Four Quick Things This Week: Racism, The Minimum Wage, Hillsborough & The Blame Culture

Thing Number 1 - Racism

Don’t know if you picked up on this yesterday, but after the furore surrounding Ken Livingstone’s inappropriate comments about an easily identifiable group, there was a similarly inappropriate comment by Andy Burnham on Question Time last night, where he told us his policy about foreigners. He said that he’d like to introduce a law that bans an easily identifiable group of foreigners from being able work in the UK purely on the grounds that they are foreign. Of course, he didn’t use those words, he said it the other way round – that he wanted a law to protect British wages so companies could not look to recruit labour at a more competitive rate from abroad. Apart from the different choice of wording, the statements made by both men should have made the headlines as being dodgy – but, alas, we live in a society in which that is highly unlikely to happen.

Thing Number 2 - The Minimum Wage

So, a chap I know called John told me today that having applied for the government’s cycle to work scheme in which he purchases a bike and accessories, and through the salary sacrifice initiative makes savings of 42% via reduced tax and National Insurance contributions, his application has been rejected because the monthly deductions on this (don’t forget voluntary and beneficial) purchase will take his earnings below the legal minimum wage, and makes him ineligible for the scheme. 

Great – another of the many minimum wage stories of lament – the consequence of which, in this case, is that staff in his firm on 20-100k per year could obtain the full 42% tax savings on a bike, but John who earns just above the minimum wage cannot. You don’t have to be that bright to see what’s wrong here. I phoned on his behalf and made what was to me the obvious suggestion that in order that minimum wage earners don’t miss out they could extend the 12 month payback duration to 18 months to keep them above the earnings threshold, but they couldn’t alter it as it’s driven by central government. Thanks central government! Thanks Chancellor!

Thing Number 3 - Hillsborough

Despite his ill-conceived comment on Question Time, Andy Burnham covered himself in glory this week with his part in the Hillsborough inquest. The recent Hillsborough ‘Justice for the 96’ outcome was the end result of a controversial process that has lasted 27 years, largely to do with the issue of blame. Initially the police blamed the fans, but given the falsity of this claim it was always likely that eventually, and with an impressive degree of tenacity and perseverance, the campaigners would see the truth exposed – that, in fact, the police were to blame, as were the Football club, and many others involved in the organisation the of this tragic FA Cup semi-final event. The outcome has been pleasing not just because it’s good when justice prevails, but also because it is a lovely demonstration of how honest people working together for a worthwhile cause can find justice in the end and see that the blame is apportioned to the right people, which, as they knew all along, wasn’t the fans.

Thing Number 4 - The Blame Culture

Alas, unlike the Hillsborough campaign, quite often blame does not go to the right people. In a society solidly riveted to the recourse of the blame culture, this often makes for frustrating reading, particularly in the political arena. I’m afraid to have to say that very often politicians and the media get this backwards – that is, they go about their business in a culture in which too many people get blamed for things that aren’t really their fault, and don’t get blamed for things that are their fault. A lot of the things politicians do that are their fault – like imputing price controls, over-regulating industries, and creating artificial shortages – elicit praise and support from large swathes of the population when really these things should be met with ignominy. On the other hand, a lot of the things politicians get blamed for, for which the fault ascribed to them is an exaggeration – like crime levels increasing under their time in office, increased inequality, and increased poverty – elicit reproach and hostility when really these things should be opined about with a more balanced and informed view. 

The Market Of Dating & Mating

I stumbled on an article today that claims poorer couples are more likely to divorce than richer ones. The writer suggested a few reasons why this may likely be the case:

"Are poorer couples more likely to divorce because money problems put pressure on their relationships? Because they don't have access to the kind of marriage counselling available to richer couples? There's another possibility, too — Stevenson and Isen found that college-educated women are less likely to believe "financial security is the main benefit of marriage." So are less-educated, potentially lower-income women entering marriage more out of financial necessity than actual compatibility, then facing the cruel irony that they're more likely to divorce, leading to more financial insecurity?"

I don't see why - one argument is that rich people may have more at stake in terms on equity, but they equally will have financial security after the equity has been divided up. Are those the reasons most likely? Possibly, but perhaps they need to think a bit more deeply. Given that on average richer people tend to be the higher earners, and higher earners tend to be people with high intelligence, it is probable that in terms of the dating market, richer people are more saleable commodities, and thus may end up in higher quality marriages (part of this may need to be offset by the likelihood that such people would also fare better in the dating world post-divorce too, so may not feel so inclined to stay in bad marriages).

Or it could be that richer, smarter people are more discerning about choosing their beloved, particularly as they tend to marry later in life. Perhaps richer people are better equipped to negotiate those difficult patches in marriages than poorer people. Finally, given that in richer couples' marriage there is a higher probability that the women is educated, it is perhaps the case that the marriage is stronger by virtue of the fact that both partners hold a strong position in the marital decision-making.

The Economics of Dating
The market of dating is like the financial market in that it consists of buyers and sellers (the prime difference being that in the dating market buyers are also sellers and sellers are also buyers). Such markets would only be in equilibrium with an optimal adjustment of prices that enabled all participants to trade.

Consider saleability in terms of A-Z, where As are the most desirable (looks, character, education, intelligence, humour, earnings, sexual charisma, etc), Bs the second most desirable, right down to Zs, the least desirable. Say a B comes onto the market - he or she is going to be an 'expensive' proposition in terms of value in the buyers' market, because many buyers will be competing for that B.

After a cleared market you will find that, save for various exceptions, As, Bs and Cs tend to end up with other As, Bs and Cs, and so on. This is what they call assortative mating. It doesn't always turn out that way - but on average the probability that it will is compelling.

Let's simplify it by just looking at age - particularly in relation to the myth that 'men going for women half their age' is quite widespread. The likelihood is that it isn't. For a man to successfully couple up with someone half his age either he must have something worth selling (often money or high intelligence), or she will probably have not much worth buying.

Please understand these economic terms are not to treat people as commodities - they are illustrations for what is happening in the real world. If you're 25 and quite expensive in the buyers' market (i.e. a good catch) you're going to be looking for someone in your age range, unless you'll be prepared to compromise that for, say, an older gentlemen with higher earnings or high intelligence. If you're 25 and quite inexpensive in the buyers' market, you may settle for someone twice your age who is slightly more of a catch than the sellers in your age range. But these are more the exception than the rule: most people are not dating people half their age - and those that are will be people who have become or remained expensive in the dating market.

I read a similar report in the Guardian about a year ago, in which the columnist postulated that the rise of Internet dating was causing an increase in divorce and relationship breakdown because it was now so much easier to find someone other than your partner. While it may be true in a limited number of cases, overall it's very likely that the opposite is true - online dating is more than likely reducing the number of divorces and improving the quality of relationships.

