Robots are taxed, Mr Gates – too much

Microsoft creator Bill Gates says that robots that take human jobs should pay income tax. Zillionaire businessman he may be, but does he understand basic economics? It seems not.

First, robots are already taxed – to the hilt. They are a form of capital, and capital has long been an easy mark for high-spending politicians. But capital does not just grow on trees, you have to create it. That means cutting your consumption and putting something aside to make all the tools that you hope will make your life easier and more productive in the future.

Of course, the only certainties in life are death and taxes (and unfortunately they come in the wrong order), so the labour-saving robots we buy for our homes and kitchens come out of taxed income. And if we are silly enough to actually invest our savings until we have enough for that new computer or new car, we pay tax on the interest (and on inflation as well).

Regarding the businesses that make robots and computers other tools, the investors who finance them already pay income tax, or company taxes on the return that their investment makes.

Second, remember that a robot is just a tool. They may be very fancy tools, but to economists they are no different from any other kind of tool going back to pre-history. They are just another form of capital that boosts your productivity.

The tools that have ‘taken’ most human jobs are not robots, but the most basic tools developed by our early ancestors. Think how many workers you could save by digging the peat to fuel your roundhouse with a wooden spade, rather than by hand. It is a hundred times easier. If you then transport the peat back home using a wheelbarrow – another tool – you save even more time and back pain. And so it goes: the spinning jenny, the cotton gin, the water frame, steam, internal combustion, electricity, the internet, industrial robots… they all allow us to produce and enjoy much, much more. Bill Gates’s logic is that we should tax all tools, from spades to spanners. Nuts.

And do these tools actually ‘cost’ jobs? No, they have allowed humanity to prosper and increase, with far more of us now engaged in far more productive and useful things with far less effort, time and cost. 

Most of us would think that a rather good thing. When you tax things, you tend to get less of them. So why tax tools? Why tax progress?

Third, do not get taken in by the politicians’ talk about how great jobs are. Leisure time is Christmas: jobs are the January credit-card bill. Jobs are the sacrifice you have to make to get what you want.

Entirely naturally, we want that sacrifice to be as small as possible. We want to work less, work in more enjoyable forms of labour, and have more time for ourselves to spend with our families, our leisure, our interests, our philanthropic activities and all the rest. You don’t help human workers by making the tools they need to achieve these things more expensive. Indeed, if robots liberate us to do all these desirable things – as they do – they should get a reward, not a tax bill.

Fourth, if you really do want to help humankind, is yet another tax the answer? We’re taxed on what we earn, what we spend, the spirits we put into our cars and our stomachs, the flights we take, the investments we make, the people we employ, the gambling we enjoy. Taxing our tools too is too much.

A much better idea than putting income tax on robots would be to remove income tax on humans. That would spur human progress faster than even the visionary Mr Gates could ever imagine.

Fake news spotted in The Observer

And we all do have that duty to fight back against fake news, don't we? That corruption of our body politic which we must be ever vigilant against? 

One of Britain’s most successful orchestras is moving to Belgium amid fears that its musicians may be among the victims of a post-Brexit crackdown on immigration.

The European Union Baroque Orchestra has been based in Oxfordshire since 1985, but will give its last UK concert in its current form at St John’s Smith Square, London, on 19 May, before moving to Antwerp.

Gosh, really? 

Other major orchestras are also weighing up their options. The highly influential European Union Youth Orchestra (EUYO) has been based in London since it began life in 1976. Now it is making contingency plans to move to the continent while it waits to see what life after Brexit might look like.

Marshall Marcus, former head of music at London’s Southbank centre and now chief executive of the EUYO, said the orchestra had already received invitations to move to other EU countries. “For some time we have been forming our plan to be ready to relocate, if and when this becomes necessary. Or indeed simply advantageous,” he said.

“If we do land with a hard Brexit it is really difficult to see how British musicians will be able to continue to take advantage of the opportunities that the EUYO and other EU initiatives have been able to offer generations of European musicians,” he added.

He lists EU worker protections, customs unions, import documents (carnets) for instruments and visa requirements as possible future headaches. “No one I know in the music industry – here or on the continent – wants to have to return to the bad old days of filling in more forms, taking up more time and spending more precious money in order for musicians to be able to perform for audiences on both sides of the channel,” he said.

