If recycling doesn't work then why not stop recycling?

A quite delightful tale of a complete failure to understand what the universe is telling you from Australia:

Hundreds of thousands of tonnes of glass are being stockpiled and landfilled instead of being recycled, threatening to seriously damage the community's faith in the billion-dollar recycling industry.

Key industry insiders interviewed by Four Corners have described an "unsustainable situation" with glass which has "nowhere to go" because there is "no viable market".

Australia consumes about 1.36 million tonnes of glass packaging per year: wine and beer bottles, glass jars and containers.

Glass consumption is at its highest in New South Wales, which produces about 460,000 tonnes of used glass per year.

One recycling company, Polytrade, has decided to go public in an effort to raise awareness about the issues being faced by industry due to what it describes as a failure of regulation.

Yes, you're right, it does indeed end up as a demand for subsidy.

But as we've pointed out before there's a larger piece of pigheadedness here. There's nothing wrong with recycling of course, but then again nor is there inherently anything good nor holy about it. When it saves resources this makes us richer, when it doesn't save resources it makes us poorer. We should thus want to do it when it makes us richer and we have a good guide to that. If it is profitable to do then that profit is the amount it is making us richer and thus we should be doing it. For profit is the amount by which the output is valued at more than the alternative uses of the inputs.

This is not to say that market prices are perfect of course. There are indeed things they don't contain, public goods and externalities. But they are already corrected for, Oz has a landfill tax. And yet still glass recycling loses money - therefore we shouldn't be doing glass recycling.

Not that we see much problem with landfilling glass to be honest. Glass is, after all, merely boiled sand and if we're digging up sand to make glass then we've a strong assumption of having a hole to put used glass into.

Some recycling is just bonzer but the type, as here with glass, that makes us poorer, uses more resources, just shouldn't be done. That the process makes a loss is the universe's way of trying to tell us this. 

If only these people knew what they were talking about

That Brexit is going to change things is rather the point of Brexit. Yet there are all too many people who really haven't grasped what is to change and what isn't:

A hard Brexit will mean ‘Swedish stilton, Polish pork pies and Belgian black pudding’ pushing out British favourites, Ministers were warned last night.

Food producers fear cheap foreign imposters masquerading as much-loved classics such as Melton Mowbray pork pies and Cornish clotted cream will dominate the UK market.

They warn EU rules that ban imitations passing themselves off as famous British foods will disappear if Theresa May’s threat to walk away from Brussels becomes a reality. More than 70 brands, including beers, worth about £1 billion are protected.

Representatives of British brands last night urged the Environment Secretary Michael Gove to make sure EU-style rules continue after 2019.

That's what the Great Repeal Bill does, takes all of those EU laws, directives and regulations and puts them into UK law. That is, the bill to fulfill this demand is already before Parliament.

Labour MP Chuka Umunna said it ‘beggars belief’ that one year on from the Brexit vote, Ministers still had no plan for protecting British regional food producers. ‘We are now staring down the barrel of a Brexit that gives much-loved foods from cheddar cheese to pork pies no protection at all from cheap imitations,’ he said.

‘Michael Gove needs to stop briefing against his Cabinet colleagues and get on with the day job of fighting for our farmers and food producers.’

That's the Great Repeal Bill that Chuka's party, Labour, is threatening to vote against. Sigh.

As to what should happen of course those designations should go. Trademarks are fine things and there's no problem with people applying for nor defending them. But to take one example, the Cornish pasty, that was granted this exalted status in 2011. Before then competition reigned supreme and there really is no one at all who is going to claim that the product has improved since those days.

In fact, it's the very survival of these iconic foods over the generations, their very claim to this heritage or protected status, which shows that competition and not protection works just fine. For why would they be iconic if they hadn't survived said competition? It's the very fact that they did win it that makes them iconic.

The standard British left's confusion between capitalism and free markets on display

The Guardian has one of their long reads on why this neoliberalism, this free market capitalism, is just so over. In it they manage to show why the British left never does get it, the point. That point being that markets, free or not, and capitalism, are entirely different things. They are not even measures along the same axis.

Capitalism is a description of who owns, markets are a description of distribution, with prices in those markets being the information source. Until and unless this is understood no one is ever going to understand what are the important parts of the system.

