Really not quite grasping the economic basics here

Jonathan Reynolds, Labour’s shadow business secretary, said the UK should be willing to apply “trade remedies” - tariffs - if it is found that Chinese brands have gained an unfair advantage over their European peers.

Asked about the issue at the MakeUK manufacturers conference on Tuesday, he said: “There are some sectors where I look at just the sheer overcapacity that’s coming out of China and I worry that is inconsistent with how a healthy, global market economy should operate.

“Where there is a concern that we’re not facing free and fair and healthy competition, we’re right to use trade remedies as an answer to that.”

This is not just to dunk on the Shadow Secretary, we expect the current one to make much the same sorts of points. And all likely contenders too. Simply because politics just hasn’t - 248 years after it was first properly pointed out in Wealth of Nations - caught up with how trade works. Nor, even, the most basic point about who the economy is supposed to work for.

The claim here is that the Chinese government has been taking money off Chinese citizens and giving it to Chinese car making companies. As a result those Chinese cars are subsidised and thus cheap to us Britons.

That is the claim. The next step is where the lunacy comes in, in the reaction. For now the claim is that we must tax ourselves for buying these cheap, subsidised, Chinese cars. That’s what a trade tariff is. So too would be any system of quotas or other restrictions upon those cheap cars being imported. It’s a tax upon us Britons.

Or, just to point up the lunacy, China is taxing its citizens so we must tax ourselves in response.

The entire point of trade is that we get to put our hands on the things made by Johnny Foreigner - those things that we desire of course, those which are cheaper, or better, or simply more desirable than we can make them ourselves. That’s not an aberration, that’s the point.

Even more basic, the point of an economy is consumption, not production. So, if someone’s offering cheap electric vehicles - however produced, however financed - the correct answer is “Please send a second shipload. Pretty Please”.

The Chinese government is, as a result of its actions, getting Chinese car companies to ship us cars. Each coming with a cheque attached signed by the Chinese taxpayer. We get the car and we get the free money. The political response is that this is dreadful and cannot be allowed.

Foreigners sending us free money is a bad idea that must be stopped. Now do you see why politics is such a lousy way to run the place?

Torture the Green Economy statistics enough and they'll confess to anything

We’re told that the green economy is a very good thing, growing fast, highly productive and all that:

The UK’s net zero economy grew by 9% in 2023, a report has revealed, in stark contrast to the 0.1% growth seen in the economy overall. Nevertheless, the report pointed out that strong future growth from green businesses was being put at risk by government policy reversals, lack of investment and competition from the EU and US.

Thousands of new green companies were founded in 2023 and overall the sector was responsible for the production of £74bn in goods and services and 765,000 jobs, according to the report by the Energy and Climate Intelligence Unit (ECIU) and the Confederation of British Industry (CBI).

Super, great. But there’s a confusion there. If this is all a very good thing, growing fast, highly productive, then why do we still have those demands for subsidy?

The answer is that the numbers are being tortured. In the actual report itself we’re told:

The net zero economy spans a number of new and emerging sectors, such as renewables, carbon capture, or green finance, as well as more traditional, established sectors, such as manufacturing. The latest CBI Economics analysis shows that these businesses contributed £74 billion in Gross Value Added (GVA) in 2022-23, which is equivalent to 3.8% of the UK economy – larger than the economy of Wales (£66 billion). They also supported 765,700 Full Time Equivalent (FTE) jobs, equal to nearly 3% of total UK employment. Their contributions include the value generated by their own activity (£25 billion) and their employees (218,500 jobs) as well as the wider economic contributions they supported through their expenditure with suppliers and the expenditure of their employees on goods and services. In essence, due to these wider spillover benefits, for every £1 million in GVA contributed by net zero businesses, nearly £2 million more was added through these wider economic contributions.

Ah, no, that’s not the way GVA works.

GVA is attempting to give us something like GDP calculations but for some portion, region or other subset of that national economy. GVA is therefore worked out the same way as GDP but for that subset. This means that what people spend upon housing, clothing, food, as a result of this subset of the economy is not included in the GVA of the subset - for the housing, clothing, food, would turn up in those other subsets if we were to analyse them. As, when we calculate GDP we do not include those run on effects. For, obviously, if we included the run on effects in GDP of each sector then we’d be double, triple, multiply counting every sector and end up with a GDP that is hundreds of times larger than reality.

