It's as if the last 38 years haven't happened, isn't it?

It could even be true that the tech platform companies are gaining something like a monopoly. We don't tend to think so, we're running with the idea that a contestable monopoly will not be exploited as a natural one would be. But, for the sake of argument, OK, but that doesn't mean that this is the solution, does it? 

What’s the answer? We’ve only begun to grasp the problem, but in the past, natural monopolies like utilities and railways that enjoy huge economies of scale and serve the common good have been prime candidates for public ownership. The solution to our newfangled monopoly problem lies in this sort of age-old fix, updated for our digital age. It would mean taking back control over the internet and our digital infrastructure, instead of allowing them to be run in the pursuit of profit and power. Tinkering with minor regulations while AI firms amass power won’t do. If we don’t take over today’s platform monopolies, we risk letting them own and control the basic infrastructure of 21st-century society.

We tend to think we've all just spent the last 38 years proving that nationalisation isn't the answer to what ever monopoly problems might actually exist. The nationalised railways had a continuing decline in passenger numbers something that reversed as soon as even a simulacrum of private ownership returned. The privatisation of the electricity and water companies led to higher investment and a smaller workforce, showing that nationally run companies just weren't efficient.

And we're absolutely sure that everyone's just dandy with getting their search services from British Leyland, right? 

It is indeed true that monopolies can and do exist, either for those natural reasons or because of legislative privilege. But we've already tested the nationalisation solution to destruction and no, it's not the answer.

Peter Hitchens is wrong to oppose festival drug testing

Earlier this month, Peter Hitchens and Transform’s Steve Rolles appeared on a minor TV channel to debate whether UK festivals and police forces should continue partner with drug-testing services like The Loop in an attempt to reduce the harms associated with illegal drug use.

The discussion quickly turned towards the question of Britain’s legislative approach to drugs in general, a vital part of the context in which drug-testing services operate. Hitchens’ argument is that Britain is stuck in a halfway-house of drug prohibition; whilst police target suppliers, they largely turn a blind eye to cases of individual possession. Deaths, health risks, and other harms from illegal drugs are in his view not the result of too much prohibition, but too little. Post-1971, the War on Drugs was never fought in Britain.

Steve Rolles countered Hitchens’ call to intensify user-level enforcement of drug laws by citing a 2014 Home Office review of international approaches to drug policy, which found no clear relationship between the intensity of user-level prohibition and overall levels of drug use. The review also states that comparatively low rates of drug use in Japan—Hitchens’ go-to example of effective drug policy—cannot simply be explained by its harsh enforcement of drug laws:

In Japan, where cultural conformity is traditionally valued, drug use is subject to a degree of stigma. In this context, it is difficult to tell whether low levels of drug use are a consequence of legislation, or a product of the same cultural attitudes that have informed the zero-tolerance approach.

Hitchens dismisses this reference to Japanese cultural norms as “racialist”, conflating race and culture without actually rebutting the point being made. However, it does seem reasonable to expect some level of deterrence from harsher enforcement of drug laws, even if other factors also play a role. The key point that Hitchens fails to grasp is that the harms associated with drug use are not simply a function of the number of drug users. Drugs sold on the black market and consumed in the shadows create more health problems due to impurities, non-standardized dosage, HIV risks, and economic distortions. Criminal gangs tend to be more violent than regulated commercial premises.

But I suspect that weighing up the costs and benefits of different regulatory regimes is secondary to Hitchens’ moralistic case against all drug use. Despite being an occasional drinker, he believes that taking drugs “severs the link between hard work and reward, [making] deferred gratification appear a waste of time and a foolish rejection of readily available delight”. He does favour the tightest possible restrictions on alcohol, but its legality is surely irrelevant to the wider moral question of whether having a big bag of cans with the lads irreparably damages your ability to work hard. Of course, the answer is usually no, and the same is true for Britain’s illegal drug users. Nothing is risk-free, but many regulated drugs can be relatively safe and enjoyable consumer products.

