Sunday, 24 June 2018

They're Fellow Humans, It's Not Rocket Science!

As most of us have known for years, migrants and refugees are good for economies - and now there appears to be 30 years of evidential data to back this up. This ought to be considered though in line with an important distinction between the benefits of having free movement of labour, and the problems of having free movement of people instituted in regulation (I blogged about this distinction here).

Because, you see, the thing that human beings ought to do, that they don't do enough, is think primarily about the benefit of immigration to the immigrants themselves, not through the very parochial lens of counting costs of immigration on indigenous folk. The two key benefits of immigration for immigrants are:

1) They work hard and try to make a better life for themselves and their family.

2) The better life they are making for themselves and their family is better here than it would be in their home country.

Some people assert that “It’s alright for you, you don’t live in a community that has been negatively affected by immigration!” This is true, but I would swing the twit-ometer back their way by saying “It’s alright for you too, you don’t live in a community like the ones from which the immigrants were escaping when they chose to come here!”

And we all know about Schrodinger’s immigrant – the one that simultaneously comes here to steal your job and sponge off the state on benefits. Schrodinger’s immigrant is largely based on the phenomenon of being angry at immigrants whatever they do, putting on your parts when immigrants work, and putting on your parts when they claim benefits; putting on your parts when they integrate too much, and putting on your parts when they stay in their own communities.

Lastly, you'll also know of those who complain about foreign aid, declaring that we have people on our streets that we should be helping first. It's a familiar piece of virtue signalling, but I would suggest to you that the kind of people who wish to care more about people in their own country by caring less about people in even poorer countries are not likely to be the kind of people who care about either group of people very much.

To end, here's a meme I shared recently that nicely sums up my feeling about treating people as human beings worthy of our love and kindness and generosity, irrespective of where they come from:

Edit to add: In this debate, most people forget to ask the primary question: why are wages low in a poorer foreign country and higher in the UK? The reason they are higher in the UK, of course, is because productivity is higher in the UK, thanks to better technology and advanced capital investments. Consequently, higher wages in the UK are the result of economic growth and prosperity - but equally, where wages are low in foreign countries that have the competitive advantage over the UK in a particular industry, this is wrongly seen as a threat, when in fact, it is another part of the UK’s increase in prosperity. 

This is also where confusion comes about lower foreign wages that are thought to be ‘unjust’ relative to UK wages. If industries in the UK cannot compete with industries abroad, it is not because of low wages abroad, it is because of high wages here: we have bid up wages so high that domestic industries are no longer as profitable and better off outsourced. This is another reason why tariffs are only pursued by economic imbeciles - they add weight to inefficiencies and starve efficiency by keeping prices high for consumers, and keeping competition and innovation down. They also misallocate resources, as industries that are protected from competition keep people and raw materials in areas of the economy that deny other areas of the economy those resources.

Immigration brings about similar benefits in terms of all the above!! 

Wednesday, 20 June 2018

Another Cracking Policy That Will Do More Harm Than Good

We just recently learned that big business bosses will be forced to justify salaries under new government plans, which include gender pay gaps, top end salaries, and also parental leave policies - the whole shebang. Not only is this is a terrible idea because of the misunderstanding of the facts - it is a potentially damaging idea that will probably harm those it seeks to help.

What's behind the insistence that big companies are now mandated to calculate and publish their ‘pay gap stats’ is the spurious belief that there is an unfair pay gap between men and women (there isn't!) and that the firm's top earners are riding roughshod over the lower earners in the company (they are not!).

Not only have these politicians shown they don't have a very good eye for facts - what's more, even if it were true that there is an unfair gender pay gap or an unhealthy stratification, this policy is too low-resolution to get to the heart of it. Simply getting firms to publish their pay stats won't get to the crux of why, when there are differences, those differences exist. Only by comparing jobs like for like can this policy be illuminating - and this latest idea will not achieve such a thing.

A firm that publishes the mean and median salaries of the men and women in their workforce will omit many vital factors that determine pay, such as experience, qualifications, risk-taking, scalability, and several other minutia areas of the remit. A proposal that looks to redress what it thinks are illegitimate causes of a pay gap that are actually legitimate causes would do more harm than good. 

But that's not all of it - unfortunately, such an injudicious policy may well come with another unintended consequence - one that could actually disadvantage women in the workplace by skewing employer incentives to act against women.

A firm that is forced to demonstrate a 'fair' balance of sheet of equal pay when there is currently a 'fair' balance sheet of sometimes unequal pay is not going to help women, it will only harm both women and men, because some of the important factors that determined legitimate unequal pay (experience, risk, working patterns, qualifications, different priorities, etc) and some of things that determine what people value from a job (flexibility, shorter hours, career breaks, reduced responsibility, working from home) will be undermined.

