Monday, 20 April 2015

A reminder why we have an international aid budget

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I get the anger at there being cuts at home while the budget for international aid has been protected. And, for the record, I don't support the mandated 0.7%, the de facto hypothecation of the budget or the preference for bilateral deals. But having an international aid budget isn't simply a case of us rich folk being nice to poor people in Africa. Investing in those places - helping them develop - is absolutely in our interests.

As we've been reminded:

Whether it was the Mediterranean's deadliest refugee drowning in decades remains to be seen. But it was certainly terrible, and its political effects could spread far. One of the survivors of a refugee boat that capsized late on the night of April 18th in the waters between Libya and the Italian island of Lampedusa said that at least 700 people had been on board. Just 28 have been rescued so far. That would make it by far the worst maritime disaster in the Mediterranean since the second world war.

A great deal has been made of the decision by the EU (and individual states including Britain) to end "planned search and rescue operations in the Mediterranean" because it was believed that fishing refugees from out of the sea only encouraged more of them to attempt the risky crossing. I do not support this policy - it is quite simply inhumane. I remember the suggestion - I think from P J O'Rourke - that instead of turning these folk away, we should be on the beach with a towel and a passport. We keep saying how we want risk-takers and people with get up and go - isn't that the very definition of these refugees?

The solution, if that's the right word, is for there to be less reason to leave Africa in the first place. And while war and the depredations of lousy government are part of the story, economic opportunity is central - just like us, these Africans are seeking to better their lives and are taking enormous risks in doing so.

And this is why we have an aid budget. It's also why that aid is better directed through multilateral agencies like the World Bank and International Monetary Fund than through cosy bilateral deals or, worst of all, through the agency of well-meaning but wrong-headed NGOs. Right now our aid programmes are a mixture of anti-globalist nonsense, the subsidising of rural poverty and a few strong infrastructure programmes (mostly around health and education). It's not the size of the budget but its direction that is the problem - we need investment that comes with strings, with a bit of that Washington Consensus that the left are so touchy about but which has been the single biggest reason for reductions in world poverty.

So long as the gap between opportunities here and opportunities there exists people will try to arbitrage the gap - some will be ordinary economic migrants, students and the like. But there's big money to be made smuggling people across borders and, as the Americans have found, it's almost impossible to stop people crossing those borders. So investing in those countries so they have the infrastructure needed for development makes every kind of sense if we want to prevent out richer places being a huge magnet for the billion or so folk out there who'd like a better life.

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Saturday, 18 April 2015

Life on the farm...


Catstones Moor from Tan House, Wilsden on a cold April day
From where I lie
The sheep can safely graze
The farm breasts through the haze
And all is still
From where I lie
A magpie skirts the vale
Reminder now of this o'er-deepening dale
And all is still

The old tractor splutters and coughs into the little farmyard, its days work done. Another day in its thirty years of lifting, shifting, towing and spreading on the sparse fields of a Yorkshire hill farm. The engine is stilled and the driver - the tenant of that hill farm - clambers down from the tractor's cab.

The farmer is old. Too old you might say. Having got down from the tractor he stands for a few seconds seemingly oblivious to his similarly old border collie and catches his breath. The next task is to close the field gate - the man is tired and he makes his hand into a fist so as to still the shakes that get worse with each passing day. With the gate closed, the days work is done or will be so long as nothing dies, breaks or falls. Last autumn the fox got into the chicken run and killed all but a handful.

The farmer shuffles slowly to his house. A house with no central heating, a leaky roof and single glazing but where the tenant farmer can't afford to run more than one fire - so he'll stay in his coat to keep warm and anyway he's tough and can cope with a little cold. His wife died a couple of years ago, his daughter's alright as she's a nurse in Sheffield and his son's driving tipper trucks for the big quarry company. The farmer knows nobody will succeed him - as he did to his father - in the tenancy and he frets about the animals.

