On the productivity problem - are we measuring the right things?

From Goldman Sachs via Reason:

Goldman Sachs's economic research team has found that a lot of the innovation Silicon Valley generates isn't captured by standard measurements of GDP. For example, while email, direct messaging, and Google Maps clearly make all kinds of work easier or more efficient, they're free, so GDP doesn't include the value consumers gain from using them. It's telling that a recent MIT study found that the median person would be willing to pay more than $40 a month for Facebook. Just because users don't pay for a service doesn't mean they don't value it.

Every time I see an article on the dilemma of productivity (despite technological advance productivity flatlines) I think of this issue. After all back in 2008 almost nobody had a smartphone yet now they are ubiquitous and pretty cheap - I got a temporary one for £20 when my phone smashed. Yet little of this obvious betterment makes its way through into productivity measures.

Now since I'm not an economist I always tread carefully when dipping my toe in the waters of this sort of subject. It does seem, however, that there's been a shift in betterment from advancing productivity in the work place to a much more interesting improvement in consumer's lives. We always joke - "so much for austerity" - as we pass another dog walker's van parked up on the edge of the moor. A decade or so ago such businesses as dog walkers simply didn't exist but now there's sufficient money out there for people to afford to pay someone else to walk the dog.

This is just one example to which could be added a loads of others from specialist dessert cafes through to smartphone app based products like Airbnb, Uber and assorted takeaway delivery services. There's a craft beer explosion accompanied by hundreds of micro-pubs to go with the hundreds of micro-breweries and more places to eat and drink than we ever imagined. For not a lot of money people access a wealth of live sport, film, TV, games and other entertainment. And even if you're not prepared to pay an extra sub there's the joys of YouTube and the plethora of podcasts and ad-enabled music streams.

The point here is that consumers are seeing the benefits of technology ahead of businesses. The disruptive technologies - taxicabs, hotel rooms, food service - are not advances that, in the main, lead to productivity gains in business. This isn't to say that, in services such as law and accountancy, there aren't advances to be made or that the advent of new transport technologies won't see productivity gains as the need for drivers diminishes. But not only is business slow to change but also the outlook of government is to protect the existing infrastructure whether it's a legacy transport system like heavy rail or a professional protection that means, for example, only a human lawyer can do something.

Frontier Economics looked at the effect of ebay in the UK, France and Germany and found:

...eBay helps consumers save around 24 percent of what they would otherwise spend in France, Germany, and the United Kingdom. That translates to 1.1 billion Euros in savings per year.

None - or precious little - of this gain is translated into traditional measures of productivity and GDP. The critical change is that huge consumer benefits are delivered by Google, Facebook and other free-to-air platforms but while we calculate the contribution of these firms' ad revenue we ignore the value of the benefits realised by the mass of consumers using the free services.

We forget that these services - Twitter, Facebook, eBay, Uber, Airbnb, Spotify - didn't exist or were babies back in 2007 yet now are some of the most significant, almost dominant, consumer services to the point where politicians now want to clobber consumers by regulating or controlling these businesses. It there has been productivity gain - let's call it betterment - then it has been in the lives of consumers not the efficiency of businesses.

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Are there too many posh people in politics? And, if so, what should we do about it?

Chris Dillow, in a slightly chip-on-his-shoulder manner, writes how "posh people" should be disqualified from politics. Chris cites lack of hustle, overconfidence, a casual attitude to money and the lack of a "gut understanding" of how other people live. There's nothing new about the analysis presented - people who've had a struggle to escape from poverty very often resent the effortlessness with which posh people slide into grand roles.

There are, however, some thoughts arising from this that strike me as important:

1. By creating two categories, rich and poor, Chris ignores the reality which is that most people are neither. An interesting experiment here would be to contrast the manner in which 'middle class' is understood in the USA and the way in which 'middle class' is presented very often in the UK. I'm middle class (my Dad was an insurance clerk in the City for all his working life) but my experience bears little or no resemblance to the typical middle class life described in the Sunday supplements with its foreign holidays, private schools, nannies and endless dinner party angst.

2. Empathy is really important in politics - perhaps as important as what we could call "lived experience". One of the features of modern political discourse, with its emphasis on economics and obsession with evidence, is that it loses feeling. Everything is boiled down to a narrow utilitarian analysis with no room for "gut understanding". People parade class credentials (or attack others for their excess of privilege) without appreciating that this is simply adopting a badge not being empathetic, let alone understanding, of other people's lives. I may be the grandson of a miner but that doesn't make me working class - just a little bit closer to understanding that class than someone who is the grandson of an earl.

3. Policy-making is dominated by the well-off. Chris points to some very privileged people - Jacob Ree-Mogg, David Cameron, Boris Johnson, Seumas Milne and Andrew Murray - to make his point about how posh folk are a problem. But there's a much bigger group of people, not all the product of elite private schools, but still unquestionably wealthy and privileged. The influence of these people (they litter the media, civil service, think tanks and charity administration as well as politics) leads to tin-eared policy-making such as the persistent attacks on working- and lower middle-class lifestyle choices.

4. Generally-speaking the private sector is far more egalitarian than the public sector. I recall the then chief executive of Reed Elsevier telling a tale of how, for the annual report, his PR team were very proudly saying "all our senior management are graduates" - he had to point out to them this wasn't true as he wasn't a graduate. Employment in the city has always been a strange mish-mash between barrow boys and public school grandees (not least because trading requires that ability to hustle, negotiate or strategise that Chris points out is often missing in posh folk).

5. There are too few what I would call "ordinary people" in politics these days. From 1965 to 2005 the Conservative Party was led by people from ordinary backgrounds (Heath, Thatcher, Major, Hague, Duncan Smith, Howard) - all bar one from what us Londoners call the 'provinces'. That politics is now - in every part of its spectrum - completely dominated by folk from less ordinary backgrounds is a failing in what should be an egalitarian pastime.

We give a great deal of attention (rightly in the main) to getting better representation from women and ethnic minorities but much less attention to whether the interests and outlook of the people we chose, gender and race aside, reflect the interests and outlook of most people, especially outside London and the Home Counties. Indeed, there's a tendency to look down the nose as MPs like Phil Davies ("he used to work in ASDA, you know") or Ben Bradley ("shelf stacker in Lidl") rather than see this experience as providing a fighting chance of actually understanding what it's like for the customers and employees of value supermarkets.

I don't think the posh should be disqualified from politics, people like Tony Benn and Willie Whitelaw made major contributions to politics, but I do consider that Chris Dillow has a point - political parties need to think harder how they can get people who better represent the electorate. I think the Conservative Party has done some good work here but it is still the case that the centralised candidate approval system makes it too easy for London-based people with good connections to get approved and onto shortlists for winnable seats.

Perhaps we need also to look at non-graduate routes into professions - my uncle was a county court judge when he died but started his career as a 14-year old post boy in a solicitors' office (another uncle started at Barclay's as a sixteen-year old and finished as a senior tax accountant at the bank). These days too many jobs are closed off to non-graduates - the latest here is nursing which has gone the route of social work and policing in this regard - which makes it pretty tough for the 50% of kids who don't go to university.

Lastly, we need to ask whether the domination of London and the process of sortition by wealth (largely driven by housing costs) contributes to the manner in which well-off people simply don't have a clue about the real lives of most ordinary people - not just the poor but millions of people who are what the Americans would call 'middle class'.

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The world is not an engineering problem - an argument against technocracy

Chris Dillow has an interesting blog post about the problems with what he calls 'liberal technocracy':

This urge to express all arguments in consequentialist terms is an admission that liberal technocracy has won. The only acceptable arguments for any policy, it is believed, are consequentialist ones – ideally, along the lines of making us materially better off. And everybody seems to accept Mill’s harm principle, and thus argue for bans on the – often elusive – grounds that the activity in question does indeed impose harms onto others.

