C Northcote would approve
CN Parkinson that is:
Peter Bridgewater has a clear message for the International Whaling Commission (IWC) that he once led. The organisation – which played a critical role in ending whale hunting in the 1980s – has become a zombie institution that should vote to disband itself at its meeting next month.
“The commission did great work, but that was last century,” Bridgewater told the Observer last week. “Today it has – like so many other international conventions or organisations – outlived its useful life and should be quietly disbanded.”
Some take Parkinson’s Law to be that work will expand to fill the time available for its completion. We tend to take another lesson from the book which is that bureaucracy will, inexorably, expand (as in the essay in The Economist, the last useful article published in that source). The job and duty is therefore to be continually, inexorably, pruning that bureaucracy in a countervailing manner.
Another of C Nothcote’s derived points was that a bureaucracy strives simply to continue to exist - as with any other lifeform. The only way to properly curtail the attempts at continued expansion is to kill, not merely prune.
So, yes, kill off an international bureaucracy and the Montreal lot about the ozone hole - now solved - also seem to be being discussed. Excellent.
But we think we should go further - as we always do think we should go further of course. The essential job of any management - private, state, anything - is to continually prune, kill off, those bureaucratic barnacles upon the ship of state or enterprise. To continually strive to close down things to avoid them becalming the whole effort.
Markets contain their own incentive, those that don’t do this go bust. But governance? Some way back we actually suggested a Viscountcy for any Minister who successfully closed down their own department. We should revive that perhaps. Would have to be proper close down of course. Raze the buildings, sell the workforce back to the private sector, plough the ground with salt, the full Carthaginian. But why not? After all, a Viscountcy is pretty cheap to create and there’s no right to sitting in the Lords that goes with it - it’s an award, not a thing.
Possibly we should extend the idea. Manage to close down a smaller bureaucracy and gain a lower level award - GCMGs, CBEs and possibly the MBE for sending only a handful out of comfy offices into the howling gales of the marketplace? After all, we do want an incentive for public sector managers to curb the growth of bureaucracy and we’ve not got any other one at present, do we?
Tim Worstall
We do tend to think this isn’t a good idea
Obviously we think this is a bad idea:
Labour’s biggest union backer is demanding that Rachel Reeves imposes a wealth tax on the richest 1 per cent to give public sector workers a pay rise.
Ahead of the Chancellor’s first Budget in October, Unite has put forward a motion at the Trades Union Congress to demand the levy to raise billions for public services.
The motion from Unite, which gave Labour almost £2 million in the year up to the election, says such a tax would raise £25 billion a year and could be used “to give public sector workers a 10 per cent pay rise”.
Now several whys we think this is a bad idea are obvious. Wealth taxes are a bad idea because of deadweight costs. Every tax, by its existence, destroys some amount of economic activity. Wealth taxes do this more, per £ revenue raised, than income or consumption taxes. Therefore if more money is required then we make ourselves poorer by raising it through wealth, instead of income or consumption, taxes.
Then there is the point that we think government should not have more revenue anyway. Currently they’re getting 40% of GDP, 40% of everything, and the plan is that this should rise. We’d very much prefer 30% and number go down. We really do believe in that fructifying in the pockets of the populace idea.
But let’s be more specific. The current fashionable analysis of the UK economy is that it’s locked into a low investment and therefore low wage disequilibrium. We need to increase investment - possibly substantially - to shock it back into the preferred high investment, high growth and thus high wage alternative. At which point the insistence is to liquidate the current capital stock of the country to pay the wages of public sector workers?
How does that get past however few synapses are being employed here?
Tim Worstall
Mazzonomics does seem to ignore opportunity costs
And, as the saying goes, if you’re going to ignore opportunity costs then whatever it is you’re doing it’s not economics:
The festivities are open to everyone, thanks to the community-led, non-commercial efforts of the Carnival Village Trust (CVT), a registered charity, with funding from the Greater London Authority, the Royal Borough of Kensington and Chelsea, and Westminster Council.
That funding of the Notting Hill Carnical is a cost. Obviously.
Like other cultural events and community initiatives, however, the Carnival has increasingly faced difficulties securing funding. This is part of a broader crisis. The arts and culture sector contributes more than £125 billion to the UK economy and employs more than 2.4 million people, yet it has faced severe funding cuts, and public spending is far below that of Britain’s European neighbors.
All of that funding is a cost, obviously. At which point we want to know what are the benefits? Sure, a great party, that’s a benefit. But among those things being counted:
Performing in the bands, building the floats, designing the costumes, cooking the food, and contributing in other ways generates roughly £100 million in economic value.
