Tuesday 31 January 2017

Housing Crisis Paradox

We are told that high housing costs are due to a lack of supply. Therefore we need to build more homes to make them affordable. But building and maintaining housing expends labour and capital, which are a cost. 

How can increasing the cost of something make it more affordable?

Of course people need somewhere to live and the cost of housing is outweighed by the benefit of having shelter. But as the UK has roughly a million more dwellings than households, everyone has a roof over their heads, so it doesn't  appear we have an actual "shortage".

This paradox is based on a misunderstanding of costs. Location isn't a produced factor, so what makes up the majority of rents and selling prices isn't a cost, but a transfer payment. It is this payment which causes excessive individual, inter-generational and regional inequality, from which affordability issues for large parts of society is but one of the symptoms.

What puzzles me is that the subject of economics is really about costs and how to reduce them ie resource allocation and productivity.

Why is is then not a single economist recommends tackling this problematic transfer payment at source with a 100% LVT as the best way of addressing the "Housing Crisis"? Which would not only solve affordability issues completely and permanently, but would reduce costs by allowing the market to rationalise our existing housing stock.

Instead they want to tackle it indirectly by building more houses in order to reduce selling prices. Not only will this be far less effective in the goal of reducing the transfer payment, it will add billions of pounds of unnecessary costs to our economy.

Daily Mail on top form

Police find body of 14-year-old boy who went missing after barn fire at £2million country estate

Monday 30 January 2017

"Obama Administration Bails Out Private Equity Landlords at the Expense of the Middle Class"

Emailed in by TBH from Naked Capitalism.

A fairly long article, concluding with this:

Let us stress that there is absolutely no policy justification for this. The mission of the government sponsored agencies is to promote home ownership, not to give real estate speculators a “get out of losses or underwhelming returns for free” card.

Even worse, rather than forcing the private equity industry to take some well-deserved lumps for miscalculation, it will encourage them to continue to compete with lower-income prospective homeowners for purchasing properties. That means it will be even more difficult for young people to buy homes.

Lambert has pointed out repeatedly in his stats wrap in Water Cooler that real estate markets are suffering from a shortage of homes. Having private equity continue to be on the prowl for lower priced properties that they know they can unload from an economic perspective means that the pauperization of the middle class is now official policy.

Sunday 29 January 2017

Daily Mail on top form

Father 'shot his wife and son, 16, dead before turning the gun on himself' in their $1.2million home in a wealthy DC suburb

Saturday 28 January 2017

The Onion's Home Repair Tips

From The Onion

The so-called American Dream of homeownership is a fantasy carefully constructed by special interest groups to trap generation after generation in a quiet lower-middle-class life and preserve the hierarchical status quo.

But since you’re already here, you might as well know that you need to fully dry the bathtub before attempting to re-caulk it.

Friday 27 January 2017

Killer Arguments Against LVT, Not (408)

At the nuttier end of the Faux Lib spectrum, from politicsforum.org. He or she refers to land or land and buildings as "property", but it's a very common mistake so ignore that.

The basic point is that property is indispensable for supplying credits. Property generates rents, and it can be sold. Therefore it is an excellent security in order to back up credits. Thus property involves a premium, namely the right to receive a credit.

Liquidity originates from property. Since a bank receives the security in exchange for the credit, the interest originates from the premium of the property. Its height is still determined by the premium of liquidity.

In general capitalism emerges as soon as land becomes a private property, for land is a reliable security. Securities must maintain their value during the currency (term) of the credit. Land is durable, so that its premium remains intact. Credits create money.

In other words, money is simply a claim on property, and solvency corresponds to property. So the amount of money is determined by the available property. The debtor must pay (transfer) the premium of property to the creditor.

Note that the debtor retains the right to use his property. Entrepreneurs compete for credits. They exchange their premium on property with the premium on liquidity (the opportunity to make profits). In fact the interest on credit forces the entrepreneurs to become profitable.

This in turn furthers innovation. So the driving force for productivity is institutional, namely the creation of debts, which must be served. During a crisis the state can stimulate the economy by supplying additional property, for instance by selling state-owned land.

That is all so incoherent and feeble it is barely worth demolishing - it collapses under its own weight. All the credit created by land merely goes into buying land, by definition. There is no knock-on benefit for the real economy. You can unpick each and every single assumption/argument just as easily. TruthToPower did a lengthy demolition, but let's go with...

Paradigm wrote:

I think it should be pointed out that the argument presented in the OP actually does a good job of explaining the argument for land value taxation. See, the use of land for credit is precisely the sort of thing Georgists are critiquing. The fact that rising rents are used for credit expansion is why land is such a central component in economic bubbles.

Since land is a fixed commodity, its value is bid up by speculators until it becomes too expensive for continued economic activity, at which point the bubble bursts, and the whole house of cards comes crashing down. The idea with land value taxation is to take this asset out of the equation so that economic activity can be based on the actual goods and services available, rather than on speculative assets.

The other really obvious fish in the barrel is this bit:

Entrepreneurs compete for credits... the interest on credit forces the entrepreneurs to become profitable. This in turn furthers innovation. So the driving force for productivity is institutional, namely the creation of debts, which must be served.

Let's assume that's correct. With LVT, businesses would be under the same pressure to meet their LVT bills. In that sense it comes to the same thing and his argument falls flat, but...

a) With LVT, businesses (or households) are not faced with huge debts, hence more financial stability etc.

b) With LVT, all landowners would be under pressure to innovate. Without LVT, those landowners who are not engaged in wealth creation on their land (landlords and those who leave land idle) merely consume/reduce the wealth created by others.

It's not a game of Monopoly... well, it is actually.

