Just to remind, incentives matter - even for professionals
British General Practitioners - the gateway to the services of the National Health Service - get paid through capitation fees. An amount per person who is on their patients list.
More than a third of GPs refused to offer routine appointments during the last year, a poll has revealed.
Covid absences, unprecedented demand from patients and staff shortages have created significant pressures in primary care, GPs said.
More than 800 family doctors were surveyed by Pulse and 35 per cent reported that they had stopped taking bookings for routine appointments at some point in the last 12 months.
One GP in Liverpool, who asked to remain anonymous, said his practice had switched off the online booking system overnight and at weekends due to the overwhelming demand.
He told the magazine the workload level would be “unsafe” to operate and the practice still sometimes turns off the booking system during the day.
The incentive therefore is not to actually see - or treat, heavens above no - patients. It is to have a list of patients who may or may not get seen - or treated.
As we’ve been known to point out the first of the two things that everyone should know about economics is that incentives matter. It’s possible to muse that incentives are misaligned here.
Possible even to go further and suggest that the incentives be realigned. Pay GPs for actually seeing patients - or even, wonders, treating them - and marvel as behaviour changes to match the new incentives.
After all, none of us has great problems in getting in to see a lawyer, who are indeed paid by the time they spend actually dealing with us. So, yes, why not pay doctors as we do lawyers, they both claim to be professionals, why not pay them the same way?
GPs are currently paid not to see patients. Is it really any wonder that it’s difficult for a patient to see a GP?
The big (government) cheese
Observers of the British media might form the conclusion that politics in the UK is somewhat cheesy. In the United States, however, government is literally cheesy. In underground cellars, converted limestone mines, and caves kept at an exact 36°F are stored 1.4 billion pounds of government-owned cheese.
Government started the scheme of buying surplus milk products to help dairy farmers by maintaining their prices. It mostly consists of processed cheese and dehydrated milk powder because these have the longest life spans. US processed cheese is typically composed of various different types of cheeses blended together with other ingredients such as emulsifiers. It was widely used by the US military in World War II, and in US schools since the 1950s.
There was a UK Government cheese in World War II when it was officially decreed that as part of the war economy and rationing, only cheddar cheese made in a certain way would be broadly available to consumers on a national scale. It was unofficially known as “government cheddar,” and was rationed. This was phased out after the war ended, but US Government cheese goes on.
When Ronald Reagan became President in 1981, he ordered the distribution of 560 million pounds (250,000 metric tons) of government-stockpiled cheese. It went to welfare beneficiaries, food stamp recipients, and the elderly receiving Social Security in the United States, as well as to food banks and churches.
The surplus has built up again, however, and is currently given out regularly to prevent the stockpile growing ever larger. In 2016 the government decided to distribute approximately eleven million pounds of cheese worth $20 million, to give aid to food banks and food pantries from across the United States. The purpose was to reduce a $1.2 billion cheese surplus that had been at its highest level in thirty years, and to stabilize farm prices. Currently eligible senior citizens over the age of 60 are provided with one 2-pound block of processed cheese every month, supplied by participating dairies.
The policy is controversial because the processed cheese is high in saturated fat, cholesterol and sodium, and is regarded as unhealthy by many food scientists. In a difficult-to-believe scenario, the US Department of Agriculture has run campaigns promoting greater consumption of dairy products, while the US Department of Health has run campaigns urging less consumption of them.
Although US government cheese reportedly melts readily and is therefore easy to cook with, its taste and texture are regarded with disdain, even by those not already disdainful of American cheeses. Its production has nothing to do with demand, but is down to the lobbying of the American Dairy Association.
The US government cheese stockpile is what happens when government interferes in the market to ‘protect’ producers. It calls to mind the EU’s once infamous butter mountains and milk lakes, and its current mountain of milk powder. Unfortunately, many of the countries that face food shortages have populations with a high degree of lactose intolerance, ruling out the obvious solution.
One unnamed official of the US Department of Agriculture reportedly suggested that the best thing that could be done with the surplus cheese would be for the government to dump it all in the ocean and not buy any more. It would perhaps be preferable to the current policy.
