Libertarianism & The Possible PR Problem

I saw recently that the Adam Smith Institute, to whose Blog I contribute from time to time, has disassociated itself from the term 'libertarian' in favour of the definition 'neoliberal'. I have sympathy. If you believe a set of things, labels don't often do them justice, and they can frequently give people the wrong end of the stick. As long as you're not someone who seeks comfort and fulfilment in group identification (which I definitely am not), you're probably wise not to get too identified with labels, as they are so often open to all kinds of loose interpretations.

Although I lean heavily towards the pro-market ethos of libertarianism and its concomitant liberal attitude to our freedoms (most associated with the Philosophers John Stuart Mill, John Locke and David Hume - and Adam Smith, of course), I am equally aware that libertarianism, like most groups, has extreme ends of the spectrum where one will find all kinds of radical, immoderate zealots with whom one has little in common. Hereafter, when I use the term libertarian I am defining it in a relatively moderate form that embraces freedom and markets, desires far less interference and regulation by self-serving politicians, but does recognise the role of the state in our lives.

Under that definition, I find libertarianism has the only genuine regard for a system that works for everyone, because it cares about all the people in the world, it understands that trade and competition are the main determiners of what works for human beings, and it is unbound by geographical borders and nationalistic preferences. Almost any sane mind wants a government to interfere in our liberties only when the benefits of their interference outweigh the costs.

To be a libertarian, I find, is simply to show that you understand the economic, logical, empirical and philosophical arguments regarding when it is good for the state to be involved and when it is bad. It is about understanding that there are vital thinking tools that people well-informed in economics have that most other people do not. These tools are roughly translatable as being the following 8 things that need to be understood but frequently are not.

1) Almost every action has tangible and intangible benefits, and tangible and intangible costs, and if you haven't considered all of those factors thoroughly you do not understand enough about what you're doing.

2) Just because there are good intentions and a perceived ethical stance behind a view or an action, this does not mean what you have is a good idea. In fact, quite often good intentions and a perceived ethical stance actually mask the reasons why many ideas are bad ones.

3) Just about everything in life is a trade-off, where something happens at the expense of something else (primarily time, money, and material resources) - and there is rarely anything you can do, or ought to do, that lies outside of this consideration.

4) If there is one thing that should almost never be interfered with it is the mechanism of prices that are dictated by the supply and demand market. Prices are not just sums that tell us the value of something, they are vital information-carrying signals that inform us of the outcome of billions of transactions throughout the world. No politician can know the market clearing price of anything better than the market knows itself.

5) The economic pie is not fixed, nor is it zero sum. If I have a slice of it, this does not mean it leaves less for you, because the economy can keep growing, creating wealth and value for both of us.

6) The principal drivers of human prosperity, increased well-being and economic growth are trade and competition.

7) Just as in the market of goods and services, tax is also something that also ought to be opened up to competitive forces.

(Note on 7: Just as shops and restaurants compete with one another for your custom, so too do governments of nation states in their rates of taxation (they would be able to do this more successfully were it not for the fact that so many people are under the misapprehension that society would be better if the rich were taxed more). Governments are competing with governments of other countries for foreign investment, where attracting more external workers and more capital investment from foreign entrepreneurs benefits the nation. People want to work and invest in nations where they are not taxed too heavily on their income and their investments, which is why sensible politicians will not tax too heavily).

8) To properly understand economics you have to understand incentives. When one person goes out to complete a transaction based on self interest, he (or she) adds a little bit of value not just to his own circumstances, but to every agent involved in the transaction (the seller, the transporter, the manufacturer, those mining for raw materials, and so on). Multiply that one transaction by the billions that have been going on every day in the past century and a half (in particular) and the result is the Smithian invisible hand mechanism that aggregated to all the increased prosperity and well-being the world has seen.

Understanding these 8 points provides the bedrock on which you can build pretty much your entire arsenal of economic understanding, political analysis and societal commentary. Virtually everything you need to speak rationally on any of those three things is bootstrapped by the wisdom of 8 points above. When I associate with the libertarian ethos, it is the above with which I am identifying when I call myself a libertarian.

But as I alluded to a moment ago, and this is where I am of a similar view to the ASI and the IEA, I certainly do recognise the important role that a state plays in society even if, as I covered in this paper, there are an awful lot of ways in which politicians distort and harm trade. Incidentally I do think there are several institutions and services that are currently state-provided that will one day not be, but in many cases the transition will likely be gradual, because it has to occur evolutionarily, not as a sudden change in the status quo.

Not only should it be acknowledged that the state (for now, at least) provides important functions in our lives - we also have to remember that people's decisions are affected by the information they have - and sometimes they need regulatory protocols to ensure they obtain that information about goods and services. So clearly, for this reason, being a libertarian doesn't mean adopting a 100% erosion of state influence.

Many regulatory laws are superfluous, but not all of them are. We need laws that protect factory employees from working in dangerous conditions unbeknown to them. If Jack is employing Jill and surreptitiously putting her life at risk due to faulty equipment or dodgy wiring that she could know about, I don't want Jill to be devoid of protection through the law. Nor do I want Jill to be a victim of trade description issues, or poor quality of product, or banking malfeasance - basically all the things that we as consumers wouldn't wish to be victims of due to asymmetry of information.

There are also some cases in which state regulation protects consumers from monopoly power, and also makes businesses accountable for their negative externalities. But by and large, with the qualities of the free market you are all but guaranteed (through price theory) to facilitate the most rational, incentive-driven allocation of resources possible, as well as minimising inequality, lifting masses of people out of poverty, and maximising the successful co-existence of humankind and the natural world.

The other thing you have to think about is the question of what kind of society you want to live in, and what kind of society is most likely to engender that. We can first ask which elements of daily living are most important, and then ask which political services are most important. So, for example, seeing what people are always saying they value, I would say off the top of my head regarding the question of which elements of daily living are most important, these are the following 7 things:

1) A country in which no one is unfairly discriminated against due to colour, gender, ethnicity or sexuality.

