Friday, 20 July 2018

Planning makes houses expensive...


...or so it seems - here's Randal O'Tolle in The Antiplanner:
With few exceptions, prices rise above three times incomes only when government policies make it difficult for homebuilders to meet demand.

For example, in 1969 the only places in America where housing cost more than three times incomes were Hawaii and Stamford, Connecticut. I don’t know why Stamford was on the list, but Hawaii had passed legislation strictly regulating where people could build homes in 1961. Other states and urban areas didn’t do so until the 1970s, and as they did so their housing prices rose faster than incomes as well.

Thanks to the urban planning prescriptions, housing is prohibitively expensive in too many areas. While median home prices are more than three times median family incomes in 45 percent of housing, it is more than four times in 24 percent of housing and more than five times in 14 percent of housing.
O'Toole points out that US millennials have low ownership rates (below 30%) in California and New York where there are strict controls on rural housing whereas a swathe of Southern and Mid-west states have millennial ownership above 45% because there aren't significant controls on rural housing development. It's true some millennials want to live all hugger-mugger in pokey city flats but most of them want what their mom and dad had - a family home.

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Monday, 16 July 2018

Murder, starvation, poverty, autocracy...how did communism get to be cool?

It came to a head with an attractive young journalist proclaiming on morning TV: "I'm literally a communist, you idiot". For me this seemed little different from someone popping up and saying; "of course I'm a Fascist, twit face" or "absolutely, you numpty, I'm a Nazi". Yet unlike these latter statements, saying you're a communist doesn't get shock horror reactions, The Guardian won't headline its spluttering indignation at someone being a communist. Indeed the more likely reaction is a sort of "bless, young people care so much about the downtrodden - communism is wrong but their heart's in the right place".

Communism - even in places that really ought to know better like East Berlin - is cool and trendy. Communism is cool despite its track record of economic failure, suppression of democracy, state-sponsored murder, starvation and the incarceration of political opponents. The cruelty of Pol Pot's Cambodia, Mao's 'Cultural Revolution', Stalin's purges and Castro's gay correction camps is set aside because, y'know, communism is cool.

Why is this - seriously, why? Here's a few thoughts with my marketing hat on.

Communism is an ideological brand and people's attachment to it isn't based on much considered analysis but on the belief that (as my Dad said years ago) "socialism just means good". And if you don't believe me, here's a response to me on Twitter following my criticism of communism:
The communist manifesto like any seminal text is not to be taken so very literally but considered and applied to the current socioeconomic climate, taking or leaving as appropriate. This just seems like adult common sense to me.
It's like the Bishop of Durham explaining how, in a very real sense there is a god but he/she/it isn't quite how it says in the bible, that's allegory. So let's explore how communism got to move from being a 19th century piece of political philosophy to a seemingly faith-based creed (despite killing about 100 million people inbetween).

Communism's brand identity has a variety of elements - workers, the people, revolution, anti-establishment - that position it well for those looking to be politically contrary (a common trait in younger people). All of the factors in communism's brand identity are positive - other than the unfortunate fact of, when put into action, its tendency to make people poorer or at least those people it hasn't killed or exiled. But the identity is strong enough to resist these unfortunate historical issues. How come?

Communism's brand associations provide a justification for the "not true communism" response to any criticism citing the Soviet Union ("Stalin wasn't really a communist"), Castro ("Cuban totalitarianism was forced on it by US aggression") or Vietnam (US aggression again). These brand associations - what do you think of when someone says 'communism' - include:

Trendy university lecturers (I recall one lecturer's opening remarks to our 'Geography of South East Asia' module - "I'm a radical Marxist geographer")

Marx and Marxism - not The Communist Manifesto but the degree to which Marx is seen as significant in economics and (especially) sociology. Communism gets academic credibility to match lecturer trendiness

Communist iconography is appealing and rebellious - Che Guevara t-shirts, the hammer and sickle, the colour red.

WW2 - the Russians were our friends and allies (sort of) so communism isn't as bad as that other totalitarianism we don't talk about except when we want to criticise slightly orange US Presidents

All the bad stuff must have been a mistake ("not real communism") because Dr Steve Rogers* is way too trendy to do anything so bad as executing shopkeepers or forcing accounts clerks to work in market gardens. And anyway Marx says (insert trite quote cut and pasted from Good Quotes or Wikipedia). "Do you like my Che t-shirt - only £9.99 down the market?"