It will be yet another example of a deleterious effect that comes when politicians stick their noses in where they do not belong.

Monday, 18 June 2018

Why Capitalism Is A Lot Like Magic

Magic is defined as the power to influence by using mysterious forces. The magician on stage bewilders his audience because he knows things about the set-up that the audience does not.

Capitalism is like magic because its powers are seeped in qualities that appear to be mysterious to the majority of the population. Even very prescient minds like those of Adam Smith, David Ricardo and John Stuart Mill were nowhere near envisioning just how this miracle of capitalism would take form.

The magic of capitalism, to the nascent enquirer, is that it appears on the surface to depart from the rubric of one of humanity's great laws - the law of diminishing returns. This is why so many people see capitalism as a zero sum game, and are so regularly confused by the fallacy of the fixed pie - it can be quite counterintuitive. After all, if I have more of something, doesn't that mean someone else needs to have less?

Sometimes, yes. If I buy the last packet of cookies in the local corner shop, the person behind me might have to wait until more stock is delivered. If I give you 2 slices of my pizza, I will only have 6 slices left instead of 8. Nature adheres to similar regularities: one barrel of oil sold in the market is one less barrel of oil in the ground. A potato farmer who digs up his yield has fewer potatoes in the soil.

But imagine a potato field whereby every time the farmer dug up his yield he ended up with more potatoes in the soil than before he started. And suppose that after digging up his mysterious additional yield he found that there were even more potatoes than previously before. If this process kept occurring, we would rightly infer that the farmer has a magic potato field.


Capitalism is like the magic potato field. It is not just a trading of goods and services - it is, at heart, a trading of ideas and innovations, and they do not yield diminishing returns; they proliferate in number, rather like (and also because of) populations increase because of exchanges of DNA through sex. When people think up ideas that go on to become light bulbs, combustion engines, stethoscopes, mousetraps, cat's eyes, cars, helicopters and space stations - the opposite of diminishing returns happens - we enjoy the law of increasing returns.

This is why capitalism is rather like magic - a non-supernatural miracle, if you like. The more we increase our prosperity, our progress and our standard of living, the more we can increase it further; the more ideas we have, the more ideas we will have; the more jobs we create, the more jobs we can create; the more we innovate, the more innovation becomes possible; and the better our standard of living gets, the better it can become.

Not only is this why capitalism is like magic - it is just about the only thing in the world of its kind: where individuals who pursue improvement for their own lives, simultaneously make everyone else better off by doing so. It is the great human cooperative; the greatest democracy; the greatest antidote to corruption and tyranny; and the greatest celebration of talent, diversity, individual sovereignty and equality (yes, equality) the world has ever seen or probably will ever see.

That so many people are its enemy; that they so willfully misunderstand it, distort it, cherry pick at it, formulate so many confused arguments against it, and call for interventions that retard its gravitas, stifle opportunities and impede its magical effects on fellow humans is one of biggest regrets we as a species should have.  

Saturday, 16 June 2018

My Top 20 Exhilarating Things For The Mind To Master Before It Dies

In no particular order, my 20 things to take the time to master in life to attain an enriched & exhilarated mind:

1) Hume's distinction between causality and causation, and the fact that everything we know comes from experience

2) That mathematics is the territory and physics is the map, not the other way around

3) Aumann's Agreement Theorem

4) Price Theory

5) Applying nature's principles of natural selection and the law of parsimony to human applications of behaviour

6) Bastiat's principle of 'That Which is Seen and That Which is Not Seen'.

7) The nature of logic: that logic is derived from experience and arises out of our own conceptualising of the world

8) That everything to do with God is both a creation and a discovery

9) That the free will and determinism topic is not an 'either/or' proposition - it is a mathematical spectrum.

10) Harsanyi's Amnesia Principle

11) That morality is both objective and a human invention

12) The principles of Comparative Advantage

13) That competition and exchanges of goods, services and ideas are the primary things that drive progress

14) The Ideological Turing Test

15) The Coase Theorem and Pareto Efficiency

16) Which 'unequal outcome' situations are problems that need solving, and which are simply an aggregation of individual differences.

17) That physics and metaphysics seamlessly blend into one another's territories

18) The sorites paradox and its application to human ideas

19) The fundamental details that make up the great enrichment and the hockey stick of human progression

20) That the sovereignty, rights and liberties of the individual are primary over any group or association that individual has

Wednesday, 13 June 2018

Being Smart When Dining Out

I’ve been reading Tyler Cowen’s book on food - dubbed ‘New Rules for Everyday Foodies’ - which contains a few pearls of wisdom on dining out that I thought worth sharing.

