Blog Review 785


An amusing point about the professional political classes.

Some journalists also seem to have an odd idea of what is normal.

Yes, they really do want to attack home schooling.

Are we all becoming more socialist? Or simply more cooperative?

A guide to doing business in Russia. No wonder it's a poor country.

Might there be a better way of choosing the chief executive of our largest company?

And finally, why alcohol is like petrol.


The Mancession


There's evidence that, entirely contrary to what people like Harriet Harman have been trying to tell us, it is men who are bearing the brunt of this recession in terms of job losses.

The jobless figures for May showed unemployment at 9.4%, a 25-year high. But while rates for men and women were roughly equal in 2007, 10.5% of men are now unemployed, compared with 8% of women. Four of every five jobs lost in the past two years had been held by men. The gender gap is the largest ever seen in US labour statistics, which go back to 1948.

“What’s happening in this recession is unprecedented," said Mark Perry, an economist at the University of Michigan. “It’s structurally different because the job losses are so concentrated among men."

Blue-collar jobs in manufacturing and construction are haemorrhaging while white-collar work in increasingly female-dominated, often publicly funded fields, such as education and health, are holding steady or growing.

As you can see a large part of this is down to occupational segregation. Further, it's not just the types of jobs, services against manufacturing, but it's also the sector, public or private. Public sector jobs are more secure, less likely to disappear in a recession.

Which leads us to a further conclusion, similarly entirely at odds with what Harriet Harman and her ilk try to tell us. That the gender pay gap (at least, not all of it) is not due to discrimination. It's due to entirely rational sorting and the choices made by individuals.

Just as more dangerous jobs pay a wage premium to compensate for the risks of injury so do or should those more insecure jobs pay a premium. Or if you prefer, workers will, if they are risk averse, choose a lower paid but more secure job. Which means that if women are preferentially employed in the lower risk public sector then womens' wages will be lower than mens'.

No discrimination required, just individuals deciding what they prefer by their own lights.

Regulating e-cigarettes


altRegulation has an odd impact on industries; take the cigarette industry for example. In a quest to stop people from smoking governments have legislated and regulated to point where the purchase of e-cigarettes are both socially and financially preferable to traditional cigarettes.

You would think this would make them happy. After all e-cigarettes do not produce second-hand smoke and aren’t carcinogenic. These are after all the ‘evils’ for which tobacco industries and smokers have been persecuted. But true to form, there are moves afoot to regulate e-cigarettes out of the market in the US, backed by The American Lung Association, the American Cancer Society Cancer Action Network, the American Heart Association and the Campaign for Tobacco-Free Kids.

If they do ban e-cigarettes then we will be on a slippery slope to the dangers of prohibition. As things stand, the wonders of human ingenuity, has thrown up a solution to the heavy hand of government, allowing those who can stand the indignity of having to smoke fake cigarettes, to do so without the some of the negative externalities as have existed in the past.

The logic of many involved in the anti-smoking movement leads us to prohibition, the reality of which will involve the balance of power shifting from consumers (who are increasingly becoming criminals) to the vagaries of the black market and the increased dangers and deaths that result.

The Investing Revolutionaries


This week booksmith recommends The Investing Revolutionaries. Marvin Zonis, professor emeritus,  at the University of Chicago has desribed it as: “The money managers that tell you they can ‘beat the market’ are the tyrants of Wall Street. Here’s a straight-talking yet powerful guide to growing your wealth through passive stock market investing." Click here to find out more.

Blog Review 784


Why the European Parliament election doesn't actually mean all that much.

Are publicly funded bodies actually allowed to do this in an election?

Perhaps we should just have fewer politicians if this is the sort of language they inflict upon us?

This is simply absurd, even though it is in fact true.

Complex and confusing but debunking the latest rubbish report on how many hundreds of thousands are already being killed by climate change.

If your basic contention in a report is that medical costs drive ever more people into bankruptcy then you really should mention that your own research shows that fewer people are going bankrupt because of medical expenses in your report. No?

And finally, Gordon Brown becomes a video star in Germany.


The costs of illegal downloads


I think it's probably fair to say that Ben Goldacre is currently the best writer about science in the British newspapers. This piece of his about what is purported to be the cost of illegal downloads is a good example. It would appear that the debate over what the law should be is being driven by an conspicuous absence of rigorously sourced facts. The headline number employed is:

An industry estimate, as an aside, in a press release.

You'd hope that they would be able to do better than that really.

However (and Ben does say that he's not an economist so we can forgive him not stating this) there's a much larger problem with all of these estimates of the costs of downloading, of pirate production, of couterfeiting.

Reports always, but always, take the form of x illegal pieces or downloads and the value of a legal sale is y thus to total cost is xy. Which betrays a rather alarming lack of understanding of the most basic building block of economics. That as prices change so does demand.

It might be that demand doesn't change very much with prices, it might be that it changes a lot, but we're absolutely certain that the demand for a music album at £10 each is different from the demand for the same album at £0. Thus we cannot assume that all of those who get a counterfeit or illegal download of music would in fact have purchased one at the full price: indeed, we're pretty much certain (unless we think there are Giffen Goods hidden in here) that the number of purchasers at £10 will be lower than the number at £0.

So whenever you see the costs of these actions being calculated in that xy manner simply snigger and ignore the argument. They're either ignorant or, what is worse, propagandists.

Public choice economics


John McDonnell seems incredibly naive for a man who has spent nearly 30 years in elective politics. Seriously naive

Given this history of a party created and motivated by the highest ideals, founded and motivated by the self-sacrifice of generation after generation of its members and supporters, party members have looked on aghast, in disgust and anger at the self-interested, self-serving political faction fighting among ministers and MPs over the last week. Ambition and naked self-interest have taken over from any sense of political purpose.

As James Buchanan has been pointing out over those years this is simply what happens in a system that grants such powers to politicians.

It isn't that this year's or this decade's crop of politicians are any more venal than those of any other time and place. It's simply that the limits and checks on them have been reduced so that the innate venality is able to express itself.

For all economic actors are self-interested, it the limits that we place upon its expression which re important. In market systems we do it by competition. In politics it appears that we don't.

Let's put it another way. Would Mr. McDonnell be so aghast at a group of children gorging themselves sick if they'd got the keys to the sweet shop?  Naive to think that politicians won't do the same.

The solution is simple, simply have fewer politicians with fewer powers so that there's less of ours that they have access to.

Who's in control?


altAlthough the political show of resignations, reshuffles and elections is damaging Gordon Brown and the Labour party to their core, there needs to be a rapid solution or conclusion if Britain is to move forward 

At the moment we are a country lacking any clear government, leadership or direction. Gordon Brown has taken his hands off the helm and we are heading straight for shallow water. We clearly need a change of government, in a recent poll 66% of people said they would like an immediate election if Gordon Brown stood down. However, we live in a country where the wishes of the people have little part to play in governance. We are currently in limbo – if there was a terrorist attack in London or a flash flood, would the government really be in a position to respond? Party politics is clearly a major distraction from fixing past mistakes.

It would be easy to think that as long the Labour party are concentrating on damaging each other at least they aren’t focussing on damaging us. But we currently have a government wielding huge power but with no clear idea what to do with it. If there is one thing we have learnt from the past month, it is that we need to limit the power of the government and introduce much greater levels of transparency and accountability.