It's always a bit risky to critique a Nobel Laureate but here goes....


There's no doubt that the work of Amartya Sen has enriched the human race. His studies of famine, as an example, have led to a general realisation that in the modern era they're not a result of insufficient food, they're a result of insufficient ability to purchase food that is extant (or to attract food from outside the area to the one of earth). The solution is therefore not to ship corn or wheat, but to ship money and simply give it to people. That this idea has so penetrated even the US government sufficiently that both the Bush and Obama Administrations have attempted to change the method of US famine relief in the face of the usual vested interests is evidence of quite how powerful the point is. However, this does not mean that Professor Sen is correct in all things. And this piece on universal health care shows us this:

The usual reason given for not attempting to provide universal healthcare in a country is poverty. The United States, which can certainly afford to provide healthcare at quite a high level for all Americans, is exceptional in terms of the popularity of the view that any kind of public establishment of universal healthcare must somehow involve unacceptable intrusions into private life. There is considerable political complexity in the resistance to UHC in the US, often led by medical business and fed by ideologues who want “the government to be out of our lives”, and also in the systematic cultivation of a deep suspicion of any kind of national health service, as is standard in Europe (“socialised medicine” is now a term of horror in the US).

The problem with this is that the US does have universal health care. What it does not have is universal health care insurance. And that's a vital distinction. We do not think that the US health care financing system is something that anyone should really be desiring to imitate. We most certainly don't suggest that the NHS, or any other of the European health care systems, should be rebuilt upon the American model. But it is the financing of the system, not the actual treatment, health care delivery, system that is the undesirable thing to copy.

Rock up to any emergency room in the US and you will be treated regardless of capacity to pay. Every county runs a health care system for the indigent and those otherwise unable to pay. Medicaid provides treatment to the poor. Everyone, but everyone, in the US has access to medical treatment. What they do not have access to is treatment without the possibility of having to pay for it out of pocket: and pay for it after the treatment has been given of course.

The importance of this distinction is that Sen is discussing how other countries, ones which don't in fact have universal health care, might move to having such. Great, excellent, a subject well worth discussing. It's also true that we wouldn't go around recommending the US system to those poor countries which currently don't have universal healthcare. But if we don't distinguish between healthcare and the method of financing access to it then we're going to get horribly confused as we try to design the appropriate systems.

Paul Mason wants to be an economist


This is ever so slightly strange. Paul Mason has decided that he'd like to be an economist, figure out how the economy works in detail.

If I could rub an empty lager can, and get a genie to appear and grant me one wish for 2015, it would be for something apparently banal but revolutionary: an accurate simulation of the economy.

It would be multilayered: it would model the microeconomics of my home area, allowing me to test the lurid worries of my neighbours about the opening of a second tattoo shop. It would model the real Britain – including the sex work, the cybercrime and the drug deals. And at a macro-level it would model the whole world – from the effects of a factory collapsing on its workers in Bangladesh to those of fast fashion on the consumption habits of teenage girls here.

The reason we need such models is that the ones provided by economics are pretty useless – particularly when modelling instability, complexity and change. Mainstream economic models rely on the 150-year-old assumption that capitalism’s tendency is towards equilibrium, and that everybody acts rationally; they struggle to accommodate sudden shocks. About 20 years ago economists decided to abandon data and go for an ever more abstract series of models that are logically consistent but not tested against facts, and unable to predict real crises.

There's really only one slight problem with that idea. Hayek showed that, in theory, such detailed planning of an economy simply isn't possible. Knowledge is local, the centre cannot possible gather enough of it in apposite time scales to be able to produce such models. We end up with the end result that we can only use the economy itself as the model of the economy.

It's entirely true that not everyone actually believes Hayek on this point. There's always those who think that just a little more computing power, just a little more scientific socialism, will enable us to overcome this wastefulness of capitalism and markets.

But as the socialists themselves found out, this just isn't true. Or, sa this great essay points out, In Soviet Union Optimisation Problem Solves You.