2) A country in which reason, logic, evidence and free enquiry are of primary value.

3) A country in which every citizen has enough food and a place to live.

4) A country where individuals are the rightful owners of their own lives and therefore have inherent freedoms and responsibilities

5) A country in which religious beliefs remained personal, and are largely kept separate from politics and legislation.

6) A country in which every couple can have a formal union with their beloved (either marriage or civil partnership) based on their beliefs and preferences.

7) A country in which free speech is afforded to its citizens, to the extent that (except for very extreme cases) anyone is free to say anything they want to anyone they choose.

As for the political services, a government should largely be focused on doing the following:

1)  Protecting our freedoms and rights through the rule of law.

2)  Administering justice.

3)  Providing a military defence for its citizens

4)  Lightly regulating the economy

5)  Providing all the services the public sector currently provides more effectively than the private sector.

What you may notice about the above is that as things currently stand the 8 qualities are the ones best served by our having a free and open choice-driven society, whereas the 5 that follow them are, for now at least, qualities and services that the majority of us are happy to be looked after by the government.

On that note, one also has to consider present perceptions against future perceptions. For example, as I hinted above, there are some services that the state currently performs in the present that markets will be able to perform better in the future. But naturally in some cases the transition will take time, and some libertarians are fine with the notion there is a time and a season for specific optimum changes.

To finish, I should mention that to the perception of many, libertarianism also comes with a stigma of being ethically questionable, as people are quick to accuse capitalism of being about selfish, uncaring pursuits of individualism, driven primarily by the greedy profit motive. This is both unfair and short-sighted. The truth is somewhat opposite: libertarians understand something that makes the left very uncomfortable - that it is the people themselves, rather like in a democracy, that decide how society progresses - it is bottom up, not top down - and this makes control freaks very uncomfortable. The reality is, there is no proletariat revolutionary class within the bowels of the free market capitalism - mere organs controlled by the body of the bourgeoisie - the people are in charge and always were, as Mises was shrewd enough to pint out in the 1940s...

"The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy."

The principles of the libertarianism I've described cannot therefore be immoral or uncaring, because its ethos is built on the championing of progress for everyone, not minority groups, which is what its opponents advocate (often without knowing it). We build our more formal ethics on our reasoning, but initially more so on our intuitions about instances that exemplify wrongdoing according to our conscience. These are the pivots around which ethical codifications revolve.

The free market, as regular readers will know by now, is literally the aggregation of all the world's mutually beneficial transactions. That's what it is in a nutshell. And by mutually beneficial transactions, we mean an act when both parties get a surplus from a transaction - that is, the buyer gets consumer surplus from the purchase, and the seller gets producer surplus from the same transaction.

The free market simply couldn't evolve into the complex multi-faceted nexus of connectivity it is now without the underpinning moral and ethical concomitants. However, given the up and running ethical substrate on which trade and competition can occur (the two biggest drivers of human prosperity), one should only desire government involvement in areas where the market doesn't already engender optimal outcomes - and that is the quintessence of my beliefs, however one chooses to label it.

You Voted For Failing Businesses

In a recent blog post I wrote about how our individual market decisions are what create wealthy people, and as a side-effect, in-country inequality. This blog post is also about our individual market decisions – it’s about how we collectively punish failure by the nature of our voluntary spending.

While it’s true that in the short term when businesses close or industries shrink the people directly involved feel the cost - for society as a whole it is good when inefficient firms go under because it’s society’s way of signalling that our preferences have changed.

The next time you’re thinking it’s bad news when a firm can no longer survive, console yourself with the fact that we democratically voted it to be that way with our buying habits, and that what it actually means is that a competitor is doing well at the expense of someone’s else failure.

We’ve probably all noticed how the newspaper industry has diminished in recent years as more and more news is disseminated online and through more numerous television sources. I happened to notice on Forbes the other day just how much it is diminishing with the following graph charting its decline:
 

As long as there is no foul play, and as long as industries aren’t being hamstrung by politicians, then every instance of failure is a good thing. It’s we the buying public that have decided the world got to a point where it had too many newspapers being printed, too many VHS recorders, too many fax machines and too many landline telephones. And that’s all fine and dandy, because the main thing the market is good at is changing its shape, pace and structure according to the aggregation of every mutually beneficial transaction that occurs in society.

Incidentally, I’ve often pondered whether the reason a lot of people are so averse to the market is because it is so proficient at dealing with failure. Many people are quite risk-averse and they are disenchanted by the nature of competition, which may be why they see the market as a cold and uncaring system, when in reality it's the opposite.

The other thing that may be a factor is that a lot of people have control freakery when it comes to society. They can't stomach a free society where individual transactions shape the landscape rather than rulers from on high. The human mind simply does not have the breadth and cognitive wherewithal to coordinate anything as dynamically complex as an economy – we have to be guided by supply and demand and the price-signals it engenders.

It is those signals that tell us about preferences for newspapers, twixes, comedy shows and mobile phones, and many people feel pretty insecure by the fact that billions of market choices based on trial and error are infinitely better at running an economy than any human minds that try to govern it.  

The World's Greatest Healthcare Plan?

In just about every economy I know of, there are numerous state-mandated distortions going on whereby normal market signals are being skewed either by being exaggerated or by being suppressed.

Because of this, people frequently get paid more than the marginal value of their labour, higher prices get passed on as costs to customers, as do lower prices as costs to providers (the medical profession - the topic of this blog - is perhaps the worst case in point), and the whole price system of value being attached to choices becomes distorted.

As well as all the other costs to society in the shape of lost value and forgone opportunity, what also happens is that people are given perverse incentives, which means when they are acted on there are all sorts of sub-optimal outcomes in relation to supply, demand, cost, quality, access and lifestyles.

