Owen Jones is entirely right here: refugees' lives matter too


It's not often that we write with unreserved praise for Owen Jones but his piece today deserves it:

As the news of up to 200 dead refugees, drowned off the coast of Libya, filters fleetingly into news coverage, the only guarantee is that more will drown. And with news of more than 70 refugees found dead in a truck in Austria – to try to imagine their last living moments triggers a horrible feeling in the pit of the stomach – we know that more bodies will be found in more trucks. Those of us who want more sympathetic treatment of people fleeing desperate situations have failed to win over public opinion, and the cost of that is death.

For those who believe that hostility to human beings from other countries who lost the lottery of life is somehow hardwired into us, there is evidence to the contrary. Germany takes in around four times as many refugees as Britain does; and for every Syrian asylum seeker received by Britain, Germany gets 27. And despite German generosity comparing starkly with our own, half of Germans polled support letting in even more refugees.

Like Alex Tabarrok, I am not aware of any mainstream moral theory that does not tell us that all humans matter, not just the ones who look like us or were born near us. I often wonder how different our approach to trade and immigration policies would be if we took it as axiomatic we don't just care about people lucky enough to be born in Britain. This is the 'big assumption' I ask people to make when I talk to them about liberalising immigration – and if we made it, the debate about immigration's impact on natives' incomes would be a mere sideshow.

There are valid questions about the most humane policy towards the asylum seekers trying to cross the Mediterranean or English Channel. And I am much more optimistic than Owen about the potential for migration to reduce global poverty. But, as he rightly says, the baseline for all of these debates must change. When people are dying from drowning and suffocation, we have to accept that we are not the only ones who matter.

Ruth Davidson speech to Adam Smith Institute


This week the ASI hosted the feisty Ruth Davidson to deliver a lecture on lessons from Scotland's founding father of economics - Adam Smith - as she outlined her vision of an alternative to the SNP's statist agenda.

Good Evening Ladies and Gentlemen.

Thank you for the opportunity to speak to you this evening.

It seems to me that there is a rather long and – if I might say – inglorious tradition of Scottish politicians hanging speeches round the neck of Adam Smith and his legacy.

I’m sure you’re familiar with them, but – for me – there seems to be two main types.

The first type is what I would refer to as the Gordon Brown method.

The Brown method is where you examine Smith’s philosophy from three hundred years ago and demonstrate that, astonishingly, it coincides almost exactly with your own policy agenda here in early 21st century.

Yes, it turns out that Adam Smith was a kind of New Labour prophet, just waiting to be discovered all this time.

Which shows your current policy platform isn’t a tricksy wheeze to triangulate left and right, all the better to scoop up the votes of middle England. Oh no!

It turns out that it has a “golden thread” linking it right back to the heart of the Scottish enlightenment where, before the words “Tony Blair” were ever heard, it was first discovered that liberal economics and social justice could go hand in hand.

The fact that Smith actually came from Kirkcaldy is just the cherry on top of the cake.

I can only say that if I was Gordon Brown looking for some kind of ballast to hold my political beliefs together, I probably wouldn’t have been able to resist either!

But that isn’t the only type of speech of course. There’s a slightly shabbier version of the Brown method which adds a great dollop of parochialism mixed with hubris.

This is the one where Politician B seeks to assert that pretty much everyone has got Adam Smith wrong from Day One. Apart, of course, from the speaker himself.

And why have they got him wrong?

Broadly speaking, continues Politician B, this is because they are not Scottish.

And, in not being Scottish, they therefore fail to understand the true meaning of Adam Smith.

Target number one is, of course, the Adam Smith Institute.


(Read the full speech here.)

Taking Corbynomics seriously...and stop giggling at the back there


One of the joys of Corbynomics is that it's all largely the invention of Richard Murphy. We therefore know that it is wrong on any specific subject, we've just got to work out how it is wrong on any specific subject. Which leads us to the idea that this peoples' quantitative easing will be able to replace the private finance initiative. The idea being that if the Bank of England just prints money with which we can do nice things then we won't have to go off and borrow expensively from the hated bankers and kittens will ride sunbeams once again. The problem with this being that PFI really has very little to do with the price of the finance used to build these lovely things. Sure, bankers get their cut of the interest, as do investors, but that's really just not the point of it all. Instead, the point of PFI is to get some people into state run projects who are worried about losing all of their money. That is, it's really about getting equity partners in.

The point of that being that we all know how projects work out if they are funded by the magic money tree. They come in late, vastly over budget and thus waste vast amounts of real resources. And the only way we've ever figured out how to introduce some rigour into the management of these sorts of projects is to make sure that someone is indeed sweating over the idea that they could lose all their money. PFI is thus far more about bringing the strictures of value for money, completion on time and to budget, into public procurement than it is about either gaining the finance to build something or the price that is paid for that finance.