Via MBK from The Times:

Tesco, the country’s biggest supermarket group, has announced a surprise £3.7 billion merger with the food wholesaler Booker.

The deal, which has the unanimous backing of both boards, will create one of Britain’s largest wholesale and retail food businesses that aims to improve the quality, choice and price for customers, independent retailers, caterers and small businesses.

1. Tesco is trying to increase its monopoly power, so whole idea is to reduce "the quality, choice and price for customers, independent retailers, caterers and small businesses".

2. That's a kick in the teeth for the 1,000 workers at the two distribution centres which Tesco is shutting down.

3. Tesco is still my favourite supermarket though. As a consumer, I see little to complain about.

Thursday 26 January 2017

Sounds like a job for LVT-man

Vie MBK from The Telegraph:

The vast majority of houses were sold under freehold, traditionally, while flats were leasehold. The latter puts owners at a disadvantage, exposing them to the whims of the freeholder.

But now houses, as well as flats, are also being sold with leases. Homebuilding giants such as Taylor Wimpey, Bellway and Persimmon then sell on the freehold as an extra source of income.

Telegraph Money has previously highlighted the plight of Taylor Wimpey homeowners whose leases include provisions that can mean ground rents double every decade. As well as the growing cost of paying ground rent, such terms cut the value of the property.

Admittedly, you have to worry about the naivety of some people, but LVT-man will sort it out.

I've explained this before when people advance the KLN: "But what about leasehold flats? How do you apportion the LVT bill between leaseholder and freeholder? What if there is a head lease and then sub-leases and sub-sub-leases? It's all very complicated!"

No it's not.

We know what the location element of the rental value of any flat is, regardless of chain of title. Let's say median £5,000 a year or something. If the leaseholder with immediate right to occupation has to pay £500 a year in 'ground rent' (i.e. privately collected LVT), his LVT bill is reduced to £4,500 and the freeholder gets an LVT bill of £500 (if LVT rate is less than 100%, the bills are scaled down proportionately).

If there's an intermediate leaseholder, receiving £500 per flat in a block and paying £200 per flat to the superior interest, his LVT bill is £300 (or whatever percentage) per flat, and so on.

This would pretty much demolish the value of the freehold reversion and any intermediate leases, making it easier for tenants to enfranchise, transferring the liability from the freeholder to the newly enfranchised tenants.

If the builder has played clever buggers and wants more ground rent than the LVT value, he just pays tax on what he actually asks for and the tenant has a zero LVT bill.

If a freeholder wants to sell the freehold reversion as an "investment" or lets tenants enfranchise, LVT would be levied on the entire proceeds (paying several years' tax on several years' income received up front). The investor or tenant can then amortise the appropriate part of the cost* against their own future LVT bills. So the greedier the freeholder is, the lower the future LVT bills for subsequent 'investor' or newly enfranchised tenant.

In these cases, an LVT rate of 100% would be ideal because it would make the whole exercise pointless from the point of view of the cynical land speculators and piss taking freeholders.


* The next 'investor' or tenant is paying for two things - a) the NPV of the ground rent income until the lease expires, which would be an allowable deduction for LVT purposes, and b) the value of the freehold reversion, which would largely relate to bricks and mortar and hence be irrelevant for LVT purposes. We can work out the value of a) very easily and arrive at b) by subtraction.

Wednesday 25 January 2017

Killer Arguments Against Citizen's Income, Not (6)

Twitter exchange:


UBI still seems barmy to me. Idea from @Citizensincome in @thetimes today seems to give a paltry £3K per person at national cost of £200billion.

@citizensincome (i.e. me) replied:

Thus replacing existing welfare payments and tax breaks which cost £200 billion. Also, redistribution is not a net national "cost" by definition.

@martin_farley hit back with these:

Quite. The 'cost' would be a tax rebate or a replacement for benefits for most people... #basicincome acts as either a benefit or tax break, depending on your income. It's just a more efficient version of both.

Why would giving tax payers a £3k rebate represent a cost to them?


Tuesday 24 January 2017

Stockbroker LOLZ

From City AM:

Sports Direct has split from three of its brokers, announcing today that Liberum Capital would be its sole broker from hereon.

The controversial retailer's former collection of brokers was made up of City heavyweights Goldman Sachs, Citi and Haitong.

Haitong and Citi are both neutral on the company's shares, while, last May, Goldman Sachs stopped recommending investors snap up shares and then later slashed its full-year profit forecasts.

By contrast, Liberum is one of the few brokers with a “buy” recommendation for the retailer.

Testing Times: Whose Independent Missile Test Anyway?

Testing times again for a Defense Secretary over the latest Trident Program. It was never, ever simple though. Back in the 1960’s everybody understood that the British goal of Nato was to keep the American Empire in, the Germans down, and the Russian Empire out. But it was never clear how the British, sub-launched, ‘independent’, Doomsday weapons contributed to this system.

At that time the American’s made some deals with Russia (Salt 1,2) that they would limit methods of shooting down the incoming missiles. The Russian deployed what anti-ballistic missiles they were allowed to own around Moscow. The problem for the British, who had Polaris, was that it could only deliver 16x2 warheads. Not enough to wipe out the target.

But it may well have been the case that Britain, in Polaris, had an ‘independent’ system. Because we quickly made clever party balloons that would deploy in space and spoof the Soviet counter missile control systems around Moscow (Christ comrade! It looks like 16x10 ish warheads). So keeping the end of the world in our hands too. The Americans had to admit that we were very clever. But they had to make sure we couldn’t do that again.