We idealise farming - on the telly the life's not that of an old man with Parkinson's struggling to keep enough together so as to just about make a living. Instead we see a big strong man striding across the fields talking purposefully about the jobs and tasks around the farm. Or else some presenter's plaything of a hill farm - filled with a restored farmhouse, lambs, chickens and beautiful moorland views. A million miles away from our old tenant farmer, from the reality of hill farming.

Sat in his tatty armchair sipping a mug of tea our farmer might let his mind wander to the neighbour - the farmer dragged through the courts, broken and bankrupted because he shot a dog that worried his sheep, a dog that threatened his meagre livelihood. The village a short while away is filled with suburban dog-owners who see the fields as some sort of playground where the dogs can run.

Or the farmer might think of tomorrow's tasks - the wall to fix where someone decided to liberate some stone for a little garden feature of a wall, there's maybe muck to spread, later there'll be hay to cut and gather. And there's always paperwork. Endless paperwork - from DEFRA, from the Council, from the benefits people. Plus the bank - he smiles as he remembers the local farmer who drove his muck-spreader into Keighley and treated the front of Barclay's Bank with some choice muck - and the suppliers he hopes to put off paying for a few weeks.

Farming in England's uplands is dying - quite literally. Our farmer is all too typical - it's not a business he's running, he's only kept from starving by subsidy and the benefits system. And there is no succession, no new farmers. Why should there be when no-one can make a living from running an upland farm - even with the Common Agricultural Policy. Yet we expect that farmer to provide a service to us all - keeping footpaths open, mending fences, treating and keeping the land and raising livestock. All so we can get all misty-eyed as we talk about the unique moorland environment and campaign for special designations so that place can be protected from heaven knows what.

If we want to conserve those uplands - so we can walk, cycle, ride horses across it or maybe just drive through it to a pub with a view - then we need to ask how we are going to pay for it. Because those farmers - old, tired, ill and poor - simply aren't going to be there to do all the heavy lifting of loving and caring for the place. So next time you see two old men and a lad fixing a stone wall don't just admire the skill or even appreciate the effort. Instead ask how your free enjoyment of the countryside - enshrined in law - is being paid for. Then before you get back into your new-ish motor to drive back to town, blush a little in guilt at how a poor man's money is being spent on providing you with a playground.

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So let's not talk about the 'jobs miracle', let's talk about welfare instead!

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The latest figures for employment, unemployment and jobs came out yesterday and it's fair to say that they are, without question, good figures:

UK unemployment has fallen to its lowest rate since July 2008, official figures have shown.

The number of jobless people dropped by 76,000 to 1.84 million in the three months to February, the Office for National Statistics said on Friday.

That means the unemployment rate has fallen to 5.6%, in line with forecasts.

Average weekly earnings in the three months to February, excluding bonuses, rose by 1.8% compared with the same period a year earlier.

Growth was slightly lower than the rate in January. When bonuses are included, weekly earnings rose by 1.7%.

The number of people claiming Jobseeker's Allowance in March fell by 20,700 to 772,400, the ONS said.

Add to this record numbers of job vacancies and we should be looking forward to continuing growth in employment plus, as vacancies begin to outstrip the number unemployed, rising real wages.

The New Statesman, which I guess we can describe as part of the 'intelligent left', published an article (by Jonathan Portes) with this headline:


About that Conservative jobs miracle... 

Now you'd expect therefore that the article would discuss - perhaps with some criticism or different analysis - those figures I quote above. But in a long article packed with data not one word address that 'Conservative jobs miracle'. Instead we get Portes' usual, tightly argued position on welfare reform. Or in this case benefits paid to people who are sick and disabled. And as I read it, the jobs miracle (in Portes' view) isn't down to people coming off incapacity benefit - he doesn't provide any indication as to what might have contributed and seems more interested in the budget deficit rather than why so many people have found work.

For me the positioning of an article about welfare as an article about jobs reveals the extent to which the intelligent left is prepared to ignore good economic news and to poke about trying to find something wrong with what's happening out there. I find this all a bit sad. But then the intelligent left has always been a terribly 'glass half empty' bunch.

