Parting thoughts

Today is my last day as Executive Director of the Adam Smith Institute. I joined back in 2010 at a junior level, helping out with the research. Over the years was able to rise up the ranks and help to shape the Institute’s research and overall mission.

It’s a bittersweet day for me. I’m enormously proud of the things I’ve helped to achieve here, and especially of the teams I’ve been able to build. I hope you won’t mind indulging me in some memories of my time here.

When I started, the team of Tom Clougherty, Sally Yarrow and Philip Salter mentored and encouraged me, giving me chances to go on media and write for national newspapers that few other 22 year olds will get. Those early days especially were a time when my confidence grew and grew. The fact that people as smart and capable of that, who I liked and respected so much, saw something of value in me gave me encouragement and a feeling that I could make something valuable of myself.

After they left, and the period of interregnum that followed (made manageable thanks to the enormous talent and hard work of JP Floru and Peter Spence, who went on to a successful career in journalism), we had to rebuild. Our first hire, from City AM, was Ben Southwood. Ben is the reason that the modern ASI is what it is – anti-dogmatic, curious, and iconoclastic. You simply cannot be an ideologue around Ben. He is too smart and too intolerant of bullshit to let it happen. I try to be as open-minded, flexible and reasonable as possible – to the extent that I am, it is largely thanks to Ben. His influence on the Institute is less visible than mine, but it is absolutely equal to mine. He deserves to be known as the person responsible more than anyone else for bringing rigour and intellectual curiosity back to the British free market movement.

With our first generation team under my leadership, made up of Ben, Charlotte Bowyer, Kate Andrews, Nick Partington and Sophie Sandor, we helped to rebuild the Institute and restore the ASI’s place in the political landscape. Those were scrappy days of long internal debates and risk-taking, as we tried to re-direct the Institute to be something relevant and exciting again, and show our own personalities in its work. Kate’s star continues to shine, as befits one of the best communicators of ideas in the British liberal movement. Charlotte’s talents, more than anyone else I’ve worked with, reflect what I like to see as my own – an enthusiasm for every challenge, and an ability to cut to the facts and through the rhetoric in political debate.

Some of the best memories I have of those days are our trip to Hong Kong, our shared love of PC Music and Carly Rae Jepsen, and the evenings we spent trying out new restaurants together. I’m amazingly proud of that team and how much we were able to achieve. It was because we were some of each other’s closest friends that we managed to do so much with so little.

As some of those staffers left, new ones joined. Sam Dumitriu, Flora Laven-Morris, Holly McKay and Hunter Georgeson helped to turn a think tank that was back on its feet into one that was running at full pace. I remain in awe of Flora’s ability to turn PR lead into gold, and Sam’s ability to master subjects just before they exploded, like electricity regulation and the gig economy. Sam, who will be taking over as Head of Research, is one of the most impressive policy wonks I’ve met at any think tank, and I believe the ASI’s output will reflect his serious, scholarly approach to empirical research.

As the political landscape shifted, we were joined by Daniel Pryor, Matthew Kilcoyne, Amelia Stewart, Oliver Riley and, most recently, Jonas Christiansen. I have known Daniel since he was seventeen and, of all the future stars I’ve come across in the liberal movement, he is one of the brightest. Matthew’s understanding of the political tectonics is unparallelled, and combined with his flair for PR, I believe the ASI’s work will be more influential and more politically relevant than it has been for decades. I am proud to have had a hand in the founding of the Entrepreneurs’ Network, founded by Philip Salter who, along with Sophie Jarvis, has created an important, powerful voice for entrepreneurs that does not just revert to corporatist talking points.

The ASI we’ve tried to build has been one that is self-aware, pragmatic, humane and, above all, interesting. We’ve tried not to just bang the same drum all the time, unless we think it’s a particularly important drum that nobody else is banging. We’ve tried to put new, unusual ideas like NGDP targeting, full expensing, YIMBY housing policies, Japanese-inspired transport policies, and globalist migration policies onto the agenda. In embracing the word ‘neoliberal’, we’ve tried to build a new identity for like-minded people who are sickened by the libertarian flirtation with the alt-right and want to be able to identify themselves as open-minded, liberal believers in the power of markets to improve the human condition. None of these jobs are finished yet, but we’re getting there. I’m proud to have had a hand in that.