Now it's fair to say that America's healthcare system has been in a bit of a mess for the past few years, with Obamacare proving to be far from effectual. For those unfamiliar with how it works, I'll try to summarise what I see with an analogy, where the people around the table are American citizens. 

There is a group of 7 friends sitting at a table with a big cake they are about to share. Obama's grand plan was to invite 4 other friends around to share the cake while at the same time promising that the 7 people's share of the cake wouldn't be any smaller. Obama carried on maintaining that the USA is a country of 10 or 11 people eating a cake and only 8 or 9 are paying for it, and thus he wanted the other 2 to chip in.

Both sides of the debate constantly seemed to be lacking two vital things; 1) The solution of making the cake bigger, and how to do it. And 2) The fact that there is more than one type of cake, and by inviting friends over you might have to change from a cake you like to one you don't. Moreover, it would be more fruitful for some of the critics (on both sides) if they learned the difference between health care and health insurance (Those who had a healthcare plan and were on board with Obama's vision probably thought those who were the most recent to sign up would get whichever leftover options were available).

Anyway, Donald Trump, who never seemed that keen on Obamacare has now, after meeting Obama at the White House, decided he might be interested in keeping some of the key provisions of Obamacare.

Given the foregoing, I thought you might be interesting in this proposed legislation for American healthcare, sponsored by a member of the House Republican leadership and a member of the health committee in the Senate - it is modestly titled The World’s Greatest Healthcare Plan. Read the whole thing, please do - but for a bullet-pointed summary, here are the major provisions of the legislation:

• It repeals all the ACA mandates and replaces current tax and spending subsidies with a universal tax credit that varies by age and geography, but is the same regardless of income.
• It ensures that the health care safety net will always be adequately funded, regardless of the number of people with private insurance.
• It allows Medicaid to compete with private insurance, since the size of the tax credit for private insurance is roughly equal to the federal contribution to a well-managed Medicaid plan.
• It allows employers to buy individually-owned insurance for their employees — insurance which they can take with them from job to job.
• It replaces all tax-favored medical accounts with a Roth Health Savings Account.
• It gives employers and employees new tools to control costs, allowing them to convert insurance benefits of marginal value, dollar-for-dollar, into take-home pay.
• It denationalizes and deregulates the exchanges and subjects competing health plans to a type of “free market risk adjustment.”

Here is a summary of the major provisions of the legislation, with links to short white papers explaining each of them. Here are 25 problems in the ACA that the legislation is designed to correct. Whether it would still be beset by many of the political problems that plague domestic healthcare plans is still the big question. But it's an interesting proposal to look over - particularly if you're an American reader.

Let Me Tell You Your Secrets....

Hey, my dear reader, I care about you and feel I know you quite well. Let me tell you some of your secrets. You have a great need for other people to like you; you have a tendency to be critical of yourself; you have a great deal of unused capacity which you have not turned to your advantage; you have found it unwise to be too frank in revealing yourself to others; your sexual adjustment has presented problems for you; you prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations; at times you have serious doubts as to whether you have made the right decision or done the right thing; and you pride yourself as an independent thinker and do not accept others' statements without satisfactory proof.

I also know that while you have some personality weaknesses, you are generally able to compensate for them; that you are disciplined and self-controlled outside, yet you tend to be worrisome and insecure inside; at times you are extroverted, affable, sociable, while at other times you are introverted, wary, reserved; that some of your aspirations tend to be pretty unrealistic; and that security is one of your major goals in life.

Impressed? Feel like I know you personally really well? Well please don't be. I mean, I'm sure I do know many of you pretty well, and some of you better than you think J, but all those things I wrote above are actually part of a psychology test that Bertram R. Forer gave in 1948. It was called his Diagnostic Interest Blank - and it was to a group of his psychology students who were told that they would each receive a brief character vignette or profile based on their test results. One week later Forer gave each student a supposedly personalised sketch and asked each of them to rate it on how well it applied. In reality, each student received the same sketch, with the traits I listed above.

Fairly obviously (I'd hope), what is most noticeable about the traits is that they are far from specific to particular individuals - they are general traits and behavioural patterns that are seen in pretty much all humans. It is a natural human tendency to "prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations" and to "have a tendency to be critical of yourself". As an individualised profile, there is nothing special about the reading at all.

As anyone who has scoffed at astrology, fortune telling, mediums who claim to contact the dead and crystal ball gazing will know - the Forer effect (also called the Barnum effect) is a cunning form of subjective validation which can get credulous people to part with their money by being told things they either consciously or subconsciously want to hear.

Now the thing is, part of the motivations for writing my Blogs, and why I have to be hard on people sometimes, is because the world of elected politicians, media journalists and newspaper columnists is awash with Forer effects designed to manipulate the public into embracing their policies, reading their newspaper articles, buying their books, and so on.

And it's no coincidence that the variables most strongly influencing the Forer effect in gullible customers are very closely similar to the variables that underwrite the misleading political narrative that so many people fall for - namely: the subject believes that the analysis applies chiefly to them and their life conditions; the subject too easily defers to authority of the speaker without much critical evaluation of what's being said; and lastly, the subjects prime themselves to narrowly focus on all the positives they hear while blocking out or not considering the negative connotations (as per Bastiat's Seen and Not Seen, which forms the basis of most economic and political errors of judgement).

The Trump election - which I'm not going to go on about repeatedly in Blog posts - provides an interesting window into this effect in action, but also with a strange twist of tonic. On the one hand many of the Clinton supporters were carrying on being naïve to the subjective validation her establishment kind comes out with. While on the other side, there appeared to be a mass rejection of the establishment Forer effect, but by almost equal measure a mass of wide-eyed anti-establishment suckers who ended up electing a complete moron like Trump by falling for his subjective validation. Oh how the world needs an intellectual revolution right now!

