This is to get the incentives entirely the wrong way around

There are two views we can take of profits. One is just the unearned moolah that the plutocrats gain. The other is an incentive to do something, something we might desire done. After all, profit made by the butcher, the baker, provides the incentive for our dinner to arrive. That first view is more generally held by the ill-educated and the left, but we repeat ourselves. Sadly, it seems to be shared by the current Tory government which isn’t the point of having one of those at all:

Councils would be able to strip landowners of large portions of profits from the sale of their land, under proposals expected to be unveiled in the Budget, The Sunday Telegraph can disclose.

An official review commissioned by Philip Hammond, the Chancellor, is to endorse controversial calls for the state to “capture” more of the increase in value of sites when they are granted planning permission.

Sir Oliver Letwin, the former minister carrying out the review, is expected to recommend that local authorities should be able to seize greater amounts of landowners’ profits in order to fund the construction of local infrastructure such as roads and affordable homes.

There are practical reasons why this is a bad idea. Section 106 agreements already strip much to most of the profit from such schemes to make such payments. There are even reports that some schemes don’t go ahead as they’re just not worth the candle any more, not what we desire at a time of purported housing shortages.

But to move up a level to something more like theory it’s to take the wrong view of those profits. It is only possible for there to be a profit if the output is worth more than the inputs. That’s the definition of profit in fact. And such creation of value, that’s the very definition of the creation of wealth more generally. So, we actually desire that more people transform low value farm land into high value housing. The profit by doing so is that increase in the general wealth. Why should we be taxing this punitively?

And from theory to practice again. Why does this profit exist? Because the planning system does not allow enough of such land to be transformed. So, even if you are pearl clutching at the idea that people profit the solution is simply to issue more permissions to do so, thus the value of each one declines.

The answer, as ever, is to blow up the Town and Country Planning Act 1947 and successors. There’s a certain wonder that a Conservative government doesn’t do this, remove one of the great socialist planning exercises of the post-war years.

Venezuela campaign: How nationalisation caused food shortages in Venezuela

Venezuela is currently in the grip of a devastating food shortage. Reports estimate that in 2017 the average Venezuelan lost an average of 12kg, following a 9kg weight loss the previous year. 60% of Venezuelans said they woke up feeling hungry each day.

Nationalisation, a key policy of the Venezuelan regime, is an important cause of the hunger. Also called expropriation, it was applied to every aspect of the food chain from basic agriculture to food processing and retailers.

Chavez introduced a Land Law in 2001 permitting the expropriation of agricultural land. Seized estates were turned over to co-operatives and regime supporters. The new farmers lacked the technical know-how, management skills and capital necessary to maintain production. Moreover, as state retained title to the land, the regime would repossess it if the new farmers did not continue their political support. By 2010, the government had seized 20% of the agricultural land in Venezuela. The remaining private farmers do not invest in their farms for fear of expropriation.

These expropriations destroyed Venezuela’s agricultural capacity. According to the National Confederacy of Agriculture and Livestock Associations, agricultural productivity dropped sharply from 2007 to 2011. Maize production fell by 40.3%; rice by 38.9%; sugar by 33.6%; coffee by 46.5%; potatoes by 63.5%; tomatoes by 31.0%; and onions by 24.6%. Livestock farming was also devastated. Beef and veal production have dropped by 75% between 1998 and 2014.

Nationalisation also affected Venezuela’s food processors. The government expropriated 18 of the 27 plants producing the staple corn flour. All are now making a loss and are in various stages of collapse. One of the most egregious nationalisation cases is the Cariaco Sugar Plant: within two years of being nationalised it was only producing at 11% of its previous production levels. The Ezequiel Zamora Sugar Plant, started in 2002 as a new state enterprise by Chavez in his home state, has cost a huge amount but is largely in ruins and barely producing any sugar. Workers in nationalised food-processing firms who protest the situation are treated with no mercy. In February this year, the regime arrested several trade union leaders at the Lacteos Los Andes “Hugo Chavez” plant in Cabudare who protested corrupt and incompetent management.

Chavez also nationalised food retailers, such as the large supermarket chains Exito and Cada in 2010.  These were turned into a state-owned operation called Bicentennial Supplies that by 2017 had largely collapsed, with 60% of its shops shut and 6,000 of its 9,000 workers dismissed.

