Friday, 12 November 2010

Hayek vs. Keynes

Sometimes you just need to rap.

(please excuse the useless intro)



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Tuesday, 2 November 2010

The Great Debate

Unless there are undiscovered WWII Veterans yet to be found on remote islands around the UK, there can't be anyone in Britain that hasn't heard at least some of The Great Debate currently raging about the government’s planned cuts and, more generally, deficit reduction. In fact, the debate is not simply confined to the shores of 'Blighty'. Interested people will have noticed that deficit reduction is a hot topic the world over, especially in the West.

I have yet to blog on the cuts in general, although I have passed comment on child benefit which forms a tiny part of the overall package of cuts currently proposed. This is for two reasons. The first being that there is so much existing commentary on this subject that anyone interested has not been short of material. The second is that this debate is not easy to summarise. There are so many facets, and so many differing opinions to this debate that trying to take on the whole subject in one go would likely result in a life's work, and for some academics it almost certainly will.

However, I recently received a request to do exactly that (a doff of my proverbial hat to the supportive individual who made it), and so with some trepidation I shall give it my best shot. Wish me luck! I will try my best to keep on point as the deficit reduction debate is full of wormholes which can lead one into a series of digressions, which I believe could leave the author experiencing a psychological break, or at the least a migraine.

To my mind, this debate is comprised of two main elements which, taken together, only serve to confuse. The first is primarily an economic question: what should be done about large government deficits? The second a more political debate: if reducing the deficit, what should be cut?

Turning to the first point (should the deficit be cut?), we must start with an admission. We are very much in uncharted territory in the current predicament; humans do not have a textbook for the current economic situation. There is no right answer. Modern economic history provides a number of examples of situations similar to ours, or involving some of the problems, but none that are good enough to definitively point the way. As Mark Twain said, history never repeats itself, it rhymes.

In the 1930s Keynes developed an economic understanding suitable for his times and not too dissimilar from our own, including lessons which have subsequently been accepted into general economic thought. More recently a more laissez-faire approach was developed revolving around the concept that 'the market is always right'. After the banking crisis of 2008 some were quick to proclaim that Capitalism was dead. However, whilst some of the modern laissez-faire thinking has been debunked, real lessons were also gleaned that will endure current criticism and go on to form accepted economic thought. The bases of these two schools of thought largely describe the two sides of this particular argument. The Keynesians who warn of deficit reduction too severely, or too quickly, and the Free Marketeers who support balanced budgets and deficit reduction. I fear even this is too simplistic a description but I'll run with it for now.

Economists in the US, the UK, and in Europe have been debating furiously for the last two years on the right course of action, and I'm afraid they are still debating even as I write. Often economic lessons are only understood some time after the fact, when sufficient data exists to resolve the debate either way. Nonetheless, we must move forward, and can't wait for economists to agree, if they ever will. The UK has decided to reduce the deficit, and as quickly as possible without tipping us back into recession. Deficit reduction was proposed by all political parties going into the recent election. Therefore, I think I can say with a reasonable amount of confidence that eliminating a government’s deficit is generally accepted to be a good thing. The question really is when do we cut? And how quickly?

For anyone still wondering why we need to cut at all, and whether this represents a significant reduction in the State, backed by ideological reasons or any other, the following chart showing both former and projected government expenditure illustrates in correct proportion the size of the problem.


(please note that the 'cost' of bailing out the banks is not included in these figures!)

As is evident, government expenditure from circa 2005 onwards experienced an almost unprecedented growth above trend. One should remember that this growth in budget was not really debated at the time. I suspect that had vast new government programmes been commissioned, the budget implications would have been raised, but in fact much of this additional spending was pumped into existing programmes in the form of better pay for civil servants, increased welfare payments, and significant capital expenditure. Some would say that existing programmes were historically underfunded which this chart also supports, but between 1997 and 2005 this shortfall was rectified.

The effects of this above trend growth are too numerous to detail but must include a contribution to the bubble which caused the crisis, a factor not often cited in media commentary. The government deficit is simply a result of a government spending every penny of its inflated tax returns, only to be left short when the real tax revenues are revealed after the crisis. In such a circumstance it seems only logical to suggest that the government is going to have to reduce its expenditure at some point to match its income.

The Conservatives believe that taking the pain as quickly as possible, without crippling the patient, is the best medicine. This certainly sounds like a reasonable position and given that we are now competing in a globalised marketplace there are advantages to a swift return to health. However, Keynes taught us that cutting government expenditure can be self defeating. No one knows if the Tory medicine will cripple the patient, only time will tell. But at present the economy seems to have taken the news without going into a nosedive. Of course the opposition argue that economic data can lag behind announcements, and that given the seriousness of the current problem, more caution would be wise. This sounds an equally reasonable point and only with hindsight will we know which approach would have been the better choice.

This leads me on nicely however to the second problem: if cutting expenditure, what is to be cut?  We encounter here my main objection to the British voices currently calling for caution. To oppose a cut, one must believe the expenditure being cut is already useful. If you can't defend the expenditure, your only real position vis-à-vis stimulating the economy must be to agree but insist that the savings are reinvested in more useful government expenditure rather than reducing the deficit. I am still aghast that some have suggested that now is the wrong time to cut 'waste'!!! Is there ever a wrong time to cut waste? This sort of thinking is the worst example of our debate's two elements crossing and producing a twisted outcome, and an example of the confusion I warned of earlier.

If we are to reinvest savings in the quest for economic stimulus, Keynes comes into his element. Keynes found that capital expenditure had a multiplier effect on stimulating the economy and could help kick-start an ailing economy. For example, paying a doctor an increased salary does not stimulate the economy because any additional money paid to the doctor has to be taken from someone else in the form of taxes. However, paying a builder to construct a new motorway achieves the same zero sum wage transfer, but also provides society with a new road!

