Things that might be true but aren't obviously so

One of the reasons we structure science the way that we do is that there are many things that seem to make logical sense. Theories that can be floated, ideas that seem to run along entirely sensible lines. But it’s not always true that sensible and true are quite the same. So, we need to test the theories against reality. Much of science - when done properly - is in constructing the experiments to try to disprove the idea being floated. Also, the mark of good science is that when reality differs then it’s reality that wins.

Childcare and fertility rates is one of those things:

Affordable childcare is one way to boost Britain’s birth rate

Well, could be, yes. We can all see the logical connection there. If having a child becomes less costly to those having the child - the expenses don’t go away here, of course, they’re just rather more charged across the society though the tax burden - then we might well assume that more children will be had. Given the abortion numbers we can observe that the higher fertility rate is there in potentio, it’s an active choice being made for the children not to arrive. So, yes, could be childcare, could well be.

Except there’s no actual evidence that this is so. Society 50 and 70 years ago had less of that affordable childcare than it does now. The birthrate is lower now than it was then. Looking across European countries we don’t seem to see any correlation between childcare provision in the here and now and the fertility rate.

It’s not even true that the wider issues of maternity leave, maternity pay, the gender pay gap and so on correlate with fertility rates. Among the rich countries Sweden and the US can be considered as being at the opposite ends of the policy spectrum concerning those issues and yet their fertility rates are statistically virtually indistinguishable. And no, immigration (first generation immigrants tend to bring with them their home country fertility rates) isn’t the answer as Sweden has a similar to the US rate for that too (both countries about 14% foreign born).

Childcare costs limiting fertility just seems to be one of those theories that doesn’t have any actual evidence to support it - however sensible the logical process itself.

The mistake being made by the Effective Altruists

Given the day, an examination of a moral insistence:

This is the season for giving – a time when charities call for donations and the gulf between the haves and the have nots becomes particularly apparent. But how much good can – or should – you do, by opening your wallet?

Such are the questions posed by effective altruism (EA), a movement thrust into the spotlight by the arrest of its high-profile exponent, billionaire Sam Bankman-Fried, after the collapse of his cryptocurrency exchange.

That a seeming charlatan coopts a moral idea is not a reflection on that idea of course, charlatans do as charlatans can get away with.

However, there’s an error - a gross one - at the heart of this effective altruism idea.

“It’s really important to give to the most effective charities,” Singer contends, “because they can be not just 10 times but hundreds of times more impactful in what they do.”

The same utilitarian logic means the EA site 80,000 Hours (of which Singer is not a part) suggests supporters choose a high-paying career so they can donate more during their lifetime (a practice known as “earning to give”).

That’s where that problem is. There’s a more minor one here:

Many critics focus, in particular, on the enthusiasm of some EA advocates for “longtermism”: the argument that, because far more people will exist in years to come, maximising good means allocating a greater importance to the future.

The other way of describing - OK, one other way - longtermism is that we’re using a low to very low discount rate. If we use market interest rates then things that happen half a century out or more have very little value now. So, our actions now can - should even - disregard that half a century out and more. We should worry much more about alleviating hunger now than soil quality in 100 years’ time, more about shelter and heating for the cold now than CO2 levels in 200 years’ time - ah, you see the problem here?

We are also being told, at this very same time, that society should be using a low discount rate concerning that future in order to deal with climate change. The whole insistence of the body politic is that discount rates should be low - then people start to criticise longtermism?

Seriously folks, make up your minds.

The larger error though. The claim being made by effective altruism is that you go make the money then give it away. There absolutely is a place for charity, yes indeed (To break the collective identity here, the One Taka Meal floats my boat). But if the aim is to do the most for the most people then that’s not quite the thing to be doing. Growing a business that makes a profit is.

No, bear with us. Think of Schumpeterian Profits in the American Economy. Of the value created by entrepreneurial activity some 3% or so sticks to the hands of the entrepreneurs. On average, across economies and time of course. The vast majority of that value created flows to consumers in the consumer surplus they enjoy. That creation of the new or more efficient - which is what entrepreneurialism is - leads to consumers being able to have more than without that new and or efficient. They’re better off.

