Makes you proud to be human

From the BBC:

Barely half an hour after they were jolted by a major earthquake on Tuesday, people of the Pakistani coastal town of Gwadar had another shock when they saw a new island emerge in the sea, just over a kilometre from the shore.

A local journalist, Bahram Baloch, received the news via a text message from a friend.... Mr Baloch and some friends landed on the island on Wednesday morning to check it out and to take pictures...

"There were dead fish on the surface. And on one side we could hear the hissing sound of the escaping gas," Mr Baloch said...

So what did our intrepid explorers do next?

Although they couldn't smell gas, they did put a match to the fissures from where it was oozing, and set it on fire.

"We put the fire out in the end, but it was quite a hassle. Not even the water could kill it, unless one poured buckets over it."

"Little White House On The Prairie Down"

From Wiki and Wiki:

Although predominantly a drama, there are some comedic moments. The show's central characters are Charles Ingalls (Channing Tatum), a U.S. Capitol Police officer who is assigned to the Speaker of the House, his wife Caroline (Richard Jenkins), after Ingalls saved Caroline's nephew's life during a tour in Kansas.

Cale is struggling to develop a better relationship with their four daughters Mary, Laura, Carrie and Grace (Joey King), who has a strong enthusiasm for politics. He hopes to impress them by getting a job with the Secret Service and adopting three children - Albert, Cassandra, and James.

His hopes are dashed when the interviews are conducted by the Oleson family - Nels, proprietor of the town's general store and his malicious, gossiping wife, Harriet (Maggie Gyllenhaal), a former college acquaintance of his who believes him to be unqualified due to a lack of respect for authority and follow-through.

After lying to his four daughters about the outcome of the interview, the Ingalls family joins a tour of the White House. At the same time, U.S. President Rev. Robert Alden (Jamie Foxx) proposes a controversial peace treaty between Lars Hanson, the town's founder and proprietor of the town's mill; and Dr. Hiram Baker, the town's physician.

Meanwhile, Mary Ingalls meets teacher-turned-husband, Adam Kendall, a mercenary disguised as a janitor, who detonates a bomb at the center of Oleson's Mercantile, the town's general store.

The House That £100k Built (Episode 2)

I'm watching the second episode on BBC2 right now, it's exactly the same as the first.

The "self-builder", widowed Sumati (which the voice over pronounces "Timothy", go figure) pays £100k for the land/plot* and spends the rest of her life savings - £50,000 - on building the actual cottage she will live in as cheaply as possible, using salvaged materials etc.

These Homey fuckers, honestly. Why don't they cut the crap and do a series called "The plot of land which cost £100k"? That's the so-called self-builder's biggest problem, designing and building a house and having it built for somewhere between £50k and £100k is the rewarding and easy bit.

* The way the story tells it, she bought what she thought was a habitable little cottage for £100k and had some money left over to do it up and is disappointed to learn it is a wreck. But it is clear from the context that any sane person would have know that the old building was uninhabitable, which is why she could acquire it so cheaply, and the old cottage is demolished in the first few minutes of the programme and she starts again from scratch.

More NCEisms

Following on from the "A Search-Theoretic Critique of Georgism" post earlier, I found this elaboration by one of the authors here.

Gochenour, gives us a valuable real life example of how landowners create land values, and therefore all Land is Capital etc, etc.

An illustrative example: say an undeveloped lot near a residential area is valued at $x, the sale price at auction.

The new owner, an entrepreneur, has local knowledge and believes that the lot is a good place for a business. He canvasses the neighborhood and decides to build a restaurant serving delicious BBQ sandwiches. He believes he has a solid chance of running a successful restaurant, so he takes the risk and embarks upon the project. Ten years later, the restaurant turns out to be a success.

Sadly, the restaurant burns to the ground in a freak conflagration. The rubble is cleared and we are left with an empty lot. But is it the same lot as before? Should it be valued at $x? Now, everyone knows a successful restaurant could be built here, before, no one knew. The “unimproved” value has changed. For that matter, the value of nearby lots is likely to have changed as well. What happened to the value of big commercial lots in semirural areas after the first successful Wal-Mart?

There are a couples of point here:

Firstly, the site described above had potential, which the search discovered (costs which the entrepreneur incurs before he bids for the site - he pays these in his capacity as entrepreneur and not in his capacity as landowner). The other people at the auction were too lazy, unimaginative, skint to put in a higher bid. Only later when the restaurant became a success was the full value of this location revealed. But it would have been revealed to anyone who built a well run enterprise from that location.

Can it really therefore be said, the restaurateur created the potential i.e. the added land value, or just exploited its full potential? What exactly was innovated? A tasty new way of BBQing ribs perhaps, but is that a new use for land? I'm pretty sure retail was discovered quite a long time ago.

