On Being Offended

Consider these 4 statements, and which ones are good positions to hold:

1) Everyone has a right to be offended

2) Everyone has a right not to be offended

3) No one has a right to be offended

4) No one has a right not to be offended

I think statement 4 is a strong 'yes' - 'no one has a right not to be offended', because there is no right that protects you from hearing something that offends you. Things are bound to crop up that will offend, because the honest pursuit of facts and truths makes that inevitable.

Given the foregoing, the statement 'everyone has a right to be offended' (statement 1) has concomitance with statement 4 'no one has a right not to be offended' - as both involve the environment of free expression, frankness, and probability of being challenged or affronted.

This leaves statements 2 and 3. Some people advocate the principles of statement 2 - 'everyone has a right not to be offended' - but as a viewpoint I think it is manifestly unhelpful, as such a right would be to insist on being quarantined from any contra-views that might affront you. Similarly I can't even envisage a condition under which 'some people have a right not to be offended' is ever going to be useful to anyone. As for statement 3 'no one has a right to be offended' - that is also one to reject if we agree that free expression, frankness, and being challenged are qualities bound up in our having a right to be offended and no right not to be offended.

Brand Buffoonery

From what I can see from a brief perusal, Russell Brand really is an incompetent buffoon whenever he pontificates about economics and politics. His misunderstandings of the market are beyond ludicrous. I don't know (and have no interest) in what his comedy is like (or however it is he makes his living), but his political and economic ramblings would be genuinely hilarious were they not so apparently influential among half-witted enthusiasts who seem to be craving the Brand brand. It's also unsurprising to find that Brand’s so-called ‘revolution’ has the support of fellow half-witted commentators like Johann Hari and Owen Jones. These are people who, like Brand, get it wrong just about every time they open their confused little mouths. They are like 14 year old Trotskyites awaiting the mental epiphany that most teens experience before they hit adulthood.

Whatever this 'revolution' is that Brand is trying to propagate, it's a revolution based on a peculiar misunderstanding of what's actually happening in the world. Brand’s revolution (hardly an original one) is what he refers to as:

“A socialist egalitarian system based on the massive redistribution of wealth, heavy taxation of corporations and massive responsibilities for energy companies exploiting the environment.”

He also thinks profit stinks, telling us that:

“David Cameron says profit isn't a dirty word, well I say profit is a filthy word.  I think the very concept of profit should be very much reduced because wherever there is profit there is also deficit. This system currently doesn't address these ideas.”

Oh dear oh dear – what a mess. I’ll leave the environment part because I’m going to do a series on green issues when I get time, and in previous blogs I’ve addressed the fallacy of heavy taxation of corporations and the misleading notions surrounding massive redistributions of wealth. What I want to do here is correct this self-proclaimed revolutionary’s misapprehension about the ‘evil’ nature of profits.

Here’s the reality. Try to picture all the voluntary transactions going on in the world today. The entirety of all market transactions is producing mass amounts of societal value. We know all those transactions produce societal value for one simple reason. The people who parted with their money to transfer some of their cash towards a profit for the sellers or providers did so because they thought that the goods or services being sold were worth more than the money they parted with. Similarly the vast majority of workers in the world do so because the alternatives are less desirable. Profit, far from being a filthy thing, is exhibition of huge societal benefits across the world. Profits give exhibition to value in the same way that losses give exhibition to lack of value.

It’s true that some profits are excessive – but that doesn’t make profit filthy, it means something else. If a business is making a huge profit it means there is room for competition to come in and enter the market. Where there is a lack of competition it is usually because of poor governmental systems – either a corrupt government (like in many African countries) or a government that regulates too heavily. You’ll have to ignore the irony that Russell Brand, Owen Jones, and their kind want a world with more government regulation, not less. You could also be kind to Brand and overlook the irony that it is thanks to profit that Brand was able to make his money in the first place. But make no mistake about it; free trade and competition are the principal things that engender economic prosperity – and where they are being unhelpfully stifled or retarded by exogenous forces, human prosperity is being stifled and retarded too.

Another notion of Brand’s revolution is the assertion that “Capitalist, consumer culture inures us to unfairness,”. Even leaving aside the fact that evidence of human psychology shows the contrary (and that in places where capitalism is not so prominent the results of the same experiment showed people to be ‘more’ selfish not less), Brand speaks the very opposite of the truth here. In most cases, a free market of voluntary transactions proves to be terrifically efficient at diminishing or eliminating unfairness. Consumers are alert to the practices of businesses to which they part with their money – they will penalise poor quality (be it goods, services, cleanliness, prices, treatment of workers, and so forth) and this puts selection pressure on businesses to up their game. In a free market of mutually voluntary transactions, fairness, customer concern, employee rights, and good general business practice make up the foundations on which a capitalist society function.

The '85 Richest People' Fallacy

Forbes tries to shock us with the news (from an Oxfam report) that The 85 Richest People In The World Have As Much Wealth As The 3.5 Billion Poorest. It’s the sort of fact that can very easily elicit cries of ‘global injustice’ and calls for greater equality in the world. The reality, though, is very different.

All this talk of 'making the world more equal' may come with noble intentions and genuine concern for the poorest people on the planet, but unfortunately the philosophy and economics that bootstraps it is mistaken. Consequently, these mistakes lead to a plethora of bad ideas and injudicious policy proposals that only hurt the people they are trying to help. Contrary to a lot of leftist propaganda, many of us want the world to be more equal, we just realise that redistributionist polices implemented by the State are much less successful than free trade (and the concomitant necessities like rule of law, property rights and a stable government that protects its citizens).

This isn't just an elaborate libertarian theory; it is empirically demonstrated by observing the progression explosion of the past 200 years and the increased real income per head that has occurred in every country that has seen the positive effects of free trade for its citizens. Yes, the rich become richer, and in some cases the wealth gap increases, but this is not really relevant - what's relevant is everyone's absolute gains because of free trade - and the most significant shifts in absolute gains are seen in the poorest people becoming less poor. Anyone who claims to care about the well-being of the worst off in society should care about what's making their absolute standard of living better, not how they compare to the richest people in the world.

