Nicky Morgan in Brexit fake news shocker

We are warned these days that we must be most careful about fake news. Indeed, that we must vigilantly fight back against the purveyors of it. What is meant is that anyone who states that Donald Trump might have a point must be mercilessly mocked and banished from public life, but the actual effect of taking the injunction seriously is that we will all end up exposing the usual political falsehoods.

Yea, even from former Cabinet Ministers. Such as this from Nicky Morgan:

Its consequences would be very dangerous: this would be an extremely perilous economic path. Leaving the EU with no deal means Britain would default to World Trade Organisation rules with our biggest trading partner. The resulting tariffs on imports and exports would raise prices for British consumers buying imported goods,

The problem with this is that reversion to WTO rules doesn't mean that Britain must impose import tariffs. That's fake news. If Ms Morgan knows that it is untrue then she's being economical with the actualite. If she doesn't know then she's remarkably ill informed on the subject she wishes to pontificate about.

This isn't unusual, Nick Clegg has been wandering around spreading the same fake news.

WTO terms means that there is a maximum tariff schedule that other people can charge against our exports. There's also a maximum that we're allowed to impose upon imports into the UK. But it is a maximum. We are entirely at liberty to impose any rate we like below those various maximums as long as the same product from different sources is equally treated. That includes imposing rates of 0%.

We did in fact go and check this at the source, the WTO itself in Geneva. We can move, as Patrick Minford has been saying we should, to unilateral free trade under WTO rules. There is absolutely no insistence whatsoever that we should or must impost import tariffs.

To claim that Britain must impose import tariffs is incorrect, it is not true, it is fake news. Yea even though we're told we must by an ex-Cabinet Minister who should know better.

A little offer to Ms. Morgan. If she'd care to tell us whether she's being economical or merely ill informed we will publish the answer she gives us.

Somewhere, Edmund Burke is doing the Happy Dance

As a conservative sorta guy Edmund Burke wouldn't really be in tune with today's millennial snowflakes. Yet there are things they're doing which he would thoroughly approve of:

Millennials have nevertheless dealt with the breakdown in the social safety net through community support, connectivity and responsibility. We’ve used social media to create a new kind of economy, one where decisions and directions have the potential to be mitigated, controlled and owned by those formerly most vulnerable. In an era of welfare cutbacks, young people have responded by crowdfunding the needs of their peers.

Burke, of course, thinking that that war against the collapse of society best being fought by the little platoons:

This form of selfless community organisation flies in the face of what older generations would have us believe about selfish, lazy millennials, but nobody should be surprised – a recent YouGov study in Australia showed that respondents under 30 were those most supportive of socialism and wealth redistribution over capitalism in comparison to other ages. It many ways, we see social capital as more of a viable resource than money.

That the young and untried like ideas that don't work in greater numbers than those tempered by experience is not a great surprise. But none of us oldsters are against social capital, nor against the rallying around. As with Burke, it's who does that rallying and under what level of compulsion.

The best level being those very little platoons in action here, just people getting on with it themselves, under no compulsion at all other than that they wish to do this.

But when I had the misfortune of having three cameras break on me consecutively, as a freelance photojournalist, I was thrown into panic. My livelihood was directly compromised by a series of unlucky mishaps. It was hard to pretend that I wasn’t on the verge of a breakdown as I catastrophised about what I would have to do in order to get back on my feet.

After a day of appeals on Twitter, I earned a few hundred dollars to buy a new camera; the donations were all from young people who had experienced similar things, or from people who liked or supported my work.

We might or might not have chipped in ourselves. But that the problem was solved without the compulsion of state socialism shows that it's not in fact needed to solve such problems, does it not? That, perhaps, art can be done without taxation and arts grants? 

Burke did say that left to themselves, allowed the room to do so, that people on their own will solve many to most such problems. How wondrous of the millennial snowflakes to prove this for us all over again.

Maybe arguing about immigration isn't totally hopeless after all

Here’s a cool new paper. It tests whether people are willing to substantially shift their opinions about immigration policy when they’re given more information about it. The results suggest that people may be doing less ‘motivated reasoning’ about immigration policy than many think, and that there’s real value in trying to highlight the facts to the public.

I’ve written before about why people oppose immigration – whether it’s because they believe that immigrants threaten their incomes, safety, or way of life, or because they just don’t like immigrants and want less of them for more emotional reasons. Simply asking them is unlikely to give us the truth, because people who simply dislike immigrants will tend to give a more reasonable-sounding reason (they may not even be aware that they are doing this). This paper tests this by looking at whether people’s responses change when they have new information that might make them less hostile to immigrants.

