Tuesday, 18 July 2017

The New York Times Manages To Get This One Entirely Backwards

Some people really don't think things through very well. The New York Times ran with a story that celebrated the fact the solar industry employs far more Americans than wind or coal: 374,000 in solar compared with 100,000 in wind, 160,000 in coal mining and coal-fired power generation, and narrowly behind natural gas, which employs 398,000 workers (in gas production, electricity generation, and petrochemicals).

The article writer was trying to insist that this must be a good thing for solar power, because it demonstrates how important solar power is in creating jobs. Alas, anyone who understands economics would not reason this way - they'd instead reason that solar power presently shows itself to be a pretty unresourceful and inefficient part of the energy industry.

And once you then compare number of workers to energy output as a percentage, things look even worse for solar energy. 398,000 natural gas workers amounts to 33.8% of all electricity generated in the United States and 160,000 coal employees amounts to 30.4%, whereas 374,000 solar workers amounts to just 0.9% of total electricity.

If you try to break that down to electricity generated per worker, then coal generates 7,745 megawatt hours of electricity per worker, natural gas is 3,812, and solar is a measly 98 megawatt hours of electricity per worker. That is to say, producing the same amount of electricity requires 1 coal worker, 2 natural gas workers and a whopping 79 solar workers.

To put that into perspective, it would be like having three large supermarket chains across the country, producing the same output, but Supermarket A does so with 300,000 workers, Supermarket B does so with 600,000 workers, and Supermarket C doing so with 23.7 million workers, and the state subsidising Supermarket C because it thinks it provides better value than A and B.

Solar energy is, at present*, showing itself to be a wasteful and inefficient method of producing energy, but people won't get why until they understand that jobs are a cost of doing something, because they are the price we pay for people's labour.

I encourage any readers who deny that jobs are a cost to email me immediately, as I have plenty of opportunities for you to partake in some 'cost-free' activities. You can come and wash my car, do the dusting and hoovering, and while we're at it, my bathroom could do with a good clean too. And, of course, you won't want paying for any of that because according to you those activities do not have any costs attached to them.  

* I say at present, because there probably will be a time when solar power is the predominant and most efficient energy technology

Sunday, 16 July 2017

The Tax Love That Dare Not Speak Its Name

Yesterday I made a comment that if the NHS really is the envy of the world, it can easily be put to the test by allowing people to opt out of it, and instead receive a tax rebate equivalent to their National Insurance contribution, while having to pay for any health care they need.

Under this improved system there would be a measure in place to factor in how much National Insurance the individual has already contributed, plus a safety net for people that cannot afford the funds for health care.

After making this comment, I received tonnes of hate mail through my letter box, and dozens of online death threats. Only joking, not really! Although my wife did give me a funny look. Her feelings are widespread, because I don't think this policy would be at all popular in Britain, as the NHS is the closest thing we have to a religion, despite being none of the following:

A) The best health system in the world
B) The envy of the world
C) A health system on which any other nation has ever tried to model its own system
D) Affordable in its current incarnation, particularly long term in the future

Its main problem - a problem that is woven into the fabric of most public sector, taxpayer-funded services - is that the people are not getting true value for money, because behaviour and incentives are mis-aligned with consumer costs. If there is anyone that epitomises this error of thinking it is the man who wants to be the Chancellor of this country.
John McDonnell, the Marxist in the Shadow Cabinet with about as much charisma as a cactus plant, was on The Andrew Marr Show explaining how their excessive tax programs pay for themselves because the revenue they generate will help them break even, therefore creating a value to society. This is wrong, wrong, wrong. As I said the other week, taxes have deadweight costs, roughly to the tune of 30p in every pound. That is, if it costs £1 to provide something in the private sector, it's going to cost something like £1.30 for the equivalent thing in the public sector, which robs society of value.
Consider one of Labour's programs to create jobs, costing £10 million a year in salaries. Let's even be generous to McDonnell and suppose that the program manages to generate a profit of £1 million a year. Labour records this as a success and offers it as proof that their job investment program benefits society. Now factor in the 30% deadweight costs of taxation - you'll find that a program with an £11 million return (that is, a £10 million yield + £1 million profit) actually costs £13 million to create due to the financial distortions that come with taxation.
The other glaring omission from John McDonnell's medley of myopia is that such programs fail the second test too - that is, they rob society of some of the instances in which people can spend their own money on things that benefit them most.
Suppose a mugger waves a knife at you in the street and asks you to hand over your wallet containing £130. After giving it to him, he promises to spend £100 of it on a pair of shoes for you and he'll keep the remaining £30 for himself. Not only are you £30 worse off in terms of opportunity costs, you are also worse off in the fact that you probably didn't want to spend the whole £100 on shoes, and even if you did, the chances are he is not going to pick the same pair you'd buy for yourself with your own money.
Our present party leaders are not quite like muggers, they are more like mafia bosses. When the mafia used to start up protection rackets they had to strike a good economic balance. Suppose they were going to operate in an area with 50 bars and restaurants - how much should they charge the owners for 'protection'? If they charge too little they don't maximise profits, but if they charge too much they might drive the bar and restaurant owners out of business, which means no more revenue.
While government taxation is slightly different to a protection racket, in that the benefits from taxation do extend out to taxpayers more than the benefits from 'protection' extend to bar and restaurant owners, the ethos isn't too dissimilar - the likes of Theresa May and Jeremy Corbyn want to get as much tax out of the electorate as possible without reaching the tipping point of election-losing unpopularity.
It is a mistake though to think of the Laffer curve - which looks at the relationship between tax collected and the rates at which they are collected - as determining the rate of taxation that will raise the maximum revenue for the government. That's not what we should think of as the optimal tax rate - the optimal tax rate is the tax that raises the optimum revenue with the fewest negative spillover effects on the economy.
To suggest that a healthy tax rate is one that maximises government revenue is like suggesting that a healthy conscription rate is one that maximises the number of soldiers in the armed forces, or that a healthy diet is one that maximises food intake. The true value of a tax rate or an army quantity or a healthy diet is one that proves most effective when considering all effects, not simply getting the most of something we can.
As things stand with the 45p top tax rate, the tax gained from the top 1% is apparently at a record high. The top earners earn 13% of the income but now pay 30% cent of income tax collected. Even the top 0.1% (stress that's nought point one percent, not one percent) pay a comparably astronomical 14% of the total income tax paid, which is an increase by a factor of 140. If you want more money to spend on public services, more borrowing isn't the answer, and neither is higher taxes - you have to adopt policies that will generate more income. And in that failure, both main parties are on a mission to become more and more alike in this.  