Thus, changing the price paid for the finance doesn't change the argument in favour of PFI at all. Yes, it's superficially appealing to pay nothing to the Bank of England for the finance rather than 5% to hte City, but compared with things like the 276% cost over run of the Humber Bridge it's not the point at all.

These people are mad


There's always someone willing to take advantage of a good crisis, isn't there?

British railway passengers could be subject to airport-style screening at intercity stations, under plans being considered by the European Union in response to the Arras train attack. Train operators could be obliged to introduce surveillance cameras in every carriage and stations instructed to install scanners for passengers boarding high-speed trains, under options being discussed following the foiled attack. For the first time, Brussels officials are drawing up plans to create common EU rules on railway security. At the moment it is a national competence.

Before deciding whether to let the bureaucrats in Brussels make the rules it's necessary to work out whether the rules themselves make sense. That is, let's test the competence of the proposed rule makers, shall we?

Fortunately we've a method that allows us to do this: cost benefit analysis. Predictions are that soon enough we'll have some 1.4 billion high speed rail passenger movements each year in the EU. So, if we're to scan passengers, that means 1.4 billion passenger scans. Say, given the inevitable queues, this costs each passenger 10 minutes. And let's simply ignore the cost of the scanners and the people to man them. 14 billion minutes, 230 million hours, that's quite a lot of time being spent there. And we should value time at something....the Sarkozy Commission recommended that this sort of time should be valued at "undifferentiated labour rate" or minimum wage for ease of calculation.

230 million hours at, say, 7 euros an hour? That's €1.6 billion euros a year, just in the time spent being and waiting to be scanned. Hmm...and so what's the benefit?

Well, in order for this to be of benefit overall we've got to look at what will be saved. Lives, presumably. And we do know the statistical value of a life. Around and about €5 million in fact. That means, that to be of benefit, these scanners must save 320 lives a year. Each and every year.

Do we have 320 people a year being killed by terrorist attacks on trains? Are we likely to? Not that we can see it has to be said.

So, rather than imposing all of this cost on the good people of Europe it would seem more sensible to simply stay with the system we have. Punch any bearded nutters who start waving AK 47s around. After all, we do have good evidence that the current system works.

If even business doesn't get this then what hope?


One of the standard bits of economics that we need to explain again and again is the incidence of taxes. Corporations don't pay profits taxes, shareholders and workers bear the burden. similarly, business, in the form of a business that uses commercial property, doesn't pay business rates: they fall upon the landlord. But if business itself doesn't manage to grasp this point then what hope of getting everyone else to grasp it?

The Government’s “business tsar” has backed an emphatic call from the nation’s retailers for a fundamental reform of business rates to boost Britain’s productivity. Sir Charlie Mayfield, chairman of the John Lewis Partnership and president of the British Retail Consortium (BRC), has thrown his weight behind a chorus of complaints from the bosses of Britain’s high street traders that the hefty business rates tax is hampering investment in the sector. An overwhelming 95pc of 100 UK retail bosses surveyed by the BRC said that a reform of business rates would boost the nation’s productivity. “Business rates bills have continued to rise when property values have fallen,” Sir Charlie said. “Retailers are now paying £2.40 in business rates for every £1 in corporation tax. Reforming the rates system would be a welcome boost for retailers and help drive investment in training and technology,” he added.

The level of business rates makes no difference at all to the operating costs of those who rent buildings or space. The total rental value is determined by what people are willing to pay to occupy such space. How that is split between landlord in rent and government in rates is irrelevant to that price the occupier will pay. Thus the incidence of the rates is not upon the operating business but upon the landlords.

And reducing taxation upon landlords is not going to make any difference at all to the adoption of technology nor productivity.

What this is is a rather more naked call from landlords that they should be taxed less: any reduction in the rates bill will lead, as above, to their being able to increase rents. And of course there's a few retail chains that own their properties, rather than lease them.....such a reduction in rates would privilege those businesses over others.

We're not so naive as to believe that any part of Britain's taxation system is perfect but business rates are one of the better parts of it as is. Taxing landlords and their rent is closer to a land value tax than anything else and as such is one of the least distortionary taxes and one with the lowest deadweight costs. Don't reduce it.

The suggestion is that Labour should sponsor its own Militant entryism


At least this is how we read this:

Labour leadership frontrunner Jeremy Corbyn has unveiled plans to give grants to working-class party members to help them become MPs to stop it being dominated by people from affluent backgrounds.

Data from his campaign team claims Labour now has more MPs who went to private school – around 12% – than those from manual working backgrounds.

Corbyn would set up a diversity fund to help party members who are shortlisted in one of the top 100 target seats at the next election while they are trying to win selection. Campaign costs can amount to £4,500, his team claims.

We suspect that it will not just be those of working class backgrounds who are aided through the candidate selection process in this manner, but those who hold the correct views. Correct here meaning somewhere over on the magic money tree side of socialist views.

