Shelter commits Worstall's Fallacy once again

One of us has been banging on about this so often and for so long that it has been termed Worstall's Fallacy. The point being that we cannot decide how much more we must do about something until we account for what we already do about that thing.

For example, the American poverty numbers are calculated before taking account of much of what is done to reduce poverty. Only cash income is considered. But much American poverty alleviation is delivered through the tax system (the EITC) or goods and services in kind (Medicaid, Section 8, Snap and so on). The published official poverty rate is thus around 14% of the population, the number after alleviation more like 4% or so.

We cannot then go around shouting that 14% in poverty is terrible thus we must spend more on the EITC, Snap, Medicaid and Section 8. It may well be true that more should be spent - possibly even less - but the relevant number to be looking at is the 4%, after the effects of what is already done.

And so it is with Shelter's estimations of how many homeless people there are in the UK. They tells us there are 250,000 unfortunates in that position:More than a quarter of a million people are homeless in England, an analysis of the latest official figures suggests.

For the very first time, Shelter has totted up the official statistics from four different forms of recorded homelessness.

These were:

national government statistics on rough sleepers
statistics on those in temporary accommodation
the number of people housed in hostels
the number of people waiting to be housed by social services departments (obtained through Freedom of Information requests)

Temporary accommodation, hostels, those are things we do about homelessness as most of us understand the word - that rough sleeping. This is to commit Worstall's Fallacy, to count as not yet done the very things we are doing to solve the problem.

It's entirely true that hostel living isn't as desirable as a safe and secure home to call one's own. But it's an entirely viable solution to rough sleeping, or homelessness.

The importance of the fallacy is that only by proper measurement can we work out what the next step in our solution should be. Absent serious mental health or addiction problems (and the occasional expression of choice) the problem of rough sleeping is largely solved. For we do have those hostels and people don't have to sleep on the streets, something that was not true say two centuries ago.

What we don't have is those safe and secure homes that all can call their own. And thus that is the problem that should be concentrated upon. And fortunately we know the solution there, blow up the Town and Country Planning Act and successors.

Well done students but you've entirely missed what Martin Shkreli did

An interesting report out of Australia:

A group of Australian high school students have managed to recreate a life-saving drug that rose from US$13.50 to US$750 a tablet overnight after an unscrupulous price-hike by former hedge fund manager Martin Shkreli.

The Sydney Grammar students reproduced the drug, Daraprim, used to treat a rare but deadly parasitic infection, in their high school laboratory with support from the University of Sydney and global members of the Open Source Malariaconsortium.

Dr Alice Williamson, a postdoctoral teaching fellow with the university’s school of chemistry, said she could not stop dwelling on the story of Shkreli, who acquired Daraprim last year through his company, Turing Pharmaceuticals, and almost immediately and exorbitantly hiked the price. The drug is used to treat malaria and to prevent toxoplasmosis infection in people with HIV.

OK, well done those students.

“I couldn’t get this story out of my head, it just seemed so unfair especially since the drug is so cheap to make and had been sold so cheaply for so long,” Williamson said.

“I said ‘Why don’t we get students to make Daraprim in the lab’, because to me the route looked pretty simple. I thought if we could show that students could make it in the lab with no real training, we could really show how ridiculous this price hike was and that there was no way it could be justified.”

Which is to entirely miss what Martin Shkreli actually did. The drug is indeed simple enough to make, it's long and well out of patent and yes, perhaps it should be a $1 a tablet or whatever. As, to some level of accuracy, it is here in Europe and elsewhere in the world. So, it wasn't a patent and it wasn't making the drug that allowed the price rise.

Instead, it was and is the near insane rules that the Federal Drug Administration places upon the manufacture of drugs. Which is why the price rose in the US and did not and has not risen elsewhere.

Shkreli wriggled his way through the regulatory system - it's the regulatory system at fault therefore. The solution is thus a change in the regulatory system, not demonisation of Shkreli nor students making the drug in labs. Because however many Australian or other students show how easy it is to make in a lab the FDA won't allow Americans to take it.