Finally, the two people who made all of this, the best years of my life to date, possible – Madsen and Eamonn. Eamonn was, I once realised, the fourth person I ever followed on Twitter, back when I was a student in Ireland and years before I had set foot inside the Adam Smith Institute. The enormous respect that Eamonn commands across the world is well-deserved, not just because of his huge contributions to the political and intellectual landscape but because of his generosity of time and spirit. Eamonn will speak to anyone, and give time to everyone, as an equal. To be treated in such a way by such a giant is an awesome experience. All who have met him will know what I mean. 

And Madsen. Madsen defines the ASI and changes the lives of so many of those who come to know him. His sense of mischief and his brilliant mind together make him a force of nature. Throughout the last seven years he has mentored and challenged me. I have “downloaded his software” on so many fronts that I find myself approaching my days with the same determination to change the world and confidence in my own ability to do so that I feel that nearly anything is possible. As I take the next steps in my life, his motto will always stay in my mind: quod tango muto – that which I touch, I change.

Why do people say that hunter gatherers don't work very much?

It's a commonplace these days for people to insist that hunter gatherer societies don't do all that much work.

Questioning the notion that the hunter-gatherer way of life is a “precarious and arduous struggle for existence,” Lee instead described a society of relative comfort and abundance. Lee studied the !Kung of the Dobe area in the Kalahari Desert (also known variously as Bushmen, the San people, or the Ju/’hoansi) and noted that they required only 12 to 19 hours a week to collect all the food they needed.

A couple of reasons why this isn't really very interesting as an observation:

Let us first revisit the !Kung themselves. As Lee himself would later mention in his 1984 book on the Dobe !Kung, his original estimate of 12-19 hours worked per week did not include food processing, tool making, or general housework, and when such activities were included he estimated that the !Kung worked about 40-44 hours per week.

The second being that it's near impossible to have any population density among hunter gatherers. 7 billion people trying to live like that would rapidly be dead as they stripped every living thing, including each other, from the environment.

But another observation.

The average British food budget for a family is some £60 a week. The median full time hourly wage is some £13 or so an hour. Our calculator tells us that this is 5 hours of work a week for the food required. Note well that that is 5 hours work to feed a family, something we can define as the (still, just about) modal four people of two adults and two children, or if preferred, two adults only. Using that latter we work somewhere between one fifth and one tenth of the amount of time hunter gatherers do to fill our bellies.

How the hell does anyone still say that we work more than our ancestors? 


Why complain about capitalists subsidising care homes?

It is entirely true that there are problems in Britain's care homes industry. Government has been eager enough to push up the costs of providing them - those rising minimum and national wages - and somewhat less eager to raise the price paid to cover those wage rises.

Yet it's simply bizarre for people to be complaining about capitalists subsidising the sector.

You would be forgiven for thinking that any connection between wealthy financiers and Four Seasons would involve luxury hotel chains. But last week the relationship of rich investors with a very different type of property has been making headlines. The private equity-owned care home business Four Seasons, which cares for 17,000 older and vulnerable residents, has been teetering on the brink of collapse.

It has been a long time coming: loaded with more than £500m of debt by its owners, its £50m-a-year interest payments have become unsustainable. An 11th-hour intervention from the regulator, the Care Quality Commission (CQC), resulted in an agreement with the hedge fund that owns much of its debt. But how long will it be before we are here again?

In the last 20 years the influence of private equity in the UK’s care home chains has grown. Southern Cross, once the UK’s largest provider, collapsed in 2011 when it could no longer service its debt. The demise came after its owners sold and leased back the care homes they ran and used the cash to finance overly aggressive expansion.

Think it though. Care homes are running. The last time a chain went bust not one single one closed. No one lost their care nor home - investors lost a packet. So, what are the investors actually doing as they lose money? Subsidising the care homes with their losses.

More money has been spent upon those care homes than the taxpayer has had to stump up for.

In what manner is this a bad deal for the taxpayer? 

No one wants literary fiction therefore everyone must pay more for literary fiction

It is not quite true that no one wants literary fiction any more. Rather, that fewer people seem to do so and are willing to pay less money for it as well. But the answer we're told we must implement is indeed as in that headline - therefore everyone must pay more for literary fiction. 

And they do mean everyone, the dustman must be taxed so that the creative studies graduate can write for the Duke to read. As regular readers know we do not believe that all should be taxed so that the well off gain their pleasures - let them pay for themselves.

The actual report itself from the Arts Council isn't that bad, it's a reasonable enough look at the changes in this marketplace (please do note that a number of us here have written books even if not of literary fiction. We sympathise with those writing but that still does not change our view of what should happen).

It's what people are then taking it to mean which is the problem:

So, assuming that we are not going to tell writers what to write, and that we do not want literature to become the exclusive preserve of those who don’t need to earn their living, we need to find ways of enabling other kinds of novelists to continue.