Sounds terrible doesn't it? Paperwork in Channel, Europe Isolated!

We do tend to think that it really is about paperwork but perhaps a rather different sort, the now tallow enabled crinkly folding stuff. From the EU Baroque Orchestra page:

The European Union Baroque Orchestra is unique: EUBO nurtures and supports young baroque music performers through the challenging transition between conservatoire study and the music profession.

The activities of EUBO are an integral part of the EUBO Mobile Baroque Academy (EMBA), a Creative Europe co-operation project 2015-2018 co-funded by the European Union.

From the EU Youth Orchestra page:

The EUYO is funded with support from  the 28 member governments of the European Union.

With the support of the Creative Europe Programme of the European Commission

It doesn't seem all that remarkable to us that EU funded projects would like to remain in the EU in order to maintain their EU funding.

What does seem remarkable to us is that absolutely no mention is made of this in a report in a so called serious newspaper. But you know, maybe we're just picky about propaganda and fake news?

If the law specifically allows something then it's not a loophole

Yet another whine about how Uber is doing something or other:

Uber has been accused of exploiting a legal loophole that allows its drivers to operate in UK towns and cities where they don’t have a licence, leaving local authorities powerless to regulate them.

Mick Rix, the GMB union’s national officer for the hackney and private-hire taxi trade, said the company behind the cab-hailing app was “acting with impunity” across the UK, where it was increasingly “spreading its tentacles” into smaller towns and cities.

What is happening is that if you've a license from anywhere then you can work anywhere. As opposed to the former system where you could drop off anywhere but only pick up in that local authority that you were specifically licensed in:

After changes to the law surrounding taxi licensing, brought in by the Deregulation Act 2015, drivers with a private-hire licence from a local authority can use it to operate anywhere in England and Wales. Previously, the law required drivers to return to the area in which they were licensed between jobs.

The law was specifically changed to allow this. This is not therefore a loophole. Except if we are to assume that our Lords and Masters who write the laws are idiots of course and that would never do would it? 

It also seems like an eminently sensible change:

Councillors in other local authorities have also complained that Uber drivers who do not fulfil the authority’s specific licensing requirements – such as minimum vehicle age and successful completion of a knowledge test for the area – can still operate legally in their jurisdiction with a licence from elsewhere.

Licensing fees also vary from area to area, leading some to suggest that drivers are seeking out the authorities where it is cheapest to get a private-hire licence.

Reading council denied Uber a licence to operate last year, but during the summer’s Reading festival an average of 1,000 passengers a day took a trip using the taxi app. Although it is not known where the drivers travel in from, it is thought that many are licensed by nearby Slough borough council and Windsor and Maidenhead borough council.

Sensible on several levels. With sat nav that local knowledge requirement is rather old fashioned. Monopolists do tend to be monopolists and there's always the possibility that licensing fees will become, given the former monopoly of their issuance, a nice little tax upon the taxi using public.

But perhaps most important a series of locally planned monopolies is going to have a capacity problem. Demand is hugely variable across small areas - look at that festival there. If provision is limited to the drivers the area would more normally support then many will not be able to get a cab at those times of high demand. Allowing the one license which can then be used nationally leads to supply being able to move across those local authority borders and thus match demand more closely.

The end result of this should be greater efficiency of use of the fleet (and drivers). Which is pretty much the economic offering from Uber in the first place, less time waiting for a ride (on either side, driver or passenger) and thus a more efficient use of said fleet. More rides from fewer cars and less driver time, an increase in economic efficiency and as always with one of those, something that makes us all richer.

We can't see what 's wrong with this picture at all and it's most certainly not a loophole, is it?   

Can we please get this business rates thing right?

Two little stories that caught our eyes:

Nearly three-quarters of small companies in London say business rates are the most important issue they face, piling further pressure on the government over the controversial tax.

The Federation of Small Businesses (FSB) warned that London was in “serious danger of losing its vital support system of micro and small businesses”. The average micro business, which employs fewer than 10 people, will have to pay £17,000 to cover business rates from April, it added.