Here's why. Where are you more likely to find a job - in a city or in a small village? Obviously it's a city because there are more vacancies in your increased search space. The introduction of online dating is a bit like moving from a village to a city - suddenly numerous possibilities open up as the number of prospective partners increases and access to them also improves.

To put it in market terms, the search costs go from low to high. People confined to jobs, dating or trading in their local village are going to have lower quality jobs, dates and goods because villages lack the multiplicity of choices that cities have. In a city you can afford to be more discerning and more patient as you take your time meeting lots of different people to find a high quality match. You are less likely to settle for a less-than-optimum choice of partner because the search costs are low. Thanks to the Internet, search costs just got even lower, which increases your chances of finding a more suitable partner, thus increasing the likelihood of a higher quality relationship and reducing the number of divorces or break-ups.

On Trade Unions & How Shockingly Bad They Can Be For Those They Claim To Represent

A friend asked me: are trade unions an essential part of a successful economy, or a hindrance to progress?

Here was my response to him:

I think the importance of unions is overstated - it is not the case that businesses wouldn't have progressed this far without trade unions, although perhaps slightly less quickly in terms of valuable things like workers' rights, health and safety standards, working conditions, and so forth. Unions have done, and still do, some good, under certain conditions, particularly with regard to working conditions.

But I'm afraid they do an awful lot of unintended bad too, and I have a classic real life example of this, as my mother was once in charge of the union in her place of work (a large printing firm). She was a formidable figure in the workplace, so I'm told (I was quite young at the time), and is to this day a lovely, caring lady - but alas, the stories she told me went on to horrify me, as I pointed out to her how bad the union's actions were for the firm (consequently, the firm has now, unsurprisingly, ceased trading).

The main error of reasoning that beset my mother's union (and numerous other unions too) is in mistakenly setting up a stratification between what's good for 'The bosses' and what's good for 'The workers'. The reality is, for well run businesses, what's good for the bosses is also good for the workers, and what's good for the workers is also good for the bosses, because both have vested interest in the firm's success, so should pull in the same direction*.

The story I am now going to tell has very slight embellishments, but not in any way that changes the moral of the story, or the kernel of facts related to the form's trajectory. The firm had 100 machinists operating 10 printing machines. One day the bosses looked to acquire the services of consultants to see if 100 staff was too many. The union kicked up a fuss to the extent that pressure was put on the bosses to withdraw that proposal. The union argued that the consultants were potentially a threat to some of the jobs.

When I said to my mother that if the firm could run with, say, 90 machinists, then it would be better for everyone concerned if they let 10 workers go (even the 10 in the long run), my mother asserted that that would be to fail to protect the jobs of the 10 workers, and that was her union's sole purposes - to stand up for the rights and jobs of the workers.

Here's what she doesn't understand. If her firm has 10 too many workers then it is not operating at maximum efficiency. The 10 superfluous workers are not only not adding value, they are costing the firm money. But what their continual employment in the firm does is make them less competitive, which means that competing firms whose worker to value ratio is more optimal will seize the advantage, most notably in lower prices that they can pass on to their customers. In advantaging rival firms, what my mother's union was doing was disadvantaging her own firm's 100 machinists, and ultimately the whole firm too.

To add to their imprudence, my mother's union thought it would be good to create a rule that said temporary workers had to be offered at least one week's work if they were needed for any length of time. I said "What about if they just needed the temps for a day or two?". To which my mother replied "It wouldn't matter, we'd still keep them for a week. In fact they often had quiet spells that lasted several days with nothing to do".

I replied "Didn't it occur to your union that they were costing the firm unnecessary money, and that it would have been better to have scrapped the one week rule and just have temps in for time they are needed?". "No", she said, "That wouldn't be fair on the temps."

A few years later, my mother's firm went out of business. I certainly wouldn't go so far as to say that it was entirely the union that caused this - there were other factors too. But reading above, I hope you'll be able to agree that they didn't help the firm's finances, and spent a lot of time hindering their ability to be competitive, even though they didn't realise the harm they were doing in stifling efficiency.

The other danger of unions is that they are often trying to get better pay for their employees with scant regard for whether that sum is above the market value or not. If 90 workers have a market worth to a firm of £3500 per week, and their union demands they are paid £4000 per week, then in the long run it is going to be bad for everyone at the firm. Given that employees won't often know the real market value of their labour, it is always likely that they will distort pay levels detrimentally.

The other intangible effect of this is hurting other workers too. To illustrate this in simple terms, suppose there are six groups of workers: printing machinists, retail workers, building trade workers, clothing factory workers, agricultural workers and steel workers. Suppose that after union coercion, the steel workers weren't able to raise their wages, but agricultural workers raised theirs by 10%, clothing factory workers by 15%, building trade workers by 20%, retail workers also by 35%, and printing machinists by 50%.

Given that wage rises are passed on in the shape of price rises for the consumers, let's see how this benefits the groups. With the figures above there has been an average wage increase of 21.6%, so if we assume the same for prices (the figures won't exactly match for reasons too complex to go into here, but they'll be along similar lines) then as you can see, the benefits go to printing machinists and the retail workers, but building trade workers are now slightly worse off, clothing factory workers even more so, agricultural workers worse still, and steel workers worst off of all. Four of the six groups have been made worse off by the aggregate wage rises, and that's not even to mention the increased unemployment that would come from such demands for higher labour, and possible liquidations too if firms have competition from aboard who can be more competitive.

I’m not unsympathetic to many of the ways that union members like my friend are good people to have around, to ensure good, harmonious and safe working environments, because sometimes those voices apply necessary duress on bad senior staff. However, in order to ensure there is no bad to accompany the good work, the main thing that must be avoided at all times is distorting the natural market value of prices – that is, the equilibrium point at which supply is equal to demand. Prices are an incredible thing – they inform us of people’s wants and needs. They are information-carrying, like a democracy. If the price of oranges is more than the price of apples, it tells us all sorts of things about the supply and demand curves of both. If prices of DVDs are low, and getting lower, it tells us that there are newer more popular technologies on which to watch movies. If you find it hard to locate a pay phone on the street, it tells you that demand for them has all but vanished (even most elderly people have a mobile phone now).

As you probably know, a price ceiling is a form of legislation by the government that says the price of x must not go above their ceiling price. Bear in mind that the price of a good is nigh-on optimal if set by market forces. Therefore if the government's price ceiling is lower than the market value, demand will rise and supply will fall, creating a shortage. Rent controls are an example of a price ceiling. Property investors are less likely to invest in housing, which creates a shortage as rents can no long reach their market value.