We’re fine with people doing economic analysis of the green economy. In fact we’d welcome it if people did. We’re really very sure indeed that the result will be that green economy jobs are less productive than the rest of the economy. For the obvious reason that the green economy is attempting to solve externalities - those things not included in market prices nor our market price based measures of the economy like GDP or GVA. As the value of the output - lower emissions - is not in our measures of output, but the working hours to achieve them are then we run into the productivity measurement equation. Value of output at market prices divided by hours of work put in to gain it.

Exactly because we are trying to solve externalities by our green policies then and therefore green jobs will be less productive.

As we say, we’re absolutely fine with, even look forward to, economic analysis of the green sector. While we wait for that we can reject political fluff jobs like this.

So we've tested government doing the investing and it's a crock of....

….umm, shinola? Or is it the other one?

There is a logical argument stating that government should be doing the investing for us. Government can - because it has the backstop of being able to charge future generations of taxpayers to pay back the loans - borrow more cheaply than near any private organisation. Therefore profit from investing should be higher. It’s also true that government has all those Rolls Royce minds to decide upon what should be invested in. And thus the insistences from the likes of Professora Mazzucato, Professor Richard J Murphy and every politician eager to get their hands on the spending taps that, really, government should be doing the investing.

Well, it’s a logical argument but as with all such it does need to be tested against that reality outside the window:

Four district councils in London’s commuter belt have accumulated debts worth a collective £4.2 billion, or about £10,000 per resident, on property investments, many of which have gone awry.

Woking, Spelthorne and Runnymede, all in Surrey, and Eastleigh in neighbouring Hampshire have the highest debt-to-income ratios in the country. The four owe debt between 700 per cent and 1,500 per cent of their annual income, according to the Chartered Institute of Public Finance and Accountancy.

Woking is already effectively bankrupt, while both Eastleigh and Runnymede have been the subject of notices from central government concerned about their financial health. Spelthorne has yet to receive a similar warning, but in 2022 KPMG, its auditor, warned that the council’s decision to borrow £225 million to purchase three Heathrow properties in 2017 was unlawful, a ruling that Spelthorne contests.

Note that these local councils did enjoy those presumed benefits. They borrowed from central government at central government (ie, gilts or thereabouts) rates in order to invest into market rate paying investments. With, of course, all that lovely information that government has about what should be done and those very fine, well tuned, minds to make the decisions.

They then lost all that money and have driven themselves bust in doing so.

So, we have now tested this idea that government should be doing the investing. The idea is found wanting when tested against that reality outside the window. This despite having those preferential financing rates, centralised information and fine minds.

The logical arguments fail because even with those advantages they then decide to micturate societal capital up against the wall.

Let’s not have government and politics deciding what to invest in, eh? If only for the societal value of clean, dry, walls.

Why government's a lousy way to do things

A standard argument in favour of government doin’ stuff is that government is eternal - therefore they’re the only people able to take a long term view of matters. To be able to deal with those decades long, even generational, matters that individual lifespans, or corporate ones, simply won’t bring to salience.

Well, OK, it’s a theory, Like all theories - or at this stage of the scientific game, hypothesis - this needs to be tested. The way science works is that we deliberately look around for the evidence which disproves the contention. If we find such evidence - we need only the one piece - then the hypothesis fails. Repeated attempts to disprove that do not disprove gradually move the hypothesis over to being a theory at which point it becomes a useful working assumption for how we deal with the world. Until, if ever, that disproof does arrive.

So, doctor training:

Ministers have dramatically stalled plans to double the number of doctors being trained in England by 2031 in a move that has caused dismay across the NHS, as well in medical schools and universities, the Observer can reveal.

In June last year, ministers backed a long-term plan to expand the NHS workforce and pledged, amid great fanfare, to “double medical school places by 2031 from 7,500 today to 15,000, with more medical school places in areas with the greatest shortages to level up training and help address geographic inequity”. Labour is also committed to raising the number of doctors to 15,000 by 2031.

