How wondrously glorious that farmers make such small profits

We do think this is an absurd thing to complain about but then the modern left, you know:

UK farmers making tiny profits as supermarkets boast record takings

As the report itself, from Sustain, goes on:

For a 480g pack of mild cheddar purchased in a supermarket the dairy farmer has high production costs of £1.48 yet receives in profit 0.02% (much less than a penny) of the selling price of £2.50.

For a 350g four-pack of beefburgers….receives in profit 0.03% (far less than a penny)

For a loaf of bread, the cereal farmer has costs of 9.03p yet receives an almost negligible profit

For 1kg of apples purchased in a supermarket (about 6 apples), the apple grower has costs of 76p, yet receives in profit just 1% (3 pence)

Isn’t this glorious? For it’s the proof of the free market creed. It’s entirely true - as Steve Keen keeps pointing out - that there’s no truly free market anywhere. As we don’t have an infinite number of producers of anything with zero costs of market entry then we don’t have anything that truly and wholly meets those theoretical strictures of what is a truly free and entirely competitive market.

On the other hand, with farming we do have some billions of farmers globally which is probably enough to at least asymptotically approach such an infinite count of suppliers. Entry costs at the small scale are really very low - most local councils will rent you a starter farm for £100 a year or some such even if we do normally call them allotments.

So, we’re really very close, with farming, to that model of a truly free and competitive market. The end result of which is that the producers make from near no to no profit. Well, there we go then, our proof of the desirability of a free and competitive market. In one the capitalists, the producers, make near no profit. Job done, extraction and exploitation - expropriation of the worker’s sweat of hand and brow even - destroyed.

Given that we’ve now got our proof all else that is necessary is to insist upon having free and competitive markets in every other area of life. At which point the cruel rapine of capitalism is destroyed. Super - job done.

Next question?

We can't help but think there's a simple solution here

One of us is a millionaire, the other a care worker. The cruel divide between rich and poor disgusts us both

Julia Davies and Winsome Hill

Well, let’s see now. We doubt that it’s beyond the wit of womankind to work out how standing orders work. A couple of hundred pounds a week sent from one account to t’other - £10k a year say - would seem to solve matters. After all, a large part of the initial observation is that such a sum would make no difference to the one while it would radically change prospects for the second:

The cost of living crisis affects all of us, but it doesn’t affect us equally. One of us struggles to afford the spiralling price of the weekly shop, while the other can shop as before, unaffected by rising food prices. One of us fears turning on the heating to keep her house warm, while the other can heat her home and travel for some winter sun without a second thought.

Well, get on with it then.

Or even, as we’ve been pointing out for 16 years now.

Economists have a handy term called “revealed preferences”. In colloquial English it means “look at what people do, not what they say, and certainly never take notice of what they say others should do”.

Yes, and this leads to the idea that we can test who really believes by what they do:

LAST YEAR there were five people in Britain who thought that their taxes were too low. No, this isn’t the number of people who have called for higher taxes. Rather, it is those who were so convinced of the righteousness of state spending that they voluntarily sent extra money to the Treasury.

That’s not a large portion of the population there. It’s not even a large portion of the millionaires in the country.

Cheques, by the way, should be made out to “The Accountant, HM Treasury”, and sent to 1 Horse Guards Road, London SW1A 2HQ. A 2nd-class stamp is sufficient and you are encouraged to add a covering note so that your donation is spent in the way you like.

When the tax’n’spend brigade show us their thank-you notes, we should listen: until then we should ignore them and insist that our money remains, fructifying, in our pockets.

Not that we’d actually put it in this manner, dreadfully demotic and even crude as it is. But until we do actually see those voluntary sums - and the thank you letters - we’re likely to conclude that those moaning in this manner are full of it.

Politics isn't a good way to do things

Sometimes politics is a necessary way of doing things, but it’s still worth remembering that politics is a bad way of doing things. The necessary part meaning that sometimes politics is merely the least bad way of doing things.

Take investment. Thurrock council took upon itself the task of investing. This did not work out well:

A Tory-led council has admitted a series of disastrous investments in risky commercial projects caused it to run up an unprecedented deficit of nearly £500m and brought it to the brink of bankruptcy….which reveals it has lost £275m on investments it made in solar energy and other businesses….Thurrock had become one of the most indebted of all English local authorities in recent years after borrowing £1.5bn – 10 times its annual spending on local services – to enable a string of investments in solar energy and other businesses…..including hundreds of millions lent to companies owned by businessman Liam Kavanagh to invest in 53 solar farms….. borrowing cheaply from the Treasury and investing….