Of course, nationalisation is not the only cause of food shortages in Venezuela. Price controls forced businesses to operate at a loss or shut down. Three-quarters of private businesses in Venezuela have ceased to operate as of 2018. Venezuela now imports 70% of its food and people are reliant on inadequate government handouts. To rescue the situation drastic measures are needed. To prevent a famine the Venezuelan government must abolish price controls and end expropriations. Only then will hunger be relieved.

More information on the Venezuela Campaign can be found on their website. 

Clearly, therefore we must stop recycling plastics

A point we’ve been making for a decade now - recycling’s a great idea as long as you’re adding value. If you’re subtracting value by doing so then it’s just yet another method of making us all poorer. Making us poorer not being a known aim of any socio-economic system outside the heads of the Momentum crew.

Thus, if we find that we cannot recycle something because it’s too expensive to recycle that something we should not be trying to recycle. So it is with plastics:

Plastic is becoming too expensive to recycle, councils across Britain will on warn Saturday, raising fears that homeowners' efforts to sort through their waste may be futile.

The warning by the Local Government Association comes as the Telegraph reveals mountains of plastic waste are sitting on an abandoned airfield because the local council cannot afford to send it to be recycled.

The LGA, which represents more than 400 councils across Britain, is demanding that manufacturers contribute more towards the increasing cost of recycling.

Otherwise, they say, local authorities will no longer be able to afford to keep processing it.

Recycling plastic eats money, swallows the wealth of the nation. Therefore we should stop doing it. No, we cannot argue that it saves some precious natural resource - we’re already told we’ve too much of that natural gas around, that we cannot use what we already know is there. To the point that we shouldn’t be drilling for any more. Not that we agree with that last but that is what we’re told by these same people who want us to recycle.

This also does not mean that we should just tip it into the oceans to choke whales. We’ve got it in a nice pile, so we can burn or bury it. We’ve still that waste management problem and the point is simply that there are cheaper ways to deal with it than trying to recycle.

Another way to put this is that if something is worth recycling then someone will pay you for it. If they demand money to haul it away then recycling is not the correct response. Money is being demanded - we should stop this recycling because it’s not adding value, is it?

Do note the overall economic problem, resources are scarce in aggregate. Thus if we waste our wealth on this waste of waste recycling there will be orphan waifs shoeless and subsisting on yesterday’s crust. Burn the plastic, for the kiddies.

The NHS is hiring assistants, not nurses - why might this be?

Quite who is complaining about this is one thing, what they’re complaining about another:

NHS hospitals are "plugging the care gap" with healthcare assistants amid a growing shortage of nurses, a new report suggests.

The study found the number of healthcare assistants is rising at four times that of nurses, amid a shortage of around 35,000 nurses.

For every nurse taken on between December 2015 and December 2017, four of the cheaper workers were hired.

In some areas, hospitals lost almost exactly as many nurses as they hired healthcare assistants, raising fears that the cheaper workers were being used as substitutes, endangering patient safety.

The study found almost one in three care roles in NHS trusts is now filled by a healthcare assistant.

We don’t know whether this is a good idea or a bad one, we’ll not claim expertise in clinical assessments. We do think it’s an entirely unsurprising outcome though.

The direction of movement in recent decades has been to make nursing a profession. Graduate entry only - or at least a degree is required as part of the training. It was quite blatantly pointed out that this was the aim, too. Make nursing that profession, a higher valued occupation, in order that nurses will be higher valued.

Well, people employ or buy less of higher valued things. Thus the creation of that graduate profession is going to lead to substitution with non-graduate staff. What else did anyone think would happen?

It’s also true that we still require the same amount of pillows plumped, bedpans emptied, bodies turned. The things that nurses might not be doing now that they’re prescribing and generally being more professional. So, again, substitution away from those with the higher qualifications to those with the minimum required to do that work that still needs doing.

We can imagine complaints about this view. That we’re not taking something seriously. But the logic is impeccable. For think about what the argument about the other end of nursing is. That nurses should be picking up goodly parts of doctoring. On the grounds that we don’t need people with 7 years of university, perhaps another decade of training, to do all that such have historically done. We can instead substitute to more specifically - and thus for a shorter period - trained nurse practitioners. Thereby using more narrowly but just as well trained staff to do what must be done.