Thursday, 13 July 2017

A Fascinating Article That Comes To Totally The Wrong Conclusion

I stumbled upon this intriguing article in the New York Times by Nicholas Kristof, entitled “What Monkeys Can Teach Us About Fairness” in which the author tells us about an experiment in which monkeys were taught to hand over pebbles in exchange for cucumber slices. They were happy with this deal. He goes on:

"Then the researcher randomly offered one monkey — in sight of a second — an even better deal: a grape for a pebble. Monkeys love grapes, so this fellow was thrilled. The researcher then returned to the second monkey, but presented just a cucumber for the pebble. Now, this offer was insulting. In some cases the monkey would throw the cucumber back at the primatologist in disgust. In other words, the monkeys cared deeply about fairness. What mattered to them was not just what they received but also what others got."

If Kristof had stopped there, that would have been an interesting account - when monkeys receive something but see other monkeys receiving something better they react dissonantly. That in itself is fascinating.

Unfortunately, Kristof uses this to propound the theory that what monkeys care about here is income disparities, and that this has parallels with the wider human concern about income inequalities. This is a step too far, and takes the conclusions into illogicality, because interpretations of income distribution are based on something fundamental that is missing from the monkey experiment - and that is, what people do to earn what they received.

If the teacher gives little Johnny 2 chocolate bars and little Freddy 1 chocolate bar, it might be that she has treated Johnny better than Freddy. But if beforehand she stipulated that there will be a classroom maths test, and the person who scores top marks will get 2 chocolate bars, and the runner-up 1 chocolate bar, then nothing she has done has been unfair, because Johnny and Freddy's chocolate bars were given based on merit. Their rewards were commensurate with what they did to earn those rewards.

The same is true of wages - they are not arbitrarily distributed like the cucumber and grapes in the monkey experiment - they are based on what people produce for their employer. Monkeys may suffer dissonance at income disparities irrespective of how those incomes came about, but humans generally do not - they recognise the source of the variance in the incomes.

Tuesday, 11 July 2017

Winding Back The Snowflake-Shaped Clock

Have you noticed how people habitually choose when to get publically offended, using offence as a public convenience to express phoney outrage from the comfort of their ideological hobbyhorses? Conservative MP Anne Marie Morris makes a stupid reference - to "A nigger in the woodpile" - that only someone with the brains of a suet pudding would make, and gets branded a 'racist' by the twitcherati.

Yet the consistently ludicrous Diane Abbott has a string of obnoxiously bigoted comments to her name (''White people love playing 'divide & rule", "London shouldn't have another white middle ages mayor", "Blonde, blue-eyed Finnish girls are unsuitable as nurses because they had never met a black person before" are just some of the lowlights) but you can guarantee that the people castigating Anne Marie Morris would not do so to Diane Abbott - even though it is about as unlikely that Morris is a racist as it is that Abbott isn't one.

Similarly, when the DUP registers on people's political radar, everybody Googles them and unleashes swathes of invective because they are homophobic, anti-abortion, freedom-oppressing, pro-death penalty, science-denying young earth creationists. And yet these views are so prevalent in Muslim communities in our country that very few people bat an eyelid anymore, much less express public disapproval. Snowflakes abound in this offence-seeking culture, but it seems that people are good at taking their offence a la carte.

Now for my principal point. Wind back the clock every quarter of a century in the UK and yes, for sure, you'll see a generation worse than the one that followed it in numerous ways. On things like sex, skin colour, disability, ethnicity and sexuality we used to be terrible, then we got a little less terrible, then a little less, and less still, and then a lot less terrible (as progression generally follows exponential power law patterns). There is still a lot of work ahead of us, but, the likes of Anne Marie Morris and Diane Abbott aside, things are much better than they ever have been.

There are, however, things that are slowing down the progression in some parts, and in others stifling it altogether. One is what has been aptly termed 'generation snowflake', which is where society is helping people along in being too lily-livered regarding matters of offence and/or being offended on behalf of others. The other is the preoccupation with diversity and positive discrimination, whereby everything from businesses to art are valued too much on their diversity at the cost of not being valued enough on their merits.

Now I'm all for diversity, and have written several times about its qualities, and also about how a lack of diversity limits the potential of the agency in question. I have something I call 'The Family Business Impediment' - which, to quote, is basically this:

"Family businesses have a higher probability of doing less well in the market than other businesses - where, by family business, I mean businesses that tend to favour hiring family members over a more competitive recruitment process. It stands to reason that if your opportunity pool of talent is more closely related to average percent DNA shared than it is ability, experience and merit, you limit your chances of finding the best candidate (ditto if you discriminate based on skin colour, sex and sexuality)."

But it's also very much the case that these things can be taken too far, and often are - such as the case where diversity becomes a superficial tick-boxing exercise rather than having candidates that are there on merit.

Apparently last year the Oscars got criticised for having no black actors/directors shortlisted. Now I know little of this, nor much about films released last year - and maybe this was criticism for past legacies - but we mustn't cultivate a society whereby people become frozen with fear if they do something that fails to satisfy a diversity ticking exercise.

Maybe, just maybe, it was thought by the judges that the best films of last year just happened to not have any black lead actors or directors. In fact, given the extreme duress they know they are under to include a diverse range of candidates in order to not appear prejudiced, it's possible, just possible (and I don't know, myself) that the films nominated were genuinely thought to be the best.

I don't want society's generation snowflake to impede people's ability to employ who they think is the best candidate, or to make the kind of TV show they want to make, or to give awards to whichever films they think are best, and so on. This is a thin end of the wedge problem.

I mean, I was reading an article recently (from a few years ago) where a member of staff in a job centre told a prospective employer that she wasn't allowed to put 'Must be had working and reliable' on the job ad for fear that it 'could offend people that are lazy and unreliable'. Yes this was an isolated case that the job centre repudiated, but it shows the level of fear society is able to engender about offending on people's behalf.

I don't want that, just as I don't want schools being afraid to hold an assembly, or nurses being afraid to wear a crucifix around their next at work, and so on, and so on. Personal offence, and its more annoying cousin, offence on someone else's behalf, has been one of the most unsettling and troubling culture shifts in my lifetime.

It is to some extent a sign of our becoming more caring and empathetic too, but equally, I fear, a sign of our becoming more anodyne as we adopt an unhealthy risk-aversion, a protectionism if you like on intellectual ideas for fear of being hounded as a sexist, a racist, a xenophobe or an Islamophobe.

