Rob's Blog

A friend posted a link on Facebook to a story about a woman who went to A&E for a broken nail. What seems to have happened is that NHS West Kent have put out a press release imploring people not to use its services unless they really need them.

Which strikes me as a pretty odd state of affairs. Imagine a business complaining of too many customers.

Anyway, I pointed out that this is a problem with “free” at the point of use health care. The flip-side is people not going to the doctors’ because they worry they’ll be wasting his time. I’ve certainly had this experience myself, where I’ve visited the doctor in the hope of getting stronger allergy medicine and left feeling like I have burdened him unnecessarily. The treatment you generally get from the receptionists boils down to the same thing. It’s more, “what are you doing here taking up space in my surgery?” than “how can I help you?”

At least with a vendor/customer relationship everyone knows where they stand. People will visit the doctor when they think the urgency of the situation outweighs the cost. The doctor will be pleased to see you whatever you are there for. 7% more customers would mean 7% more profit, not 7% more problems.

Someone replied wondering what would happen if there wasn’t an NHS, and you became seriously ill, unable to work, and therefore unable to afford treatment.

My answer is that that’s what families and communities are for. Previously such problems have been solved by friendly societies, or church congregations. Or you would have to rely on your family.

There was some discussion about whether this is a realistic notion in this day and age. There is no such thing as community, and who wants to look after ailing family members?

I think there is still community, it’s just that people are more dispersed because of modern transportation and telecoms. Your circle of close friends is your community.

But to the extent that community has been devalued, it’s probably a consequence of spending 60 years telling people they can rely on the state to provide for them: why go to the effort of being nice to your neighbours when the government will send round a nurse to look after you? I think when conservatives talk about family and community, this is what they mean, not any “Big Society” nonsense.

Similarly, no-one wants to pay for their friends’ operations. But why don’t they? It’s because the government does it for them. The expectation is there so they don’t save for the eventuality. And the high taxes don’t help with this, either.

But even if you don’t agree and think that the NHS is necessary, you have to accept that if you offer a service at no cost, there will inevitably be more demand than you can cope with.

I’m reading Surely You’re Joking Mr Feynman! Actually it’s my son’s bed time story book. He’s only ten months old so I just want him to be familiar with people reading, and it doesn’t matter so much what we read.

Anyway, this bit got a folded corner, from the chapter ‘Is Electricity Fire?’. In the early 1950s Feynman gets invited to a conference on the “ethics of equality”.

There was a special dinner at some point, and the head of the theology place, a very nice, very Jewish man gave a speech. It was a good speech, and he was a very good speaker, so while it sounds crazy now, while I’m telling about it, at that time his main idea sounded completely obvious and true. He talked about the big differences in the welfare of various countries, which cause jealousy, which leads to conflict, and now that we have atomic weapons, any war and we’re doomed, so therefore the right way out is to strive for peace by making sure there are no great differences from place to place, and since we have so much in the United States, we should all give up nearly everything to the other countries until we’re all even. Everybody was listening to this, and we were all full of sacrificial feeling, and all thinking we ought to do this. But I came back to my senses on the way home.

The next day one of the guys in our group said, “I think that speech last night was so good that we should all endorse it, and it should be the summary of our conference.”

I started to say that the idea of distributing everything evenly is based on a theory that there’s only X amount of stuff in the world, that somehow we took it away from poorer countries in the first place, and therefore we should give it back to them. But this theory doesn’t take into account the real reason for the differences between countries — that is, the development of new techniques for growing food, the development of machinery to grow food and to do other things, and the fact that all this machinery requires the concentration of capital. It isn’t the stuff, but the power to make the stuff, that is important. But I realize now that these people were not in science; they didn’t understand it. They didn’t understand technology; they didn’t understand their time.

Feynman does not say these things because of party politics: he has looked at the world and this is how it works.

I’ve recently been getting interested in coffee, and bought myself a grinder, which is pretty much an essential first step in getting the best out of coffee because ground coffee goes stale fast, so it’s highly preferable to grind it right before you brew it.

For beans I went to Has Bean. This is an internet roasting company. They source quality coffee from all over the world, and ship it out to customers the day they roast it. So you get freshly roasted coffee in the post. As far as I know, you can’t get coffee like this in supermarkets. Supermarkets sell whole bean coffee, but it’s bog standard coffee for the masses and it was roasted whenever. Most people think they are getting good coffee but they are buying pre-ground coffee in fancy packaging. It’s not the real deal. The point is it’s a different market: coffee geeks want something a bit special, while your average supermarket shopper is likely to think that splashing out on some slightly more expensive Fairtrade coffee is a good idea.