As The Beard pointed out, history runs first as tragedy and then as farce. And some of us are sufficiently greybeard to recall when the Labour Party expended great effort to root out the Militant Tendency. Now the suggestion is that the Labour Party should actually subsidise such entryism.

Yes, there is an element of farce to that, isn't there?

Perhaps we should take Corbynomics seriously?


Given the polling numbers perhaps we should at least think about taking Corbynomics seriously? So, to the fountainhead of all things Corbynomics, Richard Murphy:

This process requires three things. First, high quality economic data on what is really happening in the economy, and far too few economists have any experience with that.

That is rather funny for as we've repeatedly pointed out Murphy has only the shakiest grasp of economic data. However, there's more here. For what he's really saying is that if only the policy makers had more information then they really would be able to plan that economy. Which rather runs foul of the point made in Hayek's Nobel lecture, that we simply cannot get that sort of information out of an economy in anything like useful time:

This brings me to the crucial issue. Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement. This is sometimes carried to the point where it is demanded that our theories must be formulated in such terms that they refer only to measurable magnitudes.

It can hardly be denied that such a demand quite arbitrarily limits the facts which are to be admitted as possible causes of the events which occur in the real world. This view, which is often quite naively accepted as required by scientific procedure, has some rather paradoxical consequences. We know: of course, with regard to the market and similar social structures, a great many facts which we cannot measure and on which indeed we have only some very imprecise and general information. And because the effects of these facts in any particular instance cannot be confirmed by quantitative evidence, they are simply disregarded by those sworn to admit only what they regard as scientific evidence: they thereupon happily proceed on the fiction that the factors which they can measure are the only ones that are relevant.

And we also have a certain empirical problem as Cosma Shalizi has pointed out at great length. we do not in fact have a utility function that we can attempt to optimise. And even if we did we'd need another 100 iterations of Moore's Law to be able to run a computer to optimise that function that we don't have.

Both theory and empirics tell us that Corbynism won't work. Simply because an economy is too complex a thing to plan. Therefore, let us not take Corbynomics seriously.

Good grief, this is ridiculous


We're not sure that people understand what they're letting themselves in for here:

The vast majority of people believe alcohol abusers should pay for their own treatment rather than get it free on the NHS, a survey has found. More than half said the NHS should not fund treatment if the illness was a consequence of smoking and patients should be forced to pay for it themselves. The report questioned 4,000 UK adults about the cost of common procedures in the UK and whether it should be publicly funded.

Boozers, smokers and fatties save the NHS money: the costs of treating these various diseases unto death are lower than the lifetime costs of treating people who succumb to other diseases or even just old age. So the basic concept is wrong in itself.

However, there's another problem here. Which is that the health establishment, or at least the majority of the public health bit of it, is convinced that all diseases are caused by someone "doing something". In fact, if you tot up all the numbers, the people who have got cancer, or diabetes, or heart disease, from sugar, salt, smoking, boozing and donuts you end up with more people than there are people actually ill.

Meaning that if this principle were taken seriously, that you don't get NHS treatment for something you've done to yourself, there would be no free NHS treatment at all. Which would be fine for the bureaucracy of course, nirvana in fact: £120 billion a year without having to do anything. But it's not really the point of having an NHS, is it?

Fraser Nelson might be too laudatory here


But isn't it going to be just marvelous if he isn't? For he's talking about the state of education, the state of the state school sector. And it appears at least that the problem has finally been cracked:

When Boris Johnson is asked about his education, he cheerily replies that he would like “thousands of school as good as the one I went to: Eton”. Once, this would have been seen as preposterous: how can state schools compete with a £35,000-a-year Leviathan? But each year shows what teachers can do, given enough power and trust. Battersea Park was a failing school when Harris took it over last September with only 45 per cent of its pupils securing five decent GCSEs. Yesterday, it announced this has risen to 68 per cent. King’s Maths School, a free school in London, released its first-ever results earlier this week. Its average points score is among the top 10 schools in the land. Not the top 10 per cent; the top ten schools.

The staggering advances being made by state schools in Britain are the work of teachers and pupils, rather than politicians. Kenneth Baker, Tony Blair and Michael Gove simply offered increasing amounts of freedom to teachers, and their faith has been amply rewarded. For those who had despaired of ever finding a remedy for sink schools, this is nothing short of miraculous – and it’s only just beginning. School reform can now be seen as the greatest achievement of the Labour years, even if the Conservatives are the only ones who believe in it.

We might even call this a victory for conservatism (no, not Conservatism). Burke's little platoons can indeed organise society so that it actually works. But the much larger point that we need to keep pointing out here is that there's a vast difference between government or state financing of something and government or state provision of something. This is relevant to the railways, the NHS, to the power sector and all the rest as well.