Fix the FDA therefore, nothing else.

Good news from New Zealand

Alex Tabarrok at Marginal Revolution has drawn my attention to an unequivocally excellent bill set to pass with cross party support in New Zealand.

“The Bill effectively removes what is known to be one of the single greatest barriers to live organ donation in NZ,” Mr Reid says. “Until now the level of financial assistance (based on the sickness benefit) has been insufficient to cover even an average mortgage repayment, and the process required to access that support both cumbersome and demeaning. The two major changes that this legislation introduces – increasing compensation to 100% of lost income, and transferring responsibility for the management of that financial assistance being moved from WINZ to the Ministry of Health – will unquestionably remove two major disincentives that exist within the current regime.”

Readers of this blog will no doubt be aware that when there is a chronic shortage of something (as is tragically the case with kidneys) typically the price will increase, and this will incentivise new production. Of course, with kidneys that's not allowed to be the case. It's illegal almost everywhere (not Iran). In fact, it's even worse than that - donating a kidney is extremely costly, it means taking nearly a month off work. Many otherwise very altruistic people simply can't afford to donate, this bill will help them donate. It's not a full incentive, but it does mean that people don't have to go into debt to save a life (or ten thanks to the work of game theorist Alvin Roth). 

Interestingly, how compensation is framed seems to play a lot of the role in whether or not lawmakers get on board. In Iran, they're not buying kidneys but "rewarding altruism". In New Zealand, the bill got support because it was framed as compensating donors for lost wages rather than for selling their kidney.

This is objection to sales is typically based on two plausible but wrong objections.

First, some (particularly religious objectors) argue that allowing money to change hands commodifies the human body. The problem is that this is based on an incredible simplified form of Kantianism. Kant objects to people being treated as merely a means to an end– the merely is the key part. We can't go throughout our day without treating some people as means to an end - e.g. bus drivers, shop assistants, and call centre workers. What matters and is morally problematic is when those people are merely seen as means to an end and not as autonomous individuals.

But it's clearly not the case that by buying and selling kidneys we turn people into mere commodities. For example, take pets. Many beloved family pets were at one point bought and sold in pet shops, but they clearly haven't become mere commodities. 

Second, some object that poor people will be exploited under this system. But, this too is easily dealt with. Exploitation typically is a result of desperation, but it's the buyer and not the seller who's the truly desperate one. Perhaps, sellers might be pressured into the decision in order to pay off a debt collector knocking on the door. If that's the case, then simply legislate that donors have 6 months or more to back out of the decision, that rules out those caught out in a moment of desperation. Others feel uncomfortable that sellers will be mostly drawn from the poorest groups in society, but this shouldn't worry us. The solution here is not to ban poor people from making money from their non-essential organs, but to tackle the underlying poverty through policies that boost the incomes of the poorest.

I'm a little pessimistic on the prospects of proper compensation for kidney donors making its way into law. But, New Zealand's experience shows that gradual reforms can succeed. Hopefully, these reforms will, as economic theory and Iran's experience predicts, save lives. And if they work, maybe that'll be the first step to more experimentation with compensating donors. 

How remarkable, we actually seem to have a conservative minister

We are not Conservatives around here, nor even conservatives. But it is still possible to think that the past had found the correct solution to some point or problem and to thing that progressing beyond that might not have been a very good idea. At which point we find that we do in fact have a conservative Minister in this country - even one that is a Conservative:

Hospital patients could be treated by apprentice nurses under plans to be announced by Jeremy Hunt, sparking a new row about how the government is tackling shortages of health professionals.

The health secretary will say on Wednesday that student nurses can train on the job rather than having to complete a university degree.

The move could allow as many as 1,000 apprentice nurses to join the NHSannually and work alongside fully qualified nurses and “nursing associates”.

This is of course how all nurses, every single one of those NHS Angels, was trained until just a few short years ago. It's also a rather good way of training people to do what is after all a hands on job. Possibly even one of these apprenticeship things which are all the rage, again, these days.

We most certainly do not believe that a general turning back of the clock is appropriate, the world is a very much better place now than it was in the past. But that does still leave room for some of the solutions of the past to have been the correct ones. As, we think, here.