Two examples, as Jason Furman pointed out about Walmart the benefit to American consumers of the simple existence of the stores is some $263 billion a year (2005 numbers). The net present value of that might be around the $5 trillion level. That the inheritors of Sam Walton’s shares have $150 billion between them is trivial by comparison. The Amazon Effect is that online shopping, by squeezing inefficiencies out of the retail chain (in much the same base manner as Walmart, even if using the next technological step to do so), has lowered the inflation rate, per year, by perhaps 0.2% for a decade and more. Two decades possibly. That’s a 2 to 4% reduction in the cost of living for all Americans. Each and every year. In a $23 trillion economy. That’s somewhere in the $500 billion (OK, $460b) to $1 trillion range. Per year, we’ll let the net present value of that be an exercise for the reader. However much Jeff Bezos has is a triviality compared to that.

Back to that point about effective altruism - do what creates the most value for our fellow human beings. Making a pile of cash to give it to charity isn’t the point at all. The process of making the pile is. Of course, there are certain constraints here, must be by actual entrepreneurial activity, not the capturing of economic rents or political corruption and so on. But within the normal dictates of free market capitalism the creation of an organisation that produces value to consumers aids far more people far, umm, morely, than whatever is done with the pile of capital captured from that activity.

This is true whether the organisation is a workers coop - so not producing the grinning capitalist winner atop the pile of gold - or a charity or a capitalist organisation. The value created by the activity is far greater than the amount that is captured to then be given away.

Make the world a better place? Sure, a valid, even wondrous, goal. Providing something better, or cheaper, or previously unavailable, is making the world a better place.

WhatsApp is free and it provides some 1 billion humans with some to all of their telecoms desires. That’s a pretty good piece of altruism right there. Last time we checked Facebook employs a couple of hundred engineers to provide that. This is a greater or lesser piece of altruism than whatever the Zuckerberg Foundation is going to blow the cash upon?

In a free market and capitalist economy the way that money is made is by producing something that other people, voluntarily, purchase. They do so because what is being offered to them adds value to their lives. Creating a successful organisation (we carefully do not use “business” here, but by successful we do mean an organisation that adds value, that profits. The profit being the added value of the output over and above the costs of the inputs - by definition) that salves or sates some human desire is the most effective form of altruism there is. Beats charity by some orders of magnitude - simply because the benefits of that added value are so much larger than any sum that can be appropriated from the activity then given away.

Effective Altruism as a philosophy manages to entirely miss this really rather important point. The way to add more value to more lives is, well, to produce more value that people can enjoy and which improves their lives. The amount of this that is done by making stuff is vastly greater, by those orders of magnitude, than the amount that can be abstracted from it to then be shuffled off to Tristram and Jocasta to pay for the Land Cruisers with which they play Lady Bountiful.

What’s being missed in the philosophy of effective altruism is the effective part - which does seem to be a strange bit to miss for a philosophy so named.

What if today's strikers really are like the miners?

We think this is a very odd comparison by Ken Capstick:

The media damns striking nurses and ambulance staff as the enemy, just as they did the miners

For of course the miners were the enemy. The enemies of Gaia that is. Those coal mines all did need to close. The very same wokes and luvvies who used to collect money for the striking miners now collect to oppose the opening of that Cumbrian mine today. On the simple grounds that Britain has no place for coal mines - and, obviously, no place for coal miners.

Leave all that stuff about Thatcher and Scargill and battles aside. The mines needed to close.

Which is why we think this is so odd:

When mineworkers took strike action in 1984 to save their industry from a government policy aimed at its total destruction, Margaret Thatcher was quick to refer to them and their families as the “enemy within”. As strikes take place across Britain, the government’s response echoes the past.

Whether it be rail workers, train drivers, Royal Mail workers, barristers, postal workers, refuse workers, London Underground workers, air transport workers or our wonderful NHS nurses, the government finds itself determined to force through cuts in wages.

Odd because the comparison being made is, well, which of these groups should now be considered the people we should deliberately put out of work? For that is the comparison with the miners.

It’s possible to muse on this, obviously. Automation might well mean we need fewer train drivers and London Underground workers. The fall in rail travel might mean we need fewer rail workers overall. While we recognise the necessity of lawyers it is conceptually difficult for us to support their fees. Apparently, given those same Gaia concerns as trapped the miners, we should be having many fewer air transport workers as air transport is to become verboeten.

