Adam Ferguson’s great insight

Adam Ferguson, who died on February 22nd 1816, was, like myself, a graduate of Edinburgh and St Andrews universities. He was a leading figure of the Scottish Enlightenment, and has a memorial in the East wall of St Andrews cathedral, which I usually visit when I go there. He was a contemporary and friend of Adam Smith and David Hume, fellow members of the Select Society.

He studied civil society and is widely regarded as “the father of modern sociology.” He emphasized innovation and technological progress as more important to growth than capital accumulation, and was a firm believer in the possibility of progress.

His most significant contribution, however, was his recognition that human beings could create, through their uncoordinated actions, outcomes that were never designed or intended. He said:

“Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design.”

Hayek took up this notion of spontaneous order, pointing out that markets and economies are the product of human activity, but were never designed in advance from any theoretical blueprint. Hayek developed the point further, showing that the spontaneous order of the market is superior to a centrally planned system. It contains far more information that the minds of any planners could hold, and its information is more immediate, incorporating the day-to-day decisions of millions into its ongoing framework. And it is faster to react, Hayek showed, because it does not need to collect the information centrally in order to respond, but does so immediately at the periphery.

A corollary of this is that when people ask if a planned economy is preferable to “random chaos,” they are asking the wrong question. The alternative to an economy planned centrally by a few is one that emerges spontaneously from individual planning decisions made by millions. The answer is, of course, that the latter is superior, not only at the theoretical level explained by Hayek, but in terms of the practical results it has achieved, results far superior to those achieved by any of the ‘planned’ economies.

Ferguson’s great insight, that human beings create viable systems by the interaction of their individual decisions, lies at the heart of market economics. Instead of having decisions made for them by the ‘enlightened’ planners, people can make their own ones, and in doing so contribute to outcomes that satisfy the many instead of fulfilling the aims of the few.

It's how you tell 'em that matters

Tommy Cooper never told a good joke in his life - the manner of his telling them left audiences frantic with laughter. This seems to be advice for the presentation of statistics these days:

Gender pay gap is getting worse in nearly half of firms, analysis suggests, as critics say forcing firms to report is not enough

Umm, wait, you mean it’s not getting worse in more than half of firms?

The gender pay gap is getting worse in nearly half of companies, new analysis suggests, as critics say forcing firms to report their disparity is not enough.

Four in ten private companies that have published their latest gender pay figures have reported wider gaps than last year, according to the BBC.

6 in 10 have not. We take that to be generally getting better rather than generally getting worse ourselves. But that might just be because we can count to 13 without taking our socks off.

But note what happens next:

“We believe that it should be mandatory for employers to publish, alongside their pay gap data, action plans with specific targets and deadlines.”

Sam Smethers, Chief Executive of the Fawcett society echoed those views, and told the Telegraph: “Initial findings look worrying with 40% of those who have already reported showing pay gaps widening not narrowing.

“Women will be wondering what is going on. “We need to require employers to publish action plans that we can hold them accountable to.”

All must be urged on to ever great tractor production all the same. It really is how you tell ‘em that matters.

The abolition of Identity Cards

On February 21st, 1952, Churchill's new Conservative government, which had campaigned under the slogan "Set the people free," abolished National Identity Cards as part of a campaign against regulations and controls.

The cards had been introduced in 1939 as a wartime measure, anticipating the dislocation of the population that would be caused by mobilization and mass evacuation. The postwar Labour government retained them, citing their need for National Service registration, rationing, the Health Service, family allowances, and post-war credits. Post Office clerks who were uncertain of a customer's identity, could demand to see them.

The police fell into the habit of demanding to see them, even for trivial matters such as overstaying one's time in a parking slot. There was a widespread feeling, expressed in Parliament, that this was un-British, and was more redolent of the practices of totalitarian countries. A famous test case aided those campaigning for repeal.