The Keynesians therefore should be arguing for reduced non-capital expenditure in favour of increased spending on new capital projects, such as new government buildings, transport infrastructure, and other public works. This is not where we find British opposition arguments, however. Amazingly we find arguments against cutting child benefit for the top 15% of income earners on the basis that it will undermine the economy, not a debate as to whether the top 15% should be getting benefits in the first place. That the left makes this argument is an added bizarre dimension, one that I believe can only be caused by the complexity of this issue.

Of the details of the cuts so far announced, of which there have been few, I have yet to hear many with which I disagree. Housing benefit limited to £400 per week, my mortgage is only £365 per month!, benefits removed from those who don't need them, a two year public sector pay freeze, raising the retirement age, a leaner armed forces, and a market for higher education. These all sound like reasonable ideas to me, whose merits would certainly be worthy of a discussion whether we needed to make cuts or not. I am disappointed by some of the capital projects cut - I mentioned that building new schools and infrastructure would have added benefits at a time like this. At least the government has acknowledged this by retaining some projects like the M25 expansion, and Crossrail, albeit they seem a little London-centric.

Until the opposition can argue how better they would spend the money to ensure a strong economy, it seems prudent at least to take the opportunity to seek out ineffective or wasteful government expenditure and to reduce the deficit, safe in the knowledge that we can always spend it if the economy starts to bomb. This is why the Tories have made such progress, their position whilst possibly not entirely correct, is not currently opposed by an equally credible argument. Cutting less quickly does nothing to stimulate the economy, it only reduces the pain in the short run. The government should be careful in this respect, however, and have plans ready for increasing expenditure if the pain becomes too acute.   

If you take anything away from this blog, I hope it’s that when reading commentary on deficit reduction you can identify the two differing arguments: namely whether in economic terms the deficit should be cut or politically whether the cut in question is the correct use of government spending. The two are often confused with one another, and by clearly separating them we can see the inconsistencies in some popular arguments.  

If you are interested in more information I can recommend Stephanie Flanders blog for the BBC which I think explains some of the numbers in more detail and a collection of her recent blogs explain this subject further.

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Monday, 1 November 2010

The Nutty Professor

Why can't we have a sensible debate about drugs? It does surprise me that it is such an emotive issue. The ethical questions concerning abortion, or euthanasia are obviously going to raise emotions, but the issue of how we manage dangerous substances (from Heroin to knives, and even bleach) seems to raise similar levels of controversy.

The unfortunately named, Prof Nutt, former government 'Drugs Czar' is making the case, yet again, for bringing a little more perspective to the debate. However the media cannot help themselves but try and make a big song and dance out of it. The below interview, on the BBC of all places, beggars belief. Sian & Bill look almost desperate to extract the most sensationalist headline from the Prof that they can. Sian & Bill don't have to sell any newspapers? this is the same organisation that bring us David Attenborough and his wonderfully educating evidence based research. What on earth is going on in the BBC newsroom these days?


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Wednesday, 27 October 2010

Oi! Where are you going with my country?

Tony Blair recently stated in his memoirs that:

'I was never a passionate devolutionist. It is a dangerous game to play. You can never be sure where nationalist sentiment ends and separatist sentiment begins'

Very true Tony.  Unfortunately his party still pressed ahead with the devolution agenda. Certainly to my mind the creation of the Welsh Assembly, and all that goes with it, has furthered separatist sentiment. This has happened to the extent that I have noticed a change in public attitudes and the frequency that one encounters radical views within the short time that the Assembly has been in place.

The front line of this feeling is of course lead by Plaid Cymru, who quite amazingly, are actually in coalition and currently 'running' Wales. This comparatively tiny party shout a lot louder than their number would suggest.

Recently I learned that they have invited a politician from the Flemish Nationalist Party to speak at their annual conference. One should wonder what, if anything, ties Wales and Flanders together. Looking at the Flemish Nationalist Party's policies you can begin to see their motivation.

1) Preferential choice in schooling for families with one Dutch speaking parent.
2) Libraries to stock at least 75% Flemish books.
3) Blood donation drives to be conducted among people who are mono-lingually Dutch.

Plaid Cymru has been pushing the Welsh language agenda throughout. My view has always been quite simple. Language is a method of communication; it is a 'currency' if you like, for information exchange. Efficient exchange occurs within single currency areas, and therefore having multiple currencies in use is always inefficient.

In economics the argument can be made for separate currencies for a multitude of reasons which do not apply to language, and if I digressed would take this metaphor too far. The promotion of Welsh language in Wales is not designed to improve efficiency, which could be argued about teaching other foreign languages to children, it is designed to appease a cultural desire. This is why it should not be mandatory, or an issue for government.

As far as I know, 20% of the population of Wales can speak Welsh, most of which I would imagine are young and can only speak Welsh because it was made compulsory in schools a few years ago. I am also lead to believe that of those completing the most recent census, only 2.5% chose the Welsh option, and the numbers who select Welsh at cash-points are even lower. Where is the demand for Welsh that this party thinks it is satisfying?

Lastly, Plaid has recently issued some new ideas it is considering putting into its new manifesto.

- making Wales a trilingual nation within a generation, with children learning a third language.
- introducing a national car-free day from 2012.
- making electric car charging stations compulsory in every new public building from 2016.
- creating more community gardens for food security.
- launching a new Welsh diet and nutrition drive based on the creation of local food systems across Wales.

What strikes me about these, apart from the fact that most of them are a bit wacky, is that they all seem to appeal to small groups of fanatics. Having found some support banging the Welsh language drum, they have now found that appeasing the 'greens', the 'eat locals', and so on, can improve their party base. I found the trilingual policy particularly humorous as with only 20% of the population speaking Welsh I would say it is a bit ambitious to claim that we are even a bilingual nation!