A price floor is a form of legislation by the government that says the price of x must not go below their floor price. Therefore if the government's price floor is higher than the market value, demand will drop and supply will rise, creating a surplus. The minimum wage is an example of a price floor. Employers are less likely to hire staff, which means an increase in unemployment. If unions find themselves distorting the natural market clearing rate of prices, then they are doing a lot of harm (to everyone) that is probably invisible to them.

* If you're interested, I wrote a nice little ice cream analogy to convey that point, in this blog post)

Why Is It That Pretty Much All Projects Overrun?

Why do projects nearly always take longer than scheduled? You know the score - you've seen it many times before: some large firm wins the tender to undertake mass refurbishment on a large government building, or to build a new distributor road stretching several miles, and inevitably the project overruns and the initial budget put aside proves inadequate to the completion of the job.

But why does this happen so frequently? The reason is quite straightforward; it is because the estimated time is a predictable underestimation - a phenomenon that greatly increases with the complexity of a job. And time is, of course, money.

Writing a blog post is quite straightforward, so if I set myself 20 minutes to write it (or less with short blogs like this one) it isn't difficult to stick to the deadline. But projects like big building projects, even when an up-front fee has been agreed and the incentive is to complete it as quickly as possible, are highly likely to overrun - quite simply because our highly consistent underestimation of time at each stage of a project is going to be multiplied with every further stages of the process. It is the individual probabilities of stages multiplied that is the key to the explanation.

This is what is commonly known as the "planning fallacy" - whereby for every step in a project, there is around a 50% chance of that stage being completed over the estimation time. Once you plug in the numbers, that means that for a project of two steps there's a 50% chance multiplied by a 50% chance, which means for two steps the chance of overrunning is now 75%. For 3 steps it's 50% * 50% * 50%, which means there is an 87.5% chance that out of a 3 step program it is going to overrun. Consequently, then, a project in which each constituent step has only a 50% chance of not overrunning, means that for every step the probability increases by x 1/2, which means that projects with multiple steps are nigh-on certain to overrun.

A Tenuous But Probably Well-Observed Correlation

In the penultimate chapter of his book The Better Angels of Our Nature: Why Violence Has Declined, Steven Pinker attempts to bring together the tenuous linking of increased free market libertarianism and increased peace:

"To think like an economist is to accept the theory of gentle commerce from classical liberalism, which touts the positive-sum payoffs of exchange and its knock-on benefit of expansive networks of cooperation. That sets it in opposition to populist, nationalist, and communist mindsets that see the world's wealth as zero-sum and infer that the enrichment of one group must come at the expense of another."

In my case, he's pushing at an already open door with a comment like that, but then I'm not one of the people that needs convincing - I mean, as I've blogged about a couple of times now, it's pretty evident if you look the nations that most espouse economic freedom, democracy and liberalism, they are pretty much always the most peaceable countries too.

As well as the obvious point - that free trade is underwritten by co-operation, empathy, and a stable rule of law that protects individual rights - what Pinker means by 'thinking like an economist' is probably that people well versed in economics are not so heavily sullied with the divisional myths that pervade the left; like for example, class stratification, wanting to forcibly confiscate wealth from higher earners (the higher the taxes the better), enviously resenting those who are successful, failing to note when value is being created, falling for the fixed pie fallacy and feeling a false sense of entitlement for what others have acquired, thinking that the economy is zero-sum, lamenting when other more competitive industries prove to be more efficient than industries in their own country, and treating others as less important if they happen to belong to a country outside of their own geographical borders.

The link between peace and the free market is tenuous, but that's only because the entirety of our global interactions, past and present, amounts to a vast nexus of tenuous and complex correlatives. And it's not the first time that we've talked about it.

Wow, Just Wow! Whatever Happened In Society To Take Us Back Down This Road Again?

Oh heck, where did it start to go wrong again? As I'm sure you can remember, we used to be pretty repressive when it came to personal liberties, where anything deemed too offensive for social mores was frowned upon, contested and sometimes banned. Radio stations would not play The Rolling Stones' Let's Spend The Night Together; the film Last Tango In Paris caused uproar, as did Monty Python's Life of Brian. It even used to be difficult to be openly gay, or be involved in a mixed heritage relationship.

It's easy to look back and recoil at past attitudes, but we did seem to get a little better. We stopped being so intrusively upset about people's works of art, and about how they expressed themselves, and we grew the hell up about who people had relationships with. 

But alas, recently we seem to have gone backwards again. I can't recall precisely when - it seems to have insidiously crept into our society, but we started to find ourselves surrounded by spineless busybodies who get offended too easily in the absence of a rigorous argument or any notable reasoning skills, and thought it was their right to do so in a way that meant everyone else had to be very afraid of offending them.

And it seems they got their wish, because what emerged from this national paranoia was an even larger bunch of busybodies - those even worse than them: the people who get offended on their behalf. We've become so used to seeing people afraid of upsetting or offending other groups that it no longer surprises us when we hear of the latest person who cannot comfortably wear their crucifix necklace at work, or the latest group to be guilty of 'cultural appropriation*' for wearing sombreros on a night out, or the latest university that creates ‘safe spaces’ to protect the right of some students not to be offended (heck, did they forget that free expression, argument and debate are the essential tools for learning and for challenging bad ideas?).

What has caused us to journey from lily livered impotents to reasonably intrepid proponents of free expression back to lily livered impotents again? I can think of two main changes that might have altered the public consciousness. In the first place, the country now has a lot more diversity, which means there are a lot more minority groups with views that differ from the mainstream. And in the second place, computer technology has undergone radical changes, which means there is mass communication going on, and also that everything everyone does it pretty much under external scrutiny now.

Personally I see no reason why either of things should cause us to become spineless again, but it would appear that we have. Diversity of people has generated an unprecedented range of beliefs, opinions and cultural practices that appear to make many people uncomfortable in expressing themselves for fear of upsetting someone, or being labelled a racist or bigot. The widespread fear of upsetting Muslims is perhaps the most obvious case in point. And the extent to which everyone can have their say on social media is unprecedented too - it appears to be bringing with it a huge rise in vile threats and guttersnipe abuse, which as a consequence appears to be making many people fearful of free expression once again. But I've said it before on here, and I'll say it again - we must stop this train of timidity in its tracks as soon as possible. 

To finish, I want to leave you with a video doing the rounds at the minute - of a black campus employee confronting a young white male who has his hair in dreadlocks. Alas, this video is isn't exactly an isolated incident - hardly a day goes by without someone asserting that how someone looks, the clothes they wear, the statue they had erected, and so on, has suddenly become racist or simply deeply offensive to a minority group.

