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Tim Worstall

Cameron\’s an ignorant friggin\’ spaz

Cells known as “drunk tanks” which detain inebriated people until they sober up could be introduced to towns to tackle the nation’s growing alcohol problem, David Cameron signals on Wednesday.

Spray them with cold water while we\’re at it and we can have the full Soviet experience.

Drunk tanks, popular in America, are prisons used to “house” drunk people overnight until they sober up, avoiding the need for them to be formally arrested and charged or taken to hospital.

Twats.

If someone has committed a crime for which they can be arrested then they should be arrested. If they\’re ill enough to need to go to hospital then they should be taken to hospital.

And if they\’re simply drunk, not drunk enough to be arrested and not drunk enough to need a hospital then what the fuck are you doing locking them up?

Yes it is a free country yes we are allowed to get drunk and no you can\’t lock us up for doing so.

I\’d give this perhaps 45 minutes before we get the first court cases about unjust imprisonment.

Dontcha just love nef?

Their report on fishing.

They note that overfishing is a dreadful waste of resources.

They are correct.

They note that certain parts of the world have overcome this problem.

They are correct.

They note that the EU has not because it\’s all run by idiot bureaucrats and politicians.

They are correct.

Their solution? More bureaucrats and politicians.

They fail to note that those places which have solved this problem have done so by insisting upon private ownership of the right to fish a particular stock. Essentially, moving fishing from being a form of hunting to being a form of farming.

It\’s a classic Commons Problem one solved by, as Hardin said they could be, allocation of private property rights. But this being the nef they\’d never actually say that because, well, you know, property is theft, innit?

Some people really would have best been left as stains on the bedsheet.

Ms. Millar and logic

\”Schools are being cajoled and bullied out of the maintained sector based on a divisive and false prospectus, when the real English success story is the improvement, especially in deprived areas, of thousands of maintained schools.\”

Are you quite sure you actually meant to say this?

For what you\’ve said is that as maintained schools are opened to competition from non-maintained schools then maintained schools improve.

Which rather seems to argue in favour of opening maintained schools to competition from non-maintained schools, doesn\’t it?

This just in from Polly

If David Cameron really does bring in tax breaks for nannies and domestic cleaners, the dead-weight cost will be so phenomenal before it creates any extra childcare that Labour can start by taking that money back to spend on making universal childcare a reality.

Yes, Polly has just said that reducing taxation increases the deadweight cost of taxation.

Ho hum.

The problem with Oxfam\’s social justice paper: lack of ambition

So George tells us all about Oxfam\’s pencil sketch of where we are and where we should be in balancing social justice and matters environmental.

We have environmental limits to what we can do but we also have social justice limitations to what we must do. The two can conflict.

I\’ve no real problem with the basic outline of that argument. I may well disagree with the limits that they insist are there on hte environmental side but leave that aside. Where I really disagree is here:

Bringing everyone above the global absolute poverty line ($1.25 a day) would need just 0.2% of global income.

Who in buggery has that as the limit to their aspirations?

I certainly don\’t think that managing to drag the last remnants of humanity up to the living standards of a medieval peasant is the end of the story. I would much rather we drag that last remnant of humanity up to the sort of living standards that we pinkish people enjoy. You know, that $100 a day sort of lifestyle, not the $1.25 one.

Tehre are those who say this cannot be done: at which point I say try reading your own reports matey. The SRES, the economic models upon which the entire IPCC, climate change is going to boil Flipper, model is built upon.

In there you will see that if we continue down this globalised market path, the A1 family, and we largely decarbonise our energy production system (and note, this particular scenario in the family excludes specific measures like carbon taxes and bloody windmills, relying only upon simple technological advance) as A1T supposes, then we both beat climate change and we also have the current poor of this world (OK, their grandchildren, given that we\’re talking about 2100) living at the same position high on the hog as USians in 1990.

Now that\’s an ambition that beats that $1.25 a day, isn\’t it?

And the only limit to getting there, the only environmental limit, is that carbon in the atmosphere thing. Solve that problem and we can do it: we don\’t face systematic limits from water availability, metals, energy, fertilisers, land, food or anything else.

Incredible shock at The Guardian!

Are stock markets stupid?

The crisis on the eurozone has not stopped the FTSE, Cac and Dax climbing for most of the past three months

The shock being that they actually manage to get to the right answer. Stock markets measure the prospect of profits for large companies, not the general health of the wider economy.

Wonders will never cease, eh?

Young people are socialists

How absolutely stunningly amazing!

In December, a poll by the Pew Research Center found support for socialism now outweighs support for capitalism among a younger generation of Americans.

That the young are more socialist than the general population is hardly a surprise really, is it?

Fortunately a sufficiently large number of them manage to grow up as they age.

So Rangers and Portsmouth go bust. Good.

Because this is the way that capitalism deals with screw ups.

We\’ll have all sorts coming out of the woodwork claiming that this shows what is wrong with contemporary society etc. And they may well be right.

But what they\’ll be missing in their calls for changes in the law, for community owned football clubs, for mutuals, for the crucifixion of tax dodgers and all the rest is that what we\’re seeing here is the system dealing with a couple of screw ups.

