Ministers Confusing Themselves With Parents

Sometimes I can't believe what I read: this time about government ministers wanting to regulate how long children spend on the Internet. It is not politicians' job to run the country in loco parentis - so even if it is the case that children are spending too much time on the Internet, this area is one for the parents to regulate, and parents only, not the state. But illiberal nannifying aside, I'm not even sure that this is much of a concern in the first place - in fact, the intention may be rather misplaced.

As it happens, I saw one or two pictures doing the rounds in recent weeks, lamenting the fact that kids have forgotten how to go out and play because they are over-consumed by attention to digital devices. I've no doubt there are conditions under which that's true, but I think the narrative that kids are missing out on playing in the woods because of their iPads may be mistaken.

When I was a boy I played out with friends; on the swings and slides; on skateboards, on bikes, even at being ninjas. If I'd grown up with an iPad, and the entire world's knowledge readily available at the touch of a button, the outdoor activities probably would have been less alluring to me.

Don't get me wrong, it can be fun playing outside when you're young - and no child ought to be at a computer for too many hours a day. But I think it is a misjudgement to assume kids are missing out on enjoyment because they are indoors on digital devices rather than outside playing netball or climbing trees.

And surely, if children found more enjoyment playing outside than on their digital devices, they would spend more time outside. Maybe when we were kids we played outside because that's the best we had - and maybe now there are more options, the outside playing time doesn't satisfy quite so much when compared with the alternatives.

It's equally likely to be true that as material progression occurs, attitudes change relative to expectations. A Christmas stocking filled with 1970s presents would disappoint a contemporary child to about the same extent that it would elate a 1940s child. Older people still find satisfaction in listening to the radio and watching scheduled TV programmes with adverts. Younger people have been accustomed to instant downloads whenever they want something.

I like television; I like films; I like reading books; and I like going out - but I find my juices run out on those things quicker than they run out on being on my computer, with its heady mix of writing, debating, surfing and entertainment - and that is probably true for many younger people too. They don't do many of the things their parents did, because they don't have to. And in all likelihood, their children and grandchildren will have ways of entertaining themselves that will make today's iPads and gaming consoles seem quite prosaic in comparison.

 

Labour Hits Turbo On The Stupid-O-Meter

I've not held back on my criticisms of Labour's madness over the years - but this latest bout of intellectual and empirical insanity truly has to the worst idea they've ever had the gall to float in the public domain. In fact, in terms of political policy, I'm going out on a limb in saying that, from memory, it is probably the worst idea I've ever heard from politicians - equivalent of wanting to fine unicorns for stealing flowers from the bottom of the garden.

The latest hair-brained idea from Labour is to punish firms for not closing sex pay gaps. Apparently, under a Labour government, and driven by shadow equalities buffoon Dawn Butler, firms will have to prove they are taking action to close the pay gap or face a fine.

They will need lots of luck finding such a thing, because if reality ever does kick in they will discover that there is no sex pay gap. It is illegal to pay women less than men for doing the same job. The Equal Pay Act of 1970, the Sex Discrimination Act of 1975, and then later the further codified Equality Act of 2010 all protect workers from unfair discrimination if their remits are the same.

What does exist is an earnings gap - which is a statistical weighted average based on the life choices men and women make, and the numerous things that comprise the differences in terms of personalities, aspirations, wants and life choices. An earnings gap is precisely what you'd expect to see when men and women are free to make decisions that suit themselves and their families.  

So this is both a non-existent problem, and worse, a non-existent problem that even if it were a problem would not be the fault of employers, much less something for which they should be penalised. In what is turning into a very long list, this is surely the very worst example of half-witted politicians misdiagnosing a problem, and then positing a truly illiberal, wholly asinine solution to it.

 

 

Theresa May Can't See The Wood Huts For The Tree-Houses

Young people without family wealth are "right to be angry" at not being able to buy a home, says Theresa May. She is right, but alas, she neglects to tell the whole story - the part where successive governments, including hers, have played a huge part in this problem is the real reason prospective home owners should be angry.

Suppose you actually want to help the buyers of a specific product like housing - the last thing you should do is help make it a sellers' market. A sellers’ market is an economic situation that hands advantages to sellers over buyers, and this is the society to which young people have been accustomed.

House owners hope the housing market will be a sellers’ market when the time comes to sell their house, and house buyers hope the housing market will be a buyers' market when they are ready to get on the property ladder.

