Tim Worstall

In a sidebar about the GDP figures:

“The fact is, companies clearing out their warehouses boosts G.D.P., but doesn’t do much for those out of a job.”

Something of a pity that the article itself is actually about how the restocking of warehouses boosts GDP…..and about how previous company clearing out their warehouses contributed to the decline in GDP.

Remember this when you next read an NYT editorial on how the economy should be run. At least some of the people at the newspaper really have no idea what they’re talking about.

You know all those wibbles about the US Military not allowing aid flights to land? About how it is is troops that get priority etc, and this shows that there’s a military takeover going on?

Well, geek is as geek does and this is well geeked.

It’s all about the shortage of forklifts in Haiti (I paraphrase).

Was the Moon created by a nuclear explosion on Earth?

Strangely, this on is at least possible.

We all knew that Thatcher had more balls than hte rest of the Cabinet put together but odd of The Times to spell it out quite so blatantly:

Going to work on an egg

Margaret Thatcher ate little else as he changed Bitain, archive reveals

Interesting:

More than half a million homes are at “significant” risk of flooding and the cost of protecting them will double to £1bn a year by 2035, according to the latest data from the Environment Agency (EA).

Current spending is about £570 million a year. If costs remained static in real terms then that cost, at 2.5% inflation, would be a £1 billion in 2035.

Therefore the EA is predicting 2.5% inflation over the next 25 years.

Inequality between economies, and within advanced economies, has never been greater – witness this week’s statistics on the widening wealth gap in the UK.

Fact fail first: inequality between economies has been falling as inequality within them rises. Fact fail second: the report mentioned says that the wealth gap is as high as it has been since WWII. That’s not, as you might recognise “ever”.

But here’s the logic failure:

So self-evidently desirable and beneficial are these pillars of the market economy that even China, after years of fighting them, is embracing them as quickly as it dares. But China wants the benefits, not the excesses, and so far, in this giant experiment in market liberalisation, it seems to be getting them.

Inequality in China is higher than it is here or than it is in any other major economy. So either China hasn’t dodged this excess or inequality isn’t such an excess to be dodged. Either of which make the contentions a little strange.

Lord Turner, chairman of the Financial Services Authority, has signalled a regulatory crackdown on foreign exchange carry trades which he insisted served little or no useful social and wider economic purpose.

Here we go, trying to pick winners again.

The wise, the omniscient, the benevolent, dictator will make everything better for us. But where do we find such wise, omniscient and benevolent people?

Anyone got any bright ideas here? For I’ve absolutely no idea at all how we sort through the millions upon millions in the country to find those few who know enough and are selfless enough to be able to do this correctly for us.

Just as one example, we’ve a Prime Minister who we are told has saved us all by boosting Keynesian spending to prevent a recession turning into a depression. How excellent, chalk one up for the Great Man thesis of government.

But this very same man, as Chancellor, was responsible for over-spending in the boom years (yes, even Ritchie agrees here). When, under those same Keynesian rules, he should have been fiscally contracting he was fiscally expanding.

So even if we find people who are sometimes right, the power being bestowed upon them requires that they are always right: and how and where do we find such Gods?

For if we manage only to uncover those with feet of clay and yet give them such powers we’re not going to be any better off than we are now, are we? Perhaps worse off in fact…..

This one is actually reasonably funny:

‘If you and your friends all buy one, will they sync up?’

Osborne teams up with Richard Thaler: latest exponent of the drear conviction that we’re all little idiot baa lambs and have to be driven into behaving properly. You know, managed, prodded, but all for our own good of course.

But perhaps most significantly, the crisis has finally put to rest the assumption, which underpinned Labour’s entire system of financial regulation, that individual behaviour is always entirely rational…

Who has ever said that individual behaviour is entirely rational? That we attempt to be so, that we attempt to reach our desired goals in the best manners available to us given the information about the world that we have plus the inevitable imperfect information about the future, sure….but the leap to perfect rationality from that is something of a straw man.

and that market prices always reflect intrinsic values.

What? What in buggery are “intrinsic values”? If we’re all the way back to Thomas Aquinas and “true value” then we’re about to march off a very steep cliff. For there isn’t and aren’t any such things. The value of something depends upon the value of everything else: we cannot say that 1 kg of gold is worth $12,000, or x tonnes of wheat, or y tonnes of fresh water or z numbers of smiling babies, without having some idea of the relative values of fresh water and smiling babies. Which in turn depend upon the state of knowledge (medical knowledge tells us what our forefathers did not know, that unfresh water leads to definitely not smiling and in fact dead babies) and the state of technology (how much effort do we have to put into freshening water to get smiling babies?) and indeed where we are at any one time (less effort if we’re by a clear mountain stream, more if we’re on a boat out in the ocean).