The best that can be done to help the world’s poorest is to open up trade and development opportunities – this is exactly what happened to all the countries that were once impoverished and now prosperous. What's so amazing (as I touch on here) is that nothing in the entire several hundred thousand year human history has done for the material prosperity and life expectancy of the human race what capitalism and science have done in the past 200 years. Blaming capitalism for the remaining poverty and hardship in the world is like trying to throttle a goose that has already laid plenty of golden eggs, and still has plenty more still to lay.

To prove the point, consider how easily misled people are by the fact that the 85 richest people in the world have as much wealth as the 3.5 billion poorest. The way Oxfam arrived at this fact is adding up the total wealth that was attributed to the poorest 3.5 billion of the world's population (which amounted to $1.7 trillion), and compared it to the Forbes rich list, counting the aggregate wealth of the top billionaires until it matched $1.7 trillion (which turned out to take them down to number 85).

Alas, although the analysis does show that the 85 richest people in the world have as much wealth as the 3.5 billion poorest, it doesn’t really tell us anything meaningful or change-inducing. Here’s why. Suppose the redistributionists got their way and were able to steal the wealth of the 85 richest people and distribute it evenly amongst the world’s poorest 3.5 billion people. Each of them would get a mere $485. Better than a smack in the eye, you might insist, but the trouble is, nothing sustainable would have been achieved by this mass distribution. What about next year or the year after? And what use would the $485 be to those in war-torn countries, without a stable government, or in places where resources are scarce?

In fact, my redistributionism thought experiment actually goes to show precisely the principal flaw in the agenda of the Robin Hood-types who want to make the world more equal by redistribution rather than free market trade and participation in capitalism. Allocation of resources outside of trade only briefly suspends the problem, it doesn’t solve it. Once upon a time just about everyone in the UK and US was living on the poverty line. What changed for them was the industrial revolution, progression explosion and scientific enhancements as economies became vastly more productive and human prosperity increases.

The 85 richest people in the world consist of one or two heirs who inherited their fortune – but most of the people on the list made their wealth in the same way that all economic prosperity occurs, through free trade. Wealth does not come from magic fairies, nor is it created from a vacuum. It is created by the voluntary transactions and exchange of currency of millions of people every day.

What People Keep Getting Wrong About Food Banks

Something I've been hearing rather too much of recently - from politicians and from political commentators - is that the increasing number of people relying on the foodbank scheme is evidence that poverty* is increasing in the UK.

People who make such a claim are confused. It is evidence of no such thing. Irrespective of whether or not poverty is on the increase, the number of food bank users is not the right metric to use to determine the number of people in poverty. Increased food bank use does not necessarily mean increased hardship - it probably means increased help for those in situations of hardship. Here's an illustration that will show why.

Imagine a village called Poppellville consisting of 100 people. Ten years ago 30 of the people in the village were below the median line and only 2 of them were getting help from food banks, as the foodbank scheme was still in its infancy. Fast forward to the modern day, 18 of them are below the median line, and 16 of these 18 are receiving help from the foodbank scheme. Clearly this increase in people using the foodbank scheme in Poppellville is not coinciding with an increase in poverty. In absolute terms, there has been an 800% increase in the number of people in Poppellville now benefiting from food banks over those ten years, while poverty has dropped by 40% in that same time period.

That illustration sums up what's probably the case in the UK. Rather than food banks being an indication of increased economic hardship, they most likely are a demonstration of our increased ability to respond to economic hardship with donations of food for those that need it.

* For simplicity's sake, I'm using the woeful definition of poverty that the UK Child Poverty Act 2010 uses - a definition over which I've been critical in the past.

The Guardian's Confusion About Manufacturing

I just read this lament in The Guardian about how the UK and the Eurozone are 'suffering' from a steady manufacturing slowdown. Basically, they think it's really bad that our manufacturing industry is declining because it means we must be suffering economically. Alas, their confusion is in failing to see the changing landscape of our economy - we do not manufacture as much in terms of raw materials - what we 'manufacture' more of nowadays is services (anything from litigation to TV programmes) - and they are what contribute greatly to our economic prosperity.

If the weight of economic prosperity really was measured in terms of weight of manufactured goods produced then Newcastle or Leeds would be wealthier than London's city centre, and Detroit would be wealthier than Manhattan. You would also see investors being keener to invest in companies that manufacture goods than in services, but we find that's also not that case.

The Latest Bright Idea About How We Choose To Eat

The ludicrously misinformed Tory MP (and former GP) Sarah Wollaston is at it again. I had a few choice words to say about her in a recent Blog post – but this time she’s gone overboard with her litany of misinformation and shoddy reasoning.

First the misinformation: you’d expect an ex-GP who is now chairwoman of the Commons Health Select Committee to be better informed than this, but Wollaston’s claim that binge-eating obese people cost the government a lot of money is false. A study showed that smokers and obese people actually save the health service money, because although they cost more than healthy people between the ages of 20 to 56, they also die sooner than the healthy group, meaning it costs less to treat them in aggregate terms. Plus, add in the State pension savings for those who die young and you’ll see the case against Sarah Wollaston’s claim is even more compounding.

Now the shoddy reasoning: Wollaston exclaims the need for regulation to force stores to offer discounts on fruit and vegetables. The only way to achieve this is price-fixing – that is, fixing the amount that supermarkets can charge for healthier foods like fruit and vegetables. But it is beyond foolish to even entertain the idea of price-fixing because price-fixing is guaranteed to get the situation wrong. If the price is fixed too low then demand will increase and willing suppliers will diminish, creating a shortage of supply. If the price is fixed too high then consumption will decrease, which in the case of fruit and vegetables will achieve the opposite of the desired effect. The only way to optimise the price is to leave it to market forces, which, of course, involves no price-fixing at all.

With people like Sarah Wollaston in The Conservatives, it’s little wonder that there are so many rumours about several Tory MPs wanting to follow Douglas Carswell and Mark Reckless and switch to UKIP.

 

 

 

Why We Don't Need An Energy Revolution

"Pessimism won’t do. We need an energy revolution."