Continuously lose money and not have a sugar daddy to cover the losses? Go bust.

This isn\’t therefore evidence of how the system is screwed up. This is evidence of the system dealing with screw ups.

No Ed, that wasn\’t the 30s mistake

I fear what\’s happening here is that the world is making the 1930s mistake and the ratings agencies are partly responsible for this.

Even though it is clear in Greece, in Ireland, in other countries, in Britain too (that) this austerity isn\’t working, the message is \’Plough on, dig a deeper hole, carry on with an austerity that is failing\’.

You really need to read some Freidman.

The 30s mistake was not austerity. Because there really wasn\’t all that much austerity in the 30s. In the UK the big squeeze was in the 20s (the Geddes Axe) and in the US Hoover doubled Federal spending and blew out the budget deficit.

The mistakes in the 30s were monetary, not fiscal. The UK didn\’t have a horrendous slump in the 30s because we came off the gold standard and thus fixed that monetary problem. The US didn\’t. The Fed allowed the money supply to collapse.

And as you\’ll have noticed, what with QE and the propping up of the banks, we\’re just not making the same mistakes in the 00/10s as were made in the 30s.

Where the situation really is bad, Greece, Portugal, Spain etc, they really are making the mistakes of the 30s. They\’re allowing the money supply to fall and there\’s sod all they can do about it because they\’re in the euro.

All of this leaves room for the argument that fiscal expansion will make things better. Happy, for the moment, to leave room for that argument. But given that the mistakes of the 30s were monetary let\’s make sure we don\’t make monetary mistakes right now, eh?

Economics in Liberal Conspiracy land

Top flight football players also, I suspect, have a tendency to spend a larger proportion of their income, unlike bankers and investors, who are, I would bet, far more likely to hoard their cash and thus deprive society of a vital resource.

We have a word for this \”hoarding of a vital resource\”. It\’s called \”savings\”. Out of which we do \”investments\”.

Sigh.

Ritchie\’s quite lovely argument about why the NHS must be a monopoly

There are, without doubt, certain conditions that must exist before any market can operate, even imperfectly. The first condition is that there have to be willing buyers for the products. Without such buyers there is no chance of selling products, let alone at a profit. Second, if abuse is to be avoided as a result of monopoly profits being made there has to be competition in the marketplace.  If there were, for example, to be only one commercial supplier of an essential service, such as healthcare, then the opportunity for price abuse would be enormous.  This is especially true when purchases of healthcare frequently arise in situations of high stress when the opportunity for finding an alternative supplier is limited (or to put it another way, the purchaser is almost invariably at a disadvantage to the supplier at the point when they must buy because they are in pain and far from being able to make an objective decision).  Only competition and informed decision-making can, to some extent, limit that opportunity for abuse of the consumer and even then only if what is called oligopolistic behaviour can be avoided.

Because monopoly is bad therefore we must have a monopoly.

Genius, eh? But there\’s more!

However, this means that to be effective competition is dependent upon all market participants always working at less than full capacity, which means that competitive markets must always (whatever the theoreticians may say) be inherently inefficient in practice because all participants in the market must be underutilising the resources that are available to them if the consumer is to get the choice that they desire.

He seems to miss the implication of this. Which is that if competition is inevitably efficient (and there\’s no reason at all in his logic why such applies only to health care) then we should obviously do away with competition altogether.

However, we actually have evidence that, over time, competition is not inefficient. We in fact have very good evidence that competition is efficient in fact. And what is that evidence called?

The 20 th century.

Take as our example the non market economies versus the market economies. Efficiency is an increase in total factor productivity (yes, this is what efficiency means). As Paul Krugman points out, the decidedly non-market economy of the Soviet Union managed not to increase total factor productivity at all during its entire ghastly existence. All growth came from the consumption of more resources.

During the same century some 80% of growth in the market economies came from tfp improvements, only 20% from increased resource use.

The largest natural experiment in economics therefore shows that markets are not inefficient. Quite the contrary, they are efficient, much more so than monopolies.

The Murphmeister is therefore spouting nonsense. Again. And it\’s for the same old reason. He\’s trying to do all this economics stuff without knowing what other people have done before him in this economics stuff. He doesn\’t realise, for he\’s ignorant of the subject, that his arguments have been considered, then rejected, already.

Or, if you want it simply put, in 1963 Trabant introduced the 601. About the same time that BMW introduced the 3200 CS. By 1991 the Trabant was still the 601. BMW had moved on just a tad to to the E36.

I\’m sure we\’d all love to have such a stunning rate of innovation in health care as well, wouldn\’t we? State planned monopoly as in the Trabbi, competitive markets as with the BMW?

How very weird from Larry Elliott

Now let\’s look at the economy. Initially, the challenge came from the United States and Germany, but after the second world war the UK was also eclipsed in terms of growth rates and living standards by France, Italy and the Scandinavian nations. More recently, the threat has come from the bigger emerging economies of India and China.

Warning signs of imminent decline have too often been ignored and even when they have been heeded, wrong lessons have been learned.

Who actually cares about relative decline? It\’s absolute levels that matter.