Values are thus relative, always, all the time, not intrinsic.

We can just about side step this and go for a much weaker meaning of “intrinsic” which is “what people think these values are” but then by definition market prices are the average of what everyone does think these values are.

So we’re not off to a good start here.

A classic example is the way that Gordon Brown’s tax credits system was initially designed. Obviously, we are in favour of tax credits, but when the system was first introduced it was assumed that people would promptly inform HM Revenue and Customs of any change in their income. That must have seemed so plausible on a spreadsheet on the then chancellor of the exchequer’s desk. But of course, as it turned out, people don’t quite behave like figures on a Treasury spreadsheet, and as a result billions of pounds were lost on overpayments.

So if we recognise that people do not always act rationally, what does this mean for public policy?

Eh? What is irrational about keeping overpayments to you? At least once (and I think more than that) they’ve been written off. So this behaviour is in fact entirely rational. You might have to pay the money back, you might not. So hang on to it and wait and see. You can’t be worse off by doing so and you might be better off by doing so. This is rational action, not irrational.

That Osborne and Thaler (and of course Brown himself) cannot see that this is rational behaviour really rather bites at the arse of the idea that politicians are going to be more rational than we are now doesn’t it?

They then maunder off into behavioural economics which is a very different thing.

So if we recognise that people do not always act rationally, what does this mean for public policy? This is where behavioural economics and social psychology – an academic field that has already garnered Nobel prizes for the likes of Daniel Kahneman – comes in. These disciplines are enabling us to develop a new approach to policymaking, based on empirical evidence about how people really behave.

Here is one example. Over the past decade, the UK government has spent billions of pounds trying to encourage households to become more energy efficient. These efforts have largely failed, but it doesn’t have to be like this. In Sacramento, an energy company has harnessed the insights of behavioural science, and prints information on energy bills that allows households to compare their energy use with similar homes. This simple change led to a fall in overall energy consumption as homes using more energy than their neighbours quickly adjusted their behaviour to fit in with the norm.

In what way does this undermine the thought that people at least attmept to behave rationally? What you’ve just done there is increase the information available to people, OK, great. But you’re then still depending upon them acting upon that information in a rational manner, aren’t you? You’ve again undermined your assumption of irrational behaviour: indeed, the very success of this scheme obliterates that assumption as with new information people are acting upon it rationally.

Jebus, if this is how the Shadow Cabinet thinks then we’re fucked, aren’t we?

Behavioural economics is all very well (“Hey, wow, you mean that’s the way people actually behave?”) but none of it leads on to the idea that people aren’t rational within the bubble of their own desires and the information available to them. Nor to anything quite so medieval  as “intrinsic values”.

And most certainly not to the idea that the bloke who’s good at kissing babies in Tatton is more rational than we are when faced with our choices about our lives.

A world away from home Andy Murray keeps hopes of a nation at arm’s length

Australian Open finalist plays down the pressure of a chance to be the first British man to win a Grand Slam in 74 years

Maybe it’s me that’s got it wrong. I thought there were four major tournaments, each of which can be called a “slam”. A Grand Slam” is winning all four of them in the same year (or perhaps over the years).

No?

Go vote.

LinkedIn just sent me an email introducing me to my own stepson. The company thinks, in its irritatingly chirpy way, that we may have some things in common.

Want a baby? Start with SEX

Erm, yes, thanks for that. I knew there was something I’d forgotten…..

Tristram Hunt:

Over one hundred acres of US farmland is currently being withdrawn every hour from agricultural use for development.

We’re so much better with our Green Belt etc etc etc. How lucky we are to be saved by bureacratic technocrats who know so much better than we do what to do with our own land.

Oh Yes.

Total farmland area of the US:

922,000,000 acres.

Worth noting that area of pastureland is increasing, forest stable (that’s forest on farms, not the great forests) and arable land falling presumably as farming becomes more efficient.

Just think, in 1,052 years it will all be gone at this rate. Nothing but suburbs.

It’s like King Eadwig worrying about the rate at which the churls were clearing the forests for charcoal.