No, no, we do not. The Guardian's Zoe Williams is worried about human-induced climate change, and insists we should invest in alternative green technology - except by 'invest' she means throw taxpayers' money at it. I have good news for her - she can relax, because the situation will resolve itself through market forces. Here's the rub of the situation. Humans are causing climate change, but they are also penalised for their carbon externalities through green taxes and numerous regulatory measures. That is to say, because prices have been changed to account for the increased emissions, the only investment that is needed is investment that is more economically viable that the current prices.

The imminent effect of those price changes will tell us the best course of action. If, for example, our ability to augment our solar capacity enables that venture to be price competitive against our current carbon industries then consumers will respond to it. If it doesn't, they won't (that point alone illustrates how State interference can only impede the process). The costs (present and future) of staying with our current carbon trends have already been factored into the increased prices of our externalities. We don't need to throw taxpayers' money at it at all - because people's preferences for economic viability will drive this, as already happens in virtually every other market process.

Forget All-Women Shortlists, We Need All-Merit Shortlists

Labour MP Austin Mitchell has made a tit of himself recently with some ill-conceived remarks about women in Parliament. However, despite a lot of misjudged waffle he is right about one key thing - that all-women shortlists are un-democratic and pretty much always a bad idea.

On Newsnight feminist Labour MP Stella Creasy took Austin Mitchell to task for his views, reminding him that “Only 23% of MPs are women, barely more than one fifth” despite women making up just over half the population. So what? Less than 1% of garage mechanics are women, but that doesn’t mean women are being discriminated against in that profession, it probably means that very few women want to mess around with oily engines all day. Less than 13% of primary school teachers are men, but that’s also not evidence of discrimination, it is evidence of there being more women candidates for the role of primary school teacher.

Even if it is true that women are under-represented in Parliament, representatives are voted in democratically, which only goes to show that in a democracy more men get voted in than women. Perhaps voters have a greater preference for men MPs than women. Or perhaps not. Either way, you have to decide how much you value democracy, and to what extent you’ll let democracy run its course. Britain and America celebrated the first democratically elected president in Iraq after the removal of Saddam Hussein. When it turns out he was too sectarian they influenced his un-democratic removal. Some people championed democracy in Palestine - and then they got Hamas, and everyone knows what a disaster that has turned out to be.

More women in Parliament may well be desired - but the problem with artificially advancing one group is that you have to artificially disadvantage other groups in the process. Why should one group, be they men, white people, heterosexual people, or whoever, be discriminated against purely on grounds that they happen to belong to the wrong group on a particular issue? Promoting MPs just because they happen to belong to a group called ‘women’ is not only unfair on the other group called ‘men’ it rather deindividuates the individuals in question too. The process of demanding high calibre MPs while at the same time artificially increasing the probability of low calibre MPs by swerving merit-based selection is not something we should champion.

Don’t get me wrong, it may well still be the case that society still has too much of a bias against women, and that there is a serious redress needed – but that redress must come about by changing attitudes, increasing openness and opportunity, and extension of choice where it is lacking – not by affirmative actions that discriminate unjustly against the group(s) not in favour. Merit-based societies are the best way to go, precisely because they are unbound by group preferences. Imagine the absurdity of trying to artificially improve the education results of under-performing working class students by changing the meaning of grades instead of encouraging their academic prowess. From now on if you go to a private school you need A-level As to get into a top university, whereas if you go to a State school grade Cs will do. Just as such a system would undermine scholastic gradation, so too do all-women shortlists undermine the qualities perceived by a democratic body (the electorate) to be worthy of selection as an MP candidate.

As black student Clarence Thomas once pointed out, “As much as it stung to be told that I’d done well in the seminary despite my race, it was far worse to feel that I was now at Yale because of it.” MPs that are in Parliament because they are women have every reason to feel the same.

Finally, the other reason why all-women shortlists should be discouraged is because a democratic process like our voting system (it isn't exactly wholly democratic, but it's close) is the only power the citizens of the UK have against their elected MPs. Democratic accountability - and how I wish there were more - means feedback from political performances. Remove the ability of the electorate to vote in or vote out individuals based on their skills, merit, views and performance alone and you unleash discord through the gradual disempowerment of the voter. As we've seen in previous blog posts (here and here), diversity has to be considered with all its merits and demerits factored in.   

 

* Photo courtesy of bbc.co.uk

Stop The Tyranny Or I'll Give You Something Nice

Robert Frank is generally considered to be one of the smartest economists in America. In an essay on consequentialism, however, he seemed to hit a stumbling block with this issue regarding why the British supported intervention in the Falklands rather than philanthropy:

"The British could have bought the Falklanders out—giving each family, say, a castle in Scotland and a generous pension for life—for far less than the cost of sending their forces to confront the Argentines. Instead they incurred considerable cost in treasure and lives. Yet few in the UK opposed the decision to fight for the desolate South Atlantic islands. " 

Two obvious things he's missing. In the first place, governments always severely underestimate the cost of wars - they go in hoping for a quick and inexpensive resolution - they act as though they hope they won't have to fight lengthy and costly wars. And in the second place, military mobilisation acts as a deterrent to aggression for dictators.

Somehow I don't think the warning: "Stop invading other countries and maltreating your citizens or else we'll pay for each one of them to have a Scottish castle and a generous pension for life" would have had much of a preventative effect on the likes of Adolf Hitler, Slobodan Milosevic, Saddam Hussein or the current vicious Islamic thugs slaughtering people in Iraq with the intention of establishing a caliphate.

Foreign Footballers Are Like Foreign Foods – They Benefit Us At Home

England captain Steven Gerrard thinks reducing the number of foreign players in the Premier League will make the league better, and enhance the quality of our international team. Rio Ferdinand thinks the same. Greg Dyke is right on board with this, claiming that having a maximum of two non-European Union players will bolster home talent. I had a few choice words to say about it in this blog here.

