HIV up 200%, Malaria flaring up in Greece

Greece is borked, but because of the incompetence or malice of those at the ECB it is significantly more borked than it needs to be. It such a bad state are Greece’s finances because the ECB has sat idly by as it languishes in depression that they’ve cut major public health programmes leading to…

“Greece is an example of perhaps the worst case of austerity leading to public health disasters,” Mr. Stuckler explained in a telephone interview.

“After mosquito spraying programs were cut, we’ve seen a return of malaria, which the country has kept under control for the past four decades. New HIV infections have jumped more than 200 percent,” he noted.

Via. This is just an addendum to yesterday’s post trying to personalise it a little.

Filed under: Economics, Foreign Affairs, Politics, Society

"To Understand Inflation We Must Understand Money"

Reblogged from uneconomical:

Christina Romer's paper links to this brilliant "infomercial" video from the US in 1933, which explains the power of monetary policy - which, by the way, is all about expectations:

Absolutely wonderful!

Filed under: Politics

The insane ECB continues its reign or terror

While the UK’s latest inflation report seems almost optimistic, Europe remains completely fucked. Look, I don’t want to swear, but what else can I do? Remember how much you swear when you stub your toe? That’s not as bad as unemployment, is it? Well millions of people are unemployed thanks to the worst institution in the world, the ECB.

As Matt Yglesias points out, although the periphery’s descent into hell is decelerating, even Germany is suffering. It reported only 0.1% quarter-on-quarter growth for Q1 2013. This is what Eurozone economic “growth” looks like versus US growth.

And, although Karl Smith can’t make Eurostat spit out the numbers he wants someone can. Above is growth rates, what that fails to show is the magnitude of the divergence between the US, where fiscal policy is nuts but monetary policy relatively sane, and the EU where everyone’s just gone batshit crazy and decided things need to get worse before they can get better.

Let this be a lesson to you, you can fill a properly instituted legislature with lunatics and by the magic of checks and balances somehow survive, let them into your central bank and you’re doomed.

Filed under: Economics, Foreign Affairs, European Central Bank, Eurozone, karl smith, Matt Yglesias, the insane ECB

How to guarantee your shiny new nuclear power plant is over budget

September 2012 – EPR reactor construction site – Flamanville, France © EDF, Morin Alexis

First of all, nuclear power is a safe and clean energy source. However, building nuclear power stations is really, really hard and they are often delivered over budget and behind schedule. You’d think, since we’re on the verge of building a new one at Hinkley Point, we’d be doing everything we can to make sure it’s done right. Right? Wrong. To incentivise its construction the government and EDF are doing everything they can to destroy any incentive of building to time and budget.

To understand energy investment in the UK today you need to understand the government’s energy market reform. Trust me I’ll keep it short and use bright colours.

The government doesn’t want to, and legally cannot, willy-nilly subsidise energy investment in the UK. One because they’re Tories and they don’t want any spending on balance sheet because they’ve fetishised the UK’s debt and two because EU state aid rules mean they’re just not allowed to subsidise private energy producers. In the next few years lots and lots of power stations are going to be retired because they’re old and nobody wants to replace them without a subsidy. We are at an impasse that leads to an energy crisis. Can an impasse lead somewhere? Yes. Shut up.

The solution is an elaborate system of contacts, payments, counterparties, bargaining, auctions and horseplay that we know as Electricity Market Reform. The system is really simple. You sign a contract agreeing to produce electricity and the government guarantees you for a set number of years a certain price per Megawatt hour. If the market price is below that contracted price consumers receive a surcharge on their bill, if the market price is above it they get a bonus. How often do you get the bonus? Shut up.

Eventually the contracts will be auctioned which should mean that payments to consumers occur roughly as much as payments from them. But to begin with the contracts will be negotiated. Because we’re in such a poor state generation wise we’re getting blackmailed by the French.

Taken from here.

EDF want to build a nuclear power station using a reactor developed by Areva called the EPR. In order to build it is reported that EDF are to receive £93-96 per Megawatt hour. This is more than double the current market price of electricity. To justify the investment EDF claim to need an ex-ante internal return of around 10%. Their problem isn’t that a nuclear power plant is an unproductive investment, they produce a phenomenal amount of electricity. It’s the construction.

Olkiluoto, the first EPR to be built will be 200% over budget and six years late when complete. Flamanville, the second EPR will be about 150% over budget and 4 years late. Linear projects are a fool’s game, but fuck it, at this rate Hinkley Point C will be two years late and double the cost expected. Since the UK is desperate for new, low-carbon generation EDF know they have us over a barrel and a likely cost overrun on their hands. Hence why we’ll be paying them double the market price for electricity.

It doesn’t end there though. If you thought the incentives were bad enough as I’ve describe, it gets worse. To prevent massive windfall profits the government are going to insert a clause into the agreement which will allow for excess profits to be clawed back. Mull that one over.

