Crime-Reduction/Abortion/Freakonomics: A Quick Rebuttal Of A Rebuttal

After my last Blog on the causal link between crime reduction and abortion posited in Freakonomics, someone sent me a link to an article by Steven Ertelt from LifeNews, in which he claims criminologist James Alan Fox has refuted the causal link (see here to read the attempted refutation in full).  There's so much wrong with the article that it's beyond ill-conceived. The attempted refutation can be boiled down to three principal statements, on which I'll comment below.

1) The study found homicides by blacks between the ages of 14 and 17 have jumped 34 percent from 2000 through 2007. If the unborn aborted babies would have been more likely to be future criminals then crime in the black community should have gone down not up.

MY COMMENT: Clearly this needn't be the case. I can conceive of a situation whereby abortions increase while at the same time an overall crime increase occurs in a certain sample space, where the abortion effect engenders a damage limitation effect with its reductions. If more black babies are being aborted yet twice as many more are being born or twice as many are getting involved in gangs then there is no inconsistency.

2) Nearly 60% of the decline in murder since 1990 involved perpetrators ages 25 and older-individuals who would have been born prior to the landmark abortion decision.

MY COMMENT: This statement literally doesn't make any sense. Declines in crime can't by definition 'involve perpetrators' - a crime declension simply refers to fewer recorded incidents. There are obviously no perpetrators in those crimes that weren't committed. The 60% reduction probably refers to the natural tailing off period, where people in older age groups (like late twenties and beyond) grow out of those bad habits, and after which obviously statistically commit fewer crimes. Here's what else is wrong with it - a growing up of a certain generation of people into the age at which they commit fewer crimes will be offset by a growing up of a certain generation of people into the age at which they commit more crimes, so one would cancel out the other, unless, as Freakonomics suggests, those would-be younger ones were no longer being born at such a rate. The above 60% argument doesn't refute the legalisation of abortion theory - it is perfectly consistent with it.

3) The abortion-crime link also cannot account for the transient surge in youth homicide during the late 1980s, if not for which the 1990s would not have witnessed such a sizable decline.

MY COMMENT: This is a spurious contention too - the abortion-crime link makes no claim to account for the transient surge in youth homicide during the late 1980s - it merely claims to have put a halt on continually increasing crime rates that seemingly would have escalated into the 90's, were it not for the sudden drop. Again, no inconsistency there.

Nothing we've seen in the article has gone any way to challenge the hypothesis put forward in Freakonomics - and one might be entitled to expect better from a criminologist.  The logic still stands; if a great many of the aborted youths would have been highly likely to commit crimes, and increased abortion in those communities did occur, then by definition there will be a reduction in crime in that area of study.

* Photo courtesy of diethylstilbestrol.co.uk 

Reduction In Crime: A Casual Link That No One Was Expecting

I was watching The Culture Show Malcolm Gladwell special on BBC2 the other day, and something struck me as strange. Jon Ronson and Malcolm Gladwell were discussing Gladwell's well known chapter in his best-selling book The Tipping Point: How Little Things Can Make a Big Difference, in which he had argued that the steep drop in the New York City crime rate after 1990 was primarily down to Mayor Giuliani's "zero-tolerance" policies. 

Ronson and Gladwell sat and deliberated over the strength of the causal link between Giuliani's "zero-tolerance" policies and the crime drop, with it being suggested by Ronson (and another contributor independently) that the causal link may not be as conclusive as Gladwell had propounded in his book. Gladwell responded with the admission that perhaps he might (stress 'might') have overestimated the causal link.

Here's what I found very strange about the whole encounter; it is very well known by readers of this particular type of modern social commentary literature that Mayor Giuliani's "zero-tolerance" policies were not the cause of the steep drop in the New York City crime rate after 1990. The cause was something quite startling - and I'm certain that Gladwell (and probably Ronson) would not have been unaware of what it is, as it was made known rather (in)famously in the excellent book Freakonomics by Steven D. Levitt and Stephen J. Dubner.

Can you guess what it was?

What Levitt and Dubner showed in Freakonomics is that it was legalisation of abortion in America that went on to have the biggest significance in reducing crime rates 15-20 years henceforward in the States in which it happened. Before 1973 abortion was illegal in all States in the America - but later in 1973 there was a court case (Roe vs. Wade), whereby (to cut a long story short) the consequent results of the judicial legal case yielded (soon after) the legalisation of abortion in about 5 states. This has fairly conclusively shown that there is cross-correlation, and that the legalisation of abortion was the single greatest cause of decrease in property crime, violent crime and murder.

In case you haven't worked out why - it's because the future criminals were no longer being born, they were being aborted.  Yes it's true, you did read me aright - legalising abortion meant that future criminals weren't being born, hence the drop in crime 18 to 24 years later. It was 18 to 24 because that is the peak of human crime life, so of course it followed that the cumulative age distribution curve for property crime, violent crime and murder matched the curves for the drops in rates of crime for these three offences in the five states, which is about as conclusive a pattern as you could wish to see.

I'm only telling you facts - of course, that’s not an argument in favour of or against legalising abortion, nor does it involve any ethical judgements about abortion – it simply shows that good can come from bad, and why the moral worth of an action should not be determined by its resulting outcome, even though positive knock on effects occur where they are at the time unexpected. Furthermore, these weren't trivial drops in crime either; murder dropped by about 40%, and violent crime by about 35%.

It is not surprising that Malcolm Gladwell made the error of judgement in linking Giuliani's policies to the steep drop in crime - after all, two well known factors in crime reduction are an improved economic situation, and better policing coupled with more people in prisons (sometimes changes in law have an effect too, but most petty crime stats are fixed anyway, so one usually offsets the other). But once the rate of crime falling was known, it should have been more obvious that neither improved economic situation nor better policing were the catalysts for this reduction, because improved economic situations and better policing are highly unlikely to reduce crime by as much as 35-40% - it would take something much more significant.  Another compelling reason why decrease in crime cannot be explained by the improving economic situation of the time was that further studies showed that different economic progress in different areas did not cross-correlate with reduction in crime in those states. And better policing coupled with more people in prisons could not be the reason for the reduction in crime either, because, as before, not all places changed their policing or prison strategy, and changes were seen in many areas where there was no substantial reduction in crime.

