Universal Basic Income has become a hot topic in recent years; propping up in the news and mentioned by politicians from time to time.
The standard definition of UBI is a government program where every adult citizen receives a set amount of money on a regular basis; either weekly or monthly. The goal; as stated by supporters of the measure is to alleviate poverty, and to ensure every adult; even if unemployed, has some form of income to support them.
It is quite standard for the majority of supporters of UBI to be of a, Social Democrat position. There are however some Conservative-esque arguments in favour of UBI. These Conservative-esque arguments tend to be more based in deterministic elements of automation, and tend to believe UBI a possible ex-post rather than ex-ante; with the basis of: “if automation is inevitable, there should be a UBI on the table when that time comes.”
There are standard arguments against UBI to do with the ethics of redistribution, but I’m only interested in briefly talking about the economic pros and cons.
This pro/con dynamic really can be broken down to ideal and practical.
The pro of UBI, would be if we got rid of everything and replaced it with UBI. When I say get rid of everything; I mean abolish the NHS, Disability Benefits, Child Tax Credits, Government/Public Schools, and every other form of the welfare state, and replaced it with a UBI program, which gives people the finances and allows them to decide how they’re going to use it, based on their own ordinal ranking and marginal utility.
We would still have the ethical problems of redistribution, however, if it were an automatic program of transferring income to person A, the program would be less costly than all the current programs we have. Most of our welfare programs take up a lot of time and therefore resources, due to lots of bureaucracies and civil servants involved; so instead of welfare 1 going to person A, form 1 for welfare 1 goes to civil servant 1, to be forwarded to bureaucrat 5, so form for welfare 1.5 can be signed by civil servant 7 etc.
This means the idealistic pro of UBI, is that we would in principle have less civil servants and bureaucrats; thereby reducing the overall cost of welfare.
The con of UBI is very much a practical problem. There are other cons to UBI such as the effects of price increases, particularly if the program sees MV (money velocity) rise, but since our pro is an idealistic one, it comes logically that our primary con is a practical one.
The practical problem of UBI is that it is very unlikely that these other programs would be abolished and replaced with a single, simple UBI system, because it would be political suicide. Even if a politician explained to people very clearly and said: “We’re getting rid of the welfare state, including the NHS and replacing it with a UBI. This way money goes directly to people so they can choose for themselves where they want it to go, in terms of what they need to support themselves. All the money is going to go directly to the citizens.” It would still be political suicide, because then bureaucrat’s and civil servant’s jobs would be at risk. Under a UBI, there would be little argument in favour of having so many bureaucrats and civil servants, since money goes directly to people rather than to programs.
The likelihood is, if UBI was instituted, it would be on top of all our current programs; adding to the overall cost rather than seeing a reduction and a simplification in the idealistic.
Libertarians aren’t against welfare per se, it all depends where said welfare is coming from; for example a government program is coerced on to people, and forced extraction; or, extortion breeds resentment among people and violates property rights; whereas charity is voluntary and breeds compassion.
The UK is a very charitable country. The most recent, everyday example being the late Captain Tom Moore, Captain Moore raised roughly £32.8 million on a JustGiving page for the NHS, simply by walking back and forth in his garden. This was a sum of money raised in a nation with a progressive tax system, and under circumstances where large numbers of the population had become unemployed due to lockdown; imagine how much more could’ve been raised with a low flat tax system, and where large numbers of people weren’t forced into unemployment. It’s more than likely at least £100 million could’ve been raised.
As stated above, the UK is a very charitable nation, but one problem facing people receiving help is the absence of information; people don’t know there are charities out there that can help them. It’s anecdotal, but I recently came to the discovery of a private healthcare charity in the UK called The Benenden Charitable Trust; because humans aren’t omniscient, it is more than likely there are charities out there that could help people, but those people don’t know they exist.
This is where local government could play a role.
Local governments could advertise charities that operate within their borough, to help people become aware of charities that could help them. This wouldn’t do anything about the apparent stigma attached to asking for help however; nor is this something the government should get involved in because this would result in government’s watching what people spend and knowing every tiny private detail, and forcing them into accepting help. The stigma is something that could theoretically be lessened if people see what help is out there.
This short piece should not be seen as any form of argument for or against UBI, it should be seen purely for what it is; looking at the costs and benefits of a UBI program.
The standard theory of the market as it is expressed in the classic supply and demand curve, also known as the Marshallian curve or cross, notes that the price gravitates towards the quantity supplied by the quantity demanded, and that this ensure a state of equilibrium.
This is undeniably a very useful tool for giving a 30 minute talk on economics for a short and sweet answer; but it’s all wrong.
The claim that the Marshallian Cross is wrong does not invalidate the value in the basic demonstration it provides; nor the utility gotten out of a short answer to a question of market activity, but it is very much like taking a photo of a couple at point A, then a few minutes later at point B. We are skipping the market process and assuming perfect states of equilibrium. In fact, further analysis of the cross allows us to realise, that we violate the possibility of disequilibrium, and in so doing, the entrepreneur.
Let us examine this in more detail in the next few diagrams:
In our diagram we suppose, firstly, that the price is above equilibrium, where there is excess supply (Ex S) over the quantity demanded (QD). What does this do to the price? – It forces it down.
In our second point, we suppose that there is an excess demand (Ex D) over the quantity supplied (QS) this has the same effect but in reverse by forcing the price up.
Notice how under the curve, we assume two things:
That we are consistently in equilibrium.
That there is always a single price.
Under the Neo-Classical view, everything that is to be known is already known; man is omniscient. He has access to perfect knowledge and he need merely to analyse the data he already knows; there is no room for discovery of unknowns, nor room for the entrepreneur. The entrepreneur to our curve is an analytical pest.
I mentioned above the assumption of there always being a single price, below we can see a quite comical examination of what is meant by this:
Under the equilibrium model and the Marshallian Cross, we are hypothetically assuming that with each supply curve, there is an equal demand curve running parallel to it. In fact every demand curve assumes an equal supply curve running parallel to it also; thereby consistently assuming the hypothetical to reality, that being only a single price is constant, and there is no possibility of two or more prices existing for the same product.
It is a fundamental law of Economics that there is a single price for a product. However, this is a tendency. The reason to say it is a tendency is due to the fact that at any time, the market can be filled with ignorance; either optimal ignorance, whereby you know you lack information but the cost outweighs the benefit of acquiring said information, or further, the ignorance may be based in the absence of information (not knowing what you don’t know).
If there is no optimal ignorance, nor absence of information for a particular consumer good, input or resource, then the tendency for pricing signal’s to converge to a single price occurs.
To give an example, I am optimally ignorant of how to speak Korean. I would like to know how to speak and understand it, but I have analysed the cost in terms of resources and time are too great, and would be better spent on ventures I value more highly.
