Know no economics foundation again

2825

know-no-economics-foundation-again

There's a really amazing report out from the new economics foundation which leads to some really rather remarkable conclusions. What they're trying to do is in fact reasonably sensible. We all know that GDP doesn't measure how happy people are, doesn't tell us how resources are distributed, all it does is tells us the value added in a particular economy in a particular timespan. It is, if you wish, a measure of how much we've got to play with, not a measure of how we're playing with it. OK, as long as we all understand that limitation GDP is a very useful little tool and it has the added advantage of being easy (well, easier than alternatives) to calculate. So we can measure it often and see what's happening. Not so much "are we getting richer?", but "do we have more resources with which to do things?" is the way I like to think of it.

Now, should people try to devise alternative measures, additional ones, to measure other things? Sure, why not? However, what comes out of such attempts might not be what those attempting might desire or worth the attempt. For example, this chart, showing "trust and belonging" across Europe. You'll note that the countries with higher levels of such are the ones with smaller populations. Bit of a stunner, isn't it? That smaller, more homogenous, societies end up with greater trust and belonging?

However, over and above such trivial observations, we also get in the report a reference to "longer working hours" and the terrors that they inflict upon the national wellbeing. I'm afraid that when I come across such references I simply stop reading reports these days. For the number of people doing those long working hours is falling as indeed are average working hours. As both have been for nigh on a couple of centuries as GDP rises and we decide to take more of our newly created wealth in leisure than in cash incomes.

If somebody can't be bothered to note reality when compiling a report then I'm afraid I can't be bothered to note anything further they might want to say in their report.

Oh, and as falling working hours, the increase in leisure time, does track rising GDP rather well, it also shows that rising GDP is still a pretty good meaure to use in trying to decide whether we're going forwards or backwards, doesn't it? Making the effort required to devise alternative measures somewhat moot really.

Clean up the BBC: episode 2

2821

clean-up-the-bbc-episode-2

Vaizey’s proposals on the BBC (for greater transparency) highlight an even greater issue. Why should the BBC have special privileges at all? The BBC charter states that the organisation’s mission is “to inform, educate and entertain". However, whilst there is a case for, free access public service TV, for the education and the transfer of vital information, there is none for entertainment; especially in a multi-channel-stream world. The BBC has no exclusive power to entertain, and whilst I enjoy many of their programmes, they need not be made by the BBC, or forced on others. In addition and most importantly, if they are enjoyable then people will voluntarily pay for them through the market, just as they do with other goods.

Also, if one were to support a free access public TV services for vital information and/or education, there is no technical reason to use only one institution; inhibiting efficiency and innovation. The best method would be to offer the contracts on a competitive basis (and if the BBC were the best, then they of course they would get the contract).

Instead, the BBC could survive commercially like other channels through a mix of advertising, subscription services and other commercial mechanisms rather than forcing itself on the public. Let all the viewers decide what they want to watch, how, when and where.
 

Rabbie Burns: Lost in translation

2827

rabbie-burns-lost-in-translation

The University of North Carolina Scots literature dept translated a Japanese collection of Burn's poetry back into English. They discovered that in the Address to the Haggis instead of reading 'Chieftan o' the pudding race', it was 'O Prince of the sausage people'!

Blog Review 850

2826

blog-review-850

Wasn't it Will Hutton who claimed that manufacturing industry, the revival of within a banking led form of Rhineland capitalism, was the solution to all our woes? Hmm, wonder how well that's working then?

A primer on market failure and government failure.

When is an inorganic fertiliser actually an organic one? Strangely, if you rape Gaia by mining her, this is OK, but making the same chemical in a lab isn't.

Âpplauding the new President and applauding the old.

If you're going to write about the CDS market it would help if you understood it. The same goes for Polly and banking.

How we can make the banking system even worse. By ignoring property rights.

And finally, a corollary of Muphry's Law* at work once again.

* That is, that whenever you make some snotty remark about someone else's spelling, grammar, historical research, knowledge of pop music or indeed anything else, you will make at least one equal or greater error in the course of said snotty remark.

Poverty causes pollution

2818

poverty-causes-pollution

We often hear about how it is our unbridled consumption which causes the pollution causing Gaia to choke on our wastes. We much more rarely hear (although we do our best around here) the point that a clean environment is actually a luxury good. It's something we buy after we've worked out how to feed and clothe ourselves. Proof of this particular pudding comes from some new research:

Burned wood and animal waste are the chief constituents of a "brown cloud" of pollution that has caused illness and death in southern Asia, scientists have discovered. For years the huge toxic sooty cloud has descended on southern Asia and the Indian Ocean during the winter months, hanging in the air for days or weeks at a time. The cloud has been traced to many deaths in China and India from heart and lung diseases. But until now experts have not been sure what it is made of. Two possible sources were the burning of fossil fuels, such as coal and oil, or of "biomass", such as wood and animal dung. The new research shows beyond doubt that smallscale home fires in which wood and animal waste is burned for heating and cooking are primarily responsible for the cloud.