 

 

On Why Those Polls Keep Misleading The Masses

The polls keep drastically confounding expectations, and lots of people want to know what's going on. How can something as relatively straightforward as asking people which way they will vote and collating statistics on that basis repeatedly turn out be so difficult? Like the weather, it should be impossible to nail it to an exact science, but surely the indicators should be more reliable than this, shouldn't they?

I don't want to claim to have a sixth sense - it's probably just good intuition, but the last three big political events have been cases where I felt confident of the result, even though the pollsters looked to convince me I was wrong. The majority seemed confident that Ed Miliband's Labour would win more seats than David Cameron's Conservatives last May, but I felt quite confident that the public wouldn't buy Miliband's message. Ditto Brexit - even though just before bedtime on the eve of the results I felt confident that we'd vote to leave the EU, the pollsters and bookmakers declared it highly unlikely. And now the same with Trump, who was a 5-1 outsider a few hours before the result, but who confounded majority expectations and won the Presidency. Assessing the feeling in the run-up, this wasn't much of a surprise to me either.

My record is not perfect, however - for quite a while I remained unconvinced that rank outsider Jeremy Corbyn would win the Labour leadership election the first time around against what I thought were more mainstream candidates (Andy Burnham, Liz Kendall & Yvette Cooper) - but I was completely wrong about the extent to which hoards of people were ready to vote for someone so far on the hard left.

Given that society can be divided into far more groups that many people ever do, there are clearly important sub-sections of society that are not getting captured in the polls. And anyway, populations are very large, and at best polls are only a small sampling of a demographic - it's difficult to take the pulse of the electorate if you place the measuring instrument on the sole of the nation's foot.

Polls are also seductive to people because many find it difficult to accept open-endedness and uncertainty in life. People are tendentiously drawn to simple stories with binary subplots that fit their preconceptions. The notion that things like elections and referendums are often beyond the scope of human predictions is something that few people wish to embrace, which is probably why the egoism of 'expert'-based prediction hangs around.

What's evident, aside from how polls fail to capture so much public opinion, is that polls are unreliable at capturing the following sets of society: the set in which people have been unsure how they were going to vote, or been unwilling to say, or been susceptible to an unexpected change of mind, or not been honest or open, and also the set in which people for whatever reason thought they'd vote one way but ended up not voting at all.

We have to face up to the fact that there is a huge epistemological gulf between the pre-voting opinion polls and what people have actually voted for on the day. The only sure-fire opinion poll of reliability is the result itself.

Finally, what would help people predict with greater accuracy would be an increased understanding of what the societal landscape is actually like. Taking the UK voting population as a whole, they can be divided roughly into 5 groups.

Group 1) Older people who think the nation needs a big state to govern its people, and like (within reason) the kind of governance we have at present.

Group 2) Younger people who think the nation needs a big state to govern its people, and like (within reason) the kind of governance we have at present.

Group 3) Older people who think the nation needs a big state to govern its people, and dislike the kind of governance we have at present.

Group 4) Younger people who think the nation needs a big state to govern its people, and dislike the kind of governance we have at present.

Group 5) People (older and younger) who think the nation does not need a big state to govern its people, and are gradually trying to influence change in a more libertarian framework of thinking.

Group 5 is currently the smallest group but is also quite a rapidly proliferating group. They are the people who would likely vote if economically savvy pro-market candidates came along, but may not be inclined to vote for the kind of politicians we have at the moment. Group 4 is a large group and is also a rapidly proliferating group. It consists of conscientious, left wing, green-friendly social justice warriors who want a big change of personnel in government. They want more of the same size government (bigger if possible), just not this kind of big government. This group, along with group 3, also feel quite stridently that inequality is a huge problem, that the government screws over the poor, and that the systems needs a complete socialist revolution type of overhaul.

Groups 1 and 2 are the two large groups (with group 1 being a lot larger than group 2) that help perpetuate the status quo by being somewhat complacently accepting of the system as it currently is, and not very much into revolutionary politics. These groups, in particular group 1, consist of lots of people who just vote one way out of habit, dyed in the wool allegiance, or just blithely out of a sense of duty to partake in democracy.

Trying to predict outcomes of elections and referendums involves getting a good grasp, not just of these 5 groups, but also of the multitude of potential sub-groups into which they could divide in the run up to voting day. That's why, once you offer the population a Remain or Leave vote in the EU Referendum, and then in the build up throw in all kinds of complications like reliability of claims, forecasting the cross-national outcomes of either decision, economic projections related to trade deals, immigration and market fluctuations, it becomes a very intractable business to predict - and ditto the UK General Election and the recent Presidential Election.

The Deliveroo Riders Should Get On Their Bikes With This One....

I published the following article on the Adam Smith Institute blog yesterday - but there is more to add at the bottom:

In the wake of the recent tribunal which declared that Uber drivers should be classed as employees with rights to the minimum wage, holiday pay and so forth, we read today that something similar is happening with Deliveroo, as riders seek to unionise and gain similar workers' rights as Uber.

Deliveroo is a company that provides a delivery service on behalf of thousands of restaurants across the country, and it classes its riders as self-employed "independent contractors", on a pay rate of £3.75 per delivery.

It is true that under such conditions they lack some of the regular workers' rights many of us have, such as paid holiday and the right to the minimum wage, but it's incredibly short-sighted to assume that that means there is a problem needing fixing - after all, by equal measure, Deliveroo contractors also enjoy some working benefits most of us do not; namely, the flexibility to work the hours that best suit them, and as little and as often as they wish.

Rather like how the decision made against Uber was so drastically wrong, the same will apply here, because there is an abject failure to understand that in a dynamical and diverse market, a 'one size fits all' imposition frequently harms little niche elements that are doing perfectly well as they are.