Which is, as we say, most odd. For if we are to consider how the current strikes are indeed exactly like those of the miners then the obvious comparison is with which of these groups should we soon enough stop employing altogether?

Which isn’t what we think Mr, Capstick means but it is what he says.

Ahhh, there we are, our Laffer Curve spotted in the wild

There are those confused enough to deny that the Laffer Curve exists. Which is only the idea that tax rates can be high enough to reduce the amount of tax collected. Note the “can” there, along with the equal point that tax rates can be low enough that revenue can be increased by raising such tax rates. The implication of this being that we’d like to know where we are with any specific tax - the answer will depend upon that specific tax and the structure of the society surrounding it. That peak rate will be lower in a country where people can avoid income tax by leaving the country than it will be where changing residency doesn’t free from the tax system as one example. So too the revenue maximising rate of a transactions tax will be very much lower than that of a consumption tax, both again lower than an income tax. The EU once found that a financial transactions tax of 0.01% was above the Laffer Curve peak while not even we would suggest that’s the revenue raising maxima for a VAT or PAYE.

But rates definitely can be high enough for us to spot Laffer Effects - that is, the withdrawal of labour which may or may not lead to that reduction in total revenue collected:

Rishi Sunak has been urged to lift “bonkers” tax rules on the size of pensions to stem the tide of over-50s retiring early.

Senior Tories have said the Prime Minister should increase or even scrap the lifetime allowance because it acts as a “perverse incentive” to quit.

Number 10 is attempting to reverse a sharp rise in the number of older people choosing to leave the workforce since the Covid pandemic.

Mel Stride, the Work and Pensions Secretary, has been told to come up with ways to incentivise over-50s to stay in and return to their jobs.

The lifetime allowance currently stands at £1,073,100, having been reduced from a high of £1.8 million just over a decade ago. Pensioners are typically taxed 55 per cent on any earnings they withdraw from their pension pot above that amount.

Highly - and expensively - trained and experienced doctors are retiring when there’s still a decade and more of use in them simply because the tax rates are too high. The obvious answer is reduce the tax rates.

So, let’s do that, reduce the tax rates. The simplest method of doing this is simply to abolish the lifetime limit on pension pots. After all, we like people saving. At that macroeconomic level savings will equal investment and no one observant has been complaining that there is over-investment in the British economy in recent decades.

This is not a political point, nor is it some creation of neoliberal phantasies or anything. This is plain and obvious evidence, like a nose upon a face level obviousness. People are withdrawing their labour because the tax rate upon the income from that labour is too high to produce the incentive to work. So, they don’t.

We would add in some little piece of neoliberalism though. Which is an observation about these tax rates faced by these highly paid professionals and which produce this obvious effect. The combination of taxes and benefit withdrawals produces very similar marginal rates amount the poor. Who therefore also don’t supply their labour - or more of it perhaps - into the market. We are not therefore stating that we should ease off on taxing the rich alone. Rather, we’re shouting that we should lower the tax burden on all in order to make us, in aggregate, richer.

You know, stop taxing people so much that they stop working.

Porsche has just solved climate change for us

Or at least a very large chunk of the climate hange problem is solved.

As Steiner explained, the e-fuel plant will use wind power to electrolyze water into hydrogen and oxygen. The hydrogen is then combined with carbon captured from the air or industrial sources to synthesize methanol, which in turn can then be converted into longer hydrocarbons to be used as fuel. The synthetic e-fuel is a direct drop-in for pump gasoline,

As we’ve been saying for some time now if we can have cheap green hydrogen then we are indeed done. True, there then has to be some Stinks work but nothing difficult. If we’ve hydrogen and CO2 then we can make methanol, gasoline, aviation fuel and, obviously, methane. All of which will be net zero carbon.

The synthetic e-fuel won't be exactly cheap—Steiner thinks at current prices, it works out to around $8 per gallon ($2/L),

We’d not want to run the world’s airfleet on something at that cost but we most certainly could do. And it would almost certainly be cheaper to do so than to junk everything we’ve already got and start using Zeppelins instead. Most of Europe has been paying €2 a litre recently and while it’s a dent to the pocketbook internal combustion engines are still cheaper than electric cars right now covering all running costs.

This also largely solves the battery problem. We know how to stock, store, transport and use at our leisure - gain dispatchable energy from - such chemical constructions.

