Timmy Elsewhere

Something weird is happening at The Guardian

In the comments on Robert Reich’s latest:

Report
TimWorstall
TimWorstall
1 hour ago
Guardian Pick

2

Oh seriously, doesn’t anyone ever bother to check these assertions?

“Seventy per cent of the US economy depends on consumer spending. But wealthy people, who now own more of the economy than at any time since the 1920s, spend only a small percentage of their incomes. Lower-income people, who were in trouble even before the pandemic, spend whatever they have – which has become very little.

In a very practical sense, then, the US economy depends on the spending of most Americans who don’t have much to spend. That spells trouble ahead.”

Here’s consumer spending (personal consumption expenditure, which is the correct term for what Reich is talking about) as a percentage of GDP:

https://fred.stlouisfed.org/series/DPCERE1Q156NBEA

Back in those glory days of strong union power, equitable and shared growth and all that guff consumer spending was only 60% of GDP. Now it’s nearer 70%. So, it appears that the increasing wealth concentration being complained about actually increases consumer spending as a percentage of GDP.

Look, it’s fine to have different visions of how the world should be and all that but might we just start with an agreement that our analyses have to conform to reality?

Err, one of my comments being a Guardian Pick? Who has been spiking their water cooler?

Barrels, both

By the argument Blyth is using building a new gym at Brown is investment, everything that happens in the classroom, being an intangible, is not. But then at Brown, with Blyth, that might actually be true.

We entirely agree that there are different visions of the future we should be striving for. But we would like to at least try and insist that the evidence presented to argue for one or the other be evidence, be observations about the real world. For without that stricture we end up somewhere on the spectrum from being misleading through propaganda to casuistry which really, we do insist, isn’t the way to run the world.

On the banning of halogen bulbs

Imagine if electric cars, heat pumps, LED lights, really are the bees’ patellae. Excellent – as people look to replace their current systems then they’ll naturally gravitate towards these better technologies. That way we’ll make more progress in solving climate change because we’re doing at the least cost.

Elsewhere

A rather more gentle treatment of Mark Bittman’s misunderstandings:

Bittman’s observation is correct, and first principles are an excellent start to the process of logical deduction. But it is also an appalling place to end the process of thinking. True, we don’t all have to stand on the shoulders of giants and reach further and higher than the pebbled seashore, but those previous generations of billions did contain some bright people who did think about the problems of the human condition. Some of them even came up with interesting answers.

The economist looks at Bittman’s statement and notes that healthcare is a luxury good – as our real incomes rise we spend more of our incomes upon it. Food is an inferior good – as incomes rise a smaller portion of total income is spent upon it. As our incomes rise, the portions that we spend on different things change. This is the same insight as Maslow’s Pyramid that denotes the hierarchy of human desires. As we satisfy our desires on the lower level of the pyramid, we allocate more of our rising income to the upper levels of the pyramid. This is what those definitions of luxury goods and inferior goods mean.

Against peasant farming

The total incomes made from British farming – and this includes subsidies and higher prices from trade restrictions – are around the £5.2 billion mark. There are some 17.6 million hectares of farmland out there. Simple division tells us that the income to be gained from farming the one hectare is around the £300 mark. The UK median salary is now a shade over £30,000 a year, so you’d have to farm some 100 hectares – 250 acres in real measurements – to reach just the average.

Small farms simply do not adequately fulfil the purpose of any economic activity, which is to provide a worthwhile living to the person having to do all the work.

What joy, I make Zero Hedge

A new left-leaning constitution could include even tighter lithium mining operations in the country. 

“Even, possibly, to the point that those old, grandfathered, licenses are revoked. Or the lithium operations (intimately tied in with the potassium and iodine ones, they’re not separable) might be taken back under direct state control. There are those, as above, who still would relitigate that initial privatization,” former Forbes writer Tim Worstall wrote in a Seeking Alpha piece in late 2020. Back then, he was writing about SQM’s path in light of a new constitution in 2021. 

Worstall added:

“The process here is a constitutional convention and it’s really difficult to predict what the end result of one of those is going to be. After all, they are, by there mere declaration of what they’re doing, insisting that they’re going to change the basic rules of the country. And SQM does have that slightly anomalous position – as does more strongly lithium mining in Chile – which means we might want to worry here.”

A new constitution could change SQM’s position in the country and even affect their legal right to mine. No wonder the stock crashed.

Basically, if Chile writes a new constitution then those old mineral licences – which are pretty weird – could be up for grabs again. So Chileans have elected a fairly lefty constitutional convention to rewrite the constitution. On that news alone this stock drops 10%.

Elsewhere

This is especially important with respect to climate change. The Stern Review was the report for the British government that laid out, proved, the case for doing something about climate change, probably the most important part of which is that we must use the cheapest method of doing said something. The logic is irrefutable: We humans do less of the more expensive things and more of the cheaper things. Therefore, if we use expensive methods of dealing with climate change, we’ll actually do less climate change prevention. If we use cheaper methods, then we’ll save the planet more, or save more of the planet.

Thus follows the rationale for our producing some part of wind turbines, even if not the blades, in Beijing rather than in Pittsburgh.