There are indeed good arguments, Adam Smith made one of them for example, that there should be governmental subsidy to the education system. Being part of a generally literate and numerate population almost certainly is a public good. But that does not mean that it has to be government that actually provides the education. The same is true of health care: yes, it probably is true that at least some goodly portion of health care financing should be provided through the insurance pool of the entire population. And thus through the mechanisms of if not the tax system in its entirety then at least some portion of that insurance net. But this is not at all the same as stating that every provider of health care should be a government employee, nor that politics should be the mechanism by which we decide what health care, in detail, to offer.

As this schools revolution is showing, there is that vast difference between government financing of something desirable and government provision and management of it in detail. And as that revolution is showing, removing the government provision of it seems to be the best method of improving the provision of it.

Gentrification: Demolishing a Sense of Community?


In 1964, Ruth Glass first coined the phenomenon of gentrification having observed the transformation in the social-structure of Barnsbury, Islington, following the residential displacement of its local working-class population. However, residential rehabilitation is merely one particular feature of today's gentrification process that is now encompassing of broader strategies of, inter alia, economic, social, and spatial restructuring. Indeed, contemporary social movements like Focus E15 indicate that gentrification has become an extraordinarily politicised and contentious phenomenon in the sphere of urbanisation. Its mechanisms could be analysed through combinations of both production-side and consumption-side channels. Neil Smith's (1979) rent-gap thesis has served as a provocative explanation of the production-side factors, describing the process of gentrification as a gradual consequence of the systematic disinvestment of capital in certain localities. But, from a consumption-side perspective, gentrification could be understood as a process of changes in the consumption preferences of the middle-class demographic that have increasingly renounced the monotony of suburbia and have become intoxicated by the thrills inner-city life.

However, London's current process of housing stock transfers can be better understood through the concept of a third-wave of state-sponsored gentrification (Watt, 2009), whereby the state has actively encouraged the gentrification process within previously inaccessible, disadvantaged inner-city neighbourhoods, most of which are home to a plethora of low-cost socially rented dwellings, by promoting the investments of housing associations and privately-operated property developers into the construction of owner-occupied housing, and, in the meantime, validating the destruction of affordable social housing to accommodate these changes. Interestingly, for private-investors there is considerable potential for capital accumulation because of a state-induced rent gap that has come to being because of sustained state-disinvestment into London's urban infrastructure whilst the land that it is constructed on has continually risen in value because of market demand outstripping supply. London's individual councils have all used the rhetoric of mixed-communities, and their supposed benefits in terms of the reduction of socio-spatial segregation and improvements in social-cohesion, as a rationale to displace, and replace, substantial parts of those same communities. It is through regenerative programmes that are “discursively framed as community-led regeneration [initiatives]” (Watt, 2009), such as the New Deal for Communities, that the leverage of those residing in London's social housing against a market-led gentrification process has been removed. Indeed, London's gentrification process, at present, is not representative of a natural, inevitable market adjustment process, but is, in fact, a series of inefficient government interventions that have failed to treat the systemic causes of regional degeneration within the capital and, oftentimes, produced grossly socially inefficient outcomes.

So, what does the existing academic literature have to say about the outcomes of gentrification? Principally, the most commonly invoked consequence of the gentrification process is displacement, which can be defined as the “complex, multi-stranded phenomenon whereby low-income residents are pressurised out of their homes and neighbourhoods, either directly via removal through housing demolitions, landlord evictions and rent increases, or indirectly via the loss of neighbourhood resources” (Watt, 2009). Atkinson (2000) validated this phenomenon as a veritable outcome of London's 'urban regeneration' initiatives and found that in the inner-city boroughs of Hammersmith, Kensington, and Camden, increases in the number of those in professional employment, those with higher-education qualifications, and those that are owner-occupiers, were subsequently followed by elevated levels of displacement of the working-class, the elderly, and private-sector tenants. Naturally, the forced dislocation of these residents from their communities has staggeringly detrimental consequences for the most vulnerable subdivisions of society; the elderly, for example, which are disproportionately represented amongst displacees, could suffer from the removal of long-term, supportive community networks which are imperative for comfortable day-to-day life if they are displaced from the places in which they have legitimate economic and social claims. Whilst neighbourhood transition can, of course, be understood as an organic outcome of the interaction of market forces, and the supposition that a neighbourhood must remain a stagnant environment is entirely inaccurate, the direction of its outcomes, however, are malleable and could be, and ought to be, moulded by political interventions which counterpoise the effects of displacement rather than fostering them. Currently, London is pursuing its strategy of mixed-community development by increasingly utilising public-private partnerships to improve their existing inventory of housing in light of unprecedented levels of budget cutbacks. Yet, the government's benign motivation to dilute London's gravest difficulties of concentrated poverty has been achieved through considerably more hostile approaches by private-developers that have aggressively out-migrated residents of social accommodation. Therefore, this development strategy has circumvented any sense of social responsibility and, more importantly, neglected the “structural causes of regional and city economic decline and poverty” (Atkinson, 2003).