Eventually, the segment returns to the original question of drug-testing at UK festivals. Hitchens argues that allowing these services to operate makes a mockery of the law, and would only support them if they weren’t part of “a deliberate campaign to undermine the idea that the law should be obeyed”. In other words, he doesn’t support them.

This argument sits uneasily with his belief that our drug laws are already toothless. Given that laws against illegal drug possession no longer exert a serious deterrence effect anyway, what difference will festival testing sites make? And since Hitchens’ approach is extremely unlikely to be tried in this country, isn’t the only realistic way of creating greater respect for the law to get rid of the drug prohibition that he argues isn’t being enforced? In the meantime, services like The Loop are doing great work by reducing the risks of drug use—we should encourage more clubs and festivals to welcome them.

How can competition law avoid being anti-competitive?

The rise of large tech companies mean that antitrust law is in vogue again. The US’s Federal Trade Commission disappointed many people by deciding that there was nothing anti-competitive about Amazon’s purchase of Whole Foods, but last month the European Commission ruled that Google’s presentation of Google Shopping search results was a monopolistic practice. It looks like this debate will get bigger and bigger, particularly since after Brexit the UK may need to make new rules about how we regulate large firms to replace Articles 101 and 102 of the Treaty on the Functioning of the European Union, which govern important elements of competition law in EU member states.

Broadly speaking, there are two views of how competition regulators should act when faced with a potentially anti-competitive firm. The first, which is dominant in the United States, sees direct harms to consumers, such as excessively high prices in an uncompetitive market, as being the most and often only reliable measure of whether a firm is acting monopolistically. This position tends to prefer to wait and see whether a big firm which may have market power will use it to harm consumers. 

The second view is that regulators should take action before a firm gets powerful enough to do this, and wants anti-monopolistic interventions in advance of a firm getting big enough to harm consumers. Members of this group would look at a firm like Amazon and, acknowledging that it has not yet hurt consumers by raising prices to extract monopoly rents (profits above normal market rates), worry that it may someday be in a position to do so, its rivals in the market being too weakened to compete back. 

This disagreement has several different elements. How good are courts at judging whether a practice is pro-competitive or anti-competitive? Many behaviours by firms could be either – taking over a supplier could allow a seller to raise prices for consumers monopolistically, or it could allow them to lower prices for consumers by reducing markups across the supply chain. How do you know which a given takeover will do, and is it better to wait and see? 

How good are markets at financing smaller rivals to monopolists? How important is innovation, and do monopoly rents incentivise innovations that can disrupt monopolists? Should a firm’s political power, not just its market power, be something that regulators consider – in other words could a giant Amazon be so influential someday that it is able to bully politicians into protecting it from antitrust lawsuits? (Interestingly, a new paper appears to show that ‘social lobbying’, like wining and dining, but not ‘office lobbying’ of politicians is effective at changing their minds.)

These are all disputed, but probably the biggest divide is whether you view false positives or false negatives as being equally harmful. An influential Frank Easterbook article from 1984 argues that the harms are not symmetrical, and that in fact a mistaken conviction of a firm for monopolistic behaviour that is in fact pro-competitive and efficiency-raising is much worse than a mistaken acquittal of a firm that is acting monopolistically. 

The reason for this is that even very imperfect markets still have some dynamics that work against monopoly firms. As Ben recently argued, when monopolists earn excessive profits (rents), there is an incentive for other firms to think up or apply new innovations that allow them to challenge them and win some of those rents for themselves. Specifically in tech, antitrust actions against IBM, AT&T and Microsoft do not seem to have boosted consumer welfare.

Waiting and seeing might give more information about a practice, or it might encourage investment in innovation by rivals who want to displace a monopolist with their own technological monopoly. Google’s large market share in search is clearly very valuable and has led Microsoft to try to displace it (unsuccessfully) with Bing. If Bing was indeed a superior product to Google, this outcome would have been positive for consumers even if Google had been effectively monopolistic for some time. 