I would give an example of where I personally have an absence of information…but I don’t know what it is.
Further examination of this gap to which is ignored and incompatible with the equilibrium state of affairs is detailed below:
In the diagram shown above, under the Neo-Classical equilibrium context, we assume a quantity of QR. The question is what is the highest price that is low enough, to get consumers to buy this quantity? The answer is the top left noted as HP. Following this, what is the lowest price which is high enough to get suppliers to offer this quantity? The answer is the bottom left LP. This indicates; under an Austrian perspective rather than a Neo-Classical perspective, as shown in the greyed out section, that there is a gap.
A wider examination of this gap can be explained before moving on further:
We suppose two examples: Sellers selling a good; let’s say shoes, for £10 at the LP quadrant. Buyers who are late to the market, or hold a high marginal utility for shoes find they cannot acquire shoes, but would be more than willing to pay £17 for shoes. The second example, being that sellers selling shoes in the HP quadrant, are selling shoes for £20. Buyers with lower expendable income, or whose marginal utility is lower, cannot afford the shoes at £20, but would be willing and able to buy at £16. There is an absence of information for both buyers of the HP and LP, and sellers of the LP and HP. Sellers (buyers) of the LP are unaware they can sell (buy) at a higher price, and buyers (sellers) are unaware they can buy (sell) at a lower price.
We have a situation where two prices for the same good prevails because of ignorance.
This is where the entrepreneur comes in. A sharp individual sees there is an unexploited opportunity by seeing the price difference. If they are sharp; as we have assumed, they will see there is opportunity for pure entrepreneurial profit. The entrepreneur will buy shoes from LP for £10, and sell to buyers from both HP and LP for £15. Buyers from LP who were willing to pay £17 will gladly pay the £15, and buyers from HP who could not afford £20, but were willing to pay £16, will be able to satisfy their needs/wants by purchasing the shoes for £15. Additionally, sellers from LP will see they made a critical error as they could have sold for a higher price, and sellers from HP will see they could have sold more for a lower price; ergo, the market through entrepreneurial alertness has moved from disequilibrium to a position closer to equilibrium.
The market is in positions closer to disequilibrium positions, and the entrepreneur through the incentive for profit, discovers these gaps and brings prices closer to that of the tendency of a single price.
The market process is one of discovery; rather than an equilibrium state of affairs.
Competition Under The Market Process
Taking into consideration our examination of Neo-Classical Equilibrium, and the market as a process of discovery, what does the equilibrium state of affairs and the market process of discovery have to say about competition?
The Neo-Classical has a stark difference in terms with regards to competition as compared to the layman, and that of the process of discovery.
Under the equilibrium theory of the market as a state of affairs, the definition is classed as Perfect Competition. Perfect competition is a state of affairs, where we have an unlimited number of buyers and sellers; all sellers are selling at the exact same price, and all buyers are buying at the exact same quantities. All decisions, quantities, and production methods are known, and so everyone is constrained into this state of affairs, due to nothing else to discover.
Under perfect competition, no seller attempts to sell for a higher price, because a single market price is established and it would be suicide, and no seller equally attempts to sell for a lower price, because he knows for the set single price he can sell the exact same quantity. Furthermore, buyers do not attempt to bid a higher price because they know they can purchase the same quantity for the single price, and buyers do not attempt to acquire a lower price, because they will not acquire the products they desire.
Under the equilibrium theory of the market as a state of affairs, all quantities demanded and quantities sold are perfectly inelastic; they are static.
This theory of competition, ironically, has no semblance of any form of competition; under the layman sense or that of the market as a process of discovery.
Under the equilibrium state of affairs, everything is already known, and nobody can buy or seller at higher or lower prices, and so there is no competition.
Additionally, this state leaves no room for the entrepreneur.
I have mentioned the market as a process of discovery several times; what is it that is meant by this with regards to competition?
Competition under the market as a process, is simply freedom of entry.
Under freedom of entry, there are no privileges in the form of institutional blockage into the market. A man can be a very successful entrepreneurial producer, but is constantly looking over his shoulder because at any point, another could enter the market and undermine his product by selling at a price, quantity, or quality that is more appealing to consumers.
If we look back at our example of the entrepreneur buying shoes for £10 and selling for £15, because other sellers held an absence of information, and had not seen an opportunity for profit, we can understand the role competition plays in the market as a process of discovery. The market is flooded with ignorance from various economic actors, who overlook opportunities due to an absence of information and a lack of omniscience. These unseen opportunities; if our entrepreneur is sharp, are discovered, either through active search for opportunities or through a sharp eye where no search was active, and merely saw what was unseen by others.
What is required for the market to operate as a process, is decentralised discovery. What is required for competition within the market process, is freedom of entry.
Israel Kirzner: Competition and Entrepreneurship (pp. 10-11, 13, 20, 26, 28, 37-40.)
Israel Kirzner: Discovery, Capitalism and Distributive Justice (pp. 8, 23-31.)
Israel Kirzner: Competition, Economic Planning and the Knowledge Problem (pp. 9-10.)
Entrepreneurship and the Market Process with Israel Kirzner (2011) YouTube video, added by Foundation for Economic Education [Online]
There is a fierce differentiation between Professor Israel Kirzner’s entrepreneur and his role, and that of the late Joseph Schumpeter’s entrepreneur and the role he plays in the market.
For those who are unaware, the entrepreneur, as according to Professor Kirzner, is an equilibrating force who, through discovery, perceives unseen opportunities for pure profit due to imperfect knowledge of market participants; under the market process and the state of disequilibrium, he moves the market closer to a state of equilibrium. The late Schumpeter had, as would appear on the surface, the complete opposite view of the entrepreneur. To Schumpeter, the state of equilibrium is a set routine; an even state of circular flow, and the entrepreneur, for Schumpeter, breaks away from convention; he is a disruptive force, who breaks away from the set and known; to destroy existing structures, creating a new state of disequilibrium by dislodging it from the state of equilibrium.
At a first glance these two concepts can easily be seen as separate theories of entrepreneurship; and they are. However, both theories can also be looked at as being the same, but under a different lens of perspective; one expanding to see a wider view, another contracting to focus on a singular area of interest.
This is what I hope to share with the reader; an idea that Kirzner’s and Schumpeter’s entrepreneurial actor and process can be seen as merely being witnessed from differing angles of the same lens and can, in theory, be woven together.
It should be noted I will be referencing Professor Kirzner’s work; Competition and Entrepreneurship, solely for this. Due to Schumpeter’s passing before Kirzner’s work on entrepreneurship began, we cannot know of his views of Kirzner’s work, or what his perception of Professor Kirzner’s entrepreneur would have been. In such case, I shall refer to Kirzner’s work to give insight into the perceived theoretical difference between the two concepts of the entrepreneur.