You only need look at the new found 'neoliberalism' of the Adam Smith Institute to see the onward march of this "what works is what's right" approach to policy-making. Dillow speaks of how some things are, as it were, felt rather than analysed - the "best case for Brexit is an intrinsic one – that it’ll give us a sense of independence and sovereignty" and when advocates try to set out economic utilitarian gains from leaving their argument weakens. I once wrote a similar thing about Scottish independence:

It's the idea of Scotland in that quote from Henry Scott Riddell's 'Scotland Yet' - not about some idea of superiority, certainly no hatred or dislike, just a message of pride, joy and love for the place. And the nation - that thing we try to define with grand words - is all those who share those emotions, that association.

When Kipling wrote about men having small hearts it was about these feelings - we cannot love everywhere and we cannot expect everyone to love the place we love. But we can share that love with those who do and that is nationhood. No government, no kings, no lords, no oil, no First Minister. Just people placing their boots in the soil and saying "this is my country and I'll work with you to make it better".

If you want independence for reason of blood, for reason of hatred or for reason of greed then you deserve to lose. But if you want independence for pride, joy and love of the place that is Scotland then - for what it's worth - you have my blessing and I wish you well.

The idea here is something we've lost from our thinking, one of those virtues Deirdre McCloskey writes about, the idea of faith, that there are things we have to take as felt not as demonstrated by science. This rejection of maximising utility as the only purpose of public policy is perhaps the single most important thing in McCloskey's triology on bourgeois virtues - that ideas matter as much as science does. And it is true since the things we feel cannot be defined by utilitarian or consequentialist argument - here's economist Don Boudreaux:

There are no scientific ‘solutions’ to society's problems. This reality is so in part because in many cases people legitimately disagree over what arranged changes are desirable and which are undesirable. For example, some people join me in celebrating marijuana legalization; other people disagree sincerely and deeply even if there is no disagreement over the predicted health and behavioral effects of marijuana use. There is no scientific ‘solution’ to this disagreement or to any other disagreement that turns on differences in values and preferences.

This reminds me of P J O'Rourke speaking of his politics - "I'm personally conservative" says O'Rourke but believes government, public policy, should be as libertarian as possible. So a man who believes drinking and smoking are sinful can, at the same time as holding these views, support the liberalisation of their use. But, it is more likely that such a person for reasons of faith - belief without evidence - will oppose liberal drinking laws and even propose stricter temperance or prohibition.

Back at university we coined the term "soft loo-paper conservatism" to describe the approach to student politics where the only care was the good management of the student union and its services to the student body (such as, hence the phrase, insisting on better toilet paper in the union buildings' loos). Management was all that matters - Boudreaux quotes a cynical comment from James Buchanan on economists and public policy:

Once he has defined his social welfare function, his public interest, he can advance solutions to all of society’s economic ills, solutions that government, as deus ex machina, is, of course, expected to implement.

The problem is that politics just doesn't work like this - people have views, felt experiences, faith meaning that the answer might be a different one from that produced through the expert's systems. Nor can we ever be perfectly sure that the expert's answer isn't sub-optimal - there are plenty of examples of technocratic solutions to perceived problems that have failed or, in solving one problem, merely acted to create three new ones. Raising the duty on fags seems to work as a means of reducing their consumption but there's a point at which it creates an opportunity for criminal arbitrage - the cost of making a cigarette is so much lower that the sale price it's worth the risk for the criminal to create a black market.

It seems right that government should seek the 'right' solutions in its policy-making but this assumes that there is such a solution and, indeed, that the negatives of such a policy don't outweigh the benefits of the solution. After all, if we take the utilitarian argument in its entirety, it begins to make the case for a sort of Huxley-esque benign authoritarianism, a Singapore-on-Steroids. For my part, I prefer things a little messy because not only are the solutions so often dependent on coercion but they also require that the ordinary citizen's faith and feelings are denied. Maximising utility seems a good thing but it is not the main reason why people do things like set up business, create charities, build village halls, paint, sing, create or innovate. Technocracy treats the world as an engineering problem when it's an unfolding story, explorers in a dense jungle not white-coated scientists in a laboratory.

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Rent controls - the case for teaching everyone basic economics

That rent controls are a bad idea is one of the few things that nearly all economist agree on - here's Paul Krugman (not exactly a hard right ideologue):

The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.

This doesn't stop politicians everywhere from seeing controlling rents as something that will, in some way, 'fix' problematic housing markets (without upsetting the important NIMBY constituency). And it seems that the public think price controls are a good thing too - reinforcing the cynical outlook of politicians like New York's current mayor in shovelling up votes by promising cheap rents.

Here's the public view (in the UK) from a survey by pollsters, Survation:



You can see why us politicians love a price fix! The problem, however, is that fixing the prices won't fix the problem - you end up with either huge subsidy, fewer homes to rent, or rented properties that are very poor quality. Indeed, if you're a connoisseur of the UK's council housing, you'll know it's not that hard to achieve all three of these policy disasters.

Maybe we should teach more people basic economics - as Krugman points out the problem with rent controls is right near the front of the book, pretty easy stuff. If more people were told that price fixing doesn't work, there'd be fewer politicians like John McDonnell or Bill de Blasio prepared to lie to people about how rent fixes will solve the housing crisis.

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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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Free trade is not a policy...

Excellent exposition on free trade from Jon Murphy:

...since free trade is no policy, it is not dependent upon the assumptions of the economic models to function... None of the arguments for free trade require perfect information, identical principles between buyers and sellers, known utility functions and universal preferences, etc. Free trade is robust to deviations from the ideal; the system still works because it is a process, not a policy. Deviations from the ideal, movements away from equilibrium, present opportunities for entrepreneurs to correct issues; the many plan for the many and do not require the guiding hand of government to correct for deviations.

And this, especially, on using models to guide policy:

To guide policy, you need a descriptive model, not an analytical model. In other words, you need a model that is descriptive of reality, not one that reflects reality. When attempting to guide policy, this is where the assumptions of the model become important. To impose an “optimal tariff,” you need to know the demand and supply curves (something which is unknowable), you need to know indifference curves and von Neumann-Morgenstern utility functions (which are unknowable), true relative prices and equilibrium, etc etc.

Go read and learn.

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Piketty's rickety evidence...

Thomas Piketty became the go to anti-capitalist economist. Every trendy progressive pundit leapt onto his arguments about the inevitability of ever rising inequality. Whole economic strategies were designed by assorted far left numpties based on Tom's vast tome (which I guess most of them haven't read - I had a quick flick through, turgid doesn't fully capture its dullness).

Thing is though, Piketty's evidence - the thing that made his thesis so powerful - turns out to be a bit dodgy:

Very little of value can be salvaged from Piketty’s treatment of data from the nineteenth century. The user is provided with no reliable information on the antebellum trends in the wealth share and is even left uncertain about the trend for the top 10 percent during the Gilded Age (1870–1916). This is noteworthy because Piketty spends the bulk of his attention devoted to America discussing the nineteenth-century trends (Piketty 2014: 347–50).

The heavily manipulated twentieth-century data for the top 1 percent share, the lack of empirical support for the top 10 percent share, the lack of clarity about the procedures used to harmonize and average the data, the insufficient documentation, and the spreadsheet errors are more than annoying. Together they create a misleading picture of the dynamics of wealth inequality. They obliterate the intradecade movements essential to an understanding of the impact of political and financial-market shocks on inequality. Piketty’s estimates offer no help to those who wish to understand the impact of inequality on “the way economic, social, and political actors view what is just and what is not” (Piketty 2014: 20).

All this comes (via Marginal Revolution) from Professor Richard Sutch, a very highly regarded economic historian and economist. Seems that emperor might need a new tailor.

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Quote of the day: On knowledge...

