Willy Hutton never does think through his arguments, does he?

Producers using an asset they use to produce from is hoarding apparently:

There is no acknowledgment of the potential wider benefits that go beyond the non-trivial contribution the tax will make to relieving the crisis in public services. The hoarding of land that has gone on….

That farming is an activity with large economies of scale, that farms need to be of a certain size to even be economic, seems to escape. But, you know, Will Hutton.

It’s the other argument deployed here which interests today:

…since the bung was introduced by Margaret Thatcher in 1984, which has so steadily driven up land prices and farmers’ rents, will at last be checked as some of the larger estates are obliged to sell parcels of land to pay inheritance tax, as they did before 1984 without the world falling in, rather than be enabled to own it in perpetuity. Young farmers, now increasingly crowded out of the market, will get a chance to buy land: there is the prospect of a levelling off, even a fall, in farm rents. New life and ideas will be brought to the rural economy as innovative, energetic farmers enter the market – and production even increases.

The argument is that high farmland prices are a barrier to new entrants into farming. We agree, as we’ve said before. High farmland prices also mean that the return on capital of farming is pitiful. As we’ve also pointed out before. And as we’ve pointed out more than once there’s a strong implication of these truths. We must abolish farm subsidies.

Farm subsidies drive up the price of farmland. This isn’t a difficult point to grasp. If farming were subsidyless then there would be less money in farming. Land would therefore be worth less. This is more obvious under schemes that just pay a per acre amount but it’s true of any form of such subsidy. More money from the activity means the limited stock of assets upon which to undertake the activity are higher priced. Just are, obviously.

So Hutton’s telling us it’s righteous to take money off farmers in order to reduce land prices. Possibly - but if we accept that contention then it’s also true that we should stop giving tax money to farmers in order to reduce land prices. Something we wholly agree with - we’re always more favourable to not spending taxes than we are to collecting taxes after all.

So, great. If it is just and righteous to tax land prices down it’s also just and righteous to abolish farm subsidies. Go the full New Zealand. So, when do we do this then?

Tim Worstall

Tim Jackson’s latest valueless report on food costs

We agree that it is possible that the diet of the country leads to some of what ails the country. We’ll even agree that a decent study of the issue might lead to suggestions for sensible policy on the matter. Tim Jackson’s latest report isn’t that decent study.

The UK’s growing addiction to unhealthy food costs £268bn a year, far outstripping the budget for the whole NHS, the first research into the subject has found.

The increased consumption of foods high in fat, salt and sugar or which have been highly processed is having a “devastating” impact on human health and Britain’s finances.

“Far from keeping us well, our current food system, with its undue deference to what is known colloquially as ‘big food’, is making us sick. The costs of trying to manage that sickness are rapidly becoming unpayable,” the Food, Farming and Countryside Commission (FFCC) report says.

The full report is here.

It’s nonsense. We can show this very simply too. Yes, yes, there’s all the fashionable stuff in there, how pesticides and herbicides are poisoning us. Lots about UPF and they’ve even a Van Tulleken on board. But it fails at the first hurdle simply because the people who wrote it don’t have the first clue about economics. This point we’ve made before:

Fatties and smokers save the NHS money

This is one of those things which simply is true. For the NHS is a lifetime healthcare system. The full cost of a lifetime of healthcare depends, in part, upon the length of that lifetime. Those who die younger save the system some number of costs.

Yes, yes, of course it’s true that the treatment of those who die younger has costs. But also those years of not treatment have not costs.

Now, we have actually read enough of the literature to be able to say that younger deaths save money overall. But that’s not a necessary part of why we can reject this Tim Jackson report. For Jackson has noted the costs of treatment of those diseases which cause people to die young. He’s also noted the costs to the individuals who die young - loss of years of life and so on. Entirely and wholly appropriate and yes, he has agreed that the treatment costs are direct taxpayer costs, loss of life is an indirect one (or, in another phrasing, a private, not public, cost). But he’s not including - he’s not even mentioned it as a possibility, let alone included it in his numbers - the saving in healthcare costs from those who die younger.

We’ve not got a nett number here at all. Therefore it’s valueless as an attempted calculation of the nett number.

Again, note, whether our reading of the literature is correct or not - the nett effect is a saving in healthcare costs - doesn’t affect the insistence that the report can be rejected. Doing a cost benefit analysis without including the benefits - however macabre those benefits might be - is just bad science. Even, Bad Science. At which point the Professor needs to be told to do it again, properly this time. Or even, smacked and sent to bed without any supper (UPF containing or not).