What made the case all but conclusive was that the States of New York, Washington, Alaska and Hawaii all made abortion available three years earlier that the rest of the other States in the America. As a result, in ALL of these States, the downfall in crime rates started three years earlier than the other States. Additionally, the decrease in crime was most pronounced in the States that saw the greatest increase in the number of abortions.  All of these things lead to a pretty watertight case which shows the causal link to be very difficult to deny.

I've no idea why Ronson and Gladwell's conversation was devoid of the well known fact that legalising abortion was the primary cause in a future crime reduction (I say 'primary' because although legalising abortion wasn't the 'only' factor in the future crime reduction, it was the most significant factor). I know that Malcolm Gladwell questioned Levitt and Dubner's findings on the basis that the pill was introduced in the 1960s, and that that didn't seem to bring about future crime reduction, despite also being responsible for a lot of future people not being born. But it seems clear to me why this is likely to be the case, and why the pill did not have the same future effect as abortions. Quite simply, in all likelihood, the set that contained the kind of people who were taking the pill was a set that contained fewer people likely to produce future criminals than the set that contained people having abortions. This is backed up by numerous studies showing the link between family environment and criminality - that the demographic in which folk were more likely to have abortions (under-educated teenagers, those from broken homes, those from decadent provenances with poor social mobility, those in poverty, those dependent on welfare, those into petty crime, those that have drug or alcohol problems, and those that belong to gangs) - amounts to the same demographic in which there were folk from poor families, folk that are raised by single parents, teenage parents, uneducated parents and/or parents with drug/alcohol problems, and thus most likely to be future criminals.

Showing the causal link between legalisation of abortion and crime reduction stands as a good example of how one must never make precipitous assumptions about seemingly 'clear cut' causal links. Just about everyone thought that zero tolerance was responsible for the crime reduction - but as the studies documented in Freakonomics show - you just never know what's going to come out of the evidential woodwork.

* Photo courtesy of BBCiplayer

On The Myth That Thatcher Ruined British Industry

 

In a free market economy there is little place for national affiliation. If an employer has found 100 non-British workers who are willing to work for £3 per hour less than his 100 British workers, the nation is better off (as is the global economy), because before the non-British workers began to do the jobs, there were 100 potential workers each being overpaid by £3 per hour.  In a 40 hour week that amounts to a net overpayment of £12,000. In market economics, Adam Smith's 'invisible hand' states that competition brings about self-interest for the good of everyone, where prices near-perfectly match supply and demand.  Free market economy at a global level works well because hard workers, innovators, entrepreneurs and finance experts amount to different people, with a free market that enables them to coordinate their skills. It's no use being emotionally affiliated to an industrial factory that's costing us money just because it happens to be one’s own place of work, or because it happens to be based in one's own country. Thatcher's critics have got it backwards – she didn’t ruin the British economy - it is the efficiency of the relationship between prices, supply and demand that she used to help save the British economy. The northerners who are bemoaning post-Thatcherism fall largely into two camps; they are either people who really want to seize opportunities and as a result decided that after their industry has been outsourced they'll change vocations; or they are people who have decided that a life of paid leisure (albeit low income) is preferable to changing vocation or learning new skills.

Photo courtesy of lancha.deviantart.com

A Silly Argument About Diversity

Strange argument from Simon Fanshawe on the BBC's Sunday Morning Live today, arguing that "All employers should stop simply always hiring the best person for the job. Instead, they should actively recruit as diverse a workforce as possible"

That's obviously rubbish - employers should always appoint according to who is best for the job. But that's not all.  If a workforce really were 'as diverse as possible' then by definition it would contain quite a few people who were largely unsuitable for the role in which they found themselves. Moreover, if that's your primary interest, a maximally diverse workforce should contain people like an Islamic fundamentalist, a football hooligan, an 18 year old Goth, a transsexual who sniffs glue and self-harms, a gambling addict, a mason, and a member of the flat earth society. Then you'd be some way to creating a workforce that was 'as diverse as possible' - but I don't think it would be a very good workforce.

No, for soliciting opinions, forming think tanks, forecasting, or debating topics, a diverse array of minds is of huge benefit. But places of work aren't like that. Each role requires a specialised set of skills - so hire the best person for each role, with the best personality, and you'll get the best workforce. That's all the diversity you need. Diversity for diversity's sake only means artificially disadvantaging people who are better for the roles than the people you're taking on to obtain your diverse workforce.

* Photo courtesy of Facebook.com

The Niqab: A Thin End Of A Tyrannical Wedge

You may have noticed this week that the recurring debate about the full Islamic face veil (the niqab) has been prominent again, specifically (in this case) related to the wearing of the niqab by hospital workers. Now I am firmly of the view that practices attached to oppressive religious dogmas should always be secondary to the laws of the land.  That is to say, I believe that no concession should be made in deference to religious beliefs; it is the religious person that must defer their practices where they conflict with the law (save for exceptional circumstances), and (ideally) where they cause infringements in the workplace.

If people wish to wear the niqab in their everyday life, then that's up to them, and I fully defend their right to do so (although, naturally, I do find it unfortunate).  But when they are in a situation (like say in the medical profession, in a court of law, or with security considerations) in which an inability to see the face impedes the particular practice, I think they should remove it.

But even with that unequivocal stance firmly in place, there is still the issue of the niqab at a societal level, whether it causes divisiveness, and whether women who wear it are having their liberty circumscribed. I believe that Islam is one of the worst things humanity has ever invented – and when I see a woman wearing the niqab it demonstrates to me how absurd and stultifying a practice can be when it is based on religious adherence, and not openly criticised enough because it falls within the purlieus of ‘religious entitlement’. 

Of course, people will argue that many Muslims are good, decent, kind and intelligent people – but that’s the wrong line of enquiry, because there is no reason why they couldn’t be good, decent, kind and intelligent people without Islam. No, the right line of enquiry would be to ask the following question; would a balanced woman brought up in an environment in which she had open, critical enquiry, free from the oppression of an archaic and patriarchal religion, wilfully choose to cover herself from head to toe (leaving only her eyes) in adherence to the backward, misogynist desire the Qur'an has to control women?  I think the answer is clearly no. 