    However, gentrification is less-interestingly considered through residential displacement of individual households than through the effects that the threat of displacement imposes upon on the residents of pre- or post-gentrified districts. Professor Stephen Sheppard (2012) notes that “community improvement actions” are privately-produced public goods that, as is the case with many goods of this kind, unfortunately suffer from persistent under-provision and, as such, are not provided at a socially optimum level. Interestingly, unstable communities, by which I mean those that are consistently plagued by the threat of displacement, are denied investments into socially-beneficial community projects that every resident would profit from had this threat not existed. Ideally, a “perfectly organised” community would have devised institutions to ensure that community improvement actions were provided to a level where the marginal social-benefit of these improvements were equated to their marginal social-cost and, therefore, they would be provided at an efficient level. But, now suppose that residents of the community, regardless of socio-economic class, perceived there to be a considerable displacement risk, then this would have the effect of decreasing the expected benefit from some community improvement because said resident is uncertain whether they will benefit from it over the lifetime of the community. It is therefore clear that if these residents were to value community improvements below their true socially optimal level then, theoretically, they will be under-provided in such communities. Sheppard (2012) chose to test the hypothesis that a risk of displacement could be associated with considerable reductions in community benefit actions by estimating four different regressions; the chosen dependent variables to measure community improvements were the logs of the expenditure per thousand residents and the number of community improvement organizations per thousand residents, and the independent variables to measure displacement risk were the logs of the percentage of the population over the age of five that has moved within the last five years and the percentage of all the population that had moved within the metropolitan statistical area over the same time period. Sheppard found that the estimated coefficients were both statistically and economically significant. Indeed, considerable increases in displacement risk were associated with “a 52% to 72% decrease in community benefit expenditures per capita, or a 17% to 35% decrease in the numbers of organizations” (Sheppard, 2012). Consequently, there is evidence that there exists a social-cost borne by the community holistically, not only by those low-income households typically associated with bearing the brunt of gentrification. It is necessary that London's municipal governments assist in the provision of community improvement actions and that their policies address issues facing the retention of affordable housing such that these potential outcomes of state-sponsored gentrification are counteracted.

Furthermore, Sakizlioglu (2014), of the Urban and Regional Research Center at Utrecht University, explores the outcomes of this element of temporality in the analysis of displacement and has likened the state authorities targeting of Tarlabaşı, Istanbul, for urban renewal to a form of state-sponsored gentrification. Residents of Tarlabaşı found that, after having their locale announced as a 'designated renewal area,' they faced increasingly threatening appropriation strategies from both the public and private sector, suffered from substantial disinvestment within the district and observed the gradual deconstruction of the social-networks to which they belonged; as such, the inhabitants found themselves living in the long-shadows that displacement had cast some time before they were actually displaced. Today, Tarlabaşı is being transformed into the “Champs-Élysées of Istanbul” (Sakizlioglu, 2014), its residents, though, 'decanted' to the peripheral limits of the capital like those in Parisian banlieues.

London's borough of Southwark is similarly undergoing a process of urban regeneration, although it is more moderate in its approach than Istanbul's destructive transformation of Tarlabaşı. Indeed, Southwark Council's regeneration of Elephant and Castle actually comes with a promise that local people will benefit from a “dramatically improved physical environment,” have “access to more local jobs and training opportunities” and the chance to buy thousands of newly built homes (Southwark Council, 2015). However, whether such promises will materialise in the near future remains a much contested issue.

Southwark, of course, is home to two of London's most infamous 'sink estates,' the Aylesbury and the Heygate, which are characterized by extreme socio-economic marginality and serve as perfect symbols of the capital's urban blight and material dilapidation. Naturally, these estates were prime targets for Southwark's own plans for urban revitalisation and the introduction of  socially “mixed communities [which will] help to overcome the problems associated with areas focused on deprivation such as reduced local business activity, limited local jobs and employment ambitions, downward pressures on school quality, high levels of crime and disorder, and health inequalities.” (Aylesbury Area Action Plan, 2010); these are, of course, completely justified aspirations for estates that frequently feature as narcotic-infested backdrops for television's latest crime dramas.