The ability of Uber and Deliveroo workers to be classified as flexible, autonomous independent contractors ostensibly running their own businesses as available drivers and riders will be, for many, a much more beneficial set-up (ditto numerous others on zero hour contracts) than the myopic imposition of terms and conditions that would no longer favour their flexible working patterns.

When left alone, firms like Uber and Deliveroo are beneficial to the economy (for employer and consumer) precisely because they involve conditions that those who favour them will take advantage of, and those that do not, won't. Even under the new terms of £4.25 per ‘drop’, most Deliveroo cyclists are earning significantly above the minimum wage as the average worker makes two deliveries per hour, equating to £8.50/hour.

It's hardly rocket science; people who want to earn the minimum wage and have holiday pay and less flexible working arrangement will not be Uber drivers or Deliveroo riders. On the other hand, people who want to be self-employed contractors under the flexible conditions offered by Uber and Deliveroo will. That is the very nature of a free market.

Not only is this far from rocket science, there is even a quote in the article from one of the riders that with closer examination would provide him with the answer he ought to be looking for. The Deliveroo rider laments that "We don't get an hourly fee, so that means at times when there aren't that many deliveries and it is not that busy, we can be waiting for up to an hour for a delivery without getting paid a penny." - which really ought to give the game away.

If only this young man could see that the problem with his campaign is heavily hinted at with the words he utters - for if there are times when it is not that busy, and riders can be waiting for up to an hour for a delivery without getting paid a penny, it's not exactly going to help out the situation by forcing Deliveroo to shell out a state-mandated £7.20 an hour to all its riders, is it? All it will do is skew the market value of the Deliveroo rider operations and harm all the people who benefit from riding for Deliveroo under the present conditions. 

 

And then, we learn that Labour Shadow Cabinet MP Clive Lewis uttered this little gem - and I mention it only because this is the man who is currently the bookmakers' favourite to be the next Labour leader:

"They need to ask themselves if they have a sustainable business model if they have to exploit their workers like this in order to be viable"

Oh dear, this is infuriating. Who the heck is Clive Lewis to tell them whether their business model is sustainable, or to declare that workers freely involved in a contract are 'exploited'? He's so short-sighted and/or so arrogant that he cannot even entertain the notion that, actually, society is full of people in roles that suit their needs well. That is why the vast majority of Uber drivers - the people the likes of Clive Lewis are deciding on their behalf are 'exploited' - are unhappy about the ruling.

And as is usually the case, what this opposition model overlooks is all the hidden costs - because it never factors in all the would-be Deliveroo riders who won't now work if this ruling goes ahead. An individual – an actual person with a mind and a will – wants to be a Deliveroo rider and is willing to offer his or her services to make some money under the conditions they favour. No one forces this mutually beneficial transaction, but that it happens shows that both agents are better off.

Yet socialists like Clive Lewis are so averse to people having their say in how they conduct their business that they want to wilfully prevent a sub-section of society from enjoying similar benefits, yet sell the idea as though they are trying to help them.

Of course it's true that some Deliveroo riders would go along with Clive Lewis, but their motives are highly dodgy - it's because they think a state intervention can help them earn more than the marginal value of their labour. Alas, it's a nice trick if you can pull it off, particularly if you don't care about the people providing the means by which this arrangement benefits both parties, or about the many intangible losers who don't show up on the radar but who've had an opportunity denied them.

 

Dear Remainers, One Day You'll Be Relieved Brexiteers...

Even though pretty much everyone is behaving as though pretty much everything has changed, the reality is, pretty much nothing has changed. The EU referendum was always an advisory result that needed to be ratified by Parliament, so Theresa May was never going to be able to invoke Article 50 and start formal exit negotiations with the EU without the House of Commons vote taking place.

And apart from the odd disgraceful public servant who should be shown the door,  the majority of MPs will honour the referendum and vote leave, even if they are in constituencies where remain has the majority vote. The reason being, MPs that defy the will of the British people are unlikely to survive after the next general election, which means individual MPs are more likely to respect the referendum result.

As for whether it's a hard, soft, clean or messy Brexit, well the reality is, it probably won't make all that much difference long term, because the mid-to-long-term future of the EU is about as sticky as a lorry full of treacle spilling its load in the middle of the channel tunnel.

Here’s the thing, it’s fairly straightforward. Anyone with even a sketchy understanding of the very basics of trade and competition should know that any country that leaves the EU’s protectionist bloc will be better off in the medium to long term (there are usually short term shocks and tumults with radical breaks from the status quo, so don’t let it fool you).

This can be understood by anyone who understands why artificially constructed free trade inhibitors make the people within the border worse off as well as those on the outside (something I also covered in the articles attached to the above hyperlink).

You see, this is the first generation of people in the world's history that has had access to the entire world's knowledge, and moreover the ability to communicate so freely at a global level. My prediction involves two main things happening: 1) wider understanding of how trade and competition bolster people's economic well-being, and 2) wider understanding of how politicians retard this process.

 

Both are likely to happen at some point in the future - it's hard to say precisely when - but what this means is that the EU is being allowed to get away with its stultifying practices only for as long as it can continue to not get found out by a larger number of people.

What they have been getting away with is a socialistic protectionist bloc set up and run to favour its two largest single currency member states - Germany and France. It should be remembered that the European Union was originally a creation of American post-war foreign policy as a bulwark against the communist forces of the Soviet Union. The American plan, tacit though it might have been, was to keep European nations in check against ideologies it felt were threatening or economically repressive.

It was a very unnatural political union. As time went on the EU trade bloc became more and more evidently a sovereignty-stripping monolith used to gradually mould other EU members into the Franco-German line, guarding them against competitive forces and globalised free trade. In other words, the main beneficiaries of EU policies have been Germany and France, its two biggest economies, both having their interests best served by the rules they create.