If we take Gochenour's logic further, if someone naively pays too much for a plot of land, they are destroying land values? Personally, I think they are just an idiot. The only thing they've really destroyed is their bank balance.

At the end of the day, if any business has to include an under valued site as part of their plan, they haven't got a viable business.

Secondly, a lot NCEist use efficiency as a reason against LVT. What if in the example above the restaurateur had rented the plot instead. The landlord is in effect collecting private LVT. As we all know, had the restaurant been a rip roaring success he would have put his rents up.

So for consistency, as well as arguing against the public collection of site values on grounds of efficiency, NCEist's should also be calling for a ban on private landlords or for rent controls.

But, of course they never have and never will. Funny that.

Indian Bicycle Marketing

The Red and Blue Armies have declared Phoney War and as their battleground have chosen a storm in a teacup over very minor tweaks to two of our relatively less bad taxes. (They steer well clear of even mentioning the worst ones, 20% VAT on gross profits; 25.8% National Insurance on wages; and income-based withdrawal of benefits of around two-thirds of all wages up to a median income.)

Take it away, Matthew Sinclair of The TaxCollectors' Alliance...

ED MILIBAND made two big new pledges in his speech yesterday: lower business rates for small businesses, paid for by higher corporation tax on larger firms; and a freeze in energy prices for 20 months from the date of the next election.(1)

Economic reality would quickly bite for any government that tried to introduce either policy. There is nothing wrong with cutting business rates.(2) Lower rates would be a relief for many – particularly small firms and retailers. They often effectively pay half as much again on top of rent.(3)

But higher corporation tax rates for larger firms would not raise government revenue, except maybe in the short term. Just as firms in competitive markets cannot increase profits by charging higher prices, governments cannot just hike taxes and expect more revenue in return. Higher corporation tax will drive away investment and mean fewer jobs, lower wages and – in short order – less revenue for the state.(4)

1) This is indeed a stupid idea, seeing as it is UK government policy to push up consumer prices with all sorts of bizarre green taxes and rules, many of which Mr Ed himself introduced himself a few years ago. Let's get rid of those first, think seriously about nuclear power, fracking, improving competition and so on and see what happens.

2) There is everything wrong with cutting Business Rates across the board. This only makes sense in very run down areas where the rates are in excess of the site-only rental value.

3) That's the whole point, you wanker. Business Rates are - officially - supposed to be 46% or 47% of the rent payable to the landlord. So if some are paying "half as much again" then that is not far off and within a reasonable margin of error anyway.

More to the point, it is a circular calculation and the tenant does not actually pay a penny in the long run - if he knows that a place has a total rental value of £14,600 then he works backward and decides that a fair rent is £10,000 because there will be £4,600 rates on top. So really, the rates are only 31% or 32%.

4) Oh do fuck off, Mr Sinclair. All Labour have suggested is pegging corporation tax at 21% for large businesses instead of reducing it to 20% a couple of years in the future (i.e. the current mainstream rate is 23% and the Lib-Cons have proposed reducing it in 1% steps all the way down to 20%, which certainly has the merit of simplicity).

If the Tories really thought that 21% is so terrible, why have they set the rate at 23% for the current year?

I am a devout believer in the Laffer Curve, and if corporation tax were the only tax, whether it is 20% or 21% is completely irrelevant, they are both on the upward slope of the Laffer Curve, the deadweight costs of such a low tax are negligible (1% of GDP?).

The effect he refers to only kicks in if taxes are above 60% or whatever the revenue-maximising rate is and are reduced to below 40% or something where there is a noticable reduction in deadweight costs.

But of course, corporation tax is not the only tax, and is a relatively minor tax in the grander scheme of things, it raises one-third as much as VAT and one-third as much as National Insurance, why not have a think about those first?

Reader's Letter Of The Day

From the FT:

Sir, Your report on Mark Carney's promise to keep interest rates low missed the main flaw in the idea (Pound up as unemployment falls to 7.7%, September 12).

As ... Mervyn King pointed out, an interest-rate cut simply pulls investment forward in time. And that works for perhaps two years, after which the cut has no effect.

So while an interest rate rise would be deflationary, continued low rates à la Mr Carney will not be stimulatory.

Ralph Musgrave, Durham, UK.

There's a moose loose aboot this hoose etc.

From The Daily Mail:

State wildlife officials have tranquilized a moose on the loose in suburban Denver.

Colorado Parks and Wildlife officers were called on Monday to capture the animal, which had been wandering the streets of Broomfield for weeks before it became a problem for residents.

