Why The Poor Should Be Thankful To The Rich

 

If you’ve been paying attention in the past 150 years, you’ll know that as a ratio of total beliefs to correct ones, the left gets most things wrong when it comes to economics, capitalism, socialism, labour, wealth, inequality, and the like. To see why, let’s construct a caricature of a leftist - an extreme one who believes all the false things they are told, and campaigns for a so-called fairer world. Let’s call him Torquil. Torquil believes the system is grossly unfair; that the workers are producing all the wealth for the rich capitalists; that the poorest people in the UK are poor because they have been unjustly disadvantaged; that if we had complete equality of opportunity then almost everyone would do about as well as each other; that there is a ‘fair’ hourly wage based on how hard people work and how much we symbolically value those roles; and so on. Every single one of those propositions is almost entirely wrong - and where it is fractionally right, it is nearly always the fault of political interference.

The reality is this: except for the aforementioned political interference, nearly all jobs make important contributions to society - and in accordance with market power, bargaining, sensible regulation, and alongside fluid information, each individual is paid according to their marginal product (that is, for the value they create) in a supply and demand economy. Except for illegal or unsavoury activity, the money you have demonstrates how much productivity has been created. Low income individuals are on low incomes due to lower productivity, which is usually due to lack of useful skills or knowledge, or a lack of motivation, ingenuity and responsibility. And there is an inequality of talent, effort, good choices, industriousness, luck, ambition, intelligence, creativity, conscientiousness, health, positive influences, and good life circumstances.

In a nutshell, the economic right is largely correct about these matters, and the economic left is largely incorrect.

No worker can do what they do on their own - they rely on the ingenuity, risk and investment of the company owners, and the teams around them. And the more productive the worker, the harder it is to replace them - which means at an individual level each one of them is more valuable than each individual worker they employ. If, for example, a chief executive can make his 2500 employees just 0.5% more productive, he is 12.5 times as productive as a single employee. You might find this statement uncomfortable (though it is true), but in most cases in the labour market, if someone is on a low hourly income they are either unwilling to work hard enough to earn more (sometimes for good reason), unable to earn more, or at the start or end of their career, where they will go on to earn more, or used to earn more but are now winding down. There are practically zero cases where individuals wholly unjustly earn a low hourly income. There are one or two exceptions - but the rule of thumb is that people are paid according to their marginal product, and most people in the private sector (and indirectly, the public sector too) earn their marginal product because of those richer than them making capital investments.

And the rich pay for the majority of the public services too, and the lowest quintile pay for a small fraction of them. Last time I checked, the top 1% of earners in the UK paid a whopping 28% of all income tax; the top 10% paid 60% of all income tax; and the top 50% paid about 90% of all income tax. It’s also true that those on low incomes contribute less in absolute terms, but proportionally more of their income, as the poorest 20% pay about 38–48% of their income in taxes. But that is more to do with ratios and arithmetic scaling than unfairness. And any sociological focus on data, causes, and impacts would show that crime rates are higher in poorer areas, the poor require more public services in health, education, housing, social services and welfare, have lower civic participation, and so forth.

Let me be crystal clear, I am not making any accusations here or looking to blame anyone for being poor or on a low income - there are countless circumstances at play. This post is simply to show the utter absurdity of this constant narrative by the left that the poor should be aggrieved at the rich, or feel hard done by them. It’s almost the opposite of the truth. Modern prosperity depends on both entrepreneurs who take risks and workers who provide the effort and skill to make those risks pay off, sure. But the ratio of wealth creation, productivity, and increased living standards falls so heavily in favour of the rich’s influence, that the poor, far from resenting them, should be thanking them in recognition that much of modern prosperity - the jobs, technology, and material comfort we enjoy - exists because of their innovation and risk-taking.

Why Socialism Is Irresponsible

It's a shame that all the main parties competing for your vote are socialist, because to understand human beings is to understand that socialism doesn’t work; and the reason it doesn’t work is because it gets its fundamentals wrong. Just so we’re clear, socialism is the view that the means of production, distribution, and exchange should be owned or heavily regulated by the state. Of course, it has morphed into something that purports to be friendlier towards the individual, taking the Marxist principle “From each according to his ability, to each according to his needs” and using it as a conceptual lever to usher in state ownership and radical redistributive measures. But spraying perfume on raw sewage still doesn’t make it smell much better.

I’ve written for years about the fundamental problems with socialism (see side bar) – namely the way that capitalism is superior in the vast majority of ways, the perennial problem with top-down as being mostly inferior to bottom up, the fact that the people socialists purport to want to help are the ones hurt hardest by their policies, and the fact that the price system is better than the state at allocating resources.

But perhaps the even bigger issue is that socialism has a big contradiction at the heart of it, which goes largely unnoticed by the socialists. It encourages those behaving in a way that socialism claims to be against, and it penalises those behaving in a way that socialism claims to advocate.

To see why, let’s break down socialism’s most fundamental principle, “From each according to his ability, to each according to his needs”. Unfortunately, the big flaw is that the system rewards those who are behaving badly according to the values of the socialists themselves, and punishes those who are behaving rightly according to those same values. The “From each according to his ability” part means society functions best when people contribute to society in accordance with their ability to do so. This is a good thing; no quibbles there. The “to each according to his needs” part means people should receive help from society in accordance with how much they need it”. Most of us would agree that this is a good template for society – and one in which we do our best to help the first group thrive as much as possible, and the second group become part of the first group wherever possible.

The core problem at the heart of society, though, is that people are active agents with their own incentives, and people’s ‘according to their need’ is not simply a product of their environment as the socialist narrative holds - it is a lot to do with the decisions they make and the way they behave. By failing to acknowledge that people should be given credit for their positive contributions to society, and that people should also take responsibility and be accountable for their failure to contribute, the socialist model gets both things backwards. The socialist narrative treats those who contribute most as the enemy, and those who contribute least as the victim.

Don’t get me wrong – there are many vulnerable people who through no real fault of their own can’t contribute as much as others to society – and they should, of course, be the ones for whom the quality “to each according to his needs” should be most sympathetically administered. But, alas, there are many people who, through perverse incentives, bad decisions and wrong behaviour have made themselves part of the “to each according to his needs” group when they should be part of the “From each according to his ability” group. Socialism blindly treats this group as victims of a societal injustice, instead of as people who create greater dependency for themselves by their own behaviour.