Which does indeed make the logic impeccable. If nursing should move upmarket by biting off some of doctoring then that same new profession will find the lower levels of itself being chewed off by the nurse assistants.

What did anyone think was going to happen when nursing moves to an all graduate profession?

Mariana Mazzucato does have problems understanding her economics, doesn't she?

We’ve noted before that we’re unimpressed with Ms. Mazzucato’s understandings of the economic basics. But this particular complaint of hers strikes us as being laughable.

The NHS is facing ever growing challenges, not only because of recent cuts but also due to steadily rising expenditure on drugs. Our health innovation system is not serving the people that fund it; instead it provides monopoly profits for large pharmaceutical companies.

Well, yes, monopolies are bad things. Except when we deliberately create them to solve some other problem. Here it’s the public goods problem of knowledge creation. Once we know that aspirin cures headaches then everyone can go off and make aspirin. But the people who proved this - and in the modern world, more importantly, the people who spent $1 billion to prove this to the licencing authorities - can’t recoup their billion. Thus the billion never gets spent, we never do know and the authorities never issue the licence. We institute the time limited monopoly to get over this problem.

Certainly, there are other possible models out there. Reducing that regulatory cost is the one that strikes us as being most useful. Perhaps the model we use isn’t the right one from that palette of options. But whatever ones’ views there this is still a laughable complaint:

The global health innovation system lacks direction to tackle the areas of greatest need. Research shows that diseases that are not potential growth markets are largely ignored. Between 2000 and 2011 only 4 per cent of newly approved drugs were for neglected diseases that affect lower and middle-income countries, while 78 per cent of new medicine patents corresponded to drugs already on the market.

We’re against monopolies but we’re also against that market competition - other drugs to treat the same conditions - which reduces monopoly?

Is it too much to ask that a critique of this modern world at least be internally consistent?

Arbitrage and the gains from trade - cannabis edition

We know how to make the world that little bit richer. It’s only governments stopping this boost to global wealth happening. But then isn’t that so often the way with government decisions about and restrictions upon trade? That all they do is keep us poorer than we need be?

The background here is that Canada is just legalising the consumption of cannabis for pleasure reasons. That is, it has decided that adults may be adults once again without Nanny telling them they must, well, pretty much, eat their vegetables before they can have any ice cream. Canadians will be able to do what adults should be able to do, ingest that which pleases them.

There is a little wrinkle in this:

The latest data from StatsCan pegs the average combined cost of nonmedical and medical cannabis at 6.74 Canadian dollars ($5.19) per gram in the second quarter.

Further:

Canada’s supply of legal cannabis at current production levels is estimated to meet just 30 to 60 per cent of total demand, according to a report from think-tank C.D. Howe Institute released this week. The estimated demand across the country is roughly 610.6 tonnes but the forecasted available marijuana supply in the fourth quarter of this year is just 146.13 tonnes, the authors said.

As David Ricardo was known to have pointed out, Adam Smith too, trade is a pretty neat thing. And it’s the obvious solution to both any shortage of domestic production and what we might think of as the high price of it.

The UN telling us that cannabis in Malawi costs some $3 a kilo. Yes, that is $3 a kilo, as opposed to the Canadian price of $6-ish a gramme dependent upon which dollar you want to use.

Yes, we do know, really do know, that Malawi Gold is a perfectly respectable dope. Actually, considered one of the finer variants.

So, obviously, buy by the Great Lakes of Africa to sell around the Great Lakes of North America. With a 2,000 times price uplift there’s a margin in there. And in the absence of any laws stopping this it would obviously happen too. Actually, likely it has been happening even if in the small quantities the illegality would suggest.

Sadly, the new Canadian law - yes, we checked - only allows import for medical use, not recreational. Which is where the market is going to be, obviously enough.

So, in the absence of legal restrictions Canadian pot consumers would get likely better and certainly cheaper blunts. Some of the poorest people in the world, Malawian farmers, would see their incomes increase. Through that generally enriching form of trade, us all buying things made by poor people in poor countries. And it’s only government standing in our way.

How lucky we all are that government protects us from such mutual enrichment, eh?

Oh, and if you could tie crypto into this somehow you’d probably be able to float on a stock market by Monday morning.