The man behind Has Bean, Steve Leighton, has other ideas about Fairtrade. He has written an article about why Has Bean do not carry Fairtrade coffees, and a review of the documentary Black Gold, both highly critical of the Fairtrade organisation. His arguments seem to boil down to:

• Fairtrade spend a lot of money on advertising, swanky offices, armies of administrative staff and highly paid executives, which is perfectly acceptable in itself but undermines the idea that Fairtrade is all about helping poor farmers.
• Fairtrade projects the idea that the Fairtrade brand is the only way a farmer can get a good deal: which is not true. They usually get better deals from speciality buyers like Has Bean who pay more for a higher quality product.
• There are no quality checks: Fairtrade coffee charges the buyer a premium for inferior coffee.
• The farmer is not paid enough to be able to invest and increase the quality of his beans, which is not good for him or you.
• Fairtrade does not offer a particularly good price. The retail premium is much greater than the premium that goes to the farmer. The minimum price Fairtrade offer is actually quite low, only enough to subsist on, and much lower than the prices that speciality buyers like Has Bean pay.
• When the market price of coffee goes above the Fairtrade price, farmers can end up tied to the lower Fairtrade price.

This is all interesting because I too have complained about the idea of fair trade. My angle is different: free trade is fair. My bullet points look like this:

• If the price of coffee is too low for people to make a living at it, there is probably a good reason, such as that supply of coffee outstrips demand. There is too much coffee.
• The fair trade movement inflates prices, thereby stimulating extra supply of something which there is already too much of.
• The fair trade movement detracts from the real problem, which is that trade tariffs prevent farmers in poor countries from exporting other crops. They are effectively forced to be coffee farmers even when the coffee price is low.
• Fair trade people are socialists, and only deal with co-operatives, and I have heard anecdotally that family run farms can end up having to join co-operatives to get the fair trade deals they think they need.

On the face of it, Steve and I don’t have much in common. He is a practical guy with the perspective of a speciality coffee roaster; I am a philosophical bloke with a libertarian outlook. But wait a minute. Steve writes:

An issue recently brought to my attention by a member of the trade, is that the commodity markets are the seller’s and buyer’s last resort. Coffees that end up on the commodity market are the surplus of over-production, beans which just aren’t good enough to sell to the speciality market (believe me if they could, they would sell to the speciality market, as this can mean as much as double the price).

So yes, there is too much coffee being produced. That’s why it is a cheap commodity. And Steve’s business is free trade in action. People want good coffee. Has Bean has direct relationships with farmers all over the world. They go out there, talk to the farmers, see how the farm operates and make deals based on the quality of the coffee.

Steve also talks about why it’s not a disaster for people to go out of business, which happens when trade is free:

For instance, in business, if a trader cannot cover costs, then it’s only a matter of time until the bank forecloses and the business is no more. This happens every day all around the world, but we need to look at why this happens. For example, the trader has a product no one will pay the wholesale price for, or, his product is not of a high enough quality to satisfy the market place.

In other words, if you can’t make good enough coffee to get a good price, your time would probably be better spent doing something else. Of course, it would help if you had a wider variety of things to choose from, which is where my criticism of trade tariffs comes in.

The other interesting thing about companies like Has Bean is that they illustrate the power of technology to make people richer: I can buy coffee from an obscure farm in Africa thanks to the power of the Internet. There are hardly any middlemen. Middlemen are always useful, of course, but the Internet removes the need for so many of them, which is a good thing. My middleman roasts the coffee for me. But I suspect the days of ordering green beans direct from farmers are not far away.

So between Has Bean and the internet we have half the solution to the problem of low coffee prices: I can buy non-commodity coffee. The other half of the problem is to get rid of daft injustices like the EU common agricultural policy, so that when coffee farms fail, they can profitably farm something else instead.

By the way, Steve Leighton is highly prolific. Have a look at his blog for more insight into coffee and the coffee market.

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

So said Adam Smith. And it’s just so self-evidently obvious.

And yet tonight on Question Time, everyone agreed that the absolute worst thing that could happen to the NHS was for private companies could get involved and do things for profit.

People are strange.

Wow. Eric Raymond, the man who introduced me to libertarianism, doesn’t see the point in arguing about politics any more. Because it’s over.

We have run out of other people’s money. The only remaining options are hyperinflation or default.

Whatever survives the worldwide crash in government finances is going to look like austere, minimalist night-watchman states simply because they will no longer be able to borrow the money to spend at anywhere near today’s levels.