Moreover, in the system that the socialist ideology ought to support – that those who can contribute more to society should be rewarded – the socialists then bemoan the natural outcome of this, which is that inequality increases, so they then claim an injustice based on the very principles their Marxist systems claims to advocate - that those who can contribute do so according ‘to their ability’. Socialism rewards those who are willing to be a burden to the economy, by treating them as the oppressed and taking money off others to give to them; and it penalises those who are willing to work hardest to make the most contributions to society by stigmatising them as oppressors who owe a debt to society in the form of supporting those who are willing to be a burden to society. It is a belief system with a big contradiction at the heart.

Rational Irrationality

 

The economist Bryan Caplan popularised the idea of rational irrationality, based on two types of rationality; epistemic rationality and instrumental rationality. Epistemic rationality means doing your best to seek the truth and assent to facts, and instrumental rationality means adopting a strategy to achieve certain goals (some of which may make truthseeking appear inconvenient). Caplan’s rational irrationality posits the idea that an individual could be epistemologically irrational to achieve instrumental rationality. If holding a particular belief is convenient for your aims - perhaps for tribal, social, or cultural reasons, or for mere personal expedience - and the marginal cost of falsehood is low to you in this case, then you may have an incentive to be irrational on so-called rational grounds.

There is a demand curve for rationality and irrationality, and ascertaining the steepness of the demand curve is like asking whether incurring a cost for being wrong will be sufficiently bad to engender deeper personal negativity. Measuring the slope of the demand curve for irrationality is equivalent to measuring the deterrent effect of the cost of wrongness – and when the cost of wrongness is low, the individual has higher demand for it. If, for whatever personal reason, the cost of being wrong is especially low, then you can find yourself with an absurd demand for irrationality if it provides a social incentive or a cushion for areas of discomfort in your life.

There are many areas of life where rational irrationality is prominent, especially in some political and some religious beliefs. It appears so frequently in political and religious beliefs because they are the beliefs that often come with the most familial, cultural and tribal duress, and that impose the fewest costs on the individual if they lower their truthseeking and cognitive standards in order to minimise conflict and retain favour and acceptance in the in-group.

Let me be clear, I am explaining the cause of rational irrationality – I am certainly not advocating it, nor suggesting we let ourselves off lightly if we compromise truthseeking with decreased cognitive standards. In most cases, it will do us no good in the end.

Perhaps the viewpoint that best appeals to individuals for reasons other than epistemic rationality is socialism. I think it’s principally for three reasons:

1) Economics takes a lot of effort to learn and understand, and not putting in the time and effort to learn it is a much easier path, especially as being ignorant about it does not stem the flow of people’s willingness to opine about it. It is not really possible to become competent at economics, strive to tell the truth, and still say the things most of our politicians say on a daily basis.

2) Socialism enables people to channel their resentment of the rich into a virtue signalling charade to express consternation for the poor, and make themselves feel just, noble and virtuous. I suspect most socialists do not really care deeply about the poor, because if they did, they would not espouse so much ill-informed economics that makes the poor worst off of all (this is one of the big contradictions at the heart of socialism).

3) Being on the left tends to create deeper social bonds than on the right, because the proposed fight for justice and inequality, and being spokespeople for the underdog, is often quite a unifying phenomenon.

Consequently, then, I believe that being a socialist isn't really about championing redistributionist policies for the poor (if it were, the socialists would be espousing more market-friendliness) - it is about tribal affiliations and virtue signalling and envy against those who have qualities that the socialists lack.

It’s also the case, I think, that people don't tend to work out what they believe and join the political party that most closely identifies with those beliefs - the causality is usually the opposite of what people think: that is, the cart of party politics usually gets there before the horse of political beliefs. We do not live in a society full of ultra-rational agents. People prefer to believe what they think will enable them to fit into the particular group that will benefit them most.  

Socialists Are As Capitalist As Capitalists

One of the preposterous things about the anti-capitalist brigade is that, whatever form of leftism is being espoused, they still get to enjoy all the benefits of capitalism that the capitalists enjoy. The anti-capitalists are capitalists in virtually every way imaginable, except, ironically, when they tell us they want to help kill the capitalism that has bestowed such an enriched way of life upon them. Leftists who claim to hate capitalism are like swimmers who claim to hate buoyancy.

So, on what basis do I claim that leftists are really capitalists? Partly on the observation that the incentives and the rules of growth and progress that govern the free market also govern their consumption habits, their value structure, their logic and their revealed preferences. Partly on the basis that they strive to make their lives better and more secure and more materially prosperous in the way that resembles the market system. Partly on the basis that they seem more content being better off than worse off. Partly on the basis that they act in ways that make their lives better off in the same way that capitalism is the aggregation of people acting in ways that make their lives better off. Partly because most of them bemoan the wealth of the rich, yet exhibit consumption habits that increase the wealth of the rich. Partly because almost no leftist has ever protested against the rich capitalist country they live in by leaving and moving to a poorer socialist country. The list goes on.

When I see people working hard, trying to provide for their families, tying to innovate, trying to beat the competition (for jobs, for goods, for services), enjoying the fruits of their labour, undertaking mutually beneficial transactions with people of different skills, knowledge, backgrounds, ethnicity, culture and education - all of which reflect the fundamental benefits of capitalism over the past few thousand years, and especially the past few hundred - I can feel pretty confident that we can take their actions as indication of their values and their priorities. However, when I see people shouting in the streets with leftist placards, or blocking the roads, or spilling orange paint during sports events, it's much less obvious whether they are motivated by a genuine desire to do good, or by perverse incentives, personal malice, or as victims of a mass social contagion that brainwashes their young minds.

Moreover, the person actively engaged in the realities of the market is much more likely to have a balanced view of the arguments than the person who just sees bad in capitalism wherever they go. And the person with the greater stake in the success of the market's qualities is likely to have more self-determination than the person who just wants to protest its existence from the outside - and is therefore far more likely to have weighed up the realities of trade and competition. The anti-capitalists want to have their cake while telling everyone else how much they hate cake; whereas the capitalists know that if they eat a slice of cake, producers in the market will have to work to produce more cake, and consumers will have to work hard to purchase that cake. I know which group I'd trust to offer a reliable critique of the situation.