Why Scotland can't afford the EU

In the immediate aftermath of the EU Referendum the SNP reopened the issue of Scottish independence, arguing that since Scotland voted to remain, it should become independent and continue its membership of the EU. It's since become clear that automatic continuation would not be permitted, so Scotland would have to apply from scratch. However, any application would expose a fundamental problem - that its economy and public finances are in no fit state to join.

All new applicant countries must accept the 35 chapters of the EU acquis, including a commitment to join the Euro at some point, and adherence to the Growth and Stability Pact. That imposes two fiscal rules – that government deficits are kept below three percent of GDP, and government debt below 60 percent. Scotland fails both tests. Its deficit last year was 9.4 percent of GDP, over three times the limit, and substantially higher than any existing EU member including Greece. Its debt was around 90 percent, less excessive but still be way too high.

True, other countries have been admitted to EU membership and the Euro despite being in breach of the Pact. Cyprus and Malta were in breach of both rules when they joined, and before that Italy, Spain, Portugal, and Greece all joined the Euro while in breach. However, subsequent events have highlighted the risk of such concessions, both to the applicant country and to existing members. On top of that, Scotland's fiscal record since devolution has been abysmal, with deficits every single year – even when the oil price was at record highs.

The reality is that Scotland is living well beyond its means and its finances have only been propped up by its continuing subsidy under the Barnett Formula. To have any chance of EU membership an independent Scotland would first need to balance the books. And whereas a rebound in oil prices might once have helped, the North Sea is now heavily depleted with production down by two-thirds since its peak. Onshore tax increases are a possibility, but the required scale would be deeply damaging to the economy (eg a doubling in VAT or the standard rate of income tax). More realistically, Scotland could and should cut its high level of public spending, which continues to run 20 percent above English levels.

Of course, the situation would be transformed if Scotland's economy could be strengthened, and the SNP have appointed a Growth Commission to come up with proposals. It should start by recognising that the burden of public spending needs to be reduced, and that needs to happen whether or not Scotland seeks independence and EU membership.

For more detail see Scotland's Overspending Problem, TaxPayers Alliance, October 2016

A possible Labour future

Many left-wingers despair of ever being able to influence events.  With an unelectable leader, a divided party, and the Parliamentary Party in conflict with the constituency members, they fear annihilation at the next election.

I am happy to provide them with a scenario that offers hope.  A Labour MP resigns his safe seat, possibly with the covert promise of a future peerage.  Ed Balls stands as candidate and is chosen, riding the wave of his popularity gained on Strictly Come Dancing.  He is returned with a massive majority in the by-election and promptly challenges for the leadership.  He runs on a left-wing, but electable platform.

He wins the votes of ordinary Labour supporters, and some on the left who want a leader who can lead and can win.  He wins, and as leader he unites the party and runs an effective opposition against the Tories.  Come the next election the choice is between an electable Labour Party with a coherent programme and a charismatic leader and a Tory Party seen as competent and a safe pair of hands, with the kudos of a successful withdrawal from the EU.

It could be a close-run thing.

Because it's our money to spend as we wish

There's a simple answer to this latest little campaign about executive pay:

The government is to outline moves later to make companies justify high levels of executive pay.

Among the measures under consideration are pay ratios, which would show the gap in earnings between the chief executive and an average employee.

Shareholders would also be handed more powers to vote against bosses' pay, while workers would have a "voice" on boards, under the consultation plans.

Theresa May has made tackling corporate excess one of her priorities in office.

There's a complicated answer as well of course:

Though Japanese firms benefit from a high-quality workforce and invest in R&D as much as their US counterparts, they fall behind US firms in terms of their earning power. This column suggests that corporate structures in the two countries could be an explanation for this phenomenon. The findings indicate that CEOs of US firms aim to maximise profits, whereas CEOs of Japanese firms prioritise long-term corporate survival.

American CEOs get paid very much more than Japanese. American CEOs also appear to do a very much better job than Japanese. Our complicated answer would therefore be that higly paid CEOs are worth being highly paid.

