How have we ended up with this idiocy?

Well, actually, the reason we've ended up with this idiocy is simple enough. The politicians just didn't take note of what the economists were saying. Another example of how the more the economists are united in a view upon a subject the less influence economists have over it:

Most of the wood fueling converted coal plants in England, Denmark and other European countries is coming from North American forests. Each month, about 1 million tons of tree trunks and branches from southern U.S. pine plantations and natural forests is being turned into pellets and shipped to European power plants, mostly to Drax power station in the United Kingdom.

The growing transatlantic trade is being financed with billions of dollars in European climate subsidies because of a regulatory loophole that allows wood energy to count as if it’s as clean as solar or wind energy, when in reality it’s often worse for the climate than burning coal. Only the pollution released when wood pellets are produced and transported is counted on climate ledgers. Actual pollution from the smokestack — by far the greatest source of carbon pollution from wood energy — is overlooked.

That's a rather large mistake of course. 

And how we ended up here is as simple as we've said above. From William Nordhaus through to Lord Stern the economic analysis said that, if (and obviously only if, whether is not an economic subject) something needs to be done about climate change then the method is to make the one intervention into the price system. Doesn't, on this point, particularly matter whether it is cap and trade or a carbon tax.

But just make that one intervention - do not, whatever else, try to address it piecemeal with detailed regulation of this and that. Because that will be both less effective and also more expensive.

What did the politicians do? Try to plan it all with a series of detailed interventions and regulations into this and that. And that's why dealing with climate change is so expensive, simply because the wrong method of dealing with it is being used.

Remind us why we allow the European Union to do things like this to us and them

It's the wrong major Christian holiday of the year to be getting obsessed with the price of eggs but there does seem to be a distinct lack of goodwill to all men in this action by the European Union:

The plight of his company, and the broader agricultural sector, has come to encapsulate a wider disenchantment in Ukraine with a trade agreement signed two years ago with the European Union. The deal, which went into force in January, included protections for farmers in the European bloc, and, as a result, one of Ukraine’s most successful industries has been effectively shut out of the new opportunities.

The Ukraine sits on one of the largest blocks of the finest arable land on the planet. The last time we had free trade with it, the 1870s as the railways extended into the steppes, this increased the living standards of all of us as we could buy yet more of ever cheaper food.

At the expense of our local landlords of course, this was one of the triggers of the agricultural depression of that decade and the great landed estates never really recovered. In the work of Saez and Zucman on the development of wealth this is made very clear. Agricultural land as the great store of wealth, monopolised by all too few, simply disappeared as an important part of the societal stock of wealth. Disappeared into the maw of the population as cheap food.

This we would argue is a Pareto improvement. And more than that, it's exactly the thing which the EU's CAP is designed to prevent. For example:

For a blend of economic and political reasons, Ukraine built a singular capitalist achievement after the fall of Communism: enormous, technologically advanced chicken farms that are among the largest in the world.

At its peak, Avangard had space nationwide for 30 million laying hens. Thanks to cheap grain and low labor costs, it is able to produce billions of eggs annually at a low price. The wholesale price of an egg in Ukraine is 4 cents, compared with 25 cents in Poland and 35 cents in Germany.

The quotas applied make it near impossible to import those eggs into the EU. And no one should be under any misapprehension that our own production comes from some happy farmer's wife throwing handfuls of grain to clucking free range chickens. The only question is whether the barns are there or here - and whether the people profiting are making a margin on 4 cents there or 35 cents here.

This is one of the things that Brexit allows us to correct. As with Cobden being right in the 1840s, the point of free trade is that we get to consume the cheaper food grown by others. And of course, the cheaper their food is the more open to their imports we should be, not this idiot system of refusing to allow food in precisely because it is cheap.

Unilateral free trade with the Ukraine, that's what we want for Easter, even if not for Christmas.

An Austrian recession a'comin'

We are not huge fans of macroeconomics around here. Not because we think the various theories are all wrong, quite the opposite. There're truths in pretty much all of the varied theories about recessions and booms we feel. The disutility of the subject coming from the fact that it's near impossible to know which model is appropriate to explain any one particular event - making the diagnosis of the appropriate cure somewhat difficult.

Our view thus tends to retreat back to Adam Smith, peace, easy taxes and tolerable justice are the things to aim for in economic management. We might add a bit more about public goods, externalities and the prevention of monopolies but that is roughly the set of tools we think we've got which are useful. And certainly they're the ones we think should be concentrated upon.

However, we are not exclusive about this. Given that we do think there are truths in some models at times it is possible to identify the correct model and thus the correct solution. Larry Elliott is calling the top for the Chinese economy with the signing of Oscar from Chelsea. No, we're not sure about that top. But we are about this:

.."the debt super cycle is over when the cost of malinvestment and misallocation of capital outweighs the benefit of good credit creation." 