Why? The British ‘independent’ system, Washington knew, was never designed to scare the Russians, but was always designed to scare them. We threated to trip the exchange between American and the USSR by making the attack look big enough to be the first American wave on Moscow. That’s it then: a 1960s ‘independent’ British system actually targets the American political elite, because, in the end, we did not trust them much more than we trusted the Russians.

Now Trident D3,4,5 does not need to spoof (I bet it does though). But is it independent? Thinking about the headlines; who really tested the missile? I conjecture, given the non-classified history above, that the British test was actually a deeper American test. The Americans were showing the Russians and the Chinese that there is no independent British deterrent, and that they will be the ones who decide the fate of the world not the British. 'All telemetery old chap, don't you know'.

So what is all the smoke and fire about an Independent Nuclear Deterrent? Simple. I suspect that, by chance, the British and Americans have alighted on this hugely expensive mechanism as our particular method of paying our tribute to the American Empire. We are just servants to the empire, but everybody in the US and UK Military Industrial complex is happy, are they not?

We're not allowed to mention Barron Trump any more, so...

Monday 23 January 2017

Fun Online Polls: Group think & USA military spending

The results to last fortnight's Fun Online Poll were as follows:

Who is most in thrall to group think?

Tabloid readers 33 votes
Academics 67 votes
Journalists generally 57 votes
the BBC in particular 79 votes
Economists 56 votes
Other, please specify 10 votes

114 voters in total, over half chose the BBC and academics. With the benefit of hindsight, I should have include "climate scientists" as a category.

Suggestion for other included: non-smokers, smokers, actors, politicians, Students/SJWs/#GenerationSnowflake* and visitors to this blog.

* I dislike SJWs as much as the next man, but what worries me is that the term "snowflake" is being extended to everybody under 40 who don't own their own home and realise somewhere that they are being conned.
This week's Fun Online Poll, in the context of the general Donald Trump tomfoolery:

"Without Googling first, how much is the USA's annual military spending?"

Vote here or use the widget in the sidebar.

Saturday 21 January 2017

So British

From the FT:

The value of all the homes in the UK has reached a record £6.8tn, nearly one-and-a-half times the value of all the companies on the London Stock Exchange.

A rapid rise in the value of the housing stock, which has increased by £1.5tn in the past three years, has created an unprecedented store of wealth for Londoners, over-50s and landlords, according to an analysis by Savills, the estate agency group.

As well as rising sharply in nominal terms, housing wealth has grown in relation to the size of the economy: it was equivalent to 1.6 times Britain’s gross domestic product in 2001, rising to 3.3 times in 2007 and 3.7 times in 2016.

How little things have changed since the eighteenth century. It's still so much more acceptable to have your money in land than to have it in trade (as it used to be called).

Daily Mail on top form

Man in his 20s is stabbed to death and girl, 17, injured at a home on £1million avenue

Friday 20 January 2017

"Man dies in boiler room 'explosion' in Felixstowe"

From the BBC:

A person has died in what has been described as an "explosion" on board a ship at the Port of Felixstowe. One person was killed and another taken to hospital after the apparent blast in one of the Manhattan Bridge's boiler rooms.

The Japanese ship is used as floating offices by a large number of commission based salesmen selling questionable investments to gullible pensioners. Suffolk Police said the activities were highly suspicious.

The ship's owner said telephones used by overly ambitious and aggressive salesmen had been running hot for some time and a "boiler back-fire" occurred while some particularly tasty deals were being closed at 23:05 GMT on Thursday.

"Bayswater Investments (Europe) Limited (BVI) and all within the organization wish to express their condolences to the family of the deceased, and their sympathy with Ken Williams, 69, of 23 Hyacinth Street, Norwich who has just cashed in his final salary pension in order to buy another 20,000 units in the non-existent Ashanti Gold & Minerals Fund," a spokesman said.

There will be a joint investigation between the police, the Crown Prosecution Service, local trading standards, the Financial Conduct Authority, the Serious Fraud Office and the Maritime and Coastguard Agency just as soon as they have sorted out their bureaucratic turf wars.

"Eye watering", "black hole", "shocking", "whopping".

From today's Taxpayers' Alliance mass email:

News broke yesterday that Surrey County Council is to hold a referendum asking residents for permission to hike council tax by an eye-watering 15%... The reason the Council is doing this, it says, is to plug a black hole in their finances to pay for the increasing costs of adult social care.

Now, there is no doubt that appropriately funding social care is one of the most challenging policy issues we face. But a 15% tax hike in Surrey is shocking... The scale of this tax increase would put a whopping £190 per year on a family's bill for an average Band D property in Surrey.

Ho hum.

From Homelet:

• The second half of 2016 has seen a considerably slower rate of rental growth, compared to the same period in 2015
• The average UK rental value was £892pcm - this is 1.7% higher than the same period last year (£877pcm)
• Since July 2016, rents in Greater London have seen a slower pace of annual growth than last year
• This month the average rental value in Greater London is 2.0% higher than the same period last year

£892pcm - £877pcm = £15pcm = £180 per year.

I'm looking forward to the TPA email:

News broke yesterday that UK landlords are asking tenants for eye-watering rent increases... The reason landlords are doing this, they say, is to plug a black hole in their finances to pay for the increasing costs of foreign holidays and new cars.

Now, there is no doubt that going on holiday and replacing your car are the most challenging policy issues landlords face. But a 1.7% rent hike is shocking... The scale of this tax increase would put a whopping £180 per year on a tenant family's bill for an average Band D property.

Remind me, who's the 'snowflake' generation?

Thursday 19 January 2017

Remind me, when were those days?

From The Evening Standard:

Mr Verhofstadt, president of the Alliance of Liberals and Democrats for Europe group, said: "Britain has chosen a hard Brexit. May's clarity is welcome - but the days of UK cherry-picking and Europe à la carte are over.