For most of that time France has been like a microcosmic version of the union to which it is conjoined - protectionist over its own citizens, whereby local French connections are encouraged, with Germany, being the EU's strongest export country, having the most to gain from the EU and the most to lose by its gradual dismantlement.

While all this has been going on, numerous smaller European nations have lost out big-time by supplanting their own national currencies for the Euro, thereby ending their ability to competitively trade their currency against other currencies, and adjusting their fiscal and monetary policies in accordance with market signals. Not to mention that Eurozone nations were able to borrow money far more cheaply with the single currency than their with own currency, which, as is plain for all the world to see, has been an economic disaster for them.

Even if we put aside all the other things that are drastically wrong with the EU, the current situation is rather like this. Germany is like a big company that wants to sell some of its premises to smaller businesses (Ireland, Cyprus, Greece, Portugal and then followed by Italy and Spain) but will also willingly loan the money to the buyers in the hope that they make enough of a success of their businesses to pay them back, but do so by rigging the terms so that debtor submission was always a highly likely culmination - one that domestic politicians surreptitiously pass on to their taxpayers.

But, alas, because of the failing economies of those in debt, paying Germany back is hugely problematical, with the inevitable outcome being the European Central Bank trying to keep domestic banks' heads above water by printing more currency and attempting to hold it in spite of the numerous Eurozone liabilities, not to mention the huge public sector expenditure crisis that's hitting the whole of Europe (including the UK) and will only get worse as domestic governments try desperately hard work to out how to untangle themselves from public sector knots without getting strung up by the electorate.

Mark my words, and remember where you read them, because quite simply, very few people are telling you the truth about the future of the EU and how it is going to be torn to shreds as more and more member states look to follow us in tearing ourselves away.

You may think it's hard to imagine the EU not existing in a form similar to its current set-up, but radical future differences are hard to predict. And one only need imagine how many radical changes someone from the 60s or 70s would have failed to predict about the 40 or 50 years that followed to get an idea of how radically different our future Europe can be. The day when even the staunchest Remainers thank their lucky stars they are not in the EU will, I'm confident, be a reality at some point in the next decade or two -  much like how those that used to argue fervently for the UK to adopt the Euro are now doubly glad we didn't.

Try Before You Buy: The Opposite Outcome To What You May Expect

I’ve seen this kind of stat before, but I happened to stumble on this page - an article informing us that in the United States a couple that does not live together prior to getting married has a 20 percent chance of being divorced within five years, whereas if the couple has lived together beforehand, that number jumps to 49 percent. In other words, a couple is nigh-on two and a half times more likely to divorce if they live together beforehand.

Clearly all the indication is that the try before you buy method doesn’t guard against the marriage ending - quite the opposite it would appear. If you’re still in your nascent stages of economics, you might be tempted to ask the question: what is it about living together prior to marriage that increases your chances of being a divorcee? But a better way of doing economic analysis is to first realise that it may not be the living together premaritally that increases the probability of divorce, it may well be, and in fact almost certainly is, more distal factors associated with what kind of people live together before marriage and which do not.

For example, many Christians who would not live together before marriage for faith-based reasons are likely to be the kind of people that take marriage seriously enough not to divorce. By equal measure, many couples who will easily disregard any (admittedly declining) social norms about pre-marital co-habitation will probably just as equally disregard any (admittedly declining) social norms about the stigma of divorce too. A corollary of this is that if you are the sort of person who easily disregards social norms, you are perhaps more likely to be the sort of person who more easily disregards niceties and mindful considerations that keep a marriage safe from divorce.

Work Out What You Want To Say And Find A Fact That Sounds Like You're Saying It

Open any left wing paper and on a weekly basis you'll be overrun with stories of societal injustice where we are told the income gap between rich and poor is disastrous, that the rich get rich at the poor's expense, that real incomes have stagnated for the majority, and that the poor have been getting poorer.

All of those claims are untrue, but the left wing newspapers are regularly providing us with skewed or bogus statistics to show why they think they are true. A puzzling question in scenarios like this is to consider whether these distortions are cases of economic naïveté or cases of mendacity where they try to be creative with the facts in order to get people to believe their fabrications.

It's probably a bit of both, and as such I will tell you where I think they are going wrong. One category error here is in reading too much into statistics without trying to understand how those statistics actually relate to the dynamical nature of human beings.

Take the statistics we often see relating to income inequality. The first thing to point out is that those statistics begin with a false premise, because there are actually no static income categories - people move around in different categories depending on where they are in their life stage (age being a big determiner of where you are in your career). Secondly, different statistical groups have different numbers of people, which also skews the data.

For example, it is totally possible for the richest people to receive a higher share of the UK's overall income yet still see their personal incomes fall. This is not a contradiction, it is simply the case that some people were in the top 1% and then dropped out, and others increased their income at the expensive of those in the top quintile. Equally, it is possible that the share of the income going to those in the lowest quintile can decline even though those in that group see an increase in their own personal incomes.  

To highlight another case where statistics deceive, let's take for example a claim I saw in the Guardian this week about households not feeling the benefit of economic growth. The writer made this claim by asserting that there has only been about a 6% increase in household incomes in the past 40 years. As you can imagine, the people writing in the comments section were outraged.

The statistic though is deceptive because household income is a misleading way to gather data. What you should look at instead is real income per person, where you'll find it has risen by about 51% (or something close to that last I checked). How can both those stats be true?

Well, what's been happening in those 40 years is that average household numbers have dwindled in terms of individuals in a household, whereas number of households has increased as more people have bought their own place and moved out of the family home. The increase in the average number of persons per household is caused by increased economic growth. That is, people move out and become home owners because they can now afford to do so. Complaints about household stagnation are really complaints about individuals doing better.