Nationalised health care
It’s the stunning efficiency with which government plans and manages health care which makes the NHS that Wonder of the World admired by all those poor benighted Johnny Foreigners who do not get to enjoy it:
A hormone replacement therapy (HRT) substitute could be available across the country within days if the Health Secretary cut NHS red tape, an MP has said.
Shortages of HRT have forced menopausal women to share supplies, buy privately or go without the “lifesaving” medicine.
Sajid Javid, the Health Secretary, will meet drug manufacturers on Thursday to try to fix the shortages.
He will be joined by Madeleine McTernan, who was appointed as the head of the HRT supply taskforce last week.
We have a taskforce no less. And a shortage. Forcing that consideration of which way the causality runs.
There does seem to be a simple solution too:
Theramex, manufacturer of Bijuve, a substitute for Oestrogel which is facing significant shortages, said it had ample supply to meet the demand but NHS bureaucracy meant it was only available in three areas of the country.
About 150 NHS hospital trusts and 130 NHS clinical commissioning groups have yet to approve Bijuve on their formularies and only women in Somerset, Norfolk and Oxford can access it.
Tina Backhouse, UK country manager of women’s health at Theramex, told The Mail on Sunday that the supply shortages could be eased within days if the product was added to all formularies.
Now of course, that’s the manufacturer suggesting a solution that would increase said manufacturer’s sales so the appropriate level - and probably higher than Public Health England’s suggested guidelines - levels of salt should be taken with that.
And yet we do still have that example of the efficiency of government run health care, don’t we? The “not very much” efficiency.
One disagreement though:
“It would be better for there to be a national formulary”
No, it wouldn’t. For there were then we’d have that majority refusal to supply imposed upon all, wouldn’t we? We’d not in fact have those three areas supplying without problems, thereby showing that the substitution does in fact work.
As we’ve been known to point out it is competition - and a different formulary is competition - that improves productivity.
Just what should the critical minerals strategy be - less perhaps?
We can tell that something’s coming to a head. When two of the major Sundays publish long pieces on these critical minerals then clearly a political decision on critical minerals is imminent. The Sunday papers being where you go to influence future political decisions.
Last year, the UK formed the critical minerals expert group, and is due to publish a “strategy” on minerals soon.
Ah, yes.
So, the Sunday Times gives us a long piece on how those inscrutable Chinese are doing everything really cheaply and efficiently and don’t we just have to do something about that?
“The challenge the West has is you are competing against a Chinese processing industry that’s years ahead and is already very cheap,” noted Sanderson of Benchmark. With raw material costs going up, carmakers will be under pressure to choose the cheapest supplier; these are unlikely to be European processors,”
Cheap and in volume - we’d better get government involved to make sure that doesn’t happen!
The Sunday Telegraph:
The Western world has become tangled in a near Chinese monopoly of rare earths - the materials required to make the magnets required for all manner of items in households, industry, military and the green transition.
China provides around 98pc of the EU's requirement for rare earth metals. While the minerals could be mined in many countries, Beijing has invested in the production capacity required to process and export them worldwide.
Terrors, the division and specialisation of labour, added to trade, has led to cheap and efficient supply. Such a terror that requires a solution.
By the end of that piece it becomes an advertisement for Pensana, who are building a rare earths separation plant on Teesside.
As to what actually should be done. Lithium at $70,000 a tonne is a self-solving problem. The lower levels of stock markets are infested with the traditional two men and a dog companies claiming to have a lithium deposit. Why wouldn’t they be, with lithium at $70,000 a tonne? There is also a flood of real capital into sensible projects. Plus entirely new extraction technologies - why wouldn’t there be with lithium at $70,000 a tonne? Adaptations of desalination technologies now mean that lithium can economically be extracted from brines where there’re only 50 or 100 parts per million Li. We’re getting close to where mere seawater is a source and with lithium at $70,000 a tonne we might well be there in fact.
Lithium is likely to follow the same path it did last time. Everyone got terribly excited back around 2013 and some of the mines funded then have already gone bust - on the grounds that so many got funded that the marginal mines went bust.
More specifically with the rare earths the production of rare earth concentrate is trivially simple. Cheap too - values of such concentrates are in the $x,000s per tonne and x is not just a single digit number but a low one. What costs the money is the separation into the individual elements - a tolling price for that service is perhaps $20,000 a tonne. It’s the processing that matters, not the mining.