Governments who advocate strict planning regulations in effect support the state-mandated creation of a sellers' market, while at the same time they kick many prospective buyers' feet away from the first rung of the property ladder.

Basic economics should inform our politicians that if demand is high but supply is restricted, then prices will rise, making housing unaffordable for more people. So long as politicians do not interfere with prices, they will tend to adjust so that the quantities demanded and quantities supplied are more or less in equilibrium.

Theresa May is not stupid - she is expressing phoney outrage while keeping quiet about the fact that bargaining inequalities in the housing marketplace are creating a shortage. Currently the amount of housing demanded by buyers is greater than the amount supplied by providers; and prices will fall only when restrictions are relaxed so that the amount demanded by buyers is equal to or less than the amount supplied by sellers - when there is more of a buyers' market and less of a sellers' market.

The only thing that might provide a little medicine to people's frustration is the laughter they can express when they see the recent appearance of Green Party leader Caroline Lucas on Channel4 News, stating what a bad job the government is doing on the affordability of housing problem. The Green Party no less - which is rather like the Chief Executive of McDonald's appearing on television saying what a bad job Subway is doing on tackling teenage obesity.

 

 

 

 

When Tax Is Like Theft & When It Is Not

A friend asked the following question:

"If you don't pay tax you end up in prison. Therefore is tax theft, or is it the price we pay for a civilised society? If it's the price we pay for a civilised society, then it's not one we ever had a say in. Therefore it's a kind of theft, but one we appear to allow to happen to us?"

The best way to answer questions like this, I find, is to reverse the method of questioning somewhat. In asking whether tax is theft, or synonymous with theft, we are actually looking at the properties of something definitely bad and asking whether the other thing shares some or all those properties.  

On top of that, when we consider what is wrong with something, and enquire as to whether the other thing is comparable in terms of wrongness, it is often useful to compare its fundamental principles to other things in society. I will do both those things in this blog post.

The second one first. If at school you deliberately break little Johnny's mum's window, your parents should compensate them. If you break someone's window as an adult, you should compensate them. This has an analogue with some of the negative externality taxes like pollution.

On the other hand, if the local gangster goes round small businesses and obtains money through a protection racket, or if poor Tom takes some of rich Jack's lunch money in the school playground, this doesn't seem so good, even though it is tenuously analogous to how the state treats its citizens.

Apart from in spirit, the local gangster forcing restaurant owners to fund his own lifestyle is not hugely different to how the state forces me through taxation to invest in services I seldom or never use and policies to which I am wholly opposed.

To that end, I'm afraid the properties of taxation do all too often share some of the fundamental properties of theft. If Jack steals Jill's laptop, then Jill is the victim to about the same extent that Jack is a beneficiary. But the wrongness of theft is the moral wrongness that harms society, plus all the other negative spillover effects that I'll come to in a moment.

The wrongness of taxation is that it forces consumers to spend our money on things like establishment pay, layers of bureaucracy, small business subsidies, bailouts and transportation projects that we otherwise would not. To that end, a lot of taxation is a little like theft in terms of the consequences to the consumer, but it more closely resembles a protection racket (but not wholly, as we'll see in a minute).

The other thing that tax and theft have in common is that they both impose value-robbing opportunity costs on society. When Jack designs a mousetrap, or provides a taxi service, or cooks pizzas, he adds value to society. When he steals Jill's laptop, he inflicts all the costs on society that crime imposes, but he also forgoes the opportunity to do something productive.

Taxation has similar opportunity costs. While taxation transfers funds from one place to another, and in a costly way, it doesn't produce very much. There is a small sense in which taxation sustains parts of society (defence, rule of law, and other public goods) that enables others to produce, but there are enormous opportunity costs to taxation that misallocate resources by being out of kilter with supply and demand, and as a consequence rob society of a lot of value.

Taxation and theft also rob society of value by diminishing the number of mutually beneficial transactions that occur, because they both increase the cost of trade, and therefore increase the prices that businesses have to charge. The opportunity costs of taxation and theft are the aggregation of all the forgone opportunities for trade - the mousetraps that don't get made, the taxi rides that never happen, and the pizzas that never get cooked.

Some people struggle with this notion, but it's easy to see its truth by imagining a more extreme example: a country ruled by a greedy dictator who taxes the life out his citizens and allows lawlessness to occur. The costs to the citizens are not just the taxes and the crime - the more acute costs are all the lost productivity and prospective innovations that never materialise because of the taxes and lawlessness.

