But George, it matters what people do, not what they feel guilty about

Sadly, George Monbiot has gone off on one again. Decrying the fact that we neoliberals in the Anglo Saxon capitalist style world don't feel guilty enough about despoiling Gaia. The poor in other places, being as they are not Anglo Saxon and also sanctified by their being poor, care a lot more.

We are sinners as a result.

The problem with this is that what matters rather more than how guilty any of us might feel is what we actually do.

For years we've been told that people cannot afford to care about the natural world until they become rich; that only economic growth can save the biosphere, that civilisation marches towards enlightenment about our impacts on the living planet. The results suggest the opposite. As you can see from the following graph, the people consulted in poorer countries feel, on average, much guiltier about their impacts on the natural world than people in rich countries, even though those impacts tend to be smaller. Of the nations surveyed, the people of Germany, the US, Australia and Britain feel the least consumer guilt; the people of India, China, Mexico and Brazil the most. The more we consume, the less we feel. And maybe that doesn't just apply to guilt. Perhaps that's the point of our otherwise-pointless hyperconsumption: it smothers feeling. It might also be the effect of the constant bombardment of advertising and marketing. They seek to replace our attachments to people and place with attachments to objects: attachments which the next round of advertising then breaks in the hope of attaching us to a different set of objects. The richer we are and the more we consume, the more self-centred and careless of the lives of others we appear to become. Even if you somehow put aside the direct, physical impacts of rising consumption, it's hard to understand how anyone could imagine that economic growth is a formula for protecting the planet.

The problems with all of this are myriad. For a start, the impact of the poor upon the environment is much greater than that of we rich. The Amazon isn't being cut down to grow beef for McDonald's, it's being burnt down by poor peasants so they can grow runty corn for a year or two until the soil is exhausted. And the proof that we richer people do care more about the environment is all around us. Britain is cleaner than it has been for 500 years as a result of our increased wealth.

We might change out minds a little bit about this if we are to talk of climate change: for it is true that emissions from people living in the rich world are higher than of those living in the poor. But do also note what is happening: we rich world people are putting in place the expensive plans required to lower those emissions. Feed in tariffs, cap and trade, carbon taxes: whether you want to "take climate change seriously" or not is entirely up to you. But there's absolutely no doubt that it is us in the places that apparently don't care about it that are actually doing things about it.

Which brings us to the much more important basic point. The 20th century rather tells us that what people think about things, their guilt at the state of the world, is less important than their actions. Many communists and socialists really did believe that communism and socialism would be better for human beings than the terrors of capitalism and free markets. But their motives pale beside their actual works, slaughtering a hundred million and more in assuaging their guilt.

Actions George, not motives.

Repeat after us: the Treasury is not the economy and the economy is not the Treasury

We've another instance of that desperately sad confusion over the economy and the government, the difference between the Treasury and the nation. There are most assuredly people who go around paying and earning in cash and not, very naughtily, paying the requisite taxation on such sums. This will cost the Treasury tax revenue, this is entirely true. But it does not cost the nation or the economy anything:

For homeowners eager to save money on repairs, it’s a tempting proposition – you pay a tradesman cash-in-hand, he knocks a bit off the bill, and no questions are asked. With the builder or plumber failing to declare their earnings and pay any tax, such secret payments are said to cost the economy £2billion a year. Now a survey suggests the black economy is booming, with more than four in five homeowners admitting they have paid a workman cash-in-hand.

This simply is not a cost to the economy as a whole. For that money is still circulating, the economic activity is still happening, therefore it cannot be a cost to the economy. We might take it a little further too. We know very well that the levying of a tax reduces economic activity purely by being levied. The marginal deadweight cost at current levels of taxation is put at around one third or so. The corollary of that is that some one third of currently untaxed activity would simply not happen if it were taxed. The grey economy (intrinsically legal but untaxed) is thus in part an addition to the size of the economy we would have if all transactions were taxed.