At which point we could indeed get all Mazzucato about this and demand that government have a plan, intervene. The first stage of which would be to change current environmental law so as to allow people to build rare earth separation plants.
The terror is that rare earth ores will near always contain thorium. That’s radioactive, even if lightly so, and it does need to be extracted. The actual written laws about what you do next are sensible enough and on paper it’s not a grand problem. Extract and store and there we are. The reality of trying to get the permissions and licences to do so is that it’s damn near impossible. So, it’s damn near impossible to gain permission for the rare earths processing cycle.
20 years back that mine in California closed at least in part because the process was leaking thorium back into the desert that the thorium had come from. Shifting it around a bit was an environmental crime, d’ye see? Or there’s a plant in the US that can process the material under current licences. Actually, no problem at all. Except it doesn’t have the licence to be allowed to do so - thanks to the State of Utah. It has all the licences required except the one that allows it to ship rare earths out of the plant. An old French plant closed because its thorium storage capacity was full and it wasn’t allowed to build more.
The problem isn’t with capital - that’s abundant in this space. It’s not with technology, nor even expertise. It’s the paperwork to be able to go do something. So, relax the paperwork and it would get done.
We can even go that one Mazzucato stage further and insist upon government actually spending money on the problem. There are a number of possible technologies that would make this separation less costly. Bring that price down from that $20,000 a tonne. We know of one proposal out there for a £1/2 million pilot project for example - the major problem with it being that it would cost at least £1/2 million to get the licences to do it. Plus some indeterminate amount of time which again just adds to the costs. That regulatory uncertainty means private capital is rather wary.
That is, where the market is being allowed to operate, with lithium, high prices are doing their usual job of being the cure for high prices. Where markets are being constrained by regulation - rare earth processing - the problem is not being solved.
Therefore the critical minerals strategy needs to be less regulation constraining markets. And if you believe that that’s what the British government’s critical minerals strategy is going to be can we interest you in this fine bridge we’ve got for sale? Only one little old lady owner, very few miles on the clock…..
At last, something in The Guardian we agree with
Well, for the first time since it left Manchester, and Manchester liberalism, behind that is:
At a time when household budgets are already being squeezed, it is more important than ever that companies feel the heat of competition to force them to keep prices down. But across too much of our economy, that isn’t happening.
Competition is indeed a glorious thing. It’s both what keeps prices down and also drives the productivity increases which make us all so much richer over time. This applies to corporations, of course it does, but we’d just like to note that it applies to corporations, not just companies.
A corporation having wider meanings than just a company. The railway system is, for example, a corporation in the wider sense. So is whoever provides the buses. Farming as a whole in the UK can be thought of as a corporation - the NFU certainly acts like one often enough. All of these suffer from competition in exactly the same way that Sainsbury’s, Waitrose and Morrisons have suffered from the irruption of competition by Aldi and Lidl. Those company corporations suffered so that we consumers could benefit - because the competition keeps prices down and improves productivity. Those other corporations should too.
Which then tells us what we should do about health care of course. We can’t sell the NHS because the only revenue stream is us taxpayers so who would buy it? But then we don’t want to sell it anyway because if sold it would still be that monopoly not subject to the competition which improves prices - which here would be a smaller call on taxpayers - and productivity - here actually curing people of things that can be cured, an activity the NHS is pretty terrible at compared to other health care systems.
What we need to do is break the NHS up so that it is subject to that competition which improves prices and productivity.
How lovely of The Guardian to make our point for us.
It's possible to think that some people haven't quite got the point
Those manganese nodules down there in the abyssal deeps, there’s a fairly concerted move to get them dragged up to feed the renewables revolution. Also a fairly concerted move to make sure they don’t get mined at all:
Louisa Casson, a Greenpeace campaigner, criticised the industry for running the conference and banks for considering investing in the “dangerous and unnecessary” projects to “make a quick profit”.
“This destructive new industry wants to rip up an ecosystem we are only just starting to understand,” she said. “[They are] aiming to make a quick profit while our oceans and the billions of people relying on them bear the costs.”
Well, yes, we all knew Greenpeace were bananas - build absolutely nothing anywhere near anywhere.
