The problem with this is what Ms Villiers?

We are warned:

British farmers “will go out of business” as a consequence of a trade deal with the United States, former environment secretary Theresa Villiers has warned.

Admitting that she had "great fears" about "unfettered competition between domestic farmers and US imports", she said it would be very difficult for domestic farmers to compete on price.

The bit that puzzles is, well, what’s the warning about? For what is being said is that food from British farmers is more expensive than that from American - and other places around the world. This means that the living standards of us Britons are lower than they would be in the absence of the import restrictions that protect those British farmers.

That statement actually is that the “protections” to British farmers impoverish the rest of us. And when it’s put that way the problem with us all getting richer by their absence is what?

The Welsh outcome is worse, is it?

Back a few weeks there was that interesting sight, the trialling of a meme, in the leftish parts of the national press. The numbers for Covid-19 for England were looking worse than those for Wales and Scotland. The trial was to see whether this could be blamed on the structure of the health care services in the three countries.

NHS England is more market based, has more subcontracting (“privatisation” in the horror stories) and is generally less centrally Stalinist than the other two. It was possible to see chins being rubbed, possibilities considered, could this actually be built up into a story that would reverse this distressing tendency for NHS England to be run on the basis of what worked rather than what was ideologically pure.

We now have more information:

As Britain eyes an end to lockdown, one area is creating a particular headache for public health officials, scientists and politicians: Wales, and especially the old mining communities.

The country has proportionally almost twice the number of cases as the rest of the UK while mortality rates in and around the Rhondda Valley have also been among the very highest in the country.

Across Wales, the latest figures show 409 cases per 100,000 population compared to 262 in England, 273 in Scotland and 247 in Northern Ireland.

As of Sunday, Wales had lost 1,267 people to Covid-19 out of a population of just over three million.

One of the explanations we’re not going to be offered in that leftish press is that the greater centralisation, the lower impact of subcontracting, of NHS Wales has led to this underperformance relative to NHS England.

Odd that, isn’t it? Almost as if some people would prefer to ignore reality and pursue ideological purity at all costs.

A deep and painful misunderstanding about how economies work

There’s a consensus emerging and as with most forms of groupthink it’s the wrong one:

A consensus has emerged that the only route out of the lockdown is with government cash. From across the political divide there is support, offered reluctantly in some quarters, for the idea that only state-funded agencies will have the financial muscle and the will to put the wheels of the economy in motion once the pandemic has receded.

And:

Economists warn that the coronavirus crisis could see a return to the persistent and damaging levels of unemployment of the 1980s, with the jobless rate averaging 10% or more for the next five years.

Therefore government must do something and job guarantees and planning and creating jobs and……we agree that government must do something but we insist that what must be done is less.

At heart here this is a misunderstanding of the basics of how an economy works. We have those human desires and wants, we have scarce resources with which to sate them. What can be sated and how at any one time depends upon tastes, fashions, the state of technology. It is possible, of course it is, to mix and match those varied resources to meet different human desires and to do so in different ways.

So, who are those people who do so? By definition of the word those who essay attempts to meet desires by combining the extant resources are entrepreneurs. That’s just what the technical meaning is to run alongside the economic definitions of land, labour and capital.

So, we have an excess supply, at current prices, of one of those resources? That’s what unemployment is, more labour than can be usefully employed given the current structure of attempting to sate wants. You see the implication here? We want more experimentation with the employment of that surplus resource. We also want to make sure that actual human needs and desires are sated by the resultant output.

Cool - that means we want more entrepreneurs doing more entrepreneuring. What’s the greatest barrier today to being entrepreneurial? The regulations, licences, permissions, required to do anything new or something old in a new manner. Thus, to get those unemployed usefully back to work we need to reduce those barriers.

We need more free marketry red in tooth and claw, free of the restraining hand of the bureaucracy, because that’s how new businesses that employ people get started.

Sure there’s something for government to be doing in these trying times. Less.

We'd hope that policy making would be a little better informed than this

This is not, of course, a policy maker, it’s Philip Aldrick, the Economics Editor of The Times. But it’s a good guide, as that, to the sort of things that is being said in policy making and influencing circles.

One lesson we have since learnt is that more of the austerity savings should have come from targeting wealth. Taxes that skimmed the froth off asset prices that were inflated by quantitative easing and low interest rates would have spread the pain more evenly.

No, not really. The entire point of QE was to raise asset prices and thus reduce yields. This would push people out along the risk curve in their investment behaviour and thus mitigate the slump. To tax the returns from those rises in asset prices would be to cancel the very effect which the struggle is to produce.

Yes, of course government is like isometric exercise, a lot of effort and going nowhere but we should at least try to not kill the very policy we’re enacting.