What you have to ask yourself is, what forces occurred in that young lady's life for her to so aggressively demand that a young white man's freedom to wear his hair in dreadlocks ought to be denied? She didn't just suddenly decide this for herself. Who has done such a number on this (probably) otherwise bright student to cause her to uncritically and unashamedly declare that this so inextricably belongs to 'my culture' that it trumps any personal freedoms you might have on this matter - was it parents, friends from the same 'culture', or was it those pervading busybody trends I mentioned earlier, insidiously creeping back into our society, and showing increasing signs that this is just the thin end of the wedge? Things have got to change all over again!

This Should Create Mass Anger, But Instead It Creates Mass Joy

With the recent introduction of the living wage the red socialist in blue conservative clothing chancellor George Osborne made it clear once and for all that he is just as careless about basic economics as the opposition parties, that he has scant concern for the economic well-being of the people of this country, and that pre-Prime Ministerial popularity is his main agenda.

The living wage price floor is now £7.20, up from £6.70 under the old minimum wage, and within four years it will be over £9. I have written repeatedly about all the ways this is a terrible idea, but I have not gone into as much depth as I'm now going to about how politicians play on this public credulity in such a shameful way. And I'm sorry to have to be the one to tell you, but it is shameful - it's shameful because it's driven by falsity and conceit, and I hope after reading this you'll understand more about why this is the case.

I lamented in a recent Blog post about how the people that govern us make decisions of popularity, not of prudence, based on the fact that the majority of the people they govern prefer popular myths over prudent truths. Consequently, when you have an electorate that is in this position it is incredibly easy to sell them things they think are good for them but are actually not. To understand this, we need to go over the basic economic fallacy that underpins almost all other related fallacies - it's what Bastiat summed up in his seminal essay "That Which is Seen, and That Which is Not Seen" - which is basically about how economic decisions have far-reaching effects beyond the immediacy of our perceptions, and that any idea or policy has to factor in everyone who is affected (It's what I like to call the tangible costs, the tangible benefits, the intangible costs and the intangible benefits, touched on in this Blog post).

It is no exaggeration to say that just about every bad economic idea or imprudent policy in politics is down to the fallacy of only thinking about the immediate effects on an easily identifiable group rather than thinking about the effects on everyone, in the immediate and long term too. The art of a prudent policy is in tracing its consequences everywhere, not just in one easily identifiable place (for more on that, see this Blog post of mine). It is because the vast majority of the public only think of policies in terms of one easily identifiable place that politicians so readily impose these imprudent policies on us. Only when the populace wises up will there be selection pressure on politicians to wise up too.

This State-mandated living wage of £7.20 an hour benefits a select group of people (a proportion of low skilled workers) but harms just about everyone else (employers, the people that lose their jobs because their employer has to let some staff go, the consumers who have to pay higher prices, the hundreds of thousands of people whose labour is not worth £7.20 an hour to a prospective employer, and at a broader level, the nation as a whole as State-mandated price fixing makes other places more attractive places to invest).

To see why labour price controls are always bad, we first have to understand what labour is. Labour is a commodity - it is a substantially marketable sale of work sold to create value. Its price is dictated by supply and demand, which involves the aggregation of billions of choices, wants, needs and desires going on in the world at any one time. There is no such thing as a 'fair day's pay' or a wage someone 'deserves' or a 'just' wage - they are completely alien to a proper understanding of economics. They are emotive terms uttered only be people who don't have a full picture of how prices are dictated.

Who benefits from labour? The answer is everyone. The person selling his labour, let's call him Fred, benefits because he chose that option over the next best option. The employer benefits too because it's that labour that helps him make a profit, as do all the places Fred spends his money, as do all consumers generally.

How do you know if you are of value to your employer? Easy – your value can be measured by what’s called the marginal revenue productivity of wages, which is basically the benefits your employer earns from employing you. If your wages are more than your marginal revenue productivity then you earn more than the sum total of value you bring to your company.

On the back of that, two things set wage levels, primarily. Firstly wage levels are determined by the skill level of the job in terms of how easy it would be for the next person in line to come in and do the job. A McDonald's burger flipper or a Sainsbury's shelf stacker do not command high prices for their labour because it is easy to replace them in the job centre queue as the job is easy. Lawyers and surgeons command high prices for their labour because it is not easy to replace them in the job centre queue, and their jobs require lots of studying and training.

Secondly, wage levels are determined by which other job opportunities the worker has. Business owners are not just competing with the goods or services they sell, they are also competing in the labour market too. Suppose Sainsbury's has the profit-scope to open several more stores. To do this they need to buy labour, which means either hiring people currently unemployed, or hiring probably better people already doing similar work. To do the latter they must offer higher wages (or some other benefit) in order to attract these workers. So wages are set not just by who is next in line relative to the skill level of the job, but also by how many rival competitors want to buy your labour too. Your pay working for x will be contingent on what y and z are willing to pay you, because x, y and z are in competition not just for bread, milk and cereal, but for the labour upon which their profits are based.

Osborne's popularity-over-substance Living Wage price floor ignores all this, plus it ignores all the harm done to small businesses, to currently unemployed people, and all the soon to be unemployed people. Why aren't the people cheering the Living Wage thinking of these hundreds of thousands of people - the 'unseen' in Bastiat's equation? How come no one thinks about all the elderly people or already struggling people that get hit in the pocket by the higher prices that businesses introduce to pay for this? These are the people that proper economic considerations demand that you factor in too.

The hotel workers and waitresses and bar staff enjoying their extra £20 a week owe their gains to consumers, including students, the elderly and unemployed people, who are forced to pay the higher prices that fund those gains. The net gains to the winners are dwarfed by the net costs suffered by the rest of the population (most of the businesses affected by the Living Wage don't actually make very much profit, by the way).

If George Osborne wants a genuinely prudent solution, why won't he do the good thing for low earners that also isn't the bad thing for employers and consumers and the unemployed, but is somewhat less popular - take low earners out of tax and national insurance, thus making their wage more like a living wage, but not increasing consumer prices and jeopardising employment levels and penalising employers of low-skilled workers? Oh yeah, question asked, question answered, it's somewhat less popular - and he does want to be Prime Minister, of course.

It's The Politicians That Need Some Steel

The people that run our country worry me, but the people that want to run our country (Labour, the Lib Dems, the Greens) worry me far more. Despite the fact that, apparently, China has produced more steel in the past two years than the entire UK has since the 19th century (and wow, what a fact that is if it's true!), and the fact that the British steel industry is losing over £1million a day as a result of the collapse in steel prices (can they not spot the obvious supply and demand link between the two facts?), they still want to flirt around with the idea of nationalising British steel - not because it's the prudent thing to do (even the most blockheaded politicians must be able to undertake this basic arithmetic), but because it's popular with UK voters.