First, it looks at the Transatlantic Trends Survey, which polled 19,000 people in 13 different countries and, among other things, asked whether they thought there were too many immigrants in their country. People almost always overestimate the proportion of their country’s population that are immigrants, in the UK by a factor of two. But, here, half of the respondents were told the true proportion. The prediction is that if people are motivated reasoners, learning that there are far fewer immigrants than they may have believed should not change their view. If they are hostile because they believe that immigrants threaten their jobs or way of life, then information that contradicts that should result in less hostile answers.

In most countries surveyed, especially in the UK, the ‘treatment’ group that was given the correct figure gave substantially less anti-immigrant responses than the ‘control’ group that was not given any figure. In the UK there was an 18 percentage point gap, which was the difference between a majority saying there were too many immigrants among the group that wasn’t given the correct numbers and a minority in the group that was.

Interestingly, the gap seems related to the total size of the opposition to immigration – countries with smaller proportions of people saying there were too many immigrants also saw smaller percentage drops when the correct figures were provided, which is consistent with opposition being made up of two groups – one ‘hardcore’ group opposed no matter what the facts are, one group whose views are up for grabs. Further research needed!

The second part of the study was based on a poll of Americans who were given information not just about the proportion of the country that are immigrants, but their characteristics – their propensity to commit crimes or be imprisoned compared to natives, their English-speaking rate, their unemployment rates and how many of them were illegal versus legal. Again, this had a pretty big effect (0.25 of a standard deviation) in changing people’s attitudes and beliefs about immigrants for the better, though they were much less likely to shift policy positions.

Maybe this was just a temporary effect? Four weeks later, there was very little change in either group’s responses. The new information actually stuck!

Now, here’s the really encouraging bit, for me: right-wingers moved most strongly towards more pro-immigrant positions when given this new information, in terms of their attitudes and their policy preferences.

The paper isn't perfect, for example because giving new information might prompt people to give more 'politically correct' pro-immigration answers. But it's a start. 

This all suggests two things to me that are very encouraging. One is that ideas, debate and new information really can change people’s mind. Obviously that’s not exactly easy, because why should Joe Bloggs believe your ‘facts’ and not the other guy’s? But it does mean there’s hope and we might not all be motivated reasoners – indeed my suspicion is that it’s elites who are the most dogmatic, and normal people are far more open-minded, though less well informed. It’s a vindication of that handful of people (like KCL’s Jonathan Portes and the Cato Institute’s Alex Nowrasteh) who stick to the facts in the public immigration debate and challenge those who don’t. I tried doing this last week as well.

The other is that the lowest-hanging fruit in arguing for a more liberal stance on immigration could be in talking to the right more. Say there are people who are right-wing in general, but not necessarily hardcore anti-immigrationists, they get their information from right-wing news sources, which also make anti-immigration factual claims and arguments, and the opposite is true on the left. If that's the case, we would expect that there are more ‘mistaken’ right-wingers than left-wingers, and so more people on the right who might be persuaded to take a different view.

That’s consistent with the results of this paper, and it is an encouragement of immigration-liberal right-wingers to make that case to their friends and allies who disagree. It might not be as hopeless as you think.

Was F. A. Hayek a Neoliberal?

F A Hayek published his “Constitution of Liberty” in 1960, and added as an appendix a very famous essay, “Why I Am Not a Conservative.” When the ASI in 1987 published a volume of tribute essays by famous scholars, entitled “Hayek – on the fabric of human society,” I wrote the final essay, somewhat cheekily entitled “Why F. A. Hayek is a Conservative.” You can see it here.

Debate has taken place since, and I think most commentators have tended to agree with me that he was. His view morphed over his lifetime, becoming distinctly more conservative than the more straightforward libertarian outlook of his younger days. His basic case originally was that Conservatives wanted to conserve the status quo. If that status quo was socialism, he did not want to conserve it. When he wrote, there was a postwar consensus of mixed economy socialism with its nationalized industries, welfare state and National Health Service. He did not wish to conserve it.

I argued that this was an aberration, and that what Conservatives wished to conserve was not any given status quo, but the spontaneity of society. I added the magic words “or to restore” to the wish of Conservatives to conserve that spontaneity. If it were lost they would bring it back. This added a justification to the Thatcher revolution, which was well named, and of which Hayek most decidedly approved.

On the day my book “The Neoliberal Mind” is published, I ask whether Hayek was himself a neoliberal. He was certainly pro free-market and for a large measure of personal freedom, and applauded their spread. Had he lived longer, he would have undoubtedly applauded their progress since. He also shared with today’s neoliberals an outlook that seeks to prevent people from taking society in a preconceived direction, but instead to allow it to emerge from the interaction of peoples making independent decisions.