So we have some pressures internal to markets that will push against monopolistic behaviour even if a court has failed to convict on it. Judicial errors of excessive leniency may still be corrected by the market – this is not to say that they always or even often will be, just that this mitigating pressure exists and, clearly, some monopolists do eventually get beaten by rivals.

On the other hand, false positives – judgements against firms that are in fact engaging in pro-competitive, pro-consumer behaviour – have no such self-correcting mechanism. Practices that appear anti-competitive but are in fact pro-consumer, such as aggressive price cuts that are ruled to be ‘predatory’ on other firms, will tend to be abandoned by all firms and the benefits they would have delivered to consumers will be lost. This does not mean that all antitrust convictions are wrong, but it does suggest that the burden of evidence should be more akin to that of a criminal conviction (beyond reasonable doubt) than a civil ruling (“fifty percent plus a feather”).

Even worse, consider what an antitrust conviction actually involves. As Easterbrook pointed out, to determine whether a given business practice like buying up your supplier is pro- or anti-competitive requires both a large amount of knowledge of the businesses and sector you’re looking at and a theory of how the sector would look if this practice was not happening. 

Economists rarely agree except on basic things like rent controls (bad) and free trade (good). In many cases a court will be expected not just to judge what the evidence before it says, but choose from several rival economic theories about how a given market works. Doing so accurately may be difficult. Easterbrook’s whole essay, which proposed five ‘filters’ for eliminating misguided antitrust cases, is still engaging and relevant today, as is Joshua Wright and Geoffrey Manne’s paper relating it to modern tech firms.

These dangers make me think that engaging in pre-emptive antitrust action would be very dangerous. As Rohan points out, Amazon buying Whole Foods is hardly anti-competitive on the face of it as both are tiny players in the US grocery market. We would only be investigating it because of the possibility that it could become big (which it is in other areas of retail), and then also that it would begin acting in a monopolistic, anti-consumer way which it has not yet done in any other area – it is putting a lot of pressure on its suppliers and its rivals, but we should only care if it begins to use its position to hurt its consumers. 

As I argued after the European Commission’s ruling about Google Shopping being anti-competitive, competition between platforms can be a more efficient model than (legally mandated) competition within them. Business models based on freely-provided platforms like Android, and the innovation and investment that goes with them, may be at risk if regulators try to force them to be internally ‘competitive’.

It’s an open question what competition law in the UK will look like after Brexit, if we aren’t just rule-takers from the EU altogether. If we can set our own rules, and want to make Britain friendly to innovative firms, we’ll need to understand what pro-competitive law actually looks like.

Method, not attitude, marks the political divide

People on the Left, at least in the UK, take the view that the difference between themselves and those on the centre-right comes down to a difference in attitude.  They appear to think that they care for the poor, the deprived, the minorities, and the immigrants, whereas those on the centre-right care only about the rich, the fat cats, the successful, and those who can bend government to boost their profits.

This justifies some of the left, in their own eyes, in hating those on the centre-right as people without virtue, people who can be despised, shouted down, spat at, or physically assaulted.  Since the left thinks it has a monopoly on human values, opponents are deemed to be entitled to no human or civil rights, but treated as contemptible scum.

This not only degrades politics, it also chokes off any rational argument, reasoned discussion, and the possible exposure of errors.  It is a regrettable development, and one that itself is based on a factual error.  It is not a difference in attitude that separates the left from the centre-right; it is a difference in methodology.  Many, if not most of those on the centre-right care as much for the fortunes of the poor and deprived as do many on the left.  The difference lies in what the two sides think can be done about it. 