This can’t just mean cutting the existing share of the cake into smaller, or different, portions; it has to involve speaking up loudly and forcefully for the size of the share to be increased.

Not being able to make a living doing what you wish to be doing is the universe's manner of telling you to do something else for a living. Harsh, but true - as with certain writers that we know intimately the money in books is such that for near all writers they are a hobby, not a life.

Further, that people will not voluntarily fund your desired working life is not an argument that they should be forced to. So, no. If fewer people want literary fiction, and are prepared to pay less for what they do get, this is not an argument for us all to be taxed to keep the literati in lattes while they write what we don't seem to want.

There is a slightly more cheeky answer possible of course:

There will be those who argue that this just shows that literary fiction is a hangover from the past, and the poor dears should knuckle down and resign themselves to writing what people actually want to read. But few would dare to make the same argument about experimental theatre or dance. And it doesn’t allow for the fact that – like both Pullman and Mantel – it may take writers decades to hit the jackpot.

OK, super. So, let us regard this as investment then. Actual, real, proper, investment. Those who receive grants, taxpayer money, face a higher (much higher perhaps) tax rate if and when they do become successful. You know, we've all invested in them, they came good, we get a return on our investment. An 80% tax rate for Mantel and Pullman? Why not?

Or is it that we hoi polloi really must just cough up or the activities of our intellectual betters? 

The drivel of 33 Theses For An Economic Revolution

We have a lovely little list of things wrong with economics which should be corrected. 33 of them, issued on the anniversary of Luther's list about the Catholic Church and so on. There's a problem with this little list. 

It's drivel. Rather than go through each, piece by piece, something important to note about the series of complaints.

There are entire libraries discussing the pros and cons of each of their specific complaints. Their first, for example, is that society gets to decide what it wants. Sure, that's one of the first things you're taught in economics, it's a positive, not normative, subject. It doesn't say "should," rather, "if, then." 

Markets are shaped by custom, law and culture? Sure, what does anyone think Wealth of Nations is about? 

Institutions shape markets? Don't we have an entire subject, institutional economics? 

One can go on through the list in such a manner. But to move up a level of complaint:

First, within economics, an unhealthy intellectual monopoly has developed. The neoclassical perspective

What they are complaining about is something much closer to "neoliberal" economics here. Neoclassical just isn't the correct target at all. For those entire libraries discussing all of the things they claim are ignored have used the neoclassical toolkit to explore them. In fact, pretty much anyone studying the economy at the margin is using that neoclassical toolkit.

But then to move up one more level of complaint to something so ludicrous that it's amazing that actual adults will make this mistake:

Economics must recognise that the availability of non-renewable energy and resources is not infinite, and the use of these stocks to access the energy they contain alters the planet’s aggregate energy balances, creating consequences such as climatic upheaval.

Excellent, the Stern Review, the work of William Nordhaus, the economic models of the IPCC, Marty Weizman, Sir Partha Dasgupta,  the very work that shows we've a problem, should do something about it (a carbon tax!) and so on all used that standard neoclassical toolkit to get to that answer.

But now to the real biggie - what is the basic contention of economics? Resources are scarce therefore we need to study their allocation. What is their contention? That the very science of the allocation of scarce resources ignores the fact that resources are scarce.

This is drivel.

Anti-English comments by Football Association of Wales are just not cricket

Last week the Chief Executive of the Football Association of Wales, Johnathan Ford, went public with comments on who would not become the next Manager of the Welsh national football team. He didn’t rule out an individual though, instead he decided to rule out everyone from England. Not just anyone from outside of Wales, he only ruled out the English, saying the “next Wales manager could be "foreign", but "definitely not English".

The reason this smarts is not just the blatant anti-English bigotry but also because it flies in the face of their policy on players. The most recent squad of 25 for the friendlies last month had 12 players born in England (James Chester - Warrington, Andrew Crofts - Chatham, Ashley Williams - Wolverhampton, Ethan Ampadu - Exeter, Dave Edwards - Shrewsbury, Lloyd Isgrove - Yeovil, Andy King - Devon, Tom Bradshaw - Shrewsbury, David Brooks - Warrington, Sam Vokes - Lymington, Marley Watkins - London, Ben Woodburn - Chester), the Captain was English born and every single one of that squad currently plays in England & for clubs in English towns & cities.

With so many English born and English trained players, taking Wales up to the 10th best team in the world in 2015, and given they're currently sat at a not-too-shabby 19th, you might think that the FAW would understand and appreciate the benefits that immigrant talent from Wales’ nearest neighbour has brought to their sport (this is not a uniquely Welsh phenomenon either, as this exploration of how World Cup teams would look without immigrants shows).