Not only are socialists way more capitalist than they are socialist - in fact, they are only socialist because they are capitalist (because capitalism provides all the resources for socialism).

Good Cop, Bad Cop Economics: Bad Cop

For some of you this will sting a bit, but it has needed saying for a while now. It is you, the left, that stand accused as being the principal cause of most of the economic problems in your home country. You are largely to blame for the state of the NHS, for the problems with social care, for the high unemployment levels in the under 25s, for the fact that too many people are doing university degrees, for the housing shortage, for much of the decline of UK industry, even for the rise in inequality in this country. Moreover, you are also largely to blame for Donald Trump, for Brexit, and for the rise of far right groups in the UK and across Europe.

Here is why you are to blame: your combination of wilful naiveté and yet strong opinions about the things mentioned above helps encourage the people that govern us to adopt all manner of foolishness on the basis that they think you will throw them out of office if they don't acquiesce. For decades you have been complicit in creating a political climate based on nonsensical arguments, shoddy counterfactuals and lazy myopia - fervently endorsing ideas and policies that are either based on factual misinformation, poor reasoning or idly choosing to ignore or overlook large swathes of the population that feel the costs of your decisions.

Take the most obvious case in point - the NHS. You have for years treated it like a sacred religion, and forced politicians to live with the lie that it can be sustained in the same way it was for the first four decades of its existence. Your belligerent demands for it to be safeguarded from proper market-based resource allocation has pressured politicians to ignore the supply and demand crisis, the costing crisis, and the fact that our living longer, our increased aging population, the increasing number of diagnoses and the increasing technological scope for medical advancement means it is no longer operating under the same framework under which it operated a few decades ago.

You have created this problem, by making politicians so terrified to respond to these realities that instead all they can do is resort to pathetic party political tit-for-tat squabbling about who puts more money in to the NHS and under whose leadership it would be less worse off. You have left them feeling like they have no option but to behave this way.

There are plenty of other cases where you have done something similar. For decades you have applied social duress on our politicians and made them believe that the only chance they have of carving out a political career is if they publically endorse a whole menu of economic foolishness that satisfies your beliefs. Where there is inequality, and people struggling to make ends meet, people struggling to find work, people in developing countries struggling to enter the competitive global marketplace, and people struggling to pay their rent or being able to afford to live in big cities - you must take a lot of responsibility for these things, because the truth is, the government you have been complicit in fattening up is responsible for pretty much all of these problems (and that is no exaggeration).

You have demanded that the political institutions that put up barriers to free trade become ever-bigger and more powerful; you have pressurised politicians to perpetuate facile price floors like the minimum wage; you have made more and more voracious demands on the earnings of the nation's most prodigious innovators and job creators; you have intransigently peddled the long-standing fairytale that the answer to most of the nation's problems are to be solved with higher taxation and more public sector involvement in our industries; and you have repeatedly promoted the economically toxic policy of domestic subsidies and the bailing out of financially deteriorating businesses and industries.

In short, you have pressurised the politicians of all parties into normalising bad policies - policies that increase unemployment and make it harder for the unemployed to obtain work; policies that stunt job creation; policies that make the cost of living higher for ordinary working people; policies that stifle growth and dissuade outside investors; policies that keeps regions in industrial atrophy; and policies that makes vital public services like health far more vulnerable to financial crises than they need to be.

For decades you have insisted on injudicious political ideas, and then demanded that the only people fit for governance are people who will enforce these ideas. And an equally bad (arguably worse) knock-on effect of this is that most of you let politicians get away with not having to proficiently justify their policies at a level beyond the superficially inane. You will almost never see a politician under even the slightest bit of pressure to admit the costs of a policy as well as the benefits, nor even acknowledge that most policies profit a small proportion of the population at the expense of a larger (unconsidered) group.

How preposterous it is that enshrined in our cultural climate is the habitual dismissal of majority groups affected by a policy, and the normalisation of anaemic economic arguments. And how sad that the politicians that govern us have to survive on spin, on popularity-mongering and by forever being afraid to admit their mistakes, or of having a public change of mind, or of introducing a prudent policy if it's unpopular.

You have played a big part in creating this monster and the concomitant lefty social commentators and politicians that feed on its body lice. And this needs to be at the forefront of your mind every time you open a paper or turn on the TV and see what you think is an injustice, or a group of people struggling to find work or live as comfortably as they could be. Most of the things you complain about and strive to fight against are creations of your own making. You are like Geppetto smashing up Pinocchio with a hammer, or like Victor Frankenstein taking an axe to the monster you've spent decades creating.

Fear not, though - the next Blog post that will be following this Bad Cop offering will be the Good Cop approach to remedying all that's wrong as per the above criticisms. I will offer a solution to how all this can be put right with a pretty radical but effective overhaul of our current framework.

Just When It Seemed Socialism Couldn't Get Any Stupider...

According to Bernie Sanders' office, he's keen to introduce a new legislation that would:

"Create a 100-percent tax on large employers equal to the amount of federal benefits that the employers’ low-wage workers receive. For instance, if an Amazon employee gets $300 in food stamps, Amazon would be taxed $300."

In the mind of raving simpletons like Bernie Sanders, nothing could be more rational than this idea. Those nasty billionaires like Jeff Bezos get richer and richer, while ordinary workers rely on taxpayer-funded programs such as food stamps, Medicaid and subsidised housing - so the obvious solution is to force the likes of Bezos to pick up the bill for this disparity.

Like most socialist ideas, it suffers from the stupidity of not understanding knock-on effects, and how legislation changes incentives to society's detriment. These people claim to be on the side of the poor - but that's just fantasy: they must despise the poor, given the repeated efforts they make to ensure life is more difficult for them.

Let me tell you what this legislation will achieve. It will make it harder for poorer people to find work - which is a real shame, because work is far and away the best route out of economic hardship. And given that it's the big firms that give the most work to poor people and lower-skilled workers, this legislation is going to cause a huge ripple in terms of foregone opportunities. Work is not a perfect solution to being poor, but it's the best we have by a long way.

A legislation that penalises firms for giving work to poor people will ensure that less work and fewer opportunities are given to poor people. Someone who really needs a job because she has dependents and costs society more in welfare is now less likely to be given a job next to someone who needs the job far less, doesn't have dependents, and costs society less in welfare. With friends like Bernie on their side, who needs enemies?

