Sorry envious lefty folks but entrepreneurs did build that infrastructure

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You'll all be familiar with the "you didn't build that" line directed at wealthy and successful entrepreneurs who have the audacity to use public roads, educated employees and safe communities in managing their business. The most commonly used example - usually in the form of this little Internet poster - is from US Senator Elizabeth Warren.

There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.

You can hear as the socially aware cheer to the rafters at Liz sticking it to the man - telling those rich, successful business people that they owe all that success to the government and should be jolly grateful that it plans to take most of it away in taxes. And it's true that all those things were done with public money (although it's entirely possible - certainly with roads - that private investment could have delivered just as well). But that's not the point, the point is that the rich and successful entrepreneur added some value that wasn't there before - here's Don Boudreaux:

The government-built road that Smith uses to earn handsome profits by serving consumers might well be absolutely essential to Smith’s success, but this fact doesn’t mean that the road’s contribution at the margin to Smith’s success is significant.  Smith’s profits depend upon what he adds to the road’s services – how Smith himself uses the road to create value for consumers.  If Smith uses the road to ship truckloads of ordinary toothpicks to market, he might earn just enough to continue in that line of work, but he’ll not earn magnificent profits.  If instead Smith uses the road to ship truckloads full of new’n'improved toothpicks – toothpicks that sell at prices only slightly above that of ordinary toothpicks but, in addition to doing what ordinary toothpicks do, also are guaranteed to prevent gum disease, cavities, bad breath, insomnia, and erectile dysfunction – then Smith profits magnificently.  Smith’s “above normal” profits (as economists call them) have nothing to do with the road (or with, say, the private efforts of entrepreneurs who are responsible for the delivery truck Smith uses) and everything to do with Smith’s own innovative efforts.

This is the entire point - the entrepreneur is successful because he gets a small part of the value he has added to society (about 3%), most of that value is enjoyed by the consumers who use the goods or services that entrepreneur creates. Having schools, hospitals, roads and policemen paid for from taxes is not a guarantee that we will get that extra bit of margin - it is entirely down the the entrepreneur, which is why such folk are so rich.

So we have benefited (collectively) from 97% of the value added by the creation of whatever wonderful innovation our entrepreneur has developed. And, since this is how the world works, a pretty juicy chunk of that 97% has gone to the government is taxes, duties, fees, levies and rents - the Elizabeth Warren argument is simply wrong. For sure, the entrepreneur didn't build those roads but the extra tax income the added value from his innovation provides made a big contribution to providing schools and hospitals as well as contributing to the next generation of infrastructure investment.

No-one denies the essentially collective nature of free markets - the idea that they are selfish, individualistic or greedy is utter nonsense - yet the cheerleaders for what we might call the 'envious left' continue to peddle the lie that somehow that billionaire entrepreneur isn't successful from his own intelligence and efforts. Worse still that our entrepreneur should face punitive taxes on income and on the return from investment for the sole reason that he has such a lot of the stuff and we don't like him for that reason.

In the end, the marginal improvements those entrepreneurs got rich from also were what made us all richer and made it possible for government to built that infrastructure so the next generation of creative business people can make the next set of marginal improvements (as well as the rest of us enjoying better roads, schools, hospitals and sundry other infrastructure).

The entrepreneurs did build that...

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Why "Save our Forests" rather disappoints...

A few days ago I wrote about the proposals to dispose of all or part of the Forestry Commission's English estate. I remain of the opinion that the Commission is not the best steward for these estates - either as commercial woodland (which is what most of it is) or as public amenity. The Government is consulting about the proposals - the document is here - and it would be rather more helpful if people thought for themselves rather than herding like sheep behind the cry of "save our forests". The purpose of the consultation is set out clearly:

This consultation is about the future ownership and management of the public forest estate in England – land managed by the Forestry Commission on behalf of the Secretary of State for Environment, Food and Rural Affairs.

It sets out the rationale for a move away from the Government owning and managing significant areas of woodlands in England and the principles which will guide the Government in deciding the way forward. The consultation proposes a mixed model approach to reforming the ownership and management of the public forest estate to create a far greater role for civil society, businesses and individuals.

So first of all, the proposals isn't for a quick sale of the estate (which would be best achieved through simply putting the lot on the market in one big lump) but a more nuanced proposal. Yet all we hear of the ever shriller cries of "save our forests" - including nonsense like this:

They (the forests) could be auctioned and fenced off, run down, logged or turned into golf courses and holiday villages.

I really don't know where to start with this but it's clear written by someone who has never been anywhere near managing a forest - and I really can see why anyone would buy something just to have it "run down".

Logging? Yes dears, that's what the Forestry Commission do now with the woodlands it owns - it's a commercial forest operator. It's also a regulator which really isn't a good idea and explains why 90% of the Commission's woods are conifer monoculture of little landscape benefit, limited in its contribution to biodiversity and rather lacking in amenity or leisure value.

Golf courses? Good grief - a new game of 'golf in the wood', now that's an idea! Why would a developer go to all the expense - not to mention the planning problems - of clearing a whole forest so as to build a golf course when there's plenty of good open land near towns where they can be developed? Makes no sense - a bit like the suggestion!

Holiday villages! A what exactly is the problem with holiday villages? Don't we already have holiday facilities so people can stay in the woods and enjoy them? Isn't this something to be encouraged? In fact what's this - a business called "Forest Holidays" that 'operates entirely within the Forestry Commission Estate'! Wow! Holiday villages!