To which period is he referring? When were we ever allowed to pick and choose?

Also Guy, please note, we Brits don't do cherry picking any more, East European migrants do that, and we don't have "cartes", we have "menus".

UPDATE: PaulC in the comments reminds us that the UK didn't join the Eurozone or sign up to the Schengen* agreement. If that's what Verhofstadt means by "Europe à la carte" then it's a good job we're leaving - by implication, the Euro and Schengen will be forced on us if we stay in.

* In practical terms it makes little difference whether an EU member state is in this or not.

Wednesday 18 January 2017

Killer Arguments Against Citizen's Income, Not (5)

Emailed in by Lola, more innumerate and illogical drivel from mises.org, first he outlines a few of the obvious advantages, and then…

Where UBI Proponents Go Wrong

A universal basic income is not the god-sent welfare policy that it initially seems to be...

Maybe it is not "god-sent", but it is far better than the status quo. That is the point here, compare UBI with the existing system and see which is better.

It does not create incentive to work.

It reduces disincentives to work at the bottom end compared to existing welfare system (plus myriad other advantages - compared to the current welfare system) and that'll do for now.

It won’t help solve unemployment, and it will not alleviate poverty.

It will discourage employment a damn sight less than the existing welfare system. He's pointed that out himself. And assuming it is pitched at the same level as current unemployment benefit rates, maths tells us that it will do just as good a job at alleviating poverty (and real world trials shows it does better, for a given total spending).

The truth is that a UBI will exaggerate all of these factors in comparison to what would exist in a more unhampered market.

That is not comparing like with like.

There is even reason to think that it would be worse in the long run than traditional, means-tested welfare systems.

Load of shit. Why..?

First, UBI does not eliminate the disincentives to work that are inherent in welfare programs...

Yes it does.

... it simply moves them around. This program must be financed after all, and any welfare system, including the UBI, is necessarily a wealth redistribution scheme. Wealth must be forced from those who have it to those who do not. This means that at some point on the income ladder, people must go from being net receivers of benefits to being net payers of benefits.

Having displayed his inability to follow a logical train of thought, the author now lays his innumeracy bare.

Whether (and which) other taxes would be increased depends entirely on how high the UBI is pitched. For the umpteenth time, if it were pitched cautiously at current unemployment benefit rates and were to replace unemployment benefits, tax credits and the tax free personal allowance, headline tax rates would not change. Most people would break even give or take 1% or 2% of their income. People would soon adjust.

The progressive taxation that is necessary to finance a UBI means that the more a person earns, the higher percentage of their wealth will be taken from them. The work disincentives are therefore still very much present in the tax system. They’ve simply been transferred onto different, higher income groups of people.

Having not taken a few minutes to do any workings and establish that tax rates would not have to change anyway, he appears to rule out the possibility that taxes could be collected from land values rather than incomes. This has no disincentive to earning more/working harder etc, if anything, LVT encourages people to do more proper work (to generate the income to pay the LVT).

Admittedly, how taxes should be raised is a different topic to how taxes should be spent, but he then drifts off via some irrelevant wishful thinking and ends with this...

This matters because the number one cause of the high cost of living is artificial scarcity created and maintained by monopolies, cartels, and the government that serves their interests. Artificial scarcity imposed by cartels and a servile state is the primary cause of soaring costs in a variety of sectors.

Does he not realise who and what he is talking about? Can he not think his logic through to land/land owners, banks/bankers, holders of other privileges (radio spectrum, landing slots, patents and copyrights, taxi driver permits, whatever etc)? Which of course tells us where governments should be getting their money from.

Monday 16 January 2017

Economic Myths: Fungible funding

Oxfam is getting all hot under the collar about the fact that the world's eight richest men own as much wealth as the poorest half of the population of the World.

Apart from appealing to the Envious, it is hard to see what they hope to gain by pushing this statistic. If those eight men all died intestate and their wealth was subsumed into their countries' national debt, hence effectively ceasing to exist, the world would be a more equal place, but how would that benefit the poor half of the population? For that matter, if their wealth was shared out equally between the entire richer half of the world's population, the world would be an even more equal place, but the poorer half would still be no better off.

What Oxfam are trying to suggest is that if these rich eight didn't have so much, the poor half would have more, but this is really just another example of the Myth of Fungible Funding, which is that if money is not spent on something of which I disapprove, it will automatically be spent on something of which I approve. (e.g. if the government weren't spending so much on Trident, they could spend more on the NHS and variants ad nauseam.)

If I was a supporter of Oxfam, I'd suggest that they get on and do something more useful with my money, but I'm not.

Sunday 15 January 2017

"Number of first-time buyers reaches 10-year high"

… boasted The Halifax last Friday:

First-time buyers numbers have totalled over 300,000 for the third successive year, growing from 312,900 in 2015 to an estimated 335,750 in 2016 (up 7.3%) – the highest level since the start of the financial crisis in 2007 (359,900).

That is a fairly meaningless figure until you put it in context. About 800,000 people turn 18 each year, and there is net migration of up to 200,000 working age people who are in work, so if there are only 335,000 first time buyers each year, that means that on current trends, the number of owner-occupiers will fall to about one-third in the long run.

See also the ONS publication Housing and home ownership in the UK, the number of owner-ocupiers in the 25-34 age group is down from two-thirds 25 years ago to one-third now.

Interestingly, of all age groups, it is only among the over-65s that there are more owner-occupiers today than there were 25 years ago. That's not even because more of those people have become owner-occupiers in the last 25 years - in other words, 25 years ago, three-quarters of 45-64 year olds were owner-occupiers, those people now fall into the 75+ age group and three-quarters of them are still owner-occupiers (unsurprisingly).