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Wednesday, 15 April 2015

A reminder that "Big Data" analysis isn't research it's sympathetic magic


IF we analyse the principles of thought on which magic is based, they will probably be found to resolve themselves into two: first, that like produces like, or that an effect resembles its cause; and, second, that things which have once been in contact with each other continue to act on each other at a distance after the physical contact has been severed. The former principle may be called the Law of Similarity, the latter the Law of Contact or Contagion. From the first of these principles, namely the Law of Similarity, the magician infers that he can produce any effect he desires merely by imitating it: from the second he infers that whatever he does to a material object will affect equally the person with whom the object was once in contact, whether it formed part of his body or not. (from The Golden Bough, Sir James Frazer)

The current obsession with 'big data' should concern us - not because the data is useless but because it makes people think in peculiar (and worrying) ways:

But with the advent of “big data” this argument has started to shift. Large data sets can throw up intriguing correlations that may be good enough for some purposes. (Who cares why price cuts are most effective on a Tuesday? If it’s Tuesday, cut the price.) Andy Haldane, chief economist of the Bank of England, recently argued that economists might want to take mere correlations more seriously. He is not the first big-data enthusiast to say so.

This quote is from Tim Harford and describes what I refer to as sympathetic magic. We pile up enormous mountains of data and interrogate that data with clever computer technology (that mostly we didn't create and don't understand), find correlations and make sweeping assumptions based on the correlations we do find - as opposed to the myriad other correlations we haven't found.

So what that chap from the Bank of England is saying is that if we pull this lever here and press that button there it does seem that this result occurs. We've no idea why it occurs or even whether, given a different set of instructions to the clever computer technology, we'd get the same correlation again. Yet the economist takes the result spat out by the big data black box and declares it to be scriptural - the latest set of levers and buttons that will set the economy on the right course.

All the acolytes of that economist then produce graphs showing the results of all that wonderful (and essentially magical) data-crunching. Until such a time as a different mountain of data or a different analysis tool produces a different set of buttons and levers to press or pull. This continues in cycles as the followers of one or other school of magic contest to either create new answers or - more commonly - to argue backwards and forwards why the other school is wrong.

Back in 1990, before all this Internet lack, us direct marketers were playing with big databases - the geodemographics and psychographics economists and such folk think are new and exciting were the tools we used. We experimented with expert systems and with emerging data mining tools of one sort or another. And we discovered that the results of such analyses (prices cuts are more effective on Tuesdays or whatever) were very useful. But not as useful as we'd like them to be. Big data analysis was still no substitute for information about real purchase behaviour meaning that the database analyses were more useful as a planning tool than as a pointer to where marketing investment might work best.

Much of macroeconomics - for all the volume of learned interpretation it generates - falls into this trap. There is a great deal (too much probably) of information but what matters isn't how much data we have but the tools we use to assess that data. And these tools provide conflicting information meaning that there simply isn't a right answer - other than that something should be done to direct the economy.

None of this is to say we shouldn't analyse that data, crunch those numbers, try to understand what these Big Data runes tell us about the world. But we should do it with humility and should recognise that this is not real knowledge but rather a chimaera of knowledge - real knowledge is to know, for now at least, the causes of something:

Do Big Data help us establish ‘causation’ more accurately? No. But new and unexpected patterns might emerge that suggest how combinations of risks interact unexpectedly.

Though even then some patterns are just, well, luck. Their probative value can not be assumed. Quick, give me another grant! We need more data to help us understand what Big Data are telling us!