All of those are costs, not benefits. They are the effort that has to be put into having a damn good party. Those efforts could also be directed elsewhere - opportunity costs. It may well be that the party is worth those costs, that the other opportunities produce less value from those inputs. But we really must - because opportunity costs - insist upon counting inputs as costs, not benefits.
One million working hours are devoted to designing and hand-making the 15,000 costumes on display and rehearsing the performances of more than 80 bands.
One million working hours at minimum wage is what, £12 million? About? That’s a cost of the carnival, not a benefit of it. Those million hours - worth that £12 million - could be devoted to weeding the parks, caring for the old, finally building a ferry for Scotland or lauding La Mazza. Any of which might have greater value - opportunity costs - than the grand party. They’re a cost, not a benefit.
The festival creates a hive of productivity that
Labour spent upon something unpriced, by definition, reduces labour productivity.
The Notting Hill Carnival is a perfect example of why we need a new narrative for policymaking and economic development. The arts should be seen as a core governmental responsibility, with the long-term finance it requires viewed as an investment, not a cost.
As ever we tend to think that before designing a new economics we should understand the old. Inputs into a process - labour, say - are a cost of that process, not a benefit.
Actually, that’s not even economics, is it? That’s just basic accounting.
Tim Worstall
To repeat our insistence, tax avoidance is not a thing that exists
This is, of course, amusing.
A snail farm in an office building linked to a company that describes itself as the “Canceller of the Exchequer” is an attempted tax avoidance ploy, a council has said.
Snai1 Primary Products 2023 Ltd has been keeping about 15 covered crates containing snails on the lower ground floor of 9 Dale Street, in Liverpool city centre, for the past year, according to the BBC.
We’d all probably file that under nice try, never mind. But it’s this which is the important part:
City Council confirmed that Snai1 Primary Products has not made an application for the exemption of business rates and no official probe is underway.
A spokesman for the council said: “The misuse of the agricultural exemption with the use of ‘snail farms’ in commercial premises is a business rates avoidance tactic that has been attempted in Liverpool.
“To date, no agricultural exemption has been awarded on commercial premises and the council’s business rates team continues to monitor the situation closely and will not hesitate to take further action and challenge such tactics to protect public funds and maintain a fair and efficient tax system for all ratepayers.”
Tax avoidance isn’t, actually, a thing. It is, even at its worst, an attempt but still not a thing.
There is tax compliance, otherwise known as obeying tax law. There is tax evasion, otherwise known as not obeying tax law. That second is a criminal offence, obviously. Tax avoidance, however, is not a thing, not a state of being. It’s an attempt, a process perhaps. Where tax law is less than clear it is possible for there to be differing explanations of it, results from those explanations. But such cases do get examined and we end up with a determination that the attempt resolves down to tax compliance or tax evasion.
Think of the oft quoted Vodafone and £6 billion in Luxembourg and all that. Contrary to everything you’ve read in the likes of Private Eye this revolved around whether the Controlled Foreign Companies (CFC) rules applied to subsidiaries within the European Union or not. If the whole escapade had been done through Bermuda then all agreed tax would be due. If Luxembourg, well - and the end result was that it wasn’t. Sure, the issue bounced up and down the courts for a bit but the Cadbury case made the final result clear and obvious. Not until those profits were moved back into the UK would they be taxable in the UK and when they were they were. Or the Boots complaints - no, interest on debt is a deductible expense for a company. Or so may other of the varied whinges we’ve heard over the years.
It’s possible for there to ba an attempt at tax avoidance, possible for there to be accusations of such. But all do finally collapse down to “This is legal” and therefore tax compliance or it’s not and so tax is due. Tax avoidance simply isn’t a thing it’s, at worst, a process.
Tax avoidance, unlike tax evasion, is not a criminal offence.
Of course not. Avoidance is like an accusation of any other form of criminality. Something to be investigated, evidence to be gathered, but in any system which includes the rule of law is something that does - can, might - sometimes collapse down to “This is fully in order. Sir”.
Tim Worstall
George Monbiot says organic farming is Bad, M’Kay?
Animal farming ranks alongside fossil fuel production as one of the two most destructive industries on Earth. It’s not just the vast greenhouse gas emissions and the water and air pollution it causes. Even more important is the amount of land it requires. Land use is a crucial environmental metric, because every hectare we occupy is a hectare that cannot support wild ecosystems.
All of which holds for organic as opposed to industrial or chemical farming as well. Organic farming simply is more land hungry - the chemicals are substitutes for land, d’ye see? We require more land per tonne of wheat/corn/oats/peas/whatever under an organic system than we do an industrial. So, organic farming is Bad, M’Kay?