I wonder if any of those calling for nationalisation of costly, failing industries ever gave a thought to the concomitant losses in other parts of the public sector (health, social services, defence, police officers on the beat, old age pensions, etc) required to pay the price. Probably not.

One thing they definitely don't give a thought to is the notion that when a business or even a whole industry dies in the free market, it is not only a good thing in the long run, but a necessary thing too. Not only is a death in the market a sign that others are providing the good or service more competitively and efficiently, it is also a necessary departure that makes room for new industries to grow. Imagine if the companies that produced video tapes hadn't died or moved to newer technologies, or suppose people were still trying to make a living producing telephone boxes or designing gramophones - it is easy to see why they wouldn't be solvent anymore.

When obsolete industries shrink or discontinue this helps free up new capital for fresh industries. If we had tried to artificially keep alive the video tape industry, we wouldn’t be enjoying so quickly the improved movie watching experience of DVDs or On Demand TV: if we had tried to artificially to keep alive the old telephone industry, we would have slowed down the growth of the burgeoning mobile phone industry that has seen so many other auxiliary gadgets included on our hand held devices too.

It is just as necessary for a healthy economy to allow providers of extraneous goods and services to shrink or die as it is new ones to emerge. The former is essential to the latter, as there always needs to be fresh capital freed up for new and improved industries. Trying to artificially preserve the British steel industry over more competitive steel production elsewhere is not very different to trying to artificially preserve fax machines at the expense of emails - it is only a more immediate and reactionary example of the same thing.

Alas, it is true that all this does have a negative short-term effect on the workers in the British steel industry, and in some cases on local communities, but artificially propping up an industry that is being outcompeted by a more competitive industry abroad is not the right thing to do, for all the reasons just explained (By the way, if you're still having emotional home-grown difficulty with this point, let remind you of a previous article I wrote for the Adam Smith Institute in which I explain how artificially propping up failing British industries also hurts other British industries in the process).

The reality is, there is a horrible and harmful co-dependency between the masses of our population - who are so Anglo-centric that they fail to understand how competition works, and how stifling competition harms us as well as everyone else - and the pliable politicians that rely on their vote to survive in their roles. The people that govern us, and the people in the shadows wanting to govern us, are toxic to our economy, because they make decisions of popularity, not of prudence, based on the fact that the majority of the people they govern prefer popular myths over prudent truths. As George Orwell once famously said: "In times of universal deceit telling the truth is a revolutionary act", and this nation badly needs a lot more truth injected into the political mainstream.

Why I Think It's Impossible To Replicate Our Brains

In my view, the author and computer scientist Ray Kurzweil is one of the most interesting people around. Kurzweil is a bold futurist who has every confidence in the law of accelerating returns, a phenomenon that predicts a continual exponential increase in technologies in ways that will keep improving and enhancing human well-being. There is plenty of evidence to suggest he is likely to be right, although for various reasons, many of which are unpredictable, apparent exponential growth patterns can quite easily level out, and probably will in some areas of technology.

On a more specific note, in his book The Singularity Is Near, Kurzweil has made a very interesting prediction: that by the year 2040 we will be able to build the equivalent of human intelligence by scanning the brain from the inside using nanobots. Once we know the precise physical structure and connectivity information, Kurzweil says we will be able to produce functional models of sub-cellular components and synapses and replicate whole brain regions.

Kurzweil talks of "uploading" a specific human brain with every mental process intact, to be instantiated on a "suitably powerful computational substrate". Rather than an instantaneous scan and conversion to digital form, Kurzweil thinks humans will most likely experience gradual conversion as portions of their brain are augmented with neural implants, increasing their proportion of non-biological intelligence slowly over time. Quite how much time, he's not sure, although he offers a suggestion of 10¹⁶ calculations per second (cps) and 10¹³ bits of memory, plus the possible additional detail that such uploading requires, which could be as many as 10¹⁹ cps and 10¹⁸ bits.

This all sounds intriguing, but for my mind there is a possible problem that underwrites the above scenario - it doesn't seem possible to me to replicate the 'you' that you know as your first person selfhood, and ditto that for any unique human, for reasons I'll explain.

First, don't get me wrong, future advancements will astound us in all sorts of ways we cannot currently imagine, and there probably will be forms of artificial intelligence that we can interface with at a level similar to the human-human interface we enjoy. But I personally think that the 'you' and 'me' we each know to be our own mind is something of such unique complexity and evolutionary finesse that it will never be able to be precisely reconstituted in any kind of artificial intelligence. In a nutshell, the 'you' that makes up your first person selfhood is an utterly unique aggregation of mental machinery that can probably only be retained in the biological apparatus that you call your brain. I will explain why with a thought experiment.

Any time AI program writers try and extend the world of brain cells into the world of transmitter molecules they would then have to try and simulate hormones. And these, in turn, depend on genetic instructions which are themselves only partially programmed and highly adaptable. Simulating the human brain is not just about replicating the hardware that we see in the form of neurons and synapses, it is about replicating a lengthy evolutionary process that goes right back to the origins of biology itself. For example, some of our genes involved in the development of our cognition (even at the embryonic stage in the womb) are genes that go right back to the very beginning of all life forms billion of years ago - and these are genes and hormones that form the substrate of cognition prior to the point at which neurons and synapses become involved.

Let us suppose, though, that we overcame all those hurdles and developed the scientific wherewithal to attempt brain replication in an external agent - a computer or an android, as Kurzweil suggests. Here’s why I still think your own ‘self’ will remain unique to you. Suppose at this stage we can produce a short-cutting algorithm that enables us to reduce the human brain atom by atom and then reconstitute the exact atomic configurations of the original mind, reproducing the conscious cognition. What would that entail?  In the human brain there are 10^11 brain cells (that's 100 billion), and 10^14 atoms (that’s 100 trillion) in each brain cell - that makes 100 billion x 100 trillion atoms, which is 10^25 atoms (or 10,000,000,000,000,000,000,000,000). 

Now, suppose we were to replicate the brain at the rate of 1 trillion atoms per second. Even at that rate it would still take us 317,097 years to reconstitute the full brain. It sounds like all talk of reducing at the atomic level is too far, but it shouldn't be – after all, Alzheimer's sufferers experience degeneration atom by atom, one at a time, and babies are formed in the womb atom by atom, so evidently these effects do impinge on physical states, they are just processes of natural development that happen really fast.

It was once thought that consciousness was a precise configuration of proprietary parts, and that in assembling a brain from scratch there would come a point at which the first person perspective of consciousness would be switched on - rather like assembling a circuit board of cognition that lights up when all the proper connections are made.  But our aforementioned knowledge of degenerative diseases like Alzheimer’s shows that this isn’t the case – at least, it shows that atomic reduction can occur bit by bit and that the cognitive abilities of that mind operate with different degrees of composite integrity. 