When Clarence Willcock, a dry cleaning manager, was stopped on suspicion of speeding, the police demanded to see his ID card. He refused on principle, and was convicted and fined at a magistrate's court. He took the case to the Court of Appeal, and although the judgement against him was upheld, Lord Chief Justice Lord Goddard commented that the Act was intended for emergency uses, now over, and should not be invoked on trivial matters. He further remarked that demanding production of the card for its own sake tended “to turn law-abiding subjects into lawbreakers, which is a most undesirable state of affairs." Although he upheld the decision of the lower court, he declined to award costs against Mr Willcock.

In 1952 the Conservative Health Minister, Harry Crookshank, announced their abolition, saying, “It is no longer necessary to require the public to possess and produce an identity card, or to notify change of address for National Registration purposes." Police, public officials and counter clerks were instructed accordingly, and told to use other means of identification such as passports, driving licences and season tickets.

I kept my own Identity Card for many decades, battered and worn though it was, as a souvenir of more restrictive times. A Labour government passed an Act in 2006 to reintroduce Identity Cards, pleading national security concerns. Their action engendered a furore of opposition from people determined to act in defence of civil liberties. The pressure group, NO2ID, formed to oppose it, ran a successful campaign, and in 2010 the Conservative-led coalition government repealed the Act, and destroyed the National Identity Register database that it had created.

Yes, another proposal that we should all live on turnips

We bring good news and tidings of joy. It is possible for Europe to feed itself. Even, it is possible for Europe to feed itself in an organic and environmentally friendly manner:

Europe would still be able to feed its growing population even if it switched entirely to environmentally friendly approaches such as organic farming, according to a scientific paper.

A week after research revealed a steep decline in global insect populations that has been linked to the use of pesticides, the study from European thinktank IDDRI claims such chemicals can be phased out and greenhouse gas emissions radically reduced in Europe through agroecological farming, while still producing enough nutritious food for an increasing population.

See, it can be done!

Not that anyone doubted it could be done of course. The question is, as it always has been, do we want it done?

The IDDRI study, entitled Ten Years for Agroecology, used modelling to examine the reduction in yields that would result from a transition to such an approach.

Reductions, the authors argue, could be mitigated by eliminating food-feed competition – reorienting diets towards plant-based proteins and pasture-fed livestock, and away from grain-fed white meat. More than half the EU’s cereals and oilseed crops are fed to animals. The study models a future in which European meat production has been cut by 40%, with the greatest reductions in grain-fed pork and poultry.

We can’t see any evidence that that’s what people do want. Sure, there’s a vocal minority shouting that that’s what should be desired but that’s a different matter. Humans like meat generally and dislike living on turnips. A solution that insists upon a diet of turnips is not achieving that basic human goal, of maximising utility.

There are many things that are possible just as there are a number of things which please people. The trick is to find the ones that are both - not, as here, to find something already rejected. After all, a diet of turnips was common enough around this time of year in Northern Europe for some centuries. We all gave it up as soon as we could. Which is evidence of a certain desire not to go back to it, isn’t it.

Is the US Postal Service fit for business?

Benjamin Franklin was the first Postmaster General in the US. His operation became the United States Postal Service (USPS, often called the "Post Office") on February 20th 1792, when President George Washington signed the Postal Service Act. It has a monopoly of first class mail and of the use of boxes marked "US Mail," but it has experienced troubled times.

It makes losses into the billions of dollars. The latest year's current loss is put at $3.9bn, and it will not make a scheduled $6.9 billion in benefits prepayments. It still owes over $100bn to its retiree health benefits fund.

Part of the problem is that it has failed to adapt to changing times. It no longer makes big business mailing store catalogues, because people look up online what is on offer. First class mail has been replaced by e-mail in many cases. Most bills are now sent electronically, and such periodicals as survive tend to be often read online.

It has failed to adapt because it is big and cumbersome, and because it is run by government, directed to serve political needs to some extent. The same was true of both the German and UK postal services before they were privatized. It is always a critique of nationalized operations that the monopoly gives them captive customers who do not need to be lured by an attractive service, and the state's subsidy is a disincentive to cost-saving efficiencies.