If we look into Professor Kirzner’s writings on the monopolist, he speaks of how, if a perceived monopolist holds his position due to a claim of ownership over a particular resource required for production, from a short-run view he would appear to be a monopolist. However, if our view is not focussed on a particular period, and is instead expanded to before he acquired the resource and it is that of a long-run view, if his acquiring was due to other profit seekers not knowing of the profit opportunities of this resource, due to a state of disequilibrium, then he is an entrepreneur who; through discovery, saw an absence of information and a missed opportunity for pure profit.
Taking this understanding into mind, if we return to the two arguments from Krizner and Schumpeter on the topic of the entrepreneur, we can theorize that the two are true, but merely being viewed through the same lens at a short-run, contracted view, and a long-run, expanded view of the entrepreneurial process and market state of equilibrium and disequilibrium.
What is meant by this? Let us go into a bit of investigation.
According to Schumpeter’s view of the entrepreneur, when the market is in states of equilibrium; producers produce the same quantities of goods and services as that of previous periods, the entrepreneur detracts from this convention and breaks away into a new route of market activity; distorting existing structures and moving the system into uneven states of disequilibrium. This, according to Schumpeter, is the creative destruction of the market economy, and the market process.
If we contract our lens to view the perception of the market actors prior to the entrepreneur’s activities, then we can see how, to the understanding of what is known to said actors, they were in a state of equilibrium and the “pest” known as the entrepreneur, had unravelled what they perceived to know as being all information available. We are now looking at the economic process prior to the entrepreneur’s arrival, within a short-run period.
As explained earlier, according to Professor Kirzner’s view of the entrepreneur, at any given time, the market is paved with ignorance of the individual economic actors, with missed, unknown opportunities, and that the market is in these states of disequilibrium, due to no actor having perfect knowledge; no economic actors are omniscient. The entrepreneur, as an outside observer, sees these missed unperceived pieces of information of resources to which could have more profitable uses, consumer desires not being met, and want/needs unknown to consumers to which they had no prior understanding for their satisfaction; he prepares forward looking, multi-period plans in order to achieve pure entrepreneurial profit. It is this outcome, if successfully perceived, which brings market activity via a process, closer to a state of equilibrium.
If we now expand our lens to ex-post the entrepreneurial actor’s seeking of the opportunity for pure profit, we see; through our expanded lens, that there were unnoticed, unknown opportunities for profitable market activity, to which the producers prior faced an absence of information (they don’t know what they don’t know), or, they faced optimal ignorance (they know what it is they don’t know, but it is more costly than beneficial, and so efficient to be ignorant).
While Kirzner and Schumpeter did have different theories around the subject of the entrepreneur; there is no doubt to be had, if we take Professor Kirzner’s short-run and long-run argument of examining the monopolist; with regards to looking at the matter from a shorter or longer period, it becomes possible to see why a state of equilibrium was perceived by the economic actors with regards to their known information ex-ante the entrepreneurs arrival.
This short piece should not be seen as a criticism of either Professor Kirzner’s or Schumpeter’s work; on the contrary, it is an attempt to explain that the two theories can be examined to be perspectives of differing periods of time, from the perspective of the economic actors of said differing times; the ex-ante and ex-post of the entrepreneur.
This is purely designed to be a short piece on the matter; if further examination is desired, you may find it in the following books:
Competition and Entrepreneurship – Israel Kirzner
Discovery, Capitalism, and Distributive Justice – Israel Kirzner
Essays on Capital and Interest – Israel Kirzner
Theory of Economic Development – Joseph Schumpeter
Capitalism, Socialism and Democracy – Joseph Schumpeter
At the beginning of March, Rishi Sunak; Chancellor of the Exchequer, announced the first budget since the pandemic was declared.
As part of the budget and this “recovery” plan, two specific changes to taxes were announced: Corporation Tax is set to rise on large companies from 19% to 25%, and a freeze on Income Tax thresholds; bringing roughly 1 million more people into paying Income Tax, and a million more into paying at the higher rate.
The Institute for Fiscal Studies reported it is set to raise an extra £29 billion by 2025-26.
But this is fallacious at best and bad economics at worst.
One thing to note of before continuing; which will help in explaining the problems with these hikes, is that Governments’ don’t control taxes, they control tax rates. Taxes are what happen when you combine tax rates with economic behaviour. In addition corporations don’t “pay” taxes, they collect taxes; taxes to a corporation are simply an additional cost, and an increase to costs will create differing economic behaviour.
With these in mind it should become obvious at merely a glace that the tax hikes are not going to have the perceived effects the Chancellor thinks they will.
Let us address these in separate sections; from the simplest to most complex, starting with the new Income Tax thresholds.
Freezing the Income Tax thresholds will force those earning £12,500 and below to start paying Income Tax. This will inevitably lead to low income individuals to see their living standards drop further, due to the forced decrease in expendable income, many will find it more difficult to satisfy their wants/needs and see their marginal utility of goods drop. As a result a few things will happen:
More people with no work experience or qualifications will remain and enter the benefit trap, since the credits and additional welfare assistances will be not necessarily more appealing, but more manageable for meeting expenses than the large cost to incomes, due to welfare acting as a substitute to income, rather than a supplement, which means the government will not be getting as many additional receipts as they imagine.
Due to those earning £12,500 or lower paying Income Tax, spending by those demographics will see a decrease, which means there will be less revenue generated via the Sales Tax, and this decrease in consumption could further hurt small businesses already on the margin.
There will be a further disincentive to work in these positions. Most jobs paying these rates are part-time or sales assistant retail work, therefore it will have a negative financial effect on these demographics; such as single parents looking to work part time and students. Further, this will cause a hit to high-street businesses struggling to find employees, and as mentioned above, will mean the government will not get as many additional receipts as they imagine.
There will be mounted pressure to raise the minimum wage in an attempt to counteract the introduced taxes. If this occurred those unable to produce at the new rates, would find themselves laid off and unemployed; essentially making it impossible for them to find employment; increasing the unemployment rate, and, once again, decreasing the degree of receipts the government is expecting to gain.
But that is just the lower income thresholds, as mentioned above millions are expected to be pushed into the higher Income Tax rate of 40%. What can we expect the results of this will be?
Similar as mentioned above, the push up to a higher tax threshold will mean those previously paying 20% will find due to the decrease in expendable income that their living standards will decline do being able to satisfy less needs/wants, and will find their marginal utility of goods and services decrease.
I’ve gone over this a few times in previous pieces but to reiterate, let’s illustrate what is meant.