I said before that increasing the number of variables by a factor of 1000 increases the time needed by a factor of about 30 billion. To cancel this out would need a computer about 30 billion times faster, which would need about 35 doublings of computing speed, taking, if Moore's rule-of-thumb continues to hold, another half century. But my factor of 1000 for prices was quite arbitrary; if it's really more like a million, then we're talking about increasing the computation by a factor of 1021 (a more-than-astronomical, rather a chemical, increase), which is just under 70 doublings, or just over a century of Moore's Law.

Now that is talking about planning the economy. But the same is true of modeling it. For if we can model an economy then, as Mason desires, we would be able to plan it. And the reason that we can't plan it is because we can't model it. It is just one of these things that we cannot do.

Anyway, full marks to Mason for wanting to understand more about the economy, limited points for wanting to know more about the effects of policy but really, shouldn't he have known that his desires are impossible before he became an economics editor?

Ideas can mean the difference between wealth and poverty


Adam Smith never said that “The real tragedy of the poor is the poverty of their aspirations”, as some people who have never read him think. It is hard to think of a less Smithian view – he was the opposite of that quote's patrician and patronising voice, and had a deep compassion for people who had been unlucky in life. But there is some evidence that disadvantaged people underinvest their savings at a huge cost to themselves. This seems to be true even when there are no social constraints or market failures that might cause this to happen.

One reason for this may simply be that poor people do not realise that the investment opportunities exist, or do not really consider that they might benefit from them. Consider those bright young students from deprived backgrounds who have never even considered applying to university, just because nobody in their families ever has either. Your experience of the world shapes how you react to various opportunities that you get.

To test this hypothesis, a group of researchers at Oxford performed a controlled trial in remote Ethiopian villages, where they showed one of several one-hour documentaries about poor Ethiopian farmers who had expanded a business, improved their farming practices or broken cultural norms by, say, marrying for love. “Individuals succeeded largely through their own efforts and by drawing on assistance from community members and available resources, not through outside government or NGO intervention.”

The trial involved a placebo group (shown a comedy movie) and a control group (shown nothing at all) and it seems to have been a success. Six months after the screenings, the documentary group’s savings rate had risen significantly above the control group’s and had also begun to access credit at a higher rate. (These are some of the poorest people in the world, so the absolute amounts – a few pounds – may seem very small to our eyes.)

School enrolment was up by 15 percent in the documentary group, although it was also up by 10 percent in the placebo group so the effect is unclear, and spending on school expenses was up by 17% (compared to no change in the placebo group).

Overall, the results seem to show that showing extremely poor people examples of people like them who had made something of themselves inspired them to invest in themselves and their families.

It’s just one study, but it hints at something bigger. Incentives matter, of course, but you have to be aware of the existence of an incentive for it to work on you. Even if you’re aware of it, you might discount (or exaggerate) its significance according to your experiences. In a complex world, each of us uses a different pair of glasses to focus on what matters and filter out what doesn't. And no pair is perfect.

There is no obvious public policy lesson from any of this, except perhaps that people don’t always react predictably to incentives. Incentives matter – but so do ideas.

Men are not 'over', women are not discriminated against


In what seems to me slightly contradictory, two popular modern memes hold that, firstly, we are experiencing 'the end of men', who are steadily being eclipsed by women in many levels of academia, areas of the economy and so on; and secondly that women are discriminated against in the labour market, which is why they only earn around three quarters as much as men on average per hour. A 2013 paper by Kingsley Browne in the Boston University Law Review challenges both of these claims, arguing that the dominance women enjoy in many areas of society refutes the idea they are discriminated against, but their relative scarcity in other areas shows how men are still not 'over'. He explains this discrepancy between sectors to differences in preferences and characteristics between the sexes, differences he believes are biologically caused.

Common examples of perceived workplace inequality – the “glass ceiling,” the “gender gap” in compensation, and occupational segregation, among others – cannot be well understood if the explanation proffered for their existence is limited exclusively to social causes such as discrimination and sexist socialization.