The niqab stands as an example of the horrible way in which manifestly man-made patriarchal and half-witted religious dogma not only oppresses women, but causes them confusion about their own liberty.  Here's why. Some Muslim women assert that their wearing the niqab is a free choice, and a symbol of their autonomy in choosing to do so.  But in my view that’s to be guilty of failing to consider whether they would ‘freely’ choose to wear such a hideous thing if they were not so heavily culturally and/or familially conditioned by an implacably absolutist Islamic influence that lurks deep in the religion's repressive ideology. I don't think they would. 

By claiming themselves to be free, they are simply demonstrating that the shackles of Islam can give the appearance of being free in the teeth of an apparent volition. It is not a choice that I think many women would make if the well of their mind hadn't been in some way poisoned by the religious dogmas of Islam, and its antipathy to genuine free-thinking autonomy and a critical enquiry that can look beyond the manacles of cultural conditioning. 

This is a good general rule of consideration for life; we should judge decisions, views and beliefs not primarily on the specific conditioning from whence those decisions, views and beliefs occurred, but on whether we think a man or woman brought up in an environment with open, critical enquiry that remained free from oppression would likely make those decisions, hold those views and have those beliefs.  If the answer is ‘no’ then you are entitled to feel pretty confident that they are under an unhelpful thrall.

To show the extent to which this is the case, let me give you an analogous example of why this proclaimed 'freedom' is really a case of being shackled.   A few months ago I saw a documentary on travellers, focusing on a family of irresponsible rogues who were setting up fights between seven and eight year old boys in a disused pub, in order to 'toughen them up for bear-knuckle fighting in adulthood'.  When questioned about whether this was tantamount to child abuse, the chief of the irresponsible rogues insisted it was “Foyne, because dose kids do'it willingly" - after which, two or three seven and eight year olds were put in front of the camera to confirm "Aye, it's foyne, we do'it willingly".

Once you ask the same kind of question – whether seven and eight year olds bashing each other’s brains out whilst being cheered on by adults in an organised fight scenario would occur in families that had their children’s best interest at heart, and weren’t under the thrall of moronic tribalism that places a premium on bashing rival families’ brains out – you’d, of course, conclude that such behaviour is quite anomalous, and the result of bad cultural conditioning.  Roughly speaking, the niqab is to Islam as child fighting is to traveller mentality - they are thin edges of a much bigger wedge that retards human progression. 

In addition, though, I'll make a correlative point - while the subjugating ultra-modesty of the niqab is (at best) an unhealthy compromise of psychological and emotional liberty, and (at worst) a denial of psychological and emotional liberty, I do think at a general level some degree of modesty and self-respect is required in being free.  I say this because I think many of the so-called liberated folk in the present age are in their own way as constricted as Islamic women wearing the niqab - it's just the case of their being at different ends of the extremity spectrum.

Here's what I mean. At one end we have the aforementioned dogmatic religious constriction that amounts to loss of liberty.  But at the other extreme we have another kind of diminution of liberty - one that taps into this idea of being modern, free, expressive, liberal and liberated.  This is the putative faux-freedom in being able to, and in many cases encouraged to dress scantily and provocatively, to binge drink, to abuse the body, to sleep around, and similar supposed liberties that are believed to be counter-cultural.

If an oppressed Islamic woman wearing the niqab has an unhealthy compromise of psychological and emotional liberty, then I think so does the modern person who has compromised himself or herself by going too far the other way with binge, bodily abuse, promiscuity and an ultra-relaxed attitude towards discipline and self-respect- it's just that the two individuals are at opposite ends of the spectrum.

The underlying rationale here is important; if we are to will the continual progression of human beings, it is imperative that the bad elements of human history that have survived through cultural and familial propagation are not left unchallenged. The default position by many is that if something is believed by a lot of people (like a belief attached to a religion) then we ought to be circumspect in subjecting it to rigorous scrutiny for fear of offending such a large number of people.  I think that's the opposite of the truth; it is when bad practices are ubiquitous that the people undertaking them most need our help in speaking out for them, and challenging the thrall of the tyranny that shackles their intellect, their emotions and their progression.

Rent Prices & Social Care; Too Much Restriction?

On BBC's Question Time last Thursday we had a first time panellist (I think it was her first time) - The New Statesman columnist Laurie Penny - whose contribution in most cases demonstrated a half-witted misunderstanding of the topic under consideration, and whose answer in most cases was just about as wrong as you can be. Laurie Penny seems a good candidate to join the likes of Johann Hari, Owen Jones, Medhi Hasan, Salma Yaqoob, Francis Beckett and Polly Toynbee, as part of a group of continually irrational, misinformed and poorly reasoned social commentators who make me want to throw things at the TV when they're on there pontificating.

Her opening statement - that rent control is the answer to the housing shortage - is the focus of my attention here, as it's close to another issue of mine (social care), as well as being the opposite of the truth. Rent control actually does the reverse of the remedy required; it creates scarcity of supply and it exacerbates housing market shortages.

So, what does that have to do with social care? It's another one of those issues where things are going wrong, thanks to the successive governments' inability to address the situation properly. Suppose someone has a family member who is paying thousands of pounds a month for social care, which is happening throughout the country. For many people this amounts to extortionate rates where the person’s life savings are being swallowed up to go into the hands of private care firms. The right question, then, is; are the profits the care homes are making excessive? The other right question is, if they are excessive to the point that other alternatives are preferable, why are elderly people not freer to employ whom they want to care for them (say, 2 family members or friends that need the work)?

One of the golden rules of economics is that if a company is earning excess profits this should create an opportunity for potential competitors to enter the market and charge less while still making a profit. When this occurs in a free market, competition drives prices down to the level of the costs of the most efficient supplier (where costs include the cost of capital). So if a business can sustain these "excess profits" then something must be preventing other suppliers from competing within the care market.

Just like rent controls, imposing a price control will do no good, because if the government does impose a price cap, the cap will almost certainly be too low (a cap too high would have no effect, because to be too high it must exceed current prices, otherwise no one would notice as current prices would be under the cap). By imposing a price cap that will inevitably be too low, the government will only succeed in reducing supply, and thereby harm consumers of care services.

