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Tim Worstall

Dim students

The report also warns that Labour’s target to send at least 50 per cent of school leavers to university should be abandoned to focus on \”quality not quantity\”.

Quite: there\’s no point in trying to punt 50% of the population through universities. All we\’re doing at present is indulging in the grossest form of credentialism. 30 years ago you could start you articles as a solicitor, your training as an accountant, straight out of school. Now you won\’t get your CV read to do anything other than stack shelves without a degree on it. A huge waste of everyone\’s time and money.

Student leaders, however, have called the report \”offensive\” and insisted it would drive thousands away from degree courses.

Yes, that\’s the point. Further, that really is the point, as \”student leaders\” tend to be those who have had some exposure to university life and who obviously haven\’t learnt much from it.

Wee Wully Hutton on the Stiglitz Commission

Quite fun to start off a column with an error of fact, don\’t you think?

The Soviet Union used to judge itself on how much iron and how many tractors it produced.

The Soviet Union used to measure the weight, the tonnage, of tractors it produced. It\’s one of the interesting little stories that Richard Layard (one of Hutton\’s buddies) brought back from his time advising Yeltsin\’s Russian Government. The number of tractors could be useful information: the weight of them not so much. For it meant that a reduction in the weight of each individual tractor (say, a clever new chassis requiring less steel) would not be, as we would think, an increase in value added (ie, more tractors for the same steel, or the same number for less) but a decrease in production.

As weird and wonderful as that sounds it did in fact happen at one of the Moscow car plants. Engineers suggested a change to the  chassis which would have saved a couple of kilos on each car: they were threatened with being fired for their attempt to reduce production rather than praised for attempting to increase the efficiency of production.

What\’s amusing about this is that by hashing up what the Soviets actually did Hutton is entirely missing the point about why GDP is actually a pretty good measure of the economy. The use of less steel would increase GDP, reflecting the fact that we were now using fewer resources to make the same things….that is, adding more value (and added value is what GDP measures) to the resources we do use. Plus, of course, we can use our aggregated couples of kilos of steel to make something else.

Well done Willy.

People choose a life they have reason to value, as famous Indian economist Amartya Sen once put it.

Quite, which is why we should value the maximisation of freedom and liberty to choose exactly that life which is valued by the person doing the valuing: the person living it.

And over my lifetime, more people – although not enough – have been doing just that.

And not maximising the power of people like Will Hutton to determine what is such a life worth valuing. Nor the number who are choosing as Willy would have it.

Today, western societies measure the growth of their GDP, because such material advance is what we believe counts.But western societies have been changing again as their peoples move beyond valuing themselves in terms of cars, fridges and TVs…….We spend more than half our disposable income on services – adventure holidays, pedicures and garden design, to name but a few.

Quite, which is why we include services in our calculation of GDP.

But as a nation, we carry on measuring the growth of goods and services that are sold in the marketplace – the gross domestic product – as if it were the only thing that matters.

No, we are not measuring solely the volume: we are measuring the value added. The value of course being determined by those who are doing the consuming in what they are willing to pay for the goods and services: living the life that they value by valuing their consumption as it were.

Now it is of course true that GDP is not a perfect measure.

A car produced in 2009 is very different from one in 1979, so why compare them?

Indeed, that\’s why we attempt to adjust inflation rates (and thus real GDP) by \”hedonic adjustments\”. The improvement in quality. It\’s something of a lick the thumb and see which way the wind is blowing adjustment, to be sure, but it is already incorporated into the GDP numbers.

GDP does not reflect the world because it cannot reflect inequality.

True.

And of course GDP gives no guide as to whether the environment has got better or worse over the measured period, nor whether we are so depleting natural resources as to menace our children\’s futures.

There are a number of variations of Gross Domestic Product. Gross National Income, Net National Income and so on. NDP does try to take account of that depreciation however, the reason we don\’t use it as a front line number is because it\’s bloody difficult to calculate. There are also numbers which look at depletion of natural resources.