This is also a common and mistaken thought:

The highest rate of capital gains tax is 28 per cent, on second homes and private equity “carried interest”, far lower than the 50 per cent top rate of income tax. Even dividends attract more, at 30 per cent.

A familiar structure would be to draw a salary of less than £50,000, taxed at 20 per cent, and take a dividend, taxed at 30 per cent.

This is to miss that there’s a third tax in the mix here, corporation tax. The dividends can only be paid out of post corporation tax profits and it’s a matter of design and policy that the CT plus income tax rate on dividends is about the same as the pure income tax rate upon labour income. The system is deliberately set up to do this.

CT also falls heavily upon the capital value of the ownership of the company. Something that makes £100 a year to distribute is worth more than something which makes £80. If we charge £20 a year in CT to that £100 of profits then we’ve just made the company shares worth less. That is taxation of the ownership of the company, isn’t it?

It’s entirely true that we can - and should- make useful changes to the current taxation system. But it’s rather important that we actually understand the current system before we do so. It’s not entirely obvious that those doing the discussing at present do so.

A call for the return of peasant agriculture

We think The Guardian has made a mistake here. This is from Fridays for Future, the Greta Thunberg thing, calling for changes in the Common Agricultural Policy:

“[We] demand a pathway to climate neutrality for the EU’s agricultural and food sector,” the activists wrote in an open letter published ahead of the virtual meeting. “We need to transform direct payments into payments for public goods. Public money needs to flow into the transition to sustainable, climate-friendly and peasant [sic] agriculture. We need a new evidence-based and just CAP.”

The error being The Guardian’s addition of the “sic” there. For the demand really is that we move back to peasant agriculture, not to pleasant or some other word that has been misspelt.

The entire point of industrial agriculture - we can call it chemical, non-organic, other names exist - is to reduce the amount of human labour required to perform it. The removal of all of those substitutes for human labour will require adding that backbreaking work back in.

The problems with this idea being at least twofold. Firstly, the backbreaking labour. Very few of us indeed wish to do this as evidenced by the difficulty in recruiting people to go pick the fruit and veg crops. You might have seen something in the newspapers just recently about this. Secondly, to go back to us all standing around in muddy fields is to kill off the very idea of civilisation itself.

For if we are all to be growing food there’s no one left to staff the NHS, run the libraries, dance the ballets, put up the phone masts and serve the pints. Don’t forget, back when we did have machine free and organic agriculture some 80% of the population had to be doing that fields thing. Currently we have perhaps 2% - that’s 78% of the population that’ll have to move from doing all those non-farming, non-food things we so enjoy consuming back to providing that winter diet of turnips.

We’ve just spent the last 8,000 years since the invention of agriculture itself trying to haul ourselves up out of the workload that non-industrialised farming imposes. To kill off the results of that effort and return to peasant farming is, quite literally, insane. And if only the call were a typo….

Wednesday's Organ Seizure Act

On Wednesday the Organ Donation Act came into force: "force" (the government's words, not ours). This means that, based on a consultation of 17,000 individuals, the government has chosen to nationalise the organs of its citizens rather than gain their explicit consent.

The nationalisation is clear. On death, the person, after consulting with family, will be presumed to have consented to have their organs harvested: 

Firstly, the body should not become state or communal property on death. There are strong bodies of common law guidance, along with the cultural practice, in relation to the disposal of the body. The government stepping in and assuming the body is their's for the taking because the individual concerned did not check a box is a frightening reach of government power.

Secondly, the consultation of the family does not mean that the family may do with the body as they please. Tacit consent is cited here for funeral arrangements, and often there is a great deal of preparation beforehand including with wills and powers of attorney, but this should not happen with the harvesting of organs. Again, the government cannot simply step in here and take what is not theirs.

Thirdly, the sick do not have the right to the organs of the dead. There is no obligation to transfer ownership of organs from one individual to the other just because they are not in usage anymore. This may sound heartless, but there are two parties to this, and a Burkean conception of presence post-mortem is still important. Why else is there the veneration of the dead in British Culture?

Fourthly, the naming of the Act is wrong. This is not organ donation but organ seizure. A donation requires active consent, this quite simply is not. One must be confronted with the choice rather than have it decided in absentia. The use of this spin and misuse of wording is all the more sinister.

A lot of this revolves around Nudge Theory (Thaler and Sunstein) and resolving policy problems through the manipulation of choice architecture. However, this is not the manipulation of choice architecture but the manipulation of the legal status of one's self-ownership. Yes, there are not enough organs being harvested to fulfil demand, but there are different ways of presenting opportunities to donate organs that do not involve nationalising the bodies of citizens. They can present organ donation cards in more places and more frequently, such as on top of tax or GP-feedback forms. This would gain active consent rather than tacit.