However, our simple answer is that up there in the headline. It is not up to the government to tell us what we may do with the money in our pockets. Whether my £5 is to be transferred into a pint, a bumper car ride, a pork pie or a nice healthy salad is up to me. For it is my money.

The money inside a company belongs, after the payments to those with other legal rights to it, to the shareholders. How they wish to deploy that residual, that profit, is up to them because it is their money. If they wish to send it to starving babies in Africa, so be it. Or pay it out as dividends, or build a yogurt knitting factory, or offer it as however much pay they desire to offer to the person running their company for them.

The only justification a company needs to offer to the government or anyone else is: It's our money to spend as we wish.

Why the Danes are the happiest

Over the past few years, Denmark has done incredibly well in The World Happiness Report, ranking number one in 2016, 2014 and 2013 and only missing out on the top spot by two places in 2015. Recently we’ve become more aware of Danish culture and values, as television shows like “The Killing”, “Borgen” and “The Bridge” have flooded our screens, and the craze for self-help books based on “hygge” (which roughly translates as wellbeing but also implies cosiness and homeliness) are set to be the big sellers this Christmas. But before upping sticks and moving to Copenhagen straight away, we should first work out what it exactly is that makes Danes so happy to see if we can recreate it at home.

The most obvious reason for the Danes’ strong sense of life satisfaction and general positive mood is their work-life balance, which is heavily weighted towards the ‘life’ part. The average full-time working week is the lowest of any OECD country at 37.3 hours, equating to less than 8 hours a day, five days a week. Compare this with the US’s average full-time working week (41.6 hours) or the UK’s (42.2) or even Turkey’s (50.5), and it becomes apparent that Danes spend significantly fewer hours at work than most people do.

Over the course of a year and a lifetime, the gap between hours worked in Denmark and hours worked elsewhere widens when holiday is taken into account. Over the course of a year, Danes work 61% of the hours that Indians do and 80% of the hours Americans do, with only Norwegians, the Dutch and the Germans spending less time at work. This is perhaps because Danes have a legal right to five weeks of paid holiday a year so they are encouraged to take time off, whereas in the US there is no legal requirement for employers to offer paid holiday. Furthermore, Denmark tops the list of time spent on leisure and personal care, with an average of 16.06 hours devoted per day to personal activities outside work such as walking, socialising and eating.

Working less does come at a cost though, as despite Denmark’s reputation as an incredibly rich country, the average household net-adjusted disposable income per capita is USD 26,945 a year - considerably less than the OECD average of 29,016. Their levels of higher education, education quality and life expectancy are only just above or in line with OECD averages, and Danes have to commit even more of their income to housing than most OECD citizens.

With Denmark performing essentially mediocrely in health, education and wealth out of the OECD countries, it seems surprising that they made it to the top of the happiness index. The reason why Danes rank as the happiest people lies in their perception and their attitudes. Their voter turnout is incredibly high across all incomes, 96% say they have people they can rely on, their water and air quality is high, and – most importantly – when asked to rate their life in general, their average (7.5/10) was a full point higher than the OECD’s. Perhaps this shows that the Danes’ value slightly different things: they would rather have more free time and less money.

There could be one final reason behind this Danish happiness phenomenon. Researchers at the University of Warwick found that “the greater a nation’s genetic distance from Denmark, the lower the reported wellbeing of that nation”, even adjusting from GDP, culture, religion, the welfare state and geography. In other words, the Danes are simply genetically programmed to be happier.

The Guardian says it's all the Left's fault - we agree

The Guardian tells us that the current state of politics is all the Left's fault, something we agree with:

The Guardian view on France: Fillon v Le Pen is the wrong contest

The shift to the right in western democracies is undeniable. The left shares the blame, in France as elsewhere

Although we go further, it is not a share of the blame but all of it which is to be placed there. We say so not just because it's gloriously fun to bash lefties - but because we do think that the plot has rather been lost.

We here of course are classical liberals, neoliberals even. And we are so because we're really on and of the left if we are to define that in any sensible manner.