In summary, then, taxation and theft share many of the same properties - but theft is a bit worse because theft always engenders net costs on society, whereas tax mostly does, but not in every instance.

Every instance where tax goes towards providing something that could, and should, be provided privately, taxation has similar properties to theft. Every instance where tax goes towards providing something, like a public good (defence, rule of law) that is more valuable to society than the cost of the tax gathered, taxation is a lot less like theft - it is more like a compulsory insurance policy that provides societal benefits that would otherwise be more difficult to obtain because of the free rider problem.

You Know Reform Is Badly Needed When Things Like This Happen

Sometimes an argument you've been making for years deserves a rerun when something so ludicrous happens that could make even the most ardent sceptics stop and think "Hmmm… he may have been onto something all along".

The argument in question has been that the BBC licence fee is an outmoded, inefficient misallocation of resources that needs to be kicked to the curb right now. The aforementioned ludicrous occurrence that gives traction to that idea is the headline I read last night about how executives at the BBC are looking to spend £15 million of taxpayers' money on the set design of a mosque for the soap’s Muslim characters.

This, and many other things the BBC does, is not something on which the vast majority of people would voluntarily spend their money - but they are forced to do so because if they do not they face prosecution. This is no longer the way to run a service that ought to stand or fall on commercial demand, not on enforced confiscation. When taxpayers are faced with a £15 million bill to spruce up a television set with a mosque for its Muslim characters, you know there is something seriously wrong.

I have no interest in soaps, but I know many people do. Fine, then let them vote with their wallets and purses, not with a television tax. In this day and age, where digital television and voluntary subscriptions increase the width and breadth of television entertainment available, and improve quality by added creative competition, the BBC's licence fee system is anachronistic and inefficient.

There is a lot I like about the BBC - and the chances are, if it were to be offered on a voluntary subscription basis, like Netflix, Amazon Prime or a Sky package, I probably would pay the subscription costs. But for those for whom that arrangement would not constitute net value, they'd be free to spend their money elsewhere.

If viewers really do value what the BBC provides, then the BBC would continue to attract customers under a more competitive subscription system. But trying to justify a licence fee tax on the basis that there may not be healthy commercial demand for the programs and services if people were free to opt out, is no basis for retention of this arrangement.

Because one thing is fairly certain - if there was no such thing as the BBC, there is absolutely no chance that the vast majority of the public would want it invented in its current format. It is only because the BBC has been with us for so long that so few people seek to question its edifice. It needs reforming; the mandatory licence fee needs to be discontinued - and in its place a pricing model that stands or falls on the basis of commercial demand.

A Little Perspective On The Wealth Gap - Seen Through The Eyes Of Henry VIII

As you know, there is a lot of complaining about the so-called injustices of the wealth gap, with everyone from Oxfam to Jeremy Corbyn to Bernie Sanders complaining that the wealth of the richest people keeps increasing while the poor do not benefit much from capitalism.

This is obviously a foolish assertion - but more than that: even those who acknowledge the benefits of capitalism are often guilty of understating the extent to which the poorer people in the UK and the USA have enjoyed pretty much all the beneficial things the rich have. So much so that the further back in time you travelled, the narrower the difference between today's rich and poor would seem.

To see why, let me run this thought experiment by you. At the time of his death, Henry VIII's wealth was thought to be around 300,000 British pounds. Adjusted for inflation, that would make him worth about £250 million today.

Suppose we resurrected Henry VIII and brought him and his adjusted wealth into the present day to spend a week following round Richard Branson - a man worth about 16 times more (£4 billion) than Henry would be worth. We'd find something quite astonishing. The things about Richard Branson's life that would be most coveted by Henry VIII would not be the luxury goods that make Branson stand out from the average earner of today - they would be the multitude of things that even most low income earners have at their disposal. 

 

What would impress Henry VIII most about today are things like: having access to such a rich variety of food and drink; clean, uncontaminated water; an extremely low chance of mothers and babies dying in childbirth; modern medicine and healthcare; refrigerated food; microwave ovens; cars; high speed trains; computers; televisions; washing machines; global travel in under 24 hours; much shorter working weeks; welfare; access to the entire world's knowledge through the Internet; and all this (and much more) in a world that has seen the virtual eradication of smallpox, polio, diphtheria and tuberculosis.