I'll Say One Thing For Corbyn: Thanks To Him I'm Never Short Of Blog Material

Global trade is the biggest cause of material progression the world has ever seen. When we Brits buy goods produced on foreign soils, we gain hugely, as do the foreigners that produce these goods. These are what we call ‘mutually beneficial transactions’. No surprise then that the perennially misinformed Jeremy Corbyn wants to upset this with his own hair-brained idea:

“A Labour government would seek to ensure we build things here that for too long have been built abroad", says Corbyn.

We’ve repeatedly talked about why this idea is both fatuously short-sighted, and damaging to the people he’s trying to help (most notably low income Brits) - but in case there are any readers who still haven’t grasped this, let me offer an analogy to higlight the utter buffoonery on display here. Just so we are clear what we are saying: Asserting that we Brits should buy home grown to make ourselves better off is logically equivalent to the reverse statement, that we must be worse off if we buy more from abroad than buying it domestically. If we are on the same page, now the analogy:

Suppose you get a job at Sainsbury’s, and you get paid 80% of your wages in cash and the other 20% in Sainsbury’s vouchers. Then imagine there’s a minister in charge of supermarkets who introduces a law prohibiting every Sainsbury’s worker from spending more than 25% of their vouchers. At the end of the year you’ve spent all the cash you want, you’ve spent your 25% voucher allocation, but you have in your drawer a stash of Sainsbury’s vouchers that the minister has made it illegal to spend. Has the minister done you a favour or not - ensuring you have a stash of vouchers you cannot spend? Almost everyone can see why the answer is ‘no’.

Let’s even assume he makes an attempt to rectify the situation by offering you a cash refund of 50% of the value of the vouchers. Has this helped? A little, but you are still in a much worse situation than if he let you spend all the vouchers you earn - or even better, if Sainsbury’s paid you your entire wages in cash and enabled you to spend it wherever you wanted. Making Brits buy home grown goods by restricting their ability to buy from abroad is equivalent to insisting that they are paid a proportion of their wages in vouchers that it is either illegal to spend, or less valuable than spending what they earn on the transactions that would confer the most benefits for them.

On the off chance that there's someone still following me who doesn't understand why socialists like Corbyn - and communists, young earth creationists, ethno-nationalists, for that matter - are missing the boat, let me articulate it in the following way. All subjects have experts: these experts have put in the hours over many years to master their subject. They know a lot more than the layperson - and therefore, when laypeople get into arguments with experts they invariably come off worse in the exchange.

Sometimes, especially in the social sciences, humanities, and philosophically intractable subjects, there are experts that disagree with other experts. That's why two experts that differ on, say, the extent to which we have free will, the nature of consciousness, or the nature of quantum theory can have very engaging discussions and still end up disagreeing. But it's relatively rare for a debate between an expert and a layperson to be engaging. This is because, by and large, the average layperson does not have the knowledge to match an expert on his or her subject of expertise. People who disagree with experts are usually far less informed, stubborn and so agenda-driven that they lack the basic ingress for rational persuasion.

So the people we mentioned - the socialists, communists, young earth creationists, ethno-nationalists, etc - are guilty of major solecisms against robust intellectual enquiry. Because, you see, you can guarantee that the experts with whom they disagree know a lot more about the subject than they do, have studied it for a lot longer, have lots more supporting information, have better access to facts, are more apprised of counterarguments, and are probably more intelligent and conscientious too. And yet despite all this, the average person, who knows comparatively little on the subject, thinks they are right and experts are wrong.

Now don't misunderstand, it always good to avoid complacency - and no one likes confounding so-called expert opinion and turning it on its head more than I do. But the vast majority of the departures from expert opinion from laypeople are hopelessly inadequate, and are simply based on lies and distortions of the truth. When you get people like Jeremy Corbyn and John McDonnell happy to promulgate ideas that history has consistently (by which I mean always) shown to be rationally, empirically and logically discredited - and which depart from the long-standing and robust body of expert opinion, we have to ask some serious questions about how we've created a society that lets them get away with it so easily.

Put The Scandinavian Myths To Bed Now

You can't very easily claim to be a serious thinking person if you have been taken in by the widely promulgated myth that Scandinavia is both:

a) Some kind of empirically demonstrable example of the success of socialism in action.

And:

b) What Jeremy Corbyn wants to create for the UK.

These contentions are so fatuous, that if they were a human being, they would be the illegitimate love child of Owen Jones and Angela Rayner. The reality is, every time the Scandinavian countries have weighed in too heavily in favour of socialistic models things have gone poorly - and every time they have weighed in heavily in favour of markets things have gone significantly better.

By and large, private individuals in Scandanavian countries have a relatively free rein in the means of production. Scandinavian countries do push the boat out a bit on welfare, but that is not the same as a Corbyn-esque command economy built on envy, price fixing and punitive confiscatory measures.

The much vaunted political aspects of social democracy that turn up in places like Norway, Sweden, Finland and Denmark are funded by everyone else's trade. To claim that Scandinavian social democracy is a good advert for socialism is a bit like claiming that opening bars and restaurants is a good advert for protection rackets.

Scandinavians embrace the fruits of the market as a means of providing welfare - it works in conjunction with markets, not in opposition to them. Scandinavian success comes in spite of a fattened up taxation system, not because of it. The fiscal redistribution policies happen because of flexible, lightly regulated markets and fairly substantial levels of economic freedom.   

For further reading, I recommend this. Here's a summary.

• Scandinavia’s success story predated the welfare state. Furthermore, Sweden began to fall behind as the state grew rapidly from the 1960s. Between 1870 and 1936, Sweden enjoyed the highest growth rate in the industrialised world. However, between 1936 and 2008, the growth rate was only 13th out of 28 industrialised nations. Between 1975 and the mid-1990s, Sweden dropped from being the 4th richest nation in the world to the 13th richest nation in the world.

• As late as 1960, tax revenues in the Nordic nations ranged between 25 per cent of GDP in Denmark to 32 per cent in Norway – similar to other developed countries. At the current time, Scandinavian countries are again no longer outliers when it comes to levels of government spending and taxation.