This entire campaign is unhelpful - not because the forests should necessarily be sold but because it is founded on misinformation and ignorance rather than presenting any rational discussion about the future of the Forestry Commission's English Estates. There are a few such as Julian Dobson who try to get beyond the slogans to suggest possible ways forward:

It doesn’t necessarily follow that the Forestry Commission or the government are the only people who should own woodlands. Indeed, the idea that some of our best-loved forests should be owned in perpetuity by the National Trust is attractive because it reduces the risk of future sales. But - as I argued in a paper for The Mersey Forest published this month - we can’t expect local communities to take over stewardship of our woodlands without help and investment. The need is for a greater emphasis on the community forests programme alongside a clear recognition by government that our woodlands are a resource to be looked after for generations to come.

Julian's focus is on the amenity value of woodland and especially the development of woodland in and near urban areas. But there is a further discussion to be had - that of balancing the different options and opportunities presented by the variety of wood and forest. I see no reason why the upland commercial woodland can't be sold - so long as access rights are guaranteed (and this should, for these forests, extend to include cycles and horses). For the less commercial forests, we need a debate about management, leisure, amenity and different potential uses set alongside an examination of options for future ownership.

It seems to me that the government is consulting with a three-year-old - the opponents simply scream "save our forests" rather than taking the opportunity to ask whether the proposed 'sell-off' actually presents opportunities for trusts, co-operatives and others to secure the woodland for public use and enjoyment.

I find this rather disappointing.

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NEF and George's medicine - more evidence-free economics from the masters...

George plans his spending cuts

Now as you know dear readers I am an especial fan of the New Economics Foundation. Their brand of greeny-greeny, evidence-free economics with a twist of Keynesian nonsense, is just what I need to reassure me that my ever so slightly grumpy view of economics is right.

Today – courtesy of New Start – I stumbled across the opinion of this august body of mythic thinkers on the “cuts”.

Andrew Simms, policy director at the New Economics Foundation, said: ‘George Osborne is set to apply the economic equivalent of medieval medicine to the UK economy. Unfortunately bloodletting an already ailing patient is unlikely to improve their progress. To strengthen the economy and make it more resilient and fit for current challenges, we need to invest comprehensively in new low carbon infrastructure. This modern medicine will improve security, create jobs and boost the economy.’

Now leaving aside the image of George Osborne as some form of hedge witch administering a tincture of wood sorrel and elderberry to the ailing British economy, I am struck by the transference implicit in NEF’s argument. For it is the green economists who prescribe medieval remedies for modern ailments – indeed, NEF’s economic ideas has about as much link to the science of economics as homeopathy does to the effective practice of medicine.

After all this is the organisation that thinks we can get by with only working three days a week (I vaguely remember those days – happy ones for an eleven year old but less happy for older folk), who think that jobs aren’t created by enterprise but by the magic of public sector intervention and who persist in misunderstanding the Keynesian multiplier. I could go on to talk about how NEF believe there’s another credit crunch on its way and how Britain should be more like poverty stricken Ecuador. All in all a fine bunch of pseudo-economists (remember this is “new” economics so it can ignore nearly 200 years of evidence, research and study).

When we get to the crunch, NEF are simply a bunch of socialists and peddle the same tired (and disproven) solutions as all the socialists of past times. Despite its low-carbon tinge NEF’s economics is more red than green and its application would represent a huge leap backwards to a protectionist, interfering, over-taxed, over-regulated and producer dominated economy. The sort of economy that nearly ruined Britain in the 1970s. That NEF want investment to be in a “low carbon infrastructure” is irrelevant – this is just repeated the disasters of socialist capital investment led, import substitution strategies.

But then, like Gordon and the Labour Party, NEF have a money tree…

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Bus travel not stressful? Who're you trying to kid?

Now I don’t claim to be as clever as the Goldacre chap when it comes to squirreling out dodgy research (although it’s interesting to note that Ben never strays into the drinking, smoking and eating field – that’s pinko Guardianistas for you) but this research worries me.

Driving a car is more stressful than going by bus, says new research

The author, Dr David Lewis is the media’s favourite ‘neuropsychologist’ and conducts lots of clever experiments designed to advise the owners of big brands on psychological stuff. And some of his work on brands and advertising response is very good and very interesting. His latest piece of research is paid for by folk called “Greener Journeys” who are:

…largely funded by major bus companies and so there are no studies on the stress levels of driving compared with travelling by train.

Dr Lewis did this to come up with his contention:

Dr Lewis, from the University of Sussex, conducted an experiment in which the heart rate and Electro-Dermal Response (EDR) of 30 commuters was measured when taking identical or similar journeys by car as a driver and by bus as a passenger.

So just thirty folk – that’s a pretty representative sample! And even if we aren’t concerned with representativeness, can we really be so sure that the results from just thirty people are enough to prove the point? I know Greener Journeys think so - but they just want to make more money from bus travellers rather than to save the planet or to reduce my stress levels.

So here are a few questions for Dr Lewis:

1. Have you repeated and replicated your test across a range of different locations, times, weather conditions and demographics?

2. Can you provide any evidence that modest short term increases in stress (which is what he is measuring) are actually a health risk?

3. Have you tested the stress levels when the bus is late or cancelled, it’s peeing down with rain and some women is giving you grief for smoking at the bus stop?

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