Now it emerges this week that the Adam Smith Institute has unsurprisingly found what we suspected all along, that:

1) There is no link between native play time in the Premier League and performance of English national team

2) There is no link between amount of minutes played by Englishmen ten years ago and performance today

3) There is no strong link between foreign players and Premier League quality

I have a few more comments to make on this issue. If people involved in football understood more about economics they would know even without doing much research that diversity into the market improves the market. Anywhere you look, you find that competition improves goods and services, in terms of quality, prices, and choices available. A country that trades globally performs better than a country that only trades within its own borders. A university that invites students from all over the world does better than one that constrains entry to one country. The examples are endless. But here’s the key point in analogy to football – extending the quality through diversity doesn’t just improve the system overall, it improves the home grown participants too.

Let’s take food as an analogy that explains why it’s the same for football. A few decades ago in England there was almost no foreign cuisine. If you walked into the city centre your choices would be limited to British food; roast dinners, fish and chips, pies, fry-ups, bread, pastries and stewed meats and broths. In the modern day, take a walk into a busy city in the UK and you’ll find your dining options are much more plentiful. You could enjoy all those British options, but in addition your choices extend to a meal from places as diverse as China, India, Spain, Italy, France, America, Bangladesh, Australia, Japan, Greece, Mexico, Malaysia, Thailand, Turkey, and if you are in a very cosmopolitan city, African and the Caribbean too. 

If you are a provider of British cuisine you currently have to compete against all of the aforementioned nationalities. The couple who would have had a Sunday roast decades ago now could have a Mexican fajita or a Greek lamb moussaka for their Sunday lunch. The chaps who used to leave the pub and get fish & chips on the way home could now acquire any number of takeaways – pizza, Indian, Chinese, kebab or McDonald’s, to name but a few. A pub or restaurant that serves a mediocre Sunday roast, and a fish and chip shop that serves horrible fish and chips, will lose custom to their foreign counterparts, or to other providers of better English cuisine.

That’s why more foreign food is good for British food too. The importing of foreign cuisine puts intense pressure on the quality of British cuisine, and makes it better. The same goes for football players. 30 or 40 years ago UK players pretty much made up the entire league’s quota of players. If you were a good English player you had a fair chance of being picked for your club because your competition would have been only other players from the UK. Nowadays, a good quality English player has to compete with talented players from the rest of Europe and South America, all looking to earn their living playing in (usually) England, Spain or Italy.

Just as with cuisine, having foreign players in the English league improves both the quality of the league and the quality of the performers, including British players. In recent times, and just taking into account Englishmen, it takes players as good as the likes of Steven Gerrard, Wayne Rooney, Paul Scholes, Frank Lampard, Rio Ferdinand, John Terry, David Beckham, Ashley Cole, Gary Neville and Alan Shearer to make it in teams predominated by foreigners. Not only are they all world class players who did a lot to contribute to the successes of their clubs, their talent would have been enhanced by being in an environment in which they competing for places alongside world class foreign players. If they’d have been competing only against other UK players I’m certain that neither they, nor the clubs for whom they play(ed), would have had anything like the same talent or success.

England has done poorly at international level (since 1966) not because we lacked good players, but because other teams had better players. As good as Steven Gerrard, Wayne Rooney, Paul Scholes, Frank Lampard, Rio Ferdinand, John Terry and Ashley Cole were for their clubs week-in week-out, it’s just simply the case that due to a mixture of being outperformed, and perhaps lacking a bit of luck, other nations (like Spain, Brazil, France, Germany and Italy) had technically better players, and did better in the international competitions. Besides, apart from one or two disastrous campaigns, we haven’t been a million miles short of another trophy, as those who can remember Italia 90 and Euro 96 could testify. Plus, we only lost on penalties in several of the other tournaments (France 98, Portugal 04, Germany 06, Poland/Ukraine 2012). Apart from this World Cup just gone, we’ve had good enough players to excite the fans’ hopes and expectations, even if they’ve soon turned to disappointment. 

But one thing’s for sure, as the Adam Smith Institute’s research has shown us, reducing foreign players will not make all this better, and turn us into world-beaters like we were in 1966 – it will diminish the quality of the overall English League, and it will enable us to produce fewer high quality English players for our international team.

* Photo courtesty of skysports.com

The Men Who Made Us Spend - Or Did They?

I just got around to watching a three part BBC programme I've recorded called The Men Who Made Us Spend. The general contention was that our preferences for goods and services are less implicitly part of our mental constitution, and more the case of manipulations by capitalists, the media and society, turning us into their playthings.

While there clearly is self-serving media and corporation manipulation intended to filtrate into our psyche, the idea that we are malleable puppets able to have our preferences drastically altered to be manipulated at will is bunkum. Businesses exist to maximise profit, which means looking for ways to extract money from our bank account to theirs. Clearly the best way to achieve this is not to try to change our natural preferences to suit their aims, it is to conduct their aims in accordance with our natural preferences. In other words, highly marketable things, like chocolate, cakes, attractive TV presenters, trendy clothes, accessible novels, addictive video games, alcohol, and box-office hits at the cinema are easy to sell to us precisely 'because' on average we like them more than healthier, safer, more circumspect alternatives. Imagine if instead of supplying beer, wine and spirits, pubs tried to make us healthier by offering only selections of bottled water, fruit juices and teas and coffees. It would obviously be much costlier than catering for our natural pub preferences, and inimical to the success of the pub industry overall.

The primary reason free markets are so successful is not because they can change our preferences at will, it is because they can satisfy the preferences we most naturally have. Of course, those preferences change along with cultural and societal changes, and businesses are excellent at driving people's tastes in the direction they think will generate the most revenue, but they don't do this in a vacuum - they have to work with what's already in us at any one time.

Here's some practical advice that works for me, and I feel confident will work for you. The best way to avoid the susceptibility of corporate and media manipulation is to avoid the susceptibility of peer pressure and status mongering. If you can resist the gravitational pull of conformity and of being shaped to fit a populist mould you'll be impervious to the thrall of those bad influences.  

In my book The Ecstasy Of A New Morality I imagined a man on a desert island with no human contact, and I talked about how he might gradually develop an intrinsic moral system by interacting with other animals. I also expanded that to a similar desert island thought experiment that can also be applied to considering how much we humans are conditioned by how others view us. To see how extreme the social factor is, think of something like style and ownership. Imagine oneself to be on the island but yet fantastically rich, living in a huge mansion, with expensive furnishings, a fast car, fine artworks and a stunning garden. In this scenario any pleasure you had in your opulent situation could only be derived from its intrinsic pleasure – there would be no sense of pleasure from others’ reactions, because there is no one there to react. It is difficult to say just how much contentment a life of such solitary richness would bring, but I suspect with the loss of that all important component of status gravitas one's equity would lose a lot of its meaning and joy.