Finally, in a past Blog post, I proffered an answer to the question about what it is that has caused us to journey from reasonably intrepid proponents of free expression to lily livered impotents - and it is on this note that I shall end, as it occasionally bears repeating:

"I can think of two main changes that might have altered the public consciousness. In the first place, the country now has a lot more diversity, which means there are a lot more minority groups with views that differ from the mainstream. And in the second place, computer technology has undergone radical changes, which means there is mass communication going on, and also that everything everyone does it pretty much under external scrutiny now.

Personally I see no reason why either of things should cause us to become spineless again, but it would appear that we have. Diversity of people has generated an unprecedented range of beliefs, opinions and cultural practices that appear to make many people uncomfortable in expressing themselves for fear of upsetting someone, or being labelled a racist or bigot.

The widespread fear of upsetting Muslims is perhaps the most obvious case in point. And the extent to which everyone can have their say on social media is unprecedented too - it appears to be bringing with it a huge rise in vile threats and guttersnipe abuse, which as a consequence appears to be making many people fearful of free expression once again. But I've said it before on here, and I'll say it again - we must stop this train of timidity in its tracks as soon as possible."


Saturday, 8 July 2017

Econocracy? More Like Idiocracy!

On Newsnight last night, there was an interview with an economics student called Joe Earle, who has co-authored a book entitled Econocracy (article link below) that has gone on to create a new student movement that looks to challenge how economics is supposedly out of touch with reality and defined by the views of the elite.

The founders of Econocracy, as the title suggests, want to make economics less about the wisdom of economists and more about the views and beliefs of our democratic nation. By making their discipline all-pervasive, the author argues that economists have turned the subject of economics into too much of a scientific discipline in a way that apparently undermines the democratisation of economic viewpoints:

“We live in a nation divided between a minority who feel they own the language of economics and a majority who don’t. As Ed Miliband and Jeremy Corbyn have found, suggest policies that challenge the narrow orthodoxy and you will be branded an economic illiterate. Academics who follow different schools of economic thought are often exiled from the big faculties and journals."

Alas, the book's authors and the reviewer in The Guardian do not really understand what is actually happening, and this is because they are missing the most important point - that despite highly charged protestations, most people really are very unapprised of even the basics of economics, and it is only because their views are subjected to rigorous analytical and empirical scrutiny that they find themselves on the periphery of rational enquiry.

To give you a fourfold and very topical example, in recent times we've seen evidence presented that tuition fees do not reduce the number of working class students (as Jeremy Corbyn claims); that Corbyn's favoured living wage increase has been shown in Seattle to engender all the negative outcomes economists have been warning about for decades; that Corbyn's favoured increase of corporation tax has been shown to be a simple sideways transfer of costs picked up by staff and by consumers and being unbeneficial to those struggling; and worst of all, that Corbyn's fairly recent praise for Venezuelan socialism and his desire for Britain and America to adopt that model as a 'rejection of neo-liberalism' is without question one of the most foolish and dangerous assertions any modern politician has made.

Now, if Corbyn and his cult of personality acolytes were in any way friendly to empirical evidence - that is, open to what is actually true and factual about the consequences of their views - they would humbly repudiate those four false beliefs, and honestly declare that a rethink of their position is necessary. But you just know that is not going to happen, because what these people care about is not what is true and factual, it is what best serves their own interests.

Of course, economics didn't need those four evidential examples to feel vindicated - this is what economists have been arguing for decades, and this is what the Econocracy crew do not get - economics is not for the elite because it is elitist, it merely appears to be for an elite group because that group contains a relatively small proportion of society's individuals that actually care about the truth and understand the evidence and logic to arrive there.

So when the author says “We live in a nation divided between a minority who feel they own the language of economics and a majority who don’t.", well yes, we do, but that is not really any different from a pastor in a predominantly young earth creationist church saying we have a few evolutionists in this church who feel they own the language of biology in a majority church congregation that don't. Quite! If you marginalise yourself by believing foolish, counterfactual things, expect to find yourself marginalised from the mainstream.

That is also why, when the author says "As Ed Miliband and Jeremy Corbyn have found, suggest policies that challenge the narrow orthodoxy and you will be branded an economic illiterate" - well again, yes, if you publically hold beliefs that are economically illiterate you will be branded an economic illiterate, just as if you go around breaking people's garden fences, plant pots and car wing mirrors, you will be branded a vandal. If the cap fits, and it has your name on it, you are going to find a lot of people asking you to wear it.

Economics as a science
Economics is scientific, so it is only democratic to the extent that people value evidence or don't value evidence. Economics is about human preferences and behaviour played out in the form of mathematics. Therefore although it falls into the category of soft science, it is an empirical science nonetheless. For example, indifference curves represent a series of combinations between two different economic goods, and they play out in geometrical terms when slopes of indifference curves on a graph reflect marginal value. Economics is a proper empirical method for assessing what humans prefer given many combinations of goods.

If this process is interfered with in a way that imposes unnecessary costs on individuals that know their own preferences more than politicians, then economists understand in advance why the ill-effects of scrapping tuition fees, the Seattle-effects of raising the minimum wage, and the consumer-effects of increased corporation tax culminate in undesirable outcomes. 

Try chemistry as an illustration. Chemistry is a noble science, and one which returns reliable and consistent empirical data. The main reason for this is that natural laws that underpin the material constituents are not compromised or retarded through human interference. When considering gaseous compounds, the masses of one constituent that combine with a fixed mass of the other constituent are in the ratio of (small) integers to each other. But, if scientists interfered in this law so that it was no longer obeyed by all gas mixtures, the fundamental constituents of chemistry would be undermined.
This applies pretty neatly to economics as well, at least to the greatest degree. Economics resembles science in that its truths are based on empirical observations and patterns distilled from data. If we treated economics as rigorously as we did chemistry we would find one of the golden rules of economics - the fundamental principle of least resistance (otherwise known as maximum efficiency) - playing out much more prominently, and economic growth happening even more readily.
The upshot it, the only way that the Econocracy movement is going to get its wish for a more ubiquitously democratic economic discipline is when there is a more ubiquitously informed society. Economics is a bit like string theory in that only a relatively small proportion of society understand it. The main difference though is that with string theory most laypeople do not go around opining as though they are experts in the subject.

* The article about Econocracy in The Guardian.

Saturday, 1 July 2017

A March That Was Utterly Devoid Of Logic, Arithmetic & Fiscally Responsible Citizens

Thousands of people marched in an anti-Tory, anti-austerity rally in London today - during which Jeremy Corbyn declared "This is the movement that will win the next election". He's probably right about that. The way this cult of personality is gathering momentum against a mediocre Conservative government with a leader utterly devoid of charisma, Labour is very likely to win the next election.