1) At fancy and expensive restaurants (say, $50 and up for a dinner), you can follow a simple procedure to choose the best meal. Look at the menu and ask yourself: Which of these items do I least want to order? Or: Which one sounds the least appetizing? Then order that item. The logic is simple. At a fancy restaurant, the menu is well thought-out. The kitchen’s time and attention are scarce. An item won’t be on the menu unless there is a good reason for its presence. If it sounds bad, it probably tastes especially good. So order the ugly and order the unknown. You’ll probably get a better and more interesting meal.

While it’s not a watertight system, I like the idea of keeping it in mind as a possibility, as it has proved fruitful for me in the past. On the other hand, be wary of something Tyler Cowen neglects to mention. Some of the more attractive sounding dishes on the menu will be included for perceived consumer popularity - not for their high quality but for their high demand from less discerning customers. Chicken dishes often tend to be contained in this set.

2) When you enter a restaurant, you don’t want to see expressions of disgust on the diners’ faces, but you do want to see a certain seriousness of purpose. Pull out a mirror and try eating some really good food. How much are you smiling? Not as much as you might think.

Yes, indeed. Restaurants where there is lots of fun and laughter can be great places for a night out. But don’t necessarily be put off by a restaurant in which the patrons are eating quietly and not communicating much - it can often be a sign that the food is glorious. The average person, when devouring a gorgeous meal, probably focuses quite prominently on the food, and is less loquacious because of it.  

3) The larger the number of restaurants serving the same ethnic cuisine in a given area, the more likely the food they serve will be good. Why? Restaurants that are competing most directly against each other can’t rest on their laurels. They are also typically appealing to an informed customer base. And finally, they can participate in a well-developed supply chain for key ingredients.

True, restaurants in highly competitive areas are much more likely to keep up the high standards of cuisine that will keep the customers coming in. And as a corollary, sometimes you need to be wary of small towns with only one Chinese or Indian or French restaurant. If competition is sparse, sometimes standards will slip.

In addition
Now, as Tyler’s book is a heavily centred on American dining, it probably won’t surprise you lovely readers to learn that I’ve gathered a few of my own pearls of wisdom throughout my own dining experiences in the UK and in Europe:

Don’t necessarily have a main course
In decent restaurants, you are going to find some nice mains, but some lovely starters too, and a few decent side dishes. Given that you’re likely to experience diminishing marginal utility with a main (it is usually less enjoyable after consuming the first 50% on the plate), consider skipping the main course and instead order two or three starters and a side (or sometimes even better, if you’re a couple dining, two mains or six or seven starters and sides that you can share).

Restaurants will pretty much give you any combo you want if it's on the menu - just ask
If it's on the menu, it's in the kitchen - so as long as you don't commit the faux pas of offending the chef by asking him to compromise on a dish he or she has taken pride in creating, feel free to ask for any combination of things you’d like. If, for instance, you see halloumi as a part of a main, but you want another main, and halloumi as a side, and a sauce that’s in a dish you don’t want but you’d like it in one you do, tell the waiter, and you’ll usually find you get the exact dish you desire. You may even give the chef some new ideas! 

Specialising brings rewards
Try to avoid ordering a food that is not part of the restaurant’s speciality. Why is food sold at a bowling alley generally likely to be worse than food sold in a restaurant? The reason is - it's about speciality. A restaurant specialises in selling food; a bowling alley specialises in selling a good time bowling. Food is an additional extra in the bowling alley, but the main selling point of a restaurant, so you'd expect it to be less good in a bowling alley. Try to eat your lasagnes in Italian restaurants, your paellas in Spanish restaurants, and your curries in Indian restaurants, and so forth.

Pasta dishes are generally a bad thing to order
Why? Two reasons. Firstly, pasta dishes are one of the easiest and cheapest dishes to cook yourself (see my next one below). Secondly, pasta dishes are generally bad value for money in terms of the ratio of pasta to other ingredients: the dish has far more pasta than anything else, and consuming it is therefore a sub-optimal use of your taste buds and digestive system. If you’re in a restaurant with pasta on the menu, there will be plenty of superior choices instead.

Eat what you wouldn’t cook for yourself
It’s a good idea to regularly order dishes in restaurants that you are unlikely to eat at home or have cooked for you elsewhere.

Go to restaurants where rent is likely to be high but the owner not filthy rich
A restaurant in a high rent area has expensive overheads - and this in a highly competitive industry where over 50% of all restaurants close within three years of starting up. A restaurant in a high rent area needs to a have a continual standard of top notch food, or else face closure. And in highly competitive areas of the city too, this brings a high probability that the food will be very good.

Finally, here’s one for staff restaurant frequenters - be on the lookout for the kitchen’s incentives
If haddock was on the menu the day before, you might want to think twice about ordering fish pie if it’s on the menu a couple of days after.