Such is the nature of this big data thing. Yet we assume - because there is so much information - that the answers it spews out will be better, more true. To which I reply with this research:

Demographic segmentation variables are cheap and easy to measure, while psychographic variables are more expensive and harder to measure, but can provide more insight into consumers’ psychology. Suggests that a prima facie case exists for the suitability of astrology as a segmentation variable with the potential to combine the measurement advantages of demographics with the psychological insights of psychographics and to create segments which are measurable, substantial, exhaustive, stable over time, and relatively accessible. Tests the premise empirically using results from a Government data set, the British General Household Survey. The analyses show that astrology does have a significant, and sometimes predictable, effect on behavior in the leisure, tobacco, and drinks markets. 

This is Big Data analysis. Do you believe it?

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Tuesday, 14 April 2015

As dog whistles go this one from George Galloway is loud!

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One of GG's lines in his Bradford West election campaign has been to suggest that the Conservative and Labour candidates against him are stooges for a sinister neo-conservative think tank called the Henry Jackson Society. Worse that this think tank is a sort of Zionist sponsored campaign that wishes to destroy Mr Galloway (or at least get him unelected).

That's the context for this:

The inference here - in a constituency where about half the electorate is Muslim - is that the Israeli Prime Minister, Benjamin Netanyahu was somehow responsible for the Labour Party's selection process in Bradford West. You can read across from this is two ways - that it's all a Zionist conspiracy (doubtless Galloway's defence) or else that it's a Jewish conspiracy (which the lack of clarity in Galloway's comment allows others to claim or argue).

Lot's of people would consider this particular image rather anti-Semitic. All I'm going to say is that it's a very loud dog whistle indeed.

Update: Another similar image doing the rounds...



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Extending right-to-buy won't solve our housing problems but it is still a great idea

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Let's be clear about one thing at the outset, right-to-buy doesn't mean there are more houses and certainly doesn't mean there are fewer houses. All it does is transfer ownership to current tenants from government and wealthy subsidised owners. A right-to-buy policy isn't about resolving housing problems (such as London's undersupply) but is about sharing the nation's wealth more equitably. And if you see it in these terms, it is a policy that people will welcome - or would do if they didn't either have a direct financial interest (local councils and housing associations) or else an ideological objection to poor people owning property (socialists).

There's a devil in the detail of any right-to-buy (RTB) policy and no-one has seen those details in respect of Conservative proposals to extend RTB to housing associations. When the property involved is state-owned the issue of discount could be lost in the endless (and byzantine) debate around local government finance but this extension of the policy means that RTB applies to properties that are not directly-owned by the state. Leaving aside the issue of eminent domain (as the Yanks call it), any policy has to compensate the housing association for the loss of its asset and/or rental stream. The way to achieve this is to ensure that there is a pipeline of new property to replace transferred homes. Indeed it was the lack of this pipeline that provided the principle criticism of the 1980s RTB programme.

While we're on about 'taking other folks property' bear in mind that Shelter (in cahoots with the development industry and planners) is very keen on compulsory purchase when it suits them:

A royal commission should decide in an impartial way where new garden cities should be located, and new development bodies should have the power to compulsorily purchase any necessary land, their report recommended. This would help to stop landowners from making excessive profits and instead could share the proceeds with the local community once land is sold on to developers, garnering support for new housebuilding, they said.

There is - other than that this is big business calling for subsidy and discount - no difference between such a development approach and the concept of RTB. Yet selling homes at a discount to ordinary folk is a terrible awful policy that will do dreadful things to the housing market while purchasing loads of private land at below its market value is a thought through policy from experts. And of course those new towns and garden cities will be filled with properties rented to the less well-off by worthy corporations - managed naturally by men and women who live in lovely privately-owned barn conversions nowhere near those rows of little boxes they're renting.

Today there are a lot of housing association directors taking to the airwaves and tweeting madly about RTB. None of them point out that their concern isn't for the tenant but rather for their associations' balance sheets. Just as a lot of the objection (not all to be fair) to the so-call 'bedroom tax' was really about housing association cash flow.

Instead of defending the current status quo, we should be looking at how to secure the transfer of ownership to tenants with the financial capacity while maintaining our provision of good housing for people who otherwise wouldn't be able to afford such housing. I really don't see RTB as a barrier to such provision.