The communist brand also has what we can call width - if you thought communism was about economics or sociology think again. Those trendy lecturers crop up everywhere and communism (or "Marxism" but in branding terms there's little difference) has something rebellious - always "challenging orthodoxy" to the point where the challenge becomes the orthodoxy - to say: in the arts, in offshoots of sociology like gender studies and media studies, in literature, language studies and doubtless archaeology.

We can take a step back and observe that communism, from its inception in Marx and Engels' manifesto, has always been predicated on the idea of violent revolution - how else are you going to get hold of the property "for the people"? But this essential violence becomes cool because some of us (especially men) get quite turned on by political violence and the people advocating the violence are rebels, cool dudes fighting for a better world.

Communism's brand is cool because the idea of using violence to remove oppression is cool (watch Star Wars if you doubt this for a second) and the flaws - communism's track record of cruel, hateful oppression - is disregarded because the iconography, identity, story and associations allow for a myth rejecting its failures, most commonly because of the actions of communism's enemy rather than because of its inherent failings. Communism is cool because its brand values allow it to resist an honest assessment of what it has done and what it means.

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Sunday, 15 July 2018

Ten more popular lies about free markets


It sounds good doesn't it...
Maybe we should look beyond the fatalistic, nihilistic and frankly quite dumb ideas of free market capitalism - they have failed - and look to build a better tomorrow together.
Now I'll leave aside the fact that free markets and capitalism have, in any meaningful way, 'failed' - we know that's a lie - and look at a few more of the commonplace little fibs about free markets.

"It's all about profit". I guess this is right in one respect since in a system of free exchange there has to be value or the exchange doesn't take place. But, using the more regular understanding of profit, this is simply a lie - free markets are about mutual advantage, co-operation and exchange not the exploitation implicit in saying "it's all about profit"

"Only shareholders benefit". Again this isn't true - for sure, in a capitalist business shareholders risk their cash in exchange for a return (in either a share of profits or an increase in the value of their share). But when you buy something, you get a benefit - thirty minutes with an advertising copywriter will tell you this as it's the basis for those "it's the sizzle not the sausage" comments such folk like. You buy things because you get value from having or using them - indeed levels of benefit to consumers vastly exceed the returns to entrepreneurs or to the providers of risk capital (aka shareholders)

"People aren't rational so free markets won't work". How often have you heard it explained that people are stupid, ignorant, ill-informed, misled and that this means free markets are exploitative? The odd thing is that the idea of people being 'rational' is an academic convenience - nobody at all believes people always behave rationally. This makes markets imperfect but not so imperfect that they don't or can't operate to the mutual benefit of participants. Look at the choice of bread and cheese in your local supermarket and then explain how such a range is possible other than in a market system where people risk their money, time and resources to provide goods or services they think you might like to purchase?

"There's too much choice - it confuses people". The bread and cheese observation applies here too - do you really believe we'd be better off if we only had a limited or prescribed choice of goods? Yes there's lots of choice but, in the end, we use heuristics - mental short cuts - as consumers (this is why fmcg manufacturers spend millions on brand marketing) to manage choices available in the marketplace.

"Free markets are impossible because free choice is impossible". A variant on the 'too much choice' lie, this one is often used to argue for state direction or ownership. At times the argument is little more that saying "you can't make a perfect vacuum so Thermos flasks won't work" - because our choices are partly guided by socialisation, information and environment they are less than 'free'. But this sort of argument doesn't mean that more choice and more information don't make for more free markets and greater social benefit

"Markets have to be controlled or it would be chaos and anarchy!" Now here we've to make a distinction between a set of rules (very free market environments like stock exchanges have clear and enforced rules) and controlling or directing the market. Observing an old-fashioned, pre-Internet stock exchange looked like chaos as people rushed about shouting, waving paper and seemingly causing mayhem. But at the end of each day all the transactions were logged, all the prices agreed and the chaos looks like an orderly list of stock prices. Markets need rules but they don't need government-mandated orderliness or restrictions saying who can or can't participate in buying or selling good and services