Further reading --

Tuesday, 12 June 2018

They Don't Know When They Are Onto A Good Thing

A parliamentary committee has got its knickers in a twist, believing that the tuition fee system for England's universities is ripping off students and giving taxpayers poor value for money. The reality is, the system is not ripping off students - the size of the debt the committee is balking at is to do with there being far too many students, doing degrees not worth their price to the taxpayer.

Currently around 45% of student loans end up being written off, so if the article is right in saying that in the next 25 years the debt is going to rise to £1 trillion, then at this rate the cost to the taxpayer will be in the region of £450 billion of unpaid debt (this will be offset by tax revenue from post-graduate earnings, but that would still come into the treasury in tax revenue if prices of degrees better matched their value to society).

The report calls for "immediate reforms" - such as “cutting interest rates on repayments”. This is a foolish idea: interest rates constitute the price of borrowing, and should not be cut, because money loaned now will not be worth as much in the future, so the interest reflects the cost of the loan to the lender. If you’d lent me £50 in 1989, and I insisted on paying it back in 2019 - it doesn’t take much imagination to work out who comes out best on the deal.

The student loan system isn't a terrible system if and when graduates pay it back through their high earnings. The system is geared towards bridging the disparity between your peak earnings, your peak equity and your peak debt, because the majority of your biggest expenses come in your first two decades of your adult life, and the majority of your equity and highest earnings come in the last two decades of your working life.

Consequently, cries that the system is unfair to students are really quite laughable - unless you have a very odd interpretation of the word 'fairness'. A post-graduate student who goes on to earn £24,000 a year will pay back just £42 per month. Earn £27,000 a year and he'll pay back just £65 a month. Earn £30,000 a year and the repayment is a meagre £87 - hardly unreasonable sums.

The main thing that muddies the waters in this system is when too many students are doing degrees. And it isn't surprising to find in a study that when prices of degrees are more in line with what they cost to obtain, the motivations to find higher paid work are more apparent - which is exactly what we'd hope to find.

Further reading - if you would like a more detailed treatment on this, I once put it all down in a blog here:

Saturday, 9 June 2018

Creative Destruction: The High Street 'Crisis' Is Like Trump's Tariffs In Reverse

Many people are bemoaning the so-called high street crisis as being indicative of some kind of prophecy of doom on our retail industry. Now while we can all feel sympathy for the people that lose their jobs because of this, the overall picture is that just the opposite is happening: the closure of the high street shops is democracy's way of saying that better things are happening elsewhere, and that on average, the public is reaping the rewards of an ever-changing society.

This is why it's like tariffs in reverse. Tariffs benefit a small proportion of the domestic population, and hurt the rest of the population, to engender an aggregate loss. High street store closures hurt a small proportion of the domestic population, and benefit the rest of the population, to engender an aggregate gain.

What I'm describing here is standard in economic theory: it is a natural selection-type filter known as Schumpeter's 'gale of creative destruction' (after the economist Joseph Schumpeter). It is the market's way of saying that demand for whatever you are providing, or for the way you are providing it, is declining.

Creative destruction transmits informal signals, not just about who should be selling what, and how, but also about maximising investments, prudent and imprudent capital ventures, selection pressure on innovation and efficiency, new training opportunities, alternative products and improved technology.

Creative destruction is not just a filtering effect on struggling businesses and industries, it is also an opportunity for greater competition, which channels creativity, modernisation and material advance. It does not mean an end to high street stores; it means there is a niche opening for better ones. Competition doesn't just drive drown prices for consumers, and ensure increased efficiency from suppliers - it provides fresh opportunity for would-be businesses to enter the market and add to the value created in society.

Those high street shops, at their best, will not be retailers struggling to compete with more efficient and cheaper online competitors - they will be small businesses like bakers, butchers, patisseries, cafes, restaurants, takeaways and so forth, that are continually able to provide goods and services that people prefer over the bigger retailers, often to enjoy the sense of community spirit too.

Creative destruction involves losses in society as well as gains - but the 'creative' part far outweighs the 'destruction' part - as the threat of bigger competitors acts as a driver for new ideas and opportunities, and continual demand for improved products and services.

To the small minority of politicians who think the so-called high street crisis is their cue to call for state intervention in the shape of bail-outs, subsidies, tax breaks and financial restitution - this is as clumsy as it is foolish. Any political attempts to cushion the blow only serve to distort the vital information signals regarding where capital is best allocated, where labour is best employed, and which businesses and industries are likely to create the most wealth and value in society.
Finally, it shouldn't have slipped your notice that the political buffoons appearing on media outlets recently bemoaning the mass decline in high street retailers are the exact same political buffoons who've been so influential in helping these closures along by imposing literally billions of pounds of increased overheads on these companies through their inflated minimum wage legislations and fattened up taxation on businesses. Statist chickens always come home to roost.