If EDF build over budget they’ll make a modest profit because they’ve been guaranteed a high energy price.

If EDF build to budget they’ll make a modest profit because government will confiscate the payments consumers pay to EDF because they’ve been guaranteed a high energy price.

As well as being an arsebackwards roundabout way of getting you and me to subsidise the building of power stations it completely eviscerates any financial incentive for EDF to run the project to budget and to schedule. I’ve a soft spot for giant infrastructure projects, complicated engineering and carbon free electricity, but we are running this project like we want it to fail and to cost everyone a lot of money to get there.

Filed under: Economics, Politics, The Media, EDF, EMR, Energy Bill, Flamanville, Hinkley Point, Olkiluoto, the French

Short on outrage? Hate nuclear power? Like immigrants? Left wing?

Sellafield, the country’s premier nuclear waste dump (where they in fact do a lot of hard work clearing up the dangerous legacy waste from seven decades of research, generation and weapons making) have a new megacontract out:

The £1.1bn Sellafield Infrastructure Strategic Alliance (ISA) was signed in December 2012 and awarded to a joint venture between engineering, design and consultancy firm Arup and construction and regeneration group Morgan Sindall. Delivery of the contract begins in May 2013…The main contractors in this case operate on the basis of three renewable five-year terms.

That’s some serious money. Justifying spending that must require a pretty nuanced communications strategy, eh, Sellafield spokesman Karl Connor?

“The chances are [a firm on a two-year short term contract will] come in and build it, using migrant workers, and then leave when it’s built.  However, if they have a 15 year contract to help us across a wide range of similar pieces of work, they would be more likely to set up an office locally and invest in training local apprentices.”

I’m being a little unfair to Karl, but only a little. I think it’s pretty reprehensible to use anti-migrant sentiment in this way. It’s a cheap shot even if Sellafield are intimately tied to the people living in West Cumbria. It’s also a bit fucking rich considering its a US/British/French consortia running the show at Sellafield.

Filed under: Economics, Migration, Society, migrants, Nuclear, Sellafield

For now…

Britmouse has a quick and dirty response to Merv’s final Inflation Report. I’ll hopefully write something tomorrow, but for now, as usual, refer to him:

Mervyn King coined the term “inflation nutter” in 1997 to describe those who embraced stability of inflation above all else.  Governor King in 2013, along with an entire generation of central bankers, will still claim “nothing is more important” than price stability.  That is the legacy of King and the rest of the modern-day inflation nutters.

Filed under: Economics

It’s the little things

Wouldn’t want to make a big deal out of this, but when writing online always link to what you’re talking about. This post, for example, is discussing Mervyn King’s last Inflation Report, but nary a link can be found. The report is here. There are lots of things that make blogging better than print journalism, hyperlinks are just the first but you still have to get them right.

Filed under: Blogging

The Nature of the Farm: Exploding pig shit

It isn’t often I get to write such a profane title which references Ronald Coase. Today is a good day for blogpost titles [1] and a bad day for farm workers. As with most factories with simple inputs and outputs pig farming scales very well. This means that they can get very big before they start seeing diseconomies of scale but once they do they’re pretty unique diseconomies of scale.

In a paper which makes me miss my Athens’ subscription, Alex Coads highlights that profit isn’t a very good predictor of firm growth. [3] In fact firm growth is a little random. But something which definitely prevents firm growth are diseconomies of scale.

Normally these refer to limits on staff monitoring, communication costs, duplications of effort and office politics. None of these are particularly relevant  for pig farms (pigs actually don’t collude, sadly for them), so they’ve just kept getting bigger and becoming more profitable to the point where they are discovering industry specific diseconomies of scale:

The problem is menacing: As manure breaks down, it emits toxic gases like hydrogen sulfide and flammable ones like methane, and trapping these noxious fumes under a layer of foam can lead to sudden, disastrous releases and even explosions. According to a 2012 report from the University of Minnesota, by September 2011, the foam had “caused about a half-dozen explosions in the upper Midwest…one explosion destroyed a barn on a farm in northern Iowa, killing 1,500 pigs and severely burning the worker involved.”

Apparently this just did not happen before 2009. Factory farming has helped us to feed the world. Intensively farmed pigs [2] have allowed for more protein to be produced at a great cost in terms of animal suffering and at little costs in terms of money. Negative externalities where they have existed have been more diffuse, like water pollution, such severe diseconomies of scale at the farm level are relatively new.

What we are seeing is a limit to farm size. There aren’t many firms that are limited in size by the quantity of waste produced, but it appears we’ve found one. I think it is safe to say Coase couldn’t have seen this one coming in 1937.

___

[1] Is this the sort of post I should be writing if I want this job? I presume so.

[2] Writing this post makes me want Mario at Brindisa to cut me some Iberico jamon. From organically farmed, acorn fed pigs, that stuff though. And very expensive: Tesco value ham is £0.41/100g while Iberico jamon is more than ten times that, those prices tell a story.