Only after that can we start to consider anything else. Like this little gem: “ costs of providing every citizen in the UK with affordable, healthy and nutritious food.” This just before they announce that they’ll make food more affordable by increasing the costs of food by 55%. Umm, yeah…..

Tim Worstall

Milton Friedman was the Economist Who Changed Everything

The Nobel economist Milton Friedman, author of the Free to Choose book and TV series, died on this day in 2006.

His thinking, and passionate advocacy of free markets and the free society, changed the world. As the former Federal Reserve Chairman Alan Greenspan put it: There are very few people over the generations who have ideas that are sufficiently original to materially alter the direction of civilization. Milton is one of those very few people.

Greenspan was right. For most of Friedman's professional career, from the 1930s to the 1980s, the world was dominated by government intervention, control, and planning. But at last a new approach came to dominate — Friedman's approach of free markets, open trade, personal liberty and capitalism. It would spread over the globe.

When the Berlin Wall fell, Tiny Estonia took Friedman's ideas wholesale — and as a result reversed 1000% inflation and 35% unemployment, becoming the 'Baltic Tiger'. Its young prime minister, Mart Laar, explained that Free to Choose was about the only Western economics book he could get his hands on in the Soviet times, and he did not have, as the West had, hordes of mainstream economists around to gainsay it.

After Mao's death, China opened up to Friedman's economic thinking too. The reformist Deng Xiaoping invited him to lecture there on the use of market mechanisms. It improved the lives of hundreds of millions. Even China’s present, socially controlling government continues to recognize the power of markets. India too, after decades of socialist failure, liberalised its economy in 1991, ending price controls, cutting taxes, scrapping regulations and abolishing public monopolies. Hundreds of millions there too now enjoy rising literacy, life expectancy, and economic prospects. The people of India and China may not realize it, commented Nobel economist Gary Becker, but “the person they are most indebted to for the improvement of their situation is Milton Friedman.”

Ever the optimist, Friedman was confident that his ideas would, in the end, win – as they did. But for decades he was in a very small minority. From the New Deal, through the Keynesian interventionism, exchange controls, nationalization and planning of the postwar years, most Western economists and politicians simply assumed that government economic management was both essential and inevitable. Meanwhile, the Soviet Union dominated Eastern Europe and exported international socialism to Asia, Africa and Latin America. It often seemed hopeless to resist. But Friedman relished the argument, winning over even his sternest opponents with his cheerful, commonsense, optimistic approach. A naturally brilliant teacher and communicator, he spoke to the wider public in his popular books, magazine columns and interviews, and of course through his hugely influential Free to Choose TV series. 

Friedman addressed all the great public issues of the day — the importance of sound money, the damage done by trade barriers, the baleful effect of regulation, the folly of wage and price controls, the need for competition in the provision of education, the benefits of flat taxes, the poverty of state pension systems, the advantages of a negative income tax, and how the greatest harm done by drugs is the result of their being illegal.

He became, in fact, the world's leading exponent of personal and economic freedom — ideas that were once scorned and dismissed, but which now shape the lives of billions. Milton Friedman was the economist who changed everything.

Eamonn Butler is author of Milton Friedman: A Concise Guide.

http://www.amazon.co.uk/Milton-Friedman-influence-free-market-Essentials/dp/0857190369

Mergers and closures among universities sound like an excellent idea

Of course, this is causing hyperventilation among the fainting classes:

Almost three quarters of universities are on course to be in deficit in the next academic year despite an increase in tuition fees, a report has found.

Nearly 200 universities in England are facing a financial crisis with the government’s raising of employers’ national insurance contributions wiping out extra tuition fee income, according to analysis by the higher education watchdog, the Office for Students (OfS).

Net income will be down by £3.5 billion and the sector will see a deficit of £1.6 billion without swift action, it predicts, and it did not rule out closures or mergers.

This is not a specific comment upon the funding levels. Rather, a broader point about closures and mergers.

There are, apparently, 285 higher education providers in the UK. Another count has 295 and another 276 Further Education Colleges. This might be the right number, might not be - again we are making a broader point.

Back when there were only two universities they could be, as they were, left to themselves. As the system expanded there was, as we know, more government involvement. But there becomes a size of the sector when detailed central management becomes impossible. This is just straight Hayek - increased complexity leaves us with no alternative management method other than markets.