That is to say, Henry VIII would find the difference between Richard Branson and a low income worker infinitesimal compared with the monumental difference in quality of living between himself and a low income worker in the present day. The most astounding part of present day living for Henry VIII would be the multitude of present day advantages that many people take for granted, and yet still consider themselves poorly off despite having.

Given the foregoing, I find it remarkable that there are so many narrow-minded, short-sighted, entitled people in society who are obsessed with banging on about the inequalities that capitalism creates.

You may say that, for those suffering economic hardship, life is a daily grind - and I will not disagree with you. But as soon as you take your eyes off disposable income, and focus on the way society has been equalised materially in just about every other way, you'll see that instead of bemoaning the gross wealth stratifications in society, a more pertinent reaction would be to feel amazed that after 200,000 years of human history when just about everyone who ever lived was equally poor, we find ourselves living in a time when the majority of us are equally very rich.

Put The Scandinavian Myths To Bed Now

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

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

And:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ask The Philosophical Muser: On Seatbelts

Here's my latest Q&A column - if you have any questions for me, you can message me on Facebook, or email them here j.knight423@btinternet.com

A Facebook friend made contact to query my claim that it's obvious that people drive less safely with seatbelts on. The query was along the lines of this: "I don't see why this is the case, surely even with a seat belt on people try to drive as carefully as possible because it's in their self-interest to do so?"

My answer: It seems obviously true, but like many supposedly obviously true things, it is false. To see why, you only need consider the statement when said this way - "If a driver has no seat belt he or she will drive more carefully" - a statement that is very obviously true, and one that no one has any issue with.

Consequently, saying "people drive less safely with seatbelts on" is just another way of saying "people drive more safely with seatbelts off". Both are equally true, they are just different words to say the same thing.

The Liberty-Hating Feminists & SJWs Are Confused About What 'Societal Norms' Actually Are!

As a result of feminist duress, first the Professional Darts Corporation and then Formula One announced that they will be forcing walk on girls and grid girls into unemployment under the pretext that the tradition is "at odds with modern day societal norms".

As usual, the feminists and social justice warriors driving this are confused about what 'societal norms' are. Societal norms - a term that is problematic at the best of times - are created, not by top down hegemony, but by bottom up local decisions that result in net utility for the decision-makers.

The societal norm that means most of us don't drop litter, spit at one another or play loud music late at night is based on society's aggregation of revealed preferences. In other words, most of us don't like those things so we don't do them. It is the individual search for utility and the collective aspiration for cooperation that decides societal norms - and the irony being missed by those opposed to grid girls is that individual search for utility is far and away the most widespread societal norm that exists.

When feminists and social justice warriors tell us society should be opposed to something freely chosen because it departs from the rubric of 'societal norms', like jobs for women in sport, all they are really doing is forcefully imposing their own beliefs and views on people that have different wants, needs and priorities. They are doing the opposite of what they claim: they purport to be standing up for women, but what they are actually doing is trying to rob a proportion of women of something they value.

Madeline Grant makes an excellent point along those lines in this article:

"One great irony of the ongoing debate is the fact that, while the BBC and other employers are enduring a forensic examination over gender pay, feminist campaigners are backing moves to upset one of the few areas of economic life in which women have a clear advantage – the ability to trade on good looks – or “erotic capital”, to borrow Catherine Hakim’s phrase.

Jobs in pole dancing, high fashion, hostessing and the promotional modelling work, performed by the Formula 1 grid girls, all enable women to trade on their beauty. Often, the opportunities for beautiful women far outstrip those granted men. Fashion modelling, for instance, carries a female premium of anywhere from 25% and 75%."

This kind of short-sightedness stretches far beyond cases like this - the whole business is riddled with contradictions and inconsistencies, and most of them are based on one of two things: they either a) misunderstand how equality of outcome and equality of opportunity have to be traded off against each other, or b) fail to account for the factors surrounding revealed preferences and the liberty and freedom to enjoy them.

For example, they just cannot seem to grasp the basic principle that in a society in which everyone is totally free (within reason) to act in accordance with their preferences and priorities, the result will be a diverse assortment of highly unequal outcomes. Different people will trade on looks, on talent, on education, on risk, on unsociable hours, on physical strength, on interpersonal skills, on entrepreneurialism, and a whole range of other things that are valued differently in the marketplace, and that generate varying salaries accordingly.