Fun fact about looking at those numbers though: Norway, often pointed to as being the sort of society we should emulate, is depleting its capital endowment of natural resources at an astonishing rate, whereas the more Anglo Saxon economies are not. That\’s the fun thing about these alternative measures: they mark up things which rather do against current lefty orthodoxy.

Then education; if people are to be authors of their own lives, they have to be educated and not just to regurgitate facts and figures by rote. They need to be able to think.

Interesting: so, are we now to have international league tables of which nation\’s schoolchildren can actually think? Anyone think that\’s going to reflect well on Good Old Blighty?

Surveys could and should consistently capture what we want to do with our time, whether we do it and how much we enjoy it.

What Willy does say here is less important than the part that he doesn\’t mention. The Stiglitz Report is very keen on, insistent even, that we have to measure both household production hours and market production hours. What matters are the net leisure hours that contribute to the work/life balance, not whether the working hours are done in the home or an office. And as I\’ve pointed out a number of times that\’s a set of comparisons that do not work well for the more European economies. The German housefrau, for example, works 90 minutes longer a week than the American housewife. Despite the latter doing more market working hours.

As above, if we actually take the Stiglitz Report seriously then there\’s going to be an awful lot of pissed off lefty campaigners as they find that their pet peeves have just been shown not to exist: for example, the more marketized US economy would appear to be better for the work/life balance than the more social democratic German one.

In Britain, for example, we would not be discussing spending cuts and deficit reduction in such bald, terrifying and self-harming terms. We would be worrying about the impact on our well-being because that is what we would be measuring, and the discussion would be how to get what we need in health, education, personal security and social connectedness within given cash limits.

And that\’s the biggest thing that Willy\’s missed from the Report. Something which really does threaten his worldview. Stiglitz et al point out that as far as Government provided goods and services are concerned we do not in fact measure the output. We measure solely the inputs and count that as part of GDP. So, we assume, a priori, that if the government spends £10 billion on something then we get £10 billion of value from that spending.

The Report insists that this must change, that we must measure the outputs, not the inputs, in this part of the economy. Now that is indeed a serious threat to a lefty vision of the universe, that all government expenditure must be measured by its efficiency, the value added for the resources committed.

No wonder Willy didn\’t mention it.

This is absurd

British couples who travel abroad for IVF treatment and buy other women’s eggs are engaging in a form of prostitution, a fertility conference was told yesterday.

Stupidity of the highest order.

Professor Pfeffer said that even using the term “donation” in relation to the exchange of eggs was inappropriate. “It sounds as though it’s a gift. But these women are not doing it for altruistic reasons — they are doing it for money. We shouldn’t talk about them as egg donors.”

Furthermore, she said, it raised questions for the child who was conceived. “What can you tell a child when half their genetic make-up came from a woman in Romania? A woman who was so poor that she was prepared to enter [into egg exchange]? What does that child think of its social mother, a woman who was prepared to exploit another woman?”

Who is exploiting who, dimwit?

The aim of life is to pass on one\’s genes. Humans are limited (most especially women) in how frequently they can do this. There\’s the nine months of the actual pregnancy of course, the few months before even the most aggressive can start another pregnancy and then there\’s the largest cost, the 20 odd years of raising the child until it can reproduce (umm, shorter than that in some cases of course).

So here we have a system in which all of that is by passed for these women. Their genes are passed on without any of these restrictions: they don\’t have to carry the pregnancy, they don\’t have to raise the child and yet they have won a prize in the great Darwinian lottery. A child that someone else is carrying almost all of the costs of.

They\’re also being paid for this: and you say that this is exploitation?

Seriously?

Good grief, does no one actually take Darwin seriously any more?

Would I be being exploited if someone was crazed enough to want to carry and raise a child from my sperm? Absolutely not: I would think that I was exploiting them and rightly so.

For I would get what is, we are told by the scientists, the aim of life, grandchildren, without the intervening 20 years of effort. This simply isn\’t exploitation.

The woman is a crazed lunatic.