If we look at the Mangerian representation of marginal utility we get a much clearer picture of this:
Suppose ‘A’ has an annual income of £30,000; after a progressive income tax of 20%, ‘A’ is left with £24,000. Additionally suppose ‘A’ has 9 needs/wants in order of importance for satisfaction. These are:
Owning a Pet.
Suppose ‘A’ is only able to satisfy six of these needs/wants. Because marginal utility is based on the level of satisfaction = utility, and the lowest want = marginal, ‘A’ would do without the 9th, 8th, and 7th. Under the pushed up threshold of 40%, ‘A’ would be left with £18,000, and would have to do without the 6th, 5th, and 4th.
Now these needs/wants illustrated are not determined and can be interchanged with each other or different goods and services based the subjective values of the individual, but it still stands that the new threshold will force median earners to restrict themselves further.
This in turn has a negative feedback to the industries which provide those goods and services done without. Those industries, to which consumers pushed into higher tax thresholds have done without, will in due course see a drop in sales; not just meaning they are making fewer or no profits, but are not covering their costs, which will in turn cause further unemployment, closing of shops in locations hit hardest, and possibly lead to bad deflation; the kind of deflation which occurs due to economic downturns in production and productivity.
There are also the effects on savings and investment.
If people are leaving consumption needs/wants unsatisfied in order to satisfy those needs/wants that hold a higher marginal value, then we can expect those median earners to reduce the amount they are saving; since current consumption is more intense than ability and/or desire to save for future consumption, once pushed into an Income Tax threshold of 40%
In such an instance MV (money velocity) would be at a high, indicating people’s time preference for current consumption. This would mean the banks would not be able to lend as much, and the interest rate would have to rise; signalling to businesses and entrepreneurs that now is a bad time to expand their capital goods or bring new markets to consumers.
This would mean fewer businesses will be able to diversify themselves through expansion, leading to a slower growth in production and job creation.
Does it sound like a bad budget? Well we haven’t even gotten into the Corporate Tax and things are about to get a lot worse with even more negative feedbacks.
The Corporate Tax is scheduled to rise from 19% to 25%, making it the highest rate of Corporate Tax since 1982 when the rate was roughly 30%.
This will have a variety of negative effects, depending on how businesses respond to the rise in corporate tax; a combination of behaviours could be expected, considering the harm to which the economy has been subject to due to the lockdown and other government policies.
While the budget states that it is only large corporations that will see their tax rate increase, it is still to have a negative effect on small businesses; but we’ll get to that as we go along.
As stated earlier, not only are taxes what happen when combining tax rates with economic behaviour, but corporations don’t “pay” taxes, they collect them. What should be heard when “we’re raising taxes on corporations” is uttered, is:
“We’re going to use corporations as a funnel for higher rates of collection”.
With this in mind what behaviours are to be expected from the funnelling of taxes via corporations?
Let’s talk about consumer prices first, because this links closest to what was mentioned with regards to Income Tax.
One way economic behaviour can respond to an additional cost is to see an increase in consumer prices. This would mean alongside the new Income Tax thresholds, many consumers will find their cost of living rising sharply, and have to readjust their optimal ranking of goods and services they hold a utility for, to which would mean there would be additional needs/wants left unsatisfied.
This, similar to what was stated earlier, would mean businesses would not see as high profits as the government is counting on, and government receipts via the Corporate Tax would see a decrease, because people are seldom able or willing to spend as much.
This large reduction in spending, alongside a possible withholding from investment into expansion, is what could lead to the bad kind of deflation. A basic outline can be seen below.
In the illustration shown above we see a basic example of a fall in spending. Aggregate Demand (A.D1) shifts downwards to the curve of A.D2. This causes output to fall also, as displayed by Aggregate Supply (A.S1) shifting downwards to A.S2. This leads to the price of goods in turn falling from P1 to P2.
It must be stressed that to class this fall as a good thing would be in the negative. Remember, these falls in prices and demand aren’t because an optimal quantity of goods have satisfied consumer wants/needs for the complete period in which they wish to utilise them; it is because overall spending has fallen, and because output has shrunk. Which means there are expansions of capital goods that have been abandoned, and in order to offset the cost, wages have to be cut, workers laid off and prices have to fall.
It is a somewhat similar story with regards to other behaviours that can be an outcome of the tax hikes.
A rise in tax rates on profits would mean in order to offset the additional cost, wages could see a decline. This brings us back to what was mentioned earlier about lower expendable income in a cycle:
Income Tax Rate Rises – Less Expendable Income – People Spend Less – Corporate Tax Rate Rises – Wages Fall/Prices Rise – Cost of Living Rises – People Spend Less – Cost to Businesses Rise/Revenue Falls – Outputs/Wages Fall.
Leading to, as mentioned before, the government finding its receipts are not as plentiful as they anticipated; fewer receipts via the Sales Tax, Corporate Tax, and, if workers are laid off, Income Tax.
Another Area to talk about is the process of production and entrepreneurship.
Capital and production are forward-looking, multi-period processes. The process of production is not a simple, pre-determined static motion; entrepreneurial producers set plans in motion during set periods and can have these changed, moved forward as they originally anticipated, or at worst abandoned at the difference stages of completion.
To go into more detail, let us suppose the following:
Suppose I hold a claim to wheat seeds. I wish to plant the seeds and grow wheat in order to make bread, so I search to purchase land that is suitable for my purposes. I find a landowner and agree to pay him with a portion of the funds I receive from selling the wheat, plus interest.
After time has passed and the wheat is fully grown, the first period of my plan is complete. I discover there is a high demand for vodka, and so must make the choice whether to continue with the production of bread, produce vodka, or sell my wheat to those who produce vodka. I finally decide on the selling of the raw wheat itself.
After selling my wheat to bread makers and vodka producers, I pay the land owner and must make the following decision:
Do I continue to pay him for the use of this land; or, with my revenue, do I buy the land outright, and rent it to producers looking to produce wheat for bread and vodka, knowing that this is an industry in high demand. Or, alternatively, do I buy the land outright, and continue to produce wheat for high demand industries without needing to pay rent?
Ultimately I decide to buy the land outright; initially to produce wheat for bread and vodka. However, I see consumers are favouring a competitor for bread, and demand for vodka is not being met due to most wheat producers selling to this bread maker for possible higher returns. Finally I decide to dedicate my wheat production to the manufacturing of vodka alone; specialising in one particular area of the market.
The point of this long winded story, is to illustrate that at any time, initially perceived long-run plans for the market can change. That the market process is not an indefinite, unchanging plan, but that the plans producers make are multiple; in varying periods of production and can change from initial desired outcomes.
Because the process of production is a long-run, multi-period one, added externally imposed costs do not merely effect the outputs by seeing a smaller scale of outputs, they can and will effect different periods of production; which can in turn, effect the employment of those in the production of goods of higher order. The market is interdependent, and so negative shocks to one period of the process can and will send negative feedback to earlier stages of production.
