Tim Worstall

The usual blathering over here.

But allow me to make a serious suggestion.

No, really, a serious and sensible suggestion. Go back to your roots laddies, go back to your roots.

Yes, adapt them to changing circumstances but what was it you were all about?

Ah, yes….

To secure for the workers by hand or by brain the full fruits of their industry.

The common ownership bit we now realise didn’t work all that well. But securing the fruits of industry would go down well today. You know, no monstrous bureaucracy in Whitehall taking 50% of everything produced in the country…..you could adapt that one line to a low tax, small state solution.

In the previous post I am directed to this:

The Right to Be Lazy is an essay by Cuban-born French revolutionary Marxist Paul Lafargue, written from his prison cell in 1883. It polemicizes heavily against contemporary liberal, conservative and even socialist ideas of work. Lafargues criticizes these ideas from a Marxist perspective as dogmatic and ultimately false by portraying the degeneration and enslavement of human existence when being subsumed under the primacy of the “right to work”, and argues that laziness, combined with human creativity, is an important source of human progress.

That last is perhaps the only piece of Marxist analysis of anything at all I’ve seen that immediately makes sense.

For of course laziness, combined with greed, is indeed what has driven a great deal of human progress. Desiring a steak without having to chase down an aurochs led to the breeding of cows.

But quite why anyone thinks this is a radical departure from anything at all in terms of economic theory I’m not sure. It’s entirely mainstream to claim that people maximise utility….satisfy their greed at the least effort.

Thirty-seven years later a new campaign has been launched, backed by a host of trade unions, including the UCU, PCS, CWU, RMT, NUJ and NUT, under the name Right to Work.

For “right to work” already has a meaning in American English.

It means being able to take a job without having to belong to a union: ie, no closed shops.

Not quite what these British unions quite mean by it really.

“The Gulf of Mexico is a bit like the River Tyne. There is a lot of industry and boat traffic along it, as well as the oil industry, which has minor leaks all the time. When Tony Hayward said it was a drop in the ocean, it might have been the wrong thing to say at the time, but it was the truth. This spill is the equivalent of less than a drop in an Olympic-sized swimming pool. For all but a tiny bit of the Gulf, it will be back to normal within a year.

“The beaches will be normal before Christmas, fishing will be back in two months and the shellfish industry in two years. It’s not that the oysters and clams are poisonous, it’s just that they won’t taste very nice.”

A quick look at the statistics produced by the US National Oceanic and Atmospheric Administration and other bodies seems to bear out his thesis. Of the more than 2,100 miles of threatened coastline, one quarter has been touched by oil and much less has been heavily soiled. As for wildlife, the total number of animals found dead and covered in oil for the whole period is 1,296 birds, 17 sea turtles and three dolphins – that is less than one per cent of the birds killed by the Exxon Valdez spill in 1989. During the same period, 1,675 birds, 82 turtles and 53 dolphins were found dead without any outward signs of oiling.

So, the total oil released was about 2 years’ worth of natural seepage and the observed effect on wildlife is less than (but of course in addition to) the natural death rate over the time period.

The environmental costs therefore appear to be really very small indeed. We should thus be able to treat this purely through the economic costs, those environmental externalities being so small.

Using very loose numbers indeed we can say that the economic cost of the blowout is the $20 billion that BP has already put aside. Deepwater drilling provides either 10% of current oil supplies or is 10% of proven reserves (there’s not a huge difference between these two, for although one is a stock and the other a flow “proven reserves” pretty much means the stock that we know is there and are already or are on the cusp of lifting….and yes, we’re being very rough here in our numbers. To get to proven reserves we’ve most certainly already had to drill into the field as Macondo was doing).

Global production is 85 million barrels a day of which 10% we can ascribe to deepwater drilling. 365 days in a year….say, 3 billion barrels a year coming from deep water rigs. At $100 a barrel (not too far off, keeps the maths simple) that’s a value of $300 billion a year.

So, while the Macondo well has been hugely expensive for BP, in terms of the costs/benefits of the whole system of deepwater drilling it’s not really all that expensive. More than a pimple but less than a full on boil really: 7% or so if we allocate all of the costs against one year’s production.