Users of state-run monopoly services in effect pay twice. They pay once for the service itself as they use it, and again as taxpayers when they fund its subsidies and meet its losses. Funds needed for modernization and infrastructure improvement come not from investors, but from a reluctant government that always has more pressing claims on the resources it handles. That is why state-run services usually seem outmoded and old-fashioned. New technology means that people's habits change, and they change faster than the state service can keep up with.

There is a stronger critique of state monopolies, though. It is that their status magnifies the bargaining power of their employees, and enables them to gain benefits that no private firm could afford. Workers can strike, knowing that the government-backed operation will not go bankrupt as a private firm might, They can do so in the knowledge that government will come under pressure from customers anxious to regain their service, pressure that makes giving in to exorbitant demands an easy option. The USPS is struggling to meet the ongoing pension obligations that it conceded. State-run services tend to be subject to producer capture, meeting the needs of those who run them, rather than of those who use them.

The solution is privatization, as it was in Germany and the UK. President Trump is known to be considering this option in the US. When the company has to attract private investment, and to offer a service that customers will prefer to those offered by rivals, and when it has to cut costs where it can to improve its bottom line, only then does it have the incentives that will keep it on its toes.

An insight into how the law is made these days

From the Commons environment committee, telling us about the perils of fast fashion and clothes being cheap enough that even the factory girls can have a change of them:

“In the UK we buy more clothes per person than any other country in Europe. ‘Fast fashion’ means we overconsume and under use clothes. As a result, we get rid of over a million tonnes of clothes, with £140m worth going to landfill, every year.”

That’s from Mary Creagh and the correct response is “To whom?”

Those clothes being landfilled are worth £140 million to whom that is. They’re not worth £140 million to those who threw them away because they’ve just thrown them away - a fairly clear valuation of zero. They’re not worth £140 million to anyone else either as if they were then people would be collecting the clothes so as to gain that value. Outside government circles £140 million is still more than small change after all.

It’s the next bit that shows that not even Creagh thinks they’re worth that sum. For she calls on a tax to be spent in preventing such landfilling. Some reuse or something perhaps. But if we’ve got to use tax money to subsidise the reuse then the reuse isn’t worth the market price, is it? Even if that market price is nothing, entirely freebie.

All the information we’ve got tells us that these clothes going into landfill are worth nothing. So why should we be spending extra money to save that zero value? But sadly it appears that it’s Ms. Creagh who makes the law here, not you or I.

The importance of Copernicus

On February 19th in the year 1473, Nicolaus Copernicus was born in Royal Prussia in the Kingdom of Poland. Despite dropping out of two university degree courses, he went on to become proficient in astronomy, mathematics, medicine, and economics, and practiced for a time government and diplomacy.

He is celebrated for his book "De revolutionibus orbium coelestium" (On the Revolutions of the Celestial Spheres), a book that created a revolution in thought. For 1,300 years people had supposed from Ptolemy’s Almagest that the sun revolved around the Earth, the centre of the universe. This accorded with what appeared to be an everyday observation of the sun moving across the sky, and with the religious view that the Earth, the abode of humanity, was the centre of God's creation.

Copernicus had formulated his heliocentric view by 1510, but told only close friends, holding back publication of his ideas because of the controversy he expected they would cause. He finally allowed publication just before his death in 1543, the story being told of how a copy of the newly printed book was rushed round and placed into his hands so that he could see it before he died.

It aroused curiosity at first, and controversy later. The Catholic Church banned Copernicus’s book completely in 1616, regarding it as a threat to its authority, and in 1633 convicted Galileo of heresy "for following the position of Copernicus, which is contrary to the true sense and authority of Holy Scripture."

His significance is that Copernicus helped pioneer a scientific revolution that saw observation and intelligence as a pathway to knowledge, instead of using only the interpretation of scripture. Knowledge could be advanced, not by authority, but by competition between different ideas, provided that people were free to assess them, to evaluate them, and to choose between them. It parallels the way in which economic progress can be made by people freely choosing between competing products.

As an economist, Copernicus developed in 1517 a quantity theory of money, a very modern idea, and in 1519 put forward the idea that where there are alternative currencies, the more valuable will disappear as people hoard it and pay out with the inferior one. This is now called Gresham's Law. His truly was a revolutionary mind.