Which is the Austrian view of a recession of course. China has indeed enjoyed a massive boom as the idiocies of Maoism were dropped and free markets allowed reign. And it has been those markets - the thumbnail sketch is that the state directed economy continues but ever shrinks as a portion as the free market one grows up around it.

But this can hit the buffers and when it does it will be for that Austrian reason. Having identified it we can then apply to appropriate salve. Which is liquidationism. Those misallocations have to be unwound. That Keyneisan solution to a recession, demand boosting management, is not appropriate as that isn't actually the problem. It becomes instead extend and pretend.

We end up with the rather gloomy prediction that perhaps China should have a recession. 

The Guardian. Wrong about everything. Always

This simply is not so:

Sir Philip Green may have to pay £1bn to resolve the problems facing the BHS pension scheme under proposals tabled by MPs.

We do not, as a general rule, bring in retroactive law. Meaning that whatever changes are made to pensions systems will apply to things which are done in the future, not to things which have already happened.

What has rather surprised us about these suggestions from Frank Field's committee - the Guardian being wrong does not of course - is what no one has as yet noted. That this will entirely kill off what remains of defined benefit pensions schemes.

The work and pensions committee, which is chaired by Labour MP Frank Field, has called for the government to introduce a “nuclear deterrent” to stop companies or individuals trying to avoid their responsibilities to pension schemes.

This deterrent would be a fine from The Pensions Regulator (TPR) worth three times the amount it believes a company or individual should contribute towards filling the deficit in a pension scheme. Given that the regulator is understood to be seeking £350m from Green for the BHS pensions scheme, this means it could threaten the billionaire tycoon with a charge of about £1bn.

Added to this:

As well as threatening punitive fines, the MPs said TPR must become a “nimbler, more proactive regulator”. They said the regulator must consider recovery plans for pension schemes in deficit that last more than 10 years as “exceptional” and that it should approve every major corporate transaction.

If you've a defined benefit pensions scheme then every corporate transaction must be approved by the pensions regulator. Said pensions regulator would rapidly become the de facto economic planner. Except, of course, that everyone will simply stop having defined benefit pensions schemes.

An interesting and correct way to do housing taxation

As Henry George pointed out to us all the art of land value taxation is to tax the unimproved value of said land. Another way to say the same thing is that we're trying to tax the value that society adds to the land, not what the owner has added themselves. Land in the centre of London has a higher value than much land elsewhere just because it is surrounded by London. It seems reasonable enough that some of that value created by London should be taxed to pay for London.

This is of course not how we currently do it. If we, the owner of a house say, improve the house then we can expect to pay more tax upon it. This is a disincentive to increase said value - not what we want to be doing at all. 

Thus this in Portugal is interesting:

People buying a home in Portugal that has unspoilt sea views or faces the sun may be hit by a 20% increase in property tax, under fiercely contested fiscal changes which became law on Monday.

Those with a place overlooking a cemetery or water treatment plant may enjoy a tax reduction of up to 10%.

Someone always does end up next to society's disposal systems so why not? 

Given that one of us does in fact pay this tax we would note that the system is not perfect. For they also increase the tax when you improve the house itself.

But the basic idea has merit. Those who currently, in our native Britain, insist that nothing should ever be built anywhere near them for fear of spoiling the views probably should be taxed on the value of those views. Even if they still won't allow the building at least they're paying for their pleasures under such a system. 

Mark Boyle is rejecting this modern world - Hurrah! for Mark Boyle

We do not think that this is a wise idea nor is it something that we ourselves shall be doing (given that it's panto season keep those cries of "Shame! Shame!" coming from the back) but we do admire on part of this rejection of the modern world from Mark Boyle. Which is that he's being thoroughly liberal about it all.

We don't even think that he's correct in his analysis:

From Wednesday, I’m rejecting the world of complex technology entirely. That means no laptop, no internet, no phone, no washing machine, no tapped water, no gas, no fridge, no television or electronic music; no anything requiring the copper-mining, oil-rigging, plastics-manufacturing essential to the production of a single toaster or solar photovoltaic system.

Having already rejected these industrial-scale, complex technologies, I intend to move fully towards what is pejoratively called primitive technology. Insofar as engaging with civilisation allows, I’m also trying to resist the modern domination of what Jay Griffiths, in Pip Pip, calls clock time – and failing daily.

Such things destroy our humanity apparently. We tend to think they allow us to exercise it.

He does state that he's going to retain his pencil which allows us a cheap jibe about how that it most definitely not a rejection of technology. But we are still going to give Mr. Boyle our wholehearted support.