Males and females have, on average, different sets of talents, tastes, and interests, which cause them to select somewhat different occupations and exhibit somewhat different workplace behaviors. Some of these sex differences have biological roots. Temperamental sex differences are found in competitiveness, dominance seeking, risk taking, and nurturance, with females tending to be more “person oriented” and males more “thing oriented.”

The sexes also differ in a variety of cognitive traits, including various spatial, verbal, mathematical, and mechanical abilities. Although social influences can be important, these social influences operate on (and were in fact created by) sexually dimorphic minds.

As I have written before, even if the very substantial work-related differences between men and women are socially constructed, satisfying their preferences as they are, rather than as an egalitarian might want them to be, makes men and women best off. I have also written how the gender wage gap isn't evidence for firm discrimination between the genders, because it is entirely explained by women's decisions (to take safer, more satisfying jobs, to work lower hours and to take substantial time out of the workforce).

He points out that women have recently come to dominate many high status fields and that most of the gender wage gap is between, not within, professions. Taken together, he argues there is no general 'glass ceiling', although of course there are many individual instances of discrimination.

In many respects, however, women have made breathtaking advances in the past several decades. Professions such as law and medicine are reaching parity among new entrants, and women represent over 60% of newly enrolled pharmacy students and over 75% of new veterinarians.

Even within fields in which men predominate generally, such as science, technology and engineering, there are interesting variations: women are underrepresented in metallurgical and mechanical engineering but much closer to parity in biomedicine and bioengineering.

And he gives strong evidence for differences between men and women in: competitiveness, which are not easily explained by 'stereotype threat' given that they start very early and only appear in specific sorts of high pressure competition; risk-taking (boys and men take more risk); interest in children (girls and women show more of it); spatial reasoning ability (men excel); verbal ability (women excel); and occupational interests.

Whether these are biological or social they massively affect the fields that women want to enter and the ones they can do well in. And this is OK! It makes people happier to do jobs (including work in the home) they want to do and jobs they are good at. It's OK for our labour markets to reflect this—it makes us better off overall.

No, really, markets do sort themselves out


You'll recall the terrified bleating from the usual suspects over the way that the supermarkets were sitting on all that land that could be used? As we recall said bleating the first set of allegations were that they had the land banks to make sure that other supermarket chains couldn't build stores in an area. Our reaction to that was, well, issue more planning chittys then. More recently the story moved on to how the supermarkets were sitting on all that land that should be used for housing instead. To which our reaction was, well, issue more planning chittys then. We're really not short of land to build on in this country, we're only short of land someone is allowed to build upon.

And what is happening now?

Britain’s supermarkets are building on just 6pc of the land they control across the UK, underlining the problem they face with undeveloped sites as the industry battles tumbling sales.

New figures show that the pipeline of new grocery stores in the UK is 46.61m sq ft, the equivalent of more than 1,000 acres. However, just 2.8m sq ft of these new stores are actually under construction.

Building work on stores has fallen by 20pc compared to a year ago as the “big four” supermarket chains – Tesco, Asda, J Sainsbury and Wm Morrison – suffer from tumbling sales and profits.

This means that 43.81m sq ft of land across the country is sitting unutilised by grocery retailers according to property agent CBRE. This land is either subject to a proposal for a new food store, or planning permission has already been granted.

The supermarkets simply do not want to build more stores on that land that they own. That land will, therefore, in the fullness of time (given the time and effort it will take to change said planning chittys, this system is not known for its efficiency) be developed to some other purpose, most likely that housing that was being called for.

And all being done without a politician or a bureaucrat making a plan, without considering social usefulness and entirely cocking a snook at the desires of our betters in the Great and the Good.

We the peasantry have decided that we're not all that interested in more supermarkets. So, therefore, there won't be that many more supermarkets. Markets really do just sort themselves out, we get supplied with what we actually want for that's what we spend our money on, what we want.