But more important than that we have to insist on killing the pernicious idea that the economy is the Treasury, or that the Treasury is the economy. Economic activity that doesn't pay the tithe to the Treasury is still economic activity and thus is not a cost to the economy as a whole.

HMRC and the rule of law

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Plans to allow Britain's tax authorities, HMRC, to take money directly from the accounts of tax delinquents have been criticised by a Committee of MPs on the grounds that HMRC 'sometimes makes mistakes'.

A sharper criticism would be that the plan is a fundamental assault on the rule of law.

Next year is the 800th anniversary of Magna Carta, but the basic civil protections it gave citizens against arbitrary power are being systematically eroded. Governments have become elected dictatorships.

Magna Carta laid down that there could be no taxation without the 'common consent' of the people. It also insisted that no official can take anything from a person – nor fine them, nor imprison them, nor 'in any way destroy' them – without due process of law. Right now, the tax authorities would have to apply to the courts before they could take cash or other assets from a citizen.

But the new HMRC plans flout both these Magna Carta principles. HMRC can already decide that someone owes tax that they have deliberately 'avoided' – even if they have complied with every tax law. This is arbitrary power that we cannot safely entrust to any official. Reinforcing that power with further powers of confiscation – in the absence of any magistrate or court decision – is even more dangerous.

The MPs are right that even fair-minded officials make mistakes. Worse, the new plan passes the burden of proof – and the costs of proving it – from the authorities to the citizen. That again is contrary to the fundamental principle that people are innocent until proven guilty.

HMRC says that the new powers would be used only in extremis. But then they say that they expect perhaps 17,000 people will be affected each year. Many of them will, of course, be people who are completely innocent and the subject of official mistakes. Some will see their businesses ruined, and their employees losing their jobs, because of officials arbitrarily raiding their accounts. Others, worryingly will be people who the authorities decide to bully and make an 'example' of just because they are well known.

Recent history – like people being arrested under terrorism legislation for heckling the Home Secretary or walking down a cycle path – shows that when you give officials sweeping powers, they will be used. And when you exempt them from the rule of law, those powers will be abused.

Simon Jenkins is absolutely correct, the problem with the NHS is the national part

Glory be, something sensible said in The Guardian at last. Admittedly, it is being said by Simon Jenkins who does sometimes get things gloriously correct. His point is that the NHS simply cannot be run as one single monolithic bloc, it's just too large for that:

Yet one subject that is unmentionable – and therefore untouchable – is the size of the NHS itself. A public service that, for a generation, has successfully nationalised its virtues finds it has now nationalised blame for its vices. Where glory once shone down on the Commons dispatch box, now there is only scandal. It must make sense that, when every conceivable reform – devolution, centralisation, purchaser-provider split, internal markets, fundholders, commissioners – has been tried and seen to fail, someone should challenge the very concept of a central service. It might be worth looking at how others do it, and not smugly concluding that the public likes the NHS the way it is. The health service is not useless or uncaring or that bad at making people better. It is just too big. Aneurin Bevan was wrong to nationalise it back in 1948 – and his great foe, Herbert Morrison, was right in wanting a new service based on charitable and municipal hospitals, as remains the case almost everywhere in the world.

The NHS is some 11% of our entire economy. We might think that only running 11% of the economy as a Stalinist style top down and planned organisation isn't so bad. But this is an organisation the same size as the total economies of Finland, Greece or Portugal. And other than Seumas Milne there's no one at all left who thinks that rigid state planning of any organisation that size is likely to work or be efficient.

So, to localism and small scale management it is then. Jenkins mentions Denmark as a reasonable example, where it is the commune (as small as 10,000 people but usually substantially larger) that both raises the tax money for health care and also allocates its spending. Sweden does much the same but at the county level. And when the basis of the system is that fine grained then it's obvious that not all treatments can be provided by all outlets. There's therefore a considerable market in who provides what to whom.