"Free markets are unfair". Usually this refers to the fact that we can't all afford to buy all the things - there's a little bit of the green-eyed god in all of us after all. We look at the bloke with the nice jag or the woman flying first class and little 'it's not fair' particles trigger that jealousy. But it's not the market creating the unfairness or indeed causing the uneven distribution of resources and, at the level of transaction, markets are absolutely fair - there's a buyer and a seller who agree a mutually beneficial exchange. That some people are willing to pay a lot extra to get some perceived status advantage (a nicer car or a plusher seat) doesn't mean the markets for cars and seats are unfair

"Capitalism equals free markets". Well no. We're dealing with two entirely different ideas - how society manages exchange and how entrepreneurs secure the funding to run their business. Capitalism is, quite simply, a system where the small part of exchange benefit we call profit is returned to those who took the financial risk. It is possible - look at today's Russia or large parts of European agriculture - to have a capitalist system operating in markets that are anything but free. And, it's fair to say too that capitalists often like this arrangement since it means they can capture a larger part of that exchange benefit in the form of profit

"Social ownership requires socialism". Again no. There's plenty of social ownership in open market economies (mutuals, co-operatives, worker-owned, etc) and the best of these businesses compete successfully with orthodox capitalist forms of ownership - John Lewis, Ove Arup. There's no need for government to own or control any part of the economy to have a system where social ownership thrives.

Free markets - the ideology as much as the things themselves - are the main reason why we moved from most of us living in abject grinding poverty to today's cornucopia of goods and services. That ideology is about allowing everyone to participate in the market, to innovate and invent, to buy and sell, to take risks and to navigate the sometimes confusing world of choices, options and myriad varieties of cheese or bread. By all means criticise big business cosying up to big government, have a pop at rich people avoiding taxes the rest of us can't dodge and lay into corruption, exploitation and unethical practices wherever they occur. But don't kill the idea of the market as it's the best way we've got to carry on getting healthier, wealthier and happier.




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Friday, 13 July 2018

There's been plenty of economic progress since 2008 - you're just not measuring it


The problem with economics, I find, is that too often it becomes trapped inside the limits of what it measures. If we haven't attached a specific monetary value to something then the economist's assumption all too often is that this something therefore has no value. Take childcare for example - government recognises that looking after young children has a cost but only when that looking after is done by an agency external to the family. We therefore provide subsidy to people using that external agency but not to the people who choose to provide the childcare themselves. I may be wrong but it does seem that the driver here - glossed over by debates about getting women back to work (as if looking after children isn't work) - is that the only measure that counts is GDP. And there's a double win by the parent returning to work by using a childcare agency - not only does her return raise GDP because she's in the part of society we measure but the purchase of childcare raises that GDP too. It's taking in eachothers washing on a grand scale but it make the figures look good. Better stills we can throw chaff about women's equality into the mix to make it look like a social good.

One theme popular right now with some economists is the argument that there has been no "progress" since 2008's great crash. Those economists point to per capita GDP proclaiming 'look no increase in productivity' because those figures seem to have stagnated. The problem here is that it's a one-eyed look at people's lives - measuring only the money income and not what that money income gets us. It's true that average incomes haven't risen but to say there has been no progress ("the final crisis of late capitalism") is hard to argue.

Until recently I was a director of a large social housing organisation and, in preparation for the shift to universal credit and the digital-by-default approach it uses, we looked at how ready our customers were for the change, the degree to which they were digitally-enabled. What we found was nearly 9 in 10 of the tenants had access to the Internet, most commonly using a smart-phone. Bear in mind that we are literally dealing with the poorest in society - three-quarters of our tenants relied on benefits. I realised why when I dropped my (expensive) phone in a car park and it smashed.

My temporary fix was to buy - yes buy - a phone for £20 and stick a sim card in it. And this wasn't the cheapest smart-phone. For £25 I had a phone allowing me access (albeit slightly slow) to the whole of the Internet's wonders. I'd venture to suggest that this wasn't possible in 2008 and those poor and vulnerable people in our flats and houses have had their lives made significantly better by being able to afford the benefits of Internet technology previously only available to the wealthy.