The 'regeneration' of the Heygate Estate, however, has presented previous residents with a scenario that is the antithesis of the discursive vehicle used by Southwark Council. Indeed, the neo-brutalist council estate which formerly provided the local community with 1200 dwellings, the majority of which were socially rented, has recently literally been ripped down by the insatiable hands of private property developers who plan to build approximately double the existing amount on the site. Unfortunately, merely seventy-nine of those units are allocated to be socially rented and only five-hundred are considered “affordable” - I note that affordability in this context does not actually suggest that the estates previous residents could constitute the majority of tenants in the modern apartment blocks, the rent for a two-bedroom flat alone would require an income of almost £44,000, which far exceeds the £12,000 mean-income earned by tenants that socially rent (Wiles, 2014). Heygate's residents now find themselves forcibly decanted across London's other boroughs, many of them far from relatives and workplaces; as an aside, Southwark Council actually engaged in unethical tactics like permanently switching off the estate's district heating systems to flush out its remaining residents, leaving those that are vulnerable without even the most basic utilities. It appears that the previous occupants of the Heygate Estate won't be able to share in the proposed benefits of mixed communities, although it must be noted this is but one constituent of the wider redevelopment of the Elephant and Castle area. The future of the Aylesbury Estate, though, appears similarly bleak.

However, the anti-gentrification narrative, which typically presents neighbourhood transition as totally exclusionary of the locale's original residents, at times, discounts the positive consequences of revitalisation that Southwark Council had alluded to above. Primarily, gentrification can be associated with both absolute and relative increases in the average levels of income in gentrified neighbourhoods. But, to properly examine the net-effect of these absolute and relative changes, it's necessary to understand three possible underlying sources of these changes beforehand. First, those that move-in might earn an income that is comparatively higher than the localised average; we shall call this selective entry. Second, those that move-out might earn an income that is lower than the average; we shall call this selective exit. Or, third, those original members of the neighbourhood that are not displaced might actually experience increases in their level of income; we shall call this incumbent upgrading.


    The Center for Economic Studies (CES) (2010) found that both selective entry and selective exit played crucial roles in determining changes in income levels of gentrified neighbourhoods in the US. It found that in-movers in gaining tracts had incomes greater than incumbent residents by approximately twenty-five percent, which is broadly in accordance with the stereotypical pattern of gentrification which presumes that well-heeled homeowners move into lower-income areas. It also found that residents who moved out of the area earned an income considerably lower than the localised average and thereby helped contribute to rises in mean income levels. However, these two results are merely indicative of an increasing localised average of income and are of limited use in considering whether the remaining residents have actually profited from the gentrification process. Fortunately, the CES's data suggests that incumbent upgrading too had occurred in neighbourhoods undergoing economic succession; residents who remained in their housing units in gaining neighbourhoods experienced increases in real-income levels comparatively higher than their counterparts in non-gaining neighbourhoods. Now, although incumbent upgrading is not the most important contributor to changes in average real-income levels in gentrified districts, it's nonetheless still an important contributor and one which is frequently ignored in discussions of neighbourhood change – discussions that usually assume that indigenous residents themselves cannot drive community improvements. Interestingly, the National Bureau of Economic Research (2008) found that certain indigenous low-income ethnic groups with high-school diplomas actually stood to gain the most from gentrification.


What, then, are the sources of incumbent upgrading in gentrified neighbourhoods? Well, presuming that these communities were heretofore experiencing societal or spatial isolation from job opportunities, then the residential integration of well-heeled in-movers may serve to inject economic capital into the neighbourhood and facilitate access to localised employment that they previously were isolated from (Meltzer & Ghorbani, 2015). Furthermore, incumbents also benefit from ameliorations in information asymmetries concerning local employment opportunities and, therefore, their search costs will decrease. However, whether the original residents actually profit from the influx of business establishments is a contentious issue. Primarily, for the neighbourhood's original residents to benefit from the establishment of new businesses the probability that those firms choose to hire within the community must be moderately large. If service-orientated businesses resolve to set-up in the neighbourhood, complementing the consumption preferences of the middle-class, then these establishments will most probably employ the local labour force because they are unlikely to require skill-sets that are more technical than those already possessed by the neighbourhood's unemployed workers. It can be argued that this process will create positive feedback loops that encourage further employment. But, if the process of gentrification is to be inclusive of London's working-class we must endeavour to ensure that our public policies support the continuous employment of these residents.

However, Lester and Hartley (2013) posit that one possible outcome of economic upgrading observed in certain neighbourhoods is that a process of industrial restructuring had occurred as manufacturing businesses found themselves evicted from industrial buildings by commercial landlords, such that their buildings could, instead, be purchased by property developers or other commercial enterprises. Therefore, it is imperative that policy makers incorporate restructuring efforts, including additional re-training schemes and improvements in education, into their urban regeneration initiatives, such that the neighbourhood's transition away from employment in the manufacturing sector does not increase structural unemployment, further aggravating the phenomenon of spatial mismatch.