[3] Do I really have to keep writing via Chris?

Filed under: Economics, Science, Society

Greece & Germany: Things tend to get worse before they get more worse

The young man stood up.
“Mrs. Bylaxis came in this morning,” he said. “She said the proverb you did for her last week has stopped working.”
Didactylos scratched his head.
“Which one was that?” he said.
“You gave her `It’s always darkest before dawn.’ “
“Nothing wrong with that. Damn good philosophy.”
“She said she didn’t feel any better. Anyway, she said she’d stayed up all night because of her bad leg and it was actually quite light just before dawn, so it wasn’t true. And her leg still dropped off. So I gave her part exchange on `Still, it does you good to laugh.’ “

Terry Pratchett – Small Gods

Noah points out that there’s an oft overlooked argument in favour of austerity. It’s a stupid argument, but that doesn’t mean we shouldn’t take it seriously. The argument runs that stimulus will work but that is bad because it will delay “necessary” reform. This idea has a long heritage and it’s always been a good idea to mock it. I’ll try to provide some constructive examples against it.

First of all, let me say, I am a dedicated can kicker. Karl Smith is right, do you realise that everyone you know someday will die? The future is uncertain so simply making a bad thing happen later is valuable because we might not be here. Problems also sometimes solve themselves and erstwhile solutions become problems. Pretending to have the foresight necessary to say “you now must suffer now so that they then do not” is insulting.

I also think the idea is bad on its own terms. Crap policy begets crap policy for a number of reasons. Most mundanely I’d posit there a correlation between following good short-term and good long-term policy. If a government is adopting crippling austerity now, it is more likely not less that they’ll be adopting bad long term policies.

Most of all I think this “butter tomorrow, sawdust today” policy has been tried before and sown disaster. Here are a few examples:

• Hayek thought the depression would force down wages by brute force and trigger the end of unionised workers. He thus resisted efforts to end it. The result? Starvation! Smoot-Hawley! Nazis! Bet he felt pretty silly about that one.
• He’s in good company. Lenin in the 1900s argued that mitigation of the worker’s condition would delay the inevitable revolution and that nothing should be done to mitigate it. He actually got that one right. This time it was the Tsarist industrialists who must have felt silly (as much as dead people feel silly).
• The little depression seriously derailed efforts to tackle climate change. Short-term suffering crowds out the long-term thinking needed to make policy effectively. Extending austerity makes it harder to talk about long-term sensible sacrifices because you’ve less to sacrifice.
• As Ben Friedman argues “History suggests that, in the past, a rising standard of living has promoted tolerance for others, commitment to economic opportunity, and democracy. But stagnating incomes due to inequality can lead to the opposite outcomes.” Suffering makes people worse human beings and worse human beings make worse long-term policy.

To underline my point: the worst case scenario is Nazis. It is such a bad idea you can legitimately say “no because Nazi.” I can think of at least one apposite positive counterexamples too, also from Germany.

• Via Scott, the German labour market reforms of the mid-2000s took place against the more benign global and domestic macroeconomic circumstances imaginable, the great moderation was in full flow. The reforms were so successful that German unemployment continued to sink  lower even as Europe was mired in depression.

Coincidentally, just as Noah laid out the argument hypothetically, Steven Pearlstein comes along and positively endorses it. Only austerity and suffering can save Greece apparently. By embracing  short term suffering interest-groups can be defeated and illogical and burdensome regulations can be removed. Only brave short-term sacrifice can engender long term growth.

So how is Steven’s strategy paying off? Yep, same as last time, fucking Nazis again:

Via Greek Left Review

First of all a defense. Greece is one of the few countries which spent the late 20th century moving from a middle-income to a high-income country. A round of applause please before you lecture them. Their politics and economy are dysfunctional and that will make them poorer, but it doesn’t need them to be in a depression. Being poor is bad, but being unemployed is evil.

Of course if unemployment is an evil, using unemployment as a punishment for being poorer than optimal is really evil. If the Greek economy is dysfunctional they should have higher inflation and lower real incomes, what they shouldn’t have to suffer is a manufactured unemployment crisis. It’s not just stupid and evil it’s perverse.

It is a bad idea that policy should be actively destructive in the short-term to act as a bargaining tool or cudgel to implement a certain pet policy. Suffering is bad, it makes us worse people and worse people make worse policy. If your leg does fall off, laughing probably isn’t the worst thing you could do, you could listen to these bozos.

____

Edit: Matt Yglesias makes similar arguments, positively citing Mario Monti’s reforms which were scuppered because they didn’t stop Italy being in a depression.

Filed under: Politics, darkest before dawn, karl smith, necessary reform, small gods, terry pratchett

Angelina Jolie is a Mensch

Kudos for her actions and for writing this.

MY MOTHER fought cancer for almost a decade and died at 56. She held out long enough to meet the first of her grandchildren and to hold them in her arms. But my other children will never have the chance to know her and experience how loving and gracious she was.