Of course, when people are being unfairly treated, there is a human need to leap to their defence. How ironic here that the people being unfairly treated are those women who want to trade on their marketable assets but are being robbed of their income because of feminists' confusion about how societal norms are constructed.

Because, you see, it's the revealed preferences of individuals that make the trading on looks, on talent, on education, on risk, on unsociable hours, on physical strength, on interpersonal skills, and on everything else valuable in the marketplace, possible.

Feminists and social justice warriors need to wake up to the fact that these are the societal norms - and they are based on the fact that society is a multifarious mix of different people who want different things, and not always the same things feminists want or should feel entitled to demand to further their own narrow ideology.

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

McDonnell's Fantasy Analogy

On The Andrew Marr Show this morning, Shadow Chancellor John McDonnell came out with a ludicrous analogy to try to explain the benefits of bringing services into public ownership. Think of it like buying a house, he said - you make the initial investment, get returns on renting it as an asset, and then further down the line it becomes a money-maker.

Fantasist John McDonnell has always been an intellectual lightweight, and today's analogy was no exception. Even if we're kind to him, and ignore all the obvious problems with the reasoning behind his analogy (which you can distil in previous blogs here, here, here and here), there's another obvious way that returning a service to public ownership is not like buying a house as an income-generating asset, which I'll explain.

McDonnell's analogy forgets the most important problem with bringing a service into state ownership: it creates all the downsides of monopoly power, and denies all the benefits and innovations of competition. Competition doesn't just keep suppliers in check in terms of price and quality, and consumers well served in terms of lower prices and increased efficiency, it is also the driver of new ideas and improvements on existent ideas.

A service run under a state monopoly has much less of an acute eye on commercial demand, and therefore pays suboptimal regard to price and quality too. In terms of investment, the opportunity costs of buying a house are the other forgone investments and their concomitant returns. Given that house buying is about the best asset-returning venture in the marketplace, the opportunity costs in terms of a return are all-but non-existent.

On the other hand, the opportunity costs associated with state monopolies in terms of forgone opportunities are about as overwhelming as it gets. And this in a week when there is indication that Labour's re-nationalisation project is going to cost an up front sum of around £176 billion (or £6500 for every household).

This is the dangerous fantasy economics of Corbyn and McDonnell: £176 billion for more expensive, less efficient, lower quality, innovation-stifling re-nationalised services. There is almost no analogue to buying a house here - not that we should expect anyone in the Shadow Cabinet to understand this.

Why Don't We Like It When The Universe Makes Us Smarter?

The widespread human aversion to correction is one of the most peculiar of all peculiarities. People don't like being shown to be wrong - so much so that they'd rather intransigently yoke themselves to a comfortable falsehood than open themselves up to a refreshing new fact or an illuminating experience of improved reasoning. There are multiple causes of this, with some degree of overlap - the usual offenders are:

1) Lazy-thinking - the path of least resistance is, by definition, the easiest method of approach. It takes time and effort to acquire knowledge and develop your reasoning skills, and relatively few people bother to do this with any aplomb.

2) Status and ego - some people find it hard to admit they're wrong, so would rather stubbornly close themselves off from revising their erroneous opinions.

3) Tribal identity - many views and beliefs are bound up in the identity of a particular group or allegiance, particularly religious and political views, which overwhelmingly bias individuals against changes of mind.

4) Emotional biases and confirmation biases - reasoning ability can be impaired by emotions, and conformation bias occurs as we look to justify our views by seeking out information that supports what we already believe.

There are others too, but those are the main four, and between them they have quite a stultifying effect on human beings' ability to be correct about things. The only cure for this sort of thing is to wake yourself up to how painstakingly, ludicrously irrational this is - I mean, why *wouldn't* you want to be correct about as much as you can be? And related to that, why *wouldn't* you want to be shown an improved way of thinking about a situation or learn a new fact? 

Learning new facts and improving your reasoning is the universe's way of making you smarter - it is one of the things that people should embrace most, yet it is so often one of the things from which people casually shy away.

Here's what I'd advise you to try: from now on, the next time you get even the faintest hint that you're wrong abut something, or that your interlocutor appears to be making a point that could bring about a fresh perspective for you, embrace it - be enthralled by it, and look at it as an invitation to open a door you'd previously only known to be closed.