So the question I have is, where are this party, who are currently in office, with their wacky ideas, fanatical support, and lack of demand from the public, going with my country!??!?

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Two wrongs don't make a right

Following a slightly heated debate in my office, I discovered another objection to cutting child benefit for HRT payers. The objection is that there are wealthier people, already unfairly benefiting, and to a greater extent in this country, and that tackling this problem before tackling these greater injustices, is 'unfair'.

I can't argue with the sentiment.  Ideally, inequalities should be tackled in order of their size. However, that doesn't mean that inequalities should not be tackled at all until more damaging unfairness has been dealt with. As I have said previously, incremental improvements are improvements nonetheless.

I can't help feeling that this argument is also underpinned by the now common sense of entitlement many people seem to feel. In some cases it boils down to 'If he's got his hand in the till then why shouldn't I?'. This sentiment is understandable, but quite ugly. It has an 'every man for himself' quality which is surprising given that some of the loudest objections are coming from so called socialists. Needless to say some of the Right have also raised objections which seem to contradict their so called desire for a reduced State.

Camilla Cavendish, writing in The Times, has summed this up well saying "The moral outrage from the richest 15 per cent on this issue has been the ugly face of this (Conservative) conference. We are all loss-averse. But the deficit plan will get nowhere if the pain is not shared. Those who are using concern about non-working mothers to conceal their dismay at their own financial loss have jacked their moral high-ground up so high that it should give the rest of us vertigo".

Where do the roots of our new found feelings of entitlement come from? Camilla also goes on to articulate a possible cause for feelings of outrage which makes a lot of sense to me. She writes that as a voter she is bribable, as we all are, and suggests that the rise of 'middle-class benefits' may have lead to a change. "The very strong reaction to these losses is a striking manifestation of just how successfully we were bribed; how addicted to State largess we have become."  "Gordon Brown's complex system of tax credits was an explicit attempt to expand middle-class welfare" - the ultimate conclusion of which would have been a web in which nearly every single one of us was caught, and corrupted".

Thankfully, and despite the considerable media scorn, the government look like standing firm. Polling has shown that the vast majority of the public support the policy concept even if, as even the Treasury admits, there was no easy way to be completely even-handed between dual and single-earning households.

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Thursday, 14 October 2010

Remember remember . . .

For those interested in the so called 'bonfire' of the QUANGO's, the government has today published a list of NDPB's (Non Departmental Public Body's). The list also sets out what may happen to many of them. I found it quite interesting just to realise how many of these organisations even exist.

If your interested in the list, you can find it here.

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"We're entitled to life, liberty, the pursuit of happiness. . .oh, and child benefit!"

If anyone hasn't already noticed, a debate is raging over how to cut back government expenditure. Of course cutting out the, now infamous, "peace-pods" is painless (or at least I would hope so!). The scale of cut backs required, however, is inevitably going to mean cutting other items which some people will think are important.

Recently the debate has focused on the coalition government's plan to cut child benefit payments to Higher Rate Tax payers. For the most part I have ignored the arguments against the cut because in large part they focus on the inequalities it creates for people on the margins of where HRT kicks in. The inequality which is quoted already exists in the tax system, in as much a couple earning just under the threshold each, do not pay HRT, whereas a couple with one person just above the threshold will.

The removal of a benefit paid to people above the threshold exacerbates this inequality, which is claimed to be 'unfair'. However, this inequality is caused by the income tax system, and whilst the change does exacerbate the problem, the debate is not about reforming income tax. In fact by removing the benefit another inequality is avoided, being the inequality of low-income earners subsidising the raising of children by high-income earners, as is currently the case.

Therefore, ignoring this argument should leave us with an acceptable policy (in that most people would agree that high income earners should not need state support to raise their children). However, I have noticed another argument quoted which signifies another point of view I find very worrying. That is the feeling of entitlement for state support.

A government front bencher no less, was quoted in The Times as saying, "I sacrifice so much and now George 'millionaire' Osborne takes away the only thing the State gives our family back". That a MP, and a government member at that, can think this way astounds me. Ignoring the long list of government services every member of society receives in return for their taxes, the idea that we are all entitled to money back from the State cannot be correct. As an MP this individual will already earn in excess of £65k p.a. and yet they feel that although they are in the top 15% of income earners in the country, they are somehow entitled to a State benefit.

Starting with a blank sheet of paper, on a mission to design the 'fairest' tax and benefit system, I would have thought a good place to start would be to establish the definition of 'poor'. As poverty is relative, we could say that the lowest earning 25% of society can, for our purposes, be classed as 'poor'. Developing that point on we could reasonably say that anyone earning more than the lowest 25% of society should not need, or be entitled to, any State benefits. Whilst I may have plucked the 25% figure out of the air, and in reality this might be subject to immense debate, I would have thought that everyone earning in the top 15% of society could easily be eliminated from receiving benefits, without much argument.

The Governments proposals at least tackle this problem. That they exacerbate another inequality, which already exists for those at the margins, should not cause such strong feelings. Legislation is changed in increments and any improvement should be welcomed. If it raises other issues in the process they should be tabled for debate at a later date. Otherwise progress cannot be made.

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Wednesday, 6 October 2010

Econ 101

I have been thinking for a while about whether everyone should be taught economics at school. The more the merrier I'm sure most would say but teachers' time is, of course, limited. Economics therefore has to be more beneficial than other subjects in order for it to make it into the busy curriculum.

I am going to leave exactly which subjects are less 'worthy' to others who know about such things, and instead focus on the benefits of economic knowledge. I am no expert on the subject but I have studied it, and often find myself enjoying a particular vantage point denied to those who haven't.

The boys behind Freakanomics have clearly demonstrated that an economically-trained mind can help explain most of life's peculiarities, or at least those concerning humans. The fact that their books are bestsellers leads me only to conclude that many economically-untrained minds find their results interesting as well.