Questioning how much we humans do without the motivation of securing prestige, approval, popularity and positivity from others leads us to some pretty candid conclusions about what is rewarding for reward's sake and what is rewarding for the responses of others. The extent to which we can resist the pull of outside thralls is roughly commensurate with the extent to which our spending will be built on self-determination.

* Photo courtesy of bbc.co.uk

Time Is Money, But Money Is Also Time

With an upcoming wedding and honeymoon, I recently bought some extra annual leave from my place of work. I valued the extra time more than the money, so I acted rationally. It would, therefore, be foolish to look at the money I’d spent on the extra annual leave and claim I’d wasted my money, just as it would be foolish to stop a shopper after they’d left the checkout at Tesco and claimed they’d wasted the £75 they’d just spent on shopping. In both cases – mine and the Tesco shopper – we valued the thing(s) being purchased more than the money spent on those purchases. Simple enough, right?

Alas, Emily Gosden, in this Daily Telegraph article about how households are apparently 'wasting £120m' a year using tumble-dryers in summer, seems to not understand this basic principle of a voluntary beneficial allocation of resources:

“The declining popularity of the traditional washing line is costing British families at least £120m a year, as tumble dryers are routinely used throughout warm summer months. More than half of all households who own a tumble dryer use it at least once a week during the summer, according to the Energy Saving Trust. The organisation, a charitable foundation which offers advice on cutting energy bills, said that a typical household could save £18 from their annual electricity bills “by line drying clothes instead of tumble drying” during June, July and August. “

Here’s what Emily Gosden is missing. Just like the case with me and my extra annual leave, what British householders are losing in money by tumble-drying they are more than making up for in gained time in not having to go outside to put their clothes on the washing line and then bring them in after (as well as factoring in the lack of guarantee that the period of time in which the clothes are out there will remain dry). Unlike money, time is a precious resource that cannot be retrieved – so those using tumble dryers are those for whom the time saved more than pays for the £18 per year lost (which, let’s face it, at 5p per day, is hardly much).

The Energy Saving Trust wants to offer us advice by telling us that “A typical household could save £18 from their annual electricity bills by line drying clothes instead of tumble drying during June, July and August “, but this is an absurd one-sided perspective that fails to account for the gains distilled from that £18 annual cost. Those for whom the extra time gives value over the cost will use the tumble dryer more than the washing line. Those for whom the financial saving gives value over the extra time spent putting the washing on a line, getting it in, and sometimes multiplying this task due to inclement weather, will use the tumble dryer less than the washing line. Each will be acting rationally according to their preference. What isn’t rational is to tell us that as a nation we, collectively, are wasting £120m using our tumble dryers.

Finally, take each household’s £18 and translate that to minimum wage hours and it’s less than 3 hours. Let’s be super generous and skew the figures drastically in the Energy Saving Trust’s favour and suppose that each household’s weekly total washing line activity is just half an hour. Let’s then multiply that by the number of weeks in just the warmer months of the year (May-September). That amounts to:

22 weeks x 30 minutes = 660 minutes (11 hours)

Given that even at such a conservative estimate, using the tumble dryer from May to September saves 8 more hours than the 3 the £18 saves (or £32.48 more cash if you want to translate it into monetary savings), it’s clear that tumble dryer users understand the rational allocation of their time and money better than both Emily Gosden and the spokesperson for the Energy Saving Trust. It’s not surprising, of course – for too often we have to remind interfering busybodies that most of us know how to run our lives better than they do.

The Guardian Goes Off The Rails Again

The Guardian really does have some disingenuous half-wits writing for it. Here we have Patrick Collinson ranting about rail price hikes and complaining that:

“In reality, fare increases aren't really paying for infrastructure but are instead covering the gradual withdrawal of government subsidies, which have fallen by 9% in real terms since 2010-11.”

Well whoopedoo, what about that – the taxpayers are paying less in subsidies, with the fares actually being paid for by…..wait for it……the people who actually use the trains. Surely not!! Contrary to Patrick Collinson’s wishes, most of us humans have evolved to understand that privatisation is not the bogey that the old socialists used to make it out to be, but the most efficient, right and proper state of affairs for the majority of industry. Why should the council maintenance man pay to subsidise the broker’s commuting? When you multiply those types of example nationwide you see how preposterous it is. Next we have this absurd swipe at profits:

“Passengers are also paying for the vast profits made by the rolling stock companies formed at privatisation. Just one, Angel Trains, made £372m in 2013 by its measure of underlying profitability.”

That’s the kind of squalid statement that sets out to paint a railway company as being greedy, unsympathetic fiends – when, in fact, a bit of digging shows the crassness attached to the claim. Sure, £372m is a big profit, but what does that actually amount to per customer? I can’t find any precise figures for Angel Trains rail users per year, but I did find out one or two things which will help. Angel Trains has 4,500 vehicles, which even at an outrageously meagre estimate of 10,000 passengers per vehicle per year works out at 45 million passengers. Divide the £372m profit by 45 million passengers and it works out at just over £8 per year “underlying profit” made on each person. Half the amount of passengers and it’s still only a profit of £16 per year per person – hardly the sort of profit that can be said to be ‘vast’ and worthy of public opprobrium.

But on top of that, I noticed that Angel Trains have invested over £3.4 billion in new rolling stock and refurbishment programmes since 1994, as well as donating over £135,000 to numerous charities since 2008.

I know being on the economic left entails the default position that success in business should be sneered at with socialist agitprop, but they really ought to be a little bit more responsible when it comes to the companies they are smearing with their conspiracy theorist anti-privatisation propaganda.


EDIT TO ADD: As is usually the case, the measure of success is in the evidence. Here's evidence that the number of rail passengers has doubled in the times of privatisation, following years of decline under the State: http://en.wikipedia.org/wiki/Rail_transport_in_Great_Britain#mediaviewer/File:GBR_rail_passenegers_by_year.gif
 

Is Real Happiness Better Than A Superior Simulated Happiness?