Well, markets do sort themselves out if they're allowed to. Who's willing to bet on the campaigns against those now won't be supermarket sites being turned into the housing that people insist we need?

Russia, China, and the perils of economic warfare


Many Russians may believe that Putin’s invasion of Crimea was legitimate and justified, many may also believe that Putin’s domestic and foreign policies are at odds with their national interests. However, we shouldn’t be surprised if, in future, many Russians also remember the nations that refused to lift their economic sanctions whilst they suffered from a crippling crisis and that it was the Chinese government that offered help in those dire straits. Of course, this is limited help and there are a lot of other problems to sort out but the gesture is a strong signal of China’s stance and indicative of the possibility of further assistance in future. Warfare via economic sanctions leads to the division of the world into inefficient trading blocs and provides a natural basis from which governments can form convenient, logical military alliances. The wonder then, is whether economic sanctions are really worth risking any chance at long-term peace and stability we may have? Though sanctions are designed to put pressure on governments, regular citizens suffer immensely from them and, in future, when young Russians remember this crisis, that suffering won’t easily be forgotten.

Iran, like Russia, is also in a vulnerable situation and it is quite easy to see how these sanctions that artificially and inefficiently divide the world could also encourage the proliferation of worrying military alliances between those states that feel ‘cornered’ and this garners a sort of legitimate solidarity against their ‘oppressors’.

In the long-run, with alliance systems that lead to increased military posturing (as we had already witnessed from Russia in the Ukraine and in the EU, we are witnessing from China in the Asia-Pacific and we might conceivably further witness from Iran and North Korea) there will be increased uncertainty and genuine fear amongst peaceful peoples and, in the end, global social welfare and economic growth will be stunted in the name of ‘humanitarian’ intervention.

Of course, the wider problem is that the global system of trade restrictions are essentially sugar coated economic sanctions and, therefore, a form of subtle economic warfare that we are conditioned to ignore. Free trade is necessary in order to ensure that there is no unnecessary, state-induced hatred fostered between peoples. Perhaps we could add to the Geneva conventions by suggesting that economic sanctions be ruled out of the question? In this way, instead of providing fertile ground for fostering the animosity necessary for armed conflict, people who truly want peace would be free to go about their own business. The peaceful sentiment that free trade encourages may also help discourage these governments from acting violently in the first place!

Where should one go to glory in the wonders of the world?


We were rather taken aback by one of those listicles telling us all about which roads we should drive along as part of that bucket list of experiences before we die. Here is it, you know the sort of thing. Pacific Highway in California, Skyline Drive, yadda yadda. And it's fair enough, they are trying to give a list of scenic routes. And there's many such lists and sure, many of the things on such lists are worth looking at: the Amalfi Drive for example. However, the bit that always takes us aback with these things is that they're always about going to look at Nature. And always Nature, not nature. Those bits of the world that could be and almost certainly were viewed and possibly even enjoyed by our Australopithecene ancestors.

And while nature's (or Nature's) often fun and even impressive it's not that at all which we regard as the glorious thing about the world that we inhabit. Rather, it's the cities of the world that are. A wander down Cannon Street past St Paul's and into the beating heart of the world's markets that is The City. A drive down Park Avenue perhaps, or to view the commodities of the world easily available and reasonably priced upon Oxford Street. Or, dare we say it, a visit to the food section of a shopping mall where more calories are available, at trivial cost in effort and time, that one of those Australopithecenes would have seen in an entire short lifetime.

What really is a wonder of the world? The scrapings in the rocks that the glaciers have left behind or the civilisation that we have built in the past 10,000 years on that rubble?

If that latter, what, in the comments, would be your example of that one piece of it, the apotheosis of it, that all should place upon their bucket list?