Of course there are many benefits to greater economic knowledge for the individual, not least a better understanding of the world. My thoughts, however, have centred around the effects of wider economic knowledge on society as a whole which seem to be overlooked. That is to say that I haven't heard of them, and despite my looking.

In a democracy every voter has a responsibility to understand what they are voting for. This may be a lot to ask for, but incremental improvements are improvements nonetheless. In the past voters have chosen their representatives on the back of an ideology, leaving policy details for their representatives to decide. More and more these days, however, political debate is focused around policy detail, with the public being asked to decide between details, albeit important ones, by exercising their right to vote.

Take the recent election for example: all major parties went into the election with the pledge to reduce the deficit. Therefore the choice for voters was only how to reduce the deficit? This is not to say that this kind of scrutiny from the public is a bad thing. It is clearly more desirable to have an interested populace. The level of 'fine tuning' debated highlights how much agreement already exists, which is to be celebrated. But it does raise the question that if the voters are choosing the policy details, do they understand the problem well enough?

The Times recently featured the results of a Times Populus poll. Respondents were asked to indicate how much responsibility for the budget deficit resided with a variety of groups. They were asked to mark each out of ten, with ten meaning that they bear complete responsibility. A sample of the results are detailed below.

The banks - 65 per cent scored them between 8 and 10.
Gordan Brown & Alistair Darling - 42 per cent scored them between 8 and 10.
George Osborne & David Cameron - 21 per cent scored them between 8 and 10.
"Those who took out mortgages and debt they couldn't afford" - 40 per cent scored them between 8 and 10.

This should clearly be worrying. That 21 per cent of the respondents thought that the Tories were responsible for the deficit when they were in opposition, I find incredible. Since the crisis broke we have had significant media coverage, albeit much of it rhetoric, and an election to educate the public on the economic situation. Whilst I don't expect an average answer to include commentary on the exchange rate and its affect on the Balance of Payments, I would expect virtually all able adults to know at least who wasn't in power at the time.

The last result I have quoted there is also fascinating: 40 per cent of the respondents thought that those who took out debt they could not afford were largely responsible for the government deficit. This amazes me. I can see the logic in a train of thought that goes, people who can't repay loans, make banks fail, and cause governments to bail them out, but I can't believe 40 per cent of people think that this is what actually happened!

Firstly, and this I admit might be a bit of information the average man may have missed, is that the quoted figures for the 'deficit', and certainly what our votes were supposed to tackle, exclude the costs of bailing out the banks. Having said that, it was recently widely reported that the taxpayer can expect to make a decent profit on the bail outs. So I wonder why these people think we have to cut back because of a profit-making deal?

Of course they may be smarter than I give them credit for. They may actually be referring to sub-prime borrowers in the USA which certainly did trigger and significantly exacerbate the crisis. However the actions of these borrowers were not co-ordinated and, much like the classic floating table trick at a Seance where individuals lift a table without knowing that they are, attributing blame or cause to these individuals seems wrong. If I may stick with the metaphor, the question 'who caused the table to float?' may be more accurately answered, 'the magician overseeing the trick did'.

The truth I believe is fairly simple, the government of the day matched its spending to the size of the economy. I am leaving out ideological issues regarding the size of the state for a second. The size of the economy was found to be inflated, or enlarged by a 'bubble'. Whilst blame could be laid at some people's doors for bursting the bubble, the false size of the economy was as true before the crisis as it has been proven to be now that it has burst. The real economy has been found to be smaller than previously thought, and the government has to cut back its size to suit.

'Who caused the bubble?' is a different question and one where the possible answers are far too numerous to cover here. Suffice to say that whether you think it was bankers' greed, Thatcher's easing of credit regulations, globalisation, leaving the gold standard or a myriad of other touted reasons, recessions have occurred throughout economic history and although they are all different, it is widely accepted that they are a characteristic of human nature.

How and when the government's spending is to be reduced is a matter for debate, and for voters. The implications therefore of significant ignorance on this issue should be obvious. Huge decisions will be made on the back of the election results which are founded in ignorance. Debate is raging over public sector job losses 'caused' by bankers excesses and our 'debt-fuelled' society. Reducing your costs when your income falls is so obvious to me, that I can't believe people are arguing against job losses because the deficit was 'not our fault'. No one ever said it was!

Would wider economic education have averted this crisis? I think not. Would wider economic knowledge make the discussion and process easier? I think almost certainly. Would it also produce more appropriate policies to remedy the situation? I think it must, and that is the greatest shame here. Our ignorance as voters is misguiding our representatives from taking the right actions and restoring economic well being for all of us.

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Thursday, 30 September 2010

The Idiots

It's all very well and good to get stuck in to some serious thinking about current affairs  but where would we be without a bit of comedy? Thankfully the newspapers do provide us with a little every now and then. Today's gem has been provided by the South Wales Echo who cheered me up with this little beauty

CARDIFF council has cut the number of road sweeper vehicles operating through- out the city by more than a third. It recently made the cuts to its street cleaning department, reducing the number of road sweepers from 24 to 15 and cutting the number of fly-tipping vans in half to two. The reductions have led to route lengths for street sweepers being increased. Councillor for Trowbridge Ralph Cook said he first noticed the changes when he saw a road sweeper travelling down a road without appearing to sweep. When Coun Cook asked the driver why he was not sweeping, he said he had been told to skip roads that appeared clean if he was running short of time. Coun Cook said: “I asked him why this was the case and he said ‘we’ve had our routes doubled’. He showed me the route and there was no way he could do that route in the time allowed. “As a result of the reduction (in road sweepers), while they’re trying to keep the city centre up to scratch, they were having to reduce the efficiency in the suburbs. “We have a situation where drivers had their routes doubled, they’re under a lot of stress, they’re having to make judgements. What a person under pressure views as clean enough may not match other people’s view. I think it’s a recipe for increasing problems.”
 