And yes, that is the other side of pushing decision making and planning down to that level. We still want a coordination method for the whole. But we've just agreed that it cannot be central government nor planning. The answer is, thus, the other method of coordination that we know of: markets. For that is what markets are a method of, coordination, cooperation. The competition part of them is a terribly minor part: that's the bit where people work out who they are going to cooperate with.

A decentralised NHS would be, as Jenkins says, a better one. And we'd therefore need to use market mechanisms to provide the coordination across the different providers. It can still all be tax funded if that's how we decide we'd like to do it. But whether we do that or not it is still true that currently we've Stalnist central planning in an organisation that ios the economic size of entire countries. And the interesting lesson of the second half of the 20th century was that central planning on that scale just doesn't work.

UK inequality just isn't what we keep being told it is

We're repeatedly told two things: that inequality in the UK is very high and also that inequality is a terrible thing, damaging to us all. However, there's a nice little study from Eurostat which shows that all isn't quite as it seems. The Independent reports:

The grim truth about pay and living standards in some the regions of the UK has also been highlighted by official EU figures showing that parts of Britain are effectively poorer that countries from former communist countries in Eastern Europe. People in Cornwall and the Welsh Valleys are worse off than residents of Estonia and Lithuania, according to Eurostat figures comparing wealth across the EU using a measure known as “purchasing power standards” - which takes into account GDP per person and cost of living. In addition, Durham and the Tees Valley, in the north east of England, are poorer than those in the wealthiest regions of Bulgaria and Romania, the two most deprived countries in the EU. By contrast, the Eurostat figures show that London is the richest place in Europe.

The impression we get from the usual reports of inequality is that we've plutocrats living in their gilded palaces while diverse Dives scramble for scraps at their gates. It is this that creates the social tensions that lead to that inequality being so bad for all of us as The Spirit Level and the like insists.

But as we can see from these figures that's not really what drives inequality across the UK. Rather, London is a part of the Great Global Economy and the rest of Britain is a pretty middle of the road European one. We have regional, or geographic, inequality rather than that vertical pyramid people so love to worry about. Thus it's rather difficult to see the transmission method by which the inequality leads to all those horrors that we're supposed to associate with it.

That earning £15,000 a year while the people next door flaunt their £100,000 a year might indeed engender jealousy, envy, even stress. But that million of people hundreds of miles away have a better lifestyle than you and all those around you do, well, it's very difficult to see how this can have much of an effect.

If it did have an effect then we would expect those in Kent to suffer from the lifestyles in Paris, those in Bratislava to be consumed with resentment at how well off Vienna is. And no one really does argue either of those things: so why the diference between London and Cornwall is paid any mind is very difficult to see.

Even if we do want to argue that there's an effect the solution is still obvious: work to make all of Britain part of that Great Global Economy, not to try and strangle London to make all equally poor.

Polly Toynbee really needs to pay more attention to her examples

Polly Toynbee wants to convince us all that privatisation was a very bad idea, that those businesses sold off would have been much better left in hte bosom of he State. We do need to point out, however, that she would be well advised to pick her examples in a rather better fashion. For example:

The state sold off its assets at knock-down prices, with an average increase in profits of 419% in nine companies from privatisation to 2010, compared with an FTSE100 average of 206% in the same period.

Lessee: companies in the bosom of the State make low profits. Companies freed from said embrace make much better profits. How is this a criticism of freeing companies from that clutch? It is, rather, evidence that when run along political lines, as anything owned by the State will inevitably be, an organisation will be run in an inefficient manner. For Polly to choose as an example of why privatisation is bad exactly the evidence that it works as advertised on the tin is possibly careless of her.

And again:

The pay of privatised staff has stagnated while 170,000 jobs were lost.

So the nationalised companies were grossly overstaffed and the workers paid too much in wages. Privatisation corrected both these errors. Again, this is something most odd to use as an argument against privatisation.

The dogma driving these privatisations wilfully ignores past experience.