They’ve managed to borrow at below commercial market rates, invest in one of the country’s boomingest industries - solar is nine times cheaper than other forms of electricity generation isn’t it, while it still gets paid full market rate? - and by doing so lose some vast portion of the cash?

OK, good, so government doing the investing on behalf of wider society isn’t something that works then.

We’ve also George Monbiot shouting at us again:

The three sectors that appear to be most responsible for the collapse of ecosystems and erasure of wildlife are fossil fuels, fisheries and farming. In 2021, governments directly subsidised oil and gas production to the tune of $64bn (£53bn), and spent a further $531bn (£443bn) on keeping fossil fuel prices low. The latest figures for fisheries, from 2018, suggest that global subsidies for the sector amount to $35bn a year, over 80% of which go to large-scale industrial fishing.

Let us take fishing as our example there. This is an area where government and politics is necessary. Simply because we face a commons problem. As Elinor Ostrom gained her Nobel for: inshore fisheries, with their low number of resource exploiters, can largely be left to social pressure and management among that small number of exploiters. This is not a system that works at larger scale, on high seas and deep ocean fisheries. There the number of would-be exploiters is just too large therefore we’re in Garrett Hardin’s world of the commons tragedy. This requires political action - either the creation and allocation of property rights or detailed regulation.

As it happens we know the solution here. Regulation to insist upon - large - no fishing areas and individual transferrable quotas for fishermen in those remaining areas which may be fished. The reason for the private property, rather than direct regulation, approach is that the most profitable stock levels in a fishery are well above the sustainable population levels in that same fishery. People make more money by leaving a higher than necessary to merely replicate bioload because then it’s easier to catch fish that way.

But our problem is that while we’ve known that this is the solution for a couple of decades now politics is remarkably, pathetically, weak at delivering it. It’s really only the Australasians and some parts of the Alaska fisheries that have. The entire EU - which insists that fisheries is one of those central (no, don’t laugh) competences - both knows this and also insists that it’s not the system to be used.

Politics isn’t a good solution even when it’s the necessary one.

We could even have a glance at emissions:

Free pollution permits worth €98.5bn were given to energy-intensive sectors including steel, cement, chemicals and aviation from 2013-21. This is more than the €88.5bn that the EU’s emissions trading scheme (ETS) charged polluters, mostly coal and gas power stations, for their CO2 emissions.

In theory cap and trade should be as good as a carbon tax. There are differences - cap and trade produces a known emissions level at an unknown price, tax produces a price but an unknown outcome. But they should be equally effective - given the correct price - at reducing emissions. We here have long favoured the tax route because it means less politics. Politicians have long preferred cap and trade because it means more politics. As we can see more politics makes things worse - for the politicians never have been able to bring themselves to do the necessary, charging for all emissions permits. There’s far too much fun and power to be gained by listening to the importunings of those who would have them for free.

Politics is just a terrible way to get things done. Therefore we should reduce our use of politics as a method of getting things done to that irreducible minimum of where that politics is the least bad method of dealing with the real problems the universe throws at us. That is, if there’s any other possible solution at all, other than politics, then use that instead.

Who knows? If we restrict the remit of politics enough, strictly confine the political process and politicians to only those things that absolutely must be done through that process, we might end up with decisions informed by the occasional damn clue.

JOLTS and job markets

There’s an American report called JOLTS. It’s a deeper look at the labour markets over there. Not just how many are unemployed, but how many have been fired, how many hired and how many quit and how many hired. So, it’s a look at the flow through employment - the unemployment number being those who are fired or quit but don’t get hired, the stock of unemployment.

ONS tracks the same numbers over here but not in quite such a regular or even noted fashion.

Over 55s most likely to lose their jobs to robots, study finds

Up to 10 million UK workers could be replaced by artificial intelligence within 15 years

There are those who work beyond retirement age, we agree, but we’d expect the number of over 55s who will lose their jobs within the next 15 years to be asymptotically approaching 100%. But that’s just headline writing. The underlying:

Staff aged over 55 are more likely than any other group of workers to lose their jobs to robots, the first study of its kind has found.

The research by University College London (UCL) economists found nine in 10 workers aged over 55 were made redundant as robot technology replaced humans for “routine” tasks.

By contrast, 70pc of younger workers kept their jobs after retraining and switching to higher skilled more “abstract” jobs either within their own firm or another business, according to the study of 16,000 firms employing millions of staff.

It follows industry estimates that as many as 10 million UK workers are at risk of being replaced by robots within 15 years as the automation of routine tasks gathers pace.