Johann Hari is back and he's actually saying something sensible

But while Johann Hari is back and he is saying something sensible he's not, as so often, actually saying anything original. He's back with a book about drugs and the War on Drugs. This is not even remotely true:

Hari’s book turns out to be a page-turner, full of astonishing revelations. I had no idea that the war on drugs was single-handedly invented by a racist ex-prohibition agent, who needed to find a new problem big enough to protect his departmental budget. One of the first victims of his ambition was Billie Holiday, whose heroin addiction enraged him to the point where he hounded her to death. After he’d had the singer jailed for drugs, she was stripped of her performing licence, and as she unravelled into destitution and despair, his agents continued to harass her, even summoning a grand jury to indict her as she lay dying under police guard in a hospital bed.

That specific harrying of Billie Holiday might be, we don't know, but that's not the start of the War on Drugs by any means at all. As Chris Snowden has explained at book length the attempts to fight a War on Drugs begin long before Billie Holliday was being harrassed. Back to neat the turn into the Twentieth Century in fact.

However, this is true:

But something didn’t add up. “Every day, all over the world, hospital patients are given medical heroin, diamorphine, very often for long periods. And virtually none of them afterwards goes out and tries to score on the street. Which made me think, the issue here can’t just be the drug.”

Hari went to Vancouver to meet a psychology professor, Bruce Alexander, who had been similarly puzzled, so had replicated the original experiments. This time, instead of experimenting on solitary rats locked in empty cages, he offered the choice of clean or drugged water to rats kept in what he called Rat Park, a kind of rat heaven full of wheels and coloured balls and delicious food, and other rats to play and mate with. When these rats tried heroin, they weren’t very interested.

“They just didn’t like it. None of them overdosed. Even more strikingly, he then took rats that had become addicted in the isolated cages, and put them into Rat Park. And they almost immediately stopped using. What Alexander had found is that we’ve fundamentally misunderstood what addiction is. It isn’t a moral failing. It isn’t a disease. Addiction is an adaptation to your environment. It’s not you; it’s the cage you live in.”

It's not, however, remotely original. Much the same has been pointed out by Stanton Peele for some 40 years now. Most notably in pointing out that the vast majority of those American troops who used heroin in Vietnam came home and simply stopped using it, as various official reports have pointed out.

We'll have to wait for the book itself to see whether he properly attributes his sources, eh?

Lord Save Us from doctors making public policy


There's an old bon mot about preferring to be ruled by the first two thousand people in the Boston telephone book than the combined faculty of Harvard, experts that they are in their subjects. And so it is when we've got doctors trying to tell us what public policy should be rather than their sticking to their knitting and trying to treat the diseases that we become prey to:

Cancer is the best way to die because it gives people the chance to come to terms with their own mortality, the former editor of the British Medical Journal has claimed.

Dr Richard Smith, an honorary professor at the University of Warwick, said that a protracted death allowed time to say goodbye to loved ones, listen to favourite pieces or music or poetry and leave final messages.

He claimed that any pain of dying could be made bearable through ‘love, morphine, and whisky.’

Writing in a blog for the BMJ, Dr Smith admitted that his view was 'romantic', but said charities should stop spending billions trying to find a cure for the disease because it was clearly the best option for an ageing population.

It's entirely possible that going out on a wave of whisky and heroin (not a combination we would recommend if you're not planning on going out just yet and yes, gin is worse than whisky in this regard, off what libertines liberals like us know about) having said goodbye and enjoyed those last days is indeed the "best" way to go.

But we're afraid that it's still an insane thing for anyone to say that we should not try to cure cancer. The mistake is akin to that made by so many of the slower thinkers about market interactions. Sure, if there's only one single market interaction then as game theory tells us the incentive is to rip off the other party. But most market interactions are not one off transactions, they're simply a part of a number of iterations of the same transaction. In which case the incentive is to cooperate to mutual advantage.

Looking to cancer the assumption being made is that OK, once suffered from one should simply fold one's tent and steal away into that long dark night. Which is to entirely ignore the fact that as cancer treatments get better it's possible to have a series of iterations. That first, that skin cancer, say is treated and two decades later the luck of the draw brings on, say, colon cancer which may or may not be treatable. The whisky and heroin option taken at that first iteration would then have robbed one of that 20 years of life.