But there are aspects of neoliberalism which are as much about character as they are about political outlook. Most neoliberals are optimists, most embrace new technology for the opportunities it brings. I don’t think Hayek quite shared that enthusiasm for the new, or the readiness of neoliberals to embrace change and to ride with it.

Hayek sought for a name for people who shared his viewpoint, and toyed with the idea of “Old Whig.” I think on balance, and it is close, I would stand by my original judgement and say that he was more of a conservative than a neoliberal. But I think he would have approved of neoliberals even if his disposition prevented him from actually being one himself.

Odd where you can find wisdom these days

The political classes are in conniption fits about the evils of ticket touting. We've insistences that the very idea of a secondary market should be illegal. We've also the same people shouting that of course tickets must be reasonable in price, it's wrong that people must pay what appears to be the market value for something they wish to go and do.

On this very subject Matthew Syed discusses what happens in the Bundeliga, where ticket prices are deliberately low and yes, there's a massive ticket touting operation: 

On the wider point, history suggests that manipulating prices is generally a bad way to provide poorer people with access to valuable things, creating distortions, rackets and expensive counter-measures. Much better, as a rule, to redistribute income and wealth through the tax system. Either way, the Bundesliga is not the paradise we are sometimes led to believe. It has many strengths, but many covert defects, too.

Entirely so. As we remark often enough, changing the distribution of consumption is simple enough if that is what one is determined to do. Change the distribution of the cash which allows the consumption, don't mess with the markets nor the prices of those things being consumed.

And yes, just for the avoidance of doubt, there is always going to be some changing of that consumption distribution. We might have arguments about how much of it there should be, in fact we do, but the basic concept is clearly going to go on.

But the way to do it is to subsidise people, not things.

Sadly, we seem to find this obvious truth being expressed on the sports pages rather than in Parliament. 

Are we cynical enough we ask ourselves?

We're not exactly unusual around here in finding that much of the modern world makes more sense when viewed through a slightly cynical eye. But the question we must keep asking ourselves is, well, are we cynical enough? 

Take this complaining by Unite about Ineos buying the Forties pipeline off BP:

BP’s £200m sale of a major North Sea oil pipeline to petrochemicals company Ineos should face scrutiny by MPs, the Unite union has said, claiming the deal poses a risk to jobs and puts key infrastructure in the hands of one man.

Ineos said it had agreed with BP to buy the Forties Pipeline System, which transports nearly 40% of the oil produced in the North Sea and employs 300 people.

Given that Ineos owns the refinery at the end of that pipeline it seems unremarkable enough that the two pieces of infrastructure should be owned by the same organisation, or even person.

“Unite firmly believes that this sale is bad for Scotland and the UK.”

“We demand that both the Scottish and Westminster parliament carry out inquiries and that every MSP and MP in Scotland has a responsibility to make their position clear.”

“Do they believe this sale is in the national interest?”

That's really a pretty strong demand for what is a trivially sized transaction. At which point we begin to think a little cynically about this:

Unite added that it had “serious concerns” about the livelihoods, pensions and employment conditions of 300 people employed by BP on the Forties Pipeline System.

The union had previously fought a bitter battle with Ratcliffe, afterIneos threatened to close the huge Grangemouth refinery altogether in 2013 during a bad-tempered cost-cutting dispute.

Ah, yes, that's right. Ineos faced down Unite so Unite will never be in favour of anything the company does at all. So, we're being cynical, yes, but are we being cynical enough?

The Essence of Neoliberalism

Tomorrow sees the publication of my book, “The Neoliberal Mind.” This is a summary of its conclusions:

Neoliberalism is anchored in the real world of things that actually happen and can be observed to happen. In other words it is an empirical outlook, one that can adapt to observable reality. The test of its precepts is of whether they achieve the desired results in the real world. It is not rights-based, nor is it to be deduced from allegedly necessary truths about the universe. Instead it is an approach that seeks to achieve things generally desired, things such as prosperity and freedom, by means that have been shown to work in practice.

Most neoliberals are characterized by an optimism that human effort and ingenuity can achieve worthwhile goals. They are not gloomy about human nature or fearful that humanity is headed for catastrophe. On the contrary, they hold the view that human problems can be solved if people are clever enough and sufficiently resourceful.

They tend to compare the present with the past, rather than with some imagined and hypothetical future. They look at the tremendous strides humankind has made in the modern world, they examine the causes behind those successes, and try to apply the same kind of practices to stimulate further improvement.