Reality is about to smash the dreams of the world’s collectivists like the hammer of an angry god. They won’t even have the right categories to think about a world in which government is not defined and legitimized by its ability to hand out goodies and entitlements like so much addictive candy.

It’s been clear we have run out of other people’s money for a while. Government spending is vast; the will to reduce it isn’t there; taxes are increased but it feels like we’re over the top of the Laffer curve so it won’t help. Reality is bound to bite sooner or later.

What I’m less convinced about is that afterwards there will be a night watchman state. Of course, that’s the only thing reality will allow. But since when did reality stop people? I can well imagine a few more cycles of expansion and collapse before people learn.

The good news is that post-collapse will not be Mad Max world. One commenter points to Argentina:

The world will not turn into Mad Max. It will turn into Argentina, post 2001 peso devaluation and debt default. Ferfal, an Argentine native, has a very good blog about what happened at http://ferfal.blogspot.com/

The main point he makes is that the world doesn’t end, and that we won’t go back to the stone age. It’ll be a dirtier and poorer world than today, but it will still be today’s high tech world.

Oh, and via Ferfal, reports from someone living in Japan about what life is like just outside the disaster zone.

I have yet to evaluate these modern survivalists. Perhaps if collapse of government finances is coming, their ideas will be useful.

Tim Worstall has a nice explanation of tax incidence in his post about the Robin Hood tax.

There’s a difference between who hands over the cheque and who actually carries the economic burden of a tax. Your employer hands over the cheque for the income tax taken under PAYE but no one at all thinks that your employer is carrying that economic burden: you are. Same with NI.

The incidence of corporation tax is largely on the workers in the form of lower wages, some on the shareholders in lower returns. The company certainly never pays a penny of it.

And note that this isn’t people “trying” to pass it on, it’s just that the existence of a tax changes behaviour and thus the burden of it can be on a quite different set of people than those it’s presumably aimed at.

He also explains the true cost of this Robin Hood tax. It’s a barmy idea with an infuriatingly vague and disingenuous website. What they really want is a financial transaction tax which they say is, “a tiny tax of about 0.05% on transactions like stocks, bonds, foreign currency and derivatives”. But Worstall says that it would include even personal credit card transactions.

Try reading I, Pencil and counting all the financial transactions there.

So what do they think about tax incidence? “Financial Transaction Taxes can easily be designed to target banker’s profits and bonuses, while protecting the investments of ordinary people and businesses. Just like other taxes, specific exemptions and punitive measures can be built in to protect, for example, lending to businesses or exchanging holiday money.”

Sounds complicated. Won’t that be a nightmare of bureaucracy to implement? Oh no. “Well-tested, cheap to implement and hard to avoid.”

What could possibly go wrong?

Oh, and by the way: “This website is supported by the European Commission.”

If you pay higher rate tax and have children, you need to sign up for childcare vouchers NOW. If you don’t sign up before 6th April, you will miss out:

If you decide to join your employers scheme on or after 6th April 2011 the amount of tax you can save will be limited to the equivalent of the basic rate.

[...]

The changes outlined below will only apply to you if join your employer’s scheme from 6th April 2011. If you have already joined your employer’s scheme on or before 5th April 2011 you will not be affected by these changes unless you leave the scheme or your employment.

Currently you can get £243 per month tax free as long as you spend it on childcare. If you’re on higher rate tax, you save about £97 per month in tax, which is very worthwhile. If you join a scheme after 6th April, you’ll only get £124 of vouchers per month, and only save £49 per month in tax.

What the government is a bit coy about telling you (but your HR department will) is that the vouchers last five years before expiring, and you can save them up. So even if you don’t need childcare vouchers now, you should join the scheme now.

You do apparently need a child to join the scheme, though. (Otherwise who would turn down a guaranteed 40% return over 5 years?) Moneysavingexpert has more.

The Taxpayers Alliance point out an EU consultation on giving money to environmentalist groups. As they point out: you pay twice. Once when your taxes are given to the groups, and a second time when those groups lobby for higher taxes and spending on environmentalist schemes.

Meanwhile, in their email newsletter they announce that are going to try to get one million signatures to veto an EU tax. Apparently a million signatures can stop a new EU law. Who knew?

[European Citizens Initiatives] allow citizens to stop the European commission proposing a new law if a minimum of one million European citizens from at least seven EU countries sign an initiative. The “No EU tax” initiative will begin collecting signatures later this year.

Can’t we just start a club of one million people to block every single law?