Take a walk round your house, look at the things that have changed - become cheaper and better in equal measures. Televisions, fridges, microwave ovens, dishwashers. Open the apps on your cheap smart phone and see the things you've got for free - music streaming, social media, football scores and updates, bus timetables, maps, radio. I've a super little bluetooth speaker, better sound quality than any transistor radio of my youth - cost me £9.99.

Pop down to the supermarket and walk round. Tens of thousands of lines, produce from across the world and at prices little higher than a decade ago. Add in cheaper taxis from Uber, cheap home delivery takeaway food, online retailing driving down costs and prices. Thousands of small changes each one providing a little more value to us as people often for a little less cost.

So when people say "there's no productivity growth" are they really telling the truth? Perhaps - hallelujah - the productivity growth is coming in people's private lives not in the dull Taylorist world of the workplace. The last ten years have seen massive advances in people's lives, what we get for our money means we're better off even if that money's still the same. Today's TV isn't the same as the telly of ten years ago (it's flat, smart and hung on the wall). Today's mobile phone isn't really a phone, it's a computer more powerful than the PCs and laptops of ten years ago.

All this is hard to measure (how to calculate the benefit I get from wasting so much time on Facebook and Twitter) so mostly we don't bother. And this lets people get away with spouting manifest nonsense like this from Delphine Strauss in the FT:
Absolute social mobility — people’s chances of living better than their parents — has worsened almost everywhere since the financial crisis.
Our children and grandchildren are likely to enjoy a vastly better life than us enjoying things we can only speculate about. For sure there's an outside chance of the Marxist wet dream coming about and capitalism completely collapsing but it's one of those sort of outside chances that brought Ford, Zaphod, Arthur and Tricia together - damned close to infinitely improbable. And so long as capitalism continues it will carry on creating, innovating, initiating - doing the thing it has done for three hundred years: making us all happier, healthier and wealthier. Long may it continue.

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Tuesday, 10 July 2018

Don't burn the platform - social media, ad fraud and regulation


Look I know you don't like advertising (or at least lots of you say you don't) and get irritated by men in ill-fitting suits and bad shirts telling you that "the brand must be a hero" or some such nonsense, but can we stop shooting the messenger please? Advertising is not the reason why Google and Facebook dominate social media, advertising is not the reason why kids are fat (if indeed they are), and advertising is not some sort of sinister manipulative force responsible for all the evils of capitalism. Nope - advertising is just businesses talking to you.

Even the FT, what was once capitalism's leading journal, is at it:
The need to sell advertising is at the heart of the toxic behaviour of many of the social media companies. The online ad market is dominated by Facebook and Google, and appears to be fraught with bots and fraudulent clicks. Hence France, Germany and Australia are all conducting inquiries into online advertising.
First let's get one thing clear, online ad fraud is a problem and one that is more of a threat to the advertising business than to us as consumers (and because of this - it's a threat to Google and Facebook's revenue streams as well):

According to a 2016 report from The Association of National Advertisers (ANA) and WhiteOps, the loss from ad fraud was $7.2 billion in 2015—primarily from bots. To put that into perspective, total spend on display advertising, according to the 2015 report from the Interactive Advertising Bureau and PricewaterhouseCoopers, was only $12 billion, excluding Google and Facebook.
Note the last part of this - the largest part of online ad fraud takes place elsewhere than Google and Facebook (or for that matter Twitter, LinkedIn and so forth) because these are 'walled gardens' - closed platforms - that control what you and I see. That's not to say there's none of this stuff on Google and Facebook - online advertising (operationally and in terms of regulation) is still in its infancy with the technology options and the creativity of fraudsters running ahead of those policing the system. It's probably more important to focus on the shared interests of advertisers and consumers (neither of whom like fraud) rather than seek to break up, control or regulate the platforms.

One of the issues here is that regulatory regimes for advertising vary enormously and there is very little international cooperation - ICAS (the International Council on Advertising Standards) was set up in 2008 but only formalised with an independent secretariat in 2017 and, as yet, doesn't include China or Japan (the biggest source of on line ad fraud). Moreover, advertising standards regimes have historically been far more focused on advertising content - 'legal, decent and honest' - than on the sort of technological deception that is undermining online advertising effectiveness. This is made more difficult by the fact that much ad fraud is not illegal (or it's hard to prove ill intent):
One of the biggest reasons fraud is so rampant is simply that it’s not illegal. Unlike credit card fraud, nobody is going to jail for ad fraud, and it’s not exactly the sort of activity that elicits a crackdown from law enforcement, which means there is significantly less risk involved. And yet it’s extremely lucrative.

