August 2010

Umm, well, tiny problem here….

City authorities in Moscow have announced a ban on the sale of spirits between 10pm and 10am, in the most recent of a series of measures designed to break the country\’s drinking habit.


Russia has since increased excise on beer, raised the minimum price of a bottle of vodka to 89 roubles (£1.87) and announced plans to cut sales at kiosks.


An estimated 51% of production is on the black market, with factories running illegal night shifts and huge supplies of moonshine called samogon distilled in villages, where it acts as a second currency.

Err, anyone want to try and outline the cause and effect thing here?


Gaaah, I thought we\’d managed to put these lying bastards back in their box:

Despite four decades of equal pay legislation, Britain has one of the worst gender gaps in Europe. Women in the UK are paid 79% of male rates, while across the 27 countries of the European Union the figure is 82%, according to a report earlier this year from Eurobarometer.

Godammit, we\’ve been shouting about this enough. You can only get to 21% gender pay gaps if you include the part time pay gap and the gender pay gap together…..or if you play tricks with mean and median, which the ONS says you mustn\’t do.

But since more women than men work part time this isn\’t really comparing like with like. Further, Britain has more part time working (ie, a more flexible labour market, people being able to do what they\’d like to do) than many or most other EU countries.

So, given that we have more people working part time and given that we are measuring both the part time and gender pay gaps here, of course the gap will be larger in the UK than elsewhere.


Women in the Midlands fare the worst, taking home £10,434 less than men, while those in the north-east fare the best, where the gap is smallest at £8,955.

Pay in general in the NE is lower meaning that the same percentage difference would be smaller as measured in cash.

Err, no Tracy

In Britain, that’s an average of 12.7 heterosexual partners over a lifetime, compared with just 6.5 for women. Except that it is logistically impossible for the average man to have more partners than the average woman.

Depends which average we\’re talking about: entirely possible for 1% of women to have hundreds or even thousands of sexual contacts and 99 % to have few.

We even have a name for those who make their living doing so: prostitutes.

I\’ve said this before

China\’s manufacturing wages have vaulted from around $1,000 annually 10 years ago, to $3,900 last year. Pay in the industrial hubs of the Pearl River and Yangtze River deltas are much higher and likely to rise further after a wave of industrial disputes at Foxconn, Honda, Toyota, and Omron.

Wages in China are low, this is true. We\’d like the Chinese (as with all poor people) to be richer than they are.

A fourfold increase in wages in only a decade looks like whatever system it is we\’re using to get there is working.

As, indeed, Marx himself would have noted would happen. If average productivity rises then wages will rise: for capitalists will be competing with each other to capture the profits that can be made from that newly more productive labour. The only time this won\’t happen is if the capitalists are able to become monopoly purchasers (monopsonists) of that labour and that\’s what Marx (and of course many other economists) have been warning about since.

We should also upgrade that workers\’ pay number. Things cost different amounts in different places. So PPP exchange rates give us the difference in living standards rather than market exchange rates which give us just the difference in actual cash.

At market rate China\’s GDP is about $5 trillion, at PPP more like $9 trillion (close enough for our purposes). So multiply those wages by 180% to get an idea of living standards. $7,000 a year then. About half a full time US minimum wage.

Certainly not a King\’s Ransom by any means but it\’s quite a lot higher than we\’re usually le to believe and more than that, it\’s moving in the right direction.

And finally to the most important point:

Associated with this problem is the misunderstanding of what international trade should do to wage rates. It is a fact that some Bangladeshi apparel factories manage to achieve labor productivity close to half those of comparable installations in the United States, although overall Bangladeshi manufacturing productivity is probably only about 5 percent of the US level. Non-economists find it extremely disturbing and puzzling that wages in those productive factories are only 10 percent of US standards.

Finally, and most importantly, it is not obvious to non-economists that wages are endogenous. Someone like Goldsmith looks at Vietnam and asks, \”what would happen if people who work for such low wages manage to achieve Western productivity?\” The economist\’s answer is, \”if they achieve Western productivity, they will be paid Western wages\” — as has in fact happened in Japan.

It just ain\’t a race to the bottom. As those entire economies become in general and on average as productive in their use of labour as we are then the wage level will rise, in general and on average, to be the same as ours.

It\’s a race to the top and ain\’t it just great?


You’re wrong

Tax is the price for living in a democracy

The services are free

Even by the standards of our favourite retired accountant that\’s bizzare.

So a US citizen living in England does not have the vote, is not part of the Demos, therefore they don\’t have to pay taxes. But they get to use the NHS n\’all for free?

People who are resident but non domiciled should not be paying UK tax?

Isn\’t that entirely different from what he keeps telling us should happen?

Inadequate securitisation

One of the things we\’re told about the recent financial troubles is that all of this securitisation was one of the causes of it.