From Don Boudreaux at Cafe Hayek:

Too many are the people who, having mastered econometrics and gathered lots of data, wrongly suppose themselves thereby to possess knowledge. Likewise, too many are the people who, having mastered mathematics and memorized the mechanics of lots of theoretical models, wrongly suppose themselves thereby to possess knowledge. Too rare are the people who correctly understand that, no matter how smart they are and how much they might genuinely learn about economics, econometrics, and ‘the data, neither they nor others can ever hope to come close to knowing the details of economic reality in the same way that, say, a physicist can know the details of some physical material under his or her investigation.

What we call facts (and they aren't always facts, especially in social sciences) do not constitute knowledge. That knowledge comes from thinking about those facts and what they mean, what they tell us about the world.

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No we don't need land reform, we need planning reform

Hardly a week passes without someone trying to pretend that housing markets are somehow immune to the rules of supply and demand. Many of these are just politicians and pundits trying to pretend that black is white but some lay claim to some sort of intelligent analysis - a bit like this from Laurie Macfarlane at Open Democracy:

How did we get here? A popular explanation is ‘we’re not building enough homes’. While this is part of the answer, it is far from the whole story. At the root of the problem lies something that has for a long time been overlooked: the role of land in the economy.

Now before we start on why this argument is problematic, I'll say that for the last couple of hundred years land has become - with each passing year - less important as a part of the economy except where its supply has been barred from a given market (ie housing). Yet people write long articles explaining why this isn't so and how, if only we reformed how we see (or tax, or buy and sell) land, then all these problems would be over.

The article that quote comes from is pretty typical of the genre, interesting and informed but still churning a set of misunderstandings. We can start with this one:

Land first began to be treated as tradable, private property in the 16th century, triggering the birth of modern capitalism. But this transformation gave rise to a tension. On the one hand, landed property empowered people by providing physical and economic security, including collateral to leverage credit, which helped drive economic growth and technological advancement. But at the same time, private property in land was inherently exclusionary: by its very nature, granting some people exclusive rights over what was previously a common resource involves taking away the rights of others.

There are lots of examples that show this argument is false - from Roman law through the edicts of Charlemagne to the Magna Carta - but let's just stick with the last one and Steven Gastowitz QC on the subject:



So, back in the 14th century land (and earlier) was a tradeable private property. Moreover, the fact that property rights - and the desire to have government defend and protect those rights - go back into ancient times tells us that saying their existence triggered "the birth of modern capitalism" is also false.

The whole (and this is pretty crucial) point about the modern market economy is that is is not based on land and the ownership of land. It is possible to be a billionaire and not own a square inch of land (unlikely I'll grant but possible). Business, in its modern identity, is based as much on intellectual property and brand equity as it is on the supposedly 'underlying' value or availability of land. Indeed a great deal of the real estate business isn't buying and selling land but rather the rights associated with land.

The problem is spotted by Macfarlane:

But the price of a property is made up of two distinct components: the price of the building itself, and the price of the land that the structure is built upon. We don’t know the exact breakdown between these two components (bizarrely, there is currently no reliable public dataset on the land market in the UK) but the available data implies that land under homes is currently worth around £3.7 trillion – nearly 70% of the total value of the housing stock. This makes residential land the UK’s most valuable asset, even in today’s high-tech economy.

Now we can talk about financial markets and that 'land values increase natually over time' but the main reason why residential development land is so expensive is because there is so little of it in the places where people might actually want to live (there's plenty - millions of acres - of developable land unrestrained by planning rules at rock bottom prices in places people don't want to live). The result is that government either cheats by giving itself the power to buy land at lower values than could be achieved in an open market - a cheat that Macfarlane notes got clobbered by the courts - or else throws out lots of subsidies. Macfarlane (wrongly but that's a different story) blames Margaret Thatcher:

With the arrival of Margaret Thatcher, the government withdrew from large scale house building, and councils were forced to sell their housing stock through ‘Right to Buy’, and prevented from building more. There was a shift away from supply side subsidies of ‘bricks and mortar’ towards demand-side subsidies of paying housing benefit to boost households’ incomes to enable them to access accommodation. Whereas in 1975 more than 80% of housing subsidies were supply-side subsidies intended to promote the construction of social homes, by 2000 more than 85% of housing subsidies were on the demand side aimed at helping individual tenants pay the required rent.

Although Macfarlane has mentioned the 1947 Town & Country Planning Act ("kept land in private hands, but nationalised the right to develop it") we've arrived at 2000 without asking whether the decisions made under that Act and its assorted successors has any role in driving the lack of residential development land? The problem gets hinted at when Macfarlane talks about financial liberalisation:

An ever increasing supply of credit interacted with a fixed supply of land, fuelling a house price boom. In turn, households were forced to take out ever larger mortgage loans to get on the housing ladder. Thus, a feedback loop emerged between mortgage lending, house prices and ever increasing levels of household debt.

The myth that land reform folk want to push is that this fixed supply of land is a simple fact driven by that old agage - 'buy land they aren't making any more of it'. Yet, at the same time, we're reminded that England uses only 10% of its land for towns and cities - not just the houses but all rest of that urban infrastructure. And, at the same time, significantly less than 1% of England's remaining land is earmarked for housing development. If you wanted to make a big difference the best way would be to double the amount of development land - something that could be done at a (very long, very painful) stroke of the proverbial pen.

Yet Macfarlane and the land reform folk still can't see the simplicity of such a solution preferring instead a government-driven and bureaucratic approach:

Compulsory purchase laws should be changed to enable public authorities to purchase land at agricultural prices, enabling the planning and development uplift to be captured for public benefit once again. A new National Land Bank should be established and made responsible for developing and leasing land, acquiring idle and vacant land for resale, and developing more New Towns. Planning authorities should be given more resources and stronger powers of plan making or zoning so that planning can be a ‘market maker’ rather than a market stifler.

Everything about this approach is wrong. Most of all giving local councils more ability to 'zone' as 'market makers' simply invites the worst sort of rent-seeking. Decisions about what is built, where it gets built and who builds it are no longer determined in a market but instead are the gifts of local council and planning power brokers. By seeking to "level the playing field between tenures" we recreate the world of council housing that so many came to hate and which right-to-buy ended.

Yes land is scarce. But it's not so scarce that we are incapable of allowing a mature market in development to build homes - for sale or rent but mostly the former - for those people who want to buy them in the places where they want to live. But in all of Macfarlane's article - and for all I know the book it derives from - there's no recognition that, in a large part, the unaffordability of housing is a consequence of deliberately limiting the land available for housing. Yet that is precisely what our planning system does.

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Thoughts on a 21st century conservatism

Chris Dillow in that slightly laid back manner of his asks why us Tories seem to be uncomfortable with the 21st century:

It’s become a cliché that the Tories want to return to the 1950s, before the age of mass migration and our entanglement with the EU. These, however, are not the only examples of Tories discomfort with the modern world. Tom Welsh says the Tory party is threatened by the large number of university graduates, and Amber Rudd seems befuddled by the internet.

Now partly this is simply a reflection of Tory demographics but we should also spot that, especially with the Internet stuff, getting all flustered over new things isn't the preserve of us Conservatives. Check out the angst about disruptive digital transport technology, the constant fretting about robots and jobs, or the renewed enthusiasm for fixing prices and managing markets. Hardly embracing the modern world.

And, let's be honest about the 1950s - who wouldn't want to return to a full employment, low crime world with strong communities and social capital? So perhaps us Tories need to start explaining how, without casting aside all the myriad ways in which today's world is better, we can help build a 21st century version of those happy days.

Chris suggests that the reason for conservative angst is that the world hasn't quite turned out quite like we expected it to in November 1989 when the communist wall came down. Mostly, of course, this is because, despite the dark days being over, this damnable ideology persists - not least because of the refusal of those who dream of man's perfection and true communism (like Chris) to accept that their faith - the secular religion of socialism - is wholly misplaced.

In the 1980s British Conservatives managed to connect traditional Tory values - family, community, personal responsibility - with the core of liberalism deserted by those who claimed to be liberals. It was less about Popper, Hayek and Friedman and more that the thing to be conserved was the neoliberal consensus about to deliver the most sustained period of economic betterment in human history.