And:

The house price gap between London and the rest of the country has risen almost ten-fold over the last 20 years to reach nearly £300,000, a report has found.

An average home in London was valued at £105,266 in 1996 - around £33,834 more than one in England and Wales as a whole, according to research by Lloyds Bank.

But by 2016 the price gap had increased to £299,631, with a typical home in London priced at £578,381 and an average property in England and Wales costing £278,750.

Domestic property is not the same thing as commercial true, but that's likely to reflect similar changes in the second over the years.

At which point, business rates are a tax upon the rent that a landlord receives. Values have gone up strongly, rents have too, so why shouldn't the amount paid in tax upon those rents go up? 

We've got to get the money from somewhere and land's the one thing no one makes any more so taxing that is the least distortionary manner we've got of getting some tax into the coffers.

Shrug, what's all the fuss about?

They can huff and they can puff but....

Apparently Brexit will mean Britain doesn't get the fishing grounds back:

The hopes of British fishermen that the UK can win its “waters back” after Brexit are expected to be dashed by the European parliament, despite the campaign promises of Boris Johnson and Nigel Farage, a leaked EU document reveals.

MEPs have drafted seven provisions to be included in Britain’s “exit agreement”, including the stipulation that there will be “no increase to the UK’s share of fishing opportunities for jointly fished stocks [maintaining the existing quota distribution in UK and EU waters]”.

At which point we need to think a little about what is being said here:

But the leaked report from the European parliament’s committee on fisheries insists that the “granting of access to the EU domestic market to the UK” post-Brexit should be conditional on Britain continuing to respect the rights and obligations in the CFP.

At which point all becomes clear. This is a negotiating stance. If you want to be able to sell into our lovely market here then we've got to keep your fish. Perfectly reasonable and respectable argument to make and there's a perfectly reasonable and respectable answer too - as well as some more intemperate.

Not that it really matters because this "access" they are talking about is the same one that is being linked to freedom of movement. And since the government has already decided that that isn't going to happen then that form of access isn't something that we'll be trying to preserve.

They're huffing and puffing here about how harsh they'll be in negotiations but it's all rather wind signifying nothing instead of being about to blow the house down. We've already, for better or worse, rejected that Single Market membership or access that is conditional upon their keeping the fish.

Brexit won't lead to a flood of English champagne across the Continent, no, really, it won't

Our soon to be no longer Lords and Masters in Brussels appear to be getting their gussets in a twist over something that will not happen:

The European Union is concerned that British companies could violate protections given to the names of thousands of European products – such as parma ham and champagne – while the protected status of foodstuffs such as West Country Farmhouse Cheddar Cheese is retained after Brexit.

The European commission has given “geographical indication” (GI) status to 1,150 products, meaning companies can only use the name of a locality in their marketing if the product is from that area.

When the UK leaves the EU, it will no longer need to abide by the directives and could, for example, rename some English sparking wine as English champagne, or ham as English parma ham.

English champagne is that thing which will not happen. Because of the Treaty of Versailles from the end of World War 1 in fact:

ARTICLE 275

Germany undertakes on condition that reciprocity is accorded in these matters to respect any law, or any administrative or judicial decision given in conformity with such law, in force in any Allied or Associated State and duly communicated to her by the proper authorities, defining or regulating the right to any regional appellation in respect of wine or spirits produced in the State to which the region belongs, or the conditions under which the use of any such appellation may be permitted; and the importation, exportation, manufacture, distribution, sale or offering for sale of products or articles bearing regional appellations inconsistent with such law or order shall be prohibited by the German Government and repressed by the measures prescribed in the preceding Article.

That is generally taken to mean that Champagne comes from Champagne, Cognac from Cognac and so on and on. The reason the Americans don't limit themselves in the same manner is because they never did ratify the Treaty of Versailles.

Not that this protected designation of origin is important in any manner. It only started in 1992 for all the other foods and we're really very sure that the world still turned upon its axis before that date.

Still, lucky we're leaving eh, if our Lords and Masters obsess with trivialities and even then manage to get them wrong?

Those people have too much money, tax them more!