There is a shortage of cheap housing for the same reason that there is a shortage of cheap social care - government restrictions. In the case of housing, the shortage occurs because the government specifies rigid building standards, restricts the use of land, and subsidises mortgage borrowing (all these policies push up the cost of housing and create a scarcity of suppliers). Some people do argue that these restrictive policies are a good idea, and some (like me) argue that they're too bureaucratic and too much of an infringement on the free market. Opinions vary, and that's fine - but those who adopt the view that these restrictive policies are a good idea should not then complain that there is a shortage of cheap housing and a scarcity of suppliers, because the shortage and the scarcity are consequences of the restrictions.

Clearly as there’s a shortage of cheap care homes it would seem that something is preventing competition, as there appears to be a block in care industry with excessive regulations. This is what the government needs to address in order to allow competition to flow. That said, for a balanced analysis, it's worth pointing out that care home running costs aren't all that cheap for the providers; as well as the standard carer costs covering 24 hours shifts, there'll be costs for management and supervisory staff, staff to administer medicine, laundry and cleaning staff, cooking staff, and building maintenance (to name but a few).

So while I'm sure profits are being made, and government restrictions don't help the social care market - a few thousand pounds per month is deemed by some as a pretty reasonable and necessary price, given that the home needs all those staff and services, and has such expenditure.  But that's to miss the main point; it's fine if you're willing, but if you're not then your alternative options are seemingly being restricted too much by the heavy legislative measures imposed upon the system by the government.

Here's how the free market works ordinarily for consumers of goods and services. If any particular supplier seems too expensive, we look to switch to other suppliers. If all suppliers seem expensive, then either entry into the industry is blocked by regulatory constraints, or if it isn't blocked then the activity probably just has an expense to justify such prices. Clearly this isn't the case with providers of social care, because the barriers that deter (being handed a lawsuit for malpractice, incurring capital costs that necessitate such steep charges) would not apply in a situation in which an elderly relative needs a couple of carers, and there being 2 willing family members ready to care for her, and badly needing the money (with her badly wanting the money to go to them rather than into the hands of excessive care firms).

That this can’t happen, and that elderly people are held captive in this way, gives indication that important alternatives (competition to drive down prices, or relatives or friends willing and able to take on the role) are being suffocated – and suffocation in the free market is seldom a healthy thing.

My Issues With Green Politics

In the circles in which I roll, issues of green politics, sustainability and the environment have cropped up quite frequently.  I'm not a big fan of green-centred politics (by 'green' I mean green-keens in general, not just the Green Party) - I find most of it to be an unhealthy mix of the presumptuous, the unsubstantiated and the just plain spurious. Thus, my general view is that there are plenty of reasons not to support green-centred politics.  Here's why. Let's not go into the fact that green people's keenness to excessively interfere in market economics is mostly inimical to a good economy (I explain the general principle in this Blog post here)*; let's not go into the fact that to have a realistic chance of bringing the people in the developing world out of their plight we are not going to have the luxury of being as environmentally careful as the green-keens want (we should always acknowledge the fact that as technology increases this problem will diminish, as our aim should be to change the way we depend on the natural resources we do – as I explain here). I'll even pretend not to have noticed that their claims about an over-population crisis are the complete opposite of the truth (as I explain here). So I won't comment on those three things in this Blog, as in some of those issues there are aspects of the green policies that do have some merit.

No, my main reason for being at odds with green-centred politics is that the fundamentals behind their ethos - "The climate is being negatively affected; humans are negatively affecting it, therefore the continuing trend is bad and needs drastically addressing", is in my view the ethos that’s presumptuous, unsubstantiated and spurious. Now, I don't have any affiliation with any political party, which means I have no party-political reasons to be against any one party - hence, I'm keen to be as fair to the green-keens as I possibly can. But I can make little sense of the bases on which their policies stand, as they seem to me to be under misapprehensions about the merit of those policies, as well as seemingly expending too much effort on counting costs and not enough on counting benefits.

Let's take the above claim: "The climate is being negatively affected; humans are negatively affecting it, therefore the continuing trend is bad and needs drastically addressing".  The problem here is that there is an assumption made without qualification. Whenever you have a situation in which X is happening (where X is negative), and Y is causing X, one can't just proclaim that the continuing trend is bad and needs drastically addressing, because there may well be other ways in which X's negativity is being offset by other factors not in the equation. That is to say, while I'm willing to acknowledge that it's the case that at least in some part the climate is being negatively affected by humans, the statement doesn't mean much unless one can show that the climate being negatively affected by humans is more of an overall cost than the benefits such effects bring.

You see, I don’t think this has been done; hence, I think the green-keens have still got their work ahead of them, as all the indications seem to me to be that the benefits outweigh the costs. I think the reason this is often not seen is that just about all the arguments for and against are focused on X and Y, but they ignore whether this necessarily supports the conclusion that it amounts to a net cost. Their fault is on focusing on a few global bullet points (sea levels rising, overall temperature increase, deforestation) and treating them only as bad, or as bad but understating the good outcomes.  Yes, overall temperature increase contains bad effects (although one can't be certain that temperature increases are going to continue on this trend), but it also contains good effects too, as I'm sure the people of Greenland, Siberia or Alaska would testify.

If these considerations cast huge aspersions over the green ethos, why then are the environmental portents so widely felt? I think it's good to remember why much of this came about. Green parties of the 1970s and 1980s were largely set up to be alternatives to the traditional left and right parties (having the advantage, perhaps, of being one of the first **) - and as those left and right parties gravitated towards the centre (becoming largely indistinguishable since Blair's Government), the alternative vote that imbues itself with environmental sound-bytes seemed to some to be a genuinely compelling alternative. Moreover, it seems that the alternative remains so compelling that Green politicians continue to be a tenable option – which may not be a bad thing, as it keeps pressure on the main parties to include environmental policies in their manifesto.

The Economic way of thinking

As is usually the case, an economic way of thinking would guard against falling for the kind of errors the green-keens are making - because economic thinking wouldn't just involve asking whether there are good and bad effects - it entails wanting to know if there are net costs sufficient that the bad effects outweigh the good effects. This seemingly is never addressed by the Greens in an open way, because to do so would rock the foundations of their party ethos, which is just based on the assumption that there are net worsening effects. How are we to tell, say, if rising sea levels in the Indian Ocean balances out with the emergence of more habitable areas of Siberia or Alaska? Don't forget this won't happen overnight - it happens over decades and centuries, so any considerations that factor in sudden and unexpected inconveniences are a solecism against good enquiry.