Sunday, 3 June 2018

The Feminists Do Women A Disservice Here - Failing To Understand Why There Are Not More Female CEOs

There has been a lot of hoo-ha in the past couple of days about the reasons leading companies have given for male dominance of boardrooms. Several article writers have gone to town on what they consider pathetic excuses for women's under-representation in the boardroom:

• “I don’t think women fit comfortably into the board environment” 

• “There aren’t that many women with the right credentials and depth of experience to sit on the board - the issues covered are extremely complex”

• “Most women don’t want the hassle or pressure of sitting on a board”

• “Shareholders just aren’t interested in the make-up of the board, so why should we be?”

• “My other board colleagues wouldn’t want to appoint a woman on our board”

• “All the ‘good’ women have already been snapped up”

• “We have one woman already on the board, so we are done - it is someone else’s turn”

• “There aren’t any vacancies at the moment - if there were I would think about appointing a woman”

• “We need to build the pipeline from the bottom - there just aren’t enough senior women in this sector”

Not only are most of the above dismal cop-outs, they fail to do any justice to what's really going on, and why there aren't more women in leading roles in FTSE 100 companies. Previously on here I've been through the reasons why the gender pay gap myth is one of the crassest examples of non-thinking currently going on in the debating sphere (see links at bottom of page) - but the reasons why there are not more women in top jobs in FTSE 100 companies is a bit more subtle, slightly more complex, and actually, in my view, more of a credit to women than the feminists realise.

To try to summarise it in a nutshell: the main reason there are not more women in top jobs is because, on average (and remember, we are always talking about on average here - there are always exceptions and outliers), women have better reasons than men for not wanting to be in those jobs. Those reasons are evolutionary, biological, sociological and cultural - and they are, in many cases, examples of where women have a better grasp of well-being and quality of life than men.

To see why, consider a typical man whose preoccupation is climbing the greasy pole of career success. His life consists of working 70-80 hours a week, under highly competitive and stressful conditions, which often involve ruthlessness and one-upmanship, and a narrow focus on a single pursuit. He may well make it to the top, but at what cost to other areas of his life - family, friends, emotional well-being, kindness, empathy and a generally balanced life?

And we all know what the primary phenomenon is that drives people to the top - the pursuit of status; it's the ultimate peacock's tail. Status-mongering is hard-wired into male evolution - for reproduction and survival. In the modern age, humans have developed a socio-cultural sophistication that enables them to be driven by things other than genetic biological stimulus - but status is here to stay, and probably always will be.

Status doesn't dominate your chances of passing on your genes as it once did in animal hierarchies, but it does play a key part in assortative mating. Because women generally desire socio-economically upwards pursuits in the men they wish to have children with, status is a much more important thing for men than it is for women, which is why men are generally far more competitive than women, and why this plays out in the workplace statistics.

In fact, someone (I forget who, possibly a character in a movie) made an interesting observation whilst standing by the Hudson River looking over at the Manhattan skyline - he said that pretty much the whole thing has been designed, bit by bit, by the driving force of the male pursuit of sex and genetic propagation: that it's one big agglomeration of peacocks' tails.
Men are generally more interested in status, and will regularly invest time and energy in pursuits that are traded off for many of life's other rich tapestries of experience. There is a lot more to this complex subject, from both sides (obviously!!) - but the myopic narrative peddled by feminists that women are so unfairly underrepresented in the workplace, and the blinkered attempts above from representatives of leading companies trying to have a stab at the matter, are both inadequate to the task of explaining this.

With a plot of normal distribution (shaped like a bell curve) the data points tend to be close to the mean - so for example, in human height, most adult humans are between 4ft 5 and 6ft 5. But not everyone is; some people are 6ft 8 or 6ft 9, and they are mostly men. In other words, if you met someone on the street who is 6ft 8, it is overwhelmingly probable that it's going to be a man.

Similarly, if you heard that someone had been arrested for road rage, it is overwhelmingly likely to be a man. The differences between men and women in terms of aggression is not as large as the difference between the number of men and the number of women who are likely to be in prison for a violent crime, because at the furthest extreme end, the majority of the most violent people in society are male.

Like the above examples, you are going to find that, on average, the outliers in terms of individuals pursuing a status-driven career to the top of a FTSE 100 company are mostly men. Women are, on average, less likely to be driven by status (and more power to them for seeing through the superficialities of status-mongering in my view), and are therefore less likely to be in the boardroom.