However, the premise on which today's march, and the movement in general, is based is faulty and illogical. In actual fact, on the austerity issues up for discussion here, the demonstrators have got their reasoning exactly backwards on both issues. They are advocating the very thing they should be opposing, and opposing the very thing they should be advocating.

I'll explain. Suppose that in the past few years your monthly spending has exceeded your monthly wages. Worried about the household budget, your partner suggests three ways in which you could be more fiscally responsible.

A} Cut down on your spending

B} Increase your earnings (either through more hours or higher wages)

C} Go to the cashpoint more often to ensure you’re never short of money

I’m sure no one needs telling why A and B are viable options, and why C is a ridiculous suggestion. But just in case there’s any doubt, the reason option C is ridiculous is that drawing out more of your finite supply of money is not going to help your fiscal irresponsibility if your spending already exceeds your earnings - it will, in fact, compound your irresponsibility.

Now replace you and your household bank account with the government and the treasury's collection of taxes, and suppose that in the past few years your government’s spending has exceeded its income and been irresponsibly spent. What could the government do?

A} Cut down on spending

B} Increase our taxes

Option A is a viable option. Spending less money means working hard to find government waste or government non-necessities and cutting back on all the profligate expenditure it can. But this is the very thing that Corbyn, McDonnell and the thousands marching today were arguing against. In times when fiscal irresponsibility has been levelled at the government, the demonstrators want more government spending, not less - the very opposite of the fiscal responsibility most people want to achieve. 

But what about option B? Option B is not a viable option, because increasing our taxes is not like earning more money. It is more like option C in the first scenario – it is like being in a state of fiscal irresponsibility yet going to the cashpoint more often to ensure you’re never short of money.
The government’s money comes primarily from taxpayers – and they choose how they tax us. But there is a caveat that the left seem to be missing - the taxpayers are like the government’s cashpoint; whatever you take out this month leaves less for next month, and so on. Unlike in scenario 1 when cutting down on your spending or increasing your earnings is like adding to your monthly income, government's increased taxation is not like adding to their monthly income, it is like paying a visit to the cashpoint.

Yet despite this, option B is the one Corbyn, McDonnell and their cult followers are arguing for. They have their reasoning completely backwards in both cases - they should be advocating A and opposing B, not the other way round. Instead they are arguing that cutting spending (profligacy?) is detrimental and that an extra few billion pounds in tax hikes can change government spending from fiscally irresponsible to fiscally responsible.

That's as silly as saying that buying a £300 packet of toilet rolls can be fiscally responsible as long as you go to the cashpoint and draw out the money there. Taxing more does not make a government fiscally responsible - the only thing that makes a government fiscally responsible is spending less, by cutting out all the waste and non-necessities from its expenditure (don't forget, government spending is at a record high).

I hope now you can see that the enumeration is crystal clear. You as a worker can increase your income by working more or spending less, amounting to lower depletion of your assets. The government also cannot increase its taxation without a lower depletion of its assets.
Whatever they don’t tax is either spent or it is saved privately by the people that earned the money. If it is spent (freely) then there is a net economic gain because both buyer and seller partake in a mutually beneficial transaction. And if it is saved then it is available for banks to use (savings are basically us lending banks our money for a small return of interest), and it is still available for taxation when it exchanges hands next time. Similarly, if you don’t spend that £300 on those toilet rolls, then the money either stays in your bank gaining you interest, and being available for banks to invest, or it is spent on one of those mutually beneficial transactions to which I just alluded.

Unless the demonstrators get the basics right, they will be running full pelt down a dark tunnel with a brick wall at the end, into which they will smack their silly heads. Instead of congesting parliament square and making lots of waffling reverberations, they'd be better off reasoning things through properly, and then putting pressure on the government to cut much of its waste and inefficient spending. The trouble is, a lot of that waste and inefficient spending comes in the shape of things the left historically supports - so don't hold your breath there either.

Tuesday, 27 June 2017

On The Easterlin Paradox

Those of you who are readily interested in the social sciences may have heard of a paradox associated with economist Richard Easterlin called the Easterlin Paradox, which is basically a hypothesis that at an individual level higher incomes make people happier, but a nation full of people with higher incomes does not make a happier nation.

I've written before about how cautious we ought to be with notions of measuring happiness, and even posed the occasional interesting thought experiment about the nature of happiness, and Easterlin himself received criticism regarding the nature of the data and analysis he posited.

Personally I'm quite sceptical about the validity of trying to measure people's happiness in terms of how happy they say they are. How would one know whether on a scale of 1 to 10 a Belgian cattle farmer in 1974 was happier than an Israeli Rabbi in 1990 if they both answered 8/10 in a happiness survey? It's a matter I talked about before in a previous Blog post, but it bears repeating here:

"If the average Brit rates their happiness as 7.4, then how does that compare to the 7.4 variant in, say, Sweden or Sudan? Perhaps a personal rating of 9 in Sudan would only be equivalent to a 6 in Sweden. Sweden is a more prosperous country than Sudan – so maybe a Sudanese person's happiness is measured without knowing how happy they could be in a more prosperous country.

Maybe in some cases the opposite is true - perhaps some Sudanese people see European modernisation as being full of unenviable plights (depression, addiction, binging, celebrity worship, lack of spirituality, etc). Maybe Swedes are more developed because they are less naturally content than Sudanese people. Who knows? The point is, nobody knows, because one's own personal interpretation of people’s reported happiness says almost nothing about actual happiness as a quantifiable state.

That a plighted Sudanese man might rate his own reported happiness as scoring higher than the average Swede or Brit will strike some people as strange - not because it should be assumed that the Sudanese man should be less happy, but because the criteria by which people measure their self-proclaimed happiness cannot be contained by any objective metric, irrespective of whether we are comparing nation to nation, or century to century.

To show this, let's use two objective qualities as an illustration - height and weight. If you compared the average Brit today to the average Brit 100 years ago, you'd find that the average Brit today would be a few inches taller and quite a few pounds fatter than their century old counterpart. So asking a man today 'Are you tall?' or 'Are you fat?' doesn't tell you anything about historical trends or comparable data, nor would the answer given provide us with any clue about an objective identification without recourse to other statistics. A 5ft 9, 12 stone man probably would have answered 'yes' to both questions in 1914 and 'no' to both questions in 2014.

Similarly, people might on average be happier now, or they might have been happier in 1914, but simply asking 'Are you happy?' brings no light to the measure of happiness at all. This is because all self-proclaimed accounts of happiness, fatness or tallness depend on how you feel in comparison to others in your society. If happiness has increased, it won't show up in reports of happiness because our perceptions adapt to the changes in society. In other words, if we expect our happiness to increase, then our happiness rating won't necessarily change in value (because the value is measured against perception of our peers) but it will increase in absolute value, just as being in the median in height doesn't change your relative position, even if you are a few inches taller than someone in the median range in 1914.