How Britain fell out of love with the free market
Under Thatcher and Blair, it looked unassailable. But now both Britain’s main parties are turning away from unfettered capitalism. By Andy Beckett

That basic conceptual error runs throughout the piece. Unfortunately, it also runs through the thinking of just about everyone to the left of us - given us being us, that's just about everyone of course. 

A market system aids us in working out the price of bread. Who will make it, who gets it, how to coordinate the resources needed to make it, move it and distribute it. As Paul Seabright informed that very surprised Soviet manager there is no one in charge of the bread supply for London.

Capitalism is a description of who owns the assets which produce the bread. John Lewis is a worker owned cooperative, it's a socialist organisation, the CoOp is also known to produce and supply bread, it's a customer owned cooperative, it's a socialist organisation. The bread at Sainsbury's is produced by capitalist organisations.

It's true, we do tend to think capitalism is a pretty good thing as it quite obviously works. But we're vastly more interested in the importance of markets and that price system. We have before us the example of Venezuela, brought low not actually by socialism but by the idiot destruction of that information system known as those prices. They fixed the price of bread and bread disappeared. Who owns the bakeries is near irrelevant in comparison to that.

We're also entirely willing to agree that markets need crowbars jammed into them at times. Public goods and externalities (which are really negative public goods) most obviously but there are other desirable restrictions and modifications as well.

This is the great lesson the left needs to learn, something they've been getting wrong since Marx himself who didn't understand that importance of markets.

Andrew Adonis has just made the case for Britain to declare unilateral free trade

This is not what Andrew Adonis thinks he is saying but it is the meaning of what he says. His basic case is that we simply cannot renegotiate all of the varied trade agreements in time therefore we must stay in the Single Market and the customs union:

Setting aside its merits, there is a huge practical problem with hard Brexit. Leaving the customs union and the single market requires the UK by March 2019 to negotiate new trade treaties not only with the EU27, but with the 75 other nations with which the EU has free or preferential trade agreements, if British trade is not to take an immediate and substantial hit. Between them, these 102 countries include most of the trading world, and account for more than 60% of UK exports of goods and services.

As it is impossible to do all that negotiating therefore we must stay.

One possible solution is that we are indeed part of all of those trade treaties already. We conform to them all etc, so why not take a copy, scratch out "EU", write in "UK" and sign it? Sure, we know, treaties don't work that way but why don't they? 

There is also the more logical method, our preferred one. Free trade treaties are not in fact free trade treaties, they're nothing of the kind in fact. Rather, they are the details of the remaining restrictions upon trade. The difficulty in negotiating them is in working out which restrictions should stay. An easy method of dealing with that problem is thus to have no remaining restrictions. The draft post-Brexit trade treaty for the UK is thus as we suggested a couple of days ago:

1.There will be no tariff or non-tariff barriers on imports into the UK.

2.Imports will be regulated in exactly the same manner as domestic production.

3.You can do what you like.

4.Err, that’s it.

We do think it will be pretty easy to get everyone else to sign up to that. It would also mean that we would have adopted the only rational stance anyone can have with respect to trade: unilateral free trade.

As we did in 1846, and which is entirely not by coincidence when the Engels Pause ceased and real wages began rising substantially. Because it is the imports part of trade which makes us richer and so why should we try to place limitations on how Johnny Foreigner can make us richer?

Marchons Macron!

France is nominally secular, but just like Britain and #ourNHS the French have a state religion - its famously strict labour market. Gallic politicians of left and right are cursed the second they touch the subject of reforms but it looks possible that is about to be confounded. President Macron won his landslide victory earlier this year while advocating far-reaching reforms of labour laws, against the protectionist and dirigiste Mme Le Pen. And on Tuesday the Assemblie Nationale voted through a bill allowing the government to fast-track changes to the labour code. 

High mandatory wages mean that some workers are simply cut out of the market - for some the first rung of the labour ladder is out of reach. Controlling how long people can work means either controlling how long someone can get wages from an employer or imposing severe costs on employers looking for workers. High severance costs make taking on a new employee a risky choice. All of this hits the low-skilled, young, ethnic minorities and people from deprived backgrounds the hardest.