I gave mention earlier to how the rise in Corporate Tax rates would have an effect on small businesses and not just larger businesses; this, like most of what we’ve talked about here, would be a knock on effect.
Small businesses unlike larger, more international businesses don’t have the ability to branch out; nor large stocks of capital to diversify themselves and rely on other companies to provide products for them to line the shelves with. Small businesses don’t have the means to produce output, nor do they have large quantities of capital goods to utilise input materials should a supply run short. If the higher rate of Corporate Tax causes a reduction in outputs, or, at the least, a slower expansion of production, then small businesses; particularly small, family owned retail shops, will find the already produced, output stock they can store for sale will be heavily reduced or have a higher cost.
A higher Corporate Tax rate may not hurt small businesses directly, but it hurts them indirectly by reducing the amount of outsourced goods they can afford; requiring them to lower their stock or increase their prices, making them more at risk of shutting down.
Before concluding I want to briefly talk about the Laffer Curve.
The Laffer Curve theorises that there are two peak points of a tax rate, at which the government would receive 0 revenue. At the top is a 100% tax rate, at which the government would receive zero revenue due to driving out any and all investments, wages, savings and other means of generating wealth. At the bottom is 0% tax rate, at this point the government receives zero revenue because it places no rate of tax on its citizens and their activities.
While it shows at both these points the government receives 0 revenue, each peak point has different effects on citizens. At the top point the citizens’ economic activity would be non-existent and be put into positions of poverty, while at the bottom point the citizens economic activity, productivity and accumulation of wealth would be at its maximum optimal level; higher tax rates slow economic activity, lower tax rates accelerate economic activity.
So why, even if we believe what has been discussed here to be the worst of a worst case scenario, hasn’t the government seen these issues?
Well the shortest answer I can give without taking too much more of the readers time, is that it is a theoretical error with Mainstream Economics, viewing the economy as a static period; merely a mathematical formula not affected by human choice, values, ambitions and action. It is viewing economic activity as if it is not affected by externally imposed costs; that the economic actors will bring about a certain level of activity regardless of how high a tax rate is increased. It is seeing you have 12 eggs to make a large cake, taking 8 and believing you can make the exact same sized cake with 4 as you could with 12.
There is little excuse for a fallacious budget. Even if taking the assumption that such a bad budget was desperately brought in, in order to expand the governments revenue there are two problems with this:
Taking a larger amount from a small pie is not the same as taking a smaller amount from a large pie. Or, in money terms: There’s a difference between taking, say, 5% of £300 million, and 20% of £3 million.
The government already has a large revenue stream. Revenue isn’t the government’s problem, and I’m going to show this briefly before concluding:
Let us compare Government debt with Government receipts; the amount of money the Government collects in a year from all sources.
If we give the Government some leeway on its debt for the year 2020 and take a look at this ratio from the year 2019, we see the following. First it is important to look at the revenue streams from the financial years of 2009 to 2019.
As is shown, the Government receipts in the financial year of 2019 were at 634.64 billion GBP; an increase of 52.95% since the year 2009.
Next we look at the Government receipts compared to Government spending for the year 2019.
Government spending compared to receipts, was 851.3 billion GBP; which equates to roughly 34.13% higher than all sources of revenue collected by the Government.
Finally let’s look at the Government receipts for the year 2019 as compared to the debt as it stood in 2019.
In quite startling results the government debt in 2019, stood at 1821.9 billion GBP; or 1.8 trillion. The government debt is 187.07% higher than the Government receipts collected from all sources.
The Government doesn’t have a revenue shortage problem; the Government has a spending spree problem.
If the government was looking to have economic recovery, slowing down that recovery is certainly a strange way of doing it; to say the least in the most polite way possible. if the Chancellor was serious about recovery, and giving the private sector a strong push off the ground, he would’ve done well to have drastic reforms to the tax system; particularly Income Tax and Corporate Tax, into low, flat rate taxes of 5% and 10%.
Politicians like to talk a lot about the private sector giving back to the public, but for a year, the private sector has made huge sacrifices; sometimes willingly, sometimes forced on to it, in order to keep the public sector afloat; perhaps then, it’s time the public sector and the government, gave back to the private… something other than more debt, preferable.
Most mainstream presentations of the market economy place a focus on the incentive effects of profit and loss; known as the profit incentive. While it is undeniable, that profits incentivise market activity towards making good decisions about the allocation of resources, it is far too narrow a lane for looking at profits and the price mechanism.
Profits and prices are not a key function of the market economy for the incentives alone; these factors of the market economy have an epistemological nature to them; not just for the short term, current consumption and production, but in future consumption and interest too.
Information and knowledge are not centrally organised and distributed goods. To assume such a state would be to assume it possible for human beings to be omniscient; to hold perfect information for any given time period, and a state of perfect equilibrium. If we look at the Austrian understanding of the market process and the entrepreneur, this gives us a clear insight into the Subjectivist theory; this includes the standard of value being subjective, but also the step prior to the arrival of value, that being information. The profit and loss network works in a similar way, as described by Professor Steve Horwitz:
“Profit and loss are like the pleasure and pain signals sent by our nerve endings. If we didn’t feel the pain of our hand on a hot stove, we wouldn’t know that we were burning ourselves.” (Horwitz, Austrian Economics, pp. 49-50).
Without the price mechanism, we would hold no means of understanding the relative scarcity of goods and services, and have no methodology of passing on information in terms of where supply is needed; whether it is needed, and neither for passing information about where demand is; if it exists, for the particular final consumption good, or the capital goods of higher order.
To get back to the entrepreneur, The Austrian school of Economics places a high emphasis on the role of the entrepreneur, as well as the entrepreneurial process in the confines of the subjectivist theory.
The Misesian approach to the entrepreneurial process and how it relates to the theory of subjectivism, is that at any time market forces can face an absence of information (not knowing what we don’t know), and that this creates a disequilibrium. This mutual ignorance between buyers and sellers creates opportunities for the entrepreneur to acquire pure profit. If ‘A’ is selling oranges for $6 a bag, yet I value the oranges at no higher than $4 and I am subject to an absence of information because I do not know of ‘B’, who is selling oranges for $2 a bag, the entrepreneur has an opportunity for pure profit and to eliminate this absence of information. If he himself as an external observer is aware of the opportunity, he will buy oranges from ‘B’ for $2 a bag and sell to me in the middle for $3 a bag.
There is also the possibility that my ignorance is not an absence of information, but a matter of rational ignorance, or optimal ignorance. Suppose I am aware that I can acquire oranges from ‘B’, but the cost of transportation I deem as too great, or the time to get to seller ‘B’ does not fit within my time preference of having the oranges for current consumption. I have made a rational decision to remain ignorant.