But a leaked letter written jointly by health minister Andrew Stephenson and the minister for skills, apprenticeships and higher education, Robert Halfon, to the independent regulator the Office for Students, says they will fund only 350 additional places for trainee doctors in 2025-26.

Now, we have noted this before around here. That glorious - and yes, it is glorious - economic liberation of women has led to some run on problems. Female entry into the professions - part of that glorious economic freedom - then runs into things like maternity leave and a predeliction for part time working while the snot-machines are awaiting primary school. Now, because we’re all in with the economic liberation part this isn’t something to bemoan, it’s simply something to deal with.

Over recent decades doctoring has become a majority female occupation - economic liberation again. Huzzah!

Government also takes to itself the power to determine how many doctors are trained each year - or even each decade given the time it takes to train.

An average doctoring working life is some 30 years - out of training at around 30, hitting the pensions cap and retiring at 60. Say, about. Add maternity and part time working to give a decade of less than full time work over that three decades and what’s the result? Other than the wholly welcome result of that economic liberation?

The answer is that we need to be training more doctors. More more doctors than an ageing population requires, more more doctors than a growing population requires. We gain fewer doctoring working hours out of each doctor trained therefore we require more doctors trained. As we say, this is not a problem it’s simply an effect and one that has to be dealt with.

This all became obvious some 30 years back. Government did not increase the number of doctor training places 30 years back. Government’s not a good manner of doing those long term things.

Then it gets worse. Obviously, finally, they agreed that more training places needed to be financed. But now it’s being limited for whatever short term - we assume financial - reason. Which is the whole point of passing those long term problems over to government, that long term things get dealt with in a long term manner, not subject to the short term buffeting of events Dear Boy, events.

We’ve just found our disproof of the contention - hypothesis - that government deals well with long term issues. Therefore the hypothesis fails.

A beautiful theory killed by ugly facts. Again.

Now note how science works here. Repeated assertions that sometimes the hypothesis holds don’t matter. All we need is the one disproof. As science doesn’t actually say but does mean after all even the blind squirrel sometimes finds a nut. Government is good at dealing with long term problems fails as an assertion if we find the one example of government not being good at dealing with a long term problem.

Which does, of course, mean that Mazzonomics is tosh but then we all knew that anyway.

Biting back at Bite Back

No, not Dale’s publishing company, but Jamie Oliver’s attempt to mislead the body politic. Big report out:

Are food giants rigging the system against children’s health?

The answer is obviously no but we do need to identify some specific reason that it is that no. Fortunately, Sir Patrick Vallance provides an introduction:

But the epidemic of food related ill health, which grips our nation and starts in childhood, cannot be solved by science alone, it needs policy action. Medical advances to treat type-2 diabetes, heart disease and cancer are progressing fast and save thousands of lives every day, but how much better would it be if these diseases could be prevented? This is the challenge that society faces, and prevention of disease is essential if the NHS is to be affordable and sustainable.

Obesity, in common with smoking and booze, saves the NHS money. This is not just an assertion by us, it’s a known scientific fact.

It is entirely true that it costs money to treat people so rotund they cannot fall over - like Weebles. It is also true that people dying early as they pop their skins like overheated sausages do not then need further decades of treatment on the National Health Service - the costs end when the CoOp picks up the puddle for burial.

Now that is, obviously, a fairly brutal way of putting it. But it’s also true. We do indeed all die of something (well, with the exception of Elijah possibly). We will all get treated - or not perhaps given the queues - by the NHS on that path to the grave. The NHS is also a lifetime healthcare system. Thus the total costs, over the lifetime, depend upon what diseases we get and also the length of the lifetime. An aggressive and untreatable cancer - or a killing stroke or heart attack - at 65 is very cheap indeed. Physical health plus a few joint replacements and 10 years of Alzheimer’s before death at 90 is very expensive.

Again, fairly brutal but also true. And as it turns out on average, across the population, obesity - like tabs and booze - save the healthcare system money, not cost it.

As the entire justification being presented for this intrusion into our diets is wrong therefore the entire intrusion into our diets is wrong. We should - whether we can is another matter given the headwinds this very silly idea has - therefore tell these people to go boil their heads. Job’s a good ‘un at that point.