The left typically favour the use of state power through high taxation, nationalization and the fixing of prices.  The centre-right typically favour relatively free markets, private enterprise, and prices that respond to changes in supply and demand.  Their case is that these usually achieve more sure and more rapid economic growth than can be attained by collectivist planning and state controls.  The left pursue greater equality, whereas the centre-right seek to promote greater opportunity.

Those on the centre-right tend to espouse a real-world approach based on what achieves results in practice.  The left, by contrast, tend to follow an idealized concept of what the world could be like.  The centre-right point to the huge gains in living standards achieved across the world by following their policies, and to the failure of countries that have taken the leftist course.  They point to the numerous examples, from the Soviet Union to Venezuela, of the economic chaos, the shortages and the misery that have followed leftist methodology.  The poor and the deprived are not aided by such policies, they point out, the more so since they often go hand in hand with repression.

The centre-right’s methodology is what separates it from the left, and they regard the difference as being between what works in practice and what does not.

The inadequate economics and history of the slavery reparations movement

We've another of those calls for reparations to be paid for the Atlantic slave trade, this time in The Guardian:

It is clear that it would be just to pay reparations, and it is also possible to calculate the amount that Britain and other nations owe. A lot of work has been done in the United States to determine the damages owed to African Americans. The figure owed comes to far more than the “forty acres and a mule” that were promised to some African Americans who fought in the civil war. The latest calculations from researchers estimates that for unpaid labour, taking into account interest and inflation, African Americans are owed anywhere between $5.9tn and $14.2tn.

That is rather to visit the sins of the father upon the child of course. But the underlying argument is that it was slavery itself that enabled the industrial revolution to take place, therefore we who benefit from that revolution should cough up.

Which is, we feel, rather to get things the wrong way around, for it was the Industrial Revolution which did away with slavery itself. It was precisely the replacement of human muscle power with that of steam and machines which did away with the vileness of chattel slavery and forced labour.

This is not exactly a new idea either - it's a commonplace argument that the Roman Empire never did mechanise simply because human labour was so cheap in the form of all those slaves. Similarly, it's a common enough argument that Britain mechanised first because labour was expensive - there not being chattel slavery in England in any great numbers from the 12 th century onwards, definitely not after Somersett in England and Knight in Scotland in the 1770s.

Our important point here being that pretty much everywhere before the industrial revolution had if not directly chattel slavery then something at least akin to it, and pretty much nowhere has had anything like it since a successful industrial revolution. It being that mechanisation of human grunt work which made the abolition of slavery happen. 

School stunts development

It's so far unclear whether extra school in middle adolescence benefits or harms those affected—some studies find a benefit to cognitive or non-cognitive skills, others don't. Some find benefits to earnings. These are all affected by the usual problems: issues with identification, lack of controls, fade-out, and publication bias. But the evidence on earlier schooling is much less divided—and it almost universally finds that going to school too early stunts child development.

What's more, "too early" is well within the range of when we currently send kids to school. In Britain kids go to school at four or five. But a Danish study (pdf) found that even at around age seven starting school later led to less crime and delinquency through life. This study—and most of the others I present—used a "quasi-random" study design.

For example, the authors might use arbitrary cutoffs. If someone is born on 31st August and another person on 1st September it's likely that a jump in some variable between them that isn't seen between 30th & 31st August birthdays, or between 1st & 2nd September birthdays, is down to the effects of the cutoff.

In Brazil, starting school later made kids more likely to get into university. In Germany, starting school later made kids less likely to smoke, and healthier throughout life. In Louisiana later starting was also associated with lower crime, especially for disadvantaged groups in high crime areas. In Israel later school boosted maths & Hebrew performance. In Finland it boosted average educational attainment. In Australia it cuts obesity. And here's a second Danish paper, this time linking later starting with lower hyperactivity and inattention.

Now I can't claim any expertise in child development. In fact, I'm almost completely ignorant. So take this as a conjecture rather than an explanation for these findings. But here is a very interesting paper (pdf) from Aaron Blaisdell that offers a possible reason why school has such consistently bad outcomes for kids when applied too early: stunting child development.