If the entrepreneur has accurately perceived the information that I was ignorant of, then, ceteris paribus, that knowledge will be transferred to the market; informing consumers of an alternative choice they were absent of knowing, and competitors of the missed opportunity for profit. As explained by Jesus Huerta de Soto:
“The entrepreneurial creation of information implies its transmission in the market. Indeed to transmit something to someone is to cause that person to generate in their own mind part of the information which other people have created or discovered beforehand.” (de Soto, The Austrian School, p. 22).
These unnoticed opportunities play a key role in the economic world, because as stated, knowledge and information are not, and cannot be a centralised body, because at no time can one person or everybody know everything; such an approach would render knowledge and information; as translated into prices and profits, as static.
On the subject of interest, the time preference of consumers provides signals of information to the entrepreneur in terms of whether people hold a need-want for current consumption, or future consumption. The lower interest rates (due to real savings, not the artificial decrease by central banks), gives a means of knowledge to the entrepreneur that it is more profitable to create a future alternative to what is currently provided on the market, or to develop a new area of the market which had unexplored opportunities for pure profit, due to a previous absence of information, or optimal ignorance on the part of buyers and sellers. As Professor Israel Kirzner notes:
“Ever since Bohm-Bawerk, Austrian capital-and-interest theory has revolved around the concept of “roundaboutness.” This insight-that production takes time-focusses attention on intertemporal allocation of resources, on intertemporal rates of exchange, and on the structure over time of the stock of capital in the economy. Because the passage of time permits us to witness the successive initiation of time-consuming processes of production (and their subsequent successive completion), a cross-section of production activities at a given date will reveal a wide array of processes of production arrested at different stages towards completion, embodying stocks of resources invested already for a wide array of lengths of past time.” (Kirzner, Austrian Subjectivism and the Emergence of Entrepreneurship Theory, p. 112).
What happens when there are political forces which alter these signals? If an intervention of price controls or a “cap” on profits is brought into effect, then not only does this effect the incentives, but it skews the information being sent to market participants by giving false signals as to the quantity available to consumers, and to the profit seeker, as to how accurate he is interpreting knowledge and information. As Mises noted in his book Liberalism:
“But once the supplies already on hand at the moment of the government’s intervention are exhausted, an incomparably more difficult problem arises. Since production is no longer profitable if the goods are to be sold at the price fixed by the government, it will be reduced or entirely suspended. If the government wishes to have production continue, it must compel the manufacturers to produce, and, to this end, it must also fix the prices of raw materials and half-finished goods and the wages of labor.” (Mises, Liberalism, p. 52).
As further controls are put in place, additional inaccurate signals of information are sent out to market participants, to which we are then left in a situation where we not only have an absence of information, but the information we are aware of is false, and so we are operating under an absence of efficiently perceived information; a blindness of externally imposed ignorance. These interventions stifle knowledge, and holt the movements of information; creating an institutional blockage of information.
This makes the existence of a government bailout much more onerous than simply creating bad incentives for a failed business or bank; it is a punishment of consumers, for the business’s or bank’s failure to accurately interpret market activity.
The entrepreneurial process, prices, and profits are seldom irrational. They are epistemic; a means of acquiring knowledge about the value judgements and time preferences of our fellow man. They provide signals of information; if a man makes a profit he has been informed that he perceived the information accordingly, if he makes a loss he recognizes he misread said signals and miscalculated, or misinterpreted the information (or lack thereof) he had available. Any and all regulations, controls and artificial changes of these areas by government, merely obstruct our ability to utilise market signals efficiently; usually at great peril.
Steve Horwitz: Austrian Economics: Capital and Calculation (pp. 49-50).
Israel Kirzner: Austrian Subjectivism and the Emergence of Entrepreneurship Theory: The Modern Austrian Subjectivism (p55).
Steve Horwitz: Austrian Economics: Market Process and Spontaneous Order (p. 23-24).
Jesus Huerta de Soto: The Austrian School: Knowledge and Entrepreneurship (p. 22).
Israel Kirzner: Austrian Subjectivism and the Emergence of Entrepreneurship Theory: Capital and Interest Theory (p. 112).
Ludwig Von Mises: Liberalism: Liberal Economic Policy (p. 52).
The liberty movement has often struggled with trying to convince people to embrace freedom, liberty and individuality; to create a beautiful world where people are free to pursue personal happiness and embrace the personal responsibility that comes with it.
Sometimes this is because, there are some people who do not want freedom for others; it’s sad to say but some people just do not believe every individual is deserving of liberty, of freedom, sometimes rights. Whether they be Communists, Fascists, Nationalists, Socialists, Progressives, or any other Statist ideologue, some people are too engrained in a collectivist notion of existence; whether it be a racial hive mind hierarchy, nationality hive mind hierarchy, class hive mind hierarchy, or victim hive mind hierarchy; sometimes you’ve just got to accept the haters gonna hate.
Other times people just either haven’t heard the ideas of liberty before, they haven’t been convinced by the solutions to problems and better explanations are needed, and sometimes the issues they’re concerned about haven’t been addressed by the liberty movement.
There are then occasions where liberty minded people don’t know how to explain the ideas of liberty, and so they don’t know how to spread them. Sometimes, we Libertarians are our own worst nightmare.
I’m by no means saying I hold all the answers, but this short piece is to assist and give advice to help people spread the ideas of liberty; both to those who are political and hold no interest in politics but want to see a better world than what is around us.
Some of these tips I would argue are more important than others.
I – Read About Liberty.
I cannot stress how important it is to read about the ideas, theories and the philosophy behind liberty.
Too many times people want to get involved so eagerly; which is fantastic, but without having even a basic understanding on what it is they’re looking to bring out into the world.
You don’t have to read all of these books, some people are more passionate about social issues, political issues and others purely economic; if you’re not sure where about in the liberty movement your heart lies, feel free to pick and choose.
The books I highly recommend for starting the journey into liberty are:
Liberalism by Ludwig Von Mises.
The Free Market and its Enemies by Ludwig Von Mises.
Atlas Shrugged by Ayn Rand.
The Case for Free Trade and Open Immigration by Jacob Hornberger and Richard Ebeling.
The Constitution of Liberty by F.A Hayek.
Fascism vs Capitalism by Llewellyn H. Rockwell Jr.
In addition, reading books on the subject of anti-liberty movements and books by anti-liberty people is a useful tool for understanding these ideas and what threats they pose to our freedoms, some to consider are:
The Communist Manifesto by Karl Marx.
The Doctrine of Fascism by Benito Mussolini.
Right Wing Collectivism: The Other Threat To Liberty by Jeffrey Tucker
The Income Tax: Root of All Evil by Frank Chodorov.