It's entirely possible that cancer is that "good death" but surviving one or two brushes with it before succumbing would be even better. So no, while we might well take a doctor's advice on how to treat a cancer we shouldn't be taking same on whether to investigate treatments or not. To do so would be to succumb to the views of the experts, something that pulling names randomly from the phone book would avoid.

A Capitalist Carol, Stave 9: The End of It


Splurge was awakened by the sun streaming through the curtains, and the distinctive morning knock of one of his Downing Street staff. “What day is this?” cried Splurge.

“Why, the day of your Party Conference speech, Prime Minister!” came the reply from outside.

“Oh spirits!” exclaimed Splurge. “Thank you! Thank you! I haven’t missed it! I shall make them such a speech!”

His hands were busy with his garments; turning them inside out, putting them on upside down, such a state he was in. As he picked up his wallet to thrust it into his usual pocket, he chanced a look inside and saw the picture of Adam Smith on the back of the £20 note. “It’s all right! It’s all true, it all happened! Ha, ha ha,” he whooped.

He frisked into the study and fumbled excitedly for a pen and paper. “Oh, I am light as a feather, as happy as an angel, as merry as a schoolboy,” he exclaimed, laughing and crying in the same breath.

“What a speech it will be! I will tell them that public spending and regulation always has perverse side effects! I shall tell them that government just keeps on growing unless you restrain it! I will tell them how a free society is tolerant of others and does not try to dictate their how they should live; and how we should be wary of politicians telling us they are limiting our freedom of speech and action for our own good.”

“I will tell them about Public Choice! Yes, indeed! How democracy is not the answer to everything, and is best limited to things we cannot decide by any other means. How elections are not a measure of the public interest but a battle of competing interests – and how the majority has no right to exploit the minority with high taxation. The Rule of Law! Yes! I will tell them about how laws should apply to everyone, without favour, and not framed to give privileges to those in government and their cronies!”

“Oh, they will be so surprised!”

“And the IMF too,” he exclaimed all on a sudden, remembering his recent conversation. “I will tell them how the financial crash was caused by our expansionary policy, built on cheap credit and loose money! And how our inept regulators made it worse! That it wasn’t the bankers at all – that they were just caught up in the spiral like everyone else!”

“I know!” – at this point he danced a little jig of excitement – I will tell them that we will adopt market monetarism so that our currency remains sound and these things never happen again. And that we will pay off the national debt and adopt a zero deficit and balanced budget rule so that governments are never again tempted to spend beyond their means.” Splurge looked into the distance for a moment, thinking. “Oh, and I must write to the European regulators too! So much to do! So much to do!”

And gathering up his sheaf of scribbled notes, he dashed onto the street, dismissed his chauffeur-driven car, and took the bus to the conference centre where the Party were assembled. He had never dreamed that being surrounded by ordinary people, who were not part of the political class, could give him so much happiness. Nor that his mission to save and preserve human freedom could yield him so much pleasure.

Splurge was better than his word. He said it all, and did infinitely more. To freedom, which did NOT die, he became the as good a friend, as good a protector, as the good old Westminster Village knew. Some people laughed at his U-turn, but he let them laugh, and little heeded them. For he was wise enough to know, how healthy it is for a society to be able to laugh at its politicians, and how so few societies allow such jest.

He had no further intercourse with extravagant public spending schemes, nor bureaucracy, nor excessive taxation and regulation; but lived upon the Limited Government principle, ever afterwards. And it was always said of him, that he knew how to preserve liberty well, if any man alive possessed the knowledge. May that be truly said of all of us!

And so, as Adam Smith observed, “It is the highest impertinence, in kings and ministers, to pretend to watch over the economy of private people. They are themselves always, and without exception, the greatest spendthrifts in the society.” Save all of us from that, every one!