John Vidal manages to miss why we use the market system

John Vidal, over in The Guardian, wants to tell us all how appalling it is that large businesses get on with the design, growing and provision of seeds to the world's farmers. Better, by far, would be a more traditional system:

 Instead, it is coming from the likes of Debal Deb, an Indian plant researcher who grows forgotten crops and is the antithesis of Bayer and Monsanto. While they concentrate on developing a small number of blockbuster staple crops, Deb grows as many crops as he can and gives the seeds away.

This year he is cultivating an astonishing 1,340 traditional varieties of Indian “folk” rice on land donated to him in West Bengal. More than 7,000 farmers in six states will be given the seeds, on the condition that they also grow them and give some away.

This seed-sharing of “landraces”, or local varieties, is not philanthropy but the extension of an age-old system of mutualised farming that has provided social stability and dietary diversity for millions of people. By continually selecting, crossbreeding and then exchanging their seeds, farmers have developed varieties for their aroma, taste, colour, medicinal properties and resistance to pests, drought and flood.

That's the system which didn't produce the Green Revolution, the large scale and centralised seed selection and provision being the one that did. But instead of our cavilling about reality, let us take Vidal's argument seriously for a moment:

Instead of working in a well-funded research institute, as might be expected of a Fulbright biotech scholar, Deb is now part of the worldwide farmers’ movement to limit corporate control and to redefine what knowledge is, and who owns it. Like many others, he has found that the best way to save traditional agricultural knowledge is to grow seeds and give them away. He believes that’s the future. Pray that he’s right.

Well, maybe it is and maybe it isn't. The point being that we don't know whether it is or not. We can adopt an argument from evolution itself if we like. It's the changing environment that selects for fitness so, as time unfolds and the environment changes perhaps we will find that the capitalist and centralised system works better, perhaps that mutual and low tech one will. So, what is it that we should do here?

Obviously, we should use markets. The root of which is to just leave people to get on with things as they wish. We'll find out which works better by observing which works better. It's precisely because of the disagreement about, uncertainty over, which works better that we should not be planning the matter but leaving peoples' behaviour alone. 

Another way to put this is that markets are where differences of opinion do battle with each other. As we've such a difference here we've got to use markets, don't we? 

We're deeply puzzled by Will Hutton's logic here

Opinions on Brexit differ, obviously, that's why the resort to a referendum to find out what the majority actually though on the subject - for purists, a plurality if you prefer. Opinions on trade differ too but that's a clearer subject upon which there is an objectively right answer. It's the combination of the two subjects by Will Hutton which does rather puzzle us: 

The poverty, inequalities and hopelessness that propelled the Brexit vote – seven out of the 10 poorest areas in northern Europe are in England, and all voted for Brexit – must be decisively addressed. Britain must simultaneously recommit to full EU membership as its benefits and the colossal costs of exit become ever clearer, and stand solidly with Europe as dark and menacing forces stalk the globe – not least an imminent transatlantic trade war and the wider threats of Donald Trump.

It's that trade war bit that puzzles. Sure, Donald Trump is shouting that he's going to tax Americans by making their purchases of certain European goods more expensive. The EU's reaction has been to threaten to make purchases by Europeans of certain American goods more expensive by the application of tariffs. That is, the damaging to us part of the trade war is being imposed by our own, by the EU upon the European citizenry.

This is not sensible, as Jagdish Bhagwati points out: 

This is an elementary economics error. As Joan Robinson, one of the most prominent economists of this century and a member of the Cambridge School, famously said, if your trading partner throws rocks into his harbor, that is no reason to throw rocks into your own. It may sound "fair" to do so, but it is downright silly, even self-destructive.

So Will Hutton's point is that, in order to combat the damage of a transatlantic trade war, we must be full and forever members of the organisation - the European Union - which is imposing the downright silly, even self-destructive, bits of that transatlantic trade war? 

Oh well, Will Hutton will be Will Hutton but there's little reason for the rest of us to pay attention.

The Government's greenfield housing policy is achieving one goal - annoying the CPRE

A primary goal of government's recent housing policy has been to annoy, enrage even, the Nimbys and Bananas at the Campaign for the Protection of Rural England. To insist that we shall reject the views of the not in my back yard and build absolutely nothing anywhere near anyone crowd.