That seems to be the general thrust of this piece in The Guardian. Pensioners now, at least some of them, have higher disposable incomes than those still in work. This is appalling apparently and must be stopped. By imposing higher taxes upon pensioners:

That might be considered a good thing if it were not for the fact that the cost is unaffordable, is damaging the ability of British business to invest in the future, and fuelling inequality between generations and among the nation’s 12 million over-65s.

Those things could all be true but pensions are simply delayed earnings. Those people have worked for that money:

Perhaps the answer lies in an extension of national insurance beyond retirement , a care tax, or more transparently a separate tax regime for those who become eligible for the state pension. In short, pensioner income tax bands.

Pensioner tax bands would have lower thresholds for the higher rate of tax and the 45p rate, clawing back some of the inflated incomes many of the first wave of baby boomers enjoy from their guaranteed final salary pensions.

They received lower amounts in their weekly paypackets in order to pay for those pensions. Whether or not the pension payers saved enough to pay it is an irrelevance at this level. There was an employment contract which said some money now, some deferred into your pension. To change the rules now is not just akin to it actually is stealing their wages.

Pensioners on incomes above £20,000 a year will usually have paid off their mortgage and have few fixed costs apart from council tax and utility bills sapping their monthly bank balance. Some, we know, will be subsidising children and grandchildren on the bottom rungs of the pay ladder. Many have told the Guardian of their caring responsibilities. But the UK needs to avoid the situation in Greece, where pensions are untouchable because they have become the financial bedrock of extended family life. 

The Greek problem is entirely different. There it's the state pension (s) which are too high. This proposal here is that people who, entirely in the private sector, deferred some of their income to later in life should now be rapaciously taxed because inequality.

And this is all in The Guardian, usually in favour of the workers being able to enjoy their wages.

It's also very much missing the larger picture. We've been working for well over a century now at sorting this problem of old people starving to death in their freezing homes as unable to work they have no income. Funding pensions was the solution. And now that the solution is working we've got to rip up a century's work?

The usual ignorance of incentives is also on display. We'd rather like the younger generations today to do a bit of saving too for their own old ages. And if we go out to nick all the cash off the people who did save then what's that going to do to those we'd like to save? 

We regard this as an appalling set of suggestions and it seems to be driven solely by the idea that if anyone does end up with a bit of money then we musty, obviously, tax them more just because.

We fear the BMA has the wrong end of the stick here

The BMA, the British Medical Association, tells us that the NHS, that National Health Service, needs another £9.5 billion stat. That is, the trade union for Britain's doctors says that the employer of near all Britain's doctors should have lots more money.

Well, yes, OK, that's what unions are for but we do fear that they've rather got the wrong end of the stick:

Dr Mark Porter, the BMA’s chief, said: “These figures are especially concerning given that everyone can see a huge crisis unfolding within our NHS, with record numbers of trusts and GP practices raising the alarm to say they already can’t cope.

“The NHS is at breaking point and the STP process could have offered a chance to deal with some of the problems that the NHS is facing, like unnecessary competition, expensive fragmentation and buildings and equipment often unfit for purpose. But there is clearly nowhere near the funding required to carry out these plans.”

It's the unnecessary competition and expensive fragmentation that betrays the error here. For as Adam Smith pointed out those 241 years ago, long enough for people to grasp the point, we become richer through the division and specialisation of labour. Yes, that damn pin factory.

This does indeed apply in medicine - the literature is chock full of research showing that hospitals which do a lot of one type of operation have very much better results than those which occasionally dabble. That doctors themselves study certain specialties is again proof that the specialisation of labour applies here.

One of us here at the ASI spent a decade as the only person in the world doing a specific job. One part of the lighting industry uses rare earths to alter the colour emitted. That unique job was making sure of a supply of just one of those rare earths to that industry. No, not mining it, not processing it, not turning it into light bulbs, just ensuring that there was a supply of the right purity, in the right size, in the right place at the right time. That's the sort of granularity which private industry gets to these days. Just the one person in the world doing a specific task - OK, that level of granularity is still pretty odd but still, that's the possible end point of the process.

Fragmentation is not thus expensive, it's the process by which we become more productive and thus richer. And competition is just the method we use to decide who we are going to divide and specialise with.