Because we rate these things in comparison to others in our society, it means that if on average everyone in UK societies gradually gets happier (as they have fatter and taller) the members of the UK will rate happiness as unchanged. Despite these significant changes, most people when asked would tend towards a report that places them somewhere near the median. It isn't the number of people who class themselves as a 7.4 on the happiness scale that changes (same goes for fatness and tallness scales) it is the happiness levels of the 7.4 that changes."

There is another factor that could be at play too. The measuring of happiness can also change in accordance with the standard of the measuring. By which I mean, a happier society may well have standards of questioning that raise the bar for minimum standards of happiness. For example, having a 44 inch TV and a mobile phone would have contributed more to someone's happiness a few decades ago than today, where most people have those things. If we expect more these days, then relatively speaking we may not climb up the happiness ladder relative to our material gains. It's Adam Smith's linen shirt all over again.

Moreover, there is another reason why increased prosperity may not climb at the same pace as increased happiness. And the reason may be that people very much measure their situation relative to others in their country, so even substantial material gains may not greatly increase individual happiness if their status is making little or no gains relative to others in their peer group. I suspect - and I've always been impervious to this feeling myself - but I suspect that having a phone that is the flashiest in your social circle gives individuals more intrinsic pleasure than that same phone when everyone else has one too.

Ask a 12 year old whether they'd rather have a penny doubled every day for 30 days or £1 million and if they had to answer within 5 seconds they'd probably choose £1 million. But a penny doubled every day for 30 days yields around £10.7 million - it's just that humans unaccustomed to the size of exponential growth struggle to get to grips with this at first.

Remember, humans have by a long way advanced more growth in the previous 250 years than the previous 250,000 before that. Exponential growth has given rise to a great progression-explosion that, if it continues, will see future growth, prosperity and luxury beyond what we can easily imagine.

A physicist called Tom Murphy once declared that there is futility in exponential economic growth in that if our energy consumption grows at 2.3% per year then we'll all suffer from raw material blitzkrieg within about four hundred years. His confusion - much like the confusion of Thomas Malthus over population growth - is that economic growth is not so closely correlated with energy consumption growth, far from it.

I don't have the statistics to hand, but can remember them roughly from when I did, and in recent decades as technology has increased its capability exponentially, humans have nearly doubled their economic growth but their energy inputs have risen by under a quarter (and because of how technological advancements exponentiate, that gap is only going to widen). And if you take out developing countries from the equation and include only the most advanced two dozen countries, you'll find that economies have grown but energy consumption rates have flattened, and in some cases declined.

Economic growth happens alongside, and because of, technological progression - the progression from paper to laptop, from fuel to electricity, from high energy to low energy lighting, and so forth. Even though from an aerial view, cities like New York, London and Tokyo look like they are powerhouses of energy output, they have, in fact, a lower energy consumption rate per person than the national average of those countries.

I have a hunch that as our technological capacities continue to exponentiate, we'll eventually evolve into creatures of pure thought, where we master the ability to live disembodied virtual reality lives, retaining our thought through computer simulated brains. Having said that, the transition from where we are now to where we'll be then may well involve some pain along the way.

On a timescale of 1 to 100, if where we are now is 1 and where we'll be in our virtual reality luxury is 100, there will possibly be a period of time, perhaps around the 80 to 90 mark where we'll encounter an international crisis, whereby a large proportion of the world's population may be unable to add enough economic value to the world to earn a living. That might occur if the proportion of working humans is vastly outstripped by the proportion of robots able to do the jobs more efficiently than them (however, as I've argued before, there are reasons to believe this may not happen).

Sunday, 25 June 2017

The Skeletons In The Welfare State's Closet

Let me tell you something fascinating about the welfare state. As a society almost every single individual in the UK is in favour of it, but yet each individual, if asked to pay some kind of hypothetical pre-birth Rawlsian insurance to act as a safety net in case they required it themselves, wouldn't actually pay it (this is based on research in America, so one can assume it would likely apply here too). This would suggest that, in actual fact, society's collective preference for a welfare state is more akin to an Abilene paradox, where every individual feels everyone else is in favour of a fairly large welfare state, so feels they ought to be too.

A generally good rule of thumb in life is that you can see how much people value things by how they behave. From what I remember, your chance of dying on the road in a car is something like 5,000 to 1. Would you pay an extra £10 a day to increase those odds to 6,000 to 1? I highly doubt it, and neither would I. Would you pay an additional £5 per year to reduce those odds to 500,000 to 1? You possibly would, and so would I. This signals how much we value a reduced probability of dying against a certain financial cost such as insurance. Personally I don't value insurance very highly generally - so for example, I would not insure white goods or a bicycle I'd purchased., but many people would.

Now suppose you got to make a pre-birth insurance decision before you know anything about what kind of person you're going to be, the indication is that you wouldn't pay anything. For all you know you're going to be born in the shallow end of the talent pool, yet research shows you’re prepared to take the risk and not pay the insurance premium. I think the central reason for this is the disincentive effects – that is, the main problem with a safety net is that it is open to being (at worst) abused and (at best) something upon which people can become overly dependent. The study showed that individual preference, in a pre-birth decision scenario (there are parallels of Harsanyi’s amnesia principle here), favoured a welfare state that contained a population of just 0.6% (that’s six tenths of a percent) of the population.
Obviously I’m taking this as precluding pensioner welfare and people who’ve paid a lot into the system but need to claim a bit back due to short-term unemployment. This is really about long-term dependents, people struggling to find work, people abusing the system and people using welfare as a lifestyle choice. I should imagine the general feeling is that this ‘0.6% of the population on welfare’ ideal, which in terms of UK population would be approximately 390,000 people, is largely confined to people with disabilities and barriers to work (although apparently that number far exceeds 390,000, it’s more like 11 million).

It would seem that when we are being most candid with no public pressure to conform to a certain viewpoint, the UK as a population is glad to have a small welfare state for society's most needy, but is furtively quite narked about the proportion of the welfare state that enables otherwise work-fit and able people to enjoy a life of taxpayer-subsidised leisure.

There are obvious reasons why this is the case, and they are nearly all underpinned by one governing principle: that people feel it is unfair when they have to pay for benefits for others that they cannot enjoy themselves. A good example is leisure. People who work a 40 hour week have less leisure time than people who have a 40 hour leisure week and claim jobseeker's allowance. An even bigger example, and one that is far less obvious, is parenthood. People who cannot afford to have 3 or 4 children are subsidising people who can, because according to Aviva it costs upwards of £270,000 to raise a child up to the age of 21.  