Dogma:

Dogma is a principle or set of principles laid down by an authority as incontrovertibly true. It serves as part of the primary basis of an ideology, nationalism or belief system, and it cannot be changed or discarded without affecting the very system's paradigm, or the ideology itself.

Exactly who is guilty of that here Polly?

A little note for that nice young Owen Jones

That nice young lad, Owen Jones, does seem to need a little education in matters economic. For example, here he is stating that the closure of the Cornish tin industry impoverished that county:

De-industrialisation is often seen as a northern trauma, but it is not so. The disappearance of tin mining impoverished Cornwall, leaving it one of the only regions eligible for special financial assistance from the EU.

We find it really remarkably difficult to see how that could be true. The Cornish tin industry was only of the most marginal importance after WWII and the decline had firmly set in by the 1920s. And Cornwall today is markedly richer than the Cornwall of pre-WWI when the tin industry was in its pomp. So, given that the closure of the tin industry is correlated with the place becoming richer it's very difficult indeed for us to see how the closure of the tin industry impoverished the place.

There has been a change in relative welath, this is true, but going from being a comparatively rich part of the country to being a comparatively poor one is not the same as becoming poorer or impoverished. Jones is making the mistake of seeing everything in relative terms here instead of absolute.

And as to why the industry changed, that's simple. At the time, and with the available technologies and geological knowledge of the world mining for tin in Cornwall added great value. That is why it was done. Then, with the discovery of easier to access ores (the alluvial deposits of SE Asia as one example), the increasing depths of the Cornish mines and changes in the tin price Cornish mining stopped adding value and became a destroyer of the collective wealth. So it stopped happening: that's exactly why the area is richer today without tin mining that it would be today with tin mining. Because people have moved away from an activity that no longer adds value to other occupations that do add value. And so does the human species become ever richer, as we move capital and labour from low (or in this case, value destroying) activities to higher value adding ones.

The same is true of the manufacturing in the North that people so decry the disappearance of. The game is all about adding value and if it turns out that staffing an old folks home adds more that humans value than does making thing to drop on your foot then we're richer for the change in what people do.

Jones, as well as a number of other people, really need to understand changes relative to the positions of others are not the same thing at all as changes in absolute levels. Whatever the relative changes between north and south over the past century (and 150 years ago everyone worried about the poverty of the non-industrial south, Somerset and Dorset being regarded as some of the most impoverished areas of the country) we are all, collectively and individually, richer than if we still had those great satanic mills working away.

Hurrah! The price of carbon credits is approaching zero

This is very much a time for celebration as the carbon credit price in the EU's trading system rapidly approaches zero. Of course, we do have people taking the wrong message from this, such as our own UK government who reacted to the price falls by insisting that there must be a minimum price for such credits. But then none of us really thought that governments were going to approach this particular problem with even a modicum of good sense, did we?

December EU carbon permits dropped 4.4 percent to 5.22 euros ($7.23) a ton at 4:59 p.m. on ICE Futures Europe in London. The contract earlier slumped as much as 6 percent, the most since April 25. December CERs were unchanged at 15 euro cents a ton, while no ERUs were traded. The program’s rules curb offset use in the 13 years through 2020 to about 1.59 billion tons, 25 percent of which remains unused after today’s announcement, according to New Energy data.

There are two roughly market based ways of dealing with emissions. We could tax them at some rate and see what emissions were. Or we could limit emissions through permits and then see what the price would be. Obviously, the higher we put the price of the tax then the more we would expect emissions to fall. However, the corollary often gets missed (as HMG missed it). Once we've limited emissions though the number of permits then we obviously want the cost of each permit to be as low as possible.

For we have already defined the emissions limit and are now looking to the market to tell us the price of achieving that limit: clearly and obviously a lower price to meet the goal is better than a higher one.