We regard the great goal of global economics to be the eradication of absolute poverty - we'll sweat the small stuff later. We regard the great victory of the past 40 years as getting that abhorrence down to under 10% of the population and hope to be here to celebrate its eradication in a couple of decades' time. We also insist that classical liberalism has always been on this properly defined left - Cobden's great free trade campaign was so that the working man had cheap bread to eat after all, rather than that restrictions upon imports continue to fatten the landlords' pockets.

We think it instructive to look at those surveys done of economists in the US. They trend Democratic, as of course do all US academics. It's not quite like sociology where a Republican cannot be found but a solid majority of professional economists define themselves as D not R over there. And yet when surveyed about policy they (92%) near unanimously slam rent controls, reject wealth taxation, agree that income taxation should not be at confiscatory levels, worry that minimum wages can be too high and so on all the way to free trade is a good idea. That is, avowed lefties who understand economics roundly reject most of the economic policies put forward by left wing parties.

And that's the problem, the disconnect and the fault. For what most want is really rather simple. Just the knowledge that life is getting better, that children will have more opportunity, live better lives, than their parents. This is not a working class, nor middle class or any other class goal, it's a human one. And the method by which it will be achieved is to get those economic policies right and sweat the small stuff later.

Meanwhile, the vanguard of the modern left is condemning those who might decide to use skin colour as a guide to whom they might wish to rub uglies with on a gay dating app. As Owen Jones just did in The Guardian.

Thus that problem with that modern left - they're just not concentrating on what is important. Bettering the condition of the average guy 'n' gal is, thus policy should be all about producing that improvement. And that the masses aren't voting for the modern left is simply evidence that the masses realise that's not what said modern left is offering. And that really is the left's fault.

If there were an economically rational left out there we'd support it. Rational here just meaning one whose policies were consistent with the declared aim, that of bettering the condition of the average person. Sadly this isn't there and that's both why it's not being voted for and why the left that is there should be blamed.  

Sure Fidel Castro was a dictator but what about that free health care, eh?

We've all seen the point being made over the past couple of days. Sure, Fidel wasn't perfect and he stuck to the damn Yankees and what about that free health care, eh? 

At which point something that not a lot of people seem to be aware of:

To his critics, the late Fidel Castro was a totalitarian despot, an opponent of free speech and a man determined to preserve his hard-won revolution whatever the cost.

But to his defenders and admirers, he was a leader whose enlightened and practical approach to social care provided Cuba with enviable health and education systems.

Figures from the UN children’s agency, Unicef, show that Cuba’s youth literacy rate stands at 100%, as does its adult literacy rate.


Life expectancy in Cuba is 81 years for women and 77 for men. In the UK, it is 83 years and 79 respectively. And while the former spends $2,475 per capita on healthcare, the latter spends $3,337. Cuba dedicates 11.1% of its GDP to health; the UK 9.1%.

Those numbers don't add up - If it's 11% of GDP and spending is $2,475 per capita then GDP per capita is near $23,000 a year in Cuba. No, Cuba really is not about as rich as Malta (nominal GDP per capita) nor Chile nor Panama (PPP per capita).

Which is the thing to draw attention to. The various statistics about the island are all drawn from the Cuban government. Those Unicef, the WHO ones, are all added up from the data passed over by the Cuban government. There is no independent verification of the basic figures. Which brings us to this:

Some, however, argue that the success of Cuba’s social care owes as much to politics and pragmatism as to equality and governmental magnanimity.

As a senior western diplomat told the Guardian in 2007: “Health and education are the revolution’s pillars of legitimacy so the government has to make them work. If they don’t, it loses all its moral authority.”

We would slightly change that - so the government has to make them appear to work.

One of us spent most of the 1990s working in Russia. And one thing we learned there was that no number coming out of a communist dictatorship was to be trusted - and it was not just us, the statisticians had to start with the assumption that absolutely every economic number was entirely wrong.

Which is what drives our assumption about those social statistics. They're made up.

If only there were something like Benford's Law which could be applied to health and demographic statistics to check....