Or to put it another way, if it costs £810,000 to raise 3 children, and £1,080,000 to raise 4 children, it stands to reason that for most people you have to be on benefits to afford to support families of that size and larger. Working people cannot afford to have as many children as people on benefits, and the most expensive thing working people have to pay for is the state. Moreover, state-mandated reallocations from middle earners to benefit claimants incentivises benefit claimants to have more children (and equally more people to become benefit claimants) and this increases the cost of the state further, while at the same time reducing the opportunity for more middle earners to have children.

There is no easy solution to this problem - we cannot put a cap on the number of children people can have, and we cannot live in a society where children go hungry. But I have three principal must-haves for a well-functioning welfare system, and it would appear that in the deepest recesses of their honesty, people agree with me. They are:

1) The idea of a redistributive system whereby those who are best off do their bit to help those who are least able.

2) The redistribution system must guard heavily against incentives to abuse it or become overly-dependent on it.

3) In terms of taxing those most able to help those least able, it is best to tax in ways that do not discourage work, innovation or productivity.

Pretty much everyone already openly agrees with number 1, and pretty much everyone agrees with number 2, although they are more cautious about admitting it. But judging by the current state system of redistributive taxation, an awful lot of people have not got to grips with number 3 yet, which is a shame because getting number 3 right is the most effective way of helping people on benefits.  

Finally, the 2016 release of the much lauded movie I, Daniel Blake by Ken Loach, and the rise of Jeremy Corbyn in the same year, has prompted thousands of people to take to the streets and declare war on a capitalist system that has left benefit claimants maltreated and disregarded by heartless bureaucrats. While I'm sure there are plenty of people for whom this has been the case, when it comes to the overall picture, nothing could be further from the truth.

The stats are far too numerous and lengthy for this blog post, but go and research just how much the welfare state has expanded and proliferated as a proportion of GDP since Ken Loach first began his film career, and you'll see it is gigantic compared with 50 years ago. Consequently, Loach and Corbyn - the self-proclaimed defenders of the poor - are picking the wrong enemy in capitalism, because it is only thanks to the kind of economic growth that comes from trade and competition that we can afford such a large and costly welfare state.  

Saturday, 24 June 2017

Heck, Even Corbyn Has Out-Corbyned Himself This Time

Jeremy Corbyn has felt buoyed recently - his better than expected election vote-share and the cult of personality that's surrounding him are giving people amnesia about the fact that his policies are complete economic lunacy and would bring about the worst recession this country has faced in decades.

But this latest bit of publicity - insisting that teen workers should get £10 an hour by law - so comprehensively exposes his ignorance and carelessness that even many dyed-in-the-wool lefties are now saying "What the heck is he playing at?". Because you would have to be so wilfully uninformed about even the basics of supply and demand curves to even think of such a ludicrously counter productive policy, let alone publically declare it as a policy on your wish list.

Being completely clueless about the negative effects of price floors is one thing. But what's truly bizarre about it is that when you analogise it to a topic that isn't jobs but goods or services no one has any trouble seeing how silly the principle is. Suppose the government made it illegal for anyone to sell bathroom suites for less than £10,000. It is obvious who would be hurt by such a policy; those that cannot afford bathroom suites of £10,000 or more, and those trying to sell bathrooms below £10,000.

Such a silly law wouldn't help people in the market suddenly be able to afford a bathroom suite, and it wouldn't help the firms trying to sell them either, because the law won't make less expensive bathroom suites suddenly worth £10,000. Anyone who can see the logic of being against a £10,000 minimum price of bathroom suites but cannot see the same logic for minimum wage laws is not being consistent.

If you still cannot see this, let me put it another way. Suppose you support Labour's plans to raise the teen living wage to £10 or £11 or even £12, thinking how wonderful it'll be for low teenage earners to now get a 'fair' wage. I'd have to ask, why don't we make a law that gives them an even 'fairer' wage - say £20 an hour or £30 an hour or even a 'super-fair' wage of £40 an hour?

I don't think there is anyone in the country who thinks a £40 an hour living wage is a good idea, because anyone can see the problems that would occur with it. So you'll note that that means even die-hard Corbynites can agree in principle that there is a living wage law that would be too high to implement because it would do lots of damage in skewing the marginal value of labour, particularly in the teenage labour market where inexperience and additional risks are built into the employer's decision about whether to hire.

What isn't clear is why they can see it's a bad idea for £40 an hour, or £30 an hour, or even £20 an hour, but they cannot see it for £10 an hour. You may come back with the argument that it's obvious that £40, £30 and £20 are too high, but there comes a point when the number is just right. But that doesn't hold, because if you can see the logic that a price floor hurts both buyers and sellers, whether it is for bathroom suites, cars, labour or any example you'd care to mention, then the price floor is going to hurt more people than it helps at any level where it interferes with the real value of prices determined by supply and demand.

Suppose the living wage is set at £10 an hour. In the labour market, if a worker can produce £7, £8, £9 or £9.50 per hour worth of output to his (or her) employer he will be hired for a wage rate that's below the marginal value of his output. This means that a living wage law of £10 prices out all those people from the labour market - it makes it illegal for them to provide the firm with the value of their labour, which is bad enough for adults, but positively asinine if you extend the law to preclude inexperienced teenagers who are worth even less to prospective employers, and are keen to break in to the job market.

Equally, it fails to account for the fact that if a teenager's labour is really worth £10 an hour to an employer, his salary should climb up to that value purely by market forces. To see why, suppose you are producing £10 per hour worth of output to your employer but you are being paid £7.50 an hour. As long as prices are not too sticky, a competing employer could procure your services for a rate higher than £7.50 an hour but lower than £10 an hour - and in a competitive market your wage rate would be bid up until it fell just below £10 an hour.

I hear Jeremy Corbyn and John McDonnell are scheduled to appear at Glastonbury this weekend. My advice to all the teenagers at the festival would be to grab handfuls of mud and chuck it as these two fools until they look as dirty as their latest imbecilic living wage policy.

Monday, 19 June 2017

I Think There's One Big Flaw In These Sexual Abuse Trials

Like me, you may have been distracted recently by a little thing called the General Election, as well as terrorist atricities in our major cities and now the Grenfell fire tragedy. So much so that if you blinked you might have missed the news that Rolf Harris will face no further legal action over allegations of historical sex abuse after a jury was unable to reach verdicts on four charges, and prosecutors said they would not seek a second retrial.

The disgraced entertainer and artist, who was jailed in July 2014 for unconnected sex attacks on young girls and women, was being tried for the second time over alleged sex attacks on teenage girls in the 1970s.