Don't forget also that if you asked a man in 1913 about how the world would look on a global level in 2013, he'd have no way of foreseeing it in its current set-up.  If environmental changes occur over such slow passages of time, then in a few decades countries surrounding the Indian Ocean may well be well prepared for rising sea level, and Siberia or Alaska probably will hugely benefit from increased global temperature. From what I can see from looking at their literature, The Greens haven't offered any proper cost benefit analysis on the dynamical change of global states - they've merely prodigiously estimated the costs and exiguously estimated the benefits. Of course, that doesn't mean the Greens are wrong - it only means the methods by which they think they are right are faulty.

In offering an economic view of the situation - one that has no ideological biases - I'll tell you how I think it really is.  Climate change is presumptively unwelcome, whether it is hotter or cooler, because present human endeavours are optimised specifically for present day conditions.  Whether you're farming, building factories or houses, or designing railways or cars, you are optimising the production for modern day use consistent with modern day conditions. But environmental changes are gentle century-long slopes not steep month-long drops - so once you consider the extent to which activities associated with farming, factories, houses, railways and cars will have changed in a century to be coterminous with the gradual changes in the environment, you see there are probably no crises at all. Given that the earth's climate and environment has been changing for millions of years, it is obvious that no climate of any time is the optimal one in absolute terms.  If there is no reason to believe that the present climate is the optimal one, then assertions that we need to be preoccupied with green issues are hard to justify, as adapting to the gentle century-long slopes of change is not only something we have to do, it's something we've been doing since mankind began.  Economic thinking enables us to not fall for these extreme knee-jerk reactions - as the climate throughout our human evolution has varied by considerably more than the comparably meagre changes being predicted for global warming in the next few hundred years.

It's because humans have lived, survived, increased in numbers and prospered over a range of climates much greater than the predicted range by climate-obsessors that economist-type thinking must, for me, involve some raised eyebrows.  It's fairly obvious that if there's no reason to believe humans will be negatively impacted by future climate change, with every evidence that our present and future innovations will more than offset any environmental shifts, it's equally absurd to bear sizeable resources (time, energy and money) trying to prevent this change. I'm not saying we shouldn't be mindful of being more environmentally and ecologically prudent, nor that we should avoid doing what we can to diminish the extent to which environmental change occurs with rapidity, but that's a far cry from constructing political parties based on that ethos and becoming climate-obsessors.

You are quite welcome to hold the view that there are more negative effects to global warming than positive effects, but to make it fly you must provide reasons to justify it - you can't just exaggerate the negatives and understate the positives, and decree yourself to have taken the right stance on this. I'm interested in compelling arguments, and evidence-based conclusions - but I haven't heard any yet, so for now I remain sceptical, particularly as being green-focused seems to aid popularity amongst the electorate, which does, of course, provide political parties with the motive for propagating unbalanced green-keenness.

* A short précis is that in market economics we find that competition brings about self-interest for the good of everyone, where prices near-perfectly match supply and demand.  In other words, the competitive market is what brings about the allocation of resources with maximum efficiency.  The different ways to allocate resources is only maximised to the best effect when competitive markets function freely (this has been proven mathematically by Debreu and McKenzie).  When you have 'supply'; and 'demand' for that supply, and 'prices' that invoke near-maximum efficiency between the supplies and the demand – there is almost no necessity for human interference.

** Consider a thought experiment; suppose there'd never been a Green Party, but instead an Amber Party whose whole ethos had been the opposite of what the Greens espouse.  The Amber ethos is centred on prodigiously estimating the benefits and exiguously estimating the costs of our global activity, always citing how much better the planet would be if colder regions were warmer, explaining the benefits of creating more habitable areas and better river routes, etc – you’d likely find that the national feeling would be near the opposite of what it is now.



Follow Up: Rents, Housing, The Minimum Wage, & Too Much Employment

After a friend from America commented on the last Blog regarding how she agreed that rises for low earners are dwarfed by other prohibitive factors, I thought I'd do a quick follow up about the specific case she mentioned - rent prices rising with rises in the minimum wage, producing a nullifying effect. Here's how things are in the capital of England  In London there is a great need for low-skilled work, but rent prices make it hard for low-skilled workers to live in London, so the Government subsidises them with housing benefit.

Suppose we have John the cleaner; John works in Canary Wharf cleaning for a big city firm, and is subsidised by the Government (which means the taxpayer).  John's housing benefit is stopped, meaning he can no longer afford to live in London, which means his firm has to hire another cleaner.  But when John represents all low-skilled earners, things change, as city business that need cleaners will have to increase wages of cleaners to enable them to live in London, lest they have cleaner-less offices.

So assuming we stop the minimum wage, as my last Blog post suggests, we are left with a choice, with neither option perfect. We ether:

A) Stop topping up the incomes of low earners with tax credits as that is only really a further subsidy to the employers of low-skilled workers, letting the market care for itself, which would reduce the probability of inflated housing cost and under payment for low-skilled workers, but would create a vortex.

B) Continue to top up the incomes of low earners with tax credits, whilst having the corollary effect of increasing the inflated housing cost problem (among other things).

Most people in the UK prefer B, which is fair enough, as it's the pearl of great price of the welfare state.

Incidentally, here's where the situation started to intensify. Until the eighties Conservative government sold off their council houses, local councils used to build council properties and rent them out for modest sums (modest sums subsided by the taxpayer, of course).  Naturally, the selling off of council houses was ideological in the sense that the Tories expected to secure votes from these house-owners, but also it was seen as efficient, because it transferred the cost of maintaining properties from the council to the individual property owners.

But this had a knock-on effect; low-earners were then expected to rent property from private landlords, which causes problems when they are numerous.  One of the ineluctable laws of economics is that if demand increases and supply decreases or remains unchanged there will be a higher equilibrium price to account for the scarcity of supply. That is to say, to apply it here, when claimants of housing benefits constitute a greater part of the market, rents are hiked up. As a corollary, higher rents engender a surge in buy-to-let investments, which forces up house prices, which comes full circle in justifying high rent.  This 'locking in; effect means that taxpayers are expected to subsidise low earnings to guard against a low-earner exodus from London, or a compelled increase in the minimum wage.