You see, when we want to be, I think we humans are fairly adept at sensing weaknesses in our own position when up against smarter people. I don't think the feelings and sensations are alien. As an experiment of self-discovery, let me encourage you to try to own those feelings when they arrive. The next time you sense you've been holding on to a view or belief that needs correcting or revising, stop and take ownership of how it makes you feel.

You may feel threatened, or embarrassed, or obstinate, or defensive, or angry with yourself, or even ashamed that if you change your mind you're going to upset people close to you. I promise you, you will feel at least one of those things. But don't worry - it's the universe's way of inviting you to be smarter, and encouraging you to embrace and be glad of the opportunity.

And if that doesn't turn out to be enough to help you engage in the opportunity, remind yourself that what the universe is asking you to do is nothing different to what you've already being doing all your life - enjoying new discoveries and welcoming fresh perspectives. You don't mind being right on whether it's okay to drop litter, or on what the hottest planet in our solar system is, or on the properties of plutonium, or on whether theft should be illegal - you're just being asked to follow what you've started to its logical conclusion and remain consistent with it at every juncture.

Every time you become a better thinker, or less wrong about something, or more rational, you've made gains for life - you've taken another step on the journey of mental exhilaration. Don't fight it: thirst for it, enjoy it, and embrace it with open arms.

With This Basic Error, Trump Is Doing His Best To Hide His 'Genius'

Oh dear, Donald Trump really doesn't get this economics thing at all. We read today that he has now declared he will use NAFTA negotiations to make Mexico pay for the wall. Alas, a 'stable genius' like this really shouldn't be making so many category errors.

Trump has spent the best part of a year explaining to Americans how, under current NAFTA rules, Mexicans export far too many goods and services to America, and that that is hurting the domestic economy.

Yet now through NAFTA renegotiations he's "going to take a small percentage of that money and it’s going towards the wall” - which infers that Americans will receive either US dollars or Mexican pesos as payment for the wall.

At which point, one has to ask: what the heck is Trump on about? If he's on about payment in dollars, then Mexicans first must acquire the dollars to pay the wall bill – and to do this, Mexicans must sell goods and services to Americans. It is only through selling more goods and services to Americans that Mexico will get more dollars to pay for the wall. But this contradicts Trump's rhetoric about dissuading more Mexican exports to America.

And if Trump means payment in Mexican pesos, then his reasoning is equally flawed, because he unwittingly commends the very thing he has spent the last year rejecting - that is, increased sales of goods and services from Mexico to America. 

The upshot is, the only way that Mexicans can fulfil Trump's wish is if they export more real goods and services to America - something Trump mistakenly presumes is a benefit to Mexicans at a cost to Americans. Trump needs to make up his mind whether he wants to slow down the Mexican imports he thinks harm his domestic economy or whether he wants to speed up the Mexican imports to pay for the wall.

Lastly, there is an outside chance that a 'stable genius' like Trump thinks (although I doubt it) Mexico will pay for the wall through US import tariffs. Yet as anyone with even a sketchy understanding of economics will know, tariffs do not just hurt foreign exporters, they hurt the domestic economy too.

If Trump raises import tariffs he will raise the prices of imports from Mexico too, meaning Americans will buy fewer of those goods or pay higher dollar prices for the goods they keep on buying. Either way, Americans are paying for the wall.

And where Mexicans are hurt by higher tariffs, they will have fewer dollars from their exports to America, which means they will have less to spend on American goods, which will do the other thing Trump claims to hate - hurt American jobs. Must do better, Donald!

Healthonomics:

This is a frequent phenomenon called Gammon's Law (after Max Gammon), which follows a predictable pattern whereby increase in expenditure will be matched by fall in production, where the more resources a system swallows up, the less efficient it becomes in terms of production per unit of investment. Pretty much any big centralised institution - health, schools, taxation, the EU, the church - when it gets so big that it passes through the efficiencies of economies of scale and begins to suffer from diseconomies of scale (see also the Dunbar number) will show a pattern whereby increased input produces decrease quality of output. In economics, the Rahn Curve (named after American economist Richard W. Rahn) is a graph that illustrates that there is a level of state spending that helps increase growth rates, but that there is a point over which it reduces growth rates. 