However, perhaps we shouldn’t allocate it against one year’s production? How long have we been deepwater drilling for? A decade say (I’ve no idea, just a guess)?

The damages are therefore coming out at 0.7 % of the value produced by the technology.

The cries of “Oh, this is all too expensive” don’t really therefore seem to be based in reality.

Now yes, OK, this is all very back of the envelope, needs a lot more real numbers plugged into it. But there is however a very important point to be made about the system as a whole.

We can see that there’s going to be huge swathes of new regulations about how, even if it will be allowed, deepwater drilling takes place. But our very rough numbers suggest that if such regulations increase the cost of such drilling by more than 0.7% then those regulations will cost more than any benefit we get from them.

Yes, this is assuming that such a blowout only happens once a decade….but do note it is also assuming that the new regulations entirely eradicate the possibility of a blowout at all.

The real lesson here being that whatever the new regulations brought in are they need to be written with a very light hand. For it won’t take much of a rise in the cost of deepwater drilling or such regulations to make us collectively poorer.

“So while we talk about good things and cooperation this is not just a financial matter, it is making contributions to the world economy. And it could become derailed very soon if we go back to economic nationalism. We mustn’t let that happen.”

George Osborne, the Chancellor, said that negotiations are currently underway between the EU and India to complete a long-delayed free trade agreement. If successful the talks could ease the flow of goods between European countries and the subcontinent and dilute the need for any form of protectionism.

Mr Osborne said: “Those negotiations have taken a number of years but we hope to conclude then next spring. But I give you a commitment here that Britain will do everything within the EU to champion that agreement and make it happen, and then we will avoid that economic nationalism that [Mr Cable] is talking about. It will also bring benefits to the people of Britain and the people of India.”

David Cameron, the Prime Minister, said that both the UK and India are “trying to defeat the forces of economic nationalism”.

So we’ve the Prime Minister, the Chancellor and the Business Secretary….essentially, the economic part of the UK Government….saying that yes, of course, lots of trade between Britain and India is just a lovely and wonderful idea and we’ll do everything we can to make it easier.

That “everything we can” being chat to the bureaucracy in Brussels.

For trade is, of course, a sole European Union competence. We don’t set our own tarrifs, trade rules, quotas or regulations.

Heck, we don’t even get the money from what tarrifs there are.

As George Clooney’s latest girlfriend, Elisabetta Canalis, becomes embroiled in a scandal involving alleged drug taking and prostitution at a nightclub in her native Italy, we look back at the dating history of “Gorgeous George”.

They’ve really bought into this “get the hits on the web” business, haven’t they?

UKIP wins donation case.

The basis of the Supreme Court’s judegment (on a 4-3 basis) is that Parliament intended to stop foreign donations. However, what they actually did was enact that donations from those not on the elctoral roll were verboeten and subject to forfeiture.

The Supreme Court divined a difference between what Parliament meant to do and what they did do. If there’s an impermissible donation then we assume it’s foreign and it’s to be forfeit. However, if it is then shown that the donation is not foreign, it’s somebody who could be on the electoral roll but isn’t, then full forfeiture isn’t necessary.

The other bit that’s interesting is that they direct that the original judgement, from Westminster Magistrate’s Court, stands. I think I’ve got this right that it was the Electoral Commission who appealed that and then UKIP which appealed the decision of that appeal.

I could do with some guidance from any legal eagles here, but doesn’t the fact that we go back to the original judgement now mean that all legal costs since then have to be picked up by the Electoral Commission? As they’re the peeps that first appealed?

Back when it was all banned there was an argument that the ban had little or nothing to do with protecting gamblers. It was to protect American companies (both on and offline) who were getting their lunch eaten by foreign competitors.

Now they’re thinking of allowing it again:

With pressure mounting on the federal government to find new revenues, Congress is considering legalizing, and taxing, an activity it banned just four years ago: Internet gambling.

Note what’s buried in the bill:

….and prohibit companies that violated the 2006 ban from obtaining licenses.

“Violating the 2006 ban” will no doubt be interpreted as “existing, anywhere, after the 2006 ban” so none of the incumbent companies will get a licence.

Way to protect the domestic industry, eh?