That may change - and boardrooms may benefit hugely from having far more female representatives - but I doubt it will change that much, because many smart people do not want to climb greasy poles, work 70-80 hour weeks, spend very little time with family and friends, and scale their career so far upwards that they end up sacrificing many of life's other rewarding pleasures. It is very likely the case that more of these smart people are women than men.

A close analogy may be in the school playground, where all the testosterone-filled lumps are trying to court the relatively empty prestige of being a star on the football field, while all the smart kids are sitting on the outskirts devouring calculus, chemistry and Cervantes.

Further reading on the fallacy of the so-called 'unfair' gender pay gap:

Saturday, 2 June 2018

Ask The Philosophical Muser: Reader Response To Trump & Tariffs

A reader asks about my recent post on Trump's tariffs:

"I don't get everyone's blathering about Trump issuing tariffs to help our domestic steel industry. The President of the United States has an obligation to the steel workers in the US not to steel workers in foreign countries. That's one of the basis on which he was elected, to compensate the home economy for it's (sic) losses"

My response:

Even if we ignore the central point of what I wrote - that Americans themselves are better off without the tariffs (and heaven knows why we'd ignore it, but let's do it anyway for the moment) - one of the rules of thumbs I find generally reliable is that if you transplant a proposition to analogous real life examples and find it doesn't fly analogically, there is a good chance that your proposition doesn't fly in the case you want it to either.

I will offer some examples. So remember the proposition here is that Trump should compensate domestic workers from the threat of foreign competition. So I ask you to think of one other instance in real life where we would countenance such an idea as a moral or rational equivalent.

When Tesco opens a superstore in a nearby town, we don't have an obligation to compensation the local high street businesses. When Amazon can deliver CDs and books to your door at the cheapest rate, we have no obligation to compensate HMV and Waterstones. When average looking Dave loses out to handsome Mike in the pursuit of Kerry's affections, we don't think they have an obligation to compensate Dave for remaining single. When more and more women began to enter the labour market, no one thinks that the government should have compensated men for the increased competition for their jobs. The list goes on.

Similarly, when Americans are made better off by foreign competition in the form of lower consumer costs, the fact that no analogous compensatory situation exists anywhere else in society speaks volumes about its absurdity. Foreign competition should no more be punished for entering the US economy and making Americans better off than increased competition from women, online traders and large supermarkets should be punished for making people better off.

Finally, as I said in a Facebook post in March, when Trump was first tweeting threats about tariffs against the EU:

"Trade is not like a race where you try to untie the laces of fellow competitors in order to make it harder for them to cross the line. In trade deals, the best situation for all the runners is everyone crossing the line together with their laces intact: that is, by all participants removing tariffs and subsidies. Trying to partake in a trade war with other countries by imposing tariffs is like trying to slow them down in a race by tying your own laces to theirs - you both become inhibited in trying to run."

And here is what so many don't understand about trade that they would understand with absolute clarity if it were a running race: even if others wish to run with their laces untied, you are still better off if you run with yours tied up, and encourage others to tie up their own laces and join you over the finish line.

Monday, 21 May 2018

Getting An Argument Entirely Backwards (And Why Falling Wages Are A Good Thing Overall)

Sonia Sadha does a brilliant job of getting her argument about pensions and risk entirely the wrong way round. She tells us that:

"We need to ask hard questions about why young people are being expected to bear increasing amounts of individual risk. The obvious example is pensions. Gone are the days when companies pledged to pay retired workers a guaranteed income for the rest of their lives; today’s workers must, instead, save into an individual pot that must last."

I'm sure the irony will be lost on most people associated with The Guardian - but this, of course, from a paper whose columnists continually bleat on about the plight of falling wages. To understand why this article is misjudged, you need to understand why falling wages are not the bogie that most think they are.

But before we get to that, it's a shame Sonia Sadha doesn't seem to grasp that pensions are not separate from the price of labour - they are deferred labour costs bundled into the same overall package as pay. Whether the pay/pension costs to the firm are at a ratio of 90/10, 80/20 or 70/30, they are still total costs that a business must factor into its overall balance sheet.

In an age where firms are forced to pay a minimum wage, which puts the value of labour out of whack with the price of labour, and then consequently only serves to increase both unemployment and consumer prices* - and in an age where people are living longer and longer, making pensions prohibitively expensive - the reality is, more and more employees are not worth the combined costs to their employer of their pay and a lengthy pension payment plan.

Because your pension is deferred pay, the only way for many employers to keep up the kind of pension commitments that were prominent when we didn't live so long would be to increase the pension to pay ratio, which would mean cutting pay to increase pension duration. And that's a policy you will never see a Guardian columnist endorse. What Sonia Sadha sees as the ignominy of apparently "forcing individuals to bear more risk" is really just a simple case of arithmetic.