I would have thought that skipping roads that appeared clean was a sensible policy to save some money in these austier times, however clearly Coun Cook disagrees. Clearly the cut throat world of private enterprise and the long arduous hours put in my nurses and policemen, does not compare to driving, what is essentially a large ride on lawnmower, around your local area.
 
To complete my enjoyment of this piece, a local council spokeswoman was asked to comment on this scandal and said:
 
"A new programme of street cleansing has been introduced deploying cleansing teams to cover a specific area each day"
 
Is it me? or does the idea of your local authority deploying cleansing teams conjure Orwellian nightmares for you too? 

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Wednesday, 22 September 2010

Buttonwood

I'm not really adding anything here. Buttonwood of The Economist has written a perfectly good blog article which I would recommend everyone read. I think it sums up rather well the very essence of the choices societies face in allocating resources 'fairly'.

The only other thing I will say, having heard as we all have the rhetoric that surrounds these topics, is how refreshing his sensible thinking is. This educated and balanced thinking is sadly lacking in the world.

http://www.economist.com/blogs/buttonwood/2010/09/politics_regulation_financial_markets_and_inequality?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ButtonwoodsNotebook+%28The+Economist%3A+Buttonwood%27s+notebook%29&utm_content=Google+UK

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Monday, 20 September 2010

Friday, 17 September 2010

Nazi Atheists

The pope is certainly keeping me busy. Not a day of the plane and he has already decided to launch an attack on atheism on the back of a total lie. In his speech yesterday he is quoted as praising Britain's fight against Hitler's "atheist extremism" and goes on to say "Britain and her leaders stood against a Nazi tyranny that wished to eradicate God from society".

If I may just quote Mr Hitler himself:

"I believe today that I am acting in the sense of the Almighty Creator. By warding off the Jews I am fighting for the Lord's work." Adolph Hitler, Speech, Reichstag, 1936

"I am now as before a Catholic and will always remain so" Adolph Hitler, to Gen. Gerhard Engel, 1941

It shouldn't need stating that the head of the Catholic church should know his history in this regard. Not to mention that the man himself was alive at the time, living in Germany, conscripted to the Hitler Youth, and claims to be an academic. So what is he playing at?

Of course a bit of Heathen bashing is to be expected from an organisation such as his, but is there a more sinister reason? some seem to think so.


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Wednesday, 15 September 2010

The Catholics

I am a little uncomfortable addressing my thoughts regarding any one particular religion. My contempt for all religions, and the harm they cause, means that to pick on any one religion for criticism leads to a suggestion that perhaps there are 'good' religions and 'bad' religions. Clearly my objections to religion stem primarily from the simple premise that we should not believe in anything for which there is no evidence or where the probabilities of it being so, are massively remote.

However, in recognition (not honour) of the pope's 'state visit' I thought that I might just raise a few points. Having read and heard a lot on this issue in the media recently, it became apparent that actually it has all been said by much wiser men than me, Therefore I have posted below a fantastic speech on the issue by Stephen Fry, and a link to Ben Goldacre's latest comments regarding the harm caused by the Catholic view on condoms, which is clearly the largest and most recent 'evil' perpetrated by the Catholic Church.

Ben Goldacre - The pope and Aids.




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Tuesday, 14 September 2010

Distressing Demographics

Just a quick note regarding the problems caused by demographic imbalance.

As I have alluded to in my post on housing, over the last twenty years or so, the 'baby boomer' generation, amongst others, has piled it's earnings into investable assets. Whilst the Bank of England was focused on consumer price inflation, asset price inflation was allowed to run riot. If nothing else this exacerbated the current crisis by inflating property prices.

Of course this 'new money' invested into asset markets by an aging generation, apart from pumping up prices, and in the case of housing to the exclusion of the young, can only be temporary. The demographics show that the 'baby boom' generation is not followed by generations of a similar size. You can guess the effect this will have on the markets.

Buttonwood, of The Economist, has commented on this point whilst analysing where the best returns are expected going forward.

The results are sobering. The best annualised returns look set to come from high-yield bonds, which should earn a little under 6% over the next decade. For investment grade bonds, the expected return is an annualised 4%.

As for US equities, given that both earnings and valuations are above trend, the expected return is just 2.3% a year (if you take the more optimistic view that the profits trend improved after 1958, you can bump this return up to 4.2%). Treasury bonds also offer a measly 2.3% a year.

What about alternative assets? Here the news is even worse. Gold, oil and property will all lose money for investors if reversion to the mean occurs, while the return on all commodities will be flat.

The problem, which Deutsche discusses at length (it is a 100-page note) is demographics. The baby boomers bought assets and pushed up prices in their working years; as they retire, this buying support will disappear .

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The 'R' word

I would like to think that if there is a theme to this blog it is uncompromising rationality. No doubt every blogger thinks that their views are rational, and indeed defining rationality is itself quite a debate (and one for another day!). However, I often feel that many of the topics or issues about which I am motivated to write go hand in hand with irrationality.

As someone who strives to hold only rational views, it is of course not possible to avoid possibly the greatest irrationality of our time, and perhaps all of human history: religion. I must confess that my views on this immense subject are equally substantial and are therefore too extensive for one post. Hopefully I can articulate my views piece by piece as they occur or reoccur to me.

This week has been a fantastic week for the interested atheist. Channel 4 has been running its 'Richard Dawkins Season', the Pope is to visit the UK next week, and to top it all off we no longer need god to create the universe, thanks to Stephen Hawking. As a result, the papers and 'blogosphere' (please note my intense dislike for the word, I shall not use it again) have been alive with debate and comment. This has presented a feast of information, consternation, laughter, and in some cases blind rage, to entertain me of late.