Yes, courtesy of Huffington Post you can do all the work, get none of the money and not even see your name in lights!

The Huffington Post has openings for unpaid blog team internships for the fall. Primary responsibilities include:

-Evaluating blog submissions and editing copy
-Correspondence and other communication, including editorial and technical problem-solving, with blog contributors
-Additional editorial duties and support for heavy volume of daily blog submissions

Whatever did happen to the minimum wage thing?

For I feel the need for a burst of civil disobedience.

Zil lanes for the Olympics indeed.

I think a massed arming of the populace with ballons filled with paint should do it.

Via.

There we have it, thirty years ago the world’s centre of economic activity was in the mid Atlantic, today it is around Turkey, in thirty years time it will have reached India and China. This is the new globalization and I’d like to hear how Western politicians plan on dealing with it.

Why should politicians deal with it? Quite apart from whether politicians can or that we’d even trust them to deal with matters economic, why on earth should they?

Who gives a shit where the centre of economic activity is ?

All we care about is that we can trade with it.

After all, it’s not like we’ve not been here before. China has been the world’s largest economy in 19 out of the past 20 centuries.

Yes, yes, I know that the question is being asked because Duncan labours under the delusion that politicans can do something about everything and under the even worse one that they should do something about everything but really. Think about what is actually happening here to move this centre. The 1.5 billion or so of South Asia and the further 1.5 billion or so of East Asia are both producing and consuming more (that’s what economic activity means, see?).

In what way is this a problem that needs something doing about it? Either they produce and consume their own stuff (fine, so what?) or they produce stuff for us to consume and we make stuff for them.

Lovely, where’s the problem?

It would appear that you are to be prevented from swearing in emails…..

There will never be another s— deal at Goldman Sachs Group Inc.

The New York company is telling employees that they will no longer be able to get away with profanity in electronic messages. That means all 34,000 traders, investment bankers and other Goldman employees must restrain themselves from using a vast vocabulary of oft-used dirty words on Wall Street, including the six-letter expletive that came back to haunt the company at a Senate hearing in April.

Fortunately you are usually using the English language, one abnormally rich in synonyms. Such multiples of synonyms meaning that you’ll always be able to keep one step ahead of the software filters.

You might find that replacing “shitty” with “poopy” or “cacky” doesn’t quite get over the true meaning you wish to, but what about danna, Sir Reverence or pilgrim’s salve (especially useful with Bostonian or older white shoe firms perhaps?)?

Instead of pimping a deal you could beard-split it, or bull it, even buttock-broker it.

Instead of fucking someone over, you might prefer to describe it as prigging them, swivving them, even wapping.

To stop wanking about and make a decision would be to stop boxing the Jesuit.

Of course, this particular set of synonyms might not suit: not really sure what the reaction would be to the knowledge that Goldman Sachs was now using thieves cant.

Snigger.

The taxpayer is spending more than £15m a year to send the children of British diplomats and military officers to private schools such as Fettes, Winchester, Roedean and Marlborough.

The subsidies – costing as much as £30,000 a year in school fees – are being paid by the Foreign Office even when the diplomats have returned to the UK and then stay on for years.

The extraordinary hidden privilege has been unearthed by Gloria de Piero, a new Labour MP, in written questions. In a co-ordinated response, the Foreign Office and the Department for International Development said the perk was necessary to “recruit, motivate and retain staff who are skilled and equipped to meet the department’s objectives”.

It is understood the same privilege is provided to senior members of the military, but no figures have been divulged by the Ministry of Defence.

It’s extended to all officers, not just senior ones. And it’s hardly hidden, everyone part of the system knows about it. And it certainly has its problems….promotion to Major/ Lieutenant Commander is pretty much a matter of time served, after that on merit. But if you’ve not managed promotion from those ranks by 45 ish, you’re never going to (absent a bloody war or a plague) but the forces won’t throw you out until you’re 55. There’s quite a number serving out that decade as lame ducks on account of the school fees subsidy…..

The reasoning for the perk is simple. Diplomats and military peeps can be and are posted overseas: that’s part of what the job entails. Sometimes children are not allowed….but that’s not the only part of it.