Update:

Indeed it seems some housing associations were keen on RTB only a year or two ago:

Mark Henderson, Home Group chief executive, said: “When the Government published its Housing Strategy at the end of 2011, improved right-to-buy opportunities for council tenants were at its heart. Home Group highlighted then that a far more seismic economic impact would be felt if the same opportunity was extended to housing association tenants providing we can replace a new property for each one sold.

“Updating the right-to-buy rules for housing association tenants not only offers individuals the same chance to become a homeowner as residents in council homes, it will give a phenomenal boost to the UK economy.”


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Monday, 13 April 2015

Sorry envious lefty folks but entrepreneurs did build that infrastructure

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You'll all be familiar with the "you didn't build that" line directed at wealthy and successful entrepreneurs who have the audacity to use public roads, educated employees and safe communities in managing their business. The most commonly used example - usually in the form of this little Internet poster - is from US Senator Elizabeth Warren.

There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory — and hire someone to protect against this — because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.

You can hear as the socially aware cheer to the rafters at Liz sticking it to the man - telling those rich, successful business people that they owe all that success to the government and should be jolly grateful that it plans to take most of it away in taxes. And it's true that all those things were done with public money (although it's entirely possible - certainly with roads - that private investment could have delivered just as well). But that's not the point, the point is that the rich and successful entrepreneur added some value that wasn't there before - here's Don Boudreaux:

The government-built road that Smith uses to earn handsome profits by serving consumers might well be absolutely essential to Smith’s success, but this fact doesn’t mean that the road’s contribution at the margin to Smith’s success is significant.  Smith’s profits depend upon what he adds to the road’s services – how Smith himself uses the road to create value for consumers.  If Smith uses the road to ship truckloads of ordinary toothpicks to market, he might earn just enough to continue in that line of work, but he’ll not earn magnificent profits.  If instead Smith uses the road to ship truckloads full of new’n'improved toothpicks – toothpicks that sell at prices only slightly above that of ordinary toothpicks but, in addition to doing what ordinary toothpicks do, also are guaranteed to prevent gum disease, cavities, bad breath, insomnia, and erectile dysfunction – then Smith profits magnificently.  Smith’s “above normal” profits (as economists call them) have nothing to do with the road (or with, say, the private efforts of entrepreneurs who are responsible for the delivery truck Smith uses) and everything to do with Smith’s own innovative efforts.
This is the entire point - the entrepreneur is successful because he gets a small part of the value he has added to society (about 3%), most of that value is enjoyed by the consumers who use the goods or services that entrepreneur creates. Having schools, hospitals, roads and policemen paid for from taxes is not a guarantee that we will get that extra bit of margin - it is entirely down the the entrepreneur, which is why such folk are so rich.

So we have benefited (collectively) from 97% of the value added by the creation of whatever wonderful innovation our entrepreneur has developed. And, since this is how the world works, a pretty juicy chunk of that 97% has gone to the government is taxes, duties, fees, levies and rents - the Elizabeth Warren argument is simply wrong. For sure, the entrepreneur didn't build those roads but the extra tax income the added value from his innovation provides made a big contribution to providing schools and hospitals as well as contributing to the next generation of infrastructure investment.

No-one denies the essentially collective nature of free markets - the idea that they are selfish, individualistic or greedy is utter nonsense - yet the cheerleaders for what we might call the 'envious left' continue to peddle the lie that somehow that billionaire entrepreneur isn't successful from his own intelligence and efforts. Worse still that our entrepreneur should face punitive taxes on income and on the return from investment for the sole reason that he has such a lot of the stuff and we don't like him for that reason.

In the end, the marginal improvements those entrepreneurs got rich from also were what made us all richer and made it possible for government to built that infrastructure so the next generation of creative business people can make the next set of marginal improvements (as well as the rest of us enjoying better roads, schools, hospitals and sundry other infrastructure).

The entrepreneurs did build that...

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