This being said, Chris Dillow is right, conservatives have to reconnect with the middle class bedrock of their support and this can only happen when the process of leaving the EU is concluded. And the starting point is for us to rediscover sociology as a means of understanding our world and to set aside the dry, metric-dominated economics that dominates elite political discourse. It is possible to want strong, cohesive communities and to support an open, buccaneering, free-trading world.

Chris is right that there's no canon of economists on which to build a modern conservatism but this might not be such a deal (even for an economist like Dillow) - as I wrote a week or so ago:

As a starting point in understanding conservatism let me say that emotional meaning is more significant than philosophy, at least in its role as an ideological source. Place, people and values matter more to conservatives than the words in some book written in the 19th century. Where there are central texts to liberalism and socialism, there is no source book for conservatism - we can't get ideological reassurance from Marx or Smith or Mill.

As conservatives, however, we can take advantage of not being tied to a canon to dip into a wider range of sources, to use fiction - Austen, Trollope, Tolkien and even Disraeli - as well as philosophy. Above all though, conservatives should pay more attention to sociology than economics. Most of our problems are because we haven't done this, we've allowed ourselves to be captured by the dry logic of what Deidre McCloskey calls "Max U" - maximising utility, utilitarianism, metrics, technocracy, Plato's Philosopher Kings.

It seems to me that this is a starting point for a conservative future, one that values personal liberty and supports community, encourages enterprise and respects service, and sees the building blocks of a good society in the actions of good people who love the place they live not in a vain search for perfection, for a 21st century Utopia.

....

Now, about those robots...

From Deirdre McCloskey:

If the nightmare of technological unemployment were true, it would already have happened, repeatedly and massively. In 1800, four out of five Americans worked on farms. Now one in 50 do, but the advent of mechanical harvesting and hybrid corn did not disemploy the other 78 percent.

In 1910, one out of 20 of the American workforce was on the railways. In the late 1940s, 350,000 manual telephone operators worked for AT&T alone. In the 1950s, elevator operators by the hundreds of thousands lost their jobs to passengers pushing buttons. Typists have vanished from offices. But if blacksmiths unemployed by cars or TV repairmen unemployed by printed circuits never got another job, unemployment would not be 5 percent, or 10 percent in a bad year. It would be 50 percent and climbing.

Maybe there is a limit. Maybe. But aren't we better off, regardless of that financial investment warning, planning for tomorrow's changes to result in similar outcomes from today's?



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"They can pay more for their food" - Jay Rayner meets Marie-Antoinette

I'm going to leave aside accusations of vanity, self-promotion and smugness because we are all guilty of such vices. I'm going to focus instead on the vexed question of whether it is ever morally defensible to argue that governments should enact policies people should pay more for something as fundamental as the food we eat.

Here's the argument:

British consumers have become too used to food being sold too cheaply. In an age of austerity when many are struggling it is a tricky argument to make, but the fact remains. We need an agriculture sector in a position to invest in its base to help improve our productivity and therefore our self-sufficiency. The 10% of income (down from 20% in 1970) that we spend on food does not enable that. Many may find this unpalatable but the fact is this: unless we improve our self-sufficiency, we will be at the complete mercies of those international markets. Unless we pay a little more now, we risk paying vastly more later. This is an argument that farmers, retailers and the Government needs to engage with.

This is the core of an argument made by food writer, Jay Rayner, as a sort of cod justification for refusing to give the benefit of his knowledge and expertise to the UK Government. Now I know most people think Rayner's article is about the unfolding terrors of Brexit but it isn't, it's about how Rayner thinks the UK (note the UK not Europe or the EU) needs to be more self-sufficient in its production of food because lots of terrible things might happen if we're not - most of which, surprisingly, is about food prices:

...the UK sits with dwindling self-sufficiency, in a stormy world in which food has become one of the great economic battlegrounds. Added to that is the appalling folly of Brexit, forced through by a cabal of ideologues happy to trot out falsehoods about the sunny uplands of economic joy that leaving the European Union would bring.

Instead it has resulted in a devaluation of the pound, making imports more expensive and the exporting of our food more attractive.

If, as many fear, a bad deal is done for Britain resulting in huge tariffs and penalties on trade, food price inflation is going to be in double digits for years to come. That’s if we can get hold of food at all. The people who will suffer the most, of course, are those who already have the least. For them the buying of food will use up a massive proportion of their expendable income.

Now there are a few things here that do rather matter with the first being the presumption that a UK government would impose "huge tariffs and penalties" on trade in food. And, given that this would be necessary to have the policy he wants of greater self-sufficiency, why he has such a problem with such impositions? Or, to put the question a different way, how does Rayner propose to increase the proportion of UK food consumption produced in the UK? And wouldn't this be completely impossible if we remained a member of the EU?

To give Rayner his due, he refuses to wholly embrace the 'supermarkets are totally evil' line used by many of those supporting his mission of expensive food. Rayner also slaps down the urban growing fad:

They are interesting educationally. Allotments are good for mental wellbeing and general fitness. But the carbon footprint of the food produced tends to be appalling.

The problem is that, in criticising localism, Rayner undermines the basis for his argument on food production and self-sufficiency.

...do not be fooled by environmental arguments around localism. What matters most when judging environmental impact of food production is the full life cycle: you need to look at the carbon (and other inputs) not just of the trucks getting produce from field to fork, but in the farm buildings and machinery, the fertilisers and the workforce.

It's hard to find a more compelling argument for international free trade in agriculture than this one. A world where food is grown in the place most suited to its production rather in a less fertile location just across the road. If food miles aren't the problem (Rayner cites transport costs as 2% to 4% of total food cost) then what are the arguments for self-sufficiency at any level below the whole world?

It seems to me that Rayner, if he is to make his argument for remaining in the EU, has to recognise that the shared competence on agriculture needs to be viewed at the level of the whole union not individual member countries. And just so we're clear what this means:

It turns out that the EU is not self-sufficient in terms of all the nutrients normally locked in agricultural products and principally available for different usages: The respective self-sufficiency ratio is only 91 per cent.

I hate to make Rayner's pro-remain argument better than he does but being 91% self-sufficient in food is better than being less than 50% self-sufficient in food - and this is without any change at all to our current approach on food prices. Rayner makes a localised and protectionist argument (one that, incidentally couldn't be achieved if we stayed in the EU) focusing solely on UK food production rather than EU food production within a single market.

Rayner doesn't set out how his proposal to increase food prices, perhaps even to double those food prices will be achieved. It seems from his article that the model is essentially to dramatically reduce the area under production through environmental regulation and, therefore, to increase the costs to UK farmers. Obviously such a policy can only be achieved if two things are done: huge tariffs amounting to de facto import bans on foods that can only be produced expensively in the UK and the introduction of VAT on food so as to fund, in part, the subsidies necessary to sustain newly uneconomic farm businesses. And, to be blunt, no government is going to get away with imposing a huge tax on food, so the only way to deliver Rayner's policy is through preventing (or at best, severely restricting) imports of food. Fans of the corn laws will be delighted!

It shouldn't surprise us that Rayner doesn't get to the financial and economic logic of his argument (preferring instead horror stories about horsemeat and vague suggestions that the European Food Safety Agency, EFSA, regime would be scrapped) because it makes almost no sense at all. Not only does the logic of his argument about the EU tell us we are already more-or-less self-sufficient but also that doubling food prices has to involve a massive tax hike on food.

To return to where we started - is it morally justified to argue for government action to hugely increase food prices? For my part, I don't think it is an ethically defensible argument. Food is essential (and especially the basic nutrients Rayner considers when he talks of the 2007/8 food price spike) and government should prioritise policies that reduce prices such as relaxing planning rules to allow more efficient supermarkets. Rayner, like Tim Lang, the lefty food policy wonk of choice, fails entirely to see that the very people who lose under their policies are the poorest. And to suggest otherwise as Rayner does, is to propagate a terrible misrepresentation - the massive hike in prices his policies demands can only reduce the quality of life for millions of families in Britain. I'll be OK, Jay Rayner will be OK, but the poorest and most vulnerable in our society won't be OK.