This act will not even be guaranteed to increase the rate of organ transfers. Presumed consent, as it is officially known, has not been statistically demonstrated to increase transfer rates (Hitchen, 2008). This has been demonstrated in Wales, Sweden, Singapore, Chile, and Brazil (Arshad et al, 2019). In order for even critics to be satisfied, they have argued that the government must first approach the public to inform them of the change in the law (Bramhall, 2011). This has not happened, bar a single tweet from the Department for Health and Social Services. 

For presumed consent, the ends do not justify the means as it completely deforms the rights of the living. The government exists to uphold property rights, not to deprive us of them for the purposes of viewing us a 'waste' if we are put into the ground without giving up organs. No sane individual would baulk at seeing less people on waiting lists and more people living happy, fruitful lives. Yet, the method of getting here must be ethically sound. Hence, the government should not cut corners and fully consult the Behavioural Insights Team on how to fulfil their policies without infringing on the consent of those they govern.

We hope the government reforms this law to remove this legal, social, and philosophical problem before it creates a lasting change with our relations of the state for the worse.

Max Marlow is a past ASI intern and current President of the LSE Hayek Society

There will be someone along in a moment to get this wrong

The only limitation on the coming flood of articles shouting that the government should borrow more is how fast people can type. Perhaps allied with the willingness of editors to publish them. For if the government can borrow at negative rates then the government should borrow more, right?

The new government bonds, known as gilts, were issued with an effective negative interest rate of 0.003 per cent and found ready takers, with investors prepared to lend £8.1 billion on those terms, according to the Debt Management Office.

The government can borrow at a profit and create such wonders! Of course, this presupposes that government allocating resources within the economy is an efficient manner of resource allocation, an idea we reject after the certain basic minimum of things that government must do. But let us remain agnostic, for our purposes here, on the desirability or not of more borrowing.

The argument will be put forward that market prices are indicating that such borrowing is profitable - thus the market is demanding more such. The problem here being that the Bank of England already owns just shy of £700 billion of such gilts, or soon will do. That is, that yield, that market price, is not actually a free market price, it’s a highly manipulated one.

In itself this is fine for the point of quantitative easing is to distort the free market price. That’s actually the aim. But this then conflicts with the general injunction that prices are information within the economy. A distorted price is distorted information, it tells us things which aren’t quite true.

We should therefore reject that coming flood of pieces. For if we are to use the argument that market prices tell us what to do we do have to then insist that it is free market prices, not deliberately distorted ones, that do.

Think on it for a moment. The Venezuelan government distorted the price of toilet paper with the well known effect of there being none available. A distorted price was not, thus, a good guide to the supply and demand of toilet paper, was it? The same is true of the QE distortion of the price of money, we should not argue from that incorrect price.

Entirely true, but do we want to?

As with every other interest group looking to make use of a crisis the vegans and vegetarians are telling us that we should stop eating all that meat:

Instead of killing animals, exploiting workers, and despoiling the environment, we can feed ourselves sustainably and help heal the earth through community-oriented plant-based agriculture. Farmland that is currently growing monocrops with petrochemicals for animal feed can switch to producing legumes, grains, fruits, vegetables, pulses, nuts, seeds and other crops directly for human consumption. Suburban lawns can be turned into gardens, and in urban settings, food is already being grown on empty lots, in school and church yards, on rooftops, in food forests, in containers and planting boxes, and even in abandoned buildings re-configured into vertical farms.

Using expensive urban land, rather than cheap rural, to grow food is a recipe for impoverishment. The vast labour requirements of small scale farming as opposed to industrial will also make us poorer. And organic agriculture is going to be very difficult indeed in the absence of the dung from those animals no longer being reared. But yes, it’s all possible, at a price.

To put it bluntly: it’s time to get used to eating less, or no, meat.

Ah, but that’s to miss the important question - do we want to?

The aim and point of our having an economy in the first place is so that we humans get more of what we desire. This is the purpose of trying to get richer. What it is that we desire is an individual decision - utility is always personal. It is entirely true that many things are possible the question is instead which of the possible things meets our desires best?

Given that the vast majority of us happily chow down on the products of industrial farming, that the progress of civilisation itself can be marked by the manner in which food becomes cheaper - requires less labour, so that there are more people available to build civilisation - it would appear that for that vast majority of us the current system works. Works in the sense of sating, as best can be done given scarce resources, our desires.

Given that this is the very reason to have an economy it would be more than a little odd to discard the system, no?

Price gouging and price controls in Italy

Meddling with prices is an irresistible temptation for governments, particularly in times of crisis. So, to avoid price gouging, the Italian government capped the price of surgical face masks on April 26. I’ve written on the issue for the Wall Street Journal, here.

