobs losses will hit harder in the North. Female wages are rather lower than male: so more women will lose theior jobs than men. And this £9 an hour idea is actually higher than the median private sector part time hourly pay (from ASHE) which means that one of the glories of the UK labour market, the plethora of part time jobs providing that life/work balance and flexibility, is going to take one darn great big hit.

As we've been saying, instead of raising the wage a vastly better idea would be simply to stop taxing the working poor so damn much. For we've not in fact got low wage poverty in the UK, we've got tax poverty.

Moving away from aid in development

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Today, world leaders are meeting in the Ethiopian capital of Addis Ababa for the third Financing for Development summit. This builds upon the work of previous summits to produce a framework for the funding of development programmes and all that entails. It's an important discussion, not least of all because after decades of hurling cash at nations, growth in recipient nations has been sub par. Clemens et al. indicate that a 1% increase in aid in one year results in a 0.1-0.2% growth in real GDP per capita on average, which emerges in the following 5-10 years from the aid increase. Previous studies have conflicted in their findings of the impact of aid on growth - this paper reconciles the various views by controlling for confounding factors and considering just those factors that tend to have a short-term impact. Such a modest increase (combined with the fact that this is an average figure - many countries would not have benefited from aid at all) indicates that the effectiveness of aid is, from a charitable perspective, suspect. In subsequent posts on this subject, I’ll write on alternatives to aid.

Development aid is often confused with humanitarian aid - and this makes it look much more appealing than it really is. Few people would advocate not donating to emergency causes in other nations to help in the aftermath of a crisis; long-term development aid doesn't have this morally glossy hue. The main reason is simply just that the evidence doesn't show it to be very effective.

The economist Dambisa Moyo has written extensively on this subject in her book, Dead Aid (2010). She puts forward the argument that aid in Africa has served only to entrench aid dependency, and result in market-distorting inefficiencies. The consequence of this approach is one in which donor nations are off the hook but none of the promised benefits have accrued to the recipients. Moyo also indicates some evidence to show that nations that didn't receive aid have done better than those that have. Her research and argument goes further than many mainstream development economists (i.e. Paul Collier, who maintains that the right kind of aid can be helpful) - for Moyo, it's not just that aid has been ineffective, but that aid has entrenched the poverty it sought to cure Africa of.

This provides great context for Lucy Martin's paper on the impact of tax compared with aid. Martin finds from experiments in Uganda that citizens are 13% more willing to punish leaders for misusing tax revenue on average - but those with most experience of taxation are 30% more likely to punish government. The theory is simple: the loss of utility is higher when, not only do you lose earned income, but that income is not put to good use to produce social goods. The fact that in many countries, poor citizens do not pay tax results in less anger and frustration at poor governance. Aid as a substitute for tax revenue hence enables this process to continue and results in less frustration - and less clamour for better governance, without which the institutions that result in development cannot develop.

In 2006, William Easterly wrote:

The evidence is stark: $568 billion spent on aid to Africa, and yet the typical African country no richer today than 40 years ago. Dozens of “structural adjustment” loans (aid loans conditional on policy reforms) made to Africa, the former Soviet Union, and Latin America, only to see the failure of both policy reform and economic growth. The evidence suggests that aid results in less democratic and honest government, not more. Yet, unchastened by this experience, we still have such absurdities as the grandiose plans by Jeffrey Sachs and the United Nations to do 449 separate interventions to reach 54 separate goals by the year 2015 (the Millennium Development Goals), accompanied by urgent pleas to double aid money.

Nothing much has changed since his time of writing, except we have committed yet more resource to an aid programme which is at best ineffective and at worst harming the prospects of the world’s poorest. The insights of extensive research and leading economists should inform us to proceed carefully and to give more weight to those areas of development that might be more fruitful. Most importantly, when the evidence suggests we might be doing enormous harm to those least able to bear it, our governments should be proceeding with humility and caution rather than hiding behind their cheque books.

 

Yes, let's take BBC financing out of the political arena

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We finally have what looks like a very sensible idea about the financing of the BBC:

Tony Hall, the director general of the BBC, has pledged to ensure that last week’s hasty deal with government to secure stable funding for the corporation will never happen again.

Writing for the Observer, Lord Hall, who has been forced to accept responsibility for the £750m cost of free licence fees for the over-75s, argues that key negotiations about the financial basis of the BBC must now be taken out of the political arena for good.

If one is to use the power of the state to take our money at gunpoint risk of a jail sentence for non-payment then it is right and just that the amount to be extorted and how be part of the political process. For that's what that process is: the series of decisions over who may use that power of the state and how.

So, it would appear that the head of the BBC now agrees that the BBC should no longer be tax funded, but should perhaps charge a subscription, carry advertising, whatever. For that's the only way that BBC funding can righteously or justly be divorced from the political process, by not using that process to gain said funding.

Sadly we're just kidding. What is being meant here is that the BBC should continue to use said state power to extort from us all but that none of those beastly politicians, the ones we elect to decide who may use that state power, should have anything to do with it. Just an open hand into our wallets.

Which isn't, we have to say, quite how we think the system should be working. You can ask for our money and if we like what you're doing then you'll get some of it: as all private sector businesses have to do. And if you demand our money with the weight of politics behind you then you're going to have to put up with being controlled, or at least limited, by the politicians.

What you don't get to do is use the power without accepting the oversight. Not while there's still pitchforks and burning brands available to the citizenry you don't.