Thus, if we've set a limit, if 25% of those permits won't ever be used, and if those that are being cost somewhere around spit, then we're solving the emissions problem much more cheaply than anyone thought we would. Which is excellent news, isn't it? Thus, and inevitably, those who blather about how awful it is that permits are cheap have got entirely the wrong end of the stick. Which is where HMG comes in again with their imposition of a m,inimum price for such permits. They're deliberately making it all more expensive than it need bem, the very fact that permits are cheaper than their minimum being all the proof that we need.

Climate change is bad enough without people deliberately, or perhaps through ignorance, making dealing with it more expensive than it need be.

We could of course insist that the original targets were wrong: but that would also be saying that government is incompetent in dealing with climate change. Which isn't a great argument for having them do more, is it?

Gary Becker, 1930–2014

Gary Becker, made a Nobel Laureate in Economics in 1992, has died aged 83.  He was one of the great economic minds of the second half of the 20th Century, and was described by his mentor and friend, Milton Friedman, as "the best student he ever had."  At the Adam Smith Institute we knew him through the Mont Pelerin Society, whose meetings he attended.

He was a leading liberal thinker (using the word in its European sense), whose original contribution was to introduce economic thinking into other areas of human behaviour such as the family, marriage, discrimination, crime and addiction.  In a key insight he showed, for example, that the entry of women into the workplace had raised the value of their time and thereby reduced their demand for children.  He incorporated into economic thinking ideas that had hitherto been thought to belong to sociology and other areas of behavioural study.

His insight on crime was the observation that criminals are not necessarily mentally ill or socially oppressed, but capable of calculating quite rationally if the likely proceeds of a criminal act would outweigh any penalty, taking into account the probability of being caught.

He was a key figure in the Chicago School, and was Professor of Economics and Sociology at the University of Chicago.  He was regarded as an inspirational teacher and a valued colleague, and will be sadly missed.  He wrote:

My teachers taught me that economics was not a game played by clever academics, but a serious subject that helped us understand the real world we lived in.

In aiding that understanding Gary Becker played a major role.

There's an awful lot that is accepted wisdom that really isn't true you know

There's an awful lot of things out there that are the accepted wisdom and yet are still wrong. Take, for example, the reason the Mongols came swarming out over the Steppes:

The traditional view has been that the Mongols were desperately fleeing harsh conditions in their craggy, mountainous homeland. The Lamont-Doherty team, however, found just the opposite: Between 1211 and 1225—a period that neatly coincides with the rise of Genghis Khan and the Mongol empire—central Mongolia enjoyed a spell of sustained benign weather unlike anything the region has experienced during at least the past 1,100 years and probably much longer.

Pretty logical really: you're not going to get huge population movements without there being population gorwth and thus pressure for population movement.

But that's just an interesting historical curiosity. What interest us rather more is that we can look around us and see that a new "conventional wisdom" is being created right now. The conclusion is goin to be the same as the old one, that there must be vast and punishing taxes on anyone who actually has anything. It's only the reasoning that is changing. Last time around it was that socialism would be more efficient than capitalism and markets, therrefore we must confiscate all the capital so that the State can deploy it in that more efficient manner.

No, really, don't laugh, socialists right up into the 1950s and 60s really did believe this. Now, the one under construction, appears to us to be the one about inequality. The Spirit Level told us that inequality was bad for a society, bad for everyone in it.  Diamond and Saez told us that the peak of the Laffer curve is 80% for the taxation of income (actually, they said 54%, but it gets read as 80% as people forget the caveats in their model) and Thomas Piketty now says that inequality will only get worse unless there's an 80% income tax plus a whacking wealth tax.

We're back where we started in policy terms, take all the money off anyone who has the temerity to have any. It's only that reasoning that has changed.

That reasoning itself being highly suspect: the Spirit Level was amusingly taken apart by Chris Snowdon. The 80% income tax result was brought down by many who read the paper. And Piketty's arguments are being sifted through and thoroughly taken apart as well. Won't stop many people searching for yet another reason why taxes must be much, much, higher. We just have to remember that the validity of the policy position depends on the arguments and logic that are used to get to it. And they're not right yet, at least.