Thus we really do conclude that the BMA have the wrong end of the stick here. The very things they are complaining of are the very things which, in every other walk of life at least, make us more efficient. And if it works everywhere else there is no reason at all why it won't work in medicine.

On the subject of Merrie England

The Observer draws our attention to a little book called Merrie England:

When Merrie England (quoted above) was published in 1893, it became a literary sensation almost overnight. Written in vivid, plain English by the Manchester-based socialist campaigner and journalist Robert Blatchford, the book was presented as “a series of letters on the Labour problem, addressed to John Smith, of Oldham, a hard-headed workman, fond of facts”.

To this fictional resident of one of Lancashire’s grimmest mill towns, Merrie England advocated a socialist transformation of the most advanced capitalist economy in the world. Using his Latin pen-name, Nunquam, Blatchford deployed satire and polemic to call for communal collaboration to replace competition and chasing profit as the driving force in human lives.

“Take the case of a tram guard working, say, 16 hours a day for £1 a week,” begins one of Nunquam’s rhetorical salvos. “That man is being robbed of all the pleasure of his life. Now there ought to be two guards working eight hours at £2 a week. If the tram company makes big dividends the cost should come out of those dividends.”

The implication there is that the dividends are enough to cover the wage bill going from £1 a week to £4 a week. And if we're honest about it we too would probably say that if dividends are four times the entire wage bill then there's a bit of room for a pay rise. We're not, however, entirely sure that the example is factual.

The paper uses this as a lead in to a discussion over the Labour Party's woes:

It has been estimated that 149 of Labour’s 232 constituencies voted Leave, in defiance of the party’s wishes and at odds with the overwhelming majority of Labour’s mainly professional membership. 

Well, yes, seems about right. However, the part that really interests us is this small detail:

Blatchford’s coruscating critique of free market economics and the culture of individualism became part of the warp and weft of the nascent Labour party.

Those were heady times for a British working class growing in confidence and taking its first political steps. Over a century later, the modern Labour party could use a Merrie England.

Possibly so. It's just that looking at the frontispiece of the original we note something that amuses. The publication was (in part) funded by advertising quack medicines to those stout working classes.

How's that for sticking it to the capitalists and critiquing the free markets?

This looks eminently sensible - not very new though

Apparently there's some great new breakthrough in being able to make cancer drugs cheaper for patients and the NHS. This sounds like an excellent idea to us, wouldn't we all like more people to be cured more cheaply?

The high price of new cancer drugs is indefensible and unsustainable, say two of the world’s leading cancer research institutions, who propose a different way to develop them that could sideline big pharma.

“There is a clear and urgent necessity to lower cancer drug prices to keep lifesaving drugs available and affordable to patients,” say leading scientists from the Institute of Cancer Research in the UK and the University of Texas MD Anderson Cancer Center, where many important new cancer drugs have been invented, in a paper in the journal Cell.

How absolutely super, eh? So, what's the magic ingredient in this?

Pharmaceutical companies used to justify their prices by pointing to the high cost of clinical trials involving many thousands of patients. But that is no longer always necessary, the scientists say in their paper. The new targeted drugs require a test for a genetic biomarker to see whether patients will respond or not. That means the drug can be trialled on far fewer people. The drug crizotinib, used for advanced lung cancer, was approved following a trial involving only 347 patients, they point out.

We're not convinced that is actually new though. The standard analysis of drug costs has been that it can cost $800 million to $ 2 billion (dependent upon who you want to believe and how you assign opportunity costs and the expenses of failures) to get a new drug through clinical trials and to FDA or equivalent approval. Further, the standard solution to these costs has been to reduce the costs by reducing the level of proof required - with the FDA specifically to argue only on proof of safety and leave effectiveness to the market (generally you must prove that the new drug is better than those already available in order to gain a licence).

Thus this proposal is not exactly new. Lower the costs of a drug gaining approval and drugs will be cheaper, yes, seems obvious enough and what some have been shouting about for some decades now.

The only remaining oddity therefore is this wibbling about "Big Pharma." Why shouldn't the big firms take part in exactly the same process? If said new process makes drugs cheaper than why not allow all to do so?