There are - obviously - other insanities here.

products that are classed as high in fat, sugar or salt (HFSS) and therefore unhealthy.

That’s not even remotely true. What portion of the total diet is those evil substances might cross a line between healthy and unhealthy. All of those substances are absolutely essential in a diet - we die without them - so the presence of them cannot be, in itself, unhealthy.

We’d remind of - possibly reveal - Mrs Worstall’s Dictum: “If the larder’s* full of a balanced diet at the beginning of the week, empty at the end of it, then we’ve all had a balanced diet that week.” Quantities of whichever at a particular meal or component of one do not matter that is.

This is a larger point too - relevant to emissions. Sure, we desire that CO2 emissions go down. This does not mean that each and every component of emissions must reduce, only that total emissions do so. So, say we need to reduce emissions by 98% and flying is 2% of total emissions. It is not true that flying emissions need to fall - only that all others do. Not that we insist that is the correct answer (even as we might think it is) but the logic is correct.

If it is, for health reasons - and not NHS fiscal ones - true that salt, sugar and fat consumption should fall then it’s the consumption of those as a part of the overall diet that does. Not in any one specific piece of food. Therefore it is not true that foods that contain those things which are unhealthy, it is overall diets which contain too much of them which are.

Given that the report fails on these two very basic logical points the rest of it is of no matter. Into the under the desk round filing cabinet with it. Plus, obviously, making sure that the political world also rejects it for the obvious nonsense that it is.

One final little observation in the report that really did amuse us. Apparently Ferrero and Mondelez have business models which are based - respectively, 100% and 98% - upon these unhealthy foods as defined. They’re, umm, chocolate makers.

Sweetie makers make sweeties. We need a 20 page report to tell us this? Apparently some people do but given the factual content in that assertion perhaps we should ignore the opinions of those requiring such information prompts?

*Yes, larder, not cupboards, posh background. So, bite me

So why won't luvvies put their money where their mouths are?

One possible answer is that they’re cheap. But we could never say that about Britain’s most distinguished thespians and artists. Of course.

The actual answer is also more interesting:

It’s not the first time that directors have bought the shop window. Quentin Tarantino owns two theatres in LA, including the Vista. And back in 1970, avant-garde maestro Jonas Mekas co-founded the Anthology Film Archives in New York, which is still electrifying the edges of movie culture.

In the UK, some film-makers have had a go. Here in Scotland, for example, Jeremy Thomas, who produced Bernardo Bertolucci’s The Last Emperor and David Cronenberg’s Crash, co-owned Edinburgh’s Cameo Picturehouse for a while, and even Tilda Swinton and I got into the world of projectors and popcorn for a bit with our Brigadoon-like pop-up The Ballerina Ballroom Cinema of Dreams.

But with cinemas struggling or closing in several cities – Bristol, Edinburgh, etc – why haven’t UK-based directors bought some of them?

We’ve already ruled out that obvious answer, they’re cheap. So, what is it?

Then there’s the fact that part of the UK’s cinema circuit isn’t purely a private sector endeavour. Networks such as Picturehouse, Vue, Everyman and Curzon are all showing aesthetically bold movies like The Zone of Interest, but beyond them there are cinemas that receive some public funding – from the BFI via the National Lottery and the Film Audience Network or local councils, for example.

These sums are small and not secure – council funding is particular is disappearing – and to access them cinemas and arts centres often become charities. You can donate to them but not invest because they don’t exist to make a profit. They do specialist seasons and, at their best, film education, so are not purely commercial organisations. The result? The film exhibition scene in many UK cities is broader and richer than equivalent towns and cities in the US.

There’s another way to describe that and it’s “crowding out”.

There are things that people would do, unaided and off their own bat. But which they don’t do if government is already doing them. That is, government action crowds out those private actions.

This idea is hotly contested of course - those in favour of government action on all sorts of things like to stoutly deny that crowding out can ever happen. Government is only ever additional to private efforts, it does not replace. For that argument makes government action look better, bolsters the arguments for government acting. Those less enamoured of bureaucrats like to point up the crowding out effects.