This being The Guardian of course certain details manage to escape them:
The hoped-for gold rush lies thousands of miles away on the bed of the Pacific Ocean, where trillions of potato-sized nodules of rare earth elements
Umm, no, they’re nickel, cobalt, copper, manganese, none of which are rare earths. Anything to do with financial numbers confuses of course - this is The Guardian:
expected the ISA to agree a payment regime that would hand mining companies a post-tax profit of 17.5%.
No, it’s for an internal rate of return, IRR, of 17.5%.
But details, schmetails, except we do love this proposal, which does seem to be wholly and entirely missing the point:
The African Group considers that this philosophy alone is insufficient. More specifically, the African Group will only support a payment regime that demonstrably:
a.) results in deep-sea mining contractors facing rates of payment (an overall burden of taxation)
that are within the range of those prevailing for land-based miners;
b.) results in substantial and fair compensation to mankind whenever deep-sea mining occurs; and
c.) either i.) constrains production from deep-sea mining to a level that does not result in lower
metal prices and a loss of government revenue from land-based mining; or ii.) results in high
enough revenue from deep-sea mining for governments with revenues from land-based mining
to be fully compensated.
We grasp the fully compensated part. That’s just the countries which currently host mines trying it on. Shrug, commercial negotiations are about trying it on and seeing what one can make stick.
But don’t you love that idea? A new mine may only be opened if it doesn’t reduce the prices of the metals mined? Rather missing the point of opening a new mine really.
That demand is actually that the current mines must have a cartel over any new mines to protect their profits in perpetuity. Given that this is a UN driven process don’t dismiss the possibility of it happening either.
Perhaps this international negotiation thing isn’t in fact quite the way to manage new technologies?
Let's just not have fresh food checks then
The Guardian tells us that checks on fresh food from the remnant EU are to be delayed again:
The delays could push back the full implementation of Brexit controls until 2023, sources said, with physical checks removed and a potential relaxation on the requirement for import of products, animals, food and feed system (IPAFFS) paperwork.
We’ve not had such checks for near 18 months now. In fact, we’ve not had such checks for some four decades if we include the time we were inside the EU.
The absence of such checks in the near 18 months since we left has produced no problem that anyone has reported upon. And we would have been told if there had been some outbreak of turnip trichinosis, shallot shigella or equine lasagna - that last being a real one and one that happened during our membership period.
The benefits of such checks would therefore seem to be zero. The costs of them will be something above zero. Doing something that costs but which gains no benefit at all is one of those things we shouldn’t be doing - it makes us poorer.
Yes, of course, it’s possible that the absence of checks could lead to problems. But having tried it for that near 18 months we’ve now found out that the could is actually does not. One of the values of experimentation is that we move from that world without the Rev Bayes to one with his insight. Given that we now have real world evidence we can assign a probability to the possibility of problems with not having checks. It’s zero.
So, let’s just not burden ourselves with the costs of those checks. For they’re not needed.
We can gain the same policy advice through another construction as well. The r-EU has armies of inspectors wielding their clipboards all over the fresh food production system. This was good enough for us while we were inside that system. Now we’re outside those r-EU inspectors are still there, doing their wielding. There’s absolutely no point in our checking their work, as we didn’t used to, so let’s not bother ourselves with the cost of doing so.
That is, the r-EU itself is already carrying all the costs of inspecting the fresh food they send us so why should we bother?
The Guardian on corporate profits
The Guardian is shocked - shocked - that corporate profits have increased.
The analysis of Securities and Exchange Commission filings for 100 US corporations found net profits up by a median of 49%, and in some individual cases by as much as 111,000%. Those increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or bumped dividends to enrich investors.
Given that the purpose of a company is to enrich investors we find ourselves very relaxed about this, very relaxed indeed. It is competition which benefits consumers, not the capitalism part so much.
We would though argue slightly about some of the detail:
Steel Dynamics profits increased 809%. The company was “not materially affected by inflation” as higher prices “exceeded” increased supply chain costs.
Well, yes, tariffs on imported steel will have that effect upon a domestic steel producer. Tariffs are the deliberate choking off of the competition which benefits consumers after all. If this noting of the profit rise had been accompanied by The Guardian calling for abolition of the tariffs then we’d be right there with them. But it isn’t is it? We’ve the capitalists being blamed for what the government has deliberately gone out and done.