People made loans and then flogged them off as bonds instead of hanging on to said loans until maturity.

However, there\’s one thing that rather militates against this story.

No, not that securitisation, flogging off the loans, led to lower quality loans being made (that\’s a slightly different question) but that too many people flogged off said loans. Actually, the problem in the financial markets was that not enough people flogged off said loans.

When the music stopped and the dancers started looking around at the inadequate number of chairs left, some still had great steaming piles of those securitised loans on their books. That\’s why those banks fell over. If they had really been sold on then the economic loss would have been the same of course: but the financial system wouldn\’t have frozen over. It would have been private investors (few of them though), insurance companies, pension funds, which took the hit of losing…but the losses would have been rather less as the prices were, during the crash, deeply depressed by the fact that every bank was trying to unload at the same time.

This isn\’t to say that such a result would have been perfect of course: but if the banks really had flogged on those securitised loans, as they were supposed to, we\’d have had a recession, yes, a housing collapse, yes, but not a financial system collapse. And it\’s that last that marks out recent events as being different from previous asset bubble collapses.

So we can argue that it was insufficient securitisation, assuming that there\’s going to be any bonds at all rather than direct loans held to maturity, which caused the problems.

OK, that\’s all past stuff: but it has great relevance to sovereign debts problems here in Europe.

Arguably, places like Greece, Portugal, Spain, should get out of the euro, devalue, default (even if only partially, by redenominating into the new local currencies) and then get on with life.

But they cannot be allowed to do that: because it\’s the banks which hold great wodges of this debt that they\’ll be defaulting upon. So the entire European banking system (I exaggerate) will fall over and that cost would be far greater than having to stump up a trillion or two to help out the PIIGS.

However, if the banks had not bought and held the bonds but had, as a proper securitised market would ensure, simply facilitated the trade of those bonds onto long term investors then we wouldn\’t have this problem. Yes, of course, we\’d still have the same losses on defaulted bonds, losses which would need to be absorbed somewhere, but we wouldn\’t have a banking system with the potential to implode.

Which leads to a policy prescription. We should be insisting on legally binding full securitisation. No bank (our definition of a bank here being someone with a banking licence, thus someone able to tap deposit protection schemes, central bank liquidity windows etc) should be allowed to hold any portion of a loan that they or any other such bank has originated. All such loans must be turned into bonds which must find a home with terminal investors (who can then go on and trade them to their hearts\’ content).

We\’re not going to stop asset bubbles or incontinent governments in the future after all: but we might be able to stop such bringing down the entire financial structure.

So, what are the powers that be doing at present? Yup, the EU and others are insisting that any originator of a loan must hold 5% of it to maturity. They\’re actually insisting that banks must do in the future what has just caused the last fuck up.

It\’s said of generals that they\’re always ready to fight the last war. It takes politicians to insist that we\’ll be ready to lose the last one.

Idiomatic translation

\”My niche is that not only can I show British culture in an unfamiliar way, but I can do the same with the language. I can show how absurd English idioms sound to the Italian ear.\” These include \”Bob\’s your uncle\”, which apparently derives from the nepotistic practices of 1880s PM Robert Cecil. Palmieri proposes an Italian alternative: \”Silvio fucked your daughter.\” He also reveals that the Italian version of \”Have your cake and eat it\” is: \”Have your wife drunk and the bottle still full.\”

Good grief, George gets it!

Well, one bit anyway.

But as if to show that they haven\’t really thought this through, they\’ve decided to supplement the ETS belt with braces and suspenders: as well as creating a functioning emissions trading system, they intend to maintain feed-in tariffs and the renewables obligation system. This could be an insurance policy, in case a sensible ETS doesn\’t materialise. But if it does, they will end up with three separate and incompatible systems.

Sorry, make that four. Like the renewables obligation, the proposed emissions performance standard – forcing power stations to produce no more than a certain amount of carbon – is a good idea in its own right, but it would become redundant if the ETS really kicks in. Which policy do they intend to prioritise?

If you have a functional cap and trade system (and yes, that does mean auctioning all permits rather than giving them away) then you don\’t either need or want any of the other systems.

Similarly, if you had a proper carbon tax (say, James Hansen\’s idea of a tax at the wellhead or mine) then you don\’t need a cap and trade system: or any of the rest of the things either.

You want to either limit or tax carbon once and once only, then leave the rest of the economy alone to work out how to deal with that limit or tax. That\’s actually the point of doing it this way, of making sure that we use the flexibility and local knowledge of the market rather than the people being stupid in offices which is regulation and bureaucracy.

There are a couple of things he\’s still got wrong though:

Possibly the most important measure it contains is the commitment to create \”a floor price for carbon,

No, we don\’t want a floor price for carbon. Absolutely not. As long as we\’ve got the cap limit that everyone must adhere to then we\’re over joyed, delighted, if the permit price is low. 1 cent a tonne would do nicely. For the cap limits the emissions and the permit price is the cost of that limit. A low permit price means that it\’s costing us less than we thought it would to reduce emissions: what a nice surprise!