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"It starts with what you can see from your doorstep" - thoughts on conservatism

Conservatives don't spend a lot of time thinking about what it means to be a conservative. After all politics is boring, political philosophy doubly boring. So we don't spend hours discussing the nuance of our ideology, preferring instead to talk about the garden, the football or the state of the gulleys on Bingley Road.

The problem with us conservatives not thinking much about conservatism is that others decide to do it for us. And they really don't get it at all. A thoughtful consideration of conservatism get replaced by a set of negative stereotypes depending on who is doing the defining.

To our right we get faux-conservatives who pretend that they're the only real conservatives. Everyone but them are 'cucks', 'conservatives in name only' or, worst of all 'liberals'. The true conservatism for these people is a sort of warmed over nationalism peppered (or even pepe-ed) with sub-literate on-line memes and old-fashioned racist tropes.

To our left are a bunch of folk who range from considering us sad thickos to really, genuinely hating us. No chance of a positive press here, we're greedy, uncaring, elitist and even murderous. Conservatism is a bloated, red-faced man in a pin-stripe suit.

As conservatives we've allowed these oppositional stereotypes to dominate people's understanding of the ideology (insofar as it is an ideology - but more of that later) because we spend almost no time considering what we do believe and, more importantly, what conservatism means to the millions of people who simply toddle along to the church hall and vote for us.

Conservatism is ill-defined - it's felt rather than analysed, emotional rather than intellectual. Unlike the left there is no ur-text, no 'Capital' that provides a bedrock of religious certainty to ideological discussion. We have a set of populist aphorisms - 'hand up not a hand out', 'people who do the right things', 'choice and opportunity' - but these don't help except as a set of clues to what we believe.

The advantage, of course, with all this is we can, like the Red Queen, believe almost anything if we try hard enough. This is the problem that some absolutist free marketers (and those Pepe-loving nationalists) have with conservatism - it doesn't preclude a role for the state or assume that there is some perfect model of government that, if introduced, will lead us to the Fields of Elysium.

The disadvantage with the lack of that ur-text or even a recognised corpus of accessible conservative thinking is that there's no obvious ideological filter through which to assess policy. Conservatives literally wing-it much of the time at least in ideological terms. When people speak of some sort of conservative ideological mission they largely miss the point - it's mostly this is what we do not a case of this is what we believe.

As a starting point in understanding conservatism let me say that emotional meaning is more significant than philosophy, at least in its role as an ideological source. Place, people and values matter more to conservatives than the words in some book written in the 19th century. Where there are central texts to liberalism and socialism, there is no source book for conservatism - we can't get ideological reassurance from Marx or Smith or Mill.

As conservatives, however, we can take advantage of not being tied to a canon to dip into a wider range of sources, to use fiction - Austen, Trollope, Tolkein and even Disraeli - as well as philosophy. Above all though, conservatives should pay more attention to sociology than economics. Most of our problems are because we haven't done this, we've allowed ourselves to be captured by the dry logic of what Deidre McCloskey calls "Max U" - maximising utility, utilitarianism, metrics, technocracy, Plato's Philosopher Kings.

If you spend time with conservative people - and as a Conservative Party member and activist of forty years, I can say that I have done just that - you soon realise that the stuff of national debate and headlines is not the stuff of conservatism (not, as I've noted, that conservative folk spend that much time talking political philosophy). Boil it down and the core of our belief is about community, family, neighbourhood, friends - social capital, sociology. Yet we bang on as if economics is everything, dry and dusty emotionless numbers.

Because of this and because we don't think enough about what we're about, conservatives become pragmatic, technocratic and seem uncaring. If we don't ground our policy in community, family, neighbourhood and home, we end up sounding like the young man with the spreadsheet trying to tell the old publican why his business is dying. Or worse that it would be an improvement to close that business and turn the property into a convenience store or some flats. Apply this thinking to how we see the poor. Not benefits scroungers. Not immigrants. Not undeserving. But somebody's family. Someone's neighbour. Someone's friend.

The reverse used to be true about conservatives. The folk bothering about their neighbourhood, the town, the country were mostly conservatives. The sense of social duty and that 'we can't let things like that happen here' was what drove my grandmother and two friends to start delivering meals on wheels in the years after WWII - ferried round by the local curate who had a motor-cycle and sidecar.

In Britain, conservatism doesn't need a relaunch, we just need to literally go back to our roots as conservatives. To understand why we are what we are and to start talking about those conservative things - few of which, once we've got past thrift, have much to do with economics, at least in that Hayekian or Marxist "we've a prescription for the perfect society here in this book" sense of economics.

Firstly, everything is local. This is what matters most to people. Their family. Their friends. Their neighbours. Their community. Their place. As Kipling said:

GOD gave all men all earth to love
But since our hearts are small,
Ordained for each one spot should prove
Belovèd over all

Admitting our hearts are small is just the start - we must then be able to answer the questions people have about their school, their hospital, their road, their house, their family. It's not that people in Sevenoaks don't care about school and hospitals in Wilsden, of course they do. It's rather that those small hearts make them care much, much more about the things of their neighbourhood than they ever will about things in distant (even five milesaway) places.

Today this means giving people control of the answers to these questions, at the very least a say, a chance to hold the people running the services to account. So when we say we don't like the EU, it's not because it's evil or stupid but because it's simply too far away to understand what our neighbourhood, our community and our family needs except as numbers on a spreadsheet or a footnote in a think-tank report.

Even the local council is too far away to really understand what matters in our communities, to our families and for our neighbourhood. Yet the flattening of everything - creating Harm de Blij's 'flat earth' in the pursuit of Max U - makes that council just an outpost of the distant regime. And people know this and feel excluded. For some there's enough money to escape (or even to be an 'Anywhere' person, a 'Flat Earther') but for most people that's not an option.

If conservatives are to make a difference - and what's the point if that's not the aim - we need to stop trying to make everyone's lives better by centralised fiat. And start with making our and our neighbours lives better. Conservatives should apply that old shopkeeper's adage - 'look after the pennies and the pounds will look after themselves'. Look after communities - the bit you can see from your front door - and the whole of society, even the bits we can't see, benefits.

The Knight Foundation, an American charity that supports journalism and active citizenship, ran a programme called 'Soul of the Community' that showed how there is an "important and significant correlation between how attached people feel to where they live and local GDP growth" and what "most drives people to love where they live (their attachment) is their perception of aesthetics, social offerings, and openness of a place". If people love where they live, that place will succeed - it's Sam Gamgee going round The Shire planting a grain from Galadriel's garden in every corner.

For me this is the starting point for a conservative mission. We're not about grand schemes for the perfect society but rather for places that people love. I quoted Kipling's 'Sussex' above but I could equally have used Casey Bailey's 'Dear Birmingham' because it's exactly the same sentiment - I love this place for all it's flaws, mistakes and problems. It's my place.

This is where we start - with home, friends, family and the places we love. You want a conservative manifesto then it starts with how we give folk the power and the tools to turn the places they love into great places. For sure there are lots of other things about keeping people safe, about nation and stuff like that - even macroeconomics if you insist, but if we don't start with what we can see out of our front door we've missed the point.

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I know it sounds good but will it work? Thoughts on big rises to minimum wages.

Be careful what you wish for - or so they say:

The study, commissioned by the city government of Seattle and published by the National Bureau of Economic Research, found that Seattle’s law incrementally raising its minimum wage — to $13 an hour last year, en route to $15 — resulted in low-wage workers’ earning less money rather than more. This surprised many in Seattle, who had been assured by all the best economists, including Paul Krugman, that such a thing would not come to pass.

The debate about minimum wages is a really important one. And, like all such debates, one that is dominated by righteous assertion - 'how can you not support people being paid a basic minimum, they have to eat' - rather than through considered analysis. It is probably time to take the pain and ask again whether minimum wages work.