In particular, I have been struck not by comments from those employed directly by the belief industry, but by the ludicrous comments of religious supporters. Those employed by religious organisations, from priests and bishops, to rabbis and imams, often don't provide interesting fodder for observers like me. Their belief and craft is so strong that it is impossible to debate with. The Times this week covered some wonderful examples of this such as

"Physical laws . . . are about the regular relations between actual realities, I cannot see how they explain the bare fact that there is any reality at all" - Dr Rowan Williams, Archbishop of Canterbury

and

"the fact that we have an extraordinarily complex universe which continues to grow before our very eyes is the strongest possible evidence of the existence of a creator" - Sheikh Ibrahim Mogra, Leicester imam.

I struggle to even comprehend Dr Rowan's point let alone counter it. Were I to actually attempt to debate the point with him, I'm sure that within the next few exchanges I would likely surrender and leave searching for a paracetamol.

Religious supporters, however, are a feast of wondrous and troubling comments and insights that both delight and enrage. One might ponder why there is a difference and I can only conclude that either religious employees are trained to be deliberately difficult to nail down, or that religious supporters, who do something else with the majority of their time, have not sniffed as much of the 'spiritual glue' that those who dedicate their lives to it clearly have. As a result their brains straddle the void between occupying the real and logical world around us, and yet also the world of ancient fantasies (which constitute modern day religions) to which they subscribe. This contradiction produces some incredible comments which could only arise from someone who is trying to reconcile the scientific knowledge of the tangible world with the supernatural tales of the religious.

Naturally some of the funniest statements are often made by ordinary people as responses to a particular article or blog post, and I will endeavour to compile a list from now on of the truly great ones. However, the most enraging are often the authors of articles themselves. Commissioned pieces of opinion writing, which seem to have an uncanny habit of appearing in The Daily Mail. This week I have two articles, one in response to Mr Hawking's less than surprising statement that 'god isn't necessary to create the universe', and one in regard to the forthcoming visit by the Pope.

Starting with Professor John Lennox, Professor of Mathematics in the University of Oxford no less, who claims right off the bat that 'Stephen Hawking is wrong', and goes on to make some incredible assertions.

One of my favourites has to be:

"It's a simplistic approach, yet in our secular age it is one that seems to have resonance with a sceptical public."

That god wasn't needed to create the universe is not a surprise or news to atheists (which I believe he has confused with secularists) In fact the only reason why this is 'news' at all is that Hawking can now prove his theories. Theories without which the religious would deride as, quite amazingly, lacking in evidence. Having dipped a toe into Hawking's world I can assure you that there is nothing 'simplistic' about his approach.

Prof. Lennox goes on to say:

"Hawking's argument appears to me even more illogical when he says the existence of gravity means the creation of the universe was inevitable. But how did gravity exist in the first place? Who put it there? And what was the creative force behind its birth?"

This reminds me of an unapologetically blunt description by Richard Dawkins of such people as 'the yapping terrier's of ignorance' in much the same way that toddlers are known to follow their parents around continually asking why?, why?, why? to questions that don't have an answer. Asking questions is of course a quality to be commended but as Dawkins again states:

"you are again assuming that the 'why' question is a sensible or legitimate question. Not all questions are. You have no right to expect and answer to a silly question."

To me this is no different from asking why water is wet. The only answer to such a silly question is because it is!

The striking contradiction with this approach often favoured by the religious and the supporters, is that the same silly questions can be asked of their position, and invariably they will have no answer whatsoever. Why does god exist? Who made god? What is god's purpose?

Similarly Prof. Lennox continues with his hilarious contradictions, such as:

"If the brain were really the result of an unguided process, then there is no reason to believe in its capacity to tell us the truth."

I am sure that if you asked Stephen Hawking if he thought the brain were the result of an 'unguided process' he would of course disagree believing as he does in evolution. But the assertion that only if a creator had designed the brain could you believe in its capacity to tell us the truth, is quite frankly complete nonsense. It suggests that this man would argue that if his brain tells him there is a god, and god made his brain, his brain must be telling the truth! I remind you at this point that, somewhat disturbingly, that this is a professor of Oxford. It makes you want to weep.

I encourage you to read the entire piece, and challenge you to not find yourself either scratching your head or laughing aloud at the other points he goes on to make.

Turning to Mr Stephen Glover, and I appreciate this post is turning into a bit of an epic, who thankfully is only a journalist, and his recent article regarding the Pope's planned visit. Stephen jumps in on one of my most cherished issues, in describing Dawkins as an atheist extremist. He says:

"the militant atheist and Christian-hater Richard Dawkins"

Militant? Really? This is a classic middle class Oxford professor who delivers, if forceful in argument, as polite a challenge to religion that I think you can make. Equally I sincerely doubt that Dawkins holds his distaste for religions in any form of preferential order.

He claims that the things being said about the Pope are:

"not merely discourteous. . . but reveal disturbing traits of intolerance among this country's supposedly liberal intelligentsia."

The things being said, include the Pope's insufficient response to child abuse and rape that has occurred across the continent in his organisation, and his refusal to condone condoms which has lead to the unnecessary deaths of thousands in Africa. That the 'liberal intelligensia', and I hope all good people, are intolerant of this is to me a wholly rational and commendable response.

He goes on, in talking up the Pope:

"he does not bend to fashionable secular trends, and holds fast to beliefs which are those of the traditional church, Isn't that admirable?"

Admirable? This is certainly beyond my belief.

"he is not a monster and child abuser to be vilified as though he deliberately committed acts of evil."

This is a parallel of a defence most often used by CEO's on trial for corporate crimes perpetrated by their staff, which fails by the way. Certainly if it works for the Pope someone should let Tony Hayward the outgoing CEO of BP and Fred Goodwyn the former MD of RBS know.

He returns to his attack on Dawkins with:

"there is a hard-core which embraces and promotes atheism with the blind fervour of religious zealots. Richard Dawkins is my prime exhibit".

