More riots in France

The new riots in France should not be considered another outburst of anger from a downtrodden group in French society in the mould of the car burnings we saw earlier this year. Graduates of the Sorbonne may face some difficulty finding work with a youth unemployment rate of 23% but as they are emerging from a top university it is far more likely that they will succeed than fail in finding employment. These demonstrations are more in the mould of the regular strikes by French public sector unions defending their interests; they are strikes in the defence of the status quo.

This is significant because if the earlier riots, in the banlieues where unemployment is 50%, constituted a powerful case for reform the new demontrations, and the public support for them, are indicative of the strength of the political forces opposed to such change. The simple reality is that most French people are employed and a large number of the unemployed are safely contained within the banlieues away from the sight of the middle classes. So long as those in work fear reforms which hurt their security of employment more than they do France's present steady stagnation change is unlikely.

South Park vs. Scientology Round 2

It appears that after legal threats from Tom Cruise the South Park episode which so offended Mr. Hayes will not be shown in the UK or repeated in the US. There are even suggestions that this is due to his threatening to cancel publicity for Mission Impossible III with Viacom. This is an absolutely tragic violation of freedom of speech that seriously needs to be fought. Using the court system to harass those who speak out against their religion has been standard practice for the Scientologists for some time and South Park is a show uniquely placed to get past this thanks to its high ratings and experience with controversy.

Of course, the episode has already leaked onto the Internet and free speech will find a way but it is dissapointing that even a well known TV show cannot freely speak out against a group which is only differentiated from the other nutty cults by its funding. Exactly the same logic applies here as it did during the Danish cartoons crisis or after the cancellation of the play about a Sikh temple. Freedom of speech is the principle which guarantees accountability and accountability is a major part of what makes the West the success it is. Freedom of speech is a principle which we should defend to the hilt.

Cameronomics

Cameron's article today on conservativehome.com got a familiar reaction. Conservatives like winning and there was broad support but nervous questions about the statement that tax cuts will not be prioritised over economic stability. Reform responded to this when it was first announced with a standard, and clearly correct, line that a small state is not more unstable. However, there are two possible processes at work if a party states that they will not prioritise tax cuts over stability:

1) They are left wing and believe that private sector irrationality makes capitalism inherently unstable and in need of state sector stability.

2) They believe that should we come to possess a debt/GDP ratio radically higher than it is today (a severe fiscal crisis) then it would be sensible to prioritise austerity over ideologically driven tax cuts. While there are no policy implications now we need to let the public know that our ideology does not imply poor decision making in a crisis.

While the first paradigm is patently false I believe it is the second that the Conservatives are addressing and this is far less troubling.

MatthewSinclair.com

http://www.matthewsinclair.com now points at this blog.

Buying your own name as a domain name when you are not famous can be a form of bet on your own success. There have been several corporate cases where substantial amounts have been paid for domains and private individuals have surely had to do the same on occasion. My MP has http://www.oliverhealdmp.com which is so much less satisfying than oliverheald.com would be. Avoiding the confusion and disgrace which comes from having your name point at someone else's website becomes highly valuable if your name has meaning. That famous names can drive traffic to websites was the first mover advantage rationale behind firms like Amazon investing so much early on.

By buying the name now I incur a steady cost of £8.99 per year. At the moment I am not famous and this domain therefore has little value beyond a vague sense of satisfaction and control which I will treat as insignificant. Still, it takes ten years for me to become famous and by then I will have paid around £90. According to this shady looking website domains can go on sale for hundreds of thousands of dollars but with only the moderate success of a thousand pounds in value my domain name becomes a fine bet if I believe that I have a greater than one in nine chance of becoming famous. Of course there is an opportunity cost in tying up my capital in this way but it is unlikely to be a problem if my expectations of my own success are rational.

The reason why I can get a good deal in this case is an information assymettry. Domain registrars and shady individuals behind sites like "openforsale.com" know less about me than I do. For this reason they have to treat me in a similar manner to a random individual. The name of a random individual has a very low value as they will not bid for it and very few people become famous. I have an ability to differentiate between my promising self and random others that domain registrars do not.