• The third-way radical social democratic era in Scandinavia, much admired by the left, only lasted from the early 1970s to the early 1990s. The rate of business formation during the third-way era was dreadful. In 2004, 38 of the 100 businesses with the highest revenues in Sweden had started as privately owned businesses within the country. Of these firms, just two had been formed after 1970. None of the 100 largest firms ranked by employment were founded within Sweden after 1970. Furthermore, between 1950 and 2000, although the Swedish population grew from 7 million to almost 9 million, net job creation in the private sector was close to zero.

• Scandinavia is often cited as having high life expectancy and good health outcomes in areas such as infant mortality. Again, this predates the expansion of the welfare state. In 1960, Norway had the highest life expectancy in the OECD, followed by Sweden, Iceland and Denmark in third, fourth and fifth positions. By 2005, the gap in life expectancy between Scandinavian countries and both the UK and the US had shrunk considerably. Iceland, with a moderately sized welfare sector, has over time outpaced the four major Scandinavian countries in terms of life expectancy and infant mortality.

• Scandinavia’s more equal societies also developed well before the welfare states expanded. Income inequality reduced dramatically during the last three decades of the 19th century and during the first half of the 20th century. Indeed, most of the shift towards greater equality happened before the introduction of a large public sector and high taxes.

• The development of Scandinavian welfare states has led to a deterioration in social capital. Despite the fact that Nordic nations are characterised by good health, only the Netherlands spends more on incapacity related unemployment than Scandinavian countries. A survey from 2001 showed that 44 per cent believed that it was acceptable to claim sickness benefits if they were dissatisfied with their working environment.

• Other studies have pointed to increases in sickness absence due to sporting events. For instance, absence among men due to sickness increased by 41 per cent during the 2002 football World Cup. These shifts in working norms have also been tracked in the World Value Survey. In the 1981–84 survey, 82 per cent of Swedes agreed with the statement ‘claiming government benefits to which you are not entitled is never justifiable’; in the 2010–14 survey, only 55 per cent of Swedes believed that it was never right to claim benefits to which they were not entitled.

• Another regrettable feature of Scandinavian countries is their difficulty in assimilating immigrants. Unemployment rates of immigrants with low education levels in Anglo-Saxon countries are generally equal to or lower than unemployment rates among natives with a similar educational background, whereas in Scandinavian countries they are much higher. In Scandinavian labour markets, even immigrants with high qualifications can struggle to find suitable employment. Highly educated immigrants in Finland and Sweden have an unemployment rate over 8 percentage points higher than native-born Finns and Swedes of a similar educational background. This compares with very similar employment rates between the two groups in Anglo-Saxon countries.

• The descendants of Scandinavian migrants in the US combine the high living standards of the US with the high levels of equality of Scandinavian countries. Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. It is true that poverty rates in Scandinavian countries are lower than in the US. However, the poverty rate among descendants of Nordic immigrants in the US today is half the average poverty rate of Americans – this has been a consistent finding for decades. In fact, Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated. This suggests that pre-existing cultural norms are responsible for the low levels of poverty among Scandinavians rather than Nordic welfare states.

• Many analyses of Scandinavian countries conflate correlation with causality. It is very clear that many of the desirable features of Scandinavian societies, such as low income inequality, low levels of poverty and high levels of economic growth, predated the development of the welfare state. It is equally clear that high levels of trust also predated the era of high government spending and taxation. All these indicators began to deteriorate after the expansion of the Scandinavian welfare states and the increase in taxes necessary to fund it.

There's No Uglier Sight Than Mobs Of People Devoid Of Perspective

There is no uglier sight in society today than young lefties, with the best standard of living of any group of human beings that have ever been alive, taking to the streets to splutter and moan about how indignant they are that free sweeties that someone else has to pay for are not being given to them in such plentiful quantities.

It is no coincidence that the majority of the Corbynistas are young people. Young people have no capital and often no job yet, so directly they pay none of the costs of redistributionist policies, but enjoy many of the benefits. They are also not as experienced in life, so haven't had the chance to develop a more informed worldview.

But there is another reason why they demand such economic foolishness from our politicians - they don't actually know how lucky they are, and have been born into a world in which the many riches we enjoy are not only just taken for granted, but have actually primed young people to expect more and more without really having a proper perspective of just how remarkable and incipient this economic enrichment for humans actually is.

Young people of today live under conditions that their grandparents would have found luxurious, and that their great-great-great-great grandparents wouldn't have even thought possible, and that most of the people that have ever lived in our 200,000 year history wouldn't have even been able to contemplate was possible - yet they still go around like spoiled brats complaining about how unfair and unequal society is.

Society has many tough elements, and it may be a quite ghastly place compared to our best utopian fantasies - but when juxtaposed with the reality of 99.9% of human history, we are in the period of a great enrichment that is, lest we forget, still in its infancy. By all means, let's speak out against things that are genuinely wrong in society, but for goodness' sake, please can the parents of these young lefties help rattle a sense of perspective into their parochial little minds?

The great irony
The great irony they need to be made to realise is that it is only because we have experienced such a progression explosion in the past 150 years that we even think in such terms of an improved standard of living and harbour expectations about material prosperity for all. Such is the incredible progress we have made, that we live our lives through a lens of expecting economic progress with a sense of entitlement that would be completely alien to anyone who lived prior to the Industrial Revolution.

And just a little further back, it just wouldn't have occurred to someone living in the time of Shakespeare to ask whether they were materially better off than their parents, because nobody really had any reason to think that humans could progress very much more than they had already - after all, for the 10,000 years prior to Shakespeare, progression, compared to what we know now, was occurring at the pace of a snail wading through treacle.

And you'll notice this is why the phenomenon occurs so readily in young people: the reason young people demand such a higher standard of living is because they have such a relatively high standard of living. Far fewer older people are likely to be on the streets exclaiming how tough today's standards of living are because they have had decades to appreciate just how much progress we and the rest of the world have made. Young people, on the other hand, have just taken exponential progress for granted, and are too often mincing around with their placards utterly devoid of just how incomprehensibly incredible their lifestyle would have been for their great-grandparents.  

Perhaps the best example that underpins what I'm saying is the widespread obsession people have with the so-called injustices of inequality (a subject on which I've blogged numerous times before). Yes we do have inequality, but as above, the main reason we have it is because we have so much human wealth, and because the economy is not a fixed pie, so people who provide lots of value for others can increase their wealth and make millions of others better off by doing so.