Moreover, through the process of gentrification, the appetites of the upper- and middle-classes for high-quality institutions puts pressure on important public services to improve the quality of the service that they deliver, thereby improving the quality of life for all residents within the community. 'More Coffee, Less Crime?' is a recent examination of the outcomes that gentrification has had on the crime rates of certain neighbourhoods in Chicago, playfully using the annual number of coffee shops operating as an “on-the-ground measure of a particular form of economic development and [the] changing consumption patterns that tap into central theoretical frames within the gentrification literature” (Papachristos et al., 2011). Its conclusion? That more coffee does demonstrate a negative relationship with the community's crime rate, especially with regards to serious offences like larceny and homicide. Its logic is simple; indigenous residents are able to benefit from the social, cultural, and economic capital of the more-affluent in-movers and so can demand better law-enforcement efforts that ameliorate crime rates at the neighbourhood and, potentially, city level. Furthermore, the process of gentrification not only improves such institutions but, also, has the effect of offering original residents economic and social opportunities that increase social-cohesion and further decrease delinquency. However, the investigation also found that certain neighbourhoods that have undergone periods of socioeconomic heterogeneity are sometimes less-capable of controlling crime internally than others; this effect was found to be particularly marked in Black gentrifying neighbourhoods where particular types of crime, including those of property and economic nature, have increased marginally. In London, though, it seems that the gentrified neighbourhoods are seeing that crime is actually falling precipitously, but we must question who does this really benefit?

Whilst some academics have argued that 'improving' the social-mix in less-affluent areas has, on aggregate, proffered greater investment into socially-beneficial projects for the local community, the distribution of some of these benefits within these communities has begun to reflect the socio-spatial segregation that has come to define classic anti-gentrification rhetoric and the oppositions notion of 'gentrified London.' Indeed, Butler, Hamnett and Ramsden (2013) have used cross-sectional data to argue that the process of gentrification in the Victoria park area of East London has resulted in “direct exclusionary displacement” of the existing lower-income population from well-performing local schools that have benefited from the influx of the London's upper-classes within the last few decades. Schools like Lauriston and Mossbourne Academy have become part of a middle-class narrative, and have readily submitted themselves to middle-class domination at the expense of inclusion and multiculturalism by constraining local resident’s choice of education through 'distance to school' regulations and increasingly bounded catchment areas. Only those with a certain threshold of social and economic resources are able to make the decision that their local educational establishment is unsatisfactory and, therefore, engage in socially reprehensible behaviour like purchasing property in close proximity to schools like Lauriston, such that their child's name is registered to an address in the school's catchment area, but subsequently renting the address out to other aspiring professionals. Consequently, such behaviour serves to displace children in the locale from what would otherwise be their catchment school, resigning them to under-resourced and under-performing institutions and, more importantly, denying them an opportunity to escape their immediate position in the UK's system of social stratification. Indubitably, one's choice of education has never been a truly free choice, naturally bound by the number of places that schools have to offer and, in the case of the private sector, one's ability to pay, but to further concentrate the freedom to exercise choice amongst the absolutely and relativity privileged (Power et al., 2003) by increasingly rationing choice through 'distance to school' policies is contrary to libertarian ideology and, at the same time, ultimately denies children from lower-income households of opportunities for intergenerational equality.

        It is these disparities in the distribution of outcomes between agents in locales undergoing initiatives of urban regeneration that serve to undermine the propounded benefits of mixed-communities that are premised on the economic, social, and normative, integration of people within heterogeneous neighbourhoods. Lees (2008) argues that the predominant policy assumption that gentrification can foster social cohesion is usually predicated on political conjecture. Instead, the evidence presented contrasted said assumptions and appeared to suggest that “gentrification [tends] to result in ‘tectonic’ juxtapositions of polarised socioeconomic groups rather than in socially cohesive communities” (Lees, 2008). It seems that socially-mixed communities cannot actually guarantee the upward mobility of the working-classes because the lifeworlds of each differing group rarely intersect, which, thereby, restricts the transference of social capital from high- to low-income populations. Furthermore, contact between these divergent groups “tend to be superficial at best and outright hostile at worst” (Uitermark & Duyvendak, 2007) which implies that communities that are socially mixed, and, therefore, home to disparate culture and social-classes, are equally likely to engender community conflict as they are harmony. Indeed, the state's promotion of urban regeneration through mixed-communities as a panacea to London's problems of concentrated poverty is a cosmetic policy that treats its symptoms without actually ameliorating the social conditions that affects its most underprivileged groups. Further, mixed-communities appear to be a completely one-sided strategy that are seldom advocated in equivalently socially-homogenous, but comparatively more-affluent, neighbourhoods; consequently, these strategies increasingly stigmatise the working-classes and, incorrectly, foster the sentiment that all of society should become, or aspire to become, middle-class.