It appears to be working:

Having analysed new Government data, the Campaign to Protect Rural England has learned that 3,332ha of the green belt were lost to housing in 2017, up from 2,105ha in 2013 and 3,328 in 2015/16.

That's not an error, that's the point:

Rebecca Pullinger, Planning Campaigner at the Campaign to Protect Rural England said: “Whilst the increase in the proportion of development taking place on brownfield land is promising, the lack of reduction in greenfield development is alarming news for those who love the countryside. Developers are still able to force through land hungry, greenfield development even when brownfield options exist, often only benefitting their own profits.

CPRE has identified is a need for a national policy that empowers councils to refuse applications for housing on greenfield land where suitable brownfield options exist.

That is also not an error, that's the point. To, however marginally, free ourselves from the restrictions of the Town and Country Planning Act 1947 and successors and build houses people want to live in where they'd like to live. Instead of where the Nimbys and Bananas think they should be allowed to squat in squalor.

Under previous rules, at least 30 new homes had to be built per hectare (the equivalent to two and a half acres), but new regulations mean developers can get away with erecting just 26 homes per hectare.

Good, someone has noticed that modern British housing is, by far, the smallest in Europe and it would be a good idea to allow rather more than just 300 square metres for a new house and garden. We should relax said rules further. To, like, having no insistence upon density at all.

The complaint is that 8,240 acres a year are being concreted over. This in a country of 60 million such acres. We could thus do this for a millennium and end up with some 10-14% of the entire country nothing but housing and buildings and factories and civilisation. Actually, just about what we have been doing since William the Bastard stole the entire place. For Britain is today about 10 to 14% civilisation, the rest of it being land we can extend it to. We should do more of that given the number of people here who all would like to have room to swing a cat.
 

That decline of the nuclear family allows us to solve the gender pay gap

We're not sure that Sir James Munby has things quite right here:

Britain should "welcome and applaud" the collapse of the nuclear family, the most senior family judge in England and Wales has said. 

In a speech Sir James Munby, the president of the High Court's family division, said the modern British family was "complex" and "takes an almost infinite variety of forms". 

He said that "whether through choice or circumstance", many people "live in families more or less removed from what, until comparatively recently, would have been recognised as the typical nuclear family. 

The nuclear family is still, after all, the modal arrangement. Not something we expect to change all that much in a species descended from a millennia or two (to look only at English household arrangements and to be strict about the meaning of "nuclear") to hundreds of millennia (with a wider definition of nuclear to mean extended familial grouping) of such families. That being rather the way evolution works, there's a tendency for us to be doing things because we're descended from people who did those things. It's when the environment changes that they become non-optimal strategies.

We're also liberals and thus hugely applaud the increase in the ability of people to live their lives as they themselves wish. However, the specific point of interest here is this:

The most recent figures from the Office for National Statistics show that there are around 10,000 same-sex couples in the UK who have dependent children. 

There are, roughly speaking, two competing theories about the gender pay gap. It's all about misogyny, capitalism perhaps, the oppressions of The Man. Or, it's just about primary childcarers and that just tends to be women. That rise in the number of same sex parents gives us a population allowing us to tease out the two effects. We could, perhaps, look at the incomes of the primary childcarer in such relationships as opposed to the other. Or see whether male primary childcarers see the same income limitations as female - something we could also look at through the rising number of cis- and hetero- male primary child carers.

We're pretty sure what would be revealed - we'll see the same career structures and income changes among primary childcarers regardless of sex, gender or that of partner. But even if it turns out the other way around, that it is actually The Man causing it all, we'd like to see the research done.

Because it would be useful to be actually able to identify, properly and fully, the cause of the perceived problem, wouldn't it? For only when we've done that can we possibly try and craft any solution to it - or even decide whether it's something that it's worth trying to solve.  

The British electricity market looks pretty competitive to us

There're a number of different ways to look at a market and ponder whether it's competitive or not. Our problem being that the movement of prices in one that is perfectly competitive and one perfectly rigged will be the same. We can't therefore look just at those prices to try and make our determination.

We can though think about what should be true if it is a competitive market, look for that occurring and thus come to a determination. One of those things being, well, if the market is competitive on price then we'd expect to see those attempting to be the lowest cost provider experiencing significant difficulties in keeping going. For trying to be the lowest cost provider - without any particular low cost production method - is a precarious place to be in a competitive market.