But here we have it from the belly of the beast. The reason luvvies don’t support little cinemas is because government already does it. So, if we stop the taxpayer having to support little cinemas then the luvvies will indeed support them instead. Rather a win/win there for everyone.

It’s also proof perfect that we can shut down the Arts Council entirely and save a £billion a year in the process. For that spending only crowds out what would happen privately anyway.

We mean, sure, we should do that anyway, but nice to have another arrow of an argument in the quiver, no?

No, devolution alone won’t fix poverty in the North East

Poverty in the North East
The North East, as everyone knows, was once a powerhouse of coal mining, shipbuilding, and manufacturing which fuelled the nation’s growth and prosperity. However, the decline of traditional heavy industries, coupled with shifts in global trade patterns and technological advancements, decimated the region's economic foundation.

The repercussions of this industrial decline have been felt far beyond the factory walls, affecting the social fabric of the North East. Unemployment soared, and the ripple effects of job losses exacerbated into poverty and deprivation. 

Now 54.6% of all homes in the North East are classed as deprived in one or more of the four dimensions used to measure deprivation in the UK. And the problem with deprivation is that it casts a long shadow. The poverty that the North East grapples with is intergenerational, and very difficult to combat.

The problem with poverty:
This is not complicated. Poverty is bad. Beyond the loss of potentially productive workers due to poor health and education, poverty had wide ranging social and psychological impacts. Not only does mental health suffer under poverty – which then circles back to reduced productivity, but social cohesion is harder to achieve. 

But the issue in the North East isn’t in getting people to understand the problems with poverty – it’s in understanding that poverty in the North East is repetitive. It is intergenerational.

What is intergenerational poverty?
Intergenerational poverty occurs when poverty persists from one generation to the next. Children born into deprived circumstances face barriers to accessing essential needs (such as stable housing) and opportunities (such as quality education) which constrains their prospects. In the North East Child Poverty Commission’s most recent report, 35% of babies, children, and young people live in poverty, and 11% in very deep poverty. This helps perpetuate a cycle of poverty and marginalisation.

  • Material poverty serves as a formidable barrier to upwards mobility. With factors such as a lack of stable housing, an inability to meet fundamental needs and one in ten households in the North East being classed as “food insecure”, harming a child’s growth and future wellbeing.

  • Educational poverty, characterised by limited educational resources, feeds into lower academic achievement which limits future economic opportunities. 

  • Cultural poverty is a socially sensitive topic, as those referencing it could fall into the trap of blaming the poor for their conditions, but it is a crucial factor. When people face barriers to opportunities for a long time they might start to believe that they can't improve their lives. This feeling of hopelessness feeds into the younger generation by making their dreams feel unattainable and curbing their opportunities.

These are just a few of the many limitations that are passed onto the next generation. The cascading effects of intergenerational poverty only serves to exacerbate inequality over time. 

A new approach to fighting poverty:
If, as I think everyone should, you read the NECPC’s report ‘No Time to Wait’, you begin to understand the scale of the problem facing those trying to fight poverty.

The report itself makes for harrowing reading. Reading the words and experiences of those who deal with poverty every second of every day is eye-opening, and the plethora of statistics on the topic is  heartbreaking.

Now, if you were part of a charity or organisation actively working to combat poverty on a daily basis, witnessing the potential of bright children being limited by circumstances beyond their control would likely be disheartening. Additionally, observing the limited impact of government policies in addressing these challenges would likely lead to high levels of frustration and disappointment.

Which makes the solution proposed by these organisations understandable.

Devolution, from the point of view of those calling for it, will finally allow these charities and organisations the power to make a real difference and help save the futures of hundreds of thousands of children.

The dangers of devolution:
The hope of the organisations calling for devolution is that giving more power to councils and regional bodies will result in the regional policy they want. 

However, expanding devolution by granting councils increased powers and authority could lead to a proliferation of politicians. While many politicians undoubtedly work with commendable intentions, their actions may become influenced not solely by the pursuit of fostering growth. Additional objectives such as securing re-election and upholding a consistently favourable public image may become the main focus of their work.