Old problems in UK scientific education

The Financial Times today reports on the CBI's observation of further falls in the number of science graduates. The CBI is right to point out anomalies such as psychology being used to boost biology numbers. Psychology is methodologically more subjective than economics and both are different in nature to the natural sciences. Psychology is a fine subject for academic study but is a far more esoteric concern for industry.

The FT fails, in setting the context of the article, to note that this is a fall from a low base in the UK. There have been concerns about the quantity of scientific education in the UK since at least the beginning of this century and these concerns have generally been justified. While there are excellent centres of scientific study (such as Imperial College) there is not the same quantity of scientific education as elsewhere in Europe. This matters because scientific education is particularly important economically. Scientific education doesn't only increase the base of skills for high value sectors but also increases the ease with which firms can identify promising scientists, which is important if they are making a high value investment in them. Also, science departments are valuable as they often maintain links with industry and are at the centre of competitive industries. Early and important examples are the links between Ruttgers University and Merck and between the University of Delaware and Du Pont. These advantages are the reason Michael Porter pointed to high end research institutions as far more important to economic growth than mass university attendance.

Our current system of higher education funding is created with the goal in mind of creating lots of graduates. This goal is determined by class concerns (university implies entrance to the middle class) as much as anything. The economic rationale above suggests we could be better off targeting funding at the hard subjects which provide such solid returns to the nation.

South Park vs. Scientology

Isaac Hayes, who has voiced Chef since the series' inception, has quit South Park. He has described how he cannot be associated with the attacks on religion he sees in the show. It appears, as is noted by the Reuters report, that the problem is more specific and related to the show's recent attack on Mr. Hayes' religion, Scientology.

The episode was brutal, featuring long sections describing the bizarre beliefs of Scientologists but the inclination of those who run the religion to sue those who publically question it rendered the religion a fine target for important satire. South Park is in its tenth series and Mr. Hayes has taken part in shows where entire episodes have been devoted to mocking Christians, Jews and Mormons. If there has ever been a show which can fairly use the defence of mocking all equally it is South Park. Being so selectively offended completely undermines the moral case Mr. Hayes attempts to deploy.

The OFT investigates supermarkets

The BBC reports that the Office of Fair Trading is set to launch a probe into the dominance of the UK market by a limited number of supermarkets. The problem is that it appears to be struggling to find a harm. There is the question of monopsony power allowing supermarkets to drive down prices but, as supermarket margins remain low, this operates as a transfer of wealth from producers to consumers which is not a suitable candidate for OFT action.

All the evidence is that the supermarkets have been an unambiguous good thing for the consumer with prices falling and increased choice thanks to the supermarket's expansion into non-food items. An anti-trust case could exist to block a merger between any of the top players but beyond that the watchdog should clearly be stepping back and letting the supermarkets tear each other to pieces.

The move towards increased shopping in supermarkets instead of small shops surely has its origins in the same trend that is leading to reduced fertility. With the decline of discrimination against women in the workplace there are increasing opportunity costs to time spent not earning. When women could not work the value of the time they spent travelling between different shops is of far less concern than when that time could be spent earning or in scarce leisure time.

"Shoot to kill"

Reuters reports that an initial review has suggested that the Met's "shoot to kill" policy is appropriate and should remain. This has led to another chorus from various quarters that such a policy is both wrong and undemocratic as it was introduced in secret.

I honestly fail to see the secrecy. I would have always expected that if a police officer saw a suicide bomber and thought the only way they could stop them killing others was to shoot them then they should do so. As suicide bombing does not require great physical exertion it seems entirely credible that killing is the only way of stopping them and that it must often be done quickly. If this has been formalised recently then I don't think a police cover up is to blame for that formalisation not making the front page; it doesn't sound much like news.

The problem in the de Menezes case was that the police shot someone who was not a suicide bomber. This may raise questions about whether the police have poor mechanisms for identifying suicide bombers but it says little about how they should behave towards bombers once they identify them.