Relative decline comes from the way in which cuntries previously following insane Marxist prescriptions are now joining us in the sunlit uplands of classical liberalism (perhaps overstating things there but still….). This is good isn\’t it? Our fellow humans are gaining better lives: no, not at our expense at all, simply by stopping doing stupid things.

Indeed, we get richer precisely because they do so.

So where\’s the beef? Do I or you care that Britain is 5th, 7 th or 15th in the international league tables for standards of living? Or should we care that living standards are as good as we can make them? That is, we should care about absolute riches, not relative?

State annuities: sounds like a nice problem in the making

Lord Myners\’ master plan is for the Government to get involved. People would buy their annuity from the Treasury\’s Debt Management Office (DMO), which sells gilts for the Government. The DMO would insure the risk and provide an annuity through National Savings & Investments, another government agency. The pension payments would be made through the Post Office.

How excellent.

We\’ve spent decades trying to get people to save for their pensions.

Now, at the last gasp, at the vinegar stroke, we\’re going to load all of the risks and liabilities of those pensions onto the State.

And oh my God doesn\’t it leave room for some future Chancellor to play games with the payouts?

British man gives birth

A man who used to be a woman has become Britain\’s first \”male mother\” by giving birth to a son.

The definition of him as a man is subject to a possible correction.

Although he has legally changed his gender to male, the man in question was able to give birth last year because his womb was not removed during the original sex change procedure.

It is possible for transgender men who were born women, who still have functioning ovaries and a uterus, to become pregnant while still identifying and living as men.

We have a word for those with uterus, ovaries, fallopian tubes and so on.

Woman.

What the laws say, what the individual says, all very interesting from a sociological point of view. And I\’m certainly perfectly happy with whatever decision anyone wants to come to over such things. No skin off my nose after all.

But it isn\’t just pendantry to insist that at some fundamental level this is not a man that has just given birth.

Oh dear Professor Delong, oh dear

No, I\’m sorry, this does not work.

Could she possibly be right? Is the U.S. tax system unusually progressive?

That is an interesting question. And this is the wrong way to answer it:

Looks to me like only 6 OECD countries have less progressive systems, and 21 OECD countries have more progressive systems…

Because the question is about the tax system. The answer is about the tax and benefits system.

The US federal tax system is indeed more progressive than the tax system of many, if not most, other OECD countries. Quite simply because the federal tax system includes very little in the way of consumption taxes (such as a VAT, a regressive tax) and concentrates almost entirely (things like the small gas tax aside) upon incomes.

Adding in the State and local tax systems makes, well, actually, it\’s difficult to tell precisely, because there are income taxes in some places, not in others, but probably makes the system less progressive because that\’s where almost all of the consumption taxes are.

But that tax system is still more progressive than in nearly all other OECD countries.

The entire tax and benefit system, on the other hand, is markedly less progressive in the US than it is in most other OECD countries. For the really quite simple reason that the US system as a whole redistributes much less income than those other countries. Govt as a whole in the US is 30% ish (very rough figure) of the economy, in other places it\’s 40-50% of it. And that difference isn\’t really in the goods and services that government provides. Similar amounts as a portion of GDP are spent on free at the point of consumption education, health care (yes, really, US government health care spending is of a similar order as total health care spending in many other places) and more on the military and possibly the criminal justice system.

The difference is the amount of the national income which is redistributed from rich to poor through the benefits system.

Other places have more progressive systems as a whole because they tax more and redistribute more: not because the tax system itself is more progressive.

Indeed, there\’s a school of thought that insists that in order to be able to have that greater redistribution, that more progressive system as a whole, it is necessary to have a less progressive tax system. For the only way you can raise enough cash, without entirely killing growth, to do the redistributing is by taxing consumption. Which is normally regressive.

Slightly unfortunate premise about the Black Scholes equation

It was the holy grail of investors. The Black-Scholes equation, brainchild of economists Fischer Black and Myron Scholes, provided a rational way to price a financial contract when it still had time to run. It was like buying or selling a bet on a horse, halfway through the race. It opened up a new world of ever more complex investments, blossoming into a gigantic global industry. But when the sub-prime mortgage market turned sour, the darling of the financial markets became the Black Hole equation, sucking money out of the universe in an unending stream.

And because the derivatives markets were based on Black Scholes and we had a financial crisis, thus the financial crisis came from the use (more accurately, misuse)  of Black Scholes.

Except, well, the financial crisis wasn\’t a crisis in derivatives. It was a crisis in housing finance and the securitization of said mortgages. Which aren\’t to the first order, derivatives and which aren\’t priced using Black Scholes.

Ian Stewart is emeritus professor of mathematics at the University of Warwick. His new book 17 Equations That Changed the World is published by Profile (£15.99)

The maths is fine. It\’s the knowledge of the financial world that\’s a little off.

Even where the crisis was arguably about derivatives (ie, where the value of x depends upon the underlying value of y), credit default swaps and AIG, the problem wasn\’t that they had used B-S to value them. It was that they used bull shit to do so and simply never considered the possibility of a fall in the value of y. That is, they didn\’t value them as options, but as insurance contracts that they would never have to pay out on.