Saturday 14 January 2017

The wrong house

Continuing my very occasional series, from The Mirror:

A brave mother-of-four fought off two armed and masked men who burst into her home looking for drugs…

The intruders kept asking Sophie where the crop was and appeared to be looking for cannabis plants… She attacked one of the men, who was downstairs, with a pair of crutches and forced him out of the house. She then confronted the second man as he was coming down the stairs.

Sophie said: "He actually apologised to me for getting the wrong house before he ran off."

Paris Jackson doesn't do irony

Apparently, Paris Jacksons is upset about a TV film in which Michael Jackson was to be played by a white actor.

I don't get it.

Paris Jackson is a white actress who has been playing the role of Michael Jackson's daughter for the last 18 years, and nobody complains about that:

Friday 13 January 2017

If this is a good idea, then employers will do it anyway.

From a recent Evening Standard:

Employers were today urged to offer loans to staff to cover their rental deposit as part of a campaign to help workers with soaring housing costs.

Mayor Sadiq Khan announced that all parts of the City Hall group would offer employees help with renting a flat and urged businesses across the capital to follow suit.

Many firms have reported that they are struggling to retain and attract the best talent as workers are increasingly priced out of the capital.

The campaign, Fifty Thousand Homes, calls on employers to pay all staff the London Living Wage and to offer housing advice and flexible working within six months of signing up.

They are also encouraged to offer help to buy through mortgage guarantees or loans, preferential lending terms for mortgages and to consider providing quality rental accommodation.

For an individual employer, it might be a good idea to thus steal a march on other employers and/or get away with paying lower wages in exchange for a larger bung up-front.

For example
- if you don't have enough cash to move to London and are offered a £40,000 job in London, you can't accept it.
- if another employer offers you £5,000 signing on loan to pay your rent deposit/two months rent in advance and a £30,000 salary, you can take it, but are then stuck with the £30,000 salary until you repay the £5,000 signing on loan (which will take you years). You can't move either because you have nowhere near enough money for another deposit/two months rent up front and don't dare losing your first deposit (which some honest landlords sometimes pay back a couple of months after you leave).

If all employers do this, then it will merely push up rents and house prices (and suck money out of the rest of the economy). Khan is firmly in the pocket of the developers and is as Home-Owner-Ist as they come, of course, which is why he loves this idea.

The added downside is that if employees owe their employers money, they are one step closer to being bonded slaves. I'm always very wary of employment-related accommodation, it's a bit of a trap.

Killer Arguments Against Citizen's Income, Not (4)

From Business Insider UK:

The universal basic income — a universal payment to every adult, designed to support a basic living standard regardless of whether the recipient works — has never been a broadly popular idea.


But it has become subject of fascination for policy wonks...

Ad hominem. How would be describe the maniacs who came up the myriad of overlapping rules in the current welfare system? And better a 'wonk' than a total wanker.

... across the ideological spectrum because of the goals it intends to serve: decoupling subsistence from wage labour (a goal of the left), replacing complex safety-net programs that often create disincentives to work (a goal of the right)...

We have a welfare system that largely achieves (1) but the high marginal withdrawal rates are a massive disincentive (2). So a UBI set at the same level as current unemployment benefit (in the UK, at least) ticks boxes (1) and (2) and would cost no more than current welfare system and various tax breaks meant to alleviate hardship/poverty.

Job done.

... and preparing for a future in which automation reduces the demand for labour.

It is true that a lot of proponents say this, but it's a complete red herring AFAIC. Let's worry about it if and when it happens. This is the only one of the pro-UBI arguments which looks a bit shaky, so he then focuses the rest of the article on this.

On the basis of no facts or logic whatsoever, he bungs in this bit of wild exaggeration as an aside:

But after watching voters act out their rage at the establishment this year, I have become convinced that a UBI is a very bad idea that would further destabilize the global order — and that the assumptions that had policy wonks interested in the UBI in the first place are bad, too.

"Destabilise the global order"
? FFS.

One problem is that a UBI does nothing to replace the sense of reward or purpose that comes from a job. It gives you money, but it doesn't give you the sense that you got the money because you did something useful.

WTF does that have to do with anything? A UBI can't and doesn't replace lots of things, but so what? Going back to his basic principles, if we reduce the insane high marginal withdrawal rates (i.e. move towards a UBI), the unemployed are more likely to look for work, and those in work will do longer hours, that's reason (2) he mentioned at the start but then completely ignores for the rest of the article.

And so on and so forth. Finally:

Policies are available to make work more central in society and more rewarding for workers, but unlike the UBI, they have to be conditional on work.

Follow that link - 1 is a step towards UBI, 7 is a good idea in and of itself but has nothing to do with UBI or 'worker's rights' or anything, and the rest is just a long wish list of government subsidies and market interventions, all of which will be either expensive, counter-productive or unenforceable. So a load of crap dreamed up by, er, 'policy wonks'.

... but some are more equal than others.

Putting their usual left/right spin on the same press release.

The BBC:

New research by the Institute for Fiscal Studies has found that one in five low-paid men aged 25 to 55 now work part-time.

While 95% of top-earning men normally work full-time, 20% of the lowest paid now work part-time. That means wage inequality for men has risen over two decades, but for women the opposite is the case.

City AM:

Inequality in net household incomes has declined over the last 20 years according to a new report from the Institute for Fiscal Studies – the second set of figures this week to reveal a narrowing gap between Brits at the top and bottom of the scale.

Published this morning, the IFS numbers record household incomes calculated after benefits and taxes, and reveal steadily falling inequality.