More bureaucracy and politicians will not lead to the dramatic fall in poverty that these charities and companies desire. Instead, it will gum up the system, hindering the fight against poverty and further constrain the North East.

This is all without mentioning the elephant in the room that in 2004, 77.93% of the North East voted against devolution and a regional assembly.

Alternative solutions:
There are alternative solutions to fighting poverty, rather than devolution.

Local authorities and mayoral offices have an opportunity to collaborate. If the combined authorities of the North East pooled their funding to help finance a cross-sector initiative they could help fight poverty. By engaging charities, schools and even businesses a comprehensive plan to take on poverty from multiple angles can be drawn up. Then, the pooled funding from various local authorities and mayoral offices can be used to properly finance a cross sector comprehensive poverty action plan.

  • Schools play a crucial role in addressing poverty. By collaborating with local authorities to provide the necessary resources and engaging with the business community, schools can facilitate work-based learning opportunities and mentorship programs that prepare students for the demands of the local economy.

  • The involvement of charities can significantly enhance the reach and impact of any efforts to fight poverty. Charities in the North East have spent decades fighting poverty, generating  a deep understanding of the specific needs of vulnerable people and can provide targeted support and services. By collaborating with local authorities and businesses, charities can access additional resources and expertise to amplify their impact.

  • The involvement of businesses is essential for sustainable poverty alleviation and economic growth. Businesses can contribute by creating job opportunities, providing training and skills development programs, and investing in local community initiatives.

Ultimately, a cross-sector initiative to tackle poverty in the North East of England can lead to tangible benefits for the region's economy, bolstering the region's competitiveness and attractiveness for investment.

Summary:
Concerns over poverty, its ever-worsening condition and fears that more could become trapped in poverty are sound concerns that should be seeing wider attention and action. But the answer is not more devolution. The answer lies with a comprehensive plan, designed by experts in a cross-sector initiative to allow the North East to grow and flourish, without staying forever supported by the state, or becoming oversaturated with politicians.

Professor Hayek to the white telephone please, Hayek to the white telephone

Steering the UK economy out of the inflationary storm would always require unusual finesse, but the task would be easier if the Bank of England governor had an unemployment number he could trust.

The problem, highlighted by Andrew Bailey in a recent hearing, stems from deeply flawed labour market data from the Office for National Statistics, led by national statistician Sir Ian Diamond.

It’s possible to work merely with management consultancy platitudes - you can only manage what you can measure for example. Which is, in fact, the complaint being made here. The desire is to manage inflation, for that it’s necessary to have the employment numbers and therefore we desire to have those so that we can manage.

We can and should go back a step into theory. Which is that economies are big and complex and therefore we’re simply never going to have those numbers to the level of detail required for that pinpoint management. This is the rock upon which all clever macroeconomic schemes founder. Not only don’t we know, we can’t know.

For example, we really don’t know how many people there are in the country. Observations of, say, sewage volumes (with, admittedly, some heroic assumptions about diet and so on) are rather at odds with any counts of National Insurance numbers or Census counts. Certainly, anyone who tries to insist we know to within better than 5% either way is on very dodgy ground indeed. OK, maybe 3%.

It’s not just this number either. It’s all the numbers we collect have those error bars. Which means that attempting to fine tweak to within those error bars is going to be a nonsense.

Yes, obviously, a 10% fall - or a 5% increase - in recorded GDP is something to take note of, even panic about. Inflation of such sizes and so on. But in that pointillist detail required by the more ambitious macroeconomic management schemes we’re really just out of luck on that information front.

Sad, but there it is. Which does mean that economic management needs to rely upon the things that can be done. Set up the basic systems properly and leave be. Make sure that incentives are good, the rule of law is tolerably enforced, we’ve not a bureaucracy descending upon economic activity like piranhas upon a corpse, taxes are easy and so on. The outcome becomes something not managed, for that’s impossible, but emergent from the correct set up of the system in the first place.

A little bit of news for Mr. Pennycook

We have what might be called a testable proposition here:

When it comes to housing affordability, we really must get away from the over-simplistic notion that ramping up the supply of new housing will fully resolve the affordability crisis affecting many parts of the country.