The theory (at least as I understand it) tells us that, under all but the rarest of circumstances, if you raise the price of something the demand for that something will decline. All we need to examine is the magnitude of this effect - how quickly or slowly that demand falls as the price rises. It is stretching credulity to breaking point if we suggest that these effects do not apply when the price is the price of an hour's labour. So if we mandate a higher price for certain types of labour the result will be less demand for that labour either through the work concerned being forgone, reduced amounts of the work or else through automation (or, in extremis, through the business that used the labour in question ceasing to exist).

You all know this of course but how come we are all so keen on raising minimum wages (for good and noble reasons about people having a 'living wage' or whatever)? Partly this is because there have been a lot of studies suggesting that minimum wage effects are, at worst, small. The classic - if that's the word - in this genre is a study of fast food restaurants in New Jersey following a minimum wage hike:

Our empirical findings challenge the prediction that a rise in the minimum reduces employment. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent. We also compare employment growth at stores in New Jersey that were initially paying high wages (and were unaffected by the new law) to employment changes at lower-wage stores. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment.

So much for supply and demand theory! Minimum wages rises increase employment! The problem is that things don't change quickly and reduced employment is built into business plans rather than implemented immediately - employment is sticky (partly because most business managers and especially small businesses really don't like laying folk off).

But there is a middle ground:

Thus, allowing for the possibility of larger job loss effects, based on other studies, and possible job losses among older low-skilled adults, a reasonable estimate based on the evidence is that current minimum wages have directly reduced the number of jobs nationally by about 100,000 to 200,000, relative to the period just before the Great Recession. This is a small drop in aggregate employment that should be weighed against increased earnings for still-employed workers because of higher minimum wages. Moreover, weighing employment losses against wage gains raises the broader question of how the minimum wage affects income inequality and poverty.

What's being suggested here is that in a market like the USA that generates lots of work all that increases in minimum wages do is anticipate rising wages - it's not that there's been a reduction in the numbers of jobs (and it doesn't really matter whether this is 100,000 or 1,000,000) but rather the impact on overall employment. If raising minimum wages doesn't raise unemployment this can only be because the rate at which the economy is generating new demand for labour is greater than or equal to the reduced demand for labour consequential on a higher minimum wage. And in a recession the wage floor might mean a more rapid shedding of labour.

In the UK we have seen surprising labour market resilience - employment has risen despite relatively slow growth and perhaps because of stagnating levels of productivity. A lot of these jobs have been minimum wage jobs but so far the effects of a rising minimum wage (the cutely tagged 'National Living Wage') haven't been seen in overall levels of employment - indeed quite the contrary as record employment and record immigration tell us.



UK wage distribution 2016. Source:ONS

This graph shows the effect of gradual increases in minimum wages. The question is whether the current approach of gradually increasing the minimum wage will continue to protect wage levels for low paid workers without the negative effect of reducing levels of employment for those low paid workers. A minimum wage is no use at all if its consequence is merely more unemployment or fewer hours of work for those low paid workers.

This for me is the reason why the Seattle findings are so important. It's not that we shouldn't consider minimum wages but that the impact of a massive rise in minimum wage is simply to increase unemployment and income among the lower paid. In Seattle, by 2021 the new minimum wage will increase wage costs for employers of minimum wage labour by 60%. It seems to me that the City got itself ahead of its labour market - here are the key findings from the University of Washington study that caused all the fuss (bear in mind that the study found the usual very small effect from the first minimum wage hike in 2015):





It does seem that Seattle has discovered that demand curves slope downwards and we should take lessons from this unsurprising revelation. The best way to improve wages for the least well paid isn't to require that employers pay them more - 18% more in the case of Seattle's 2016 minimum wage rise - but for economic growth to increase demand for labour.

For the UK our ever more surprising ability to create new employment masks these minimum wage effects:

...retail executives concede that sharp increases in the minimum wage have lent urgency to their efforts to use workers more efficiently, by investing in technology that makes many low-skilled jobs obsolete. “On a personal level, we all want to pay our workers more,” said a top executive at one large retailer that has recently announced redundancies. “But there’s going to be unintended consequences from what the government is doing. Automation that used to be too expensive is now cheaper than the people it can replace.”

The question is really how much longer can our economy absorb the workers shed as firms reduce labour levels and introduce automation? So long as the workers leaving Sainsbury or John Lewis can get a job elsewhere with relative ease the rising National Living Wage won't be an issue. But when that rising wage results in job losses the economy can't fill and sees reducing hours worked it becomes counterproductive. Labour's policy of an across the board £10 an hour minimum wage is great politics but such a huge increase in wage bills results in the sort of system shock seen in Seattle. And the people who would feel this shock will be the very low paid workers the policy is designed to help.


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It ain't broke, it just needs some love and attention: the case for more conservatism

I have heard it stated — and I confess with some surprise — as an article of Conservative opinion that paternal Government — that is to say, the use of the machinery of Government for the benefit of the people — is a thing in itself detestable and wicked. I am unable to subscribe to that doctrine, either politically or historically. I do not believe it to have been a doctrine of the Conservative party at any time. On the contrary, if you look back, even to the earlier years of the present century, you will find the opposite state of things; you will find the Conservative party struggling to confer benefits — perhaps ignorantly and unwisely, but still sincerely — through the instrumentality of the State, and resisted by a severe doctrinaire resistance from the professors of Liberal opinions. (Lord Salisbury, Speech to the United Club 15 July, 1891)

The central orthodoxy in European politics is that, while global markets can and do deliver improved lives for everyone, this only happens because of the benign guidance of non-market authorities, which most of the time means government. You can, I guess, call this the 'mixed economy' although this definition would be very different from the one I was taught in 'A' Level economics back in the 1970s. There is a dominant view that markets fail either by not providing for everyone or else through the money not 'trickling down' to the ordinary person (presumably because footballers keep their millions in a huge vault that they fill with golden bling).

Since this economic debate was conducted at the margins - on the basis of degrees of government or central bank interference in markets - the need for distinction in politics sought out other less economic and more social aspects of life. The only challenges to the economic orthodoxy came from the discredited Marxist left and a sort of grumpy old man tendency muttering how it was better when we actually made stuff. As a result the left/right distinction became more about what's now called 'identity' politics - in short the centre-right may have adopted centre-left economics but they're still racist, sexist pigs.

This was the reason for the decontamination that David Cameron commenced (prompted, in case we forget, by the 'nasty party' jibe from our current prime minister). Huskies and hoodies were hugged, ties were loosened, sleeves were rolled-up and Tories started talking about feelings. And it sort of worked as the party's leadership became less wooden, more urbane (and urban) and less obviously inspired by the golf club bore. The result of this was that the 'nasty party' attack could only attack marginal differences in tax rates, welfare policies and government fiscal strategy. In 2015, regardless of noises off, the Labour Party simply offered the same as the Tories but with a nicer paint job.

All of this is something of a roundabout way of saying that the issue with identity politics is that, as several people have observed, it created the strategy used by what's entertainingly and weirdly called the 'alt-right'. Spend five minutes with an open mind looking at 'alt-right' and 'neo-reactionary' comments and you'll see that it is based on grievance. It doesn't really matter whether the 'white working class' (I actually saw this made into the acronym WWC in a sociology journal) is justified in its grievances, they exist and are driving a political shift in politics. The noises say to the centre-right and centre-left - "look, you listen to black grievance, Muslim grievance, gay grievance, trans grievances - to a thousand different cries of pain about discrimination - when do white grievances get a hearing?"

The owners of identify politics - let's call them the 'cultural left' - respond to this voice with 'racist', 'xenophobe', 'mysogynist' (often with some justification) and accuse that voice of creating these feelings. And then stamp on anyone who suggests we might take a pause and look at whether what we're doing in social policy isn't bringing a lot of people with us or, indeed, making much sense. The centre-right, terrified by the return of nasty party allegations, rushes to line up behind the orthodoxy of identity politics with its 'protected characteristics' and strategies for 'inclusion' based on that Fabian mythology of group adherence.