Imagine a bad actor is weighing their options. On one hand there is credit card fraud, which has modest rewards and very high risks. On the other is ad fraud, which is very lucrative and very low risk. It’s a no-brainer.
Partly this is because of online purchasing models (PPC and variants) but mostly it's because governments have focused attention on other online risks (terrorism, pornography, communication with minors) rather than on advertisers getting some of their payments scammed. As the FT observed governments are now conducting enquiries into ad fraud but this has got little or nothing to do with allegations of "toxic behaviour" levelled at social media companies. That makes for a cool headline, gets you (ironic) clicks but completely misses both the problem and the solution. Regulators and governments need to be working with the platforms rather than seeing them as the problem - they have as much interest in dealing with ad fraud as any government.

In calling (foolishly I believe) for a "publicly funded model" to compete with Facebook, the FT and Diane Coyle confuse two issues and in doing so suggest that Facebook, Google and other 'walled garden' platforms are at best turning a blind eye to fraud and at worst complicit in that deception. Coyle further confuses the issue by talking about using "competition powers" to 'break up' Google and Facebook - quite whose competition powers she wants to use escapes me - when the issue isn't competition but public confidence and the lack of effective legal recourse against fraudsters (after all the BBC, Coyle's much-loved institution, enjoys a de facto news monopoly in the UK).

And, to cap it all, the online market is international so requires international responses - setting up some sort of taxpayer-funded mini-Google in the UK simply isn't the answer. Perhaps a thoughtful government (this may already be happening) might consider using the WTO - or some other international body - as a means of looking at how to coordinate online advertising regulation? Google and Facebook are not angels but it is misleading to suggest that they are complicit in online fraud - more than anything they stand to lose out from fraud as advertisers look for different ways to engage online.

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Wednesday, 4 July 2018

Why the Taxpayers Alliance needs to shut up or learn something about local government


I can't speak for others in local government but the Taxpayers Alliance really gets my goat. And I say this as someone who wants low taxes and small government. The TPA seem to specialise in a particular low rent form of attack - sending freedom of information requests to every council usually to obtain information already publicly available. This information is then totted up and badged as waste. Thousands of hours - all funded by the taxpayer naturally - spent providing trite information about councillor expenses, officer pay, trade union facilities time or numbers of press officers. The TPA then bungs out a press release screaming about waste, how hard-working officers are 'overpaid' or councillors travelling the land on junkets.

The problem is that none of this febrile investigative work gets anywhere near the heart of the TPA's alleged mission of lower taxes and smaller government. It gets them a headline - "Ten Borsetshire top bosses earn over £100,000" or "Big Borough Chief Executive earns more than the Prime Minister" - but the effect of this isn't to get us better, smaller government but rather to undermine public confidence in their local government. The TPA will then get some information about potholes and claim that, if we didn't pay chief executives so much money or employ press officers then we'd have all the cash needed to fix those potholes - despite this being utter tripe.

Don't get me wrong, this is good politics - at least if you're looking for a stick to beat incumbent council leaderships - but it completely and totally misses the point. If you want smaller, cheaper local government then the only way to do it is for one or both of two things to happen - councils stop doing things they do right now and/or councils start charging people for the services we give them (see green waste collections, for example). At the moment - not that the TPA ever mention this, of course - top tier local councils spend between 50% and 80% of their budgets providing social services and social care - in Bradford's case about £180,000,000. Paying the chief executive £120,000 instead of £160,000 isn't going to make one jot of difference to this problem bar making it more difficult to recruit a good enough person to run the organisation.

I was talking recently about the difficulties councils have recruiting and retaining planning officers (typical pay £30,000-50,000). As soon as we get an experienced officer with his or her boots under the table, up pops a far better paid opportunity in private consultancy and off zooms the experienced planning officer. The same applies for property and planning lawyers, good accountants, leisure centre managers, and human resources officers. Maybe the nice folk working for the TPA are doing so for love and a bowl of rice every second day but in the real world there's a competitive market for the skills needed to run large and complex organisations and the professional expertise to deliver the services those organisations provide.