The agency estimates the male moose is 3 years old and weighs about 1,000 pounds. KMGH-TV reports the animal was spotted wandering through residential neighborhoods [sic] and in and out of people's yards.

Wildlife officials say the moose caused no injuries or major damage and will be taken back to the Continental Divide, where it can find food and water.

It is not reported whether they caught it with a noose and/or whether they fed it some mousse or juice before turning it loose etc.

Hard Working Houses?

As mentioned by the ONS and picked up by the FT Alphaville team, London house prices are up 9.7 per cent over the 12 months to July.

With the average London house costing £438,000, the capital gain was worth £38,729. The average London household post-tax wage, however was of £38,688 in 2011 (apparently the last year for which the ONS has statistics).

Now, there are some issues with cross comparison and the FT freely admits that it hasn't factored capital gains, paying foxtons, getting the money while having somewhere to live, potential transaction costs but as the article concludes;

"London houses don’t sleep or take holidays, and earned £4.42 every single hour of the year to July."

 

Perhaps it is time to add hard-working houses to the political lexicon.

Aditya Chakrabortty snatches Failure from the Jaws of Success

I wouldn't normally link to the Guardian, but there's an article that's really worth reading just to grab all the various facts laid out in it about the problem of too much degree education. No, really, go and read it.

Just prepare yourself for the epic facepalm at the end

University isn't just about getting a job, you might retort. I couldn't agree more. But that's what the political class has reduced it to. All the stuff that makes learning worthwhile – broadening one's horizons, having daft but heavy arguments with new friends – all that just gets lip service from ministers. And in turn, they've shaped an higher-education system that allows less and less space for speculation and taking intellectual risks. How are you meant to do that when three years at uni can now easily cost 50 grand, and you need to do one or two part-time jobs to pay the rent? What you're left with now increasingly looks like the degree factories the critics always warned against – only without the degree-level jobs to go alongside them.

On the contrary, that's exactly what the political class hasn't done. A jobs-orientated political class would have never increased the number of graduates from 19% to 40%. Or allowed so many courses in underwater basket weaving. Or when it appeared to be producing lots of BAs in underwater basket weaving rather than engineering or veterinary medicine, to have intervened.

As for having daft and heavy arguments with friends, you know, you don't need to go off to university to do that. There's this place called The Internet.

Homey-In-Chief Emeritus* on top form

From City AM:

WHAT, exactly, does the Labour party think it is doing? It wants to hike – yes, hike – corporation tax if it is elected in 2015, the latest of a long list of utterly destructive policies unveiled in recent days. The idea is that this will "pay" for a freeze in business rates on small firms, which means that the net burden on business will remain unchanged.

But this is a nonsensical idea on every level, not least because every sensible nation is reducing its tax rates on profits to try and woo globally mobile firms, and the UK's efforts had started to be noticed internationally.

All good stuff so far, low taxes on income attract businesses and wealthy people; high taxes on income drive them away. But you cannot drive land or landowners away and any tax thereon (e.g. Business Rates) merely reduces the price which a new entrant has to pay for the land (purchase price or rent).

Having made a good start, he then goes completely off the rails and contradicts his first two paragraphs:

Yes, business rates – which are levied on premises – are an appalling, antiquated tax (1) and are accelerating the demise of the high street.(2) Rates favour online firms with more limited premises.(3) Many retailers – such as Tesco or Sainsbury – pay far more in business rates than they do in corporation tax.(4)

1) He says "antiquated", I say "tried and tested".

2) Business Rates are levied on all business premises - including out-of-town shopping centres. So that's a level playing field. And by and large, high street shops are actually owned by smaller landlords or might be owner-occupied. Out-of-town shopping centres are usually owned by huge multinationals. So these multinationals are using the "small independent retailer" as a convenient human shield (see also "Poor Widows In Mansions").

Further, all tenants care about is the total bill of rent plus rates, they do not care how it is split up. So instead of arguing that rates are too high, you could equally argue that rents are too high and there's a free market solution to that.

NB, it's all about car parking (and bus routes etc.), actually. That's what "the high street" needs most.

3) Online retailers use land more efficiently, they can manage with lower value sites for their warehouses, so they pay less in rent and less in Business Rates. What's his problem?

4) That's their choice, isn't it? If they couldn't secure a huge advantage by owning prime sites with big car parks, they simply wouldn't pay the Business Rates. They also spend a lot more on wages and goods for resale than on Business Rates and corporation tax put together, so does he go on to suggest that people should be willing to work for free or provide goods for resale for free?

And like a true Faux Lib, he does not mention VAT at all, even though Tesco and Sainsbury pay far more in VAT than in Business Rates and corporation tax put together.

* This vital role is now being carried out jointly by Mark Carnage and Georgon Osbrown.