Dawkins is currently, amongst other things, Professor of Public Understanding of Science, at Oxford University. Were he not to display fervour in promoting his views, he would not be discharging the duty that his position requires. As for zealotry, which I understand to mean committed even to the point of death, I am sure Dawkins like most rational people will believe in their understanding of the world up to the point someone points a gun at you, at which point you'll believe anything they want you to believe. Sad that Professor Lennox, of Oxford University no less, has reduced himself to the sort of sensationalist nonsense that pervades the pages of the Daily Mail.

He ends as I will with,

"We may not agree with everything he says, or even with his most fundamental beliefs. But his visit should be welcome because he is something rare in the modern world. A decent man of principle."

If only he was talking about Dawkins, and not the Pope, he'd be right on the money.

Full article for your amusement.

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Friday, 10 September 2010

A tribute to Hitch

Christopher Hitchens (61) has been an unknown character to me. I still don't know a great deal about him. I know him as an outspoken atheist with a mind-blowing command of the English language. He is a fantastic orator, if you haven't witnessed his skills you should, and a prolific writer on the subject of disbelief.

The other day I stumbled upon this piece, 'Tropic of Cancer', which unfortunately reveals that he now suffers from cancer of the esophagus. Having read the article I was struck by just how beautifully frank it was, how honestly he recounts his personal feelings about being faced with his own death. I found it stunning.

Sentences such as:

"I have been 'in denial' for some time, knowingly burning the candle at both ends and finding that it often gives a lovely light"
and:

"I have been taunting the Reaper into taking a free scythe in my direction and have now succumbed to something so predictable and banal that it bores even me"

articulate a clarity of thought, an acceptance of mortality, and a dislike of drama that only someone who truly accepts the world and our short time here, could appreciate.

In his second piece of the series, 'Unanswerable Prayers', he uses his immense skill to yet again mount an attack on religious belief, from the new perspective of someone terminally ill. As an avid reader of atheistic literature I am aware that authors on the subject often receive significant 'hate' mail or even worse. Richard Dawkins has taken to printing his favorites in his books and posting them on his website for all to see. Certainly having read a few, you cannot help but think that the level of hatred and violence these messages promise could only come from someone thinking irrationally. Hitchens, to his credit, uses his razor-sharp intellect to show how vacuous these people and their beliefs in fact are.

From his new, if not unenviable perspective, he also picks up some rather comic viewpoints that only an atheist would appreciate. As a renowned writer, he mentions that he has received, in addition to hate mail, messages of support from religious people. Many of which wish him well and plead for him to convert to their particular strand of belief before it is too late. He states that he now sympathises afresh with Voltaire, who, when badgered on his deathbed and urged to renounce the devil, murmured that this was no time to be making enemies.

Despite my lack of familiarity with Hitchens, I have now seen that this titan of logic, is worthy of further research, and no doubt will prompt me to offer further credit in the future.

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Wednesday, 8 September 2010

The Arts Council

As readers of this blog will come to know, I am not convinced that state funding of the arts is an acceptable use of public money. After all most of the world's 'great' works of art were produced before such funding was even available. How a state funded body should choose to allocate its resources is a big enough problem given the lack of information supplied by the absent market, and I am convinced the current bodies have got it wrong.

The Arts Council, quite apart from my general reservation over state funding of the arts, causes me great concern because its allocation of funding does not seem to take demand for the product into account when making their funding assessments. There appears to be too much funding allocated to projects with very limited demand but perhaps not so surprisingly to projects in favour with the bureaucracy apportioning the funding. I have touched on this point before in reference to S4C.

I now find that even those inside the art community agree.

http://www.bbc.co.uk/news/uk-politics-11228143

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Thursday, 2 September 2010

Are we all NIMBY's?

The Not In My Back Yarders must be having a party!

The governments proposed plan to hold local referendums on new housing schemes in England which will require 80-90% of local people to approve new building schemes in villages would likely bring projects to a halt. Lord Taylor of the Rural Commission captured the problem well when he said

"What they will do is create not a right to build, but a right to block for a very small number of 'nimbys'”


It could be argued that even getting 80-90% of residents to turnout and vote would be a challenge in most locations. However setting a 90% benchmark for approval is just ridiculous. Planning in this country is hard enough to overcome, and allowing 'local resident's' to have a veto is definitely a bridge to far.

It's an interesting point though, because neighbours are definitely stakeholders in their surroundings and there already exists not only consultation systems regarding planning, but legislation to protect a landholders interests from neighbouring activity. But a balance has to be found between existing residents rights, and the needs of those with no home. At present the advantage definitely lies with existing homeowners.

The seemingly un-stoppable rise in house prices in the UK is, I believe, primarily driven by supply & demand. Of course house prices we are told are a factor of incomes, which to a certain extent they are. However the laws of supply and demand cannot be ignored.

We have seen a large rise in asset prices over the last twenty years despite consumer price rises remaining modest. Consumer prices are of course measured through inflation statistics, CPI and RPI, however to my knowledge there is no similar measure of asset prices. If statistics were published on the performance of asset prices, by which I mean property prices, equities, and other popular investments, this 'asset inflation' would be more identifiable. After all, to a large extent it was this asset inflation which the Bank Of England couldn't control though interest rates and contributed or caused the latest crisis.

This asset inflation has served to enrich existing asset holders, who particularly in the case of property would be older people who held property assets before 1990. As they realised the profits of this gain they of course reinvested them in the same market. Obviously many lavished the profits on luxury spending which goes some way to explain the recent success of luxury brands like Waitrose, John Lewis, and M&S, but sufficient numbers of them reinvested the proceeds in the same market that had rewarded them so richly before. This new investment money is what has made up the gap between incomes and house prices.