Markets do mean that market forces have to be left alone to play out. The bad must be able to fail if we are to gain the incentives to improve. Surplus capacity must be culled, just as it must be possible to increase capacity if demand rises.

Once we’ve got a sector of a certain size - in any walk of life, profession or activity - then markets must be used as that management method.

Tertiary education with some 500 and counting providers is of that size. Therefore we must allow market forces to work. And closures and mergers of the dullards and unwanted is evidence of market forces at work; as is not allowing closures and mergers of the dullards evidence that market forces - recall, our only useful management method - are not being allowed to work.

We do not claim omniscience over who should close or merge. In fact, we admit to not having a clue which is rather our point. Nor does anyone else - which is why we’ve got to use markets.

Tim Worstall

There is no such thing as a permanent monopoly

The German car industry is showing, nicely, the truth of one of the contentions of the late Robert Bork. There is simply no such thing as a permanent monopoly:

But the real threat to German excellence did not come from within. In the early noughties, when the California-based Elon Musk placed a risky bet on Tesla, traditional automakers were staying away from electric vehicles because they did not want to cannibalise existing business, and the Germans were particularly hesitant. The new technology threatened to obliterate their combustible-engine edge and to endanger German suppliers whose components weren’t needed in electric vehicles (EVs). Tesla, backed by the might of the US financial markets, is now worth over $1tn, about seven times as much as Daimler, Volkswagen and BMW combined.

It’s entirely possible for someone to dominate a market at any particular point in time. Why they are able to do that will depend. It might be that they simply are the best at what is being done. There might be some legal barrier preventing competition. The entire set of economic institutions might be so borked as to prevent entry into that no longer free market. Which of these is true will - OK, should - determine what, if anything, is to be done about such market dominance. If it’s produced by excellence then leave well be, obviously. If it’s manipulation, whether by capitalists or governance then change the system that allows that.

But Bork did point out - and didn’t people laugh when he said it about Microsoft - that no monopoly is permanent. Technology changes therefore any dominance is subject to the underlying technology getting away from the domineering producer. Android happened to Microsoft. Electric vehicles are happening to the German car makers.

No monopoly is, ever, permanent. Something that needs to be kept in mind when considering action against dominance at any one point in time. We have this on fair authority after all:

While we look not at the things which are seen, but at the things which are not seen: for the things which are seen are temporal; but the things which are not seen are eternal.

Messing up the entire legal and incentive structure of the economy in order to deal with some inevitably temporary issue of dominance might not be a good idea….

Tim Worstall

Transforming Ugly Buildings

It has been obvious for years that bleak concrete buildings create bleak concrete minds. Now it’s been said by the Centre for Social Justice

Ugly buildings and shabby surroundings are fuelling an epidemic of loneliness, according to a report by the Centre for Social Justice. It says the government should stop creating ugly developments that leave people feeling dejected, otherwise it will “build its way into the social problems of the future”.

People thought in the 1960s that the new way forward was to move on from ‘mock Georgian’ housing and instead build concrete skyscrapers. Vibrant communities of terraced housing were replaced by soulless buildings that assaulted the senses and provided people with no sense of living in harmony with their surroundings.

Draconian restrictions thwarted the wishes of people to live in two storey street dwellings with gardens at front and back. Limits on square footage have given the UK the smallest houses in Europe. The fault lies with the Town and Country Planning acts that have prevented people living where they wanted to live in houses they wanted to live in.

The obvious solution is to pull down those monstrosities and build decent homes in their place. The abolition of the Town and Country Planning Acts will aid that along.

This will take time, but there is an interim low-cost solution that will brighten up the dreary drabness with splashes of colour until the obvious solution can be applied.

Think how faceless tower blocks would look with brightly coloured plastic window boxes festooned with flowers under every window. Red, yellow, blue, green. Dirt cheap, and probably donated free by Fisons or ICI. It would transform and humanize the whole building, adding a splash of colour to dull, grey lives.

Those adept at Photoshop should picture those buildings as they would look thus decorated, and residents should be shown the projected results and asked if they wished it done to their own residences. The best guess must be that they would leap at the chance. The UK’s dull drab blocks could become vibrant and human-friendly, invigorating their residents instead of brutalizing them.