The key to this is the weasel wording in the seoond paragraph, "after benefits and taxes".

Thursday 12 January 2017

Stupid Headlines / Numbers


So the NHS left 485 patients on trollies for more than 12 hours last week.  Yes, alright, that's not good for those poor souls.  But let's get this in perspective.

The NHS 'deals with' about 5 million patients a week.

485 patients on a trolley for > 12 hours is 0.01% of patients on a trolley for > 12 hours.

Or the other way about, 99.99% of patients weren't on a trolley for > 12 hours.

Quite why this is something that May / Corbyn could win or lose a debate over defeats me.

It's clearly a non-event.


Killer Arguments Against Citizen's Income, Not (3)

Lola reminded me about this article in The Telegraph:

But the big [experiment] is Finland, an entire country, which is going to do a pilot, selecting 2,000 unemployed people at random and giving them a monthly income of about £500, which is what they get in unemployment benefit but they will be allowed to keep it if they get a job. After two years, we will find out whether the scheme has encouraged people to work, given that the participants will be able to keep every euro cent that they earn (after tax).

There's no "whether" about it, it will, assuming 2,000 is a big enough sample size. Please note that they pitched their UBI at the same level as unemployment benefit, a very sensible move as it enables us to compare like with like.

The idea behind the basic income is lovely. It is that, if the state gives every citizen enough to live on as a right of citizenship..

Crassly incorrect. How much a person needs 'to live on' and whether the payment should be enough 'to live on' are two quite separate decisions and not central to the UBI debate. The argument worth having is how much it will be, let's start with 'the same as unemployment benefit' and busk it from there, I can see arguments for lower or higher and am neutral on the topic.

... they will accept irregular, part-time or precarious work because they won’t lose welfare benefits if they do so.

That part is correct, it is one of the many advantages.

Now comes the real crap:

The practice, however, is very expensive. One rudimentary scheme worked out for the UK by Malcolm Torry – and remember that he is an advocate of the basic income – proposed an income of £8,320 a year, to replace all benefits except housing and council-tax benefit.

That is hardly a generous annual stipend, and yet if it is to be funded through the income tax system it would require the rates of income tax to go up from 20, 40 and 45 per cent to 48, 68 and 73 per cent.

That is a superbly 'generous annual stipend' if you ask me. Malcolm has done lots of workings, and done illustrative schemes showing how much tax rates would have to increase. (I warned him against this at a meeting, I said if you make different suggestions, opponents will pick and choose the ones they like least and slag those off. Best to stick to one plain vanilla version, but hey).

If we pitch the UBI at approx. current unemployment benefit rates, no increases in tax rates are required whatsoever (assuming you get rid of most other welfare payments and the tax free personal allowance). Clearly, if you go mad and double that, it would require higher taxes. Malcolm wasn't recommending that amount, particularly, he just did the numbers.

Now the totally, grand, shitty finale:

If it’s grand, universal reform of the benefits system you want, study the everlasting disaster of the Universal Credit system and devise a practical way to make that work, instead of diverting your energies into campaigning for the schemes of impractical dreamers.

If we did a list of everything wrong with UC and tweaked them all, we would end up approaching UBI, so why not skip a few stages and go for the good stuff?

Wednesday 11 January 2017

As we were saying...

From City AM (bottom of page 7 of this pdf version):

RENTS in the UK are moving towards an “affordability ceiling” as rental growth more than halved over 2016...

Martin Totty, Homelet’s chief executive, said: “While demand for rental property remains strong, landlords always have to be mindful of tenants’ ability to pay higher prices. We have now begun to approach an affordability ceiling, particularly in areas of the country where rental price inflation was previously highest.”

Some commentators in the property industry have said measures that increase landlords’ costs — including chancellor Philip Hammond’s decision to scrap letting agents’ fees for tenants – will push up rents. However, Totty said increasing rents could become “problematic” in parts of the country that are already expensive, as tenants simply won’t be able to afford higher prices.

So much to the KLN "landlords will pass on the LVT", eh?

Insanely stupid reader's letter of the day

From City AM:

Isn't the logical progression from the universal basic income idea so in vogue at the moment a national maximum wage?

People should be careful what they wish for.

Jim Smart

We can also file this one under "people with wildly inapposite surnames".

Tuesday 10 January 2017

Guess what the chart is (safe as houses)...

We could debate exactly when the onset of the 'Global Financial Crisis' actually was, but let's just all agree it started in 2007, making this year the 10th anniversary.  So have we had a 'lost decade'?  Exhibit A is a 10 year chart, but who can guess what the Y axis represents?

Chart 1:

EDIT:  Here's some more charts.  What are they?

Chart 2:

Chart 3: 

Chart 4:

Chart 5:
EDIT 2:  All the above charts are the Nationwide House Price Index, but expressed in the following currencies:

1) US Dollars
2) Euros
3) Swiss Francs
4) Japanese Yen
5) Pounds Sterling

According to Nationwide, UK house prices appear to have fallen when measured in every major currency except the pound.  These charts do not take into account rental income (or imputed rental income for owner occupiers) but nor do they take into account any return on the foreign currencies.  The US stock market is (for example) 55% higher than it's 2007 peak in USD terms and 150% up in sterling terms.  Safe as houses?  It's safe to say UK housing has been a lacklustre investment for the last decade.

Monday 9 January 2017

Fun Online Polls: Competing theories of gravity & groupthink

The results to last week's Fun Online Poll were as follows:

Which theory better explains the high rotational speed of stars in the outer arms of a galaxy?