We often speak of “Mommy’s mommy,” and I find myself trying to explain the illness that took her away from us. They have asked if the same could happen to me. I have always told them not to worry, but the truth is I carry a “faulty” gene, BRCA1, which sharply increases my risk of developing breast cancer and ovarian cancer.

My doctors estimated that I had an 87 percent risk of breast cancer and a 50 percent risk of ovarian cancer, although the risk is different in the case of each woman.

Only a fraction of breast cancers result from an inherited gene mutation. Those with a defect in BRCA1 have a 65 percent risk of getting it, on average.

Once I knew that this was my reality, I decided to be proactive and to minimize the risk as much I could. I made a decision to have a preventive double mastectomy.

As everyone is saying, hopefully this will be taboo busting, raise awareness, lots more women will take mastectomies seriously as the correct medical intervention and an appropriate number of women will get screening as required. Won’t be enough because patriarchy. But it’s a tap, tap, tap that works against it.

Filed under: Society

Technologically induced anti-globalisation

Chris here talks about the current deceleration of globalisation.

Figures from the OECD show that globalisation is already slowing down. It estimates that import penetration in developed economies – the share of imports in total final spending – rose from 13.4 to 21.4 per cent between 1993 and 2007 – a rise of 0.5 percentage points each year. But in the five years since then, it has risen a mere half percentage point, to 21.9 per cent.

The shorting of food supply chains has been one response to the horse meat scandal. But that is one part of a wider trend against globalised supply chains. Credit constraints are slowing globalisation because international trade needs financing, currency volatility is slowing globalisation because it makes trade more unpredictable and the home bias has increased as during downturns people become more insular.

One other thing that Chris doesn’t directly mention driving shortening global supply chains and anti-globalisation is technological change. That sounds counter intuitive but it’s not. Normally we think that technological changes like steamboats, transatlantic telegraphs and the internet as driving globalisation forward, but other similar trends work in the opposite direction. What we are seeing is data-creation-biased technological and behavioural change. That’s a phrase I just invented, which explains why it is so clumsy.

Let me explain. As time and technology progresses each of produces more data. That data is valuable. At the moment we give that data away for free, authorising this app and that app to record our likes, our past times and so on. Our data is being monetised, it’s just not use getting the money. But where there’s money, there’s fraud. You can see some pretty unsubtle examples here. Someone can can capture the benefits if they surreptitiously get your data.

The objects and programmes which record this data thus become not only passive meters but engines of value creation themselves. You’re already seeing this happen. Have you hear of Huawei? Probably not. If some Chinese people plan to get up to no good it’s convenient that westerners can’t differentiate between one name and another. Anyway. There was a minor scandal last year when it was reported that some of their appliances were beaming information back to China in a classic “can’t trust the sneaky yellow people” brouhaha.

Whether the accusation are true or not is kind of irrelevant, the panic was real and the threat is real. If not Huawei, then someone else will soon be trying to steal your valuable data. If a firm wants the things it manufactures to be secure in the future it will need to monitor its supply chain and at the moment this means keeping it short. Anti-globalisation biased technological change in action.

Let’s take one concrete example. Smart Meters will (probably) be in every home in Britain by the end of 2020, they will record our energy use in real-time. Most mundanely Time of Use tariffs will allow people to buy energy when it’s cheap. But as appliances connect to this smart system, a cascade of data will be generated about our every habit, washing, TV watching, what is plugged in where and so on. Energy suppliers will become IT firms that happen to sell us electricity.

For a lot of firms, the final assembly of smart meters isn’t happening in China or Japan or anywhere else, it’s happening here. That’s because it is cheaper to monitor manufacture here than there. Data driven technological change is shrinking supply chains. If you want to control something you need to monitor it. When information is valuable security becomes important. Thus as we digitise everything from conversation to washing machines we should expect supply chains to shorten and globalisation to decelerate or even reverse.

Filed under: Economics, Foreign Affairs, Science

Were the Victorians cleverer than us?

The Victorian era was marked by an explosion of innovation and genius, per capita rates of which appear to have declined subsequently. The presence of dysgenic fertility for IQ amongst Western nations, starting in the 19th century, suggests that these trends might be related to declining IQ. This is because high-IQ people are more productive and more creative. We tested the hypothesis that the Victorians were cleverer than modern populations, using high-quality instruments, namely measures of simple visual reaction time in a meta-analytic study. Simple reaction time measures correlate substantially with measures of general intelligence (g) and are considered elementary measures of cognition. In this study we used the data on the secular slowing of simple reaction time described in a meta-analysis of 14 age-matched studies from Western countries conducted between 1884 and 2004 to estimate the decline in g that may have resulted from the presence of dysgenic fertility. Using psychometric meta-analysis we computed the true correlation between simple reaction time and g, yielding a decline of − 1.23 IQ points per decade or fourteen IQ points since Victorian times. These findings strongly indicate that with respect to g the Victorians were substantially cleverer than modern Western populations.