Fertilizer giant Nutrien’s profits shot up by about $1.2bn on “higher selling prices [that] more than offset higher raw material costs and lower sales volume”.
One of the things Nutrien does is make nitrogen fertilisers. The price is set globally, N. America enjoys lower natural gas prices - fracking - than the rest of the world, so a N. American nitrogen fertiliser manufacturer will enjoy super profits as a result of fracking. The solution to such excess profits is to allow fracking elsewhere - Guardian?
Concentration is particularly pronounced among commodity companies, a problem highlighted in the grain market. CPI data shows bread and cereal prices increased by 30% and 7% between 2019 and 2021’s fourth quarters, while wheat skyrocketed to an all-time high in March as war largely eliminated Ukrainian and Russian crops.
Meanwhile, four large grain producers control about 90% of the market. Among them are Archer Daniels Midland, whose profits jumped 55%, and Bunge, whose profits swung by about $280m. Three companies control 73% of the cereal market.
Those are not grain producers, farmers produce grain. They are grain traders and transporters.
There are indeed things that can be done to reduce corporate profits if that’s what is desired. The Guardian doesn’t suggest any of the useful ones - pity really.
Nuclear Doublespeak
The government waking up to the importance and urgency of new nuclear power generation is good news indeed but it may not happen with the speed the announcements imply. The nuclear industry employs some of the finest brains in the country but not all of them are dedicated to what is best for the UK. Some are more committed to their own interests. They are the members of SPAVIN. After procrastinating for 12 years, the Secretary of State told an expectant Commons, in January, that a Sizewell C decision might be made before the end of this parliamentary term. SPAVIN is to blame.
If you wonder why it takes at least four years of discussions with the Office for Nuclear Regulation (ONR) before an application for a new generation plant can even be submitted, SPAVIN is to blame. And then it takes another two years or so to consider it. And the Department of the Environment, Farming and Rural Affairs, has to carry out its own multi-stage review in parallel. The US process is carried out by the Nuclear Regulatory Commission much faster. Certified pre-approved "off-the-shelf" designs and early site permits allow approval for a reactor site to be "banked" for future use. The USA’s single license combines construction with operating and can be acquired in only a year (p.10) compared with six in the UK.
If you have never heard of SPAVIN, that is because it is a secret society: the Society for the Protective Assertion of Vested Interests in Nuclear. Members’ cover is good because they practise the opposite of what they preach. The longer and the more complex, the more consultants put in the bank. For example, recommendation five of the Nuclear Industry and Research Advisory Board’s (NIRAB’s) 2020 report to the Department for Business, Energy, and Industrial Strategy (BEIS) reads “UK investment in nuclear fission should be leveraged effectively through international R&D programmes.” Apart from demanding £1bn for five years of unspecified research, international programmes are being ignored (“foreign stuff is too risky”). One Small Modular Reactor (SMR) is planned to be available by 2030 and Advanced Modular Reactors (AMRs) will be considered in the next decade. SMRs and AMRs are small reactors that can be transported on the backs of lorries. The former are used in nuclear submarines and both are available today. In short, reality does not match the rhetoric.
The rot set in when some halfwit, back in 2011, set the ONR up as an agency of the Health and Safety Executive (HSE), i.e. the government department that stops one doing whatever one should be doing. When the Admiralty, Air Ministry and War Department merged in 1964, the HSE’s equivalent was then also considered as the parent body but the government decided the MoD would make a better job of shrinking the armed forces to the point where they would be no danger to anyone.
The moral of this sad tale is that ONR and the rest of the public service nuclear sector should be focused on providing the most, and of course safest, nuclear power to the UK soonest. Members of SPAVIN need to be detected and rooted out. The UK can only learn from best world practice, if we do what they do today and stop chuntering on about leading the world in nuclear development 60 years ago.
Prototype Ferries - A Bridge Too Far
Scotland’s ferries, owned and operated (as Caledonian MacBrayne or ‘CalMac’) by the Scottish government, have become a disaster for the 70,000 people who live permanently in the islands served by their ferries — and the thousands of business, visitors and tourists who rely on these lifeline services.
Ask them, and you will hear only complaints about incompetent management, the chronic unreliability of lifeline services, ageing ships that suffer constant breakdowns, fraught nerves, missed connections and abandoned hospital appointments, irregular supplies in the shops, lost business and more.