Polly today

If he were wholeheartedly aiming to capture angry Labour voters with nowhere else to go, then his flags would be redder and there would be no boasting of savage cuts. He would be storming Labour citadels and summoning angry Labour voters to his cause. His flag would be an economic policy that didn\’t parrot the dangerous current group-think that declares debt must be paid down fast and furiously by whatever next government.

Apparently, because Labour is going down the tubes because it has been spending the money like a drunken sailor on shore leave, the Lib Dems should promise to spend  the money like two drunken sailors on shore leave.

That\’ll win them the election, oh yes it will!

Regulating the ratings agencies

This is interesting:

The SEC will also remove references to ratings from some of its own rules and forms in an attempt to make investors less dependent on agencies\’ actions.

As I\’ve been arguing all along, matters might mean that we should have different regulation: but they don\’t necessarily mean that we should have more.

Here\’s the SEC saying, in effect, that at least in this area, there should be less regulation. A little more caveat emptor and a little less reliance on simply box ticking on the bureaucrat\’s forms.

Interesting, no, however much it will enrage certain people?

Bankers bonuses

The Government has said that guaranteed bonuses contribute to irresponsible deals by bankers,

I wish that someone could explain this to me.

I can get the idea (although am not wholly convinced of it) that striving for a bonus can make, on the basis of bonus if you win the shareholders eat the losses if you lose, bankers take excessive trading risks.

But I cannot see how a guarnateed bonus (ie, a high salary paid on day 365 of employment), the opposite of something that one must take excessive risk to earn, can cause such.

Can anyone explain why the Government is pushing this line then?

What is Ritchie smoking?

Economists and Tories who argue against inrtervention in the economy say that this is OK becasue recessions indicate people do not want to work.

What?

I know of people who claim that structural unemployment is in part because some people don\’t want to work.

I know of people who claim that the incentives on offer (things like 90% marginal tax and benefit withdrawal rates) mean that some people don\’t want to work: I\’m one of them.

I know of people who claim that high and not time limited out of work benefits lead to some not wanting to work: Richard Layard is one of them.

I even know of people who claim that everyone wants not to work (pretty much everyone in fact: it would be better if we could all do as we wished rather than having to clock in and labour for our daily bread, no?).

But I know of absolutely no one who claims that recessions are caused by people not wanting to work.

Not one single person in the whole gamut of opinions from anarcho-capitalists all the way through to North Korean style the State is everything, taking in the Austrians, Keyensians, Real Business Cycle folks, New Keynesians, saltwater and freshwater schools, Chicago, socialists, Marxists and Uncle Tom Cobbley and all.

It\’s simply an absurd statement, a complete strawman.

New phrase

Yes, like this one:

When something has crossed the parody horizon, it becomes impossible to parody (that, of course, is a common idiom) for the simple reason that any parody would be indistinguishable from the original.

Similar to \”jumping the shark\” perhaps.

\”Polly has crossed the parody horizon\”….yes, works for me.

On the value of macroeconomics

Of course, you need to accept some version of the efficient markets hypothesis for this to be true (ie, that in markets prices reflect the information available to the participants in said market, to use a very weak EMH version):

The key indicator of scientific progress is not the opinion of a seasoned practitioner (with their clear bias), but rather, do large financial institutions, who would really benefit from being able to forecast the economy, have thriving economics departments, with the best macroeconomists moving in and out as Chief Economist of Citigroup, to Harvard, and back? No.

Macroeconomists are demonstrably not helpful to those institutions that could use economic expertise. Macroeconomists know a lot of stuff, just not anything useful.

But then just about everyone agrees that the weak EMH is indeed valid.

Nice line

One of his throw away lines: “some departments have shockingly few young tenured scholars in this important field (including large departments like Harvard and Princeton [and Berkeley]).” And this may explain why Krugman (and Delong) have a hard time appreciating the current state of macroeconomics. They don’t know any modern macroeconomists.

Clarkson\’s reaction?

Seven climate protesters dressed as suffragettes dumped horse manure on the Top Gear presenter Jeremy Clarkson’s front lawn yesterday under a banner reading: “This is what you’re landing us in”.