The rest of the column is a complaint about how the meat and dairy industry (definitely overtones of Tom Holt in this) are trying to ban manufactured meat. Which is indeed bad, we agree. But the point here is that if you’ve allowed government to be interventionist enough that it gets to ban things on political (or protection of economic power) grounds then sometimes the bans will be of things you approve of. The only answer to this is to have a government that is not powerful enough, interventionist enough, to go around banning things upon political or economic power grounds.
At which point the joint answer is obvious - minarchy and industrial agriculture. We do think it a tad odd that it’s George Monbiot bringing us this news but then we suppose that sometimes facts just will out, even the most dedicated activist and propagandist does have to face reality sometimes.
Tim Worstall
An anticapitalist, truly communal, social media network sounds like a great idea
One obvious benefit would be that those who are interested in being anticapitalist, truly communal, could proceed off into their echochamber and leave the adults in peace. Thus we do support this idea from Clive Lewis MP:
Excellent stuff. I’ve been thinking the exact same thing.
However, I’d like @lisanandy at @DCMS to think about what a democratic, open source, transparent, public, bottom-up, cooperative based, social media platform looks like and see it kick-started by said dept asap
The way to do this is to download a copy of Mastodon (there are other alternatives) and start running an instance on the DCMS server. If you don’t know how to do this then we’d suggest corralling any random 7 year old and get them to show you - our memories of VCRs suggest that this is the correct way to deal with any technical difficulties among those rich in years and experience.
If only all political suggestions were this easy - and cheap - to deal with.
Glad we could help here.
Tim Worstall
We find this really very amusing
Britain’s biggest banks are facing a deadline to repay more than £100bn of pandemic-era loans, which experts say could benefit savers as banks and building societies compete for customers with attractive rates in a “messy” dash for cash.
More than 70 lenders ranging from high street banks and building societies such as HSBC and Nationwide to digital and specialist lenders such as Starling Bank and Aldermore collectively borrowed £193bn from the Bank of England as part of an emergency programme rolled out in the early days of the Covid-19 pandemic in 2020.
It’s really not that long ago that the shrieking was that banks were not increasing deposit rates at the same speed they were increasing lending rates. This made their net interest margin blow out - evident in the accounts and profits - and something must be done. Varied calls were made from increased taxation to someone really must do something - set prices maybe.
All of this when all along it was actually the government causing the problem.
For while there is that Modern Monetary Theory insistence that banks don’t lend out deposits that’s not, actually, usefully true. For banks must have the deposits to finance such loans. And, if they’re getting those deposits, nice and cheap, from the Bank of England therefore they don’t need to up the price they offer to other depositors. Thus the increasing net interest margin. Because they were getting cheap money and thus didn’t need to face full market forces.
The absence of this market aberration will indeed increase the rates on offer to depositors. Good.
And, of course, that this is happening is that very proof that the MMT contention is wrong. Because banks must finance a loan with deposits the effect is that banks do indeed lend out their deposit base. As we can see from deposit rates rising when cheap deposits disappear.
Tim Worstall
But we know how to solve the EV problem - buy Chinese
Much chuntering about the problem with the electric vehicle market in the UK.
Rachel Reeves has an electric car problem. On the one hand, the Chancellor is part of a Labour government that has pledged to turbocharge the switch to electric vehicles (EVs) in Britain.
But on the other, she is racing to plug a £22bn black hole in the public finances ahead of October’s Budget.
Reeves herself has warned this will require painful choices – but with EV sales already slowing in the UK, experts now fear the Chancellor risks slamming on the brakes with a series of sharp tax rises.
Whether or not EVs really are economic or not is rather clouded by the special tax treatment they get. They’re going to start paying vehicle excise duty for example. And in the longer term there’s that pay per mile (in itself a good idea) tax system a’comin’. EVs will be paying the same as ICEs under that - they must, because the government’s point would be to regain the revenues from fuel duty - and thus EVs are going to lose their artificial price advantage.
At which point adoption is rather going to slow, no?
There’s no real way out of this either. EVs cost vastly more to buy, suffer horrendous depreciation rates and yes, cheaper fuel and lower taxes. Once the tax situation changes they might well not be cheaper. So, err?
Well, there is an obvious idea:
To repeat, the current conversation insists that cheap EVs must be achieved for climate change reasons. China’s taxpayers have spent $100 billion on getting to cheap EVs that we can now enjoy - and also save the climate. But we can’t have those cheap EVs and save the climate…
We just import the cheap Chinese EVs and so save the climate. The people who would lose from this are the local - our own domestic - capitalists who can only make expensive EVs. Oh dear, that is a pity then.