We don’t see anything all that unusual there. The incentive to retrain - whether from the worker or the employer - when there’re 30 years of working life left to amortise that retraining cost will be higher than when there’re merely those few years to retirement anyway.

But back to JOLTS and the ONS figures. What we really want to know is whether this is all some terror, the headlight on the train approaching through the tunnel, or merely some glimmer of daylight. Those flow numbers of employment telling us that around and about 10% of all jobs get destroyed each year, around and about 10% of all jobs are newly created each year. A rough number, yes, but it’s not 1% and it’s not 100% - we’re in the right order of magnitude there at least.

The jobs created are very rarely exactly the same as those destroyed - there’s near always at least some technological shift or movement across sectors involved.

We expect, in this coming 15 years, to see 150% of the jobs in the country destroyed and recreated with that jump to the left or the step to the right. The claim here about 10 million is some 30% or so of all jobs over that 15 years. We’re also told what the compensatory mechanism is - folk get retrained when it’s worthwhile their being so.

We might well mutter that we’d prefer technological change to move a little more slowly so that there’s no one left unemployed - for those technological reasons - in the run up to the Golden Years. We might also insist that we want it to work faster. Technological change is not just akin or related to rising productivity it is rising productivity.

Our point here though is different. There’s nothing very unusual about this. We’ve been doing it these past 250 years as that capitalism and free market mix brought about constant and consistent technological advance. Given that there’s nothing very different going on now than has been happening this past couple of centuries we tend to think it’s not something greatly worth worrying about.

The absence of it, now that would be that light at the end of the tunnel and it wouldn’t be the daylight.

If only John Harris would think for a moment

In the corner of Somerset where I have lived for nearly 15 years, life in late-Tory England grinds on.

This is Frome, a place the surrounding locals think is more than a little different. Almost like Wiltshire if such a horror can be imagined.

Meanwhile, a lot of local angst is now focused on an ever-increasing number of new housing developments: a huge local story….

Indeed so, much the same is happening in Peasedown St John too.

The Conservatives’ 2019 manifesto promised that the government would trigger the building of 300,000 new homes a year, which inevitably entailed a sizeable loosening of the planning system. But proposals for drastically changing the rules and introducing new liberalised “development zones” were dropped after revolts led by Tory MPs, largely from the south of England.

Yep.

If you live and work in a city, imagining the opponents of new development to be a bigoted shower and endlessly shouting “nimby” at them is easy. But take a closer look at what is actually happening across the country, and you might come to a more nuanced opinion.

Ah, nuance. No, there’s no nuance here at all. It’s simply the result of rank idiocy.

Last Thursday I went to a packed-out meeting organised by our town council to discuss plans for a huge “garden community” of 1,700 homes – housing about 7,000 people – to be built on fields beyond the edge of town that many people see as the area’s green lung.

The mere idea that there are 7,000 - more - people who wish to live in Frome is a shocker to those who know the locality. So, something must be called into evidence to explain that. As well as the absurdity that people seem to be, voluntarily, buying new builds in Peasedown St John of all places.

The answer being that no one is allowed to build housing where people would actually like to live. Midford, Freshford, Monkton Farleigh, Monkton Combe, Combe Hay, South Stoke and so on (for a moving pictures view of these places, the area the Titfield Thunderbolt was filmed in). Or even Lyncombe Vale - all would still avoid Combe Down of course - and other such delightful areas as Dunkerton etc.

So, why is the housing not where people would like it to be and why is it therefore dumped in Frome, where the locals don’t want it and those who will have to live in it don’t want to be?

Because the Green Belt is not just around London. There’s one around Bristol and Bath as well. Peasedown and Frome are just outside it. So, all the housing that could be, would be, where people wish to live is now where they don’t.

There’s no nuance to this at all, it’s simply the imposition of the metropolitans and their prejudices upon the people who actually live - or perhaps better, would like to live - in England’s green and pleasant pastures.

Given that there’s no nuance to the problem there’s no nuance to the solution either. Simply blow up the Town and Country Planning Act 1947 and successors. Proper blow up, Kablooie.

Nobody does actually want to live in Frome so why have a system that forces them to do so?

It's amazing what people will complain about

We’ve had some years now of direct action against landlords of residential properties. Limitations upon the deductibility of the costs of running such a business- the finance costs on a mortgage for example. The loading on of capital costs - at the same time as limiting the deductibility of finance costs - in the form of legally mandated energy efficiency standards. Mutterings about how people really shouldn’t be allowed to either market as they wish, nor change their minds about who they are renting to - there’s that considerable movement arguing that “no-fault” evictions should be banned.