II – Engage In Compatibility
A lot of the time people will show passion and want to fight for things that are highly compatible with the ideas of liberty; or they will wish to fight injustice, which those who are liberty-minded can agree is an injustice.
Yes your action for fighting injustice or campaigning for a cause probably won’t convince the masses of people if they’re fighting for different reasons, but if the principle for what it means is compatible there is no shame in standing for principles even if you’re shoulder to shoulder with complete opposites. For example; protesting HS2 for violation of property rights and maintaining government extortion of land, or standing up for someone facing legal punishment for freedom of speech, even if you strongly disagree with what they’ve said.
III – Lead By Example
The most common argument against liberty, and the most apologetic argument for Statism, is that people aren’t charitable and won’t voluntarily help others. This is probably the easiest thing any liberty-minded person can do. If you find a charity that is on a subject you care about, show the voluntary, charitable aspect of liberty in action by giving or helping to raise awareness. For myself I highly value education, and give to foundations and charities that focus on bringing the experience of learning to children in poverty. It doesn’t have to be an established charity; if you see a neighbour needs help, you can voluntarily choose to help them, without any coercion. Or spread the message to your friends and family that you’re giving away books, food, clothes etc, to people who need help. We resent each other because the state seizes our property to “help” others; this does nothing but build bitterness in the world, the best way to reduce resentment is to believe and practise voluntarism.
Finally, don’t be ashamed about “bragging” about charity work; it’s better to brag about voluntarism than it is coercion.
IV – Blog and Podcast
The more voices we have speaking out for freedom and liberty, the more people will hear it. Write about areas or talk about areas you’re most passionate about spreading liberty to. Whether its free trade, free immigration, freedom of speech, property rights or any other area you hold in your heart and you want to see separated from political power.
V – Know If You’re Liberty-Minded
This may seem extremely obvious, but there are so many people who are liberty-minded but just don’t know it, and at the same time so many who think they’re liberty-minded who really only believe in freedom for themselves or their “own kind” but that it doesn’t extend to others, or who want the “freedom” to control others.
I have seen so many people continue to support the Labour Party, Tory Party, UKIP, Lib-Dems, and all the other parties clearly because it’s what they’ve always done, but you see a spark of liberty in their heart that just needs to be explored.
On the other hand, I have seen way too many “Classical Liberals” who really are just Nationalists who believe in freedom of speech…for themselves but not their critics, and think social consequences mean their speech is being oppressed. Nationalism is not Patriotism, and Nationalism is not Libertarianism. Nationalism is the collectivist ideology that those born to a nation are one; a hive. Protectionism is rife with this ideology; sacrificing the value judgements of the individual in trade, because his choices, actions and desires must be to the benefit of the collective, the group. Restricting the command over one’s own labour; his property and those who wish to purchase his labour if he be foreign; because the consenting act of trade goes against the interests of the group, the hive; the nation.
There is nothing incompatible with being a patriot and a Libertarian; there’s also nothing incompatible with being a Libertarian with traditional values, community values, adopting values from other cultures and being a Libertarian; but, it is completely incompatible; if you are being intellectually honest, to be a “libertarian” who believes in the force, coercion and control of Nationalism.
There are “liberals” who don’t support free enterprise, don’t support free speech, don’t support ownership of private property and want to control and regulate the lives and choices of others; this is not Liberalism. This is plagiarism of the beautiful history of Liberalism by Progressives and Socialists.
It’s time for real Liberals; not pretend “liberals” because it sounds like a nice term, to start using the term Liberalism again with pride; I’m a Liberal. I believe in Liberalism, because I believe in freedom.
VI – Organise Events
This one is more difficult with the current government imposed lockdowns, however, if and when you can, organise events to spread awareness.
You don’t need to have flashing lights and fancy eye-catching attractions, these events would be designed to engage with the public; grab a microphone, invite attendees, find a topic that is an issue people are talking about, and speak about a liberty-based solution to those problems. While not necessary if you can get liberty-minded speakers from different countries this would be of benefit, not just because knowledge is decentralised and they may have insight you had not considered, but it helps to show that the liberty movement is not a fringe group of people sat in a basement; it shows this is a global, decentralised movement with people from different backgrounds and helps to emphasise the humanity of freedom.
At the start I mentioned how there are sadly some people who simply don’t believe people should be free, this section is about attempting to encourage the ideas of liberty with someone new; before potentially finding out they don’t believe in it.
If you find someone believes in legalising weed because people have a right to choose what they put in their body and what to do with their body, but they don’t believe in legalising or decriminalising cocaine, don’t screech hypocracy, praise them for there being an area where they believe in freedom and encourage them to think about other areas such a position could be applied to. This will not only help you, it will also help them in seeing if this is a principle they hold that they just didn’t know about, or whether it is just this one area they make exception for not controlling others.
The last piece of advice I can really give for reaching people is, Live In Liberty.
Recognise your individual sovereignty and the personal responsibility that comes with it. Allow others to make choices and to think freely, even if you disagree with their choices; they are sovereign individuals too. Treat yourself and other sovereign individuals as adults without controlling them, “for their own good”. There are many fundamental, principled differences between the liberty movement and Statism, but the most important for reaching people is this:
Immigration is a contentious issue that has been in the spotlight for many years now, most notably due to Brexit and the question of what the U.K’s future relationship is when it comes to immigration. The Conservative Party and many others have opted for a points-based immigration system, the problem here is this gives the government central decision making about who is allowed to enter the country; further politicising migration and furthering command over the international labour market; which since the government makes the choices of what type of market they want to “create” and how they want to shape employment, it very much leaves immigration at the mercy of special interest groups; whether it be for protectionism, or nationalist tendencies.
While I supported Brexit I was very saddened to see the free movement of people removed, and I truly believe if a more Liberal argument was the prominent voice for Brexit; rather than a Nationalist, Protectionist voice, then Brexit likely would’ve been accomplished within the first year of negotiations. The process would have gone along the lines of:
“We’ll make a compromise on free movement if you agree to free trade, but any attachment to the political and bureaucratic apparatus is off the table.”
Throughout this piece I’ll be going over two key misconceptions about immigration, followed by offering a brief analysis on what a better immigration system would be. These key areas are:
Immigrants Steal Our Jobs.
Immigrants Lower Wages.
“Modern Nationalism and collectivism have, by the restriction of migration, perhaps come nearest to the “servile state.”[…]Man can hardly be reduced more to a mere wheel in the clockwork of the national collectivist state than being deprived of his freedom to move[…]Feeling that he belongs now to his nation, body and soul, he will be more easily subdued to the obedient state serf which nationalist and collectivist governments demand.” ~ Wilhelm Ropke, Free Market Economist.