At the time of Harris's conviction I remember having a discussion with some Facebook friends regarding what I thought was a very interesting but highly contentious issue surrounding the matter of jurisprudence and how things change over time. I never got round to blogging about it, so thought I would today as it should at the very least give you pause for consideration of something litigiously debatable.

What’s extremely contentious about the original outcome is that Rolf Harris was charged under the sexual offences Act of 1956, because the offences happened at a time of old legislation. Basically, if he’d have done the same things now he would have received a heftier sentence, because cultural evolution has shifted people’s perspective and tolerance on crimes like paedophilia, with penalties now being severer.

Now I'm not 100% certain that this view of mine is correct, although I think it is probably more correct than incorrect, but I don’t think it is right that someone should receive a shorter sentence that has been matched to the legislative time of the crime(s). It seems clear to me that past crimes should be penalised according to the present legislation (and I mean this generally speaking, not just taking into account Rolf Harris’s situation).

Let's face it, crimes like rape, child sex offences, racism, homophobia, and social legacies like sexism and misogyny, belong to a class of behaviour that society used to treat too lightly. And while far from perfect, today's UK society is at least a society that treats these things much more seriously, and has less tolerance for these things than at any time in history.

Given that legislative measures and acts of jurisprudence are built on a cultural evolution of the increased wisdom and revisions of human beings over time, I’m of the view that sentencing for any crime should be administered according to the legislation of the time of the trial, not the offence. Otherwise it rather undermines the perceived wisdom that went into the revision processes of jurisprudence over time.

I remember at the time, my friend Mark made an interesting point; he warned that it could set a dangerous precedent. He says: “If we raised the age of consent to 18 we could then punish all those who had sex at 16″. My friend Jacqui added a good point which illustrates a thin end of the edge-type of caveat. She says: “We had hanging back in the early 60s, so if somebody was now found guilty of murder back in 1960 do we get to hang them?”. Quite! These are good observations made.

Apart from a difference in scale of penalty, the legislators at the Rolf Harris trial agreed with this action *in principle*, just not in practice. They were willing to penalise in accordance with past legislation – but only if it was the right kind of past of legislation (I’m certain that if tomorrow they had a trial in which a man was found guilty of committing murder in 1959 they would not sentence him to hanging).

The thing about Mark and Jacqui’s points, though, is that two different things are being conflated. Mark makes his point in relation to a change of law, whereas Jacqui makes her point in relation to a change of perception of appropriate sentencing.

The Rolf Harris incident should be assessed under the terms of Jacqui’s analogy because the Rolf Harris legislative issue is not to do with a change of law (his crimes were still illegal in the sixties) but a change in the perception of appropriate sentencing. The key difference is that if we raised the age of consent to 18 we could not reasonably punish all those who had sex at 16, because they were doing so at the time from within the orbit of the law. Conversely, in terms of jurisprudence, murderers that were hung in the 1950s differ from murderers now only to the extent that punitive measures differed – the act of murder was still against the law.

Hence, in conclusion, if revision of jurisprudence is to avoid being undermined, I think people should be convicted and sentenced under the (present) legislation at the time of their trial, not under the legislation of the time of their crimes, as Rolf Harris was. As I say, it's a not a view I definitely know I'm right on, I could be persuaded it's wrong if anyone has a robustly convincing counterargument (if so I invite you to share), but as things stand I think it's the right view.

Wednesday, 14 June 2017

Politicians Desperately Hope You Never Get To Find Out About Things Like This

The General Election has been fun and entertaining, but the biggest national problem we face is way bigger than any party politics or distribution of seats across Parliament. Compared with what I'm going to talk about, the question of which party has the most seats in the House of Commons is fairly inconsequential - although for reasons that will become clear, there is the case of a lesser of two evils.

When young people turned out in their masses to vote for a radical left wing party in the hope that they will cure society of its economic ills, what they were doing is the equivalent of going down to the engine room on the Titanic with their screwdrivers and spanners looking for ways to increase the ship's nautical miles per hour.  

Before you read on, just click on this web page – it illustrates the remarkable national debt rise of £5,000 per second. You'll also notice a statement that says that the national debt equates to "£78,000 for every person in the UK". Hidden behind this is something very important, and it's related to all the things voters were dismayed about when they voted, and the fact that they would be utterly shocked to find the real source of their unhappiness. 

Let me now explain why with something that many of you will not know. Politicians are ruining things for us far more than they hope you'll ever realise, because the truth is, it is actually a combination of debt, borrowing and currency inflation that is causing the vast majority of the things people have been complaining about and squabbling over in this election – from the public sector crisis, to the NHS, to social care, to low wages, to levels of taxation, to the difficulties of the JAMs (those just about managing) – all of those election issues are secondary to the primary problem that affects society, and that is the immense harm that politicians do to the value of money.  

To begin, let me explain how lending actually creates new money. Only about 2% of the money in Britain and America is cash, the rest is electronic - it is 1s and 0s on computers. Under the gold standard the money supply is limited (as there is a limited amount of gold in the world), but under the digital system there is nothing to constrain the amount of money created in fiat currency.

Banks no longer make loans by attaching it to gold stored in its vault. Now it's pretty much all digital, meaning that even if you are merely an individual customer looking for a loan in your own bank, as long as a prospective borrower does not literally want the actual notes as a term in the loan, the bank doesn't need to have the money before it makes a loan.

On a much larger scale, the money the government creates is a fraction of all the money created in circulation in terms of loans. As all this new money is created, the money already in circulation is devalued, which means people who hold the current money, that's you and me, are made worse off. We must add to this the problem of centrally created interest rates, which is the price of borrowing money. The market system of pricing of goods and services is the most effective way of setting prices, and the same should be true of the price of money, which when all is considered is the most important price of all.

Money is now a political football for politicians to play around with as they see fit for their short-term interests. All this money created has pushed up prices, so when wages rise less frequently your pay packet buys you less than before, which makes day to day living seem more expensive. And this is pretty much all the government's fault - they have done more than anyone to create the JAMs. 

To see why, imagine an island of 100 people. Of those, 50 people have £20 and the other 50 have no money but assets worth £20 per person. The islanders will freely buy and sell these assets at £20 a time. If more assets appear on the island the price of assets will drop. Now suppose instead of more assets there is the same amount of assets but more money thanks to the appearance of a man with £1000. As there is now double the money in the economy, selling an asset for £20 seems too cheap, because the £20 is now devalued. Asset prices rise to reflect the fact that there is now £2,000 in the economy, which reduces the purchasing power of all the rest of the islanders with £20 to spend.