To correct an historical misapprehension about the Indian economy

This is a common enough complaint. It’s also an odd one:

Politicians are a sorry excuse for historians

So Ben McIntyre, the historian, is going to put the politicians straight:

Take India. The British left much of value, including railways, laws and democracy, as well as a legacy of goodwill that a post-Brexit Britain would do well to cultivate. But the Raj also oversaw the destruction of Indian cultures, some appalling massacres and economic exploitation: in the 18th century India’s share of the world’s economy was equal to Europe’s; after two centuries of British rule it had plunged sixfold.

That claim about the Indian economy being a feature of a recent book by Shashi Tharoor MP. And one that does need correction by an historian, something we don’t get in The Times.

For of course the Indian economy did grow, substantially, over the period of Empire.

From Angus Maddison’s figures, the usual source, GDP per capita went from around $1,100 when Clive turned up to $1500 in 1945. And to about $1500 by 1994 too. Not a great increase in the average living standard of the average wallah to be sure.

The population of India moving from Clive’s 200 million or so to Nehru’s 400 million or so at Partition. And vastly higher in 1994 for we should add the population of Bangladesh, Pakistan, to India’s near billion.

400 million living at the same standard as 200 million is an economy which has doubled in size. an a billion doing so is a further increase of 2.5 x isn’t it.

That is, the Indian economy grew under Empire. Just as it did aterwards. The difficulty being that it was entirely Malthusian growth, more people at the same standard of living, not increasing standards of living.

You know, like everywhere grew, like everywhere does, without an industrial revolution and the accompanying (causative?) capitalism and free-ish markets.

The real point here being that what happened in India - economically, not politically - between Clive and 1947, between 1947 and 1994, is by historical and global standards just normal. The abnormality wasn’t there at all, it was that Britain, then other North Atlantic economies and now, finally, near everyone else, broke free from that normality.

The nutshell here being not what did happen to India but what didn’t?

Venezuela Campaign: reading into the schools crisis

Most Venezuelan schools are now empty of children and teachers, in a major crisis for the poverty-stricken country.

Former President Hugo Chavez used to boast that he was improving the education system, but his policies have had the opposite effect. The almost total collapse of the Venezuelan economy, caused by nationalisations, expropriations, price and currency controls, hyperinflation, mismanagement of the oil industry and abandonment of the rule of law, has ravaged the education sector.

The schools have been getting worse year by year. By 2016 about a quarter of Venezuelan school-age children were not enrolled. A study by Venezuelan universities at the beginning of 2018 revealed that out of Venezuela’s 8 million schoolchildren, some 3 million were absent. Fe y Alegría, a movement that provides free education in over 170 schools across Venezuela, reported a drop in student numbers of over 50% compared to 2017. As the economic crisis deepens, education is being affected more and more.

When the school term started this September, very few children came to school. In the poor community of Caucagua some 75 kilometres from Caracas, only three students arrived at the Miguel Acevedo public primary school out of 65 students registered. In the first week of classes, the turnout rate across the country was only 15-20%, the lowest in the previous century.

There are a number of inter-related factors in the collapse of the school system. One is the absence of many teachers, who are not being paid, or receiving enough to live on. “With my last pay check, I was able to buy a kilo of meat and a kilo of sugar,” said Roxi Gallardo, a 35-year-old teacher in the city of San Cristobal who, like many other teachers, is looking to leave Venezuela. The Venezuelan Association of Catholic Education reports that 3,500 of its teachers have quit their jobs, either to leave the country or to engage in informal work.

Another factor is that due to hyperinflation, basic items such as books, pencils and school uniforms are completely unaffordable. More importantly, many children came to school to receive free school meals. However, these are now rarely provided, and even then they are too small and lacking in protein to bother with. As the public transport system has collapsed, getting to school is much more difficult for children and teachers alike. Walking a considerable distance to school is difficult for children who are already under-nourished.

Children have been reported to become dizzy or faint because of lack of food. How can they learn when they cannot eat? “We were singing the national anthem and I felt nauseous. I’d only eaten an arepa (a local cornbread) that day, and I fainted,” reported Juliani Caceres, an 11-year-old student in Tachira state.

“Hungry people aren’t able to teach or learn,” said trade union leader Victor Venegas, president of the Barinas chapter of the national Federation of Education Workers. “We’re going to end up with a nation of illiterates.”