Too much employment?

Another rule of economics is that taxing something produces less of it, and subsidising something produces more of it. The minimum wage (which is basically a stealth tax on employers of low-skilled work) reduces employment by a little, and income tax credits (which are basically subsidies) increase employment.  But by how much?  That's the key question few people ever ask, which is irresponsible, because although subsidising something produces more of it, it is a great mistake to assume that the more the better, because that assumes it is automatically preferable to have too much of something rather than too little of something else.  If someone is going to pour some sugar and some salt on your roast dinner, you'll certainly hope they pour very little sugar and the right amount of salt.  But only a fool would argue that because they under-did the sugar then any amount of salt won't ruin the dinner. Clearly, while the right amount of salt is good for bringing out the flavour, too much will ruin the dinner altogether. 

In the above situation, the minimum wage is like sugar and income tax subsidy is like salt - too much salt and you'll have too much employment, which engenders inefficiency.  In other words, one mustn't assume that just because employment is good that there can't be too much of it - too much unemployment is bad, but so is over-employment.  If increases in income tax credit push employment past the optimum level of efficiency, then we'd either look for a reduction, or an alternative policy.  To put it another way, it is injudicious to focus only on who enjoys the benefits of a policy without examining who picks up the costs. As we've seen in the last Blog, the cost of the minimum wage falls on the employers of low-skilled labour, which, in the long run, is borne by the customers of the businesses in price hikes. The cost of income tax credit subsidies falls on the government, which means it falls on taxpayers as a whole. While I think income tax credit is preferable to the minimum wage - even the minimum wage becomes preferable to a situation whereby too much employment is created by tax credits that are too high.

 * Photo courtesy of bbc.co.uk

Why The Minimum Wage Is More Costly Than Beneficial

In my last Blog I proposed an interesting way that employment laws conceal hidden costs that impair those they are supposed to protect. On a more general level, what's also strange to me is the extent to which in everyday life things are often automatically assumed to be good, just because it's easy to focus on the headline-grabbing positives while overlooking, or not understanding, what lies beneath. When you hear that the law imposes a compulsory work break on employees, it sounds like a good headline-grabbing positive, because it appears to guard against employers denying people their rightful break time. But in reality, in a competitive market where supply and demand applies to labour as well as goods, no firm in the UK would last very long if they imposed a 'no breaks' policy on their staff (even if such a thing was legal) - so the law is largely superfluous in that matter. With that in mind, let's look at another policy in which a supposed headline-grabbing positive overlooks the hidden costs that lie beneath. I'm talking about the minimum wage.

A SIMPLE REASON WHY THE MINIMUM WAGE DOES MORE HARM THAN GOOD

In a famous parable in the second book of Samuel in the Old Testament, Nathan conveys to King David an illustration of a rich man who took away the one little ewe lamb belonging to his poor neighbour. David responded with indignation and disgust until realising that the illustration was actually an indictment against him for his actions regarding the death of Uriah the Hittite and the impregnation of his wife Bathsheba. Here's my own little parable for people (including a great many politicians) who think the minimum wage is a good thing overall.

In a town called Beansville there are lots of harsh winds that damage the town on a regular basis. When this happens there is always a regular group of volunteers (comprising 10% of the population) who on top of their regular jobs spend time clearing up the mess and repairing the damage, while the other 90% go about their business. Out of the blue the Mayor of Beansville declares that even more time needs to be dedicated to clearing up after the harsh winds, and that the people to take on this extra voluntary work should be the 10% of people in Beansville already volunteering.

If you told that parable to a minimum wage-endorsing MP he or she would almost certainly be outraged at the Mayor of Beansville's inequitable policy. But just like King David, the MP should be remorseful and contrite because the Beansville policy serves as a good indictment against the MP's support of the minimum wage. Here's why. Should we decide that the extra burden ought to fall on those people in Beansville already volunteering? Or should we decide that everyone else ought to muck in as well? I think most sensible, fair-minded people would agree that it should be shared more evenly, not all heaped on a small segment of that society. Why, then, do so many people support the minimum wage, when the policy is more or less as skewed and injudicious as the Mayor of Beansville's policy? Or to put it another way, if we're going to give low-earners a boost, why do so many people fail to realise that it is unfair to place the entire cost of that boost onto the small percentage of the population that employs low-paid workers? The prudent and fairest thing to do is to spread the cost among all of us - which can be done through a taxation that is passed on to low-earners in the shape of tax credit for low-earners, or probably even better, lower personal tax thresholds for low-earners. That in a nutshell is why the minimum wage is not a good policy overall - it unfairly heaps the burden on a small segment of society - a small segment, you may note, that is outweighed by a much bigger majority in terms of potential voters.

Consider some analogous examples; we don't expect the entire burden of our navy bill to fall only on a few people, nor our health bill, nor our parks, nor our roads and streetlights - we expect the cost to be broadly shared through taxation. The same applies (or should apply) to the minimum wage - if we want to do something for low earners we should share the cost. Let me state it in the most compelling way. Poundland, Bernard Matthews, McDonald's, Burger King, KFC and similar such businesses employ a few thousand low-skilled, low-paid workers in your region - all of whom are better off than they would be on the dole (which makes us all slightly better off). So Poundland, Bernard Matthews, McDonald's, Burger King, KFC and similar such businesses are all doing something for low-skilled, low-paid workers. What, on the other hand, have you or I done for low-skilled, low-paid workers recently? 'Not much' would be my guess - so if it's desirable to do something more for low-skilled, low-paid workers, maybe it's our turn rather than the turn of Poundland, Bernard Matthews, McDonald’s, Burger King, KFC and similar such businesses, who are already doing their bit.