All in all the costs of owning a property which is then rented out are rising. Therefore:

…adding that buy-to-let landlords face a severe financial squeeze over the next few years and many could sell up, further reducing supply.

Reduced supply and, as a result of other factors, increased demand (other factors including 500k net immigration, working from home leading to more space being desired for each resident, falling house prices making purchase seem unattractive and so on) then leads to:

London estate agent Foxtons has reported a 22% year-on-year surge in rents in the capital in the first nine months of 2022. The average rent hit a new high of £571 a week – about £100 higher than at the beginning of the year.

Record numbers of new renters registered in the third quarter: there were 30 for every property listed, which is around three times recent levels. At the same time, supply has dwindled: new instructions from London landlords have fallen by 18% in the first nine months compared with a year ago.

And of course everyone is complaining that the rent’s too damn high. That is, people are both cheering the restrictions upon supply and also complaining about the effect upon prices of that restriction of supply. Which does lead to a certain amusement at what people will complain about.

Perhaps, in order to clarify this for people we need to produce some sort of academic study here. Or even invent a whole new field where we can outline that interaction of supply, demand, pricing, of housing.

One minor problem would be what to call this new study. Inventing some -ology sounds a bit too Maureen Lipman really. Something Latinate would revolve around familiar procuratio and procuring has an unfortunate echo in English. Perhaps we should delve back into that Greek so beloved of the last PM but one (or however many it is by now) and modify ο'ικονομία in some manner.

The major problem would be that faced by any new such academic exercise. How many centuries would it take people to believe a word of this new science? Past experience suggests too many.

What's wrong with housing policy in a nutshell

We’ll admit that Matthew Parris is not usually our go to figure for enlightenment upon public policy but here he’s extremely informative:

But the developers will turn out to be the usual handful of huge housebuilding corporations. Profit, not social need, drives them, so government’s job is to direct. Private housebuilders have rarely been interested in building for the poor, nor is it their business to care that huge profit margins may be related less to added value and more to the shortage of land.

Informative about what not to be doing of course.

Profit is the value added in an activity. This is by definition. The value of the inputs at market prices is the value of their alternative uses. The value of output at market price is, well, it’s the value of the output. Profit is the value added in the activity, the amount by which the value of the output is greater than that of the inputs. Again, that’s a definition.

Value add is what we all live off. GDP is value added - it’s all production, or all incomes, or all consumption. That production number is the value added in all the economic activities in the place and or country. More GDP - again, this is all definitional - means incomes will be higher.

So, the claim is that private housebuilding will strive to add value, something that increases incomes. It’s government’s job to direct, to make sure this doesn’t happen so that we can all be poorer.

We submit that that’s a hell of a way to run a railroad and a logical construction of the grandest idiocy. Therefore let’s not do that.

The idea that the capitalists are not interested in producing for the poor is belied by many centuries of experience. As has been pointed out, it was capitalism that allowed the mill girl to have stockings - feudalism provided QE I with them just fine. Building cars only for the rich, as Aston Martin is currently showing, is a great way to lose money. Henry Ford’s Model-T, that jalopy for the working man, created one of the world’s grandest fortunes. The history of the press is of every new entrant undercutting the previous price level - the penny newspaper for a halfpenny. That last still has subsequent generations rolling in lucre - why wouldn’t capitalists be interested in taking the poor’s money?

Finally, we don’t have a shortage of land, more of Surrey is under golf courses than houses. We have a shortage of licences to allow houses to be built, something that can be solved at a stroke of the bureaucrat’s pen. Which is exactly what we should do of course. For the current system is like complaining about the price of cars while ignoring that the real problem is the limit on licences for the man with a red flag to walk in front of it. Artificial scarcity will indeed concentrate minds upon what can be sold to the rich - only the rich can afford the scarcity.

Our establishment hamstrings that red in tooth and claw capitalism then complains that capitalism and profit aren’t producing the goods. The actual answer is to stop that government direction and leave that market be to produce.

Or, as we’ve said before now, the answer is to blow up the Town and Country Planning Act 1947 and successors. Proper blow up - Kablooie. Now there’s a proper housing policy.

The vital economic lesson from Dabloons

The aged attempting to be achingly hip never does come across well but still:

According to the website “Know Your Meme”, the dabloon trend’s origins can be traced back to two images, shared by the Instagram account catz.jpeg, of cat’s paws, with the simple caption “four dabloons” beneath.

This brand of nonsensical humour seemed to strike a chord with the account’s hundred thousand followers, and was shared consistently over the following months.

By October 2022 the phrase, “But it will cost you 4 dabloons” became a popular punchline on TikTok and by late November this had become a full-on craze, with thousands of accounts posting dabloon content and videos using the hashtag “#dabloons” collectively gaining nearly 500m views, as of 25 November.