Galloway remains a shit

Jeremy Brier links to the BBC transcript of an interview of George Galloway in which he not only repeats his celebration of the Iraqi "resistance" currently massacring their fellow Iraqis but also extends this by describing the Danish cartoons as worse than both 7/7 and 9/11. Anyone who views insulting cartoons as worse than violent deaths has clearly lost touch with even basic morality.

I had my own experience of Galloway lunacy when I went along, to do my bit, to a Respect event at the LSE. The high point was when he tried to defend, in the face of my question, his assertion that Iran was free and democratic. Apparently no one had been barred from standing in the recent elections. It became funny instead of tragic when, following our questions of Galloway a Respect activist stood up to congratulate him as our questioning was clearly evidence that the establishment feared his movement; three students turning up doesn't exactly suggest Whitehall is panicking.

Pro-Test

The Pro-Test organisation is great news; in the face of animal rights lunatics the defence of liberal society requires the silent majority to get a little louder. Animal rights extremists are a danger not just to progress but also to democracy, any movement which opposes them deserves success and support.

Its first protest prompted an absurd attack from the movement which represents the "mainstream" of the animal rights movement and evidently has far less maturity than the schoolboy it is facing off against. Equally the arrogance in their statement at the initially small pro-testing organisation backfired when the next Pro-Test march massively outnumbered them. The BBC was then stupid enough to buy their newfound commitment to an open debate.

Kinnock continues his descent into the world of the crank

Lord Kinnock, returned from Europe, is supporting a report from the UK Metric Association. This report calls, in a little too strident language, for the replacement of our measuring of distance in miles with a metric measurement in kilometres.

Some of the language is absurd. Kinnock alleges that miles "contradict the image - and the reality - of our country as a modern, multicultural, dynamic place where the past is valued and respected and the future is approached with creativity and confidence". The idea that continuing to use an old measurement implies placing less value on the past is clearly absurd. However, why do miles necessarily imply a lack of confidence or creativity when facing the future? It would seem, rather, to suggest a confidence in a future different to that imagined by Kinnock and sufficient confidence not to mind the overexaggerated costs of multiple measurement systems.

One cost suggested is that our education system needs to teach both metric and imperial units. This cost isn't entirely a result of UK Government choices, though, as there is a benefit to learning imperial measurements in an economy which does business with the US.

Equally the "contradiction" of using different systems is overrated. Using one system for temperature and another for distance is of little concern when few conversions are being made the two. Equally few people will regularly need to make feet/miles calculations and therefore the complication of the calculation is a limited concern.

None of this removes fact that the metric system is clearly "better" but the overexaggeration is a fine example of the broader crisis of specialists crying wolf. People are always inclined to accord great importance to an area they spend much of their time working on and the availability heuristic, assuming that events you hear about a lot are common, will lead you to overestimate the frequency of rare problems. The metric association actively goes looking for cases of metric-imperial confusion and evidently assumes that those it finds represent part of a broader reality, they probably don't.

Tory funding rises

There have been stories recently of big donors dissatisfied with Cameron's leadership. Fortunately, this anecdotal evidence seems to be well off the mark and Conservative fundraising has risen heavily in the last quarter off last year compared to a heavy fall for Labour. While some Tory donors may prefer to fund their own ideological playground of a party it would appear that most prefer the Conservatives with their new found electability.

The world's favourite nation

Apparently we are the most liked nation in the world. Despite our various military ventures and despite, or possibly in some quarters because of, our imperial past when ranked on politeness, culture, education, quality of investment environment, as a tourist destination etc. etc. we come out as the nation people most like. This result is true on all sorts of criteria and across huge swathes of the world.

The press release from the pollster contains dollar valuations of national brands which have to contain a fair bit of arbitrary information but the sample is very large and reasonably broad although presumably biased towards those with Internet access. These results provide additional evidence for one explanation of part of Britain's relative economic success recently. We do well out of being a place where lots of highly skilled and talented people want to live, they bring money and achievement with them. The Mittals, Abramovichs and Madonnas of this world are an extreme example of a trend which has been of huge benefit to Britain.

A victory for the Single Market

Marks & Spencers have won their case in the European Court over group offsetting. UK companies now face the same tax risk when investing elsewhere in the EU as they do when setting up a subsidiary in the UK. This has to be a victory for the Single Market as it reduces the distinction between a UK company and a European company.