You might argue that our navy, health bill, parks, roads and streetlights are all public goods and services, which is why we pay for them in taxes, and that Poundland, Bernard Matthews, McDonald’s, Burger King, KFC and similar such businesses are privately owned and do not need subsidising. But that misses the point; those who support the idea of a better wage for low-paid earners (which seems to be everyone on the left, and a great many on the right) are doing so precisely because they consider it to be a public good, so the objection is remiss. And further, if you think low-paid workers are being ripped off by wealthy companies earning heavily from their labour, you'll pleased to know that one of the basic rules of economics is that the very nature of low-skilled labour is that it is easily transferable from person to person, and that because of the forces of competition, the wages of low-skilled workers are dictated by the marginal product of that labour.

It's true that the minimum wage has so-called positives (at least they're claimed to be positives by minimum wage proponents); it increases living standards for the poorest in society, and it increases the incentive for people to get back to work. But it does no good to simply endorse a policy based only on its qualities, without considering the negatives, and whether they outweigh the things in its favour. One might argue that the ill-effects of the minimum wage are more detrimental to the economy. The minimum wage has positives, but as well as unfairly loading the burden on firms that employ low earners, it also encroaches on low end business, it reduces job availability, and it often causes inflation of prices as firms try to recoup their losses on increased wages. A minimum wage does two further things. It shifts capital from employers in an unstable competitive market to low paid workers, and it induces some employers to let their staff go because they cannot afford the wages. If you’re getting £7 per hour and only bringing £6 per hour worth of benefits to your company, you’ll likely find yourself on the dole. If you are a lower paid man or woman going from here to there in different jobs, you will find less work available with every rise in the minimum wage – and the higher the rate the more unemployment. This might amount to a road block for young, unskilled workers and the unemployed – which is why tax credits are a more effective method because they target those who have children or high level benefits, and need high wages to make it worth their while signing off benefits, but who don’t have the skills or experience to command that kind of salary.

THE MINIMUM WAGE ALSO CONSTRAINS TRADE
One of the other golden rules of economics is that if you limit the use of monies you limit transactions too, because money brings about increased opportunity for trade. Minimum wage restrictions are an example of constraining trade by indirectly discouraging the use of money against the natural 'invisible hand' mechanism of supply and demand. Here's a simple illustration to show why this applies to the minimum wage. If I want to pay someone to do my gardening for me at a rate of £4.50 per hour, the law says I'm not allowed to. Yet the law doesn't prohibit me from saving £4.50 by doing gardening myself for an hour. So the law is an imposition precisely for the person it's claimed to protect - the gardener who needs the £4.50 an hour - which, if I don't want to do the gardening myself, then only encourages cash-in-hand tax-avoiding payments. Income taxes have a similar effect. Suppose I am willing to pay no more than £12 per hour to have some work done, and the workmen at the lowest rates are willing to do the work for anything over £10 per hour. That being the case I should have success in finding someone to do the job. But once the Government imposes 20% income tax, things change, because now the most the workmen can earn from me is £9.60 per hour, which means they'd be unwilling to do the job for me. This can mean that we all forcibly pay more - but quite often it doesn't, it means we try to get things done cash-in-hand on the cheap, or do more ourselves inexpertly.

Obviously it's easy to extol the virtues of income tax, but as you can see, it provides a good analogue for how the minimum wage constrains trade, as it has negative effects beyond involuntary payments, despite being a beneficial policy overall. I can't say the same about the minimum wage - its negative effects outweigh the positives to the extent that it is a bad policy to endorse. These are what are technically referred to as invisible deadweight costs - they restrict trade and transfer of money, and they damage employment prospects - but yet they are always sold as headline-grabbing positives by politicians. I think we shouldn't be surprised, though, that the Government wants to unfairly heap the low-wage burden on a small segment of society that is outweighed by a much bigger majority in terms of potential voters. Invisible costs occurring for the sake of vote-winning visible benefits are music to most politicians' ears.

The Ill-Effects Of Compulsory Lunch

I found out something the other day about my workplace regulations that I think I knew, but that has slipped back into the recesses of my mind. Under legal compulsion we employees are obliged to take at least 30 minutes lunch break.  So if I want to work through lunch and leave off 30 minutes earlier, then according to the HSE Working Time Regulations I'm breaking the law.  This basically means that if I can find better employee-use for my time then the law restricts my use of it. Is it better that lawmakers err on the side of 'health and safety' caution, or better that my ability to control my own devices is adhered to?  My gut instinct is they're doing the right thing - but at least in one sense it is constricting, because it has negative spillover effects.

Here's why. If I go into a sweet shop to buy sweets then the sweet shop owner is the supplier and I am the consumer. But in the labour market, the equivalent of sweets is the labour itself - meaning employers are the consumers of labour, and employees are the suppliers. I'm selling my labour, and the HSE Working Time Regulations are telling me about the quantitative service limit imposed on what I'm selling. When it comes to sweets, or just about any saleable product, we have regulations imposed in the form of minimum standards (criteria that products must meet). In other words, a sweet shop owner can't just sell anything as a sweet, because there are parameter lines (product quality, edibility, sell-by dates, trade description, copyright, etc) within which his product must be placed.

So while saleable products mustn't fall below a certain quality, the HSE Working Time Regulations are ostensibly saying the opposite about labour - that is must not 'exceed' a certain quality, where quality means hours generated.  By working through your lunch you're exceeding the standards, even if for whatever reason your doing this has proved immensely beneficial to you and the company.

I'd hazard a guess that if you asked most politicians about the benefits of this law they'd tell you it is for the benefit of those with the propensity to work too hard (try it by emailing your local MP if you're curious). That's about the opposite of the truth; the law doesn't benefit those with the propensity to work too hard - it punishes those whose ability for hard work makes up for other inabilities - and it benefits those with the 'other abilities' the hard workers might lack.  Suppose I employ two project coordinators whose overall output is of equal value, but whose qualities differ.  Matt is smarter, but Tim is a harder worker, often in contravention to the HSE Working Time Regulations. If I stop Tim, who do I benefit most? Not Tim. In stopping Tim I impede his ability to be on a par with Matt, and reduce his chances of a promotion, because it's Tim's hard work that puts him on the same par as Matt. Denying someone the ability to work too hard benefits not the extra hard workers but those with better qualities in other areas.