The problem I see (in relation to compromising the ‘self’) is that if in our thought experiment we reassembled a brain from scratch one trillion atoms at a time we could not reconstitute the unique first person perspective because the first person self would at some point become aware of cognita being partially reconstituted, at which point (and from then on thereafter) a new set of conceptions and experiences would be taking place during the restoration process. So the simulated ‘you’ being uploaded would at some point begin to take on thoughts of its own before the real you in its entirety was uploaded - meaning that a partial you had begun to generate new and unique thoughts.

Ok, let's speed up the process. Even if you doubt the effects of atomic reduction, and we instead chose brain cells as our object of replication, and replicated them at the rate of 1000 per second (a feat that would take unimaginable technological sophistication), it would still take over 3 years to do the whole brain. In that 3 years, such an activity is bound to cause the simulated ‘you’ to take on thoughts of its own before the real you in its entirety was uploaded. However much we can reduce the execution time - months, weeks, even days, it seems impossible to replicate the unique 'you' or 'me' that make up the totality of that first person selfhood, because during the uploading process there surely will come a point at which the original you and the copied you each start to develop new and unique first person cognita - cognita, in fact, that is being caused by the experience of the replication process itself, as well as all the interference at a neurological level.

Most Football Managers Don't Make Much Difference, You Know!

I noticed some Liverpool fans in a sports forum eagerly anticipating next season under new manager Jurgen Klopp. They were hopeful that the Klopp-factor would bring success where other managers had failed. I’m afraid I was a Cassandra figure who pointed out to them that in all likelihood Klopp’s arrival won’t make much difference to Liverpool’s success, because managers generally don’t have much of a bearing on a team’s success (for more data on this, Google the studies done by the Dutch economist Dr Bas ter Weel). Notable exceptions in Premier League history are probably Alex Ferguson, Arsene Wenger and Jose Mourinho, which is interesting given that one has retired, one is under constant pressure to be sacked and the other was actually sacked earlier in the season.

I'm sure anyone vaguely interested in football will recall times when a new manager comes in and apparently works his magic, supposedly turning things around for the better. It happened at Manchester City with the arrival of Roberto Mancini, and it's happening now at Chelsea with the arrival of Gus Hiddink. It's certainly true that some new managers have a honeymoon period on arrival, but I think they are rarer than you imagine. And even when they do occur, something else is actually happening - something more to do with probability than magic managers, as I'll explain.

In simple terms, if you're a team doing worse than expected, the chances are you are soon going to improve, irrespective of whether you sack the current manager or not. For the best example of this, take Chelsea, the club most notorious for sacking managers halfway through a season. A quick check on Chelsea’s results since the year 2000 shows that they average 1.7 points per game. As you’d expect, if you take Jose Mourinho’s bad string of results this season they fall a bit below the average, whereas if you take Gus Hiddink’s (the manager who replaced him), they rise a bit above the average.

Mourinho was sacked due to a poor run of results, but even if we overlook the most important fact – that Mourinho is a world class manager with a proven track record of success – had he not have been sacked and replaced by Hiddink one would have expected his next set of results to be better than the last. This is called the regression to the mean. If you a measure a series of results (say Mourninho’s) and they are lower than Chelsea’s average then it is expected that measuring the next series of results should see them tend closer to the average. In other words, Hiddink's relative success is about his being the beneficiary of regressing to the mean after Mourinho’s poor run of results – it is highly unlikely that his arrival had any major overall effect on performance, save for the inevitable short-term ‘work hard to impress the new manager’ phenomenon which lasts no more than about 3 games.

Given that most managers don’t have much of a bearing on a team’s performance, sacking them is obviously a costly exercise. Not only is there the expense of paying off the sacked manager, and the extra expense of employing a new one, there is also additional expense as new managers inevitably want to be given a spending pot in order to sign new players and build their new team with players they've bought.

If this is so costly, why then do football clubs sack their managers with such regularity? The obvious reason is that sacked managers are an ideal scapegoat, which gives everyone someone to blame for the failures, and it gives the fans renewed optimism (albeit false optimism) after a slump. The truth is, in most cases there is little to be optimistic about when a new manager comes in, as most won't make much of a difference to your team's results, and will, in fact, probably cost a lot more than the overall value they bring.  

The Big Question About Future Intelligence

Science fiction is largely about ideas, which means good science fiction is about good ideas. For this reason there aren't many really terrific science fiction films made, because there aren't that many real science fiction films. For every 2001: A Space Odyssey, there are countless sci-fi-flavoured yarns that serve as okay entertainment, but are not what one would call good expositions of ideas.

 

Given that it's such a compelling subject, both scientifically and philosophically, some of the best science fiction films I've seen have been about artificial intelligence (AI), and the relationship between humankind and machines. The first two Terminator films and Spike Jonze's Her are prime examples, as is Ex Machina, which I saw very recently and thoroughly enjoyed.

 

Ex Machina tells the story of a young programmer who is selected to lodge in the abode of AI designer Nathan, and participate in the evaluation of potential human qualities in one of his created androids to see if she passes the Turing test (that is, exhibit intelligent behaviour equivalent to, or indistinguishable from, that of a human). For fear of a movie spoiler, I won't say any more about the plot - but if you haven't seen it, I thoroughly recommend you do.

 

There is, though, one big question that I think the movie gets wrong. In one scene Nathan tells us how he sees human history as one tiny passage of time on a lengthy and complex evolution of mind, informing us that, in his view, artificial intelligence is the future intelligence that's going to live far beyond the human intelligence that created them:

 

"One day the AIs are going to look back on us the same way we look at fossil skeletons on the plains of Africa. An upright ape living in dust with crude language and tools, all set for extinction."

 

I doubt this very much. This view seems to be a projected future based on the reality of the past. It's easy to see why. Think back to a few hundred thousand years ago, and consider those primeval grunts from our ancestors as they began to make sense of their surroundings. They never could have imagined that those inceptive primate sounds would one day evolve into the entire world of languages, literature, poetry, philosophy, science and technology that we have today. And just as Lord Of The Rings, the Manhattan skyline, space travel and the Hadron Collider would have been far beyond the imaginative precipitations of our primeval ancestors, so too is much of humanity's future evolution beyond us today.