So, we’re done. As long as all of those laws banning ICEs, banning gas boilers and all that are rescinded.

This also shows us exactly why we should deal with the problem through the carbon tax, not through planning and the government picking of losers. We desire to use the solution to the problem which does that solving at the lowest cost. Which is why we use the - suitably adjusted - price system. To work out which is doing the solving at the lowest cost.

Our intuition here - intuition being a posh word for lightly informed guess - is that at these prices this solves aviation and comes close to dealing with cars. But doesn’t sort out the house heating problem. But that’s OK, this is the first plant, the pilot one. As we keep being told about solar, windmills and all the rest, it’s the building of them in volume that reduces costs. So we’ve still that to look forward to.

That gender pay gap wholly and entirely explained

On single sentence here aids in explaining the gender pay gap:

They started living together only two weeks before Sonny was born, and got married when he was 14 months old; they now have four more sons. At about the time they became a couple, Richard and his bandmates formed the Feeling. “I definitely felt a massive drive to up my game,” he says.

“They” include Sophie Ellis-Bextor which gives us the opportunity to parade our age and dodderiness. We’ve been around to see that whole cycle of “Who?” “Rising talent” to “Established star” and back to “Who?” again. In fact, we’ve been around long enough to recall the scandale bénin concerning Ms. Ellis-Bextor’s brother.

This does mean that we’ve also been around long enough to note that often enough there’s a gendered reaction to the arrival of children.

As the TUC says:

Fathers working full-time get paid a fifth more than men with similar jobs who don’t have children, according to a new report published by the TUC

That’s before accounting for age, education and so on - higher ages are associated with a greater probability of being a father of course. But the effect is still there when all of those other factors are accounted for.

The report shows that dads who work full-time experience, on average, a 21% ‘wage bonus’ and that working fathers with two kids earn more (9%) than those with just one.

The findings are in stark contrast to the experience of working mothers, says the report. Women who become mothers before 33 typically suffer a 15% pay penalty.

That mothers have that pay penalty is just one of those standard scientific facts:

Mothers tend to receive lower wages than comparable childless women. This ‘motherhood wage gap’ has been reported in numerous studies.

The possibly excessive period of child helplessness - even for mammals - among humans means that we’re, largely enough, descendants of those who pair bonded. That appears to have effects among us now over who does what.

At which point Occam’s shaving kit comes into contention. We would like to explain this world around us and the simplest explanation is often the best. It is possible to explain the entirety of the modern world’s gender pay gap with just these two points. Fathers get paid more, mothers get paid less. Not men get paid more, women less, but that event of parturition leads, on average and across the society, to slightly different behaviours among men and among women.

This isn’t inevitable, if men and women acted differently - say, there was an entirely equal distribution of primary child caring on average across all couples - then the effect would disappear.

We can also muse on whether we should change this, how we would and even whether we could. But it’s still true that a significant part of that gender pay gap is simply that the arrival of children incentivises men to up their game. Yea, even bass players.

Now what?

On this idea of climate funding, climate reparations

One of today’s insistences is that the rich nations - you and me effectively - must pay up to the poorer countries for climate change. Amounts vary. Some say $100 billion a year and rising in order to pay for the expenses that climate change will visit upon the poor. Others are talking trillions to cough up for reparations for this and that. And, well, there’s a certain problem with that idea.

We know very well that some countries aren’t going to gain such cash. Assume - just for the giggles - that the trillions per year are offered up. It’s still true that North Korea isn’t going to get a cheque because that would just mean more missiles being fired over Japan.

Hmm, OK. But what’s the cut off point of who doesn’t get the money? That’s where it gets interesting.

Agreed, we’re somewhat out of sync with the zeitgeist on this, the only reason we know of for continued national poverty is bad government. Others differ on that. And yet, well, there are some that wouldn’t gain cheques under even the most liberal of such regimes. Or at least should be some.

This is a decade old and more but:

Equatorial Guinea has become the richest country, per capita, in sub-Saharan Africa since the discovery of oil and natural gas reserves in the 1990s, yet the majority of its people remain extremely poor. Despite its increased wealth, the realization of the rights to food, health and education has declined. These retrogressions are documented in CESR's statistical analysis of the country's economic and social rights outcomes relative to its resources. According to official UN data, GDP per capita is over US$26,000, yet almost two-thirds of Equatoguineans still live on less than US$1 a day. Access to health and education has deteriorated as the country's economy has boomed. The proportion of children dying before age five has risen in the last 15 years and is now higher than some of the poorest countries in the region.