Inequality is actually a good problem; it's not something that people in Shakespeare's time would have had to worry about much because there wasn't anything like as much wealth to focus on. Nobody in the world today is poorer than they would have been in pretty much any other time in human history.

Finally, on top of not knowing just how remarkably prosperous their lives are, the other alarming thing I find about the young left is just how full of bile, hate and intolerance so many of them are. Most of them are not careful thinkers who have weighed up the arguments of both sides - they are chameleon-like reactionaries that have joined together as part of a mob mentality that detests the things that have made humans prosper and pulled us out of the quagmire of hardship and low life expectancy.

And while they are in this frame of mind, buoyed by a simpleton cult figure like Corbyn, and egged on by a Shadow Cabinet with about as much intellectual proficiency as a KFC 14 piece Bargain Bucket, heaven only knows what damage and economic stultification they are capable of inflicting on our society if they ever get into power.

 

 

Why There Is No Such Thing As The 'Centre Ground' Of Politics, And Never Has Been!

Jeremy Corbyn thinks the political mainstream has shifted to the left of centre, and that his brand of politics is going to be the barometer for many more disaffected voters in years to come. It's hard to say how accurate Corbyn's hypothesis is because there hasn't ever really been a political centre. At best, the mythical centre ground has been a kind of weighted average of a diverse range of socio-political views that encapsulate both left and right wing beliefs in both the social discourse and the economic discourse.

Here's how the myth of the centre gathered intellectual traction over the years. Because of all the left vs. right wing squabbling, many people have tried to claim themselves to be the more reasonable moderates that sit somewhere in between two extremes - in the proudly occupied 'centre ground' of politics. But it's just not true that the best position on most social and political issues lies somewhere in the middle - life is just not like that in most other areas of objective truth and empirical facts, and it's not like that in politics either (see here for further reading).

One doesn't adopt a middle position about whether it's fine to drop litter, or whether it's good to put diesel in a petrol engine, or whether it's wise to accept astrology as true, so why should anyone expect a middle position on subjects like abortion, same-sex marriage, price controls, assisted dying, environmental issues, the qualities of trade and the harms of retarding it? People have convicted opinions one way or the other - and the judgement about who is right and who is wrong is one for the intellect and the emotional intelligence.

There is not some kind of central ground comprising a reservoir of middle positions. The weighted average of socio-political views that make up our society is not like mixing blue, red, yellow, purple and green paint, it is more like a deep pool of blue, red, yellow, purple and green coloured balls. Consequently, when political parties try to win elections by appealing to the so-called centre ground, you know what they are really doing: they are trying to win a popularity contest a la carte by selling themselves as a weighted average of society's preferences, which is as illusory as it is empty (see here and here and here for further reading)

Given the foregoing, to what extent, then, is there a genuine appetite for hard socialism, and to what extent is Corbynmania merely an extreme cult of personality movement that has been allowed to get out of hand by a mob of credulous individuals?

  

To see why I think it's the latter, consider this hypothetical question: It's the eve of the Labour leadership contest in 2015, and Jeremy Corbyn is tragically murdered by a far right extremist. One of the other candidates (Andy Burnham, Yvette Cooper or Liz Kendall) becomes leader, and we have an alternative history in which there is no cult of personality developing around Corbyn, no huge influx of new party members signing up, no barmy shadow cabinet that wants to take Britain back to the economic plight of the 1970s - just a mainstream, unremarkable, business as usual Blairite leader that may or may not have gone on to win the next election.

I think it's pretty evident that under this scenario, without Corbyn, this mass proliferation of hardline socialism, the putrid sense of envy and entitlement from the young, and the vulgar and aggressive intolerance for people that disagree with them would not have become as mainstream as it has - it would have remained within the remit of the fringe lunatics who stand on street corners with sandwich boards declaring that "Capitalism is Dead".

The other main reason I suspect that the rise of hard socialism is really about a cult of personality is that this generation more than any other is a generation in which the anachronisms of Thomas Carlyle's Great Man theory - that history is written by the impact of a minority of charismatic and powerful men - have been well and truly put to bed.

If Corbynmania is an attempt to blow the dust off the outmoded idea that individual humans are good candidates for being put on pedestals - an idea that was already beginning to die alongside the likes of Saul Bellow, Philip Roth, Norman Mailer, Kingsley Amis and Harold Pinter - then the intellectual vacuity of the man and his ideas suggest very much that Corbynmania amounts to a personality cult where the leader's proclamations are uncritically and gullibly swallowed whole by a large group of people that are easily led and easily manipulated into some kind of mass hysteria of nonsense.

I Can See Why Socialism Would Be Attractive To A 12 Year Old

I saw a statistic from Thomas DiLorenzo that greatly concerned me. Apparently 43% of Americans under 30 view socialism more favourably than capitalism, and 69% of voters under 30 would vote for a socialist Presidential candidate. This is really disturbing and ought to horrify, probably about as much as it should horrify if a young earth creationist was lecturing in biology at Oxford University, or if an astrologer was appointed as a high school physics teacher.

Things are similar in the UK, with Corbynmania becoming an ever-proliferating personality cult based on the crass distortions and uncritical evaluations of its delusional leader. I've just listened to Corbyn's interview on this morning's Andrew Marr Show, where he is practiced in the art of making statements that are attractive to the credulous, and absurd to anyone with a smattering of intellectual curiosity.

I can well imagine being about 12 years old, and hearing positive political aspirations about making society more equal, paying people a 'fair wage' and 'investing' in our economy. But naïve ideas only survive in the heads of naïve people - and once the linguistic manipulation of these words is exposed, and once one develops even a sketchy understanding of the adverse effects that would occur through the introduction of Corbyn's policies, it becomes very easy to grow out of socialism, and somewhat alarming that there are so many young, so-called educated, worldly people that have not rejected it.

Socialism and its more aggressive cousin Communism have the most dreadfully tainted of histories - responsible for repeated legacies of dictatorships, mass killings, state-mandated theft, war crimes, environmental destruction, forced labour, famine, drastic food shortages, housing crises, mass unemployment, disease, totalitarianism, censorship, hyperinflation, poverty, and oppression.

One of the big mysteries of the present age is why so many otherwise intelligent people think that this disease of the mind is so laudable and fashionable - they would never point such approbation in the direction of starvation, mass unemployment and oppression, so why do they extol it so fervently when it goes by another name? They hate the symptoms but love the disease that causes those symptoms.