In addition to my Blog on happiness a few weeks ago - here is an interesting auxiliary thought I had: what would we choose when the offer on the table is real happiness or a higher level of simulated happiness induced through some kind of man-machine matrix? In other words, to what extent do we want the actual reality when an illusory, but happier, reality is offered to us instead?

Suppose you are faced with this dilemma for real.

Option 1) You can have your mind permanently plugged into a computer simulated machine that will increase your life's happiness by 30%.

Option 2) You can opt for carrying on your life as it would have been.

In fact, we can even substitute happiness for whole life experience (WLE). Option 1 certainly increases your WLE by a significant margin, but in doing so it robs you of the real life lived and replaces it with an enhanced simulacrum of that life.

Whether you'd choose Option 1 or Option 2 depends on whether you most value the literal way that your actual sensory experiences impinge upon your mind's engagement with reality, or whether that superior simulated engagement with reality could be chosen as a replacement for the actual lived experience. Perhaps this simulated reality takes you to a level of life experience unlike anything you'd experience if you picked the real life alternative. But if you're like me, you probably place a premium on actually having done the things that give your life fulfilment.

Even if the simulacrum could enhance my life quality by 30%, my instincts lead me towards choosing the inferior but real actual life lived. I want my relationship with my wife and kids, my holiday to New York, my visit to Mount Kilimanjaro, the books I write, the meals I eat, the friends I engage with, and the family I enjoy spending time with to be things I've actually done, not simulated illusions of those experience topped up with an extra 30% of qualitative improvement.

The strange thing about this is that we spend most of our actual life doing everything we can to enhance our engagement with reality and make it the best life possible - yet when offered the very thing we strive for through a simulated reality, most of us probably would reject it and instead opt for the actual. I suppose this has parallels with induced experiences through alcohol or drugs - sometimes the mind-altering experiences create a reality more interesting and exciting than everyday perceptions, but we know they are ersatz experiences compared with the lucidity of the un-altered state of mind.

Don't Try To Fix What Isn't Broke

I didn’t plan on writing a Blog post this lunchtime, so let’s make it a quickie. Just now I’ve been listening to Jeremy Vine on BBC Radio 2 lightly grilling one of the executives of one of the big six energy firms (sorry, didn’t catch the person’s name, nor his company, as I missed the beginning). The issue is based on this bit of news - quoted from The Guardian:

“The energy watchdog, Ofgem is predicting that energy suppliers will make £106 per household over the next year – almost 5% more than it forecast a month ago. Dermot Nolan, the chief executive, said he wanted to see this reflected in lower bills as falling wholesale power prices increase company profit margins. "If the market is operating efficiently, you would expect to see competition pressing down [household] prices."

Yes and no. While it’s true that if the market is operating efficiently you would expect to see competition pressing down prices, that fact is also counterpoised by the reality that scarcity of supply chokes the market mechanism more than most people understand. Due to the market knife-edge on which energy supplies sit, energy companies cannot easily risk insolvency by simply lowering customer prices conterminously alongside wholesale price drops, because energy companies do not buy in accordance with the fluctuating wholesale prices we observe in the domestic sector – they make huge investments over several years, during which the market is susceptible to significant fluctuations (this alone shows the idiotic short-sightedness of Ed Miliband’s popularity-mongering energy price freeze proposals).

Competition makes an industry healthy, but I have a feeling that, while it’s completely understandable, in the energy industry consumers are often to blame for not making the most of competition. In the food industry, if Budgens becomes too expensive, people switch to Tesco; if Tesco becomes too expensive they switch to Aldi. It is easy to switch food providers – all you need to do is drive to a different supermarket. But while it is similarly not that difficult to switch energy providers, the time, research, asymmetry of information, and technical nous required (many people still don’t operate a computer) to take full advantage of competition is often prohibitive unless people are willing to invest the time to be price sensitive (a luxury not everyone has). If a survey was conducted that recorded the number of people who’ve switched supermarkets compared with the number of people who’ve switched energy suppliers, I’ll bet the former is astronomically higher than the latter.

Let me paint you a Guardian-reader fantasy that will probably seduce and titillate: Ed Miliband becomes Prime Minister next year and passes a law insisting that all providers enable customers to benefit from similarly low prices. That would be better for the energy market, right? Wrong. Imposing the lowest tariff on your own consumers stops competitors offering more competitive (and innovative) strategies. And not being able to attract new customers at a discounted rate relative to your existing customers disables the very quality of competition in the first place. Also, energy suppliers would not be able to compound their discounts to larger customers whose energy use far exceeds the ordinary domestic home. Uniformity drives out the best methods of ingenuity – and the continual misunderstandings about energy prices, profits, and what drives them, leads to this fruitless “If it’s not broke, don’t fix it” preoccupation.

Move Away From The Economic Right & You Move Towards The Economic Wrong

Paul Krugman has one of the most prestigious column spaces in the world - he writes the principal economics pieces in the New York Times. But although in an esteemed role, and with a Nobel-winning status, he does write quite a bit of guff, including this whopper from this New York Times article a couple of days ago:

 “There is, however, one big difference between corporate persons and the likes of you and me: On current trends, we’re heading toward a world in which only the human people pay taxes.”

 

It’s hard to see how someone who understands economics as well as Krugman could make such a misjudged statement. We already live in a world in which only humans pay tax, and we always have done. It doesn’t matter that a corporation bears some legal resemblance to a person: tax always means that some humans have less and some have more, whether that tax is corporation tax, income tax, value added tax, road tax or whatever kind. It’s true that corporation tax hits the pockets of humans in a more indirect way, but it doesn’t change the fact that all tax is paid for by humans (see my blog post The Best Way To Get More Tax From Corporations Is To Stop Taxing Them for a fuller analysis of this)

 

The only thing to which I can ascribe Krugman’s ill-conceieved comment is his gradual gravitation over the years further and further to the left – he’s falling for the leftist rhetoric about the ‘evils’ of success in business. This next little gem gives further indication of this:

 

“The federal government still gets a tenth of its revenue from corporate profits taxation. But it used to get a lot more — a third of revenue came from profits taxes in the early 1950s, a quarter or more well into the 1960s. Part of the decline since then reflects a fall in the tax rate, but mainly it reflects ever-more-aggressive corporate tax avoidance — avoidance that politicians have done little to prevent.”