Research from the Cato Institute indicates that when government spending expands beyond about 20% of GDP, economic growth diminishes. This often works alongside Gammon’s law, where increase in expenditure will be matched by fall in production, and where resources get sucked into a black hole of diseconomies of scale and the overall production as a ratio of resources inputted diminishes. At the time of writing, the NHS has 1.6 million employees, and there are 66 million people in the UK. That means there is one NHS worker for every 41 people in the UK. You recall we mentioned Wagner's Law, which observes that with increasing economic growth we generally see a rise in state expenditure. Research by the Adam Smith Institute revealed that the total health budget exceeds £100 billion a year, and that management staff numbers increased by about 12% over the past five years, while the number of frontline staff increased by only 2%. It seems clear that the UK's NHS could be managed better: it appears to be simultaneously falling foul of the dangers of Wagner's law, post the optimum point on the Rahn curve, and exhibiting the kind of inefficiencies that Gammon’s law portends.

But whether it is the right type of system being sub-optimally managed, or the wrong type of system altogether is a complex question - not least because the question of the right size of government is an even more complex question. This is due to the fact that humans are adaptive, goal-oriented beings involved in a complex social nexus with lots of incomplete information. And consequently, the wisdom of central intelligence sometimes serves the system best, and other times it is best left to the price systems in the market. 

The challenge, as ever, is to find a way to incorporate the qualities of a kind of socialist-individualist-libertarian triumvirate at the personal level with the qualities of the free market and its concomitant mechanism for price theory to efficiently balance supply and demand. I am naturally sympathetic to a system that draws from the efficiencies of market prices, but I believe that good health care is essential to individual well-being and society's ability to thrive, and no one should be without it, especially society's poorest and most vulnerable people. I'm friendly towards a system in which taxation is collected to fund health care for anyone who is poor and can't afford it, to fund research, to subsidise low earners, to support vulnerable people, and to provide a safety net for every single person who needs it. A nation that doesn't start with that premise is ignoble. But given this as a sine qua non, there are some more complex elements to health care that need addressing. I'm not sure that any health care system that's ever been created is efficient and comprehensive enough to manage the full gamut of complex human needs without sub-optimality in some of its parts - and therefore, the studies that compare different nations' health care systems and look to highlight the relative strengths and failings are probably of limited scope. I think any analysis of health care is (distally) also a study of human society, and is going to have to include the concession that it impossible be maximally efficient and get everything right.

In my estimation, the most efficient healthcare system would be one that reflects the spirit of community libertarianism: that is, it has all the efficiencies of market-based allocation of resources and competition, but it is provided under a framework that reflects a health service free at the point of delivery for all, so no one, rich or poor, ever has to worry about not getting the range of health care they need. Consequently, I think the market is not fully equipped to tackle the complex problem of health provision. 

A typical libertarian argument is this: Doctors are professionals; they know things about our health that we do not, and they can make us better, which is why they command high salaries. Patients, on the other hand, are professionals too - they are professionals over their own lives. But when it comes to our health and well-being, we should approach this kind of reasoning with caution. There is a lot we don't know about our health, our future needs, how our behaviour affects others down the line, what viruses may be lurking round the corner (Edit to add: think of Covid-19 as a prime example), and how much health care we are going to need throughout our life (especially in old age). Even if it an imperfect model, there may be some mileage in preferring a centralised health system, as long as implicit in that framework would be a scenario for individuals where their preferences and their expenditure are more closely aligned. 

The main reason that the healthcare considerations are too intractable for purely bottom-up local market management is that health is a far too complex lottery to reflect the same incentives and value created by the market. Through no fault of their own, some people will have the genes or misfortune or accidents that mean they cost the health service tens of thousands of pounds, whereas others will go through life costing virtually nothing. A civilised society should be one that cares for all its citizens equally, giving everyone the security of healthcare that's free at the point of delivery. A health system that resembles an insurance model with coverage funded by pooled resources is a must in a society that purports to provide a security net for its citizens. The thought of a society that bases health care on what people can afford is one that should be repudiated at every level. When it comes to health, there are some outcomes that some individuals have no chance of managing without the pooled resources of others - and the bottom-up market system doesn't contain all the information needed to factor in the range of complex human health needs.