    The literature of the Create Streets and the Policy Exchange's 2013 co-publication of 'Create Streets,' which found itself particularly well-received by those in favour of the UK's current form of urban regeneration strategies, reflects these attitudes that those who reside in local-authority housing require betterment of the socio-economic composition of their community in order to improve their immediate position. Create Streets utilises these thoroughly erroneous, but nevertheless well-established, attitudes as a fundamental component in the formula for the justification of the destruction of socially rented multi-storey tenements, and the facilitation of their replacement by privately-developed “real houses.” Its arguments are premised on the stigmatisation of the high-rise architecture of London's inner-city housing estates, which, apparently, intrinsically lends itself to “[making] people badder, sadder and lonelier” (Create Streets, 2013), despite London's love-affair with luxury condominium towers. However, its implications are concerning because it presents us with a false-choice between the current form of state-sponsored gentrification, a strategy marketed as one of the only instruments of growth within the context of a deteriorating city, or the continual social, and physical, degeneration of its neighbourhoods. Indeed, this nouvelle vague of state-led gentrification, premised on mixed-community policies, owes little to the age-old invisible hand of market forces, but much to an overbearing government with an insidious political desire to cease the municipal management of social housing. Unfortunately, the UK government's urban regeneration strategies are, at present, exclusionary of those that are in a position to profit the most from gentrification's localised outcomes, such as the increased availability of employment opportunities, because the issue of displacement is merely viewed as “an unfortunate corollary of processes that are revitalising city centres, attracting private investment and securing the physical fabric of architecturally valuable neighbourhoods” (Atkinson, 2003).

    However, I do not suggest that the government should endeavour to pursue alternative policies and impose regulations that merely serve to insulate impoverished neighbourhoods from the gentrification process, thereby condemning successive generations of those communities to a destitute existence. But, instead, I argue that gentrification's current form is generally delivering outcomes that are socially inefficient. Primarily, I believe that, instead of pursuing policies that exacerbate London's existing issues of affordable housing, its municipal governments must be observed to be actively involved in addressing the residential demands of its lower-income population. I propose that local councils must proceed to eliminate supererogatory regulatory barriers to residential development, whilst, also, providing long-term financial and technical assistance to entities that include substantial portions of both socially-rented and genuinely affordable units in their development plans; consequently, this commitment will demonstrate that affordable housing is an important component of the broader community. Furthermore, in lieu of dismantling its pre-constructed housing stock, London's municipal governments must support these commitments by promoting development on appropriate brownfield sites. I believe that an increasingly more laissez-faire approach to residential development would provide the necessary incentives for agents to re-optimize their behaviour and this would, therefore, help to mitigate the exclusionary displacement effects of gentrification

Furthermore, municipal governments must resolve to encourage the participation of representative members of localities into their urban regeneration initiatives, such that these members can identify their neighbourhood-specific needs and assist in the development of functional solutions. I suppose that the comprehensive engagement of the local community in addressing their residential requirements before their options become increasingly constrained by the process of gentrification will mitigate the degenerative effects that displacement risk can impose on the indigenous population. Currently, state-sponsored gentrification materialises the abstract concept that the demands of lower-income households are immaterial, this is, of course, clarified by the permitted retrogression of the economic, social, and physical capital in those areas targeted for regeneration; this is something that our policies must endeavour to change. Furthermore, incentivising the investment into, and the operation of, privately-managed community improvement institutions that could fulfil the demands of the community's residents, will exponentially ameliorate declining levels of neighbourhood satisfaction and, perhaps, could expedite other private-market investments that will further revitalise the locality.

Additionally, the policies of neighbourhood regeneration should not only focus on the production of affordable housing units but, also, on the retention of existing units. It is imperative that retention strategies concentrate on the continued affordability of residential units to mitigate the effects of increases in costs which can result in the secondary displacement of an area's residents. Increasing the accessibility of credit to lower-income households, those that may previously have been discriminated against, could potentially offset these sources of secondary displacement. Finally, instead of promoting mixed-communities as the preeminent strategy to resolve London's complex problems of concentrated urban poverty, I argue that public policies should precisely tackle the systemic causes of socioeconomic inequalities. I emphasise that refinements in the quality of educational establishments and improvements in the availability of employment opportunities will serve as the vehicle for reductions in poverty. Introducing 'Community Contracts,' for example, as an initiative to encourage commercial enterprises to provide unskilled employment for lower-income households in neighbourhoods undergoing gentrification, in return for regulatory support to take advantage of market conditions.  I believe that these opportunities would both increase the incumbent resident's capability to remain in the neighbourhood and support the development of commerce committed to hiring within the community, whilst also treating the fundamental causes that perpetuate the cycle of poverty.

It is entirely possible that gentrification can produce mutually-beneficial outcomes throughout the various strata of the UK's society, but to achieve this we must re-evaluate the evidence of the benefits of mixed-communities that we have premised the current manifestation of state-sponsored gentrification upon and then, in light of this, we must proceed to reformat the gentrification process such that it is inclusive of all. It is only through doing so that we can begin to rebuild the sense of community that we've regrettably begun to demolish.

Resources used:

Gentrification, Education and Exclusionary Displacement in East London



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