Offered without comment because I’m seriously under-qualified to comment. But I don’t think they were. (Via Martin Robbins)

Filed under: Economics, History

This is sucky news

It’s official. No more Though Cowards Flinch.

It is no exaggeration to say that Dave Semple and Paul Cotterill are two of the (maybe a dozen) bloggers who really inspired me to start blogging four years ago. Carl Packman, their erstwhile coblogger, who began blogging almost simultaneously with me is one of the few bloggers I’ve met in real life. So I’m being completely truthful when I say this is genuinely sad news for me.

Filed under: Blogging

Is it time to nationalise the railways?

You can tell that the one state-owned train operator was never meant to be permanent by the goddamned awful name they gave it. They were probably right, directly operating railways isn’t a recipe for success, more competition is, as I’ll show below.

For this post I’ll refer to them as DOR. Directly Operated Railways seemed to catch the left’s imagination last month. A profitable, popular state-owned railway was going to be privatised! [1] Labour’s Maria Eagle attempted to seize the zeitgeist:

With the Government’s rail franchising programme in chaos, it is a bizarre and dogmatic decision to prioritise the privatisation of a service that is actually on track. Since running services on a not for private profit basis, the East Coast operator has returned £640million to the taxpayer and invested more than £40million in improvements to the service, achieving some of the best results for passengers since records began.

The company only exists because in 2009 National Express defaulted on the line in the face of recession and hubris induced gigantic losses. Are there convincing arguments for keeping DOR running the East Coast Mainline? Ed Miliband thinks so and has argued it should be kept in public ownership as a benchmark for private operators. I’m not convinced. Lets look at the arguments.

Maybe railways will just be better run by the state because at a state-owned rail company employees  are motivated by “knightly motives“, as Julian le Grand describes. I doubt this for two reason. Firstly, these were people recruited from the rest of the rail sector to run a franchise. They don’t have a public sector “mission” like in the NHS, nobody does overtime etc. to set a benchmark. Secondly, I’ve met the people who run train companies, and they love running trains. They’re like children with toy sets. It’s sweet really. The problem isn’t passion for the industry, its service and profitability.

Perhaps DOR are run differently and more efficiently to other train companies? Nope. That’s not true. Nor is it really possible. Whereas, for example, Stagecoach have a couple of buses companies and rail franchises to run, gain experience, share best practice and variously enjoy economies of scale and scope DOR have one franchise and, of course, aren’t in a position to innovate if they’re meant to act as a benchmark.

So how can we make our minds up?

Luckily we have a comparator. There is also a West Coast Mainline run by a private sector company. They’re both much better than they used to be, that’s clear. You could probably argue that the East Coast Mainline offers as good a service at a lower cost, but you’d be relying as much on faith as on evidence. The data here is on overall service satisfaction and is taken from Passenger Focus’s National Passenger Survey and it illustrates gradual but real improvements in service on both.

The data I could find only went back to 2008 which isn’t far enough for my liking, but that’s what I’m working with. You can’t spot the National Express’s default in mid-2009 or the takeover by DOR. That is probably because National Express East Coast had been in trouble for some time and DOR had a mess on their hands to begin with and the data doesn’t go back to 2006 as I’d prefer.

What you can see is an accelerating improvement in service on the East Coast from mid-2011 onwards. Some people have argued that this is because it is a state-owned railway and therefore better. I’ve two words for you people: “British Rail.” That’s not good enough an explanation.

A good argument runs like this: DOR aren’t improving in a cost-effective because they’re state-owned, it’s because they face direct competition from better operators: First Hull Trains and Grand Central. Those two firms are Open Access Operators and run services in between those scheduled by DOR and they have always been better but smaller than the East Coast operator.

You could counterargue “well why is Virgin Trains so good.” But you’d only be falling into my trap.  During quality spurt visible 2008-2010 they were facing competition from an Open Access Operator call Wrexham and Shropshire. In 2011 the company, stymied by regulation which favoured its larger regulators, folded and improvements in Virgin’s services somewhat plateaued.

What we learn looking at the East Coast and West Coast Mainlines is that improvements in rail service are not correlated with state ownership. If you look at Passenger Focus’s surveys, service has improved across the board (as have prices, but that’s another story), but service quality has really accelerated where competition was most intense.

So, should I answer my linkbait title? No, we shouldn’t nationalise the railways, what they need is the opposite: less direct state involvement, more private train operators and more competition. Rail is almost a natural monopoly but not quite. As I’ve shown competition is possible and where it can work it works really, really well. It should be encouraged.

___

[1] Actually, we’ve had profitable, popular state-owned railways in this country for a while, they’re just French, German and Dutch state-owned railways: Keolis, Arriva and Abellio.

Full disclosure: I occasionally help organise events in the rail sector.