For he is, as we say, being admirably liberal about this. At least so far as we know he is not arguing that government must force others to do the same. He's not, again so far as we know, proselytising that all should follow him into that medieval night. He is just stating that this is what he wishes to do and that this is what he is going to do.

Which is of course the liberal ideal. The entire point of the socio-political order, of our even having an economy, is so that the maximum number of people can live their lives as best suits them. And as Mill pointed out that right extends to all, and all lifestyles, right up to the point where  the exercise of it limits the same rights of others.

We just wish that rather more of those who claim to be liberals would follow this example. Stop telling us all that we must do as you say and go off and do as you wish would you? That is, if you would claim to be a liberal could you actually act like one?

Once again more than a little misleading from Shelter

Shelter tells us that all those nasty building companies are just buying land to sit on it. To watch it rise in value without their having to do any actual building of houses. Landbanking that is:

The UK’s 10 biggest house builders are sitting on 14 years’ worth of land, on which almost one million homes could potentially be built, Shelter has claimed.

Research carried out by the housing charity found that the listed firms control 404,000 plots through their current land banks, and a further 558,000 plots in so-called “strategic land banks”. 

Much of this land does not have planning permission yet, but will have been chosen in areas likely to gain it. Strategic land banks are not always owned by the house builders, but held with ‘Option Agreements’ with the landowner, which gives the builder the exclusive right to buy the land when they are ready to do so. 

So, it's not in fact 14 years of land at all.

There is a basic logic problem with he initial allegation of course, which is that a company needs income and income is gained here by actually building a house that someone then buys. There won't be any profits or dividends unless something is actually sold.

The number to look at properly here is that current land bank number. At the (total, not just these large companies) completion rate of perhaps 130,000 houses a year this is some four or five years supply of land with planning permission. And it can, and often does, take 5 years or so to be able to move land without planning permission into being land with planning permission. 

Yes, of curse, there are those 8 week targets for the council to decide and so on but that's absolutely not the actual time elapsed between asking whether some houses can be built on previously unbuilt land and being allowed to do so.

The stock of land therefore seems to be, around and about, sufficient to cover the time it takes to gain more land upon which to build. Just as if it takes a factory a week to gain more of a supply then it will tend to hold about a week's supply of that thing.

However, let us assume that landbanking is actually a thing. People really are holding land with planning permission off the market in order to speculate upon price rises. If this is so then what should we be doing about it?

Issuing more planning permissions of course. The increased supply will mean the speculation doesn't work and thus people will build not speculate. That is, the solution to our housing woes is, as it always is, simply to issue more planning permissions.  


We thoroughly approve of this action by The Observer

A week ago we were somewhat dismissive of Carole Cadwalladr's attempts to be allowed to censor Google search results. Today we must praise her actions upon the same subject:

And still, anyone searching for information about the Holocaust – if it was real, if it happened, if it was a hoax, if it was fake – was being served up neo-Nazi propaganda as the top result.

Until Friday. When I gamed Google’s algorithm.


How did I achieve this impossible feat? Not through writing articles. Or shaming the company into action. I did it with the only language that Google understands: money. Google has shown that it will not respond to outrage or public sentiment or any sense of morality or ethics. It does not accept that leading people with a genuine inquiry about whether the Holocaust happened to a neo-Nazi website is grossly irresponsible or that it demeans the memory of the six million Jews who died. But it was prepared to take my cold, hard cash.

This is excellent. Of course, Ms. Cadwalladr rather spoils it all by going on to demand that something must be done. Missing the point that she has already achieved what must be done.

She desires that the world be a slightly different, and by her lights slightly better, place. We may agree or not with her desired end state, as we may or may not agree with the desires of anyone else out there. But we entirely agree with he method employed here. You want the world to change then off you go, using your own resources, and change it. Rather than demanding that the resources of everyone else are consumed through the medium of the State, or regulation, or the law, to alter it to your desired shape. 

And the very best of British to you and all who sail in your particular little ship.

Your resources are indeed yours to deploy as you wish--as ours are ours and as theirs are theirs. And think how much better The Observer would be as a newspaper if all their solutions accorded to this principle? That this problem or other should be solved by me doing something rather than by my demanding that them over there have to pay for it? 

We're amazed at how this works really

We were entirely unaware that there was some impending collapse in the education budget of the country. So imagine our surprise when we hear that budgets are to be cut by 8%. We're really sure we would have heard about it if it were true.

But we're told it is true in the pages of The Guardian no less

But what does “winning” mean when school budgets are facing real-term cuts of £3bn by 2020? This is what the National Audit Office, rather annoyingly for Greening, announced on the same day she unveiled the new formula. All schools will need to reduce funding per pupil by 8% over the next four years as a result of teacher pay rises, pension contributions and national insurance.