The reason for that brown cloud is thus that people are poor. They're burning wood and dung to cook with, on inefficient stoves to boot (using a resource inefficiently is a useful definition of the cause of poverty by the way).

If they were richer they would, as we do, have electric or gas stoves and that brown could wouldn't exist.

Sorry, but it really isn't true that wealth is what causes pollution: it's poverty. Both in that what the poor consume creates pollution and in that only with wealth do we have the resources to use less polluting alternatives. So, how ever much some might object to the idea, the way to clean up the world is to promote economic growth.

Clean up the BBC: episode 1

2820

clean-up-the-bbc-episode-1

The recent calls by the Shadow Culture Minister, Ed Vaizey, for BBC salaries to be revealed should be welcomed with open arms. In fact, it is dismaying that, “fully audited accounts … [and] details of the salaries of all its top talent" are not already available. Transparency is badly needed in the opaque world of bureaucratic, state supported, quasi-autonomous statutory corporations.

The latest BBC scandal, with Ross and Brand, and wide ranging criticisms accusing the BBC of everything from London-centrism to political bias only adds weight to the case.

Far more “funny" than tasteless comedians is the very nature of the organization itself. The BBC is an exceptional entity because the cost of its product is set by government, enforced by criminal law, and imposed involuntarily. If I wish to watch only the many alternative channels, I would still have to pay £139.50 for the BBC. Therefore, it is patently clear that if such an organization continues to exist at all, it must be accountable to the public. Vaizey has a clear-cut case.

Where does this lead us? Find out tomorrow in episode 2. To be continued...

Quote of the week

2822

quote-of-the-week

A weak currency arises from a weak economy, which in turn is the result of a weak government

Gordon Brown, 1992

Blog Review 849

2817

blog-review-849

"Fixing the economy"....unfortunately it's not a machine that can be fixed but an ecosystem. Strangely it's the same people who argue that ecosystems are so complex we can't interfere in them simultaneously argue that the economy is so simple that we can.

This government spending multiplier. Is it higher than one, less than one, or even possibly negative?

The Easterlin Paradox resolved or, no, inequality doesn't matter that much.

The real reason there's a squabble about short selling.

A wonderful tale of bureaucratic competence.

Ragging on Oliver James.

And finally, little known inauguration news.

Public service, private provision

2815

public-service-private-provision

There was an excellent article in The Guardian yesterday by Geoffrey Wheatcroft.

The piece was inspired by a fire that occurred while he was holidaying in Switzerland. The owner of the guesthouse Wheatcroft was staying in had been called out at 4am one morning to deal with a raging barn fire – the point being that in Switzerland, as in much of the US, fire-fighters are part-time volunteers, rather than paid state employees. As he noted in his article, the same is true of the Royal National Lifeboat Institution over here: they do a fantastic job fulfilling what is undoubtedly a public service, but without receiving any state aid.

And yet most people would assume that fire-fighting and life-boating are precisely the sort of things that will not be effectively provided in a free market, and that the state is required to step in. The evidence, however, suggests otherwise.

Of course, there are plenty of other examples of things people think only government can provide, but have historically been provided by the private or voluntary sectors. Did you know, for instance, that the UK had higher rates of functional literacy before public education was introduced than we do now? Or that the vast majority of manual workers had health coverage (through Friendly Societies) before the National Insurance acts were passed? And what about the fact that most major hospitals were charitable until they were nationalized?

There is in fact a whole history of mutual aid, self-help, co-operatives and voluntarism that has been crushed by big government. The great shame is that the one thing the political left and the trade union movement could really be proud of  – the historical development of a 'welfare society' – was so comprehensively destroyed by their 20th Century adoption of Marxist-inspired socialism.

All that said, there are growing signs of a renaissance in this 'private welfare'. Here's hoping it will be a thing of the future, and not just of the past.

Northern Rock and bonus failure

2812

northern-rock-needs-changing

I’m confused by the news that Northern Rock employees are going to be given a 10% bonus, partly at the cost of the taxpayer – frankly, it smacks of double standards. It was only recently that Gordon Brown was urging a crackdown on big city bonuses in an attempt to curb excessive risk taking. 

I accept that the average employee at Northern Rock is not in a position to take the same risks as a city trader, but the government and it’s supporters cannot have one set of rules for investment banks and one set for itself. Only in September were the unions claiming that we should “Tax the bonus system out of existence". But now they are supporting the bonuses given to Northern Rock staff claiming that they "worked exceptionally hard in extremely difficult circumstances … they have experienced the loss of friends and colleagues through compulsory redundancy yet have continued working solidly with dedication and commitment."
 
Northern Rock failed at the taxpayers’ expense. The government has overlooked the fact that parts of the financial sector has still been making massive profits in the last year, for example, the Foreign Exchange markets. By rewarding Northern Rock the government is essentially rewarding failure. This is not the correct signal to be sending out to the market.