The CEO of the Football Association Wales can’t possibly think that Wales’ performance is poor because of their use of migrant labour, nor can he really think it’s the location of the manager’s birth (after all, the last two managers were Welsh born). So this is a matter of pure taste-based discrimination in which he has come out and said that he won’t accept applications from a group of people because where they were born. That it is English managers he wanted to ban is no more acceptable than if it were anywhere else, but it grates even more with the 20% of Welsh people who were born in England and the even greater number with familial links with the country next door.

In England we’ve had this conversation before, in a whole host of industries immigrants are a scapegoat. This is as true in football as it is anywhere else, migrants are seen as a useful mechanism to blame the failures of investing in training at home. There is a reason why non-national teams, private companies in a competitive environment, go after and source talent from across the world – and pay large salaries in the process – rather than relying solely on the locales where they are based. National teams piggyback off of this, and benefit when they do. The world cup in 2014 saw English Premier League players score 20% of the goals, with 80% of goals scored by players that are based at clubs outside of their homeland.

This upsets economic nationalists but true fans of clubs realize it is the winning that counts, not the birthplace of the people who help them secure the silverware.

News hit yesterday that the FAW has whittled the candidates to the top job to three Welsh men. Good for them (I have no opinions on their qualification for the job), but can we honestly say this process has been good for the team, and good for the game?

Drugs are very expensive things to create

As we've pointed out more than once around here drugs are very expensive things to create. As we've also pointed out patents might not be the perfect solution to the public goods problem here but they're a useful one. Finally, we've also routinely pointed out that the cost of creation is largely based upon the regulations about gaining approval to sell something created:

The cost of developing a cutting-edge medicine has jumped 70pc in just seven years to £1.2bn, a Deloitte study has found.

Yet a survey of the world’s top 12 drug firms by R&D spend found that despite spending more on each treatment, the companies were struggling to increase profits.

Deloitte’s analysis – which included data from FTSE 100 giants GSK and AstraZeneca – found projected returns on R&D investment dropped to 3.2pc this year, down from 10.1pc in 2010.

Over the same period the average cost to bring a drug to market jumped to just under $2bn (£1.2bn), up from $1.2bn (£708m).

We would like to have more drugs available to us. For we'd like to be able to treat at least, if not sure, those things which we currently cannot. But if the cost of new drug creation continues to spiral upwards then we'll be getting fewer of those things which save our lives than we would like.

The answer, therefore, is to change that regulatory system. If we reduce the bureaucracy in between bright ideas in the lab and the sick rising from their beds then more of the latter will do so. As is so often true, the solution to our ailments is for government to be doing rather less than it currently does. 

Why not use the John Lewis Christmas ad as an economic example?

Around here we bang on, interminably at times, about the importance of distinguishing between capitalism and markets. The first is a description of who owns, the second about competition, pricing and the distribution of what is made. These are entirely different things, different axes along which to consider the structure of an economy.

We're absolutely fine with voluntary socialism - if the workers, the customers, the producers, want to own the means of production then why not be fine with that? We would and do insist that they must create or buy them of course, but other than that again why not? Why shouldn't there be that competition in structures and forms of organisation? 

That all then have to compete in a market is the part that is important - to the point that while we may indeed be neoliberals in this modern world we're not particularly capitalists but marketists. Capitalism has its advantages at scale but it's not the basic idea which must be protected and savoured, markets are.

This becomes important when running the other way. For all too much of what the "socialists" state they want is actually anti-marketism, that very thing we consider so dangerous. 

Which brings us to the John Lewis Christmas ad. They were the first to really gear up for a large campaign at Christmas, incorporating a story, using a song which would then gain significant airplay and so on. This is an excellent piece of market participation, even as others have caught up in recent years.

But do note that John Lewis is a socialist organisation, it is owned by the workers within it.

As we say, we're just fine with that voluntary socialism, it's the markets part, the market axis, which we consider the truly important part of the economy.

We have cars because they have net benefits, not ban them because they have costs

Abi Wilkinson - admittedly, not unusually for someone in The Guardian - entirely forgets the most basic economics. She's missed opportunity costs:

If petrol and diesel vehicles were invented today, what possible justification would there be for allowing unchecked ownership? Knowing all we do about the damage wrought by burning fossil fuels – both to our immediate health and to the long-term viability of our habitat – it would seem an act of obscene, destructive decadence. The idea of driving a monstrous, tank-like 4x4 a distance you could easily walk or cycle, and then sitting outside a school (a school!) with the engine still running, guzzling petrol and burping out poison into the surrounding air, would be seen as actively malevolent.