I think the explanation is fourfold. Firstly, they get fatted up by the lies and distortions of the propagandists; secondly, they think that what is being promised is medicine instead of poison; thirdly, they completely misunderstand and are ignorant of all the basic economics that would help them see the error of their thinking; and fourthly, they believe they are doing good, not bad, so their moral suasion pulls them in the direction of these falsehoods.

They have no realisation that the big things they desire: greater living standards for the poor, a cleaner more environmentally friendly planet, less divisiveness in society, better healthcare and social services, a more even distribution of power, more value for money, job creation for the unemployed and a more educated nation are all provided much more readily by markets than they are politicians. Moreover, with some irony the socialists don't realise that every good cause to which they cleave is paid for by the fruits of free market labour - it is trade and competition that produces the tracks on which the carriages of socialism can travel.

It's not just noteworthy how much socialists are actually unmindful capitalists - and how in just about everything they do they rely on something capitalism has provided. It's also noteworthy how the common tactic in cults like socialism, Marxism and young earth creationism is the tactic of proclaiming problems and proffering no solutions. Criticisms of capitalism and biology largely amount to spurious criticisms of the thing in question – they are almost wholly devoid of their own explanations, they are merely parasites that feed off the efficacy of their host organism. For example, read anyone from olden day Marx to modern day Ha-Joon Chang and you’ll find no theories of viable alternatives.

There is no mention of a system better than the system of a free market where decisions are made to create mutual value for buyer and seller. The anti-capitalist rhetoric fails at every basic reality-check, and offers nothing that gets close to matching Pareto’s principle that a nation will progress with economic growth and value if there is increased specialisation. That is, it makes no sense if nurses make their own uniforms or car mechanics grow their own vegetables – it is far better if individuals specialise in a particular skill and engender a free economy of diverse varieties to match the diverse varieties of human beings.

It amazes me how so many people still cling to absurd and counterfactual ideas about how the state over-wielding its influence is to be preferred over the prosperity of the free market and increase in trade. One of the main reasons it amazes me is because history furnishes us with repeated real life social experiments that confirm beyond any doubt that what causes increased prosperity and happier citizens is free trade, which is underpinned by competition.

If you want a large scale example of the effects of our being back into self-sufficiency from a comparably good market system, you have the collapse of the Roman Empire and the ushering in of the Dark Ages, where free trade was retarded by a mass de-urbanisation process that put us back a few rungs on the evolutionary ladder of social progression.

 

Or perhaps you could consider the alternative paths that Germany took after it was divided into West Germany, a parliamentary democracy that embraced the free market and went on to be the most prosperous economy in Europe, and East Germany, a Communist dictatorship that provided its citizens with economic stagnancy thanks to the Marxist-Leninist Soviet-led influence.

You may like to look at the difference between the dreadfully closed state hegemony of North Korea and the hugely prosperous market-embracing South Korea; or the difference between Hong Kong, one of the freest markets in the world, and other nearby Asian nations that didn’t follow suit. Or, if you get time, read this lovely little IEA article Latin America: A tale of two continents by Diego Zuluaga Laguna about South American prosperity that saw individual nation growth commensurate with each nation’s opening up of freer trade.

All of these examples share a vital piece of wisdom – more trade and less state equals better and more prosperous societies. It’s not rocket science. Why after repeated demonstrations of this does anyone with an ounce of realism still support the woefully misguided rhetoric from neo-socialists who still want to run on about all the things that retard progress, growth and well-being?

The reality is, with the rise of the personality cult of Corbynism we are seeing one of the biggest mass delusions this country has ever seen. And the only way to stop it is by the same method we use to stop childhood guilelessness; by growing up and growing out of it.  

* For additional consideration, if you want more things to read on this matter, in particular how the burden of regulation stultifies growth, Dan Mitchell from International Liberty is well informed about how it affects things like aggregate cost, job losses, time wasted, and foregone growth.

The Salty Cereal Fallacy

I probably have just about enough faith in humanity to believe that the hardline extremists of either political persuasion (left or right) will never gain enough traction to be highly influential. There is enough contemporary evidence to show that the majority see socialism and extreme nationalism as being fringe crackpot viewpoints comparable to the foolishness of astrology and Scientology.

I'm actually more perturbed by the centrists at the moment - the ones that are surreptitiously promoting a third way that looks to conflate the so-called best parts of socialism and the so-called best parts of capitalism. This is more of a concern because it falls foul of what I call the 'salty cereal fallacy', to which I will now introduce you.

Here's how it works. Those on the side of the market and human prosperity understand that cereal can be positively supplemented with fruit, nuts, raisins, or even a sprinkling of sugar in moderation. Socialists, on the other hand, are under the mistaken impression that adding salt to cereal will make it better - sometimes confusing salt with sugar, and sometimes believing that salt will actually improve the flavour of cereal.

Now it's easy for those on the side of the market and human prosperity to win the salt vs. sugar (fruit, nuts, etc) argument - so as a consequence, some on the left are now trying a centrist compromise. That is, cereal will be improved with a bit of sugar and some fruit, but it will be even tastier if we balance it out with some salt too.

To those who understand the qualities of eating cereal, this is an obvious fallacy. Losing the argument to put nothing but salt on your cereal doesn't mean that you can improve sugary cereal by adding sprinkling just a little salt on it - that's not how it works.

To take the analogy further - salt is, of course, good for many things - it brings out the flavour in savoury foods, and its hypertonic nature helps preserve food by inhibiting bacterial growth and stifling pathogens. In the analogy, cereal represents the financial economy and savoury foods represent the social economy - where the salt of socialism is bad for the former and good for the latter. As long as people get the benefits of sugar and salt right, and apply them to the right meals, things are ok.

I have some practical advice on how this can be achieved - it is built on understanding an important distinction between the market economy and the socio-personal economy. The principal distinction between the two is that the market economy has exchanges that are precisely recorded in terms of cash exchanged or increases/decreases in 1s and 0s on banks' computers, and the socio-personal economy has exchanges that are less-precisely recorded in terms of voluntary transactions for the good of one another.

The difference between their operations is notable too. In the financial economy the demand almost always exceeds the supply (of a limited range of labour, goods and services), because suppliers maintain their status differential (principally income) by increasing their prices or their supplies (or a combination of both), and endeavour to become top of the supplier tree by out-competing their competitors.  