Worries about a loophole are ever present but would seem more of a problem for group offsetting, whether in the UK or abroad, than international group offsetting in particular. Allowing tax benefits from loss making subsidiaries creates the risk. Offsetting is worth this risk as it is an important tool to allow businesses to expand and challenge in new markets without facing greater tax risk than it does in its core business. Existing companies in other markets are in a good position to enter into insufficiently competitive markets and encouraging this kind of action is good for consumers and efficient business.

The concentration of financial services in London has been a huge benefit to the UK and is one of the key trends behind the strong performance of the UK economy over the last decade and the improvement in the public finances which we are seeing right now.

Holocaust denial laws

Holocaust denial laws are a bad idea because holocaust denial is a phenomenon that is best dealt with in the open. Making martyrs of idiotic fascists is far less effective than simply pointing out the incontrovertible facts of the Holocaust and then letting holocaust deniers make fools of themselves. Political Muscle notes that in the final balance David Irving conceded defeat in the argument over the holocaust and that this is a far more complete victory for truth than prosecuting a defiant holocaust denier.

The argument on Let's Be Sensible, that this is a case of defending holocaust survivors from libel, is a little specious. Most important cases of free speech involve calling someone a liar or an incompetent. If being wrong in a debate over history or politics is a crime then that debate necessarily becomes stunted and overly cautious.

The accusations from Islamists that that these indicate a double standard, as reported by Chris Cauldwell, are, however, equally suspect. Holocaust denial laws were not put in place thanks to a threat of violence from the Jewish community and have been implemented democratically. As such challenging them is best done through democratic debate within Austria and the other European countries with these laws. By contrast, the denial of free speech created by the violent response to the cartoons of Muhammed, the Satanic Verses, the film work of Theo van Gogh etc. is not democratically accountable and, as such, can only be challenged by editorial bravery. There is no double standard in the liberal case.

Charity in crisis

Reuters Alertnet reports on a mudslide in the Phillipines that has claimed entire towns. Fortunately this awful crisis has a good chance of attracting the international aid that can help those living in the area survive and rebuild. The most successful aid appeals of recent times have been following the Asian Tsunami and the earthquake in Pakistan. These crises attract public support far better than the every day hardship of the Third World. This is probably a result of the availability heuristic, this is the psychological tendency for people to disproportionately remember large and shocking events. A good example is the popular misconception that there are more murders than suicides. Fortunately the availability heuristic is, in the case of charitable giving, producing the correct result.

Economists, following the lead of Bauer, are usually cautious about the effects of development aid on the Third World. No country has ever got rich on the good will of others and aid can actively hurt the process of development as entrepreneurial activity is diverted from creating successful businesses towards attempting to seize as large a share of aid receipts as possible. Another problem is that poverty in the developing world is often due to corrupt states and high barriers to legal business; aid cannot cure these problems and may aggravate them if it provides enhanced powers of patronage to corrupt governments. This logic is important when considering claims such as those being promulgated by the 'Make Poverty History' campaign that poverty can be ended if $X is donated by the First World.

Fortunately, the economic distortions of aid in the event of disaster are far less important. Emergency aid is usually distributed directly to those concerned by international aid agencies and, hence, is less likely to feed corrupt regimes. It is also inherently temporary which means that it cannot do long term damage to the incentives facing those talented citizens who, in their search for wealth, are crucial when Third World countries get wealthy. As the negative effects are less and the positive effects, lives saved, offer a huge and unambiguous reward for each aid dollar spent it seems quite clear that the objectives of aid should be simple and direct. Save lives.

Reductio ad Hitlerum in the Guardian

The Guardian today carries an editorial entitled "Denmark's new values" which, as evidence for the dominance of the far right in Denmark, includes the following:

"Where else could liberal politicians get away with saying that one of their party's main aims is to stop Turkey joining the EU?"

