One of the difficulties in economics is isolating the effects of particular actions in a very complex world. If we cut income tax this year and next year tax revenues are a little higher, it’s tempting to attribute that to the tax cut.
We would not say, ourselves, that we are greatly in favour of the burkini and other such manifestations of Islamic prurience. Yet we would, as with people saying things we might not agree with, insist that the populace should be allowed to dress themselves in any such manner that doesn't actually frighten the animals.
We've another of these dirges about how the libraries are under such great threat:
Nearly 350 libraries have closed in Britain over the past six years, causing the loss of almost 8,000 jobs, according to new analysis.
In a controversial move that sparked protests by authors including Philip Pullman and Zadie Smith, councils across the country have shut their reading rooms in an effort to make deep savings.
Children’s author Alan Gibbons warned the public library service faced the “greatest crisis in its history”.
All of which brings out our inner Karl Marx. Who did insist that the forces of production (ie, technology) determined social relations. And if we're to be a little more narrow about this, technology determines, or at least should, how we go about doing certain things. The economic historian Brad Delong has long pointed out that the university teaching style of a lecture is really just a hangover from medieval days. When books were vastly expensive (a scholar might hope to accumulate a library of perhaps a score volumes over a lifetime) then having one person reading that very expensive product to 200 made some sort of sense. When a copy of the book costs less than the hourly wage of the reader perhaps less so.
So it is with libraries. When books were much more expensive than they are today then increasing the Solow Residual (in exactly and entirely the manner that Uber and so on do today, the sharing economy) through reuse and lending made great sense. But technologies change, relative prices change. It may or may not be true that we have reached that tipping point just yet, where the value of the books being lent is less than the cost of running the lending system, but we think we can all see that that is going to happen at some point.
The point is thus not that libraries are closing, nor that we should all fight the power to prevent it. What should actually be the discussion is, well, do we need libraries any more? And if we still do then when won't we?
But of course, as C. Northcote Parkinson pointed out, there's nothing as conservative as a bureaucracy considering its own existence.
Almost everyone on the libertarian free-market side recommends a similar top ten books, including the classic works of Hayek, Popper, Friedman and the others. They are in my top ten, too. However, I have drawn up a second list, one of books less celebrated, but which sustain, if more obliquely, a similar philosophical outlook.
That Tesco's brands a few of its products with the names of fictitious farms is amusing, as is the outrage that this has brought forth from the usual suspects. But then matters take a turn for the worse as we get a question of such driveling stupidity as to potentially make our brains leaks from our ears. Or possibly to ponder whether this has already happened to the questioner. We refer to this from Yvonne Roberts:
How have we allowed a system to emerge that squeezes the whole supply chain in the name of profit and seduces us into ignoring our carbon footprint for that dubious consumer privilege called “choice”?
For this is the point and purpose of having an economy in the first place. Both Adam Smith and Frederic Bastiat tell us that we must always look at economic questions from the point of view of consumption. And we can and do go further than that ourselves: the point of this whole economy thing is to maximise the consumption possibilities of the population. What is to be consumed, how such consumption is to be valued, being the choice of said population. If choice is what said people value then an increase in such choice is an addition to the value they gain from consumption: which is, again we insist, the reason we have this whole structure of markets, exchange, production and all the rest. This is the very purpose of our efforts: to increase consumption opportunities.
Profit is simply a method of keeping score along the way. If you make a profit in your production process then that means that you are adding value. The value of your outputs is greater than the value of your inputs. More accurately, the alternative uses of those inputs would produce less value added for consumers to enjoy. Thus profit is a good thing, losses bad, for losses indicate that you are subtracting, rather than adding, that value which can then be consumed.
If growing a pig in Belgium, slaughtering it in Germany and eating it in England produces more value for the consumers to consume than to grow, slaughter and consume a similar pig in England then so be it: this is the very point of it all, to produce the greatest value of output that may be consumed from the limited resources at our disposal.
Choice, consumers, consumption, these are not things to be disdained from the comfort of an Islington eyrie, they are the entire damn point of having a society or an economy in the first place.
Take the Easter egg. The salt may have come from China; palm oil from south east Asia; whey from New Zealand; sugar from the Caribbean; cocoa from South America, on and on. Britain imports food from more than 180 countries.
Ain't it just fantabulously wondrous?
School competition works in exactly the same manner as other forms of competition that is. It's something that happens at the margin, that margin then dragging up the performance of others:
There is no evidence that academies perform better than council-maintained schools. The white paper highlights impressive improvements in primary schools – 85% of those are still maintained. 82% of maintained schools have been rated good or excellent by Ofsted, while three times as many councils perform above the national average in terms of progress made by students than the largest academy chains. Where a school is failing, there is no question that action must be taken – but converting every school to an academy will not tackle those issues.