There are rumours - rumours mind! - that the oil money goes to the Presidential family and little further. There have been mutterings that earlier Angolan governments might have done something like that, maybe. A daughter of a previous President of that country has been declared, more than once, to be the richest woman in Africa for example, owning many Portuguese assets. Burma’s a military dictatorship again isn’t it? So no money for them.

And so on and so on:

Eskom, the state power provider, was hollowed out by plundering and mismanagement under much of the rule of the African National Congress (ANC).

Sending money off to either prevent or even make up for climate change does rather depend upon the idea that the money sent off will either prevent or make up for climate change. So, which places are poor enough that they need or deserve such but also well enough governed that they’ll make good use of it?

One of us was at a university talk shop just recently and we were told that COPwhateveritis had decided that $8 billion was about the right sum for South Africa. Well, OK and maybe. But who believes that if Jacob Zuma were still in power then the $8 billion would do much useful? Or if Mugabe were still deciding on what to do with however much Zimbabwe were to be awarded?

Entirely true, there are places doing well from a standing start. Bangladesh has been growing at 6 and 8% a year for a couple of decades now - Pakistan not so much. It’s not obvious that a place growing at 6 and 8% a year can usefully absorb much more outside cash and the places that are still at that startline quite possibly wouldn’t use it well.

It’s obvious that even if the cash is stumped up then some won’t get it on the grounds of incompetence, venality or plain barking madness. Which does lead us to that very interesting rumination.

OK, who?

It's always necessary to analyse the correct system

This is one of those claims that we object to:

At the heart of the malaise is the declining “energy return on investment” (EROI) of fossil fuels. This refers to the amount of energy delivered in relation to the amount expended to obtain it. When we first drilled for oil, we pursued sweet crude near the surface; at this stage, we got 100 barrels back for every barrel expended in the extraction process. Today, EROI is falling as we expend ever-greater energy in fracturing rocks and refining complex materials such as tar sands. Now, we only get five barrels back for every barrel expended, restricting the amount of net energy available to society — and placing fundamental constraints on every other aspect of life.

Therefore we must pull in our horns and accept a straitened future standard of living because it’s just obvious, innit?

The thing is it’s not - not in any useful sense - a useful analysis nor a limitation upon that future.

One attack is that looking purely at energy is the wrong part of the system to be analysing. We’re interested in what we get out of the energy, not the amount of it. Given that energy consumption to GDP - GDP being that measure of value add - has been falling this past few hundred years then we’re gaining more value from each unit of energy. We’re suffering - suffering - increased returns on energy that is.

The other is to confine ourselves to that energy on energy thing as the engineers would have us do. The correct response is to point out that we do this all the time. The Royal Navy is really very, very, interested in that last litre of jet fuel used in each flight off its decks. On the grounds that it’s the last litre used which performs that all important task about flying, making the number of landings equal the number of takeoffs. The Royal Navy also uses tonnes of fuel to make that last litre available at the time and place that it is used.

Insolation means that we face no overall shortage of energy. Any shortage is simply of having it switchonable right here, right now, when and where we want it and where it will add value.

Which is the same point as the first of course - it’s the value we gain from the use of the energy that matters. We’re perfectly happy to use energy to make sure we’ve energy when and where we can use it that it adds value.

Of course, this is also the mistake that so many make about renewables, windmills and solar and so on. It’s not the total amount of energy we can have that matters. It’s whether we can have it when it actually adds value that does - like, a cold winter’s night when the wind ain’t blowing.

It’s value that matters in economics, not anything else.

We can judge a policy by the methods necessary to implement it

Jason Hickel has another entry in his listing of reasons why we should all be poorer so that we can be socialist. Abandon the idea of us all getting richer and we can indeed be those socialists.

Don Boudreaux chastises usefully on a number of points. The most obvious of which is that if we need to reduce - if, note - resource consumption then capitalism and markets are the best known manner of doing that. No one looking East from the Brandenburg Gate in 1989 thought that actually existing socialism was light on or efficient with resource consumption.