Children love to play. Why do they find such a frivolous activity so pleasurable and desirable? Perhaps it is not frivolous, but instead is an adaptation designed to guide proper cognitive development in human children.

To understand why, I marshal evidence from different fields to build a case for play as a central behavioral mechanism of human brain and cognitive development. I start with a discussion of human evolution, focusing on the evolution of human physiology, tool-use, the human brain, and life-history strategy, and development, and how these are all connected as an adaptive suite.

The anthropological and developmental evidence suggests the existence of an extended childhood adapted to establish the skills, knowledge, and understanding necessary to become a successful hunter-gatherer. I also compare human and chimpanzee brain development, and how brain-specific genes evolved uniquely in humans to foster human brain development.

I conclude with the evidence from developmental psychology that even contemporary, first-world children are born with the drive to learn and develop intellectually through play. In this framework, human play can be viewed as an adaptation that guides human brain development to produce curious, intelligent and well-adjusted adults. I close by speculating on the possibility that barriers to or constraints on play may hamper intellectual and cognitive development.

I focus on the important concept of developmental decanlization as a mechanism of evolutionary mismatch. I argue that more empirical study is needed to better understand the importance of play compared to other forms of education for optimal intellectual and cognitive development.

I know that the "free range kids" and "unschooling" folks tend to be weirdo cultists. But maybe there is something to their schtick.

It's not the size of the budget, it's how it's spent

Don't worry, we are indeed aware that the US, like everywhere else, is not quite entirely the land of peace, love and understanding which we would all hope for, even on matters such as race. We also entirely agree that not everyone gets an entirely fair shake of the stick in this imperfect world.

However, there is something we do think should be mentioned concerning this piece in The Guardian:

Two summers ago, Indigo Williams couldn’t have been more thrilled to send her son off for his first day of school.

Her home was zoned into Madison Station elementary school in Madison, Mississippi, an “A” rated school and district where her son JS, then five, quickly dove into Kindergarten with enthusiasm. JS was taking Taekwondo lessons and was served fresh fruits and vegetables in the cafeteria. He had access to tutoring.

But when Williams and her children moved just a few miles away before the start of the following school year, her home was instead zoned to an elementary school in the Jackson, MS school district. She was horrified to see just how dramatic the difference could be.

Now attending Raines Elementary, Williams says Jonathan’s environment “feels more like a jail than a school. Paint is chipping off the walls. They’ve served him expired food in the cafeteria,” she said.

That first school district is majority white, the second overwhelmingly black. Thus a court case over the inequality. Which we do indeed hope succeeds. For there's an interesting little point which The G's story doesn't tell us.

School funding in the US is almost entirely local, paid for from property taxes inside the school district. There's also some levelling and topping up from the State in most places. It's thus obvious enough that poorer school districts could have lower budgets than richer ones and yes, as we all know, there's a racial imbalance in the US in who has all the money and the nice expensive houses.

Hmm.

Except. The Madison school district spends some $7,500 a year on each pupil, a little lower than the Mississippi state average (and well below the US one but then wages in general are lower too) and the Jackson one $8,100.

As we've been known to point out before it's not, often enough, the size of the budget that matters, but how it is spent that does.

An odd thing to complain about

We'll admit to not being up to date with the details of how such clubs work ourselves but we do think that this is rather an odd thing for anyone to be complaining about:

The popularity of sex clubs is by no means restricted to Kent, but local authorities around the country have limited powers to regulate the activities of consenting adults.

The purpose of regulation is, or at least should be, to deal with the effects on any third party of what consenting adults might get up to. Thus the not in the streets and frightening the horses type of regulation is just absolutely fine and dandy. But other than that there not only isn't a need for regulation, to regulate is against the very purpose of the body politic itself.