Existing gravitional theory plus dark matter - 11 votes
Erik Verlinde's Modified Newtonian Dynamics aka Entropic Gravity - 21 votes

Ed P threw a curve ball, with Derek seconding, pointing out that there is another explanation of gravity. I don't have the faintest understanding of the two alternative theories, even gravity itself is a mystery to me - how objects light years a apart can attract each other, what keeps us glued to the earth's surface and so on - but the whole 'Dark matter' concept seems like a bit of a fudge to me, and the two alternative theories seem to be able to predict what actually happens quite accurately without it. Whether 'predicting' is the the same as 'understanding' is a philosophical point. There again, they might be complete hokum…
This week's Fun Online Poll was suggested by Ralph Musgrave:

Who is most in thrall to group think?

Multiple selections allowed, vote here or use the widget in the sidebar.

Muddled assumptions which cancel each other out.

Somebody alerted me to this drivel at the Adam Smith Institute (but I can't find the email any more, thanks anyway):

Thankfully the situation is much better now, but in some ways we still have the worst of both worlds in housing policy. You might imagine that housing policy aims at balancing out two concerns: quality and quantity/price.

You might think policy picks one spot along a line: at one end we guarantee very high standards in design, materials, space, and amenity, but prices are high; and at the other we allow lower quality housing to proliferate, meaning prices are low. 

In fact we have managed to create a planning system that builds mostly ugly, unpopular housing in inconsistent and unpredictable ways, mostly where it's least needed, and builds so little of it that prices in growing cities are staggering.

He is making two opposite assumptions and completely ignoring the real world:

1. That an increase in supply of housing = lower prices

2. That an increase in the quality of housing = higher prices.

Truth is, rents and house prices are set by what people are willing and able to pay to live at any particular location. Construction costs have more or less nothing to do with it.

To show why his two assumptions cancel out, let's assume that higher quality means larger homes. Let's imagine every home had been built with one more room that it actually is, or that all rooms were a bit bigger, so two kids can share a bedroom comfortably, there's space for a guest bed in the sitting room, the kitchen's big enough to have some friends round etc.

It would be quite easy to have done this without using any additional land by building up a little bit higher, using loft space etc, so location values are barely affected. The additional construction cost would have been amortised and paid off years ago.  But the quality of housing (as crudely measured by size) has increased.

1. That is clearly an increase in the supply of housing. There is more space available. Applying his logic, prices would fall.

2. Each individual home is now more desirable, better quality and cost a few thousand pounds more to build at some stage in the past. Applying his logic, prices would be higher.

It can't be both can it? So one or both of his assumptions is incorrect.

IMHO both are incorrect. What would happen is that there would be a net movement of people from lower to higher value areas, pushing down prices in lower value areas and pushing them even higher in higher value areas.

Saturday 7 January 2017

"Lawyer launches petition against HS2 after saying she will have no choice but to sell her home"

Emailed in by Chrome Man from the Manchester Evening News:

A lawyer who feels she has no choice but to sell her home over plans to build a railway beneath it has launched a petition against HS2...

There is one fairly obvious alternative to selling her home i.e. not selling her home. As she can sell her home, there are people willing to acquire it and continue using it as a home.

A 7.9 mile, 45m deep tunnel will be dug from Wythenshawe to Ardwick as part of the £56bn project...

So a heck of a lot of money will be spent on minimising the impact of HS2, and our lawyer is one of the many home owners who will benefit from that.

But Hamida Khatun, 38, first realised the HS2 track was routed below her home when the M.E.N reported on it. Despite government assurances residents won’t feel the effects, Hamida’s horrified...

The tunnel is going to be a staggering 45m down, you will not feel anything at ground level.

... and believes a ‘legacy’ to her children has been destroyed.

It's a bog standard house.

And although she could apply for compensation under HS2’s ‘Need to Sell’ scheme, she knows - and HS2 Ltd has confirmed - that success would be unlikely.

The tunnel will be 45m down. A lot of homeowners will benefit from the improved transport link (or that's the intention, at least) and some will benefit more than other. Perhaps it is true that the tunnel will shave a few quid off the value of her 'legacy' but overall, the increase in value because of HS2 will far outweigh it. And why is it that people demand compensation if something happens which depresses the value of their home but won't countenance the idea of paying a bit more tax if something happens which increases the value of their house?

The mum of two, of Reynell Road, Longsight , said: “When I bought this house 15 years ago and then slowly added value...

Slowly watched it go up in price along with house prices generally, more like, for no effort on her part.

"I thought I would leave it to my kids to pay off their debt..."

What debt? What has that got to do with anything?

"I could have moved to London but I made a sacrifice to live in this community..."

Condescending cow.

"My friends and family are here..."

Ah, perhaps that's why she stayed in Manchester.

"... and now HS2 are [sic] forcing people to change their way of life."

How? It's a house, for people to live in.

“If I can find a buyer, I will, because we don’t feel able to leave this for the kids to help their future."

Why not? It's a house etc.What will the new owner do differently?

Hamida and husband Jamal, 40, bought the house for £45,000 in 2002 but after investing heavily it was worth £150,000 at its last valuation.

The bulk of that increase is down to normal house price inflation and has naff all to do with any improvements they might have paid for. And if she sells it, she will get considerably more than £45,000 plus a few quid for new carpets or whatever.

They had planned to buy a second house while holding on to their Longsight property as an investment for daughters Zara, eight, and Liza, 12.

Aha. She doesn't even need the house and they can afford to buy another one.

Residents living under the tunnel are only entitled to a £50 payment for their subsoil plus £250 to seek advice.

'Under' the tunnel?

Other than that, they can apply for Government cash with the ‘Need to Sell’ scheme, but applicants must first prove their own attempts to sell have been dashed by HS2.