 

Hang on – Krugman starts by lamenting the shift from corporate person tax to individual person tax but then goes on to lament the increase in corporate tax avoidance. As I argued in my Blog link above, the exact same solution to corporate tax avoidance is the very thing that Krugman is lamenting – a shift from corporate tax to individual tax.

 

Besides, a mere shift from corporation tax to individual tax doesn’t, by itself, amount to a loss in government revenue. If 20 years ago Bob as a company shareholder receives a £50 dividend but pays 25% tax, the government gets £12.50 in revenue. If in the present day Bob’s corporation (and thus dividend) is taxed less but Bob’s personal income more, he gets an increased dividend but pays more income tax. Suppose he now earns £75 dividend, but the government taxes him more to get their £12.50 (adjusting for inflation) – government revenue is no worse off.

 

Lastly, it is presumptuous to assume that this shift in tax “reflects ever-more-aggressive corporate tax avoidance”. It may do, but it doesn’t necessarily – and as Krugman didn’t see fit to elaborate on how he knows this, he must stand accused of making a hasty presumption. It is quite possible that the decrease in corporation tax revenue is actually down to that tax being sought by other routes. Corporation tax may have shrunk as a percentage of net tax collected, but been offset by various increases in percentage of net tax collected in other areas (say for example, in income tax, in National Insurance, in VAT, and in pensions).

 

 

 

 

 

 

Orwellian McChickens Are Coming Home To Roost

Ban supersized foods, says health committee chairman.

This is the kind of headline that makes people like me shudder with the spectre that our State hegemony keeps growing and growing. There seems to be no end to the extent to which the State wants to interfere in our daily (and let's not forget, mutually voluntary) activities. Conservative MP Dr Sarah Wollaston (a former GP, so clearly completely unbiased), wants supersize junk food portions banned, because according to her, the state has a duty to intervene to protect current and future generations from unhealthy habits threatening to shorten their lives. From The Telegraph:

"The Government has a 'duty to intervene' and outlaw supersized portions to protect children from Britain's obesity epidemic, says Dr Sarah Wollaston. The former GP has called for a direct ban on “supersized” foods and drinks, so that manufacturers would be restricted to producing chocolate bars, junk food meals and fizzy drinks in standard sizes. “Supersized” food and drinks should be banned by law in a bid to combat Britain’s obesity epidemic, the new head of the Commons health select committee has said."

When are politicians going to get the point? They should not get to dictate which voluntary free exchanges we undertake. We should enjoy that liberty – the very least of all liberties. We've already been taxed once on the earnings, and we are going to pay tax on the transaction - so for goodness' sake stop trying to dictate our actions and repress our liberty.

That's the normative issue - but there's another issue too - a point of simple logic. If the size of the portions are cut down, those who won't be filled up by them will simply buy two regular size portions instead of one supersize, or they will buy a few extra bits until they are no longer hungry. I'll wager that two portions of regular size fries contain more fries and cost more money than one supersize portion. Even aside from the taint of its oppressiveness, Sarah Wollaston's policy may well increase people's junk food consumption and decrease their finances at the same time - in both cases, the very opposite of what she wants to achieve.

What's With This George Monbiot Then?

Every now and then, albeit not often, someone tells me I should check out George Monbiot’s writing. Apparently, according to the green/economic left contingent he is the 'go to' guy for their cause, because he is one of the few who writes intelligently and researches carefully. Apart from having one brief look a few months ago, when he (or someone associated with him) appeared to distort facts about historical global temperatures dating back tens of thousands of years, I’ve thus far resisted. By accident, though, I stumbled upon one of George Monbiot’s recent Guardian missives bemoaning the fact that many of us are not worshippers of Gaia, the Greek eco-preserving Mother Goddess. So, I decided to give him a second look. I was pleased to see he was light-hearted enough to start his column with a joke:

"All the major parties and most of the media believe that we would be better off with less regulation, less discussion and more speed"

Hahahaha – very good. Oh wait, hang on, it appears he’s not making a joke at all – he’s being deadly serious. So ‘all’ the major parties (by which he must mean the Tories, Labour and Liberals – a triumvirate that stretches right back to the 17th century in various guises) believe we would be better of with ‘less’ regulation. The only way such a statement could stray into even the same territory as the truth is if we pretend that in this case 'less' means 'more'. Other than changing the meaning of words, the contention is preposterous - our major parties are continually thinking up new ways to regulate, and suppress our ability to engage in mutually beneficial transactions without being impeded by some new government protocol.

But this is what happens with relative comparatives - they skew your overall interpretation if you sit at one extreme - even moderates can seem like they are extreme. To a 3 foot 3 midget, even someone who is 5 foot 6 is seen as tall. To a basketball player, even someone who is 5 foot 10 is seen as short. This is what's happening with George Monbiot's interpretation of the main parties. If height illustrates freedom in the market economy, and being 6 foot 7 is equivalent to believing in the prosperity of the free market of supply and demand (with the necessary light regulation) then George Monbiot is seeing the free market like a heavy regulation-friendly 3 foot 3 midget who is claiming a 5 foot 6 man to be tall.

However, this comment below is the biggest whopper in his article – and as it’s the postcard version of his main point, I think it will suffice:

Planning laws inhibit prosperity. That's what we're told by almost everyone. Those long and tortuous negotiations over what should be built where are a brake on progress. All the major parties and most of the media believe that we would be better off with less regulation, less discussion and more speed. Try telling that to the people of Spain and Ireland. Town planning in those countries amounts to shaking a giant dustbin over the land. Houses are littered randomly across landscapes of tremendous beauty, and are so disaggregated that they're almost impossible to provide with public services. The result, of course, is a great advance in human welfare. Oh, wait a moment. No, it's economic collapse followed by mass unemployment. Spain and Ireland removed the brakes on progress and the car rolled over a precipice. Their barely regulated planning systems permitted the creation of property bubbles that trashed the economy along with the land.