This is the sort of myth-making that tells a black boy from Bradford's Buttershaw estate that he has more in common with a black youth in a Missouri suburb than with the white lads from the same estate. That somehow a false politics of demography matters more than a real economics of place. These myths mean that the white lads (not all of them, any more than it's all the black lads) look around for somewhere that gives them an identity, a group to join, a gang. Crypto-fascism - the "alt-right" provides just such an identity.

So long as this myth of identity - defined by manifest characteristics rather than the person - remains, we will see politics as a contest between identities, as a sort of equalities top trumps. Yet when we turn to the people who claim they study society, what we get is little different from the grievance-mongering that typifies more populist discourse. For sure it's mixed in with the left's favourite words - neoliberalism, capitalism, hegemony and so forth - but the thrust of modern sociology is entirely predicated on the idea of the group as society's building block. The students of society are no longer servants of human knowledge but campaigners promoting that same Fabian myth of identity - the progressive idea that we are defined by the groups we belong to, that we have little or no agency and that advertising, businesses and the media shape who we are.

The 'alt-right', the Trump campaign, UKIP, Marine Le Pen - these people aren't (as they claim) kicking out at identity politics but trying to sign the right up to that progressive myth of the group being more important than the person. And, in Fascism (proper Fascism not the left's preferred cartoon of Fascism), these people have a model - "everything within the state, nothing without the state" cried Benito Mussolini as he nationalised and protected industry, brought trade unions into government and championed the idea of a triumphant Italy. The central principles of Fascism - action not ideology and the corporate state - depend on the idea of society as a collection of groups not as a happy coincidence of individual interests.

If we want to combat this insidious repetition of early twentieth century progressive politics then we need more conservatives and more emphasis on the core ideas of conservatism in our examination of society. The idea of personal responsibility, the importance of family and community, and a belief in real voluntary action are the characteristics that define a response to crypto-fascism and the myth of progressivism. Sadly much official response to the racism and white supremicism of the 'alt-right' is to double down on multicultarism, to call for restrictions on speech or to try and get all those nasty voices safely banged up in jail. And this just won't work - just look at how doing this to Geert Wilders in Holland is fuelling his politics.

One criticism (especially from those who want the centre-right to be aggressive, interventionist or radical) of conservatism is that it's too accommodating, too malleable - 'Butkellism' they sneeringly called it, managed decline. But right now what's needed is to get the eggs to market unbroken rather than to get the eggs there quickly. Believing that sad little reactionaries with an internet connection represent an existential threat may inject a profound urgency to politics - especially if your progressive utopia seems shaky as a result - but a mature politics would see that the world isn't really threatened by a few folk with unpleasant ideas and snazzy flags. And the only mature politics on offer right now (at least in the form that meets the needs of the time) is conservatism meaning that, here in Britain, the Conservative Party needs to stick right with that idea, to keep it front of mind and not get sidetracked into protectionism, intervention and micromanaging the economy.

Voices from left and right try to tell us that the old model is dead - neoliberalism, globalisation, call it what you will. This argument is made without justification or much evidence and wider heads need to point out that this terrible policy platform has delivered rising wealth, increasing incomes and a billion fewer people in absolute poverty. The bus is in good order - what's needed is a little repair here and there, some fine tuning, a tweak or two, perhaps some bits of new upholstery and more polish, but it doesn't need a new engine or a new transmission. Doing this job is what conservatism does best - carefully adding small improvements while preserving the best of what's already there and recognising that people value, even love, the old tried-and-tested ways.

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Friday Fungus: On fungal economics - yeast or mushroom?

Or rather fungal metaphors in economics:

Arnold Harberger offered a nice metaphor thinking about this difference in his Presidential Address to the American Economic Association back in 1998, entitled "A Vision of the Growth Process" and published in the March 1998 issue of the American Economic Review. Harberger discusses whether economic growth is more likely to be like "mushrooms," in the sense that certain parts of a growing economy will take off much faster than others, or more like "yeast," in the sense that economy overall expands fairly smoothly overall. He argues that "mushroom"-type growth is more common.

Of course both yeast and mushrooms are fungus but the metaphor in question is made better still if we understand what's happening in the two processes. Harberger sees only the fruiting heads of the mushrooms - the visible manifestation of a symbiotic growing system:

Mycorrhizal partnerships are symbiotic, or mutually beneficial, relationships between plants and fungi, which take place around the plant's roots. While there are many species of fungus which do not form these partnerships, the vast majority of land plants have mycorrhizas (from the Greek mykes: fungus and rhiza: root), and many plants could not survive without them. Fossil records show that roots evolved alongside fungal partners and that fungi may have been crucial in helping plants evolve to colonise the land, hundreds of millions of years ago.

Broadly speaking, there are two main kinds of mycorrhiza: Arbuscular mycorrhizas penetrate the cells of their host's roots, and most plants develop this type. Ectomycorrhizas surround the roots without penetrating them. Trees may form either type, and some form both. In each case there is cell-to-cell contact between the plant and the fungus, allowing nutrient transfer to take place.

So not only is Harberger's view of growth correct - it's unpredictable in its location, mushroom-like - but when we look closer he has a fascinating metaphor for the way in which that unpredictable growth affects the wider economy (extending mycorrhizas) and the society that economy feeds (the tree symbiote of the mushroom).

The yeast analogy, on the other hand, is a managed, planned and controlled system. That yeast converts the sugars in the dough into carbon dioxide and alcohol making the bread rise (and rise again as we bake off the alcohol). When it's baked the yeast is dead and we must start again if we want more bread. There is no beneficial system - everything is the result of external intervention.

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A reminder that economics and accountancy are not the same thing

Too much of the debate about economics - particularly macroeconomics - is nothing of the sort. I've described it as 'national accounts arithmetic' - a form of accountancy rather than the application, assessment and testing of economic theory.

Here's Don Boudreax quoting Fritz Machlup from back in 1964:

Definitely “out,” relegated to the scrap heap, is the notion that there is such a thing as “the” balance of payments. Even if full and accurate information were available about each and every transaction, “the” balance would always be an arbitrary number. There are many ways of entering the many items into the various accounts, of organizing the accounts, of interpreting the resulting figures; and there is no way of arranging the data so that they can tell a true story of the causal interrelations.

This doesn't stop people doing just what Fritz rails against. Indeed some economists and most pundits routinely confuse accountancy with economics. But as Don points out:

Most people who fret over, say, the U.S. trade deficit don’t know what it is – and far too many of the few who do know what it is treat the conventional manner in which various economic transactions are recorded in international accounts as possessing an economic significance that they simply do not possess.

The thing is that, if we didn't spend millions gathering incomplete data, loading it into inaccurate models of the economy and claiming the resulting answer is 'truth', then the economy would poddle along just fine. What all this modelling, the act of national accountancy, is perpetuate the lie that government can "run the economy". This is the worst sort of lie - the lie of those taking on the mantle of gods, hubris.


But then, as Longfellow said - "those whom the gods wish to destroy, they first make mad."
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We'd be a better world with a little more geography and a little less economics.

Two things happened recently that reminded me of how we have pushed geography to the margins of learning. And that this is pretty much a disaster.

The first is a comment on my blog from by sister, Frances Coppola:

On a larger scale, the same thing is happening in the EU periphery. Whole countries are becoming ghettos of the elderly, sick, disabled and those trapped by low skills and lack of money, while the young and skilled migrate to the core in search of better-paid work. I wrote about this a few years ago. I won't post the links here, but if you want to look the posts up they are called "the creeping desert", and (rather more upbeat) "in the countries of the old". You might also like to look up Paul Krugman's work on social geography. He won a Nobel for it, if I recall correctly.