We welcome The Guardian realising this, of course we do

We are entirely happy that The G realises this, we’d just like to see them applying it to rather more of life:

The A380 proves that it’s profit that really makes an airliner fly

Even a great aeronautical achievement like a superjumbo can be brought low by the vagaries of economics

It’s not a vagary of economics it’s the point.

Sure, back two decades the idea of the superjumbo looked pretty good. No one knew it would work but the runes looked like it might. So, what we desire is a system in which people get to try out things that may or may not work. That being what a market based economic system does for us. People get to try stuff out.

We also need a method of deciding whether something has worked. This also being what is achieved by a market based economic system. If people don’t freely and voluntarily buy it then it’s not worked. Even, if enough don’t to mean no profit is made then it hasn’t.

We look forward to the application of this new found knowledge to such things as Sure Start, council housing and whatever else The G thinks our money should be spent upon. That markets work and one way they do is to tell us what we should stop doing.

Kublai Khan – international trader

Kublai Khan, who died on this day 725 years ago, is recognized as one who realized the enriching value of trade, and who implemented policies that massively extended and expanded it. The grandson of Genghis Khan, he completed the conquest of all of China and became the first ruler of the Yuan dynasty.

Formerly separate and isolated cultures were drawn into a continental system that had the re-established Silk Road as its primary transport route. This made for greater safety and security for traders and travellers, and reduced the frequency of tribute payments.

Caravans took Chinese silks, and from the Spice Islands conveyed pepper, cinnamon, nutmeg and ginger to the West. Along the way were picked up Indian fabrics and precious stones, and carpets from Persia. From Europe in the opposite direction went such wares as fine linens, horses and silver to both the near and far Easts. Each side encountered new goods, as did nations along the route, and new markets were developed. The increased volume of trade enriched those who participated in it, and saw the expansion of many of the cities involved.

Kublai Khan was, in effect, an early globalist. He established an extensive Maritime Silk Road, with Chinese vessels plying for trade across the Indian Ocean, and thence to the Persian Gulf and the Red Sea. They ventured to Eastern Africa, and there is even evidence that they may have reached South America.

Of course, along with the traded goods went ideas and people, mingling with and learning from each other. The Yuan paper money, made from the bark of mulberry trees, and backed initially by silver, copper and coin, was one example. It facilitated and reduced the costs of trade.

We remember Kublai Khan for many things, including his unsuccessful attempt to invade Japan, and perhaps for the stately pleasure dome that he decreed in Xanadu. But on this anniversary of his death we should remember the legacy of his commitment to trade, and his inspired efforts to make it safer and easier. China's new Silk Road today is a direct descendent of his own. He recognized what many leaders today do not seem to understand, that a wide and expansive trade generates prosperity in its wake, a prosperity that uplifts the lives of peoples.

Well, yes, but perhaps this is the point?

Fracking for natural gas is indeed controversial. And there’s certainly a theoretic possibility that it could trigger an earthquake or two. So, sensibly, let’s have some rules about earthquake triggering from fracking. Being able to heat our houses, cook our dinner, in 2030 may or may not be worth Lancashire tumbling to the ground in its entirety.

But the question then becomes, which or what limits?

UK fracking industry pushes for review of earthquake limits

Firms say regulations forcing operations to stop if they trigger tremors greater than 0.5 magnitude threaten viability

0.5 is, as these things go, a triviality. This past month has seen 13 earthquakes in the UK of this or greater size. We’re unaware that Newdigate is - having suffered a quake near 100 times greater than this limit - now rubble.

We have a certain suspicion here. The limit is there to make sure in the unviability of the process:

Opponents said the lobbying drive showed companies were in trouble.

“We are seeing an industry that is desperate and knows it’s not viable. I think you’re really seeing an industry in its death throes,” said Jamie Peters, an anti-fracking campaigner at Friends of the Earth.

Those “safety” rules are set at a level designed to make sure that fracking cannot be done. That sounds like a really good reason to revisit them.