Being a regular Guardian reader, but not on their side in most economic arguments, I have to find myself wondering why you will never see a Guardian writer talking about the positive parts to the human growth story. When they wanted to talk about Labour's term in office in 1997 to 2010 they would usually use per capita income statistics to talk of its successes; whereas when they wanted to criticise Cameron and Osborne they would usually use household income statistics when they wanted to depict failure.

Not only is it the case that increases in real income enables more people to live on their own, and no longer with their parents, or house sharing - what we have is a statistic that actually results from increased real incomes but yet can be used to look like stagnation when describing households. A reduction in the number of people living in a household will bring down average household income when better off individual start their own household.

If the Guardian printed something along those lines their piece wouldn't technically be inaccurate, but it would be wholly misleading. Suppose there are, as I think there are in America, approximately 40 million people living in households whose income is in the bottom 20% and 65 million living in households in the top 20%, measuring income inequality is going to mislead.

If different groups contain different numbers of people, a stat about income inequality concerning the bottom and top percentages is deceptive. Moreover, in a changing time when people get paid more for their work, those that either don't work or work part time will fall behind those that work full time. But it goes deeper, because there are other factors that contribute to income inequality that are not merely society's injustices, they are simply the result of billions of individual choices that people have made.

Remember even St Paul in his letter to the Galatians declared that we do actually reap what we sow as well - not that we should hold back from caring for and helping those less well off than us, but that actually society is not a melting pot of injustices, but rather it is an aggregate of millions of people reaping what they sow in terms of millions of life decisions made every year of their lives.

As I've said before in a previous blog or two, the biggest determiner of how well people are doing is work. A household that has two workers in it will usually be doing better than a household with one. A household with no workers will be doing worse still. Last time I fact checked, the top 20% of households have four times as many workers as those in the bottom 20%, and more than five times more in full-time work. That is going to make a huge difference - and it is one of the most disingenuous things we do to say this doesn't matter.

Alas, Ken Loach, the director of very enjoyable films such as Kes, Riff-Raff and Raining Stones, treated us to a litany of these basic category errors on Question Time this Thursday - demonstrating to the entire country that while he's a good movie-maker, he is basically clueless about how economies work, and blind to how individual choices eventuate in the societal outcomes we see.

 

Income inequality is caused by people contributing different amounts to society, and that is reflected in the wage differentials. The left are always going on about how unfair society is because there is so much income inequality. But even by the time we reach puberty we ought to have worked out that this is the opposite of the truth. A society that has unequal income distributions based on having unequal societal contributions is hardly one that ought to be called unfair - it is the playing out of what Paul said in Galatians.

Yes in spite of this, the very notion that inequality is caused by some contributing a great deal to society and some producing considerably less is scarcely mentioned, which is surprising because every person reading this will know of people to whom both examples apply.

Those in the bottom 20% of earnings not only have far fewer people in work, they have fewer skills and less education with which to contribute as much as the top earners to society. The bottom 20% will have far fewer university graduates and people with college qualifications than the top 20%, and these are important statistics that demonstrate not an unjust society, but one that is a lot more just than many care to acknowledge.

Moreover, that's not quite the end of it either, because as well as the Guardian's and Ken Loach's mendacity in skewing the narrative, income inequality stats are quite naturally misleading in other ways too. For example, they omit the welfare received by those in the bottom 20%, which amounts to substantial benefits to which the recipients contribute nothing. In fact, it may shock you to know, but the bottom 50% of earners in society pay only about 5% of the total tax generated.

Last time I checked, transfers from the government to the welfare recipient accounted for around 78% of resources for people in the lowest quintile. Not only does this mean we live in a society in which the rich heavily subsidise the poor; it means that the inequality statistics that are always appearing in the social commentary of the left are based on just 22% of the lower quintile's income - their earned income, where the rest constitutes handouts.

Another popular way to underestimate growth and overestimate inflations is to refer to a price index to make your case - the most popular one being the consumer price index (CPI). It's easy to use the consumer price index to focus more heavily on the lower prices of the recent past (thus flagging price increases) and focuses less heavily on the higher prices of the recent past (thus overlooking price reductions).

When you go to Tesco and come away happy that your bananas and your cereal and your flaxseed were all cheaper than last month, do you honestly think that those reductions came from nowhere? Had you bought grapes and tinned fruit and fresh fish you might well have found that you had paid more than last month. Only a fool would focus on the goods they happen to flag as being reduced and naturally assume that Tesco’s net price index was lower than last month. 

It’s another easy way to create a false impression by only focusing on one aspect of the situation. You might be perturbed by price rises if I only told you about the increase in price in train and bus fares, newspaper obituaries, postage stamps, and chocolate bars over the past 25 years. Less so if I only told you about mobile phones, computers, media players, and most household electrical goods (televisions, fridges, freezers, microwaves, washing machines, cookers, etc).

That is what the consumer price index does – it focuses most heavily on the things we used to get cheaper and overlooks all the things we used to pay more for. It is impossible to present a meaningful value index that encapsulates all elements and is without bias. Even a totalised economic price index would still be devoid of many factors that are related to good consumption – pleasure, utility, happiness, and well-being are four examples.

Moreover, as will be pointed out in the early chapters of many economic text books, analysis of inflation must also factor in changes in products that are concomitant with price increases. The most obvious example is cars, which are more expensive these days, but also full of features that would have been considered a luxury a few decades ago (I remember as a young boy being fascinated by a neighbour's new Ford Sierra because it had electric windows).

Think back to when cars were first prototyped and think about the vast progressions since those early days. Not only have cars become safer every year, they have improved their speed, their efficiency, their technology and their luxury, as well coming equipped with alarms, air conditioning, satellite navigation systems and CD players (these days it's actually now an iPhone played through the car stereo with an auxiliary port).