Neoliberals are conscious that investment is the key to growth, and seek policies to encourage it. They know that because it involves deferring present gratification, there must be rewards to motivate people to do it.

They reject preconceived visions of what the future should be like, concerning themselves instead with the mechanisms by which a spontaneous outcome can emerge from the interaction of millions of people. They regard the resulting order as one that contains more intelligence and more knowledge, dispersed though it is, than any that can be dreamed up by a few planners. They also see it as more compatible with a free society.

They take a realistic view of history, especially that of the Industrial Revolution. They regard it as the development that made possible the improvement of the lives of ordinary people, lifting them from rural poverty and squalor. They welcome the fact that trade and industry and the wealth they bring are helping the world’s poor today just as they helped the poor in Britain’s industrialization.

Neoliberalism seeks to remove barriers to trade and investment, not to help the rich in developed countries, but to raise the living standards of people in poor countries, and applauds the progress made recently in lifting a majority of humankind up from subsistence and starvation. It works to do more of what has worked before. It rejects notions that growth should be curbed, and takes the opposite view that growth is limitless.

Neoliberals look at the world as it actually is, not seeking to reduce it to models of it that omit its ever-changing complexity. They do not seek to make it conform to some prior precept of what it ought to be, but to allow it to develop where people want to take it. And their optimism persuades them that people can make it better.

US healthcare: most people don't know what they're talking about

US healthcare is famous for three things: it's expensive, it's not universal, and it has poor outcomes. The US spends around $7,000 per person on healthcare every year, or roughly 18% of GDP; the next highest spender is Switzerland, which spends about $4,500. Before Obamacare, approx 15% of the US population were persistently uninsured (8.6% still are). And as this chart neatly shows, their overall outcome on the most important variable—overall life expectancy—is fairly poor.

But some of this criticism is wrongheaded and simplistic: when you slice the data up more reasonably, US outcomes look impressive, but being the world's outrider is much more expensive than following behind. What's more, most of the solutions people offer just don't get to the heart of the issue: if you give people freedom they'll spend a lot on healthcare.

The US undoubtedly spends a huge amount on healthcare. One popular narrative is that because of market failures and/or extreme overregulation in healthcare, prices are excessively high. So Americans with insurance (or covered by Medicare, the universal system for the elderly, or Medicaid, the government system for the poor) get the same as other developed world citizens, but those without get very poor care and die younger. A system like the NHS solves the problem, according to this view, with bulk buying of land, labour, and inputs, better incentives, and universal coverage.

But there are some serious flaws in this theory. Firstly, extending insurance to the previously-uninsured doesn't, in America, seem to have large benefits. For example, a recent NBER paper found no overall health gains from the massive insurance expansion under Obamacare.* A famous RAND study found minuscule benefits over decades from giving out free insurance to previously uninsured in the 1970s. In fact, over and above the basics, insuring those who choose not to get insurance doesn't ever seem to have large gains. Indeed, there is wide geographic variation in the life expectancy among the low income in the US, but this doesn't even correlate with access to medical care! This makes it unlikely that the gap between the US and the rest is explained by universality.

To find the answer, consider the main two ingredients that go into health outcomes. One is health, and the other is treatment. If latent health is the same across the Western world, we can presume that any differences come from differences in treatment. But this is simply not the case. Obesity is far higher in the USA than in any other major developed country. Obviously it is a public health problem, but it's unrealistic to blame it on the US system of paying for doctors, administrators, hospitals, equipment and drugs.

In fact in the US case it's not even obesity, or indeed their greater pre-existing disease burden, that is doing most of the work in dragging their life expectancy down; it's accidental and violent deaths. It is tragic that the US is so dangerous, but it's not the fault of the healthcare system; indeed, it's an extra burden that US healthcare spending must bear. Just simply normalising for violent and accidental death puts the USA right to the top of the life expectancy rankings.

This is what we'd expect if we approached the topic more honestly, and dug into the detail of healthcare stats. You might think—you might think!—that this is what international healthcare rankings like those from the WHO or the Commonwealth Fund do. Not so. The WHO just looks at a corrected life expectancy measure, but not one corrected for any of the factors which attempt to isolate the impact of healthcare. The Commonwealth Fund's is a mix of high level aggregate measures like physicians per capita and a survey asking people around the world questions like whether "Doctor or other clinical staff talked with patient about a healthy diet and healthy eating". Neither are useless, but they are not the real deal.