Well, yes, umm….

Stephen and Sarah Nunn are believed to be the first people to sell olives grown in Britain……The couple’s glass-covered grove has yielded 200 kilos of olives, which are worth a total of about £4,000 and are being sold for £3.50 pounds per 100g, four times as much as their Mediterranean rivals.

Oh aye? You could pick 200 kg from the wild trees around here for purely the labour of picking them (one friend did just that a few weeks back just or the giggle). You’d get 20 litres of oil from the local mill, 20 litres that you could buy from the supermarket for about €40.

It’s an interesting little demonstration of Adam Smith’s point about grapes, glasshouses, Scotland and wine really, isn’t it? Better not to try and be all local and self-sufficient, but to trade with places with comparative advantage.

Of course, people should be entirely free to waste their time in this manner, to build greenhouses for olive trees,…but I would be interested to know whether they’ve got EU quota there for olive growing is indeed one of those industries where you do need permission.

However, for true stupidity, try this:

Once picked, the olives are drained in water for 10 days before being placed in brine for nine weeks, until they are ready to eat.

Yes, you don’t eat them fresh.

John Clint, owner of Hornets Provisions village store, which is selling the olives, said: “People are buying them in great numbers because they like buying local food. They have that lovely fresh taste that only comes from locally grown produce.”

Fresh? They’ve just been pickled for nine weeks!

Twat.

No, not in favour of it but what does that matter?

What I will be very interested to see is whether this is true:

The Fawcett Society, which campaigns for equality between men and women, welcomed the move. Ceri Goddard, the chief executive, said: “There is a huge appetite among fathers to spend more time with their children. This extra choice is a good thing.”

Give it a couple of years and we’ll be able to see whether loads of men do indeed take such leave. I suspect that they won’t….and that the next stage will be calling for it to be mandatory so as to promote gender equity.

It is already being talked about, after all.

No, no, buy that man a drink!

Gay scene needn’t be macho

The piece itself is so hopelessly confused as to be greatly less interesting than the headline.

I often have little thoughts (yes, thank you at the back there, very little indeed) and then realise that I’ve not got the technical skills to even being researching whether they’re true or not. I might know roughly where the basic information can be found for example, but not know how to put it together.

One that’s buzzing around at the moment.

Currently we hear a lot that it’s the UK’s “over reliance” upon finance rather than manufacturing as in, say, Germany, that’s causing all our problems.

However, I think I recall that Germany’s recession has been deeper than ours.

So, wouldn’t a simple little paper like the following be interesting?

Work out the share of each OECD (just to keep things simple) economy that is a) manufacturing and b) finance.

Look at the decline in GDP and the length of time of negative growth.

Compare and contrast the four sets of data.

I have a feeling that countries which had a larger portion of manufacturing had bigger declines in GDP.

Now that would be interesting, wouldn’t it?

I believe it is mandatory for a blog to post about this.

So, interesting question. Books for it.

What’s the possibility of taking Project Gutenburg texts , encoding them correctly, then selling them on the Tablet? Doing what Wordsworth Publishing did with paperbacks a decade or more ago?

Is this already being done? Or is there a possible little market there?

For example, I’ve still got a licence on the Crown Copyright of the King James Bible and Book of Common Prayer somewhere around…..

Ooooh, there’s lot’s of fun stuff in here.

Figure 2.6 (a) for example.

After we’ve adjusted for inflation (ie, set everything in 2008 pounds) we find that from 1968 to 2008, for men working full time wages for the have (arrived at by eyeballing the graph):

a) Tenth percentile risen by some 50%, from £200 a week to £300 a week.

b) For the median, risen by over 50% from £300 to £550 ish.

c) Top 10%, risen by over 100%.

So, for men working full time we have definitive proof: the poor have not been getting poorer. The poor have simply been getting rich more slowly.

From women’s wages the results for the tenth percentile seem even better: around and about a doubling.

Figure 2.7 shows us something very similar to the Piketty and Saetz work on US incomes over similar periods. The huge growth at the top has been concentrated in the top 1%, even more so in the top 0.5% (and P&S shows even futher, the top 0.1% and even 0.01%.). This is presumably globalisation in action. (They have several interesting pages about this actually, although fail to note the globalisation issue.)

Oh, and, yes, as with the earlier posts, they do indeed deliberately fail to include State pensions in determining wealth at retirement age.