Conversely, in the case of a socio-personal economy, the supply (of a nigh-on unbounded range of actions) almost always exceeds the demand, and suppliers who care enough about others maintain their status differential (primarily their character and reputation) by trying to summon up new ways to be a better citizen in society. Of course, a financial economy has a necessary social economy woven into it, because it’s hard to be successful in business without good character and reputation.

The salt of socialism is well suited to savoury foods, such as those instances in society where humans do nice things for one another in a non-contractual sense (such as inviting friends round for dinner). The sugar of the market economy is well suited to sweet foods, such as those instances where a financial transaction occurs that makes buyer and seller better off.

But interfering in those flavours by using salt or sugar inappropriately makes the meal worse not better. Just as it would be harmful and improper to offer friends financial payment for a meal they'd cooked for you by invitation, it is similarly harmful and improper to interfere with socialist principles in the complex price system that bootstraps our market economy.

Corbyn: What Integrity?

Jeremy Corbyn is not having a great week. Even if the claims that he walked past empty seats to sit on the floor of the Virgin train are untrue (doubtful, but possible), he has shown himself to be rather too much of a shameful opportunist by making that embarrassing short video. It was a silly pro-nationalisation plug that backfired on him.

But leaving that aside, I want to focus here on a bigger part of the Corbyn picture, because long before Train-Gate, I've been told several times that whatever faults Jeremy Corbyn has (for Americans, read Bernie Sanders) he is a man of strong, principled integrity, and that such a thing is a rare quality in politics. I would say such people are half right: yes, integrity is too rare in politics, but no, Jeremy Corbyn doesn't have it - not in my eyes. Here's why.

The socialistic ideas Corbyn has on the broad range of economic issues are not just naively idealistic, they are hopelessly inimical to logic and reason, and they have been discredited by economic expertise for as long as economics has been a formal subject.

Now for me there are only likely to be two explanations for how a man can get to the age of 66 and still believe all this guff: one is that he knows the full extent of his folly but isn't all that bothered about getting his facts right as there are lots of people in this country who think along the same lines (and perhaps more importantly, can keep him elected), and the other is that he genuinely still harbours an honest ignorance about how counterfactual and damaging his policies would be if they were ever implemented.

To be perfectly honest, I've no idea which it is (maybe a mix of both) because both positions are anathema to me. That is to say, I couldn't bear to be so cognitively dissonant that I could hold views I knew deep down to be wrong just to stay in my job or obtain popularity; and I couldn't bear to exist in a state of mind in which I hadn't thoroughly got to grips with facts and truths central to my vocation.

I suppose the extent to which either of the above is true is something only Corbyn knows. But either way, it ought to scream out at us that whichever it is, the case for Jeremy Corbyn being a man of 'principled integrity' must fall flat on its backside.

For I see no principled integrity in knowing the full extent of one's folly yet not bothering to live with values consistent with the correction of that folly, and I see very little integrity in not properly researching the economic arguments, logic and reasoning that so easily expose his ideas as being harmful to the economy, to growth and to the increased prosperity of others in poorer nations too. The fixed pie fallacy, the free lunch fallacy, the 'seen and unseen' fallacies, the failure to understand the damage of price fixing, excessive taxation - you name it, Corbyn falls for it.

So I'm afraid I cannot go along with the idea that Corbyn, and people like the London mayor Sadiq Khan, and the rest of Corbyn's economically illiterate shadow cabinet are people with principled integrity, because for whatever reason they continue to persist with damaging ideas and foolish views about reality.

It's not all that different to how a biologist might feel about a young earth creationist or an astronomer might feel about an astrologer - they may concede that such people believe they have good intentions, and are often quite likeable personality-wise, but there is very little integrity in being the kind of people forever trying to give credit to long-standing discredited views when it is so easy to pick up a few text books and see the folly for themselves.

And by the way, if you're going to try to tell me that perhaps many of them have already studied this subject and simply arrived at their current conclusions on the basis of that learning, then that doesn't let them off the hook one bit, for me - it merely confirms that they are either incapable of learning the basics, or that they have a personal agenda that overrides the facts and truths in front of them.

And this brings me to my last point. Given that the relatively simple fact that competition and free trade are the biggest drivers of widespread prosperity, there must be one heck of an agenda with the likes of Corbyn as he consistently champions policies that make those things less conducive to fruition. Despite developing a reputation to the contrary as the saintly socialist saviour with real principles and integrity, why is he doing everything he can to implement policies that make the less fortunate even worse off? Is it perhaps that people on the hard left get so much of a buzz championing the underdog that they develop a saviour complex - and perhaps even subconsciously relish keeping the poor in their state because it keeps alive their raison d'etre?

You see, it's no small irony that not only is it the ability to trade that most efficiently lifts people out of poverty and drives improved living conditions for everyone, it's that when people do become more economically prosperous it is then that they are most likely to help others. In other words, free trade doesn't just help Jack and Jill, it helps Jack and Jill help Tom, Dick and Betty too. Someone with barely enough food to survive is less well equipped to help others thrive. On the other hand, the average mother in somewhere wealthy like the UK or USA often has the economic security to help others in the community, particularly when they retire or if they work part time.

And as the nation in question gets wealthier, the narrative of the socialist saviour becomes even more outmoded, to the point that they can only keep up the lie by creating new fatuous subplots, like the rich are making the poor even poorer, that we need a fairer society that works for everyone, and that capitalism is the most justifiable target for all our opprobrium. Part of the reason that Corbynomics is so easily ridiculed in circles of economic competence is that the socialist need to scratch our societal itch is dying out more slowly than the itch itself. 

Or to put it another way, a medicine is being offered to cure a disease that's been cured by another kind of medicine. And to rub salt into the wounds, the medicine being offered by Corbyn is actually a poison that inhibits the potency of the actual cure (the closest real life example of Corbynomics in action at the moment is not in Scandinavia, as some people think, it is in Venezuela, and the results are catastophic).

If you want principled integrity, you can find it far more in people like Deirdre McCloskey, Robert P Murphy and even the IEA's Philip Booth - good honest economists, and also people of faith, who have a proficient enough understanding of the political landscape to speak of what's best for everyone, but who are also not afraid to embrace truth and facts even when they are not part of consensual opinion.