Yes, Scotland sometimes has rough weather. But that does not stop ferries running reliably in Norway or Canada. But then most ferry operations there are performed by private companies who know they face competition if they fail customers.
Cal Mac is a state-run operator and competitors are not allowed. The ships’ owner, Caledonian Marine Assets Limited (CMAL), also runs many of the harbours. Both are owned by the Scottish government. As is Ferguson Marine shipyard commissioned to build the two new dual-fuel car and passenger ferries.
This lack of competition — and CalMac’s domination by the RMT union — might explain why Scotland has probably the oldest ferry fleet in Europe, with staffing levels almost twice the European average.
It might also explain why the decision to update the fleet with two dual-fuels to serve CalMac’s busiest routes (Arran and the triangular route between Uig, Tarbert and Lochmaddy) has descended into farce. Political dithering meant that by the time the decision was made, much of the fleet was already ending its design life, leaving CalMac scuttling around to fill the gaps caused by frequent breakdowns. Rather than use a true and trusted design, two completely new ships were commissioned — each different but both massive, carrying 127 cars and 1,000 passengers.
And of course the new ships had to be ‘green’ — capable of running on marine diesel or liquefied natural gas (LNG). Which was a brave move, given that there no pure LNG ferries yet operate anywhere in Europe. Unsurprisingly, the design and build problems multiplied. The ships are now predicted to be delivered five years late. Meanwhile, passengers face daily disruptions.
The budget — already enormous for island ferries — has escalated too. The original £97m estimate took no account of the duel-fuel design challenges. The final bill could rise as high as £400m, according to one former government shipbuilding adviser — and that doesn’t even include the shore infrastructure, such as LNG storage facilities.
Kevin Hobbs, Chief Executive of CMAL, denies the idea that the two new ships are over-ambitious prototypes, saying “hundreds of LNG vessels have been built and are operational across the world.” But then most of those are designed for long-haul tanker/container fleets, not island-hopping ferries. Operators are generally cautious about using LNG.
The special equipment needed to ship, deliver and store (or ‘bunker’) LNG impose significant costs. For most ports, the cost too big and the risks associated with storage are too large. For example:
the extreme low temperatures (-162°C) requiring special materials for storage
the need for more storage space of up to 150% of fuel oil storage space.
the dangers of leaks, both due to the extreme cold and the risk of asphyxiation (the gas is odourless and colourless, making detection virtually impossible)
the need for a strict separation of gas and air — burning gas can only be extinguished by removing either the oxygen or the gas
as venting to air is not an option, a means to deal with boil off gas is required.
But the main risk is from Boiling Liquid/Expanding Vapour Explosion. That can be caused by a rupture in a storage facility, allowing the liquid gas to evaporate too rapidly for the valve systems to withstand.
Nor are LNG’s ‘green’ credentials very solid. It is still a fossil fuel and lower-carbon options may well supersede it. The UK’s LNG is currently imported mainly from Qatar. CalMac’s supplies will have to be driven hundreds of miles from the Isle of Grain facility in Kent. And the Danish firm handed a £5m contract to build two huge underground tanks to store the LNG for the new CalMac ships have revealed they will not be ready until 2025, meaning that until then, these ‘dual-fuel’ vessels will have to run on diesel anyway. It's all a classic example of a pipe-dream specification that doesn’t consider the infrastructure costs needed, nor subject these requirements to rigorous examination by an independent review team.
Meanwhile, the RMT and everyone else in the nationalised ferry system has resisted the idea of allowing in competitors in to fill the service gaps. They even rejected the idea of bringing in the Pentland Ferries standby ferry MV Pentalina, which had conducted successful trials on the Arran route. During the trials, the RMT wrote to the Maritime and Coastguard Agency, alerting them to “significant unauthorised alterations to the superstructure” of the Pentalina. Those alterations mostly amounted to the removal of a fridge from the on-board servery, which consequently had an unintended impact on the fire separation between the galley and the passenger lounge — a ‘problem’ that could be fixed in hours. The fact is that the RMT don’t want to be shown up by any competition.
So islanders’ lives and livelihoods remain blighted, because of ideology, politics, bureaucracy and resistance to competition. Isn’t it time we ended this whole charade?