Introducing greater flexibility over hiring and firing, of severance pay, and around maximum working times would - as it did in Germany and Portugal - help boost growth and ensure employment is buoyant through and after negative economic shocks. One of France’s most famous regulations is the 35-hour working week. While the lower working hours can be matched with labour productivity gains we also see persistent high unemployment as firms maintain production levels instead of raising them. This, coupled with heavy-handed employment protection legislation, that causes a double-whammy of rising hiring and firing costs, is crippling France’s long-term economic growth prospects. 

Macron knows the long-term destabilising effect of high unemployment - currently sitting at 9.4% - and wants to ensure that France avoids any further brain drain while driving up France’s sclerotic economic growth rate. Nearly 60% of French nationals that study PhDs abroad no longer return home, with one in three in either the USA or the UK

And it looks like Macron's hopes for a growing France might just happen. Pôle Emploi’s annual survey found hiring intentions were up 8.2% with the construction industry’s up by 22.5% after years of falling. Macron is right to make job creation his top priority and pledge to cut unemployment to 7% within five years. The growth rate looks like it is on the up too. France is projected to rise from a meagre 1.2% in 2016 to 1.4% this year and up to 1.7% the next. 

But we shouldn’t kid ourselves that Macron is going to have an easy ride. Reform means change and change is nearly always resisted. Macron encountered this before when he was the Minister of Economy and Finance under the socialist government of Prime Minister Valls and President Francois Hollande. Already the CGT, a hardline union with 710,000 members in key infrastructure roles, has called a nation-wide strike on 12th September.

The CGT might be the only union so far to turn its sights on Macron and La République En Marche! (LEM) but it is unlikely to be the last. Jean-Luc Melenchon, who secured nearly 20% in the first-round of the Presidential vote, has recently called for people to ‘resist’ the reforms. As Macron falls from the highs of his honeymoon popularity other opponents of his reform agenda will decide to put their heads above the parapet. 

Yet opposition doesn’t mean that Macron’s legislative package will be scuppered. Even without his majority in the House of Deputies the President has form in ensuring he gets his laws implemented. 

In 2015 the so-called Macron Law was introduced to significantly expand the potential use of Accords de Maintien de l’Emploi to get around the Republic’s strict adherence to the 35-hour working week. This led to the invocation of Article 49-3, a mechanism by which the government can force through legislation. Usually this leads to a ‘motion de censure’ which creates a vote akin to our own votes of confidence. Rebels have to decide if they back their position to the hilt, and, those that might abstain are suddenly drawn to make a decision. 

In the end the confidence motion passed. Looking at what Macron said at that time, maybe we should have known he was destined to split from his Socialist Party, set up a new movement, and win the presidency: “Is it democratic to keep procrastinating?” Macron said. “There is a moment when you have to act.”

Well, quite. And his actions so far suggest that he’s serious about getting to grips with the bureaucratic nightmare that is France’s labour code. It will be good for France’s economy, it will help us if our nearest neighbour is growing strongly and we can trade more with them. Importantly it will also help us all if it can be shown again that liberal labour markets help everyone become better off because we’ll be able to convince more people and markets of the need to reform. 

Marchons Macron!
 

The government just lowered womens' wages

It's entirely true that this will have only a marginal effect but the effect will exist and it will also be in conflict with other expressed desires of our rulers. This will indeed lower womens' wages:

Desk fans should be introduced in every workplace to help women through the menopause, a new government report has urged.

Firms must also provide non-synthetic uniforms, access to natural light, places to rest, special absence policies and cold water fountains.

If there is some extra cost imposed upon the employment of a specific group of people then that cost will end up as a reduction in the wages on offer to that group of people.

For example, employers' national insurance is incident upon wages, as we all know. For the employers are looking at total compensation costs, not wages, when deciding upon hiring. How that compensation is split between taxation and wages doesn't worry the employer all that much, that total does.

This report is urging that there be extra costs imposed upon employing menopausal women. Therefore those wages will be lower. And, of course, we are all being told that closing that gender pay gap is a major preoccupation of public policy.

So, well done there. It's almost as if one part of government has no clue about all the other parts. Even, that the world is a complicated place which is is impossible to plan, govern?

A neoliberal framework for intellectual property

When I was younger I was very libertarian, and like many libertarians I was very sceptical of intellectual property. It might seem strange to a non-libertarian—libertarians love property rights!—but it's obvious to a libertarian. Property rights over your body, your land, your house and your tools are in direct conflict with intellectual property: if someone has a right to control how an idea is used, it prevents you from using the things you "really" own in ways that you like.