Academic papers that drill down into the detail find that the US does well in cancer survival, heart attack and stroke survival, and successfully medicating those with long-term conditions such as diabetes. In fact, when the Commonwealth Fund did this sort of analysis themselves decades ago, the US ranked among the best of countries. This is partly because the US has much more advanced equipment, partly because it funds more costly treatments in general, and partly because it funds the newest treatments, when their marginal costs are often stratospheric. This may subsidise medical research for everyone else.

Now this is not to say the US system works well. The fact that the US spends vastly more than everyone else, and only does a bit better, if that, makes the system pretty unimpressive. But it's important to understand why. The UK really does have "death panels" that refuse treatments because they're extremely costly relative to their tiny impact. The USA has a system where most people can buy—are even subsidised through the tax system to buy—insurance that is as extensive as they like, paying for ever more expensive and marginally beneficial therapies. Eventually you're spending a fifth of your GDP on it.

Maybe if the US government straightened things out—scrapped the incentives that push people to get too much healthcare and deregulated the system to increase competition and push down costs the US would spend a more rational share of its income on health. I think this is pretty likely. But I bet the gap wouldn't go away fully. Americans just have a lot of cash, and want to spend an increasing share of it on their wellbeing as they get even richer. As long as the system is mostly open, I'd expect that to continue.

*see tables 3, 7, and 8 for subsample analysis; doesn't look like any sub-group has seen any significant gains at all

Owen Paterson is exactly correct here

One of the things that Brexit allows us to do is the sensible thing which EU membership stops us from doing. Kill off entirely the subsidies to the agricultural sector:

Farmers reacted with fury last night to a proposal to axe their £3 billion in taxpayer handouts after the UK leaves the EU.

Former Environment Secretary Owen Paterson told a secret ‘Brexit seminar’ of former Cabinet Ministers at an Oxford college that Theresa May should follow the example of New Zealand, which ended government help for farmers virtually overnight in the 1980s.

The shock forced a radical shake-up in the country, with sheep farms replaced by deer parks and vineyards.

Well, yes, they would react in fury of course but it's still the sensible thing to do. As we've noted before the current subsidies don't in fact achieve much anyway, other than a rise in hte price of land:

We have an alternative policy framework to suggest. Let's just not have a policy. No subsidies, no payments, no department, no Minister, nothing, nowt, zippedy dooh dah. The New Zealand option. You've had it good for a century or more now there's yer bike and have a nice ride.

For that major support is these days the flat payment per acre being farmed. And as David Ricardo pointed out, that's just an addition to the rental value - and thus increases the capital value of the land. The current system of subsidy thus just raises land prices, meaning that people who want to go into farming must pay more to do so - it doesn't increase incomes over the long term at all.

Kill the entire system stone dead.

That's the way it's going to work in a system like ours

This complaint here is so normal, usual, these days that it requires a certain change of mindset to understand why it's so odd:

The richest will reap 80% of the rewards from the tax and benefit changes that start to come into effect this week, while the poorest will become worse off, according to detailed analysis by the Resolution Foundation.

The independent thinktank’s research shows that the effect of £2bn of income tax cuts and more than £1bn of welfare cuts will add up to a huge transfer of wealth from low- and middle-income households to richer ones.

Assume that they've got their numbers right, not always a given with the Resolution Foundation. They are still of course wrong on logical grounds.

What is being transferred is income, not wealth and we're never going to get good economics unless we remember to distinguish between a stock and a flow. We would also need to recall that if we are to insist that this is wealth being transferred then all of Piketty's (and Saez and Zucman's) measures of wealth inequality - yea even including Oxfam's - are entirely wrong. For they specifically state in all those calculations that they do not count government transfers as being wealth.

Further, this isn't a transfer being done, is the stopping of a transfer already being done. It's more normally conservatives who insist that current arrangements are the natural ones, any changes from them being an upset to the natural order - but then there's nothing so conservative these days as a whining leftie, is there? 

But more importantly, what did anyone think would happen? The general aim at present, whether rightly or wrongly, is that the state should become rather smaller than it is. The aim is that that 44% or so of GDP which went through government in 2010 should decline back down to something more like 35%, something very much closer (if a little below) the post war average.

In a system where it's the richer people who carry the major part of the tax burden then it's going to be the richer people whose tax bills lighten more with a reduction in the size of the state. It's difficult to see how it could be otherwise, unless we're to load an ever greater portion of that smaller bill upon their wallets.

Actually, we'd be fine with that. Why not have a state burden of a size where it is only those on above median incomes who have to pay into it? As we say, we'd be fine with it, but given the Laffer Curve constraints on marginal tax rates we would have to point out that such a state would be very much smaller than even 35% of GDP. Something which would undoubtedly produce more whining lefties than the current lightening of the burden is.