Smelling a rat with regard to such poor reasoning is a classic example of what it means to 'think like an economist' (to paraphrase Tyler Cowen) - one is just able to spot departures from the patterned normalcy that embed the reason and rationale behind economic thinking. Or to put it more crudely, once you're used to the difference between good arguments and bad ones, spotting bad ones like this crass distortion of the facts comes pretty naturally. Knowing one simple thing - that planning/green regulations hike up housing prices and increase the chances of a bubble is enough to tell you that Monbiot is talking nonsense.

In fact, his comment is so bad that I had to do a double-take and re-read to be sure that Monbiot was actually arguing that the policies in Ireland and Spain of freeing up the supply of land and lifting regulations brought about “economic collapse followed by mass unemployment”.

Here's the truth. You know how much it annoys you when some chump tells you that ‘Correlation does not imply causation’, when you’ve made not the slightest suggestion in your blog or article that it does? Well in Monbiot’s case here, someone actually does need to point out to him that he’s got his causation and correlation mixed up.

Just because Spain and Ireland have relaxed planning regulations and financial busts does not, of course, mean that there is an A causes B causality here. The causality is, for the most part, a four letter currency problem, starting with ‘E’, ending with ‘O’ and having a ‘U’ and an ‘R’ sandwiched between them. The global financial crisis, international trade issues, burst housing and asset bubbles, and lots of sloppy eurozone horseplay where interest rates favoured larger economies (like Germany) were the primary causes of the crisis in the european nations’ economies (including Spain and Ireland). To suggest, as Monbiot does, that the cause was fewer planning/green regulations is beyond silly – not just because it is counterfactual, but because it is illogical too (as I said a moment ago, lifting regulations is better for housing supply, prices, jobs and investment, not worse). 

If fewer planning/green regulations were the primary cause, then we should have expected to see Greece, Portugal, Slovenia, Slovakia and Cyprus escape the crisis, as their regulatory laws are for the most part not as ‘barely regulated’ as those of Spain or Ireland.

Needless to say, if this kind of sloppy thinking is indicative of George Monbiot’s wider work (and I’m not asserting that it is), I shall not be inclined towards too many more of his articles any time soon. But yet in sharp contradistinction, that would go against another good maxim - that it is not good to not read someone just because you think you'll disagree with them.

* Photo courtesy of The Guardian

A Better Way To Shop For Schools

After posting my NHS blog and my smoking blog to demonstrate the brilliance of the free market, I'll finish what has turned out to be a trilogy with education - another good analogy for the quality of the free market and the impediments of State-run institutions. Most children attend government-run or government-funded schools, with a minority attending private schools.

The basic problem with our State-funded education system is that market competition does not really exist, so there is little incentive for schools to win business. If HMV fails to provide the goods and services customers want, it will go bust. Other providers, like Amazon and Play, will procure their customers. The competitive free market explains why incentives are plentiful, and why every product under the sun has improved over time yet also proved lower in cost. This is what is so marvellous about the market of supply and demand - people vote with their wallets, and firms that don't improve the quality of their goods and the allure of low prices will struggle.

Schools, on the other hand, are not currently being made efficient by such market forces. A failing school doesn't lose many customers, and its failure is likely to result in more taxpayer expenditure in the form of fines or more central government money thrown at it. This, on the whole, is the distinction between private and public sector institutions: injected finances into private sector services are usually an indication of success; injected finances into public sector services are usually an indication of failure. Not always, but usually.

Let's look at clothes as an illustration. Consumers have a vast array of desires and needs when it comes to what they wear. Evidence of this is found in the fact that the supply market for clothes is multifarious in its variety of sizes, colours, styles and prices. When market competition is replaced with government funding, consumers' preferences take more of a back seat, with politicians' preferences firmly in the driving seat.

Some people argue that the problem with a free market ethos in education is that if you're from a disadvantaged background you probably have less of a chance of thriving in a school environment, and the free market is only likely to make this worse. The reality is, the opposite is more likely. Children from disadvantaged backgrounds clearly are failing the current curriculum - but that suggests that the curriculum is not designed to tailor to their needs. More of a free market ethos would be the medicine to the ailment, not the poison. The evidence is that the 'one size fits all' government method is failing disadvantaged pupils. An education system that had the diversity to cater for a wide range of needs and abilities would be much better. In fact, my school serves as a good microcosmic example - it had a diverse range of pupils from all sorts of backgrounds, and many good teachers whose speciality was getting the best out of pupils who weren't so naturally gifted or pupils whose background was not conducive to academic excellence.

The injection of free market qualities would help all kinds of pupil at a wider level. Of course the market isn't an education panacea - there will always be problems. But this is because parents and social background play a lot bigger role in shaping youngsters than teachers and education authorities do. Pointing to the problem of young people in general when they are disadvantaged is not a criticism of the now departed Michael Gove's school policies. There are many cases of benefactors investing in free schools that contain lots of these so-called disadvantaged pupils, and the indications are that they are going to outperform State-schools (charter schools in America are following a similar pattern)

Go back to my clothing illustration and imagine how much better things would be if parents had the kind of supply of schools that clothes consumers have for clothes shops. I can get a lot of my shirts from High & Mighty because I am 6ft 7 and full of style and sexual charisma ( ;-) ). If every clothes shop was like Primark or Gucci, then clothes shopping would be hell, because variety is what makes us all catered for. Similarly, children from disadvantaged backgrounds - children so obviously not engaging with the current State curriculum - would be much better catered for in a market in which providers could specialise in tailoring their curricula to their needs.

I met a lady on benefits recently whose food is funded by Tesco vouchers. The government provides those voucher funds but it does not tell her which foods to buy, because it doesn't know her preferences better than she does. Similarly with education; it should be supplied by schools competing for the patronage of parents. Schools that had to win the business of parents would be an awful lot better than schools that received business irrespective of quality. That's as a much of a sine qua non as saying that a nationalised supermarket or clothes store would be lower in quality and less customer-focused than private ones.

* Photo courtesy of myuniversitymoney.com