I don’t know what the situation is now but way back when, Pater was posted to Naples. There was a school run by the RAF which took children up to the age of 11 (wouldn’t pass muster now, two years in one class and all that but it was actually pretty good). My brother and I went to it, being under that age. My sisters were over that age: that meant that they, if they were to be educated in Naples, would have to step outside the English education system. O and A levels would not be possible, they would need to go to either an Italian school (teaching in the Italian language of course, so they’d have to become fluent in a couple of months) or an American high school.

The posting was for 2 and a half years. At the end of which everyone back to England and so try and get back into the English education system…..

A decade later, Pater was posted back to Naples again. By this time I was 17, with 8 or 9 months to go before taking A levels. Little brother was on the cusp of CSE’s (as I think they were called at the time). There was still no over age 11 provision of the English education system in Naples.

Under the current system I stayed at the boarding school I’d been at, the boarding school the MoD paid 75% (not 100% like the diplomats get) of the fees for over the entire time I was there. In the absence of which I could perhaps have moved in with a grandmother or aunt, moved school and town etc. Or lived on my own and attended a sixth form college, gone to an Italian school, or an American high school or…..well, it’s not entirely obvious that the current system is worse than any of those.

OK, this might be an expensive system, it might not even be the right system (I can see how people might, well, certain rather grumpy people might, say that sending the children of officers to private boarding schools simply perpetuates class divisions….whatever) but some sort of system is obviously needed.

It might be that we should just tell the kiddies of people posted overseas that, well, your education’s fucked then mate. You’ll just have to bounce around between different systems and see what you pick up. Or we might need to have English style schools everywhere. There aren’t that many English kids in Naples at any one time, wouldn’t cost all that much to educate what, 30 or 40 of them out there, hire a few teachers and get on with it. Or perhaps, given the growth in “English schools” around the world since then some form of subsidy to attend private day schools where people are posted to would be appropriate?

For example, there’s a base at Carcavellos just outside Lisbon (listening centre for radio traffic over the Atlantic I think) and that strip of coast has a couple of English language day schools. Sure, they cost money, but all those military personnel are paying the same taxes as they would in the UK and so are paying for the State to educate their children. If said State has both insisted that they must go there and also is not providing a school, perhaps slipping them into the local private sector is the right thing to do?

Or maybe there should be an expansion of the State boarding sector (yes, it does exist) and military and diplomatic kids get sent off to that? Although I could imagine the social stratification getting even worse with that solution as I think you’d find that certain schools would pretty quickly get colonised by particular groups: an FCO place. A posh regiments place (Hussars might be willing to let their daughters mix with those of the Guards but perhaps not REME), the Navy might have one specialising in rum, buggery and the lash (the great failure of the Catholic boarding schools is of course the lack of rum) and so on.

My point is, and I do speak from personal experience, that some system needs to be devised so that the children of those posted abroad by the State get to continue their education. Their parents are paying the State for this education after all. Slipping the kids into already extant private boarding schools might not be the most appealing solution to a certain mindset: but for those who want to change it it is incumbent upon them to come up with some other functional system to perform the same task.

How are you going to allow children to continue through the English education system? State boarding schools. farm them out to relatives, build schools everywhere troops go with families, subsidise private educations abroad? Or just chuck them into whatever local education system there is, with all of the attendant language, curriculum and examination difficulties?

Well, what?

Update: As I’m corrected in the comments, the education thing extends to all ranks, not just officers. My mistake.

Tell people they are fat, says health minister

Not sure this is going to get a better response that “Yes, your bum does look big in that”.

Eaten by bugs apparently.

A little too soon to say for sure but the “world’s worst environmental disaster” might turn out to be a few months of murky water.

As every party promises to rebalance Britain’s economy away from finance, the creative industries are a fast-growing sector. Between 1997 and 2007, they created two million new jobs and £16.6bn in exports.

There’s about 30 million people in the UK labour force. So the claim is that the “creative industries”, which Polly seems to be using as a synonym for the Arts, employs some 7% of the workforce.

Umm, no, sorry, don’t see it really. I have a feeling that that jobs number is gross, not net. The number of jobs created without taking off the number of jobs destroyed in the sector.