Now, I support Turkish entry to the EU enthusiastically but to suggest that anyone who opposes their entry with any force must be a fascist is bizarrely absurd. Plenty of people oppose the entry of the Turks due to their own problematic labour markets, difficulties in reconciling such a large and poor country with policies like the CAP and regional funds and the Turkish human rights record. None of these concerns make someone a fascist.

The author (apparently a Danish musician) also believes that the statement "Freedom of speech should be used to provoke and criticise political or religious authoritarians" is indicative of a desire to tell others how to live. To see the encouragement of free criticism of authoritarianism as indicative of a desire to control requires a bizarre leap of logic.

How does the Guardian find these people? Why does it publish their work?

European Central Bank row

The Financial Times reports that smaller countries are up in arms over the appointment of a German to the ECB's executive board. At the moment this is a row about politics, influence and pride, rather than economics but there is no reason for it to stay that way. The relative sizes, and hence importance, of the small and large economies in the eurozone will mean that ECB policy should be set with the interests of the large economies as its main objective.

At the moment this implies an expansionary policy as the German and French economies see growth slip once again. This is being mitigated thanks to the intellectual inheritance, particularly in the German representation, from the Bundesbank of monetary caution. "Uberhawks" such as Mr. Stark reduce the danger of ECB policy overheating the better performing economies in countries like Ireland. The smaller countries might, therefore, be wiser to welcome his appointment.

The situation where the fortunes of large and small economies are reversed and ECB policy depresses the smaller states would lead to a far uglier political situation. The large countries can be expected to push ahead with interest rate rises to slow their own economies while largely ignoring the pleas of smaller countries for expansion; ideology would cease to work in the interests of small countries.

The long term future of EMU is still in question despite the massive costs of leaving. Without convergence in the performance of the eurozone economies there are big political battles to come.

The Cartoon crisis rumbles on

The crisis over the Danish cartoons is returning to some kind of dismal norm. Protests continue around the Muslim world, Reuters reports on new protests in Pakistan, while Europe is returning to its default, disinterested, stance. Despite this the crisis is unlikely to end as one more case of "Muslim world sees rioting, burning embassies, mass rage; Europe sees argument about EU budget". While European politics is already moving on there does appear to have been a change in public opinion, certainly in the UK as reported by the Times, towards a new willingness to confront radical Islam. Tolerating lunatics such as the one the Sunday Times uncovered is, thankfully, becoming less and less politically shrewd.

The Economist's coverage on the cartoons was just right. The main point I would add is that the strength of protests lends credence to the need for newspapers to show solidarity in the face of violence.

Subway and the Coase Theorem

I've been thinking recently about why I sometimes buy sandwiches from Subway. Subway sandwiches are rather expensive compared to the substitute lunches available to me from the Student's Union shop, the West Cornwall Pasty company or WH Smiths. While I do enjoy their sandwiches I am not convinced that I enjoy them more to an extent that justifies the extra cost.

It could be that I am irrational; that the amount I spend on sandwiches is small per transaction compared to other items such as rent and I, therefore, simply ignore the cost when buying sandwiches. I have an alternative explantion:

I would suggest that this is an example of the Coase Theorem in action: The Coase theorem is that externalities will occur at their socially optimal levels regadless of the legal system in the absence of transactions costs. This results from the ability of those suffering from the externality to pay those who would like to produce an externality not to if they value its cessation more highly than the 'polluter' values the action which creates the externality.

The classical example is that of a railroad which occasionally creates sparks which destroy the fields of farmers either side of the railroad. In this case if the farmer values his crops not being destroyed highly enough he will pay the railroad owner to reroute or upgrade his equipment to prevent the damage. If he values the cessation of risk highly enough he will pay the train owner to cease his service. In this example it can be seen that the socially optimal amount of externality is produced, the amount which prioritises the interests of those who value the result of the decision most. None of this requires the use of legal property rights.

Subway bake their bread instore. This may have some function in terms of freshness but it has an externality in that the smell of bread baking makes me desirous of Subway sandwiches and less happy on my walk past the store on the way into university. Now, I have no legal rights to my own space, free from unwanted pleasant odors. For this reason I have to take the Coasean route and, as the transactions cost is relatively low, pay Subway to end the desire for sandwiches by sating it.