Filed under: Economics, History, Politics

Q: How do we save Afghan interpreters? A: Nigel Farage

Afghan interpreters and their families who risked their lives working with British forces are now in danger of being denied asylum and being killed by the Taliban. The coalition are processing them on a case-by-case basis greatly increasing the chance that many will be killed before they can make it to safety.

Liberal Conspiracy, The Times, The Guardian, Paddy Ashdown and Avaaz are protesting this but I’m not sure that will work. So, I would like to make a submission to the bloggers’ logically coherent, counterintuitive, and never going to happen, policy institute.

Get Nigel Farage to help them.

The general arguments in favour of helping the Afghan interpreters runs like this:

• Moral argument: they helped us, because of that their lives are in danger because of Taliban, therefore we should help them.
• Noble argument: they helped us because we’re better than the Taliban, so we should help them to prove it.
• Practical argument: they helped us and if we want others to help us in a similar way we should help them in an organised way.

The counterargument officially runs “it is better to deal with these things on a case-by-case basis,” but the real counterarguments runs  ”the coalition have set themselves an arbitrary limit on immigration so we can’t let in lots of Afghan interpreters.”

The government is making everyone in the country poorer by stopping students coming here to study. If the cash cow that are Chinese students aren’t safe then what chance do poor Afghan’s have? Especially when the Tories are running from their UKIP/idiot-right faction. 

While I recommend you sign the Avaaz petition, I’m not sure protests from the usual suspects will work. The problem isn’t that our arguments are weak or that theirs are strong. Quite the opposite. Its that Afghan interpreters aren’t currently on the public radar and immigration is a toxic topic. So what hopes have we got? 

Joanna Lumley helped the Gurkhas for altruistic reasons, but we can’t always rely on altruism. We need to find someone cynical enough to use refugees for political gain, bulletproof on immigration, and who needs to prove they’re not a racist. What we need is Nigel Farage saying “we need to save these heroes”.

It makes sense. It will help detoxify their brand in a completely nationalist way. It’s pro-armed forces, it lauds the UK’s superiority over the Taliban and it involves a relatively small number of migrants. It’s safe for Nigel and its wise for Nigel.

With the disproportionate press coverage UKIP are currently receiving, this would put the issue into the public domain while also removing the political penalty the Tories fear from arranging a settlement for the translators.

Tim, any chance of you passing this on to UKIP’s strategy guys? Never going to happen. But its an idea.

Filed under: Foreign Affairs, Migration, Politics

Google Reader

I didn’t write at first, the pain was too raw, but as you’re all no doubt aware Google have managed to annoy literally every keyboard warrior on the internet by discounting Google Reader.

Ryan Avent has the most interesting take on this. I just tried to excerpt some of it and couldn’t because its a long, very well constructed argument which you should read in full. “Google is becoming not only part of our infrastructure but part of the way we think, how long can we leave that in private hands” is, I suppose, the best sentence long summary I can come up with. Seriously, read it.

Anyway, I’m switching to feedly, which a lot better than when I first used it a couple of years ago.

Filed under: Blogging

How to get Bangladeshi workers first world safety standards

Move them to the first world. There’s your one sentence answer, but if brevity’s not your thing stick with me.

Obviously, calling for workers globally to have the same safety standards, and yesterday, isn’t a serious proposal. I’d put the “globally unified workplace health and safety” in the same category as “open borders” something that isn’t going to happen, but something useful to endorse and promote because it moves the overton window.

But you rarely find people advocating open borders as a solution to the world’s problems. You even get general good eggs like Martin Wolf arguing the concerns of foreigners should be afforded zero weight when deciding policy at the national level. This is despite the fact that open borders solves most of the world’s problems.

First of all, Bangladesh. Last month’s factory collapse is a tragedy, an ongoing tragedy. While you’ve forgotten about it and moved on with  ECB rate cuts or whatever families are still seeing their relatives’ bodies being pulled from the wreckage, last hopes of survivors being rescued evaporating.

Why would workers put up with such awful conditions? This isn’t, as Matt and Tim argue, that this is their choice and a rational decision, that a life is worth less here than there. The reasons workers suffer under such conditions is because they don’t have another choice. But a set of choices isn’t neutral or natural, it is created.

What creates those conditions? Well at one level grinding rural poverty creates those conditions. As Matt Yglesias points out in a better post, Bangladesh now is poorer than the US was at a comparative level of development. In the US American workers could escape to the (stolen) countryside and set up their own homestead. This practice and the threat of leaving has meant that the US has pretty much always been a high wage country.

This “exit” option is denied to Bangladeshis now. Not because their rural population is high and productivity is poor, as Yglesias implies. Who wants to move to the Bangladeshi countryside other than douchebags on their gap yah? Bangladeshi wages, living conditions, safety standards are held down by immigration controls.

In the 18th and 19th century the threat of exit boosted American workers’ wages whether they left or not. The same is true today. In Lithuania the wages of those left behind by emigrants rose in response as (specifically single male) workers became more likely to leave. Contrary to popular opinion, a world of open borders gives the workers bargaining power. The threat of exit is important and works. Hundreds of years of history proves it.