 

But whatever form the evolution of mind takes, it won't be 'us' as thinking beings that is all set for extinction, because the most important thing that survives is the cognita (and its representation) on which any future technology is based. The human mind is the most sophisticated aggregation of matter in the entire universe (that we know of), and as such, it seems to me that machines we create cannot be any more intellectually sophisticated than the minds that create them (just as machines cannot be more wicked than the wickedness of the minds that create them). That's obviously not to deny that we can create machines that are more sophisticated than us at tasks, and computers that can undertake tasks in execution time at far more advanced levels than us, because clearly we can.

 

We are picking up pace in this modern age as we reach new heights and new depths in shorter passages of time. My prediction is we'll one day evolve into creatures of pure thought, that require no monetary currency, no food or drink, probably even no heart, lungs, hands and feet. Our cognition probably will be sustained by software far beyond our present imagination. But I very much doubt it's ever going to be the case that the AI we create is going to assume dominion of its own to the extent that it becomes the supreme species at the expense of the sophistication of the human mind and its proposed extinction.

 

I believe that humans will always be implicitly involved in the evolution process of our own cognita, to enable us to retain a co-operative with any machines we create, however advanced, and however powerful. We are not going to create anything that, by comparison, turns us into the proverbial "upright apes living in dust with crude language and tools, all set for extinction", because all future innovation and advancement is itself going to be part of the evolutionary process of the human mind, not distinct from it in a way that we'd allow to threaten the existence of the minds that engendered it.

The News You Lose Is The News You Don't Choose

The above image is a meme doing the rounds. Personally, the most obvious response I have is that for evolutionary reasons that served us well in our ancestry, we humans are primed to have a greater interest in certain groups over others, whether that's caring more about family and friends than strangers, caring more about whether burglaries are rife in your neighbourhood than a neighbourhood 250 miles away, or paying more attention to terrorist events relative to geographical proximity - there's no reason to be surprised that this is what happens. Strong and weak ties are in our DNA.

The other perhaps slightly less obvious factor is that whether we like it or not, the media is driven by human feeling and viewpoints far more than it drives them - it reflects the interests of the demographic to whom it is trying to sell its news stories. This means that, for good or for bad (and I personally think for bad a lot of the time), they are less likely to feature a news story on a terrorist attack in the Ivory Coast or Somalia if they can't in some way connect it to the perceived interests of their demographic. Instead they will too often opt for news stories that involve more local interests at the expense of what their readers deem to be less important or too distant news.

As much as I wish it weren't the case, the often toxic co-dependency between media provider and the public is not too dissimilar to the one between politicians and the electorate that votes them in - it is bound to lead to sub-standard results. We have so many misjudged members of the public that demand their wishes and views are represented by politicians. As Bastiat pre-empted in his great 'seen and unseen' essay, most people only have (or allow themselves) enough intellectual wherewithal to focus on how things affect an easily identifiable group, rather than how things affect all groups. 

Consequently, then, the selection pressure for politicians to be socially, politically and economically astute is diminished by their knowledge of the electorate's lack of astuteness in these areas. The same can be said for the media - the selection pressure on how they inform their consumers is largely driven by the consumers themselves. The antidote to any of the ethnocentrism and parochialism that exists as conveyed in the above image is to be discerning about where one gets one's news. There are plenty of media outlets that are more likely to ensure they cover a terrorist attack in the Ivory Coast or Somalia at the expense of news items about who won the Brit Awards and whose wife John Terry is currently shagging.

As this blog title alliteratively suggests: the news you lose is the news you don't choose, which is another way of saying that the quality of information you receive is roughly commensurate with the quality of the search, and the extent to which you care about other human beings irrespective of ethnicity, skin colour and geography.

Why We Don’t Get Many Decent Politicians

Considering that in the shape of the shadow Labour cabinet they have only an economic laughing stock as opposition at the moment, it's odd to see the Conservatives in such a shambles, what with the EU party divisions, Iain Duncan Smith's resignation over the disability cuts, and the fact that the chancellor George Osborne is really little more than a crypto-socialist awaiting his chance to be at the helm of the party in the public relations role of Prime Minister. When the opposition is so weak, it speaks poorly of the Tories that they appear so weak as well. Perhaps they think they can afford to be complacent.

But I wonder if the problem runs deeper. When it comes to listening to many of our politicians, I'm afraid often the primary thing the public has to consider is whether their rhetoric is the result of incompetence or dishonesty. I have to confess, sometimes I genuinely don't know. Take the minimum wage, which as I've shown before repeatedly in numerous past Blog posts lacks so much pull that it couldn't even shift the skin off a rice pudding. The number of politicians who call for its endorsement and incremental increase is astounding. Whether it's on Newsnight, Question Time, The Big Questions or Free Speech, you'll find they are all at it. And not just the minimum wage - price freezes, artificial protection of British industry through subsidies or bailouts - all of these things over which the State has far less control than the public realises. 

It's hard for anyone to believe that Oxbridge educated people don't know the erroneousness of their claims, so I must assume that they are simply telling lies that they know will make them popular. But they are rarely outright lies, of course - more akin to manipulative language that speaks a half-truth but is in actual fact half-empty too, making it frequently beyond the scope of the political influence that is being claimed.

Because politicians have to win votes they have to tell the public what they want to hear. They must also make claims they cannot justify - that they will create jobs (with additional value, that is), reduce unemployment, oversee growth in the economy, etc, - which means promising to do things over which they know full well they have much less influence than the public imagines.

But assumedly not all politicians are duplicitous opportunists; there are no doubt some that mean well and have genuinely good intentions. Yet most of the ones that mean well also come out with this same absurd rhetoric too - it's pretty contagious in Westminster. This leads me to think that the ones that mean well have actually been taken in by the rhetoric of those around them and those that preceded them, and the ones that don't mean well are just simply good actors who have simply perfected the art of deceiving. Given the foregoing, I think politicians can be divided roughly into two groups.

GROUP 1: Those that know much of their rhetoric is nonsense but are good at deceiving enough people to get away with it.

GROUP 2: Those that really do mean well and have noble intentions but are actually unwise enough to believe some of the things they say.

Let's call group 1 the Snakes and group 2 the Puppies.

What we long for are politicians who are well meaning with good intentions, but also smart enough to be able to see through the rhetoric and say a few candid things, bringing some refreshing wisdom as they do so. But consider what being in such surroundings would do to such a person - they would see clearly enough to all-but lose faith in the political circus, and perhaps lose a little bit of faith in humanity too. Even if we had a few rare gems, they would be the exception - and they would be swamped by the majority of Snakes and Puppies that outnumbered them.

These rarities sound like they'd be a breath of fresh air - but, alas, the truth is, the political system, coupled with the toxic relationship of co-dependency the politicians and the electorate have with each other, is not a system that is set up for truthful and candid expositions. Most of the electorate just aren't ready to digest the fact that economies, labour, house-prices, wages, supply and demand are largely beyond the control of the government (save for a few light and necessary regulations) - which means they also aren't ready to accept that a lot of the government involvement is not going to be well-informed or successful.