Err, wait a minute here, paying teachers, and pensions and national insurance are part of total compensation, is part of the education budget. And thus part of the funding per pupil of course. Thus there is no real terms cut here. Can't we ask the Guardian to stop spreading fake news like this? 

And of course there's the other point here, the relevance of this to such things as minimum wage rises. A reallocation of current budgets from non-wage activities to wages does indeed mean, in the absence of pay rises or firing people, that there is less money available for those non-wage activities. Thus is we raise the wages of sandwich makers, just as with teachers, we either get fewer sandwich makers, more expensive sandwiches, or less money to spend on hte ingredients of the sandwich.

Puzzling that this isn't pointed out in The Guardian's discussions of the minimum wage really. But then we guess that's the fake news business.

The truly worrying thing about this fake news eruption

The comment page of The Guardian is a useful place to watch the latest alarum and mass delusion to which we humans are distressingly subject take form. The one so taking form at present being the outcries over the false news which so obviously won the election for Trump (or Brexit, The Italian referendum, Beppe to be, Le Pen and, well, select from whatever will annoy those who write the Guardian's comment pages).

The truly astonishing thing about it all being the alarming lack of self knowledge on display. Because of course fake news is nothing new at all, indeed it's been a standard tactic of various on the left for some time now.

Take, for example, something from climate change - no, not the subject itself, but a particular detail. James Hansen has been widely quoted as stating that a carbon tax should be up at the $1,000 a tonne level. This is not so - Hansen showed that using certain assumptions then a carbon tax should perhaps be as high as that level. The truth is might, to say should is an untruth.

We might think that is minor but here's how today's page is panning out:

We’ve been calling this “post-truth politics” but I now worry that the phrase is far too gentle, suggesting society has simply reached some new phase in its development. It lets off the guilty too lightly. What Trump is doing is not “engaging in post-truth politics”. He’s lying.

Worse still, Trump and those like him not only lie: they imply that the truth doesn’t matter, showing a blithe indifference to whether what they say is grounded in reality or evidence.

We could replace "Trump" there in Jonathan Friedland's piece with "climate change" again and note that what The G continually tells us, that this is an imminent catastrophe and we must change our very civilisation immediately to deal with it is an untruth. The actual science, the IPCC and so on, says that future actions might indeed lead to a serious problem but a modest continuation of what we're already doing, that work on solar power and so on, is likely to leave us with a modest remaining problem, if that.

On those same pages Matt Laszlo tells us that:

That doesn’t start with stoking more distrust in the nation’s media. It starts with praising the enduring glory of the nation’s First Amendment and reinstalling trust in the nation’s press corps, many of whom did a fantastic job of covering the election.

That's the American media that was so far in the tank for Hillary that there were open calls to simply shout that Trump's a liar and be done with it? 

Mark Thompson:

What about publishers? Well, we’re not perfect either. Professional news organisations like the New York Times, where I’m the president and chief executive officer, screw up from time to time and we have to learn from our mistakes.

That's the New York Times which has been repeatedly asserting that higher minimum wages do not affect employment? It is indeed possible to have the most lovely arguments about how much a higher minimum affects whom but the assertion that there is no unemployment effect is simply an untruth. 

And closer to home here think of the UK Uncut saga. The story about Vodafone and the £6 billion tax bill. There never was such a bill, there was no deal to cut it and yet that isn't what our media has been telling us, is it? Richard Brooks, the originator of the story in Private Eye, has actually explained to us how the figure was reached. If tax law was different then more money would have been owed. We're sure that's true but there's a certain promulgation of not quite an entire and whole truth to move from that to an insistence that £6 billion was owed, no? Or the campaign about Boot's tax avoidance, something they achieved while obeying every jot and tittle of the law about what people should not do to avoid tax.

At least one of the perpetrators of that little, umm, piece of truthiness, has openly agreed that it was all about creating the narrative, exact details were not the point.

Or even the continued wails that inequality is rising to unprecedented levels. Global inequality is falling and within country inequality is nothing at all like the levels of the historical past - we've welfare systems explicitly designed to make sure that it isn't. The spread of food banks - is this evidence, as claimed, of massive need? Or evidence of an always extant need now finally being met?

We're going on a length here because this is an important issue. Yes, indeed, there is fake news out there. But what is going to be uncomfortable for a lot of those complaining about it is that a close examination of "truth" is going to leave an awful lot of supposedly established facts about our modern world looking terribly exposed.

We believe in free speech, free speech unalloyed by any restrictions other than the libel laws and incitements to violence. However, we would have a great deal of fun if some system of determining fake from true news were indeed brought in at a statutory or other level. For we'd have a system to force corrections upon just about every economic suggestion emanating from anywhere to the left of us.