The point Frances makes isn't relevant to what I'm saying here as what interests me is the last two sentences. Paul Krugman is, of course, a Nobel Prize winning economist. There are no Nobel Prizes for geography.

Mr. Krugman received the award for his work on international trade and economic geography. In particular, the prize committee lauded his work for “having shown the effects of economies of scale on trade patterns and on the location of economic activity.” He has developed models that explain observed patterns of trade between countries, as well as what goods are produced where and why.

Now I'm not going to start an argument about what is geography and what is economics but I spent my childhood reading (well more than was healthy) Stamp's Commercial Geography - the 1935 edition. And it was and I guess still is about "the location of economic activity". These days, however, it's so much sexier to call yourself an economist even if what you're doing is geography.

The second event was a visit to a book shop. Indeed to perhaps the best looking book shop anywhere in the world, Waterstone's Bradford:



Filling in some spare time usefully by wandering around this wonderful shop I noticed that while there's a politics section, a history section and a social science section there's no geography section. OK there's some shelves labelled travel but these are almost entirely guides. What there isn't is any attempt to bring together books about geography - the modern day descendants of that Stamp's Commercial Geography.

Our problem is that, while we festishise history and drool over economics, geography's mainly treated as either shopping studies or quiz questions. And the result of this is that it's not taught enough (and perhaps not well enough):

The Council on Foreign Relations (CFR) and National Geographic have commissioned a survey to gauge what young people educated in American colleges and universities know about geography, the environment, demographics, U.S. foreign policy, recent international events, and economics. The survey, conducted in May 2016 among 1,203 respondents aged eighteen to twenty-six, revealed significant gaps between what young people understand about today’s world and what they need to know to successfully navigate and compete in it. The average score on the survey’s knowledge questions was only 55 percent correct, and just 29 percent of respondents earned a minimal pass—66 percent correct or better.

In know this is America, famous for not knowing any geography, but I'm pretty sure we'd find a similar ignorance were we to survey students in European universities. We gleefully proclaim the importance of 'location' (even 'location, location, location') but then allow children to leave school knowing next to nothing about their world, barely able to comprehend a map, and incapable of seeing the connection between culture, economics and the physical world.

There's nothing new in this - the first edition of the National Geographic (published 128 years ago today) included this grumble:

Davis also takes time to bemoan the lack of geographic knowledge among the public: "It makes one grieve to think of the opportunity for mental enjoyment that is lost because of the failure of education in this respect."

I remain of the view that we'd be a better world if we focused a little more on geography and a little less on economics.

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Quote of the day - on Trumpish economics and free trade

Shared from Don Boudreaux at Cafe Hayek - the riposte to Peter Navarro, Trump's economics advisor from George Selgin, Professor of Economics at the University of Georgia:

Thank goodness that, being more enlightened than in the past, we no longer will tolerate, much less provide a public forum to, such uncouth bigots as still persist in accusing the Jews of trying to take over our economy and subvert our way of life by lending us money on better terms than our fellow gentiles can offer. No sir. We have advanced well beyond that. We now devote op-ed space in the New York Times to uncouth bigots who blame the Chinese for trying to take over our economy and subvert our way of life by selling goods to us for less than what our own manufacturers can offer.

There are two things I take from this 'neo-mercantilism': the first is that, from my experience at least, there are plenty of Trump supporters who still cling to that old Jews taking over the world shtick - this, as it happens, is something they share with a lot of Jeremy Corbyn supporters (up to the substituting of the word Jew with Rothschild or Zionist).

Secondly, we have got trapped in popular myth-making over imports. Popular opinion thinks it is a bad thing for places somewhere else in the world who can make stuff cheaper than us to be allowed to sell that stuff to us. The argument is wrapped up in stuff about protecting jobs, supporting "emerging industries", and supporting business. The idea of trade has become some sort of international sales push where we try to flog loads of our stuff to foreigners on the back of things called "trade deals". The idea that open trade is mutually beneficial seems to have been lost in our discussions. No-one is saying that trade isn't something negotiated by governments but something freely entered into by individual people and companies.

More than anything else, it is this lie- that trade is a zero-sum game at which we can win or lose - that allows for the malign politics of isolation, protectionism and import-substitution. As a result Trump, Farage, Corbyn and Le Pen are able to exploit a population stuffed by all the media with nationalist myths of sinister foreigners doing us out of our fair share. If we lose the idea of trade - open, free and fair - we risk moving to a new dark age where international power goes to the men with the biggest sticks and where the ordinary consumer pays more for lower quality goods because those men haven't finished waving those sticks yet.

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A few urban thoughts worth reading (plus a little planning grump)

Let's open with Centre for Cities who've published their latest report. As usual it is pretty mainstream urbanism - all agglomeration and clusters - but still worth a read:

The report suggests that to be successful, local economies need to grow their ‘export base’ – those businesses that sell goods and services outside of their immediate area, be that to regional, national or international markets.

This is the regional economics version of thinking exports are more important than imports. And centre for Cities (just like their inclusive growth 'opponents') still seem a little obsessed with the local multiplier. Which is pretty dodgy economics if you ask me.

Meanwhile, James Gleeson has spotted one of the reasons for the UK's (or more specifically London's) housing problems:

In 1911 England reached ‘peak North’ as its population centre of gravity rested at Stoney Stanton, after which began the great movement south-east that has continued to this day. For the last couple of decades England’s population centre has travelled at a rapid pace on a route pleasingly parallel to Watling Street, the Roman road that connected Wroxeter with London and the coastal ports beyond.

The problem is that, since we're not snails or gypsies, the houses don't move with the people. And it reminds us that we need more geography and less economics.

All of which makes the cost of building houses pretty important. And, land costs aside, all sots of reasons contribute to making this price higher and higher. Here's Canadian urbanist blogger, Urban Kchoze on the subject:

Now, much has been written about the planning reforms that we need to achieve more affordable housing. But not much has been said about what affordable housing actually looks like. Sometimes, it feels like some people think that affordable housing is run-of-the-mill housing, just cheaper, and that's not how it works. You wouldn't expect a KIA subcompact to be identical to a Cadillac large sedan.

Really interesting (with some interesting Japanese stuff - they're closer to having this cracked than most places) and relevant wherever you're thinking about for your housing.

Joel Kotkin at New Geography previews a report - Geographies of Inequality - that aims "to unpack some of the prevailing assumptions that routinely define, and often constrain, Democratic and progressive economic and social policy debates". And there's a telling conclusion:

To address the rise of ever more bifurcated regions, we may need to return to policies reminiscent of President Franklin Roosevelt, but supported by both parties, to encourage dispersion and home ownership. Without allowing for greater options for the middle class and ways to accumulate assets, the country could be headed not toward some imagined social democratic paradise but to something that more accurately prefigures a new feudalism.

We need to stop thinking that owning your home is some sort of offence against those treasured "progressive" ideals. Asset ownership is one of the most liberating and empowering things going.

And it's the attitudes of BANANAs and NIMBYs that makes this liberation more difficult:

The CLA has outlined a number of proposed reforms they say will contribute to the rural economy.

They recommended farmers be granted the right to erect small buildings (up to 458sqm) without prior notification of the planning authority in order to reduce costs and delays.

The campaign group also called for it to be made easier to convert agricultural buildings to homes. They said this is being held back by the ‘obstructionist attitudes’ of local authorities, who have refused half of all applications.

The construction of between one and nine affordable homes in rural villages would, the CLA also argued, help to address the acute shortage of homes for those who want to live and work in rural communities, as well as create income opportunities for local landowning businesses.

None of this will make a bit of difference to the 'openness' of the Green Belt or the integrity of rural communities and is more sensible that daft policies banning second homes and so forth. Yet the anti-development lobby still bangs on as if a few houses in rural areas will somehow destroy the entire culture of such places.

Finally: have you registered for the Antarctic Biennial yet?

"The Antarctic Biennale is not just another art event. It is a utopian effort to get artists, architects, writers & philosophers to think about the last pure continent on this planet."

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