If Apple has a right to the Apple logo, I can't draw it on my house or car and sell stuff out of them. If Apple has a right over using a type of glass in phones I cant use my factory, my machine tools, my raw materials and indeed my hands and thoughts in ways I very well might want to.

I was convinced by the elegance of Roderick Long's argument:

Information is not a concrete thing an individual can control; it exists in other people's minds and other people's property, and over these the originator has no legitimate sovereignty. You cannot own information without owning other people.

Suppose I write a poem, and you read it and memorize it. By memorizing it, you have in effect created a "software" duplicate of the poem to be stored in your brain. But clearly I can claim no rights over that copy so long as you remain a free and autonomous individual. That copy in your head is yours and no one else's.

But now suppose you proceed to transcribe my poem, to make a "hard copy" of the information stored in your brain. The materials you use — pen and ink — are your own property. The information template which you used — that is, the stored memory of the poem — is also your own property. So how can the hard copy you produce from these materials be anything but yours to publish, sell, adapt, or otherwise treat as you please?

But I've changed my mind. The reason regular property rights are good is not because we have a fundamental moral right to sovereignty over certain objects. Robert Nozick is wrong that "mixing labour" with things makes them morally yours in a way that other considerations can never trump. In fact the reason that property rights are good institutions is that they make us happier and freer, and that they have good consequences: rich societies where individuals feel autonomous under a rule of law.

Though the two sorts of rights conflict, the justification for both is closely analogous. Monopolies generate investment. If fields are owned in common, they produce a lot less. Most people are somewhat selfish, and do not improve fields when they stand to benefit only very little from each marginal improvement. A field that will feed 10 would feed 100 or 1,000 if separated into many privately owned plots. Indeed: an individual can feed themselves off far less land if they own it exclusively than the share they effectively use when it is part of the commons.

Some restrictions on property rights are good. Internet libertarians have arguments over not just redistribution, but even simple questions like whether it's okay to break into someone's mountain hut to get shelter in a blizzard. It's obvious that some restrictions on property rights make the world better. This approach accepts that automatically: property rights are there for human flourishing and rule-of-law systems automatically build some beneficial restrictions into them.

Things are similar for ideas. If you give people monopoly control of their idea then they may produce—or share—more ideas. If an idea is genuinely new, then its being produced or shared with you makes you better off and freer. It's all well and good to say I am restricted by not being able to make iPhones—but would I really have been able to make them without Apple?

The trade-off is follow-on innovation. Yes, patents may promote innovation. But they also restrict it: you cannot freely improve on the ideas of others if they have patented them. Their patent may encompass uses that you would have come up with, or propagated, but which they never discover or make use of.

But patents also promote follow-on innovation. Isaac Newton discovered the calculus but did not share his discovery for years. When you register a patent you get exclusive rights, but you must also bring the idea into the public domain. Without patents firms would have an incentive to be extremely secretive and keep crucial ingredients from the scientific and research community.

It might also matter what level you are at. Instituting short, clear, restrictive patents may increase innovation, but expanding these into long and fuzzy rights may reduce it. This is the famous Tabarrok Curve. And it may matter what our alternatives our. Even if patents work well, innovation prizes may work similarly with fewer drawbacks and restrictions on freedom.

A neoliberal approach to IP recognises that it may be a necessary evil—but it may not, and we might have too much or too little of it, or be doing it in the wrong ways. This is a question that has to be answered empirically.

Jacinda Ardern and asking women about their childbearing in job interviews

Yes, yes, we know. 

The very idea that you might ask a woman, in a manner you wouldn't a man, about her childbearing plans in a job interview. This coming to a certain prominence as Jacinda Ardern, the Kiwi woman about to lose a NZ election as Jezza did here, was asked what no one would ever dream of asking Mr. Corbyn.

A rising political star in New Zealand received a prominent new role — and was immediately asked whether or not she plans to have children.

Jacinda Ardern, who was appointed the leader of the Labour party on Tuesday, has less than two months before the next round of elections. She's the youngest New Zealand Labour leader ever, the BBC reports.