Everyone is already charging just the minimum necessary to keep afloat and you're coming in lower? You're going to have a little problem there or two, aren't you?

Britain’s cheapest energy supplier risks being pulled from the market after the regulator found that a catalogue of customer service failings at the cash-strapped company has continued despite its warnings.

Hmm.

The Sunday Telegraph exclusively revealed that Iresa, and a clutch of similar sized suppliers, are on the brink of collapse due to rising costs and break-neck competition in the overcrowded market.

Note what our claim is not. That the electricity market is perfectly competitive in each and every nook and cranny of either the country or market. But if we expect the low cost suppliers to have solvency problems in a competitive market, we see the low cost providers having solvency problems, we are entirely justified in assuming that we've a pretty competitive market, aren't we?

Felicity Lawrence is a wag, isn't she?

Felicity Lawrence's basic complaint about the modern world is that we've - by and large at least - solved the basic human problem. So well have we done so that even poor people are able to eat other than gruel or pease pudding these days. Of course, this is an outrage to such grande dames of progressive opinion such as Ms. Lawrence so we must all make food more expensive again to rid ourselves of this scourge.

After all, what's the point of even having poor people if they're going to be just like the rest of us? Who could we condescend to if that were true?

We do admit to not finding that all that waggish. But this is a very good joke:

Oligopolies in the retail and food service sectors are mirrored in the processing sector, where there has been remorseless merger and acquisition activity as abattoirs seek to match the power of big supermarket and fast-food buyers. Just four abattoir groups control more than three-quarters of UK red meat processing: ABP, Dawn, which has recently merged with Dunbia, 2Sisters and Morrisons, which retains its own supply chain. The proposed merger of Sainsbury’s and Asda will concentrate markets even further. Hardline Brexit free-marketeers never seem to extend their passion for liberal economics to breaking this tendency towards monopoly.

We would count Christopher Booker and Richard North among those hardline Brexit free-marketeers. We'd also point out that they've spent the best part of a decade talking about EU abattoir regulations. Those regulations of such cost that only the larger groups, with larger facilities, can possibly hope to meet the costs. All of which led to the closure of all small scale and local slaughterhouses and the consolidation of the industry into those oligopolistic chains.

You know, as oppressive levels of regulation tend to cause?

Now, isn't that a good joke by Ms. Lawnrence? Even if her more basic view of the food industry is that they mustn't even be allowed to eat cake these days.

Much to our surprise we find that we are progressives now

Actually, we always knew that we were progressives even if no one else recognises the fact. Here's Danny Dorling at the Progressive Economic Forum:

 In a progressive economy, house prices would reflect how much it costs to build a home, including the costs of the material that each home is built from, but not the hyper-inflated land value. The costs of renting will relate to the cost to the landlord of maintaining the fabric of a home and the landlord’s actual time and effort, and not to the power imbalance that comes with sharp inequalities of wealth.

If house prices are based upon construction cost, as they would be in a place without artificial restrictions upon who may build where, then rents would be reasonable and they would reflect only those construction and maintenance costs, there just wouldn't be any scarcity value there, would there?

Which is, of course, why we've been shouting all these years that we must blow up the Town and Country Planning Act 1947 and successors, the very set of rules and laws which create that scarcity value.

You know, exactly the policy that the Progressive Economic Forum isn't going to recommend any time in the next century or so. Which is where the difference in the type of progressive becomes important. We propose things that work, achieve the stated goal. They're using progressive to mean sugar, spice, things nice while we're prepared to discuss the disposition of those puppy dog tails.

Obviously, you pays your money and you makes your choice - and don't forget that they are arguing over how they get to spend your money - but progressivism that works does seem like the reasonable choice here, doesn't it? 

Why would anyone want a nationalised railway?

It's entirely true that the young of today don't recall the joys of British Rail as was. Just like they can't feel and understand the joys of an Austin Allegro given that they've all rusted into nothing already. But we would hope - against hope as it were - that they could look around the world at state owned railways and consider whether that's what they would really like:

Normally, Agarwal’s bitter experience would have remained a private story. News channels in India very rarely report on the daily hardships of the poor, or show interest in why the trains used by the wealthy run on time while those used by the masses routinely run late. Most news shows restrict themselves to broadcasting studio-based political slanging matches.

This being how government works of course, it listens to those with political voice and doesn't to those without.