Ricardo for the win again.
Tim Worstall
Self-checkout - Why markets work Part MMCXV
That there seems to be an awful lot of dithering in markets can be seen - is seen by some - as an example of their faults. Why not replace that havering with the thwack of firm planning. One decision taken once and all that waste gets removed from the system.
The comeback to that is, well, yeees, but which decision?
Morrisons “went a bit too far” with self-checkouts, its chief executive has admitted, as the supermarket chain cuts back on the technology across a tranche of its stores.
Rami Baitiéh, chief executive of Morrisons, said that it is “reviewing the balance between self-checkouts and manned tills” and removing some from stores after installing too many.
He said: “Morrisons went a bit too far with the self-checkout. This had the advantage of driving some productivity. However, some shoppers dislike it, mainly when they have a full trolley.”
So we’ve this new technology. Computing has reached the stage that we can, with greater or lesser success, remove paid labour from the checkout process and replace it with customer - and unpaid - labour at the self-checkout.
Well, could be a good idea, might not be. As with most technological advances we’re likely to find out that some is good, more could be better or worse and all and only worse. So, how do we find out that optimal position?
Folk have to try it. Different folk have to try different amounts of it too. So that we can see the real life and real time reaction of consumers.
No, planning doesn’t work. For of course every single one of these varied companies has done all that planning. They’ve surveyed and asked and prodded and thought and come up with what research and planning says is the optimal solution. Absolutely every single one of those plans has been wrong - no business plan ever does survive first contact with the market.
The one single central plan would not have had that experimentation, that trial by error and we never would haver and mither to the optimal solution.
Which is, of course, that reason for using markets. Haver, mither and dither are not inefficiencies of markets they’re the point. Because only by fiddling about a bit do we actually find out what those difficult things, human beings, actually find the best solution. We also can’t stop doing this because technology changes, perhaps only by some insubstantial in any one day, all the time. Therefore we are continually trying to find the correct mix and thus must continually fiddle about.
Sure Morrisons is ripping out some self-checkout lines. That’s the whole damn point of using markets, to find out that they should.
Tim Worstall
Wrong policy Ms Rayner, disguising the bill doesn’t make it go away
As an arrow flighting towards the centre of the target politics gives us wholly and entirely the wrong economic answer:
Angela Rayner has vowed to get benefit claimants out of “expensive private rented accommodation” after analysis found that landlords will be paid a record £13bn in housing benefit this year.
The amount of taxpayer money spent on supporting private tenants has surged by 30pc since the pandemic began, rising from £9.9bn in 2019-20 to £12.1bn in 2022-23.
The Housing Secretary has promised to deliver “the biggest increase in social and affordable housebuilding in a generation” as official forecasts predict benefits spending on private tenants will hit £12.8bn this year.
The push will be to provide more social, housing association and “affordable” housing. Instead of just paying the cash to prviate landlords. Which is entirely and wholly the wrong thing to be doing - for disguising the bill doesn’t make that bill go away.
British housing is too expensive for many Britons to be able to afford reasonable quantities and qualities of it. That’s our central starting point. As solutions we have those two ideas. One is to build more of those “affordable” houses on the government tenpence. The other is to provide the cash to tenants to pay to their landlords.
But the cost of housing being too expensive is still there either way. The capital used to build those affordable houses - also the land - could be used in other ways. That’s an opportunity cost and if we’re not to include opportunity costs then whatever it is we’re doing it’s not economics. Further, those “affordable” houses could be rented out at market rent. The gap between affordable and market is a cost of those affordable houses. An opportunity cost again.
The correct answer is to entirely abolish all indirectly subsidised forms of housing and only subsidise through those direct - and visible - cash payments. Yes, we’ll all shriek in horror as the housing benefits bill rips up through tens of billions a year toward the century. Which is exactly the point of the exercise. This is a cost that we have to carry - whichever system we use to deal with it - of the nationalised planning system’s refusal to allow people to build houses Britons wish to live in, where Britons wish to live, in Britain.
The cost of affordable housing is the same as subsidising housing benefit. Better to have all those costs where we can see them so that we finally bite the bullet - driven by shock at the size of the bill - and blow up the Town and Country Planning Act 1947 and successors. Proper blow up - kablooie.
Hiding the bill doesn’t make costs go away but seeing the full bill might well mean we get to grips with the real problem.
Tim Worstall