But enough about that. Multiple men wanted to know: What about her uterus?

Given our age, experience of this life and general wonkiness - even if personal experience might be in the slightest bit lacking - we're rather sure that more of the physique is involved than that. Still, there's a point that really does need to be made here:

Many viewers did not find the question so congenial. At the risk of stating the obvious, male politicians in their late 30s are not typically asked whether they're sacrificing their dreams of a family for their dream career.

The double standard is closely tied to misogynistic assumptions about parenting and ambition. And that's completely aside from questions of rudeness, or the fact that a person without children might be making a choice or struggling with infertility.

That's certainly one way to do it. Whether you think that's the best way is up to you:

"If you're the employer at a company, you need to know that type of thing from the women you're employing, because legally you have to give them maternity leave, so therefore the question is is it OK for a [prime minister] to take maternity leave while in office?"

For the record: In New Zealand (and the U.S.), it is illegal to discriminate against an employee because of current or planned pregnancies, and employers are advised to avoid asking that question altogether.

The basic lesson of economics is that there are no solutions, only trade offs. 

Start with that basic fact. We do indeed insist that - as we should perhaps - employers provide time off for those employees of theirs who give birth. In the UK system that employer must carry some (a small part, 10% last time we looked) of the wages paid during that period of maternity leave. They must also carry the disruption and costs of getting someone else to do that job for that time.

OK.

The price, that is the wages, on offer to someone who is known to be about to do that will be lower than to someone who is known to be not about to do that. No, do not demand that this should not be so, it is going to be so. Reality does not accord to your thoughts upon how the universe should be.

Now institute a system in which it is not permissible to ask about this.

OK.

What happens now? Anyone who might do this is now made that lower offer, perhaps tempered by the likelihood of it happening. Our ban on the asking has moved that lower value from those who actually have that lower value to all of those who might possibly have that lower value.

That is, the lower wages resultant from the costs of maternity leave are now applied to all women who might possibly take maternity leave. Or, as we might say if we look at it from the other way, there really is a gender pay gap for all women of likely child bearing age these days around 30 and above, up to the age of around the mid-40s. For never married women with no children at and past that age there is no gender pay gap, in fact there's usually a small, 1% or so, pay premium. For those who do have children there's a significant, about 9% per child, motherhood pay gap.

Why do women who have no desire for or are unable to have children suffering that gap? Because they're not allowed to point it out, employers are not allowed to take it into account.

Which is where that trade offs thing comes into play. If those who do not want children could say so, employers take account of it, then that mothers' pay gap would not apply to non-mothers. It is possible to imagine people signing off on an agreement to not take the maternity benefits if they change their mind.

No, we do not say that would be a better world. Nor that this one is either. We are simply insisting that they are different worlds and one precludes the other. A system which insists employers take no account, cannot do so, of child bearing desires is different from one where they can. The cost of having the world we do is the loss of the other.

It's useful to mull whether we've got the right deal here too. So, mull.....

How Should We Tax Legal Cannabis?

If we legalise weed, how should we tax it? A new working paper on the taxation of recreational marijuana in Washington State has a number of important insights. The study—released by researchers from the University of Oregon—focuses on the effects of Washington State’s unexpected 2015 switch from a 25% gross receipts tax (collected at every step in the supply chain) to a single 37% excise tax at retail. Three findings particularly stand out:

1) Gross receipts taxes on cannabis are inferior to excise taxes at retail.

The study finds that the tax change was roughly revenue-neutral, but the previous tax regime “discouraged otherwise efficient trades between cultivators and processors, thus creating deadweight loss.” The mechanism by which this occurred was the incentivization of inefficient vertically-integrated transactions: “an inventory lot of marijuana is considered ‘vertically integrated’ marijuana if it was cultivated and processed by the same firm.”

Put simply, if a transaction tax is levied at each stage of the cannabis production process, firms are encouraged to do everything in-house: even though this might not be the most efficient solution overall. This inefficiency is illustrated in the table below, which adjusts for the fact that “it takes roughly six weeks after processors purchase raw material from cultivators before the resulting products are sold to retailers” After the tax change, “the fraction of vertically integrated sales [fell] by 3.7 percent after the adjustment period (Column 1), which [was] driven by a 42 percent long run increase in non-vertically produced marijuana sold (Column 2)”:

Vertical integration can provide a number of useful advantages for cannabis firms, but there are also potential disadvantages. Although vertically integrated transactions continued to dominate the market after the tax change, the significant shift towards non-vertically integrated transactions provided efficiency gains. The study was careful to include new entrants to the market post-tax reform, since few incumbents would de-integrate: they would already have paid the fixed costs associated with vertical integration.