To argue for a high permit price is to completely misunderstand cap and trade. A high carbon tax, perhaps, because it\’s the tax which causes the behaviour change. But here it\’s the cap that does that and we\’d be surprised but delighted if the price of conforming to the cap were low.

The cancellation of the third runway at Heathrow and the refusal of additional runways at Gatwick and Stansted is a definite improvement.

It would have been even more cheering if the agreement had said no new airport space in the UK.

Again no: Aviation isn\’t (yet, although it probably will be) subject to the cap. But we do have the correct carbon tax on it (APD is at the right levels). So, as with his first point, we\’re done, finished. We only have to either cap or price in carbon once, we don\’t have to do that and then have further bureaucratic regulation.

Strange that George can see this in one area but not in all really.

Not so corrupt then

Rod Blagojevich, the former Illinois governor, has been found guilty of just one of 24 political corruption charges.

Well sorta, except he wasn\’t aqctually found guilty of any political corruption charges:

Blagojevich was found guilty of lying to the FBI and faces up to five years in jail.

That\’s one of those catch all charges that the Americans love to add.

Lying to the court is perjury, that\’s very bad. Lying to the coppers who have come to arrest you, that\’s, well, I\’m not sure that it\’s something we ever prosecute is it? It\’s pretty much assumed that someone at risk of being sent away for 30 years or more is going to shade the truth in what he says to those attempting to put him away for 30 years, isn\’t it?

This is interesting

Noodling around about something else I found out what the national income tax rates are in Denmark.

For such a highly taxed country they seem just fine really.

After the personal allowance (about £5k) the national income tax is 3.76%.

Yes, that\’s 3.76%, not 37.6%.

Over around £40,000 that national income tax rate goes all the way up to 15%.

I think we could live with those sorts of tax rates, couldn\’t we?

Yes, there\’s also something akin to national insurance, at 8%.

Sweden\’s system isn\’t all that different either (they add in a 25% national income tax rate).

So, err, why don\’t we become more like the Nordics?

The kicker is, of course, that in both countries there are quite high municipal amd county taxes on income: some 22-35% depending.

So the total tax rate is indeed high….but the great bulk of the money is raised locally and spent locally: the national government seems only to be taxing for what the national government must do rather than centralising everything, both revenue collection and disbursement of the funds.

While I\’m not all that keen on such high tax rates, the basic idea of the system seems like a great idea to me. Raise locally what is to be spent locally, raise nationally only that which must be spent nationally.

I know Polly\’s shouted about the iniquity of local income taxes before but why don\’t we be more like the Nordics?

That\’s an interesting question Ritchie

On the subject of Barclay\’s being fined for handling transactions with people/countries on the US no trade list:

Does banking have any ethics at all?


Barclays is understood to have voluntarily disclosed information on the dealings to the authorities after it became aware it might have broken sanctions.

As well as co-operating with the US investigation, the bank ran an internal inquiry into transactions conducted between January 2000 and July 2007.

This saw more than 175 current and former Barclays employees interviewed and in excess of 100m records examined.

Disclosures from Barclays\’ own investigation led to the bank being charged by the US Department of Justice with one count of violating the International Emergency Powers Act and another of trading with the enemy.

I dunno about you but I\’d take \’fessin\’ up to having been a naughty boy as being ethical, yes.

No, no, we can do worse than this

A couple of years ago I got a short-lived, but reasonably lucrative gig writing jokes for a mobile phone company. I know this sounds amazingly glamorous, but in reality meant a lot of staring out of windows, eating biscuits and creating puns so bad they physically hurt to put into words on the screen.

The constraints were simple, the joke had to be of twitter-esque length in characters (a bit less, actually), and not be too rude. Sounds easy eh? It wasn’t. Mostly it was making up horrible puns, or tweaking old jokes into a usable format. I soon realised however that they weren’t interested in quality, they wanted groaners.

He has a list of those they did in fact take.

So, can we do worse than that list?

And if we can, who do we sell them to?

On the economic rise of China

Yes, number two economy now. However, the important number is not the aggregate one, but the per capita one. And yes, we should also adjust for PPP, as whjat we really are interested in is living standards and things do cost different amounts in different places (as a trivial example, and iPod costs roughly the same everywhere but a cleaner is much, much, cheaper in a poor country).

And the last time the U.S. had per-capita GDP of $6,567 was back in 1932.

If it hadn\’t been for Mao, how far would China have got do you think? 1950? 1960? 1980 even?

On charitable giving


And so to a question that vexes every vicar addressing a congregation under a leaky church roof, all community groups peering into a long dark tunnel of grant cuts: how do you get the sods to give? To reach into those bulging pockets and hand over their shrapnel?