And thus the dabloon economy began.

Trivial, possibly twee and almost certainly transient. And yet:

“I think the reason we all love this is that we all secretly miss being 5 and playing with our friends,” avid UK dabloon collector Beth Woodward says.

“I miss being a kidnapped princess or a witch making potions. Being a part of this trend means I can do that again. I can be a silly little cat buying silly little items and just having a great time.”

The aim of our having an economy, a civilisation at all - hell, that coming down out of the trees bit - is simply that more people can have a great time more of the time. That’s it. There is no other.

The definition of great time is to be made by those having it. That’s also it.

This does mean that certain economic theories are simply wrong. The Labour Theory of Value for example. The value of dabloons is the enjoyment that comes from the existence of dabloons, not the zero labour that goes into their creation. Nor, equally so, the labour that historically has gone into the creation of the system - the internet, the Web - upon which dabloons are created. That labour was there, already built in, before dabloons were created and will still be there, inherent, after they fade away.

It’s also true that no central planner would invent dabloons, none did, therefore central planning is not the optimal manner of creating good times.

Finally, dabloons have no value other than that good time created. Which means that all mitherings about exchange value, use value, real values and deeper and objective values are just wrong. The value is that transient human joy and that’s it. As with any- and every- thing else. The value of a house is, at root, the night’s shelter from the rain, of a raincoat the afternoon’s similar shelter, of a steak that replete stomach for a time, there just is no other value to anything than what we humans, at that time, place upon the thing.

As the man said, the important economic question is “Everybody having a good time?”

The human economic unit is the household

Much about human beings only makes sense when we accept that the natural economic unit is the household. True, that can come in different forms - nuclear or extended for example - but such varied things as the female pelvis and babies’ head size, the very long period of childhood helplessness, pair bonding and so on only do make sense when considered as a whole. This is not to be normative, merely positive:

Close to a third of single parents have resorted to skipping meals to make ends meet because of rising food costs, according to research revealing the household types worst hit by the cost of living crisis.

Three in 10 single parent households surveyed said they had missed meals as a consequence of runaway food prices. That compared with one in seven parents in couples and an overall figure of 14% in the poll by the consumer group Which?

The norm these days (as very distinct from normative) is for a dual earner household. A dual earner household will be in a better financial position than a single earner one, other things being equal.

Please note that we are not commenting upon the level of hunger Which? claims to have uncovered - just on the difference between singles and couples.

When these sorts of numbers are flaunted it is usually with the at least implicit insistence that something must be done about this difference. At which point, well, why?

Given that we are liberals we’re just fine with people deciding to live their lives as they wish. But also given that we’re liberals we think we’d like to see rather more justification than we get about why the outcome of those choices must be equalised. After all, all choices are trade offs, aren’t they.

Don't let the State do our investing for us

There’s a considerable body of opinion out there - ranging from the respectable and wrong, like Mariana Mazzucato, to the errors of the egregious Richard Murphy - which insists that the State should be doing our investing for us. After all, all those wise people collecting all the information government has to hand will be able to invest societal resources far better than any mere set of private incentives. Add in that government can borrow far more cheaply than the private sector and there we are, QED.

It has asked ministers to write off £1.3bn of debts, including £500m run up through a series of ill-fated commercial investments, arguing the sheer scale of Croydon’s crisis required an unprecedented financial bailout from the government.

Stripped of all complexity Croydon has borrowed at below market rates to invest. If you can borrow at below market rates then clearly you should be making more profit than those in the private sector who have to pay more. This is especially so in property - it’s a capital intensive business, your cost of capital is the major determinant of whether a project will be profitable or not. So, that special borrowing facility for local councils - who get to borrow from the Treasury at something like the interest rates the Treasury pays, not the private sector ones - should make substantial profits simply because of those low financing costs.

As with Warren Buffett say, whose insurance float (of $109 billion last time we looked) means that the cost of capital to Berkshire Hathaway is actually below the numbers the Feds borrow at.

Well, it’s an hypothesis and as with all such it needs to be tested against reality. That’s how science works. Further, when there’s a conflict between idea and the universe it is, always, the universe that wins - that’s also how science works.

Now we’ve got our test of the idea. It’s not true. Government does not invest better than the private sector. So, we should not use government to do our investing for us.

Once again a pretty little theory destroyed by an ugly fact. Which is, of course, the point of using markets at this level of intellectual abstraction. To find out whether those ivory tower theories survive that first contact with the market - as Moltke pointed out, they don’t.