Think of a different arena to study the effects of competition. We know very well that the firms who export are those at the productivity boundary: exporting firms are near always significantly more productive than the other domestic firms in that same sector. Now think of the flip side of that statement: imports from Germany into Britain expose British companies to the finest and most productive German forms. This is one of the major channels by which trade improves productivity. Domestic firms must compete against those imports and near by definition those imports are coming from firms with greater than average productivity. Thus the domestic firms have to pull their socks up.....or be replaced by those who do.
Imports are not, of course, a majority of the UK economy: but that exposure to the best does improve matters over the whole economy. Now back to academies and schools: that some small portion of the education system are academies is exactly what, entirely analagous to that effect from trade and imports, is improving the non-academy state sector. To state that non-academies are improving too is not some symptom of a failure of the program, it's evidence of the success of the program: competition works.
At which point, turning all schools into academies. If it works, as it does, if it's working, as it is, then why not? After all, we do all believe in evidence based policy making, don't we? Good, academies, the competition and freedom to experiment that they bring, are improving the school system by their existence. Thus let's do more of it so as to have an ever better education sector.
Unless, of course, we'd prefer to return to the policy based evidence making of yore which insisted that competition was a bad thing....
We'd like to leave aside our well known biases on the subjects of the European Union and the NHS and make a still important point. Brexit itself is going to make no difference at all to domestic policy: what will is the policies adopted once the UK is again free to adopt whichever policies it wishes. And the NHS, sure, we're not wholly in favour of the current form of the organisation and think the same provision can be done better. But leave those both aside and consider this statement:
Norman Lamb, the Liberal Democrat MP and former health minister, backed Hunt’s EU stance.
He said: “I don’t agree with Jeremy over the current funding of the NHS.
“I’ve been very clear that I’d like to see the government investing more in the NHS and social care. But we could not even have that debate if we vote to leave the European Union.
Spending upon the NHS is not investment. Yes, parts of such spending are: building a hospital which will still be there in 30 years' time is investment. But by far the vast majority of NHS spending is upon wages and consumables and is thus current spending. We could, of course, just dismiss this as being pedantry, a symptom of "investment" to a politician being public spending upon anything said politician approves of. But sadly the issue goes deeper than this.
It is not just an apocryphal story that the original founders thought that after the backlog of problems had been cured then spending upon the NHS would go down: they really did think that it was investment. Get over the hump of untreated disease and costs would decline even as tax revenues from the newly again healthy would rise. That could indeed have been described as investment: if it had actually happened. It didn't of course, that nascent NHS went from consuming 3 to 4% of GDP to the current 9 to 10% and more (all figures are a bit hazy as exactly what is NHS spending is a bit hazy).
We're not going to get to a proper and rational discussion on what amount should be spent on the health of the nation, nor how that should be raised nor allocated, until we get over that 70 year old delusion that health care spending is an investment. It isn't: it might be just, moral, necessary, better organised in another manner, just perfect the way it is. But it's most definitely current spending and must be recognised as such before we can have a proper discussion about it.
For example, the correct question is, at heart, how much of current production of the economy should be devoted to health care? No, not how much should we borrow to "invest" in it, but what portion of current income should be devoted to it? That's what that essential division into capital and current spending aids us in seeing: and given that that's what we must see before we decide thus we must see it. Further, the insistence upon seeing it as current spending aids us in viewing that "how much" question in its proper light: what other things are we not going to have as a result of having health care?
Or as an economist would put it about everything, there are always opportunity costs. Thus the true price of something is what we give up to get it. There is no cute let out by calling it investment and thus that is the correct lens through which to view health care spending whether it's done through the NHS or not. What won't we get as a result of more NHS and is more NHS worth more or less than what we must give up?
After all, we can only find the right answer if we ask the correct question in the first place.
Apparently it is some terrible scandal that local authorities do not build anew those houses that are sold under the right to buy legislation. The answer given to this accusation being that they do, but slowly. What neither side actually says being the important part: local authority housebuilding is simply not a relevant measure of anything interesting at all:
Local authorities in England have replaced one in 10 of the homes sold through right to buy since discounts were increased in 2012.
Government figures show there have been 49,573 sales since the scheme was relaunched, while 4,594 have been started on site or acquired by councils.
About this we are told:
John Healey, shadow secretary of state for housing and planning, said government decisions were “leading to a huge loss of genuinely affordable homes to rent and buy at a time when they’ve never been needed more”.
He said: “Tory ministers have repeatedly promised that every home sold under right to buy will be replaced one for one, but these figures show that they are failing by a huge margin. Only one home is being built for every eight sold.”