Cars that used to be luxury are now standard and affordable for the majority, and this applies to laptops, mobile phones, video cameras and similar such things. Also someone of today has access to all the world's knowledge, access to the most up to date research, countless public services benefits that were once inaccessible, and communication with the world's most developed countries.

Most of the taxes paid are by people with an above average income, and many with a below average income are receiving transfers of wealth from the top downwards. Statistics about income greatly exaggerate the differences in standards of living, particularly so nowadays. Lefties have a tendency to exaggerate what Jack has and understate was Jill has, to construct fallacies of injustice.

I think a lot of the problem is that people tend to assume that when people get rich they do so at the expense of others getting rich. But this is to fall for the fixed pie fallacy. Think about it; if having billionaires was detrimental to the rest of the population then America would be one of the poorest countries in the world, as it has over 500 billionaires.

But the wealth of the richest doesn't occur at the expense of the poor - just the opposite - it helps create wealth for others in the population. In fact, last I read in Forbes the number of billionaires and millionaires in the world began to decline, which indicates that more people are seeing their real incomes go up. Just over 50% of American households have incomes of $50,000 and higher, whereas fifty years ago the number of households with the equivalent purchasing power was less than half that.

A lot of people who are statistically recorded as being not well off in terms of income are actually some of the most well off people in the land - wives of high-earning husbands, pensioners who have retired, but who own their own home and have assets that do not count as income; university graduates who are going to go on to earn a good living, young adults who are still in the high income family home, and young professionals at the start of their career who've yet to start earning what their qualifications and training will see them go on to earn.

All of the above will fall under the Guardian's statistics as being low earners, because statistics don't differentiate between the people who are going to have low incomes for much of their lives and those that have not or will not. Many of the people whose incomes are in the bottom two quintiles in the early parts of their working life will go on to be in the top two quintiles in the next 10 to 20 years of their working life.

For this reason, income inequality measured at any given time is not representative of income inequality over people's lifetimes. Nor is it representative when huge cash transfers from the government are omitted, nor the large taxes paid by the higher earners, nor the wealth of pensioners and the future wealth of the young but well educated post-graduates. The rhetoric from the media-celebrity left is all a bit of a mess really, and unless more people in the country stop encouraging them, wise-up and learn some of the basics, they won't grow out of it anytime soon. 

In failing to admit these truths, the left are letting down the people whose causes they are purporting to champion. While they assert that the poor are victims of injustice and that through no fault of their own society has placed roadblocks in front of their path to success, they gloss over many of the actual reasons why some do less well than others.

In other words, in many cases (although not all cases, of course) what those falling behind need is not so much a character embellishment but a reality check and a few home truths about the decisions they've made. I don't mean we should turn into a society that is judgemental towards those who've made a series of bad life decisions - but to do as the left does and not only fail to acknowledge these things but also pretend they are not there by writing their own hackneyed, distorted version of the reality, is helping nobody.

Saying Britain Is Overcrowded Doesn't Make It True!

To those who assert that Britain has reached its capacity on how many more people it can fit in - it's just not true! Last I heard the UK National Ecosystem Assessment (NEA) worked out that the proportion of England's landscape that is built on is a mere 6% (in fact, once you include parks, allotments, and domestic gardens into that equation, the actual figure is more like 2.27%).

Or to put it in an even more compelling way, excluding parks and gardens, if we were to quadruple the size of every city, town and village in the UK, it would still be the case that just over 90% of UK land is not urbanised.

Now obviously I'm not saying that every bit of non-urban land can be built on - there are important areas of natural beauty, there are mountains, rivers, canals, lakes and reservoirs; and there is important land for farming, horticulture and silage, but the mere suggestion that the UK is overcrowded, and that we are full, is frankly ludicrous, and ought to be put to bed right away!

As I explained in a past Blog post:

"Regarding overcrowdedness, the upshot is, rural areas are quieter because fewer people like to live in them - and house prices are very expensive in Central London and Manhattan because more people want to live there.  Its simple logic - the reason London has 8.6 million people and rural towns have only a few thousand is because more people prefer to live in London than they do rural towns. The reason being, not only is there is a greater abundance of the aforementioned benefits in more populous areas, there are also better career prospects, higher salaries, better nightlife, greater choices of restaurants, a richer choice of entertainment, more tourist attractions, better public transport, greater diversity of people – the list goes on. 

In terms of probability, the highest number of complainers of over-crowdedness will most likely come from a highly populated area, which probably explains why to them the UK feels overcrowded. Most people who pontificate on overcrowding are likely to be pontificating from a vantage point of high population density. The people with the highest probability of feeling an intense population density are those who live in the densely populated areas. For example, if city x has 7 million people and a village y has 1000 people, and only x and y exist, there is only a 1 in 7000 probability that you don't live in city x.

Let's get one thing straight, though - the UK is not overcrowded. The mistake people are making is that they are trying to average population density of people instead of averaging over square miles. You can't get a proper picture of the UK's people to area ratio by counting how densely populated a populated area is - the only way is to assess how densely populated the average square mile would be when considering each square mile as a weighted average of total population and total area. A tube station in the rush hour can be overcrowded; so can a concert venue without proper door control - but take a trip around the UK by plane and look down, and for the most part you won't see crowds of people, you'll see fields and woodlands.

The rate of urban areas in relation to square miles is vanishingly small - there is potential for literally millions more people living in the UK. Of course, just like all sensible immigration policies, a nation must ensure it has the schools, hospitals, roads, etc to support more people, but given the myriad qualities and benefits one distils from living in places like London, that ought to be something that's greatly encouraged.

It certainly is the case that in some areas of the UK the infrastructure hasn't quite kept up with population demand, but once you accept the general maxim that more people means more cultural and social benefits, it's easy to see that inadequate facilities does not mean the nation is overcrowded, it simply means that the UK infrastructure has not progressed conterminously to facilitate the social and cultural benefits that come with an increased diversity of people."