 If such vehicles were allowed at all, they would surely be strictly regulated. Disabled people might be able to claim special dispensation because of the unique mobility difficulties they face. And perhaps people who live in very rural areas might also be permitted to own vehicles, on the basis that regular public transport isn’t viable. Certainly, things wouldn’t be like they are now.

We would add that the important people - whether we call them the peoples' commissars, politicians or gauleiters - would obviously have a car in this Brave New World.

But the basic error here is much deeper than that. Sure, we're entirely willing to agree that cars have costs, pollution among them - we are the people who touted the congestion charge for decades after all. But we would also insist that they have benefits.

We'd all be far poorer if we didn't have the transport made available by the internal combustion engine. Poorer in cash terms and much more importantly in our life choices. Do note that poorer people tend to die earlier so it's not even obvious that the absence of cars would reduce the death rate nor increase lifespans on balance. 

To miss that, to miss opportunity costs, is a signal of being ignorant of the very basics of economics. Further, to argue that we have a solution is an error too. For the outcome of economic study is that, by and large, we don't actually have solutions to anything. We only have trade offs. Are the costs worth the benefits?

Given that absolutely every society ever which has had access to a private and personal form of transport has taken full advantage of that availability we'd have to assume that the people think the costs are worth those benefits. Whatever the peoples' commissars, politicians and or gauleiters believe upon the subject. 


Regulating social media threatens free speech and competition

The PM’s ethics watchdog is preparing to call for a major change in the way social media is regulated. It's thought Lord Bew, who chairs the Committee on Standards in Public Life, will recommend that social media firms like Facebook and Twitter should be liable for the content posted on their platforms. In other words, he wants to reclassify social media platforms as publishers, holding them to the same standards as newspapers.

If you care about free speech and innovation, this should worry you. Currently, if someone posts a defamatory comment or shares extremist material on Twitter, they alone (and not Twitter) will be liable for legal damages or criminal prosecution. Twitter may of course choose to ban extremist accounts for violating its Terms of Services, but that decision lies with Twitter alone. If the law changes, then Twitter could be held liable if it fails to rapidly take down the offending content.

This may seem like a small change, but it would have massive implications for the internet ecosystem.

David Post, a professor specialising in internet law, makes the case that an obscure provision of the 1996 Telecommunications Reform act has been essential to the growth of platforms like Facebook, Twitter, YouTube and Tumblr.

The provision “immunizes all online “content intermediaries” from a vast range of legal liability that could have been imposed upon them, under pre-1996 law, for unlawful or tortious content provided by their users — liability for libel, defamation, infliction of emotional distress, commercial disparagement, distribution of sexually explicit material, threats or any other causes of action that impose liability on those who, though not the source themselves of the offending content, act to “publish” or “distribute” it.”

He argues that treating web firms as platforms and not publishers “created a trillion or so dollars of value”. Imagine if Facebook, Tumblr, Twitter and YouTube were liable to be sued or fined, whenever a user posted extremist, racist, or defamatory material. “The potential liability that would arise from allowing users to freely exchange information with one another, at this scale, would have been astronomical”. It’s easy to imagine venture capitalists passing up an opportunity to invest in Facebook, Twitter and YouTube at an early stage with those risks.

Eric Goldman, another online law professor, argues that treating online platforms as publishers will reduce competition and entrench major players. Under the current law, “new entrants can challenge the marketplace leaders without having to match the incumbents’ editorial investments or incurring fatal liability risks.”

Beyond the effect on new entrants, there’s a real risk that the free flow of ideas will be restricted by platforms over-enforcing restrictions on extremist and defamatory content. We have already seen multiple cases of platforms overreacting and banning users for seemingly mild violations. For instance, the comedian Marcia Belsky was banned from Facebook for 30 days for saying “men are scum” in response to death and rape threats. Unlike pornographic content, which can be identified algorithmically, identifying hate speech, threats and defamation relies on context. If the potential liability is high and policing abuse is labour intensive, then firms may be incentivised to shoot first and ask questions later. That could have a chilling effect on free speech.

Lord Bew may be frustrated by what he believes is inaction by social media companies (despite the fact that over 100,000 people worldwide are employed in content moderation). But, he shouldn’t risk throwing the baby out with the bath water. The result of treating online firms as publishers would be to reduce competition, deter innovation, and threaten the free flow of ideas online.