Why falling wages are a good thing
Now, about falling wages: falling wages are, in net terms, a good thing for an economy overall. Obviously they are bad for the people whose wages have fallen - but falling wages are a transfer from workers to employers (and indirectly, to consumers) - there is no net negative externality, it is merely a distributional effect.

But there are several additional positive elements to lower wages. People tend to confuse economic growth and job creation, but most of the real benefits of economic progress come from saving labour, not increasing its cost. Lower wages means it costs less to produce something, which is a similar benefit to finding a new efficiency or a new technological innovation.

On top of technology improving living standards, and consumers having goods and services more cheaply, there is a third positive to falling wages in places like the UK and USA: such as boosts for our domestic economy (not to mention poorer people in the developing world having more money when home grown inefficiencies are outsourced). This is to do with the ratio of total labour costs to real output, and how the decreasing wage you need to pay employees to produce one unit of output increases the likelihood of keeping it in this country - another thing The Guardian writers have always claimed to like.

* This is basic Econ 101 that politicians love to ignore. The supply and demand curves of labour are factors that mustn't be overlooked, because employment and wages are always in a trade off tension. Price floors like a state-imposed minimum wage artificially hold wages higher than their marginal value, which means when economic supply and demand forces are trying to push wages down, something has got to give with a minimum wage law, and it's usually unemployment and increased prices for consumers.  





Sunday, 20 May 2018

Writer's Update

I know, I know - I've been quiet recently in blogosphere: a few big things have shaken up my life recently - moving house, my father's dementia, and the death of a much loved friend being the three biggest things. Under these conditions, writing has had to take a back seat. For anyone interested in what I'm chipping away at, blogging is only a tiny part of the list of projects I have on the go, and these are the biggest projects - what I like to call bestsellers that nobody has yet read!

An epistolary of wisdom and general philosophies for life

A book about God, maths and the universe

A book on morality

A book about love

A comprehensive book on economics

A book about Christianity called The Genius of the Invisible God

A book about Christianity called The Economics of being a Christian

A book called Marvin The Supercomputer, based on a massive thought experiment

A book on psychology and human behaviour

A book on fundamentalism ,cults and other dangerous in-group tribalisms

A couple (maybe three) of books of essays comprising the material that doesn't belong in any of the above

I also want to write a few plays, and I have what I think is a good idea for a TV drama screenplay too - a drama about different types of genius.

The danger is, life is so short that you really need to make these projects come to pass - make them happen!! - and this is where you need a rigorous 'To do' list structure and self-discipline in not getting sidetracked.

As I only write non-fiction, I am not going to be very edifying on the literary mechanics that operate within the author's creative engine (for that you can go to my best friend, author and creative writing lecturer Ian Nettleton).

I'm also not going to be much of a mentor to anyone on the art of self-discipline within creativity - as I have almost none. My only job in the past couple of years has been to edit the books I listed above. But instead I can't turn off my gushing tap for producing new stuff (blogs, essays, contributions to debates, fresh projects, you name it) - which means I'm in danger of always having astronomically more to do than I ever get done. It often feels like trying to mop up the water from the kitchen floor after a pipe has burst. Someone needs to temporarily turn me off at the mains.

What should help is that I now work a compressed fortnight, which means I have every other Monday off. I've decided to guard that time in order to focus on my projects, and hopefully make better progress in the coming year. Additionally, I am going to be better at writing targets for myself, as a better way of putting tangible goals on paper and measuring progress more rigorously.

Monday, 14 May 2018

The Strange Yearning For UK Manufacturing

One of the peculiar things about the current political and economic landscape is politicians' preoccupation with the UK manufacturing industry, and how important it apparently is to reconstitute some of our past manufacturing glories. It's true we once had past dominance in the manufacturing industries (along with about a dozen other leading countries), but just because people of past generations have been accustomed to something doesn't mean things should always stay the same.

When making things was the primary way to earn a living, and physical labour and extracting raw materials provided the substrate for big business, it was understandable that people were emotionally wedded to Britain's place in the global manufacturing industry. For most, their living depended on it. But the world has changed a lot.
Nowadays other nations have both the absolute and comparative advantage in manufacturing goods, and we have both the absolute and comparative advantage in providing services. IT, design, marketing, consultation, financial, legal, real estate, health care and advertising are huge industrial job creators, as are restaurants, hotels, bars and holiday services. These are based more on technical and financial assistance, leisure, entertainment, health and well-being than on physical labour and making things with raw materials.