That Chavez made any improvements to education is largely a myth. The adult literacy rate was already 93% when he came to power, after decades of work by previous governments. Chavez sought to politicise the school system by turning it into a vehicle for his propaganda. Even Maths textbooks were turned into propaganda tools. Today’s absent schoolchildren will be spared the indoctrination, but the downside is that they are not being educated at all. Despite having the largest oil reserves in the world and having once been South America’s richest country, literacy rates risk a return to levels last seen in the 1920s.

More information on the Venezuela Campaign can be found on their website. 

To correct a commonplace error about Facebook

Not to pick upon one specific writer nor outlet here, but this is simply untrue:

Portal, which will go on sale next month in the US, is supposedly designed to make video chatting hands-free and immersive. A smart camera follows you around and ensures you stay in view while the system minimises background noise and enhances the voice of whoever is talking. “It’s like having your own cinematographer and sound crew direct your personal video calls,” Facebook says. It doesn’t mention the fact that said cinematographer has a history of flogging your personal information to all and sundry.

The selling data part that is. That’s not what Facebook - nor Google and so on - do at all. Certainly, they gain revenue from our attention. But that is a rather different matter:

Though Facebook doesn’t directly sell your information, it does “let businesses and organizations connect with the people who are most likely to be interested in their products and services,” as its ad education portal explained.

What they sell is advertising. That personal information not being sold to even sundry, let alone all. It being used instead to allow people to decide who to advertise to. Approaching any other media outlet - any one at all - will gain you a set of demographics of their customer base. So that you can decide whether you’d like to advertise to these people.

This is why Parturition Monthly will have piccies of babies and ads for nappies, why Mid Life Crisis Weekly articles about sports cars and ads for virility enhancers - where the two differ that is. Facebook et al are simply able to distinguish rather better among their users instead of delivering a total and undifferentiated bundle.

The importance of this is that it makes one set of demands out there ludicrous. That it’s our data, that the data is valuable and we should be paid for it.

At one level it’s already silly of course. Facebook makes perhaps - in revenue, not profit - $100 a year from a rich world user. 30 US cents a day. So, any system of paying us for that, well, how much is the accounting and distribution system for that sort of sum going to cost? As if any of us really care about that sort of sum anyway.

It’s also true that the data itself is valueless on its own. It’s the agglomeration of it, the slicing and dicing of it, which adds the value. That being exactly what Facebook is doing and it seems reasonable enough that the people adding the value get to keep it.

But now look again at the demand being made about that they pay us. What is sold is the ability to advertise to us. So, the demand is that we should be paid for being shown advertisements. And however tempting that is when shown yet another smiling, dry, baby or virility enhancer zooming along a mountain road we do all recognise that’s not quite how economic reality works out, don’t we?

In simpler terms the internet isn’t selling our data therefore there’s no money we can insist on having back from the sale of our data, is there?

Yes, yes, but how much?

We really do need to remind ourselves of Paracelsus - the poison is the dose:

'Huge concentrations' of toxins found in Grenfell soil, study finds

Exclusive: Public Health England has not acted on early findings of report warning of potential carcinogens

The question is the meaning of that word “huge” isn’t it?

Early results of the study by Prof Anna Stec prompted her to privately urge Public Health England (PHE), the Department of Health, the police and Kensington and Chelsea council to organise a range of tests to ensure any potential health risks can be properly assessed.

In briefings to senior health agency staff, Stec said she had found “huge concentrations” of potential carcinogens in the dust and soil around the tower in west London, and in burned debris that had fallen from the tower.

High levels of hydrogen cyanide were also present in the soil she analysed.

Well, what’s “high”?

HCN, prussic acid, hydrogen cyanide, being something that is produced in fires. It’s in cigarette smoke, car exhaust and absolutely every house or structural fire residue. Also almonds.

As a gas floating around it’s pretty dangerous. But the reason it wasn’t used for long as a WWI gas is because it’s rather light. It dissipates up into the atmosphere and with a boiling point just above room temperature it doesn’t lie resting around in the soil all that much either.

Sure, we’d like to know that it’s there. But the important thing we want to know is “how much?” For we know, absolutely, that there’s going to be some there just because humans have been burning things in London for some time now. We’re also interested in whatever additional amount Grenfell might have led to. But we are only interested as an intellectual exercise.

Without that dose information we’ve nothing but scaremongering on the back of that tragedy, do we?