Working Time Regulators are trying to keep the price of products higher than their market value, so they must stop those producing products from competing on quality.  Of course, I cheated in that last sentence - I said 'products' instead of 'labour' - because it would be corruption if it were done with products, yet perfectly acceptable when done with labour. Working Time Regulations do not get rid of competition between workers - they merely artificially confer benefits on some skill sets at the expense of others.  In fact, to take it to its extreme, if you got rid of skill-based competition altogether, you'd end up with employers discriminating on much less desirable things like looks, skin colour, ethnicity, sexual orientation, and similar such considerations we wouldn't wish to see in the workplace.

So at least in one sense, employees don't need the kind of regulatory protection in the labour market that stops them working hard.  Just like the free market itself - competition between employees allows them to compete on an even playing field.  Here's an illustration that should help.  Suppose there's a specialised type of data-reader computer that is manufactured. If the most efficient computer-maker could produce such a computer at the cost of X, then X will be its market price. In a free market economy, competition between providers drives down the price of goods, which is good for buyers and bad for providers. To avoid price competition there could be collusion, where it is agreed that no one will sell this type of computer for less than Y, where Y is double the value of X. But imagine what then happens; providers who are no longer competing on price now start to do the natural thing - they compete on quality instead.  If I can make a better computer for Y than you can, I have an advantage, because our prices are the same, but mine has qualities or features that yours doesn't have. So the only way to retain the benefits of our collusive minimum price agreement is to restrict the quality of the type of computers being made - which is to impose maximum standards by ensuring neither of our computers is qualitatively better than the other one.  If you can see how absurd that is, you should have a sense of why employment regulations don't benefit those they're supposed to benefit.

You may say that regulations are good for a reason that seems obvious - they guard against over-working, which as a corollary guards against tiredness, aches, cognitive impairment, not eating enough and so forth. but I think this assumes the wrong thing twice over; 1) That arbitrarily designated times imposed by the Government are better than other times that could be imposed, and 2) That we are not the best at deciding what is best for us.  Not only are both of those manifestly wrong; as well, there is an incorrect assumption attached to it - that people only manage their own affairs because of legal precedents.  That's obviously not the case; the reason we aren't over-working or cognitively impaired or short on food is because we know best how to manage our affairs.  To offer an analogy; the reason supermarkets don't employ a member of staff to direct customers to checkouts is that it would be a completely superfluous job post, because we shoppers are just as good at assessing queues, the number of shopping items for each customer, the speed of cashier, etc as a paid member of staff would be.  The upshot is, employment laws conceal hidden costs that impair those they are supposed to protect - because we are the best at deciding our life patterns - and no one is a better custodian of our own destinies than we are, including our ability to sell our labour.

* Photo courtesy of bbc.co.uk

Why Your Partner Probably Wants You To Shave, Eat Well, & Be A Non-Smoker

In biological evolution, sexual selection is one of the processes of natural selection by which an organism increases its ability to attract and copulate with a mate (a famous example is the tail the peacock has evolved).  In humans, a modern form of sexual selection occurs in things like desire for clean-shaven-ness, eating well and not smoking - as these are seen to be attractive qualities.  Facial hair is associated with high testosterone, which is why in the old westerns the baddies were nearly always bearded and the good guy was usually clean-shaven (maybe that’s why the sheriff usually had a moustache – he had to represent the conflation of those two personalities).  It’s easy, though, to see why men shaving caught on – I should imagine the number of women who prefer clean-shaven men far outweighs the number who prefer men with facial hair.  But also, the number of women who would prefer not to go out with a hairy man is much greater than the women who wouldn’t go out with a man because he is clean shaven. 

The same is true when it comes to eating fatty foods and smoking – in terms of partnership costs and benefits, if you smoke and eat fatty foods you get all the benefits of indulgence (we're good at discounting the future - the costs come later) but your partner only gets the smoky breath and the flabby stomach and double chin.  If you don’t shave then potential mates incur precisely the number of costs commensurate with number of women who don’t like facial hair.  Therefore a man who eats well, doesn’t smoke and is clean-shaven is sexually selectable in two ways – not just because those things are more attractive, but also because it gives a potential female partner indication that you have the mindfulness for looking after your body.  This makes a man good husband and father material.

When Benefits Are Really Costs

I'm amazed how often issues crop up in politics that lead me to question whether a particular politician is a muddled thinker or whether they are trying to pull the wool over the public's eyes.  Here’s a classic case in point. The HS2 project is a high capacity railway project linking London to cities in the North of England (such as Manchester and Leeds).  This might be a strange Hitchhiker’s guide-type phenomenon for many Londoners who have never travelled further north than Watford before, but never mind.

Both David Cameron and Nick Clegg have recently been raving about this report which details the benefits of HS2, including the creation of thousands of jobs.  Naturally the report is a bit vague on the precise number of jobs that HS2 will create with regard to organising, building and administrating the project – but the estimate is several thousand jobs, which Cameron and Clegg have both enthusiastically cited as major benefits of the HS2 project.  This is such an absurd claim to make that I can only infer, either that Cameron and Clegg have a muddled understanding of accounting, or that ‘employment’ is such a positive watchword for the electorate that they are trying to deceive the public by simply saying what people want to hear. 

It strikes me as fairly obvious, but job creation is not a benefit to the HS2 project – it is a cost.  Yes, if the HS2 project helps generate jobs by way of businesses starting up to capitalise on high speed transportation, then that can be included amongst the benefits of HS2.  But Cameron and Clegg hardly even gave that a mention – their preoccupation was on the benefits of the project’s inception with regard to jobs created for organising, building and administrating the project. 

To see why such jobs are a cost, not a benefit to the taxpayer, suppose for the sake of argument that David Cameron’s Government is about to spend £50 million on wages for a UK Local Government building project, but then found out that they could hire cheaper workers to do the job at the same standard for £30 million.  According to Cameron and Clegg’s rationale, they should hire the £50 million workers not the £30 million workers, because spending an extra £20 million on the project increases the benefits of the project, and is better for the economy.  That's absurd. It’s obvious that the £20 million saved is a benefit to the taxpayer, because it can be spent on other public goods and services.

The same is true in the real life example of the HS2 project; the labour required to organise, build and administrate the project is part of the overall cost of the project, not part of the benefits.  When politicians proclaim costs as benefits, it leaves me wondering whether they are muddled economists or disingenuous hoodwinkers.