I said earlier “move them to the first world”, but that’s too simple. I meant “let some of them move to the first world and they’ll do fine, but the conditions of those left behind will also improve because their threats finally become credible.” Those textiles workers  weren’t slaves, but they weren’t free either. Free people don’t make the choice they had to, to go to work that day.

___

Photo by Photo taken by Sharat Chowdhury. Used under terms and conditions of creative commons license.

Filed under: Blogging, Foreign Affairs, Migration, Politics, Bangladesh, Rana Plaza, Textiles

A post about anything other than Thatcher 3: Limits to Coase

In the course of the day job I was speaking to someone in BA’s senior management. They were lamenting that Heathrow needs another runway, that everyone in the industry knows that Heathrow needs another runway, but that Heathrow was not going to get another runway because local opposition was too fierce.

“Why don’t you just bribe them” I asked, channelling Coase.

“We offer sound proofing of course, but its not enough,” came the despondent response.

“What about actually bribing them, you know, with money?” I asked a little incredulously.

I’d summarise the response as “splutter, gurgle, haha,” but it could have been bluer.

In real life, as loathe as I am to use the phrase, people don’t get bribed and people don’t bargain because doing so is weird.

Coase’s brilliant essay “The Problem of Social Cost” describes how mutually beneficial bargaining can help to eliminate the problems caused by externalities.

Imagine an airport which produces noise pollution. Now imagine that it has been built in a densely populated and wealthy part of the country. Seems fanciful I know, but bear with me. This airport wants to expand, and could expand very profitably, but locals, fearing an increase in noise and disruption don’t want it too.

The airport wants to produce an externality, noise. You can think of other people as owning a right not to be disturbed. To expand, the airport should compensate those who it will disturb. That’s only fair. You could have government tax and redistribute the airports profits but that’s messy and inefficient. There’s a simpler solution: bargain, split the profits, and everyone can be a winner. A cheque in the post every month for everyone in TW6.

In Coase’s world the limiting factor is transaction costs. Transaction costs are the costs of doing business, they include the cost of bargaining, of contracting, of working out who’s involved and many other things. Bargaining occurs when it is profitable so long as it is not too difficult to find the people involved and draft an agreement between all the parties involved. But this has not happened.

What’s interesting is that the failure to bargain has not happened in a way predicted by Coase.

The interested parties are well known and an extensive dialogue has been ongoing for some time. Legal settlements have already been reached. Transaction costs are low. But instead of offering locals a simple bribe, they  have been offered a more complicated solution involved sound proofing and vague promises of employment.

According to Coase this shouldn’t happen. Everyone involved has been working to increase transaction costs and has been moving further away from a settlement. A simple solution is right: there take the damn money! But people are leaving that money on the table.

The Overton Window is a concept which describes the range of ideas which are politically acceptable. Bribery has a long record of being clandestine and immoral and is well towards the unthinkable end of the Overton Window as far as policy is concerned. However, we can also think of a bribe as a payment for a service. In this case a bribe should be offered for the service of not raising legal or political complaints about noise. But people don’t like bribes, and that appears to be the end of that.

The Coase Theorem is a beautiful idea, but a great deal more prevents mutually beneficial exchange than transaction costs. The ideas which are fashionable will shape and distort the way people bargain and the deals people accept. It appears that Britain is a country uniquely adverse to bribery, at least if Tim Worstall can be believed. This might be a good thing overall, but it appears this aversion can also make us all poorer too.

Filed under: Economics, Society

A post about anything other than Thatcher 2: Nuclear power saves lives

It is annoying that one of the things that everyone knows is that nuclear power is unsafe. This it simply isn’t true!

Here’s a graph from a new paper by James Hansen outlining how many lives nuclear power saves in the average year. In total nuclear power is estimated to have saved over 1.8 million lives relative to fossil fuel generation of the same Terrawattage.

How does that work? I’m so glad you asked.

There are two ideas it is important you keep in mind when thinking about this. All power generation is going to kill someone. All everything is going to kill something. Every action we take has consequences and some of those consequences involve people dying because that is what everyone does eventually anyway.

The second idea is substitution. If we do one thing we will do less of another, especially when those activities are similar. My advocacy for drug legalisation is in large part informed by my upbringing in provincial towns where alcohol fuelled violence is ubiquitous. Nobody ever got beaten up by someone on MDMA or marijuana, substitution from booze to drugs would make the world safer. But I digress.

Although nuclear has well publicised (and well exaggerated) risks so do all generating technologies, as illustrated by the below graph.

Lets look at a few examples. Coal generation is dirty. Burning it pollutes the air, not just global warming but soot and smoke clog the air and slowly choke people. Digging it up is also dangerous.

A different story can be told about wind power. Its generation is clean, but you have to use a lot of steel and other metals in the construction and because each turbine uses a lot of material relative to the amount of energy produced it contributes to more deaths than you’d expect.