Gain not your economics from The Guardian

This seems remarkably muddled:

But the real step the EU can take towards protecting its economy (and with it, its citizens’ wellbeing, optimism and faith in democracy) involves things that are less sexy than building a spaceship, such as finishing the capital markets union that could enable more European tech start-ups to borrow money. The EU has spent the better part of a decade wringing its hands over the absence of European substantial tech companies compared with the US and China. A big reason for this is that it’s simply easier to raise funds in the US because private and public pension funds allocate a greater part of their investments towards venture capital than European pension funds do.

Venture capital isn’t lending money. Therefore you don’t borrow venture capital. The clue’s right there in that second word of the phrase - capital. The writer, Alexander Hurst, should know this:

His memoir, A Stunning Display of Unbelievable Folly, is a modern fable about money and greed; at its center, the story of how he made—and lost—$1.2 million trading “meme stocks” during the chaotic Covid lockdowns of 2020.

But then perhaps the two are in fact connected, not knowing and the performance?

But yes, obviously things get worse:

Europe already exports tech-startup founders to the US rather than keeping them at home – which, according to a US-based French investor – has resulted in French tech in the US being worth far more than French tech in France. For instance, Snowcloud and Datadog, both founded by French entrepreneurs in the US, are many times more valuable than France’s largest unicorns or biggest recent stock market flotation. A situation where the continent is exporting founders, their startups, and the capital that is funding them makes absolutely no sense.

Interesting, perhaps we can find some manner of resolving this conundrum?

This matters because, as Stanford academic and author Mariejte Schaake argues in the FT, we need European tech to embody democratic values. On that front, the EU should feel vindicated that its attempt to regulate disinformation on social media is the correct strategy. ….Whether through enforcement, some new type of regulatory agency or a future ban on X, this is not a fight the EU can back away from because the existence of European democracy itself is at stake.

And there we have it. That Europe is trying to regulate is why the start ups are elsewhere. Europe insists upon regulating using the precautionary principle, it must be shown that there will be no harm before anyone’s actually allowed to do anything. This does not work in fields where - well, it doesn’t work in any field, but - lifecycles are measured in months. This point is not difficult to find. Marc Andreessen, one of the major venture capital investors of our day (note, not lender) has been pointing this out, for free, upon Twitter (or X, to taste).

The Daily Mash did go a little too far insisting that The Guardian is wrong on everything, always. In their economic arguments we do have to admit that the comma placing seems fair enough, often enough.#

Tim Worstall

Shock, Horror: Government not very good at doing things

Today’s example is from New Zealand:

New Zealand’s prime minister Christopher Luxon has formally apologised to the more than 200,000 children and adults who suffered “horrific” and “heartbreaking” abuse and neglect while in state and faith-based institutions.

The historic apology follows a harrowing landmark report, released in July, which laid bare the scale of abuse that occurred across care institutions from the 1950s onwards. It was the most complex royal commission inquiry the country has held. The judge who chaired the inquiry, Coral Shaw, described the abuse as a “national disgrace and shame”.

As it turns out government is not very good - or even, is appalling - at taking care of children. This aligns neatly with that suspicion that the one grand signifier of not coping well with adult life is having been in care.

There are, of course, difficulties here. Some people are, at some times, simply going to require care from us all. Government is one of those ways we do things collectively. Teasing out cause and effect is also going to be problematic - those events that lead to requiring care will have their effects just as being in care will.

But we do still stick with that insistence that government just isn’t very good at doing things. Our Big Example being the Bureau of Indian Affairs over in the US. Which is:

The BIA works with tribal governments to help administer law enforcement and justice; promote development in agriculture, infrastructure, and the economy; enhance tribal governance; manage natural resources; and generally advance the quality of life in tribal communities. Educational services are provided by Bureau of Indian Education—the only other agency under the Assistant Secretary for Indian affairs—while health care is the responsibility of the U.S. Department of Health and Human Services through its Indian Health Service.

The BIA is one of the oldest federal agencies in the U.S., with roots tracing back to the Committee on Indian Affairs established by Congress in 1775.

Those Native Americans (we do not call them Indians any more) have had their agriculture, infrastructure, education and economy more generally run by the Federal Government for 249 years now. A quarter of a millennium of the Federal Government running things has left Native Americans with the worst education, infrastructure, agriculture and economy of any of the residents of those United States.