Alternatively, it’s all jobs in “creatives”, which includes, say, video games, advertising, design and so on, which might all be very interesting but doesn’t have that much relevance to a discussion of whether luvvies should be getting our money through the tax and subsidy system.

Although this is really rather strange:

The case is being compared to that of Anna Chapman, a suspected Russian spy who was arrested in New York and then returned to Russia under a “spy swap exchange” earlier this month. There is no evidence that the two women knew one another.

It has been reported that Miss Fermanova was arrested on July 15th for “knowingly and intentionally” attempting to export “defense articles on the United States Munitions list.” The night-vision goggles and scopes cannot be exported without approval from the US State Department, as they are considered to be sophisticated military weapons.

Among the items she was caught with were a Raptor 4X Night Vision Weapons Sight, which she had bought online. A customs agent claimed that the sight’s ID numbers “had been covered with black marker pens”.

The strangeness is that a), Russia is a major producer of exactly these Generation 3 rifle scopes (yes, I’ve been to the factory) and that b) it’s not entirely certain that such a scope would be on the State Department list.

Now I agree, it’s been some years since I looked at the State Department list (or even the other list kept by Commerce) and I’m entirely happy to believe that such night vision jobbies will be on the list.

However, there’s a little let out in the system. Even if something is on the list and yet it is also “generally available at retail” then it’s not a controlled item. Walmart seems not to sell the specific model but they do seem to sell something very similar from another manufacturer. And there seem to be enough online retailers for it to be possible to say that it’s “generally available“.

No, of course I’m not a lawyer but I’d think it likely that she’s got a get out of jail free card here.

As to why she did it no, not spying. Or at least, not spying for a government. This is pure commercial espionage: the Russian manufacturer wanting to see what competitors are making.

And why not? I have a buddy who regularly buys the new Russian version of whatever tank is coming out. It gets shipped to the US manufacturers of tanks so they can take it apart to see what makes it tick…..

Or, why it’s right to have markets in the public services.

As Paul Krugman said, productivity isn’t everything but in the long run it’s pretty much everything. So these aren’t good numbers:

The ONS calculates public service productivity by counting the number of procedures carried out in hospitals, pupils taught in schools and elderly people cared for in nursing homes (classified as “output”) as well as the number of staff employed by the state such as teachers and doctors and the equipment bought for them to do their jobs (“input”).

It found that the amount of labour and assets used by central and local government rose by an average of 3.2 per cent between 1997 and 2008, with the greatest increase in 2002.

However activity in public services grew by smaller amounts, averaging 2.9 per cent a year.

“Because inputs grew a little faster than output, productivity over the whole period fell, on average by 0.3 per cent.”

Now what we expect to see in the economy as a whole is a rise in productivity: trend appears to be about 2% for labour productivity for example, year on year, decade by decade, we get 2% more per unit of labour, measured across the economy as a whole. The other important one is total factor productivity, which is what is being measured here for public services. Not just labour, but all inputs. Not quite sure what trend is here but it’s certainly positive.

There is one thing which also needs to be taken into account: Baumol’s Cost Disease. We would expect services to become more expensive relative to maufactures over time because labour productivity is easier to increase in manufacturing than it is in services….yet average wages are set by average productivity across the entire economy.

Given that the private sector numbers include manufacturing the private sector numbers will likely always be better than the public sector.

However, not by all that much, given that at least half and perhaps 75% of the private sector is also services.

What we get out at the end of all of these hems and haws is that if public sector productivity is going backwards then this is making us all poorer….even, reducing wages across the economy as a whole. We wouldn’t expect public sector productivity to increase as fast as private, this is true, but we should be expecting it to increase just the same.

All of which brings us to the policy decision we need to take in order to get public sector productivity moving in the right direction. You can see what that is by examining the bones of Krugman’s argument here. Planned economic systems seem to be near incapable of increasing total factor productivity. As Baumol also notes, it is market systems that seem to be able to create innovation (innovation being the utilisation of inventions….that is, not making some new box that goes “beep beep”, but getting the beep beep box into the hands of people where it actually gets used.).

So our lesson here is that, in order to get productivity moving in the right direction we need to bring markets into the public services.