EDIT TO ADD: I briefly alluded to the toxic co-dependency between politicians and the electorate that votes them in - I think it's another factor as to why we have so many misjudged politicians; we have so many misjudged members of the public that demand their wishes and views are represented by politicians. Moreover, economics is about the most misunderstood subject around, largely because, as Bastiat pre-empted in his great seen and unseen essay, most people only have (or allow themselves) enough intellectual wherewithal to focus on how things affect an easily identifiable group, rather than how to affects all groups. Consequently, then, the selection pressure for politicians to be economically astute is diminished by their knowledge of the electorate's lack of astuteness.  
  

A Strange Argument About Whether Prison Is A Deterrent

Some of you may be interested in my response to an IEA writer’s peculiar argument for why Prisons do not act as a deterrent to crime. Some of you may not. 

I have to take issue with the claim that “Prisons do not act as a deterrent to crime”. There is a small group for whom that is the case – and that group is the recidivists who, as you say, have a high re-offending rate, and are being sub-optimally helped by the prison system. But saying that prison isn't fit for purpose because of high re-offending rates is an absurd complaint, and a peculiar error of reasoning. It's a bit like complaining that sea defences aren't fit for purpose because occasionally there are extreme coastal conditions that break those barriers.

It would be good if the sea defences prevented all flooding, but their primary job is to protect the land from the ordinary thrust of the sea on a daily basis. Similarly, prison's primary function is to reduce offending (by deterrence and by keeping criminals out of society), not re-offending. If it reduces re-offending then all well and good, but that is not its primary function. It's preposterous to consider whether prison is fit for purpose by only considering the recidivism rates. It's as preposterous as considering how many men in the UK take steroids by only interviewing weight-trainers in gymnasiums.

Such a biased research method would drastically skew the overall figures, and this is what is happening with Vicky Pryce’s “Prisons do not act as a deterrent to crime” claim, as recidivists are people who've already been convicted of a crime, so they are people for whom the threat of prison was no real deterrent first time out. Consequently, they are the biased sample of the population for whom prison is the least likely to be a deterrent second time around. The only proper way to enquire whether prison is fit for purpose is to ask how much of a deterrent it is for the vast majority of people in the UK - those who haven't found themselves outside of the orbit of the law. As far as we can gather, the threat of prison, loss of liberty, loss of employment, and so forth has been a very successful deterrent for a majority of the population.

This is compounded by the fact that when it comes to the change in social status from being an ordinary citizen to a convicted criminal, the first cut really is the deepest. That is to say, the first time a recidivist became a criminal was the worst time for him (or her). It was on that first occasion that he became incarcerated, when up until then he had only been used to freedom, and it was then that he first experienced the change in status that would give him a social stigma and make him harder to employ. If that wasn't a sufficient deterrent, we shouldn't be too surprised that criminals are even less likely to be deterred second time around. I should finish by saying that it’s only on that point I have a quibble – I agree with the rest of the article.

Best 

James

Er, No, Cannabis Legalisation Will Not Raise £1bn In Extra Taxes

There was a claim in the UK's Independent newspaper paper recently that Cannabis legalisation in UK would raise £1bn a year in taxes – and they are not even talking about gains to the economy in terms of reduced costs in law and enforcement – they only mean a projected view of the approximate value of the black market drugs trade and the extra tax they think the treasury would get by taxing those transactions. We are told that this conclusion is the result of getting together a so-called 'panel of experts' who apparently came up with 'the most detailed plans ever drawn up for the liberalisation of UK drug laws'.

Alas, if only they'd invited someone who understands economics to join their panel, they would have had a better chance of realising that the headline is, at best, misleading, and at worst, plain nonsense. What they mean when they tell us this is that the economy will be better off to the tune of about £1 billion once the government gets all the tax from what would be legalised drug sales. But the reality is very different. What they've done is simply over-inflate the figure by not understanding the economics of how tax and money are generated. Let me explain.

Of course the economy wouldn't be £1bn better off in taxes with the legalisation of cannabis. The tax generated from drugs involves a lot of tax that would have come in via some other route - it's not going to be a huge net gain. In other words, the tax the drug sellers paid through drug purchases when drug dealing became legalised is simply money that the participants would have paid through spending it by some other means when drug dealing was illegal.

Although there will be some gains to the economy in terms of reduced costs in law and enforcement, and in the reduced cost of production and sales (there will now be no costs in avoiding detection) which will as a result also increase consumer surplus, any money that is spent is tax revenue for the government, whether it is on drugs, food, car parts, or whatever.

What the article writer doesn't get is that legalising drugs will increase tax revenue as a proportion through drug sales, but it will be offset by a proportional reduction elsewhere, as people spending taxable money on drugs will be spending less elsewhere.

Perhaps an illustration will help. Tom is a drug dealer, and Dick buys currently illegal drugs from him at a cost of £100 per week. As things stand, when Dick gives Tom £100, there is no drug-buying tax, because the sale is a black market one. The government legalises drug-buying and slaps a 20% tax on drug sales. Now when Dick gives Tom £100, Tom has to give the government £20, meaning the Treasury is £20 better off, right? Not quite.

Prior to drug-buying becoming legal, it's true that when Dick gives Tom £100 the treasury doesn't collect its 20% tax from the drug deal. But it still collects its tax the next time Tom spends some of that £100. So Tom, having £100 instead of £80, uses the money to buy food, drink, petrol or clothes, at which point the treasury gets its tax. There is certainly no big net gain, it's just that the new law would mean the treasury gets its tax from Tom via the drugs sale, instead from Tom via the sale of food, drink, petrol or clothes. Or suppose, as may happen, Tom doesn't spend it yet, but hides it under the floorboards. Well, then, any 'black market money' that stays hidden under drug dealers' floorboards is money that keeps prices down, until that money is eventually spent, at which point it is taxed.

There is not going to be a £1 billion net gain, or anything like it. Increased tax revenues almost never amount to net gains for the economy - they are simply money transferred from some people’s pockets to other people’s pockets. To show how silly this is, imagine if everyone whose surname begins with A to M gave five pounds to everyone whose surname begins with N to Z. Sure Mr Zimbardo would be better off than Mr Adams in the transaction, but no one sensible would argue that the economy as a whole is better off. There is no net gain, only a transfer of resources.

When it comes to drugs and taxes, once you factor in that drug users will end up paying most of those taxes anyway when they spend the money outside of drug use, and the fact that the transfer almost certainly has administrative and deadweight costs to the economy, it's laughable how much of a mess of the argument the article writer makes.