This is, as close as we’ve actually got an example to point to, what life for all would look like if government was running everything for all of us. Which is, we insist, useful; that we have before us this evidence that government isn’t very good at doing things.

Yes, yes, there are some things that have to be done by government, things that both must be done and can only be done by government. But given the inability displayed even by the modern and current form of government we’d be better off limiting the power of government to those few and specific cases where it’s both necessary and the only possible alternative.

As ever, the case for minarchy is made by observing real world government.#

Tim Worstall

The British Airways Method of Cutting the Civil Service

When British Airways was being prepared for privatization, it had a staff of 59,000 personnel. Financial analysts said it could be made profitable if that could be reduced to 39,000. This was achieved without a single forced redundancy. The policy was to offer staff tens of thousands of pounds to take voluntary early retirement, and not to replace staff who retired as normal. The policy worked, and the privatized BA became profitable and, for a time, ‘The World’s Favourite Airline.’

A similar model could be used with the overstaffed UK Civil Service. As Elon Musk prepares to cut back the numbers of federal bureaucrats in the US, we might draw inspiration from his attitude and embark on a similar policy on this side of the Atlantic.

A micropolitical solution would involve avoiding outright sackings or forced redundancies, and instead make the terms of severance sufficiently attractive that large numbers will take them, or at least be mollified by the manner of their departure. This follows the British Airways model.

One possibility might be to put many of them on a two-year severance, giving them the choice of continuing to be paid each month for two years as they leave, or taking a lump sum at the outset instead. They could find other employment during those two years.

A start might be made with those who claim to be working from home. They would be paid for two years for not working at all. The next candidates might be those employed on diversity awareness training and decolonization of the service. Those being paid to do full-time trade union work could be included among the first batch. The point would be to start with those whose departure would make little of no observable difference to the service’s output.

But the personnel cuts must go deeper. There are whole ministries that contribute little or nothing to the economy or to societal wellbeing. We might question how far the government should be involved in culture, media and sport, and how many ministries there are that seem vastly overstaffed for any positive impact they make.

While this will cost money in the short term, it is money that is already being spent on keeping them in their positions. It would be, in effect, like a capital investment, paying money now in order to have lower operating costs and achieve greater efficiency in the future.

Previous talk of cutting the number of bureaucrats has come up against Public Choice Theory and Parkinson’s Law. This alternative approach could sidestep those roadblocks and give us a leaner and more efficient Civil Service.

But what if the 27 Club is actually useful?

Apparently this idea of the 27 Club - that famous and talented people all die at age 27 - is not, in fact, true:

It began when Brian Jones, founder of the Rolling Stones, was found motionless in a swimming pool on July 3, 1969. He was 27 and when three other superstar musicians — Jimi Hendrix, Janis Joplin and Jim Morrison — died at the same age over the next two years, the idea took hold that this cluster of premature celebrity deaths could not have been a pure fluke.

A study has now interrogated the urban myth of the “27 Club” and found that while there’s no truth to the idea that notable people are more likely to perish at 27 than other young ages, the notion that they do still has an impact in the real world.

It’s not true yet people believe it, which then makes it in human terms actually true. Because people act, research, look up, as if it is true and therefore, as a human belief, it is true about humans.

This is a useful and important point. The Labour Theory of Value is not true but many believe it is. Therefore, in terms of how society works - or doesn’t - it is useful to at least consider the LTV as being true at some level in a human society (Reader: no, really, it isn’t).

Or, more generally about politics, what matters is not truth but belief. What people believe to be true is what determines their actions, not what is actually true. It is only possible for people to act in accord with reality if they have that explained to them and falsehoods - like the LTV - debunked that society will work optimally or even usefully. Which is as useful an explanation of our existence at the ASI as you’ll come across, explainin’ that reality.

As to the 27 Club we’ve never really believed it ourselves except in one sense. Truly great talent does exist and it makes itself known pretty young too. It’s then lavished with fame and an amount of cash to make Mssrs Gates and Bezos blush. Plus all the opportunities for self-destruction that a teenager plus oodles of cash offer. From which we draw the conclusion that booze’n’drugs ‘n’ staying up late and all that - the rock’n’roll lifestyle - take about a decade to kill you. That is, given what they’ve been doing for ten years, dying at 27 is evidence of the fortitude of the human constitution. Entirely contrary to the pecksniffs who insist that a second doughnut will murder us all in our beds.

But, you know, maybe that’s just us.

Tim Worstall