Post war growth wasn’t all that great you know


Using the economist Angus Maddison’s figures, the per annum (real GDP per capita) growth rate for the UK from 1947 – the post-war nadir – to 1976 when the wheels came off the model, was 2.9%. That is indeed better than the neoliberal years since of 2.3%. So, does that prove the conventional wisdom?

Well, not quite. The point here is that long-term growth rates are driven by advancing technology, which is closely allied but not exactly the same as advancing productivity. Growth from 1918 to 1947, by the same measure, was 0.7% a year. Case proven again we might think – except when we combine the two periods we get a proper long-term growth rate of 2.1%.

I’ve expressed this view before in Anglo-Saxon terms, but to do so more politely: some portion of that post-war growth was driven by the technological and productivity advances of the previous decades that were not, earlier, translated into actual economic growth.

It is indeed possible to argue that peace and the absence of a depression allowed that expression of the stored up growth, but it becomes a lot more difficult to argue that it was those golden years policies that were the cause. That 2.1% growth rate across the whole period is about what we think a mature economy is capable of over longish periods of time, after all. That it came as lean years and fat is interesting but not a proof of policy actions. That the neoliberalism since has matched or slightly beaten that long-run rate is another interesting point. Growth is more to do with technology and productivity than public policy perhaps.

Nomadland – to make liberal heads explode

So, lots of Oscars for that movie about a bird who travels hundreds – or is it thousands? – of miles to work at Amazon. Will no doubt be praised by liberals and progressives as showing the faults of late stage capitalism – rootless nomads forced onto the roads.

The same idiots will also be telling us there’s a problem with monopsony in the American labour market:

A mobile force of 160 million people picking and choosing among millions of potential employers simply is not a labour market suffering from monopsony. That’s a tale that needs to be confined to the “once upon a time” section of the movie storage vault.

Sigh, no, really, sigh

Letters they didn’t publish

To The Guardian:

April 22 2021

Sirs,

Many economists like the idea of a universal basic income because it increases the consumption possibilities of the people who receive it. Similarly, there is support for the universal provision of goods and services because it removes income as a constraint upon consumption. Professor Simon Lewis (https://www.theguardian.com/commentisfree/2021/apr/22/earth-day-environmental-catastrophe-policy) then recommends both to reduce consumption.

Is there something in the water at UCL? Should we be staging an intervention? Or was the error in the publishing schedule and the first day of this month was missed?

Yours etc

Tim Worstall
Senior Fellow
Adam Smith Institute
23 Great Smith St
London SW1

Yes, I know you disagree, but still……

This is not, by the way, a critique of Chowdhury. Nor do I insist that you must prefer my plan to his. Rather, I want to explain that we live in what is called a “second best” world. One in which the better solution sometimes is not because of other features of the society around us.

The thing being that I have seen an emissions scheme being set up – the European Union one. And it was a morass, an orgy almost, of rent seeking and string pulling. Everyone who even knew the name of a politician was demanding the free issue of extra credits just to them. The result of those being that so many were issued that the price has been, for well over a decade, effectively zero. And prices of nothing tend not to limit people making emissions which is the point of the whole process in the first place. Thus my recommendation of the second best policy, set the price through a tax and make the world adjust to that. Simply on the grounds that “Here’s the price, get on with it” is politically easier than having to fight one’s way through every special interest group demanding favourable treatment.

Which is a sad commentary on politics perhaps but then this is a second best world.

Elsewhere

It is obvious enough that there are some out there better than we are at everything. This is something I find in everything I attempt much to my annoyance. Yet it is still necessary for me to do something with my life so what should that be? Among the things that I could do I should be doing the one that I am least bad at – the comparative part of the advantage is among the things I can do, not in relation to what others can.

That is, if we all do what we are least bad at then production will be as high as it can be and we are all, in aggregate, as rich as we can be.

So, those who are differently abled in that modern sense, what should they be doing? Their abilities might be different, yes, they might even be lesser in every manner than others, but their decision is still just as with everyone else. They should be specialising in what they are least bad at just as the rest of us should be. Different skills and talents, OK, but equally human and facing the same life questions as the rest of us.

We have that 30,000-foot view then but one of the advantages of belonging to a culture, a civilization, is that we do not have to work through every question we face in our lives from first principles. We have that system of transmitting through the generations the lessons our forbears worked out the answers to – that is what a civilisation is. Or, of course, in this era of globalisation we can steal the answers from those who worked it out elsewhere.

Getting at Georgie

That is, this is not a knee-jerk reaction, this idea that individual choice and action within markets works better than politics, government and democracy. It’s a result of direct observation of the world around us. The CFP is vile and governmental, more market and private property based fishing systems work better.

That is, the only neoliberal knee-jerk that exists is a propensity to believe that “the market” works better than the alternatives. A propensity that we’re entirely willing to see disproven as it is in the case of, say, nuclear weapons, the price regulation of a natural monopoly – it was us who insisted that the national grid and the like needed price regulation – and public goods.

That is, the neoliberal reaction to a proposal that government solve a problem is not to run from the room shrieking in horror, it is to insist upon “Prove it, Sunshine”. Something that doesn’t in fact work with fishing, as Monbiot complains. Which is why we support more market based solutions to the agreed problems of fishing.

Owen Again

So, if we’ve managed to understand Owen’s argument correctly it’s that business must pay more tax because the state provides things expensively and badly. Which is not, we think, one of the most convincing arguments ever put forward.