For the purpose of government and the body of regulation it erects is to enable consenting adults in their activities. The regulation of those third party effects is only, solely, to enable those others to also enjoy their lives as they see fit without bearing the burden of the choices of others.

That is, regulation is there to increase freedom and liberty by preventing its denial. We may not like that some deploy such liberty in the pursuit of enthusiastic non-monogamy but that's an irrelevance. The social contract demands that we tolerate it, as we do so much else, up to and including the existence of Simon Cowell.

That is, the whole of the game is that the authorities have limited powers to regulate the activities of consenting adults. As long as all are consenting, all are adult and all is in private then there should be no such regulation.

That's actually the point.

Will Hutton recommends satire to reverse Brexit

According to Will Hutton a show from the Fringe should be mounted in every constituency in order to satirise Brexit. The aim, of course, being that showing those who support it as they truly are we'll all decide it was a jolly jape but now we'll be sensible and stay in:

But when we’re faced with the next test of public opinion, however it happens, the economic case for continued EU membership and having a say in its rule-making has to be rammed home, along with the high ground argument about making common cause with European countries who share our values against the world’s Donald Trumps and President Xis.

But above all, let’s make the EU case full of hope – and, on top, a carnival of fun and mockery. There must be multiple versions of Brexit the Musical mounted in every pro-Leave constituency in the country, continually revised as every twist and turn in the story becomes ever more incredible. Every old people’s home, every ex-mining or ex-steel town, every seaside resort fearful of immigration should see the show and laugh at Brexit. Let’s smile our way to victory – and use satire, that most British of reflexes, to consign Brexiters to history.

We do, of course, agree that satire has its place, is most British and that it can be extremely effective. Wodehouse certainly contributed to the laughter at Moseley with his black footer bags comments.

However, we would also remind that satire is not the only tool available. Truth works too:

We are looking disaster in the face. A British version of Fannie Mae and Freddie Mac must be created now. Legislation to create a Gordon Mac should be introduced before the summer recess. It should be operating by the end of September. Nor is this just an economic gambit. It will be opposed by the Conservatives as an 'anti-business' public intervention. They are wrong. The only way out of this crisis is to embrace the politics of public purpose rooted in the economics of Keynes. Mr Brown has an opportunity to restore the housing market, the economy and his political fortunes. He must act.

That was, of course, Will Hutton, writing on 22 June 2008. Some 10 weeks before Fannie and Freddie were declared bust and taken into conservatorship.

With economic and political predictive perspicacity like that who needs satire?

It's not a Brexit divorce bill, it's actually the price of staying in

That some money is going to flow from the UK to the EU during Brexit seems obvious. Quite how much, and quite how much will flow the other way in the split of assets, isn't obvious as yet. But one thing we do think needs to be clarified - this isn't a divorce bill, it's the cost of staying in:

The UK will pay money to the EU as part of the Brexit process, Boris Johnson has conceded, having previously said the EU could “go whistle” over a reported bill of between €60bn and €100bn.

The issue of the “divorce bill” has split the pro-Brexit camp, with some leave supporters demanding that the UK decline to pay a penny, and Johnson told the Commons last month that a demand for €100bn (£92bn) would be extortionate.

We repeat, whatever the bill is isn't the cost of leaving, it's the cost of staying.

For that is in fact the justification being used to demand it. If you Brits had stayed then you would have paid this much into the EU budget. In fact, you've already agreed to pay this much into the EU budget. So, you should pay this much into the EU budget.

That is how it is all being justified, demanded even. If you stay you will pay this. Thus this amount is the cost of staying, not leaving. The leaving part is just making it more obvious that this would be the cost of staying.

What concerns is not the size of the bill, but the way that it is being presented. 

Another way to think of this is that the £50 billion, whatever it is, is a sunk cost. And if we stay then more such bills will arrive in the future, if we leave none will. That doesn't change anything about reality of course but it might change the way people think about it, getting the situation correct.