We offer a slightly different method of measurement. Hickel says that, actually, all would be richer by having this less. From which we’d take the logical position that, since humans like being richer then and therefore there would be no compulsion necessary in Hickel’s schemes.

Ah:

But these models typically focus on a single country and fail to take into account cross-border dynamics, such as movements of capital and currency. For example, if markets are spooked by low growth in one country, some companies might move their capital overseas, which could adversely affect the original country’s currency and increase borrowing costs. Conditions such as these posed severe financial problems for Argentina in 2001 and Greece in 2010. International cooperation for tighter border control of capital movements needs to be considered and the effects modelled.

Everyone must be prevented from even having the possibility of opting out of this new scheme. Which does lead to us at least assuming that Hickel thinks some to many would do so. That is, there’s no point in advocating a manner of preventing people fleeing the new utopia unless there is a belief that people will indeed flee the new utopia. Or, even, that even the proposers agree that it won’t be a utopia because some to many will flee it.

And if they don’t believe it would be a good thing then why the heck should any of the rest of us?

If only Andy Beckett understood the economic statistic he's trying to use

In one of Paul Krugman’s exceptional essays we are informed of a great, grand even, truth:

The question here is not why Lind got these numbers wrong. It takes considerable experience to know where to look and what to worry about in economic statistics, and one should not expect someone who does not work in the field to be able to get it right without some guidance. The question is, instead, why Mr. Lind felt that it was a good idea to make sweeping pronouncements about this subject, when he clearly was unwilling to invest time and energy in actually understanding it.

Economic statistics can indeed tell us interesting things. But we’ve got to understand the economic statistic to understand what is being told to us. At which point, Mr. Beckett:

What might life be like in Britain if most people’s wages were more generous? One answer is more like life in many other rich countries. According to the United Nations, the share of our gross domestic product that goes to employees is lower than in France, Germany, Italy, Australia, South Korea, Canada, the US and half a dozen other, often more successful, capitalist nations. This “labour share” has fallen in Britain in most years since the late 1970s, when the great counterattack began against unions and decent pay for the many. The absence of this broad-brush but telling indicator from everyday debate in Britain is a sign of how much our politics is shaped by essentially rightwing assumptions.

Well, no, not really. From his own source we can see that the Swedish labour share is lower than that of the UK. In fact, the labour share in all of those supposedly highly desirable Nordics is lower. Which is a bit of a blow for those wanting to use the labour share of the economy as an advertisement for something like the Nordic social democracy of course.

The underlying problem here - and it’s an entirely common one on the British left - is failing to understand what the labour share actually is. GDP is, by definition, all production, or all incomes, or all consumption. Everything that is produced is consumed, incomes are the link between the two. So, if we measure all incomes we can see how much of the economy flows to capital, labour and so on. That’s fine.

But in detail we need to allocate across four different sections. The capital share, yes. The labour share, yes. Then there’s “mixed income”. Here the problem is the self-employed and so on. We’re never really sure how much of the independent workman’s income is from his labour and how much from his capital. So, we count it separately. The UN numbers being used here mix those two, the labour share and mixed income, an error which obscures rather than illuminates.

The fourth is “taxes upon consumption and subsidies to production”. This is a vital part of making the calculation add up to 100% of GDP. This is also what makes the capital share not, repeat not, the inverse of the labour share. If we increase the VAT take - by, say, putting VAT on food as at least one of the Nordics does - then we will likely reduce the labour share (it’s difficult to see how that would affect the capital share). If we reduced the feed in tariff on electricity from solar panels we would - likely - increase the labour share.

A large part of the decline in the labour share over the decades has been in the rise in this portion of national income as measured by, umm, income. The capital share is, in fact, about and around the post-war average - that late 70s decline was the abnormality, not the other decades. VAT is double and more the rate it used to be for example and the New Green Deal or whatever it’s called hasn’t exactly decreased subsidies to production over the years.

Sure, economic statistics tell us all sorts of interesting things. But it is necessary to understand the statistic to be able to extract the useful information. Bit of a pity that not everyone bothers to do that really.

To put this in a more jovial manner. We’d pay good money to watch Mr. Beckett explain to Polly Toynbee why he insists upon using a number which disproves her decades long insistence that “We must be more like Sweden.” We might even try to sell tickets to watch that, ghastly neoliberals that we are.