This is what has been happening to our developed economies over the past few decades. Wages cannot keep up with inflation because the government's injection of extra money into the economy negatively impacts people's purchasing power through money devaluation. A good illustration of this can be seen by looking at the housing market and the difference between old and young people. For young people the cost of getting on the housing ladder has risen to reflect all the additional money that has been put in circulation. Older people got to buy their houses prior to this, so they benefit from higher house prices disproportionately higher than they originally paid.

And of course, with crony capitalism the money pumped into the economy by central banks is not finding its way to the everyday member of the public, it is going to people in the banking industry with special political interests and politicians on side to ensure the money supply is inflated to fulfil their mutual interests. By way of analogy, it is rather like when aid money is given to Zimbabwe or Sudan but only a small proportion of it makes its way to the neediest people because it is filtered through corrupt officials.

All the ways the economy is devalued, through printing money, through excessive borrowing, and through deficit spending, society is being turned into part Ponzi scheme part credit-pumping pyramid scheme where those nearest the new currency gain the most and those furthest away from it lose out, because by the time all this extra money reaches them it comes in the form of higher prices for goods and services relative to their wages.

I said that this disproportionately affects the young more than the old. And naturally the younger you are the worse this affects you, because you currently have no assets, just a national debt that you and the millions of unborn people will have to pay back. Okay, you don't literally pay it back in the same way you would a friend who'd lent you £10 in the pub last Saturday, but you pay it back more subtlety in the shape of less purchasing power, more things being unaffordable, and state-based initiatives that skew the wealth from the bottom of the pyramid towards the top.

Many leftists believe that all these things like unaffordable housing, higher levels of inflation, stagnant wages and increased struggling to make ends meet are because of capitalism and the way that the market makes the rich richer at the expense of the poor. It is simply a lie - these things are not caused by free markets where people buy and sell in accordance with the marginal value of the goods, services and labour - they are caused by governments and crony capitalism which consist of rent-seekers that rig the system to favour the elite over the rest. This sort of financial skewing would not happen in a freer market where the price of money was conditioned by supply and demand and where the ability to add more money into circulation was quelled.

A phenomenon called Wagner's Law states that as the economy develops over time, the activities and functions of the government increase. As progressive nations expand their economic growth, the proportion of money that goes into the public sector grows too, because there is more economic growth for politicians to get fat off in the shape of transfers of wealth. What you have to remember is that the state doesn't create anything of value, it merely reallocates sideways money that has already been earned by private sector value being created. That's not to say the state provides nothing of value to society - I don't mean that at all - I mean that the state doesn't create value by inventing things or by innovating.

Here is a fact that ought to absolutely startle you. The state is now approximately 25% of the entire country's workforce, and yet less than 15% of new currency goes into the private sector. Imagine all the talent, innovation and prosperity that could have come in the shape of value-creation if the state hadn't creamed off so many of the nation's resources for politicians' own gains.

Here's how things should be
Picture the scene: imagine you live in a society in which no central bank or government can add more money into circulation, and no government can run a deficit (UK governments have run a deficit for literally 95% of the past 40 years - 38 years out of 40), meaning they can only spend what they collect in taxes. And further, imagine they can only tax with utmost transparency - there are no more stealth taxes, and every tax they take has to be justified with visible recorded expenditure accessible to everyone.

In other words, the state has to play by the same rules as everyone else - only spending what they have and only spending money on things that people want them to spend it on because they value that expenditure more than alternatives. Even wars, like the ones in Iraq and Libya could not go ahead unless taxpayers voted with their wallets and provided the funds for the government. If you take away the government's ability to spend excessively you force them to only spend money on projects and services that people value. At present there is very little stopping them printing whatever money they need to action whatever cause they like.

Since the Nixon shock of 1971 when the link of money to a gold standard was discontinued, we have had a system built on borrowing and credit and printing of money that has left us all drowning in a reservoir of debt and deficit. Because of politicians' short-term aims, they manipulate currency to carve our their own political career knowing that most of this activity goes on out of focus of the naked eye of the electorate and at a rate that will do most damage to people who will be working long after their political careers have ended (a good example is the effects of the Nixon shock that played a huge part in the 2008 financial crisis that occurred 14 years after Richard Nixon's death).

Gold as the money standard was a good method for ensuring a limited and therefore more civilised government, whereas unlimited fiat money leads to uncontrolled currency expansion that thins out the value of money. We talked about house prices going out of control a moment ago thanks to currency inflation, but also supply and demand problems. Have a look at a product that doesn't have the same kind of supply and demand problems as houses - I'm talking about oil. Here you can map the price of a barrel of oil from 1946 to the present day. Look at how stable the price of oil was when the dollar was linked to gold, and look at how it fluctuates at a much higher level afterwards. The price of oil if measured in gold hasn't changed much at all since 1946, whereas the price of oil in dollars or pounds has shot up drastically.

The same goes for most consumable goods - their prices have risen far higher than they would have if the government had been kept in check with its careless handling of the money supply - prices of goods have risen higher than average earnings. Had government activity been wedded to the gold standard and prices of goods, services and money been more in line with supply and demand, the link between average earnings and prices of consumables wouldn't have been so out of line, and the relative value of things would be clearer for all to see. You may not realise this but many businesses either suffer hard times or go bust altogether because of distorted currencies where the supply of money created by governments is not constrained enough, or in some cases not at all.

Have you ever thought about the cost of government quantitative easing in terms of families in the UK?

"Both the Bank of England and the US Federal Reserve embarked on QE in the wake of the 2008 financial crisis in an attempt to stimulate economic growth. Between 2008 and 2015, the US Federal Reserve in total bought bonds worth more than $3.7 trillion. The UK created £375bn ($550bn) of new money in its QE programme between 2009 and 2012."

With approximately 25 million families in the UK, the cost of the state's quantitative easing program works out at just under £15,000 per family. Someone is going to have pay for that. But the thing is, can you imagine Theresa May held a referendum on whether families would each be prepared to fork out £15,000 in higher prices for the government's money creation scheme. I think we're sure people would vote with a big fat no.

This series of problems can only be put right when the monopoly politicians have on the money supply is thwarted. Only when the state operates by the same ordinances as the market prices of supply and demand will things be better for our children and grandchildren.

If this election is anything to go by, it seems young people's appetite for voting has been seriously whetted, as they came out in bigger numbers than before. Unfortunately what they voted for is more of the same kind of crises but on an even larger scale under Corbyn's Labour. We've engaged the young in politics; now we need to teach them the basics of market freedom, supply and demand, and about the damage politicians have been doing to their future for a long time now.