As an economist, I believe the market solves a lot of the problems a lot of the time, but not all of the problems all of the time. But I think human health (for different reasons to defence and rule of law) is a problem that needs top down centralised information processing, because it doesn't have the foresight required to capture the diverse range of human needs. A society that successfully cares for the complex needs of human health and well-being cannot be at the mercy of market-driven supply and demand computation, which is subject to chaotic instability and power law distributions that would be inimical to comprehensive health provision if left unchecked. It's not often I'll endorse a Marxist principle, but when it comes to healthcare, I think a tolerant and compassionate society should deliver according to the Marxist principle of “From each according to his ability, to each according to his need”. I think the only model that can satisfy this is one in which every worker contributes to a health insurance scheme regulated by the government. Higher earners may if they wish opt for private insurance, and insurance companies can compete for business to provide customers with cover. This would take out the politicisation of the health system.

A system in which most health care insurance was run independently by private operators, where providers would compete with other providers for patients based on price and quality of service, can form part of the national health framework. After all, many private companies successfully provide goods and services for public health institutions. Under a benevolent libertarian system, some providers would be part of big corporations, whereas others would be large cooperatives, and others still smaller businesses specialising in particular practices. There probably would even be many charitable organisations funded by benefactors. This would also open the market for insurance companies to offer incentive based premiums for a diverse range of people with diverse lifestyle choices (and no, I don't mean like the cost inflation-inducing American insurance system). It might be a health system rather like that of a shopping mall, where doctors, dentists, pharmacists and opticians are linked together by a nexus of industry and efficiency, where prices, supply, demand, value and incentives are more coterminous in their relations. 

If that seems like moonshine, remember, someone in the 1950s would be quite astonished to think that you could walk in to a supermarket, scan the goods in your basket and tap a payment card on the sensor to complete the transaction. Imagine in the future when money earned and money spent on health care can be so much more prodigiously efficient thanks to advanced technology. An awful lot of positive developments in society are made possible by life-changing technology. Think of any detective movie in the old film noir era with Humphrey Bogart and Robert Mitchum and imagine how much easier their cases would be to solve with a smart phone. Think of how much easier the protracted scientific revolution would have been if all the exponents had laptops and the Internet. Think of how much quicker the Industrial Revolution would have gathered momentum with more advanced electrical and combustion capabilities.

I said earlier that competition is usually good for efficiency. But with ill health and injuries, this causes me some concern, because when you have small-scale competition for cherry-picked services, firms tend to opt for services that are easy to manage and readily profitable. Not only does this tendering process amount to increased bureaucracy, and excessive use of time and staff resources - it very often is awarded to poor quality low bidders whose profits are made by cheap resources, and under-trained and under-staffed units. This doesn't work so well for patients whose health is at stake, because injuries or illnesses that are complex and risky are in danger of being refused.

In summary
There must be a negative effect on any health service model because of those who use health care too much because of bad decisions (alcoholism, smoking, drug use, binge eating), making supply shorter for the majority who need health care through no fault of their own. The system might be more efficient if people who make these bad decisions pay a higher insurance premium. But I'm not sure there could be an efficient top-down system that could be less costly than the extra costs these people would cost a public health service. Equally, a health care system, like a car insurance system, that said 'yes' to every single claim everyone wanted would be providing too much health care and costing the nation too much money, so there needs to be an optimum amount of health care provide. For example, if everyone visited the doctor every time they had a cold or a blister, the GP surgeries would be inundated beyond the capacity to cope. And I'm very sceptical of large scale operations that try to operate with the dual mandate of serving the public and trying to be financially profitable - you usually get the worst of both worlds, where failure to serve the public well enough is blamed on the financial pressures of solvency, and the failure to remain financially solvent is down to the pressure to serve the public to full capacity.

Given the complex nature of health, human physiology, diseases, infections, health prevention, research and future unknowns, I have a feeling that healthcare is one of those institutions where public service must take precedence over tight financial regulatory, and that we might just have to accept that erring on the side of generous expenditure to cover pubic need is a requirement for the kind of healthcare coverage that provides the safety net that gives everyone free health care at the point of delivery, and the peace of mind too. I'm not denying that every effort should be made to ensure money is spent as prudently as possible. But in terms of outcomes, quality and efficiency, a healthcare insurance system that combines the universal 'free at the point of delivery' safety net of a public service with the consumer sovereignty, competition and the innovative dynamism of a market system looks to be the one that will give citizens the closest approximation to what they need. The free market can do a lot to reduce inefficiency in society, but markets can't do everything - they involve people responding to the incentives that markets and free enterprise provide - but health is likely to remain far more complex than that, and should continue to yield to a model that prioritises a compassionate ethos, peace of mind, and safety net.