2) Mandatory vertical integration in the cannabis industry may reduce market inefficiency.

Since a move away from incentivizing vertical integration led to efficiency improvements, it follows that “requiring vertical integration, as Colorado does, will decrease market efficiency.” Those in favour of cannabis legalisation in the UK should make sure they does not repeat the mistakes of Colorado in this regard. Arguments in favour of mandating vertical integration center on the idea of easing the burden on regulators, who would only have to deal with one firm instead of several firms. But it seems implausible to suggest that the gains from making things easier for regulators would outweigh the efficiency losses from forced vertical integration.

3) Many U.S. states have set their cannabis taxation levels significantly below revenue-maximizing levels, although this is probably a good thing.

Another finding from the study was that Washington’s comparatively high levels of cannabis taxation were “close to the peak of the Laffer curve.” This is due to the fact that the authors’ estimates suggested the “medium-run response to a price increase [in cannabis] is elastic.”

In other words, there’s more state revenue on the table for places with lower levels of cannabis taxation. Does this mean that cannabis taxes should be set at Washington’s high levels? Not quite:

While our results suggest significant tax revenue may be left on the table in many jurisdictions, evaluating the impact of marijuana policy (and constructing optimal policy) in a broader social sense requires additional considerations. For one, the public health externalities of marijuana consumption are not well established. Nor is the relationship between legal marijuana consumption and the consumption of other ‘sin’ goods such as alcohol or tobacco. If it is indeed true, as many advocates claim, that marijuana consumption is ‘better’ in a public health sense than alcohol or tobacco consumption, the optimal regulation of marijuana should be designed to take into account responses in these other markets as well.

The authors of the study do not mention another problem with setting revenue-maximisation as the goal of cannabis taxation policy: potentially preserving the black market in cannabis. As the Adam Smith Institute and Volteface pointed out in our The Tide Effect report on cannabis legalisation last year:

Revenue from taxation of the legal market will benefit the Treasury, although this benefit must be secondary to ensuring the legal market is placed at a competitive advantage to the illicit alternative.

My colleague Sam Bowman has previously argued that “cannabis will be seen as the test case for further drug reform,” and a poorly designed taxation system will undermine the change in consumption patterns that provides the rationale for legalisation.

Finding the best cannabis taxation policy may not be the most exciting part of legalisation efforts, but getting it right is crucial if we are to ensure that the goals of harm-reduction and market efficiency are met.

Obviously we want unilateral free trade in agriculture but not just there, equally obviously

A good little report out from Policy Exchange making the same point that we've been making here. Unilateral free trade is a good thing, Brexit allows us to have it again, therefore we should have unilateral free trade post-Brexit. The only slight flaw with this report being that it concentrates upon agriculture rather than adamantly insisting, as we do, that the logic covers everything - not that that's a vice, we as usual are just doing a little more of that table thumping.

The Common Agricultural Policy has, at great expense, reduced agricultural productivity by lessening competition and supporting inefficient farmers, and increased costs for consumers. Outside the EU, the UK will be free to abolish tariffs on food products, which will unlock new trade deals, help developing countries and deliver cheaper food for consumers. We can also reform the agricultural subsidies regime so that we reward farmers who deliver public goods like biodiversity and flood prevention, rather than rewarding wealthy landowners.

Policy Exchange recommends that:

After leaving the EU Customs Union, the UK should unilaterally phase out tariffs that increase consumer food prices and complicate new trade deals.

Yes, quite so, why don't we all eat from that cornucopia of the world's food markets? 

We would, and we have here and elsewhere, go further and offer the design of the perfect trade deal:

1.There will be no tariff or non-tariff barriers on imports into the UK.

2.Imports will be regulated in exactly the same manner as domestic production.

3.You can do what you like.

4.Err, that’s it.

Now that we've solved the entirety of Britain's trade stance before breakfast we'll get on with the more difficult things later in the day.