Harvard University recently had a report out:

Rental markets are rapidly cooling after a period of significant overheating. Rent growth has almost completely stopped, following historically high rent increases in both 2021 and 2022. In the third quarter of 2023, rent growth plummeted for professionally managed apartments to just 0.4 percent, down from 15.3 percent in early 2022, according to RealPage (Figure 1). While rents slowly rose across property classes, the pace of growth was under 1 percent in the third quarter of 2023 for lower- and higher-quality apartments alike.

This abrupt deceleration was geographically widespread, with rents even falling in some markets. In the third quarter of 2023, rents for professionally managed apartments dropped year over year in 32 percent of the 150 markets tracked by RealPage, including many in the West. Just 1 percent of markets posted rent growth of at least 10 percent in the third quarter of 2023, a sharp turnaround from the previous year when rents in half of the markets increased at that rate. While the slowdown is a welcome change for renters, asking rents still remain well above pre-pandemic levels. Some of the deceleration may be explained by the large number of new units that have come online and pushed up vacancy rates. After hitting a pandemic low of 5.6 percent in late 2021, the rental vacancy rate was 6.6 percent in the third quarter of 2023, according to the Housing Vacancy Survey. The rise in vacancies has been even more pronounced in the professionally managed apartment sector. In the third quarter of 2023, 5.5 percent of these units were vacant, above pre-pandemic averages and more than double the all-time low of 2.5 percent set in early 2022. Vacancy rates in this sector rose fastest in the South, reaching 6.3 percent in the first quarter of 2022.

Now that might be over-simplistic, being merely an example of supply and demand (such Econ 101 is just so trite these days) but it seems to work. Build more housing and the price of housing falls. It’s obviously true that some housing is a Veblen Good - we can’t explain Mayfair without that. But housing in general, yes, Econ 101, simplicity, supply and demand, that works.

Build more housing, enough so that the vacancy rate rises, and housing becomes cheaper. Therefore our plan is to do what? Quite, build more housing. Or even, get out of the way so as to allow the people who actually build housing to get on with building more housing.

This appears not to be what some are proposing:

When making a planning decision relating to development arising from an application for planning permission, the making of a development order granting planning permission or an approval pursuant to a development order granting planning permission, a relevant planning authority (as defined in section 85 (interpretation of chapter 1)) must have special regard to the mitigation of, and adaptation to, climate change.

No, that really is from Hansard, something some are seriously trying to put into law. That whether 23B Burnside Drive can be accompanied by the new infill of 23C Burnside Drive must be tested against the climate change impacts. Which, of course, gives every Nimby in the country the opportunity to shriek that a household should remain homeless because Flipper broiling in the fumes of the last ice floe.

This is, to put it mildly, not getting out of the way so that houses can be built and thereby housing be made cheaper. Even if the observation is over-simplistic.

The actual truth about that Econ 101 is that it does work except for the exceptions. Housing, in the general sense, isn’t an exception.

We're glad Polly is finally recognising basic truths

The insistence that rich people won’t move if taxes are increased is, of course, wrong. The question is never whether any, it’s how many taking how much money? However, this is an outbreak of good sense. Finally:

It’s a done deal – just about. Down at the bookies, you can get 14/1 on a Tory majority at the next general election, while betting on Labour to win, the odds are a measly 1/6. If you need any more confirmation that Labour will form the next government, just listen to the clamour of the wealth advisers telling their high net-worth clients that it’s time to pack their Louis Vuittons.

Well, there we have it. People spending their own money (or for the tax types, not spending it) on their own interests according to their own views of the world is proof perfect. Which is, we agree, rather our view of the world.

Most people most of the time do at least attempt to maximise their own utility. They also pay more attention to doing so when it’s their cash - and their benefit - at risk than any other decision making method. Which is why markets work. Also, why - as Polly now finally admits - the market outcome is the correct one. For it is the one that encapsulates the most human thought about what has, is and will happen.

Cool. So, now all we’ve got to do is get more of life subject to those market - own money - decisions and the world will be a better place, right?

Even Polly now agrees.

No, no, you really cannot point to betting markets as being proof of the contention without accepting that more generally about markets.