Of course, everyone arguing for rail nationalisation is suffering from a variant of Kip Esquire's Law, that every central planner always imagines themselves doing the planning. Here, that it will be my interests that government will listen to. Instead of it being those people over there who might actually influence an election - the way to bet who does have political influence.

Sure, comparing British railways to Indian could be considered a little unfair - although we should remind ourselves that we did build them and gift them their management structure. But even so this is how government control of something works out. Things are pretty good for those who government wishes to favour, because that favours those running government. Everyone else is pretty much out of luck.

The advantage of it all being a profit making concern is that everyone's money spends the same way so gaining it by providing what the poor want, as well as those with political influence, still makes you rich. Therefore it happens, the poor do get catered to.

Happy Tax Freedom Day!

Hooray! It's that time of the year again where we've stopped working for the taxman and started working for ourselves! While Christmas always feels like it gets earlier each and every year, Tax Freedom Day is actually getting later and later.

Tax Freedom Day is our way of making Britain aware of the sheer volume of taxes we're all paying, some every single source. Britons love knowing this stuff and you may have seen it covered in the papers today. In addition to the reports you can read Dr Eamonn Butler's words in City AM, Matt Kilcoyne in the Daily Express, and Sam Dumitriu on CapX. 

In this week's #MadsenMoment, Dr Pirie explains just why we calculate Tax Freedom Day and why we should celebrate this moment of tax liberation!

The balance of old and young

There is much current comment about an alleged imbalance between addressing the problems faced by young people today and attending to those bearing more upon older people. Some analysts claim that too much emphasis has been placed on meeting the problems of the elderly, and not enough on those of the young. 

Older people have a triple-lock pension, rising with inflation or wages, or at 2.5%, whichever is the largest. They have free travel passes, a Christmas bonus, and a winter fuel allowance. Those over 75 have free TV licences, plus free or reduced admission to many attractions and services. Many are home-owners, free of mortgages, with private pensions to supplement the state’s provision.

Young people, by contrast, find it difficult to become home-owners with an inadequate housing stock, rising prices, fairly static incomes, and difficulty in saving enough for a deposit. Many graduates face tuition fee debts of nearly fifty thousand pounds. They face increased taxes and National Insurance, and many lack the comfort of an adequate private pension to support them in retirement.

This has created a political tension between young and old, a tension that comes out at the ballot box. Some of this showed in the 2017 UK general election, when the Labour Party offered to cancel tuition debt and help young people with social housing and a minimum wage increase. The Conservatives, by contrast, offered little to young people, and threatened the elderly with the confiscation of their homes to defray social care costs.  In that election Labour did better than expected or predicted.

The elderly are more numerous than the young, and historically more likely to vote, although this may have been less true than usual in the 2017 election. Some political observers see the prospect of a bidding war at general elections, with parties bidding for the votes of these two divergent constituencies. Should the young be taxed to fund benefits for the elderly, or should cuts in benefits for the old finance tax cuts for the young? Someone has to pay for the benefits.

There is a way to avoid having today’s young funding today’s old. It can be done by having yesterday’s young funding today’s old. This involves young people building up savings funds while they are earning, and using those funds to support themselves when old. It still involves the young funding the old, but removes the bidding war by having the elderly pay for their own benefits from savings when younger, accumulated over their working lives.

This personal fund, dubbed a “Fortune Account” by the ASI, would be the property of the individual, with any money remaining at death forming part of a person’s estate, to be inherited by heirs.

The Treasury fears that some people would not save enough, but dump themselves onto a state unable to let them starve, people the Treasury calls “freeloaders.” This is a valid concern, and one reason why people would be required to pay into such funds. There would be no net gain in compulsion, since National Insurance is not voluntary either.

The transition itself presents a major problem. One generation has to save for their own retirement, while simultaneously funding the commitments made to today's elderly. It might involve some one-off source of finance to fund the changeover, perhaps by a sale of remaining state assets such as land and buildings.

People would choose between competing providers to handle their Fortune Accounts, as happened when Sweden privatized its state pension scheme. The state would provide funds on behalf of those unable to earn enough to finance their own savings.

The change would be disruptive, without doubt, but it would prove a massive source of future investment as the providers put the funds to good use, investment that would augment economic growth.

Above all, it would end the divisiveness caused by the political struggle between young and old as each group sought to benefit itself at the other’s expense. And it would end the imbalance between them.