Nuclear on the other hand is fastidious in its safety. Chernobyl, the worst nuclear disaster by far, according to the IAEA, the UN’s nuclear arm, probably caused about 4,000 deaths. The Fukushima nuclear disaster, as opposed to the Fukushima Earthquake and Tsunami has so far killed precisely no one.

Lastly, look at Hydro. Looks pretty safe. But the largest catastrophes are not nuclear ones. The Banqiao Dam collapse in China and killed about 26,000 straight away and about 145,000 more later through famine and general devastation.

Without nuclear people would be using something else to generate their electricity. Much of Europe and the Eastern US would look like Poland and burn loads of coal. The mining and pollution of that coal would kill far more people that nuclear ever has thousands of times over.

So when it is reported that building nuclear power plants is expensive please bear this in mind. They are remarkably safe when you think about it. In fact, if people are serious about tackling climate change we’d probably (subject to a carbon tax’s implementation) see a lot more nuclear generation being built.

DISCLAIMER: as pointed out by Luis Enrique, I should have been clearer that I occasionally help produce events aimed at the nuclear sector. So don’t trust anything I say obviously.

Filed under: Economics, Politics

Quick, a post about anything other than Thatcher: Ecuador’s performance is even more impressive that you realise

No preprepared obituary for her Toryness here, no siree, instead something completely irrelevant (or timelessly more relevant) about Ecuador.

So, first things first, I’ve always had a soft spot for Rafael Correa.

Firstly, because he also went to LSE, secondly for actually going ahead and repudiating the odious debt built up by past kleptocracies, thirdly for running a relatively effective industrial policy and finally for this truly brilliant, hollywoodesque sequence during an attempted coup:

President Correa went to the police barracks in Quito where he arrived at 11:00 A.M. (GMT+5); after being ill-received — an honor guard was not assembled — he first tried to have a dialogue with the police and criticized their actions as treason to “the people and the country”, but after hearing hostile police chant “Lucio presidente, Lucio presidente” he screamed “‘If you want to kill the president, here he is. Kill me, if you want to. Kill me if you are brave enough!”

So when I see someone ripping on Ecuador and Rafa, I get a little peeved, especially when the criticism is so bizarrely weak. Timmy highlights this paragraph from a glowing guardian write-up of Ecuador.

By rejecting the neoliberal recipes of privatisation, structural adjustment and curtailed demand, we have grown by 4.3% over the last five years despite the global slowdown. Central to this growth, and to the reduction of unemployment to the lowest rate in the region, has been public investment, which at 14% in 2011 is the highest in Latin America.

He comments:

Dear God. Sub-Saharan Africa is growing by 5.5% a year without much if any public investment in anything.

With 14% of GDP in said public investment Ecuador should be roaring away at a much higher rate than that. They’re boasting about the figures that show what a poor job they’re doing.

This is bizarre on so many levels. Where to begin?

Well first I should not that Ecuador is much wealthier than Sub-Saharan Africa, seven times wealthier! [src src] As countries get wealthier it gets harder to grow rapidly.

Logically it could be no other way, as poor countries get richer amongst other things they have to stop borrowing ideas and technologies and come up with their own. That’s much harder and growth slows.

Africa has had the advantage of being really poor and violent and one of the best ways to grow rapidly is to stop killing people all the damn time.

Ecuador has the much harder task of seeking export led growth. This sort of development is the only really tried and tested model we know of to take a country sized economy from the idiocy of rural poverty to urbanised development.

But there’s a catch. It seems not everyone can get rich this way at the same time. It seems that pockets of development and successful export led growth move about. First the UK, then to continental Europe and North America then to a cluster focussed on Japan (including South Korea and Taiwan) then another focussed around China. The pattern is rock solid, but it’s pretty good.

So, Ecuador is not just trying to pull of this most difficult of feats cut off from much of the world’s financial markets (that debt repudiation thing mention earlier), it also has to compete with China, Destroyer of Worlds. I’ll let Karl explain this one:

China at some points has had investment rates of in excess of 40% of GDP…. For super-geeks this exceeds the Ramsey Rule at a zero discount rate. For non-geeks it means that there is no investment strategy under which this is the profitable thing to do.

Its always hard to tell but on balance I think the Chinese government is aware of this, yet is willing to lose money on its capital investments in order to provide jobs for people moving to the city. This is a smart move if you think cities produce agglomeration effects.

With apologies to the less wonkish, China is using physical capital as a loss leader in order to grow cities that will produce network effects will in turn foster the human capital that really makes a country rich.

Ecuador is competing with this, and is geographically cut off from the major global growth cluster of our time and is still growing at a reasonable pace. I’ll concede a lot of the growth appears to be oil driven, but so what. They are selling their capital stock of oil and investing it in a different sort of capital stock of public services. Sounds like a reasonable plan to me.

Filed under: Economics, Foreign Affairs, Politics