There\’s more to this problem than the loneliness of the long-distance fete-organiser. For one thing, it lies behind those gripes about the west\’s tight-fisted response to the floods in Pakistan. And the answer is also directly relevant to David Cameron and his ministers.

One way of characterising Cameron\’s grand plan for plugging the hole left by its spending cuts, and for improving schools and other public services is this: just add compassion. In those areas where the state is being cut back, the new government is gambling, fellow-feeling will fill the gap. Or, as now-culture secretary Jeremy Hunt put it to this paper before the election: \”We want to persuade people that giving is not just a duty, but one of life\’s pleasures. It chimes with David Cameron\’s ideas on social responsibility: if you have been successful, you should give something back.\”

When Tory ministers sing such lines, they don\’t just mean endowing a museum with a swanky extra wing, but also setting up a new school or helping to run local amenities. You might call this the Cameron compassion strategy – and a lot is riding on its success.

It depends what you mean by \”success\” really.

Let\’s assume that we really do want those things which people want to be funded to be funded….and we don\’t want those things which people do not want to be funded to be funded. At the one end we\’ve got the yes, of course, absolutely, we want the starving child to be fed, at the other perhaps there\’s not quite so much support for the outreach diversity advisor for one legged lesbian dancers (please do insert your own jocular prejudices here).

So, how would we define \”success\”?

We could say that because even only some people want the ODAfoLLD to be funded, then it is only successful if all of these desires, the entire spectrum are funded.

Another way would be to try and use some system of allowing people to decide what they would fund. Instead of handing over a wodge of cash for the insiders to allocate, people decide upon and allocate their own cash.

If sufficient people decide to fund the starving children, all well and good, just as if sufficient people decide to fund the ODAfoLLD. Excellent, we have revealed preferences, en masse, the population wishes both the kiddies and the advisor to be funded.

However, it might be that we\’re all entirely selfish bastards and that neither get funded….or more likely, that the babbies get fed and the ODAfoLLD is sent hopping.

But any and all of these results can be defined as a \”success\”. Our desire is to find out what people will willingly pay for: being willing to pay for it being the sign that it increases your utility, increases your happiness, by paying for it. So a system which allows people, by allocating their own money, to express what does maximise their personal utility will maximise said utility, make us as a population as happy as we can be.

Which, if we\’re honest about it, is really a rather successful outcome, isn\’t it?

Meaning that the failure of someone\’s pet scheme to get funding is just as much a success as the success of someone else\’s at getting funding: both the failure and the success increase human happiness in aggregate.

Nice piece of research

I\’m sure this will be all over the papers today:

During their childhood one in every 27 children – fewer than the average class size – will be reported as killed or injured in a road accident, the report said.

There\’s nothing actually wrong with the report itself.

However, it\’s only when you get to the notes to the press release (and thus perhaps something that journos won\’t read) that you find one of the truly important facts:

However, children are still less likely to be injured on the roads than adults. The average annual casualty rate for the population as a whole is 1 in 231, although this varies around the country and will be subject of a further report in the coming months.

As the report and the press release tell us, the average for children is one in 427.

Nowhere is this put into context: the risk of death or injury in a road accident for children is roughly half that for the population as a whole (and even lower that that for children as opposed to that part of the population which is not children).

So, far from the way the newspaper piece has been written, that we\’re failing children dismally by failing to protect them from road accidents, we do seem to be doing a pretty good job of it actually.

Oh, and the other important point? Yes, this is all children injured in road accidents. Passengers in cars (40% of the total) included.

Now, as I say, there\’s nothing wrong with the research itself. Nothing wrong with the idea of the research either. But the art of successfully releasing research is to get the newspaper reports slanted your way….whatever way that happens to be. Which means writing up the press release, briefing the journos, the way you want them briefed (I\’ve no longer got access to the Press Association listing of stories so I can\’t check that this was the route but a quick call to the desk to find out who is writing up the story can do wonders in slanting the story your way).

\”One child in every class\” will be injured in a road accident is one way. \”Half as many children injured as adults\” is another. \”Risk lower for children\” a third.

Not having looked at any other other papers yet I don\’t know how they\’ve all run it….but I\’d be willing to offer very good odds that only version one of the story has been printed.

Even that wouldn\’t really be a problem except that it\’s likley to become on of those \”facts\” which everyone knows and Therefore Something Must Be Done….when in fact we already seem to be doing quite a lot.

To my surprise, this isn\’t actually from a fake charity. Rather, it\’s an advertisement for a (not for profit) company which analyses patterns of traffic accidents.

New Roman Polanski film soon

A 15-year-old schoolgirl has become France\’s hottest literary property after writing a book about a teenager who loses her virginity at 14.

He\’s bidding for the film rights, of course, he just can\’t decide whether to direct or take the leading male role himself.