They don't need to sell, end of.

Alternatively, if their home is damaged during construction, they can claim later - although HS2 say modern construction techniques mean tunnelling effects are ‘generally small and typically go unnoticed’.

Half of central London is above some tunnel or other, they dig new ones all the time and I've never heard about anything bad happening at ground level.

"Dentists call to end workplace cake culture"

From the BBC:

Dentists have criticised "workplace cake culture", saying the sharing of sweet treats in the office is contributing to health problems.

The Faculty of Dental Surgery said eating cake and biscuits at work was fuelling obesity and poor oral health. Office workers were urged to cut back on sugar and opt for healthier alternatives, such as reading tatty old issues of Women's Own, Hello! or Country Life.

Friday 6 January 2017

That Top Gear expedition got nowhere near the North Pole.

They showed that episode again over the holidays, all great TV and so on, but if you pay attention at the end, the co-ordinates on the satnav shows latitude 78 deg.

Wikipedia's write-up says that they reached the Magnetic North Pole, which is very close to the true/geographic North Pole (which has latitude 90 deg, obviously).

Not true, they had reached the Geomagnetic North Pole, which as the map in the previous link shows is hundreds of miles further south. They set off from Resolute, which has latitude 74 deg, which is to the north of the geomagnetic North Pole, so on the outward journey they were heading south (or south-east or south-west or whatever).

So AFAICS, epic fail.

Wednesday 4 January 2017

Fun Online Polls: Immigrants in Germany in work & competing theories of gravity

The responses to last fortnight's Fun Online Poll were as follows:

What percentage of the 1.2 million Arabs who arrived in Germany in the last two years are in gainful employment?

1 percent - 34%
3 percent - 20%
5 percent - 13%
10 percent - 16%
25 percent - 9%
50 percent - 5%
All of them - 2%

The weighted average of those guesses is 10%, the true figure, as admitted by the German government, normally obsessed with downplaying any negatives associated with the recent mass immigration, is only 13%.

So the wisdom of crowds wins yet again! (I previously referred to an article in the Daily Mail that said the figure was only 3%, but let's give them the benefit of the doubt.)

The joke is that a couple of years ago, a lot of Germans were saying that immigration will be good for their economy because it helps ameliorate the effects of an ageing population, low birth rate and a shrinking working age population. That's all fine, provided the additional working age people are actually working, which quite clearly (in contrast to the position in the UK), they are not: they are a massive drain, even if we put social and criminal issues to one side.
There was an interesting piece on BBC Radio 4 this morning about competing theories of gravity.

There's no point me trying to summarise, so please read this article before casting your vote in this week's Fun Online Poll.

Vote here or use the widget in the sidebar.

Tuesday 3 January 2017

Market forces, differential pricing, general hilarity

From the BBC:

Supermarket chain Tesco has cut the price of women's disposable razors to match that of a similar product for men. The move is a victory for campaigners who demanded an end to what they saw as sexist pricing on the high street.

Last year campaigners highlighted the higher price of many toiletries marketed at women compared to the lower price of similar goods for men. All of the big four supermarkets were criticised.

The mind boggles.

Do people genuinely not know that all disposable razors are more or less exactly the same (the only real difference is the number of blades), it's just that razors marketed at women are made with pink plastic rather than boring white? If some people are prepared to pay extra for the ones with pink handles, then why shouldn't retailers charge more them? If I were a woman unhappy with paying over the odds for the pink ones, I'd just buy the white ones instead rather than mounting some campaign.

Sunday 1 January 2017

Market Failure eh?

I bought The Big Short (http://www.imdb.com/title/tt1596363/) which is a good watch. It's about the 2008/9 financial crisis using the vehicle of the experiences of a few people who saw it all coming and worked out how to short the US housing market.

And as you'd probably expect from Hollywood it doesn't tell the whole story, It starts at what I think of as halfway up the argument.  In particular it makes only passing comment on the role played the USA's Government Sponsored Enterprises (GSE's); Fannie Mae and Freddie Mac (and Farmer Mac)   in wildly fanning the flames of credit expansion. Nor does it deal with the 'anti red-lining' legislation and its exploitation by 'community organisers' using companion anti-discrimination legislation against banks to drive lending to unsuitable borrowers.

But serendipity strikes again.  This little gem from here:-

Even before he became president, as I noted a week later, no US politician had done more to precipitate that banking crash. As a young politician in Chicago, he had in 1995 played a leading role in the amending of the Community Reinvestment Act, requiring US banks to lend billions of dollars to buy homes for millions of poor, mainly black Americans, guaranteed by two giant mortgage associations, Fannie Mae and Freddy Mac." 

(Cards on the table - I've always considered Obama as a clever, arrogant, vacuous, vain, economically ignorant, largely incompetent, dangerous fool with a massive chip on his shoulder),

And over here, at about the same time, we suffered from Blair's parallel agenda to expand home-owner-ist credit expansion, which was enabled by his equally (and massively) flawed Financial Services and Markets Act 2000 which brought into existence the utterly failed Financial Services Authority.

Every time you bother to look into some financial crisis or other behind it you find some ill thought out government intervention.  And just to illustrate the point I am also reading Legislating Instability by Tyler Beck Goodspeed; an analysis of the Scottish banking crisis of 1772.

And guess what? Yep. Yet again the roots of that crisis were grounded in an earlier age's version of ill thought through intervention.  Then the Chartered Banks lobbied for legislation to protect themselves from competition (they naturally argued that it was to protect the public) and in doing so confirmed Adam Smith's saw about how businessmen will come together to work out ways to defraud the public by seeking special privileges from government.

Governments and money.  You know they don't mix.