A couple of things stand out in this story. First, the price was fixed at a level clearly below any sensible appraisal of the market price. The government itself was buying at 38 cents a mask, wholesale, and pre-tended retailers sell at 50 cents a mask. Why? If the price was fixed at, say, one euro a mask, perhaps it would have produced little damage, and the government could still claim it put an end to “speculation”.

So, why did they do something different? Well, I suppose the simplest answer is, alas, the closest to the truth: 50 cents sounded better than one euro. One euro is the price of an espresso. What a wonderful government, the one that allows you to buy two pieces of a life-saving device with the same money it will take you to buy a coffee!

Now, here comes an interesting development. The Italian Commissioner for the Coronavirus emergency made sure to clarify that he was regulating the price at which face masks ought to be sold, not the price at which face masks ought to be bought by retailers. Since retailers already bought masks at a higher price, this was meant to be a green light: go ahead, sell under costs, the government will step in and refund you. Pharmacists I talked with, however, did not do so: they were quite hesitant in taking the Italian government’s word for granted. So far, the subsidy has not yet been agreed.

Many comments on the WSJ website are humorous and funny. One claims that Italians now have received free face masks in the mail, by the government. Indeed, some Italians did receive one or a couple of masks for free, by their regional governments. Still, it is worth remembering that a surgical one is supposed to be a single used, disposable device.

Mr. Mingardi is director general of Istituto Bruno Leoni, Italy’s free-market think tank, an adjunct scholar with the Cato Institute, and a presidential scholar in political theory at Chapman University.

Patent pools, vaccines and coronavirus cures

Given age, general grumpiness and our correct if rare worldview we rarely see newspaper articles - those not written by ourselves that is - that we entirely agree with. An exception is Matthew Lynn on patent pools for vaccines and treatments for the coronavirus:

One iron law of politics and economics is always this: there is no crisis quite so bad that the European Union cannot find a way to make it a little bit worse. This week, the EU is leading efforts to create a so-called “voluntary patent pool” that would suspend intellectual property rules so that a vaccine or drug to fight Covid-19 can be rolled out quickly around the world.

At the same time, charities such as Oxfam are leading a campaign for a “People’s Vaccine” and Left-leaning economists are arguing that companies shouldn’t be allowed to stop treatments being made available to everyone.

People, runs the argument, need to be put before profits.

But hold on. That’s crazy. In truth, we should increase the incentives to find vaccines and drugs to combat the virus – not reduce them.

Quite so.

We face a large and expensive problem. We’d like to mobilise the collective resources of the species to solve it. Our only question is what is the best manner of doing this?

One potential answer is that we ask governments to do it. The problem being that governments do not currently employ the people able to do this and there’s insufficient time to go through a civil service hiring process. This before we even consider the likely outcome of asking PHE to do anything other than berate the population on their girth. Another touted possibility is that we ask the private sector - who do employ the right people already - to do it and then tell them they’ll get nothing more than a pat on the back for doing so. This does work in certain circumstances - it is what medals and titles are for, incentives to action - but rather better with individuals than collectives. This is a collective, not individual, endeavour.

We are thus rather left with the thing that already does operate as the incentive for private sector economic activity - money. It’s a vaccine, most rich world doses will be bought by governments, so it’s going to be taxpayer cash spent here. However it’s done poor world doses are going to be supplied at something like cost plus a tiny bit as near all vaccines are today.

Our two options now being that governments can offer a prize for the treatment or vaccine or governments can offer a prize for a treatment or vaccine. The first could be a large lump sum payment for whoever gets there first with something that works. The second would be the award of a patent - therefore the ability to profit from the use of - for whatever works. Which is the best system?

It is unlikely that governments will agree to pay the sorts of sums that would provide the correct incentive. This is an expensive problem, it is immediate, a week makes a difference to the true cost - we should be talking billions as that prize. Politics will not pay that sum, it is not conceivable that it would, not as one lump sum to the winner of the race.

It is also true that we don’t in fact want the one treatment or vaccine. We want as many as actually manage to do something. Governments are most certainly not going to pay out billions each time for multiple solutions, partial solutions or complete. We don’t and cannot know now which of any of the multiplicity of possible solutions will prove most valuable. We don’t know now that is, it’s something we’re going to have to try and see.

So, our only useful and viable solution is that each of those - partial or complete - solutions get out there, be used, then people get paid some sum dependent upon how effective they are. That effectiveness being estimated by how often they’re used. This being exactly what the patent system does do.

That is, we already have the system in place to deal with this immediate and expensive problem. Pay people a small fee for each use of their developed solution - patents.

Why is anyone arguing about this?