No, this doesn’t necessarily mean capitalism, multi-nationals or Crapita. It’s markets, competition among suppliers, whether those suppliers be sole traders, consumer owned mutuals, worker owned co-ops or whatever.

And just to bend over to be absolutely fair, yes, we can also say that markets will be wasteful. There will be duplication, waste as people negotiate. But this is a static analysis and what we want is a dynamic analysis.

So let us provide such a dynamic analysis with made up (but believable) numbers.

We spend around £100 billion on the NHS. Productivity is declining at 0.3 % a year. So after five years we’re going to be getting 98.5% of what we get for our £100 billion today (yes, I’m ignoring inflation, or rather assuming that there isn’t any). After 10 years we’re getting 97%.

Now we bring in markets and we manage to turn around that productivity number, from minus 0.3% to the 2% we expect of labour productivity as trend (no, not quite the right numbers but this is an example, a model, and I’m allowed to do that, see, just to make the point).

After five years we’re now getting 110% for our £100 billion…..and after 10, 121%.

But there’s a cost of bringing markets in. The cost of having spare capacity, of negotiating, of getting the workforce of the NHS acculturated to actually thinking about prices and efficiency. Call it 10% (entirely made up, it’s a model, capisce?) of our £100 billion, £10 billion a year.

We can see that in year 1 we’ve only got 90% of the health treatment we would have had without markets. Bad…and static. After 5 years, our market based system has begun to nudge ahead. The 10% loss is outweighed by the 10% gain in productivity while the non market system will have slipped 1.5%. After a decade though we’re really motoring. Our non reformed system will have slipped to 97% of output for our £100 billion while the market system will be, after out 10% of costs for markets, be producing 111%.

OK, yes, those percentages aren’t quite correct. And you can change the numbers around as you wish, assume different levels of productivity growth, costs and so on, leading to different numbers of years that it takes for the market system to move ahead.

But this is the difference between a static and a dynamic analysis of the effects.

If it is true, as a Nobel Laureate and one of the perennial also rans both state, that it is markets, not planned systems, which are able to improve total factor productivity, and markets alone which are able to do this, then a dynamic analysis shows us that moving to a market based system (or even  a pseudo market based system) will, in time, leave us all better off even at the pain of short term costs.

And of course this is the very justfication of technocracy, of those wise and omniscient peeps in government organising things for us, isn’t it? That our individual actions at times do not lead to a collectively optimal outcome. To reach that collective optimum our immediate instincts, immediate self-interests, need to be curbed, curtailed, so that in the long run we’re all better off.

Like, say, a 10% hit to health care today for a system which in a decade provides 10% more for the same money….and keeps on then getting better by 2% a year forever.

Which is why we need markets, if not capitalism, in public services.

A rigorous new analysis for the Rockefeller Foundation shows that Americans are more economically insecure now than they have been in a quarter of a century,

Given that we’re in he worst recession in 25 years, that really is a surprise.

But that’s just a cheap shot of course. What’s more interesting is the measure used to detail “economic insecurity”.

The analysis was done by a team of researchers led by Professor Jacob Hacker of Yale University. They created an economic security index, which measures the percentage of Americans who experience a decrease in their household income of 25 percent or more in one year without having the financial resources to offset that loss.

Hmm, gosh, wonder what might influence that. Could it be the “financial resources to offset that loss”?

You know, savings?

In the first month that the BEA (Bureau of Economic Analysis) provided us with data (January 1959), the personal savings rate in the United States was 8.3%. So, this means that, on average, Americans were able to save 8.3% of their disposable incomes. ……..By January 2000, the average savings rate was 3.5% – it would end up falling below 1.0% multiple times between 2000 and 2010.

When the economy nearly collapsed in 2008, the savings rate started to trend higher, moving from 1.3% in January of 2008 to 4.2% in December of 2009.

Why the dramatic drop in the average rate of savings between 1990 and 2008?

Yup. Looks like it, doesn’t it?

So, our measure of “economic insecurity” is really a proxy for a falling savings ratio. And, umm, is anyone suggesting that the cure might be more savings?

No, not really, everyone is screaming about how we’ve got to get consumption moving again, aren’t they? You know, this stimulus stuff?

Ho hum.