If the Taxpayers Alliance wants to meet its mission of lower taxes it needs to start saying what it is that government should stop providing so as to do this - not just infrastructure projects like HS2 but actual revenue services like defence, benefits, health, education or pensions. It would be more interesting to see a picture painted of the small state, low tax future implied by the TPA's mission but all we get is attacks on petty waste (and often not even waste but legitimate spending) and the wages of senior offers - wages that aren't competitive and which often result in poor management in those local councils.

It's time we started to push back at the TPA - for sure they provide good copy - over local government pay, service delivery and funding. Because the TPA is wrong, damages the reputation of local government and prefers a cheap headline over a thoughtful contribution to the debate about how English local government is run and funded.

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Monday, 25 June 2018

Hedge funds shorting the referendum? The thing it's short on is fact


On the face of it, the Bloomberg article is a bombshell. It's not so much that it names Nigel Farage but more that it points the finger at the market research industry:
Hedge funds aiming to win big from trades that day had hired YouGov and at least five other polling companies, including Farage's favorite pollster. Their services, on the day and in the days leading up to the vote, varied, but pollsters sold hedge funds critical, advance information, including data that would have been illegal for them to give the public. Some hedge funds gained confidence, through private exit polls, that most Britons had voted to leave the EU, or that the vote was far closer than the public believed—knowledge pollsters provided while voting was still underway and hours ahead of official tallies. These hedge funds were in the perfect position to earn fortunes by short selling the British pound. Others learned the likely outcome of public, potentially market-moving polls before they were published, offering surefire trades.
The article mentions two polling companies by name - YouGov and Survation - and suggests that they conducted "private exit polls" that were shared with hedge fund businesses as a means of 'shorting' the Pound during the evening. The article also hints that the polls running up to the referendum were foxed in some manner. First let's get the exit poll thing cleared up:

An election exit poll is a poll of voters taken immediately after they have exited the polling stations. Unlike an opinion poll, which asks for whom the voter plans to vote, or some similar formulation, an exit poll asks for whom the voter actually voted.
It was widely reported in the run up to the referendum that there wouldn't be any exit polling (although there were suggestions that private polls were being commissioned) because of the methodological difficulties - with no past voting behaviour getting a balanced sample would be very difficult:
The problem they face is the same as that faced by the broadcasters: without a baseline it is hard – and expensive – to construct a sample of polling stations that is representative of the country as a whole. And they won’t know if they are right until the actual results start to flow in from about 12.30am on Friday.
The YouGov poll reported by Sky News at 10.02pm wasn't an exit poll but, as the Bloomberg article makes clear, an opinion poll conducted on the same basis and with the same sampling as similar polls in the run up to the referendum (a YouGov poll reported 51/49 Remain/Leave on 22 June and Survation reported Remain leads in two slightly earlier polls). The poll result announced (I think mistakenly as if it were an exit poll) by Sky News was pretty much in line with overall polling over the previous week. It is worth noting that eight of the ten polls prior to the murder of Jo Cox MP showed a Leave majority whereas only two of the ten polls after her death did so. If the money men commissioned any polling it probably won't have been exit polls because of the sampling problem - it will have been phone or online (most likely online).

There had been a slight improvement in exchange rates in the days prior to the referendum, something that was entirely in line with the increased expectation that Remain would win the referendum - speaking personally, I switched the TV on that evening expecting to see a reasonably comfortable win for the pro-EU campaign. There's a legitimate question as to why the polls were so wrong (although pollsters will point out that the difference between 52/48 and 48/52 really isn't large in statistical terms) but the Bloomberg allegation (and the hint at the end of the article) is very serious as it suggests polling companies are colluding with investors to game election results.

For all the shock horror nature of the report, I'm inclined to the view that nobody has fixed anything - some private polling will have given different answers (perhaps more in line with earlier polling) but that's all. The hedge fund folk no more knew the result than did any of the rest of us, including the people at Sky TV and Leave.EU.

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