I\’m rather hoping it will be \”Excellent, just what I need for the roses\”.

Ah:

TOP Gear star Jeremy Clarkson THANKED eco protesters who dumped bin bags full of horse manure on his lawn yesterday.

He joked: \”It\’s nice of them to buy me something for my roses. I must buy them a patio heater.\”

Great minds and fools seldom differ etc……

Weird figures

Investment into Britain fell by half to £97bn, while outflows, or British companies making investments abroad, collapsed to £111bn from £275bn the year before.

That has to be simply some subset to the capital account, not the whole of it.

For as far as I\’m aware we\’re still running a trade deficit and the current and capital accounts must balance for the balance of payments must balance.

I think it\’s just FDI (foreign direct investment) for given that we do indeed have a trade deficit there must be more capital coming into the country than leaving it, by definition.

Gordon Brown writes

Five months ago, world leaders came together and agreed a unique response to the unprecedented challenges of the global economic crisis.

United in our determination for a co-ordinated programme of measures to ease the worldwide recession, a historic deal was signed by countries representing two thirds of the planet\’s population.

Forget the content for a moment and look rather at the style. Clunky, complex, boring, reeling of a list of details but little or no inspiration. If it\’s by a ghostwriter then they\’re very good indeed for they\’ve managed to capture the essence of the man (and I write here as someone who has ghosted just such articles for others).

Sadly, so I\’m told by one of the editorial peeps on one national newspaper, Brown actually does write these things himself. Slightly worrying really: both that he spends the time which some tax paid flunky could relieve him of the burden of and that the output is so poor.

Defending the euro

Oh dear, there\’s sense in here but nonsense as well:

The annoying thing about economics is that nearly all issues of any importance can convincingly be argued either way. It is only the long passage of time that validates one line of analysis over another, and even then, established orthodoxies get periodically overturned according to the fashion of the age.

This is very true, for very rarely are there solutions in economics, rather, there\’s a balancing of trade offs.

However:

In reality, no one will leave any time soon. Far from the crisis undermining the euro, says Willem Buiter of the London School of Economics, the single currency has proved a bulwark against the crisis. The economic situation among peripheral members of the euro is grave, but just think how much worse it would be if the likes of Ireland, Italy and Spain had floating exchange rates.

Quite, like Iceland (as they mention) they\’d go bust. Which, arguably, is a good thing. The reason we have bankruptcy is not because we actually like it so much as because we recognise that there are times when something is completely fucked. Time to wipe the slate clean and start all over again.

Iceland has done this. Harsh, painful, yes, but is it actually worse than what Spain is going to have to go through? Years and years of grinding down the economy?

Economies are (*see comments) not companies, this is true, but both have similarities.

My bet is that having bitten the bullet and collapsed, that the Icelandic economy will recover before the Spanish and will end up better off in the long run for having done so.

That Bulgarian lottery

The sports minister Svilen Neykov ordered a special review after 4, 15, 23, 24, 35, and 42 were drawn on Sept 6 and again on Sept 10 in consecutive lottery rounds.

The probability of this happening is 4.2 million to one, according to the Bulgarian mathematician Mihail Konstantinov, although he added that such coincidences can happen.

Given that it has happened the probability of this happening is of course 1.

Oh for fuck\’s sake

There has to be an easy way of moving a file of email addresses from one gmail account to another.

There must be.

Using \”export\” in gmail (with Firefox) leads to the creation of \”google.csv\” which is terribly exciting but no damn use as the computer then says that file does not exist. No, you (or perhaps I) cannot say where that file should be saved so that you can find it.

This should be easy for fuck\’s sake. I have full access to both accounts, the one where the email address file is and the one where I want it to be.

\”Help\” of course does not help as it is telling me that \”things will happen\” which don\’t then happen (like, you will be able to choose where the file is saved: no, I can\’t).

What is the bit that the idiot geeks have forgotten to tell me because they assumed everyone already knew?