That would seem to be a slam dunk, wouldn't it? And yet:
The DCLG said: “Under the right to buy one-for-one additions policy, local authorities have three years from the date of the sale of each additional home to provide an additional affordable property. There were 1,326 additional sales between Q1 of 2012-13 and Q3 of 2012-13. There have been 4,594 starts and acquisitions since Q1 of 2012-13, exceeding the target for one-for-one additions.”
What is not being said is that all of this is entirely irrelevant, The housebuilding statistics are here. Local authorities started perhaps 1.700 houses last year, out of some 150,000 for the country. They're 1% of the market, no more. No, this does not mean that "affordable housing" is not being built (quite apart from the fact that a house people can afford is affordable). Because we simply do not use local authorities to build such housing these days. That is now done by housing associations. They have taken over that 15% of the market that used to be councils.
Local authorities and their activities in the housing market are simply an irrelevance. We don't use then as we used to, we've changed the structure of the system. Bleating about irrelevances is, well, it's irrelevant.
An ever so slightly puzzling piece over in The Guardian. Telling us that we Britons are hugely well off by any historical or global standard, something which is true, and therefore perhaps we have a moral duty to spread some of our good fortune to those less fortunate. Also quite possibly true. We ourselves suggest buying things made by poor people in poor countries, this being what will make them richer. But we certainly have no problem whatsoever with the idea that you, we or anyone else might wish to simply send money to alleviate poverty or other human suffering.
What puzzles is this though:
If, in your ideal world, rich people and corporations such as Amazon and Google would pay more tax, and you believe it’s the government’s job to redistribute resources, it is hard to feel enthusiastic when charities pick up the slack created by cuts. Church-run food banks may have been appropriate in 1816 or 1916, but not now.
The collapse of Kids Company showed such concerns to be valid: with her brown envelopes of cash, Camila Batmanghelidjh oversaw a shadow benefits system on a personality-driven model far preferred by rightwing ideologues to the boring old state.
Well, we'd rather take issue with the idea that Kid's Company was a creation of the rightwing. But that's by the by. A centre left captivated by the idea that throwing money at something was more important than checking what was being achieved quite possibly.
In 1970 the UN set a target of 0.7% of GDP that economically advanced countries should give in development assistance. Sweden, Norway and others beat the UK to it, but last year this commitment was enshrined in British law. Just 12% of individual British donations go to charities working abroad, but it is striking that the UK’s aid budget of around £11bn is close to the total amount donated by individuals each year.
For a person on the median full-time salary of £27,000, 0.7% of their untaxed income equates to £15.75 a month, a couple of pounds more than what the Charities Aid Foundation calls a “typical” gift. On average, then, and if we regard the aid budget as a form of state charity, British people are a bit less generous than their government.
No, that last line is simply not correct. The government takes some £11 billion a year from our pockets and spends it on whatever foreign japes it thinks makes sense. This is not generosity at all: spending other peoples' money on other people does not come under that title. We Britons then dig into our pockets for near another £11 billion a year to send to things that actually have some effect in relieving poverty and other human afflictions.
That is, we are significantly more "generous" than the government, but only if it isn't the government spending the money. Given what the government does spend that money on probably quite rightly so too. Why, we might even suggest cancelling that official budget, returning the cash to the citizenry, and see how much better the little platoons can spend it.
Today's tale of gibbering stupidity from those who would rule us. So, the Transportation Security Administration over in the US has been asking all the people who make locks for travel bags to conform to certain standards. Standards which allow the TSA to have master keys to the luggage being transported by the population of course. There's echoes here of the FBI's fight with Apple, with the more general arguments over the encryption of digital data and so on.
Well, fair enough you might think. At which point the TSA wants to show off how well it does, asks a newspaper to come see how it works. Which then publishes pictures of the master keys. Near immediately these are scanned and run through a 3D printer from those newspaper or magazine images:
THE TSA IS learning a basic lesson of physical security in the age of 3-D printing: If you have sensitive keys—say, a set of master keys that can open locks you’ve asked millions of Americans to use—don’t post pictures of them on the Internet.
A group of lock-picking and security enthusiasts drove that lesson home Wednesday by publishing a set of CAD files to Github that anyone can use to 3-D print a precisely measured set of the TSA’s master keys for its “approved” locks—the ones the agency can open with its own keys during airport inspections. Within hours, at least one 3-D printer owner had already downloaded the files, printed one of the master keys, and published a video proving that it opened his TSA-approved luggage lock.
Forget the gibbering stupidity for a moment and consider the underlying tale here. Any system of security, any system of encryption for example, that has a government backdoor is simply not secure. Theresa May might want to take note of this. We might want to take note of it in fact. It might, just possibly, even be true that we'd like there to be a way for our protectors to study the activity of those who would do us harm. But those backdoors will leak and there will then be no security at all.