Manufacturing things simply isn’t the source of high value, high wages or big profits like it was in the past. In fact, the UK is made better off when we have a manufacturing trade deficit with countries than can produce goods cheaper and more efficiently than we can.
Not only is it an oddity how politicians hanker for manufacturing, and galvanise people into believing that that is what they should be shouting for; it is equally odd how so many people don't understand that when other countries have the manufacturing advantage over us in terms of cheapness, quality and efficiency, it is a good thing that we buy our stuff from them, and not produce it ourselves.

Wednesday, 4 April 2018

Zero Hour Foolishness

In recent years, many politicians and social commentators have bemoaned zero hour contracts, believing them to be a scourge on society, and calling for them to be outlawed. Outlawing zero hour contracts because a minority of people would prefer securer employment is about as dim-witted as outlawing night shifts because the majority of people prefer to work in the daytime.

The main question these politicians and social commentators never consider asking is why they think they know the zero hours contract situation better than the agents in question – where by ‘agents in question’ I mean the entirety of society’s revealed preferences.

There are primarily three groups in the zero hours contract situation:

1) Employers for whom zero hour contracts are a benefit

2) Employees for whom zero hour contracts are a benefit

3) Employees for whom zero hour contracts are not a benefit

The reason there is not a fourth group - Employers for whom zero hour contracts are not a benefit – is because such a group would not offer zero hour contracts in the first place if they conferred no benefits on the firm.

Last I heard, out of the 3 groups, groups 1 and 2 make up a huge majority – that is, most people (employers and employees) involved in a zero hour contract agreement find it beneficial. So effectively what our illiberal foes above wish to do is outlaw something that a majority find beneficial for the appeasement of a minority who simply prefer to have more regular and stable contracts.

I won't get into what should be the obvious reasons why even a total ban on zero hour contracts won't make current unstable contracts more stable; nor will I get into why such a completely unnecessary and oppressive law would cause harm to groups 1 and 2 by prohibiting a mutually beneficial relationship to which they are both tacit signatories.

But what I will say is - it should be evident that there are plenty of reasons why people might be on zero hour contracts, yet simultaneously no reason to ban them. It’s one of the biggest mistakes people make, acting to represent a small group without understanding all the conditions under which those outcomes came about.

For the vast majority, the labour market of supply and demand involves a mutual allocation of resources (work and wages) far beyond the scope of any top-down management, and with far more efficiency than arbitrarily introduced state-meddling can achieve. Telling employers they must offer a regular contact based on the whim of political ideologues can only harm the qualities of mutually allocated resources.

Here's what's being missed with alarming short-sightedness. Yes, some people struggle on zero hours - the part of the labour market that contains much of this kind of work is often insecure, unstable and volatile anyway - but the notion that outlawing it will make things better is moonshine.

Here's the key point. The labour market of supply and demand is dictated by the numerous price signals that generate all kinds of information about the value of labour, the supply of services, length of contracts, and so forth. A dentist can work in the same place for 15 years doing a similar number of hours each day. A sub-contracted painter and decorator can work at dozens of places in that time, with varying lengths of contract. Selling labour is not homogenous, it is heterogeneous - and you're just not going to be able enforce better pay or more stability without damaging a whole sub-section of people in that labour market.

It's common to think of zero hour contracts only in terms of employees, and to imagine most employers to be cold, uncaring exploiters. But it distorts the true reality. Economic policies affect employers as well as employees - and employers are the essential providers in this equation. Make a law that helps low earners and you hinder another group (usually low-skilled employers but also other low earners). Make a law that helps tenants and you hurt another group (usually landlords). Make a law that purports to help a minority on zero hour contracts and you hurt pretty much everyone else, while probably robbing many others of casual work.

Employers have lots to consider when they take on people. They have to make forecasts about the future; they have to consider market fluctuations; they have to consider what they should invest; and they have to consider which future state-interference will hamstring them. Zero hour contracts are sometimes opportunities to exploit, but they are mostly opportunities to reduce risk in a frequently unstable market, and create lots of short-term employment that most employees value.

Think who the beneficiaries of zero hour contracts might be - students, single parents, those looking for additional employment to top up their main job, and those with multiple part time jobs. The ability to work flexibly as and when they want is a very beneficial thing for them. Those who look to ruin theirs and their employers' flexibility are narrow and myopic.

Economic growth and competition are the main vehicles that will reduce zero hour contracts for those not happy with them. The reason being, job growth increases the necessity for employee stability, which will only diminish the allure of zero hour contracts for both employers and employees, because employers are going to want stability in their personnel.

Moreover, as unemployment rates fall and job creation continues to take place, greater power is transferred to jobseekers, which places selection pressure on firms offering less-desirable contracts. Ironically, proposals to ban zero hour contracts, or impose arbitrary restrictions that have been plucked out of the air, will uproot some of the stability in the market, which will more than likely go on to have a cobra effect type scenario - the very opposite of what we are told they are trying to do.