Of course, increasingly lax mortgage terms and low interest rates have also allowed greater participation and additional money, but I don't believe this should be seen as a bad thing. Yes, the banks do have many non-performing mortgages but they are not comparable with the US sub prime problem, and are lower even than the number during the 1992 recession. Most non-performing loans occur in the self-cert market or so called 'liar loans' business. These were mortgages given where no evidence of repayment capacity was required which is of course crazy. That doesn't however mean that 100% mortgages for first time buyers where sufficient income is evident to provide for repayments are a bad idea.

The point I have been coming around to (I seem to have drifted from the topic of NIMBY?'s), is that NIMBY's are known for taking action against development plans in their location. However with so much investment money pouring into the housing market, and so much of the economy now reliant on the continual rise in house prices, a large portion of the population now have a vested interest in restraining the supply of new homes, even nationally. Headlines about house price rises are often cheered in the press and falls met with dismay and pictured with rain clouds. Can anyone think of another living cost that is cheered when the price rises?

The governments plans to give residents a new build veto is in effect a huge barrier to new houses anywhere. We have become a nation on NIMBY's, and central government initiatives to strengthen this movement represent a frightening development.

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Wednesday, 1 September 2010

S4C

I will no doubt return to my dislike of state sponsored culture, but this piece regarding S4C is a fantastic example of the problem.

Firstly I note, that virtually all calls to protect state funded culture seem to come from wealthy government or in this case ex-government employees. This is only relevant because when the wealthy call for areas of government expenditure to be protected it is usually rounded upon by the press as a poor use of government funds. However culture spending is seemingly excluded in the press from being classified as middle class expenditure.

The article states that

Lord Morris said the likelihood of big funding cuts, coupled with recent disclosures in the Western Mail about low viewing figures for some of the channel’s programs, made it all the more important for responsibility for S4C to be transferred to the Assembly’s hands

Lord Morris is obviously aware then that S4C does not entertain the majority of even the Welsh population, and I doubt even the Welsh speaking population, and yet goes on to say

“I can’t understand why there isn’t unanimity on the subject. S4C should be part of the Assembly’s responsibilities – I can’t understand how the Assembly can run roads and housing, but not such an essential part of Welsh life.”

well, I am sorry but roads and housing are issues which affect every single person in Wales and to suggest that S4C has the same gravity as these issues shows how disconnected this man is from issues that effect most people.

In the 'age of austerity' and with government spending cuts planned, surely it is the most important policy areas which should be protected and to have to watch wealthy bureaucrats running around trying to protect their pet projects paid for by the taxpayer should be attracting more criticism from the press than it does.

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No way to run a country!

Robert Peston, the sometimes quite odd BBC business correspondent, is back from his holidays and back to blogging with this post on British political party funding.

No doubt the ways in which political parties in this country are funded will not be a surprise to most. That the donations to both of the main parties seem to emanate largely from groups or individuals with a clear and direct advantage from gaining influence will also not be a revelation. However given the history of scandal and abuse that MP's have proven is not uncommon amongst out ruling classes, in 2010 there must be a better way to fund British politics.

The often touted alternative to the current system is state funded political parties. The problems with this system are far to numerous to mention here, suffice is to say that under a state funded system taxpayer money would be paid to the BNP and that should be reason enough to object to the idea. However the current influence wielded by political backers seems almost equally objectionable.

It could be argued that I am over doing it. Despite the entire political class being funded largely by minority interest groups, party policies are broadly considerate of the majority. However as any lawyer will know in reality most British law although based on a premise considered for the majority, is rife with special interest provision and exception. When taken in totality some special interest groups or individuals can seemingly command huge power and influence in the real world despite their minority status in society.

Of course consideration of special interest is key to good legislation. A blanket policy which is enacted across the board without consideration of special interest is likely to be damaging and invoke unintended consequences, however at present the consideration of minority positions and special interest seems limited only to those lobbying the 'honorable' members of parliament.

Of course Winston Churchill got it right when he said 'Democracy is the worst form of government. . . except for all the others'.

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Where to start?

My first post . . . it's not been easy. Despite the daily debate in my head over issues covering a multitude of topics, deciding what to base my first post on has been troubling. Launching into a tirade over any specific subject seems like the wrong way to start a blog. Having been an avid follower of a number of other blogs I know that readers develop a context for the writers posts, and although all blogs must start somewhere, and all readers join at some point, to just commence seems odd to me.

I wonder what context a reader might develop of this blog, at present almost nothing I'm sure! However virtually all of the writers of blogs that I follow have created defined personalities in my mind, this despite the posts being often short and very topic specific. In some ways however a blog is far more revealing about the writer than a fully published text. Not only is the content not subjected to a publishers polishing but the rate of posts and sequencing can give an insight into the writers own life and work.

My favorite blog posts are often punchy and to the point, which is not to say they are short or lack depth. However I find that authors of published texts often go to lengths to substantiate their claims or statements and deal with any possible criticism at the same time. Blog posts however are more conversational and often sound more natural and emotive. The great benefit a blog author cherishes is of course the ability to revisit a subject and deal with critique as and when it arises. This advantage makes a profound difference to the project because in many ways a blog, unlike a book, never ends.

Blogs therefore have many similarities with a diary, and whilst I consider my personal thoughts and daily habits far to mundane to warrant recording, blogs have shown me that recording your interests can be rewarding. As one wanders through life reoccurring themes and subjects are common . . . one could say reoccurring, and recording your opinions can allow you to make progress on these issues and enhance your understanding on each revisit of a subject. In addition a blog can be a public space and encourage discussion and feedback without which your thoughts and opinions lack the validity and cogency that outside scrutiny brings.

My objectives here then are straightforward. By committing my thoughts and opinions to record, I hope to 'off-load' the information, allowing me to develop further without the burden of a mental haze of previous information on any given subject. I also want to create a forum of sorts for my readers to critique and discuss my posts in the hope that everyone gains from the ensuing mutual exchange.