Immigrants Steal Our Jobs.
Probably one of the most famous, reactionary arguments towards immigration; so much so it’s become a famous line in South Park, this argument is usually based in two areas. The first being, the relationship between immigration and unemployment, and what Bastiat called “The Seen and The Unseen”.
Below are two statistical indicators of unemployment and rates of immigration to the U.K; the unemployment rates are from the periods of 1999 to 2019; the rate of immigration for the years 1980 to 2018.
As we can see from the data, there not only appears to be no causation towards unemployment from immigration, there’s not even a correlation.
Two interesting areas to take note of in the data is that the period of 2002 to 2004 had some of the lowest unemployment rates; ranging from 4.8% to 4.7%, and some of the highest levels of immigration of that decade, from 589,000 to 596,000. In addition the other area to take note of, is the only period where high unemployment was met with high levels of immigration; unemployment being at 7.5%, a peak of 8.04% and then back to around 7.5% between 2008 and 2012, and immigration levels between a high of 622,000 to 679,000 between 2008 and 2012. However, we should note that this period, was during and at the peak of the financial crisis of 2008.
If we go even further into the data we can see which demographics are hit most with unemployment, especially around the financial crisis.
Taking a look at the data below we can see that those hit hardest by general unemployment and the effects of the financial crisis, are those who are at the very marginal beginnings of their professional careers; those aged between 16 to 24 years of age.
Unemployment for those aged 16 to 24 is just below 25%. Now someone may look at this and conclude that, sure the financial crisis hurt young workers the most, but even outside that clearly immigration hurts young workers.
Except this ignores other variables.
These other variables to be taking into account include higher education and the minimum wage. Due to the taxpayer subsidising the money used for loans for student tuition fees, the filtering process of higher education has been eroded over time; alongside an increased promotion of University being a place for socialising rather than educating; more and more people acquiring University Degrees has led to an, “inflation” of higher education, meaning a degree is not as valuable as it once was to potential employers.
When it comes to the minimum wage it is pretty straight forward. If we have an increase in the minimum wage let’s say to £10 per hour, and a prospective employee is not able to produce at £10 per hour; suppose they can only produce at £8 per hour, they will find it excessively hard to enter the job market. That, or they will find the job they used to have has been cut and they’ve been laid off. In order for the potential employer to cover the cost of employing an individual at the newly increased minimum wage, they will be seeking past experience and higher levels of qualification; causing people to not be settled long term in the job market until they’ve reached their mid-20s to early-30s.
So it’s not immigration that has led to high unemployment among young people; it’s government intervention and regulation of education and employment, which has led to young University students with a Degree only being able to find work at Primark; if they’re lucky.
The other aspect of the “they steal our jobs” fallacy has to do with what French Liberal Economist Fredric Bastiat called, ‘The Seen and Unseen’. As part of this fallacy I’ll also include the concept that immigration lowers wages.
When a new immigrant worker enters the job market, we see a supplied job that could have gone to a native worker becomes occupied. The old talking point being it’s simple supply and demand; if you increase the supply of labour, you get more jobs taken up and you see the price of labour lowered.
In the diagram shown below we see an example of the argument stated above. W0 = original wages before immigration, W1 = wages with increased supply, S0 = original supply, S1 = added supply, and D = demand.
There are a few problems with this argument however. The argument looks at it as ‘The‘ supply of labour and ‘The‘ demand for labour, as though the labour market is homogenous; that all labour is exactly the same with no degrees of different skills required, hours worked, tasks to be done etc; as if a member of the labour market who works at a warehouse moving heavy crates can be interchanged with a labourer who works on a construction site putting in drywall. This is incorrect, labour like other capital goods is heterogeneous.
The other problem with this argument, when it comes to the seen and unseen, is that immigrants have demands for goods and services that they value also. With immigration if the new residents also hold demand for goods and services that has seen an influx of new workers, then we do not see a long term drop in wages.
We can delve into this a bit deeper to get a better understanding:
Suppose ‘Group A’ work as delivery drivers for a company that produces shoes, and ‘Group B’ are the workers who produce the shoes. Let us then suppose ‘Group B’ receives an influx of immigrant workers; in the short term they see their wages decreased. However, because now, ceteris paribus, the shoes have become cheaper to produce, more consumers are able to buy said shoes at a lower price.
Now that more consumers are purchasing more shoes, there are more deliveries demanded for drivers. In this situation one of two things can happen: Either the company will increase the hours each driver works; thereby increasing their overall earnings due to working additional hours at the same rate, or the company will look for qualified workers to hire as additional delivery drivers; the drivers won’t see their earnings increase due to no increase in hours, but they also won’t see them decrease, as supply is meeting in equilibrium with demand, rather than supply being in a surplus over demand.
If the supply and the demand move to the right on the scale, then we don’t see a reduction in wages as shown below:
We see the demand curve has shifted to the right to meet with supply, after market adjustments have been made. The information is the same as above; W0 = original wages, W1 = wages with added supply, S0 = original supply, S1 = added supply, and D = demand. This time though we see the demand curve has shifted; indicated by D1 = increased demand.
I briefly mentioned the “short term” decrease in wages. The most pessimistic estimates of immigrations effects on wages sees a decrease between 2-3%.
Borjas, George J. 2003. “The Labour Demand Curve Is Downward Sloping: Re-examining the Impact of Immigration on the Labour Market.” Quarterly Journal of Economics 118: 1335-1374.
A similar pattern can be found when focussing purely on European nations and the effects of immigration. These estimates either see a small gain or a small loss but cluster around zero.
Angrist, Joshua D., and Adriana Kugler. 2003. “Protective or Counter Protective? Labour Market Institutions and the Effect of Immigration on EU Natives.” Economic Journal 113: 302-331.
Muhleisen, Martin, and Klaus F. Zimmermann. 1994, “A Panel Analysis of Job Changes and Unemployment.” European Economic Review 38: 793-801.
These changes in wages and employment are merely temporary while the market adjusts to the new supply, demand, and price range. The only realistic way these decreases would be a long term issue, would be if demand was not permitted by regulations or government intervention to meet with the new supply; an example would be a quota on the number of a particular good consumers are allowed to purchase. In this instance the actual consumer demand would be artificially forced down or forced to stay static while supply of workers and goods produced increased; resulting in the cost rising due to receiving false signals of a static demand, and a long term decrease in hours worked and wages.
Even if we were to assume of a worst case scenario of a decrease in wages by 5% in the short term, this is still no reason to restrict immigration as there are other costs not just to workers but all citizens, imposed by government that could be cut instead. It merely provides another argument for either abolishing the Income Tax, or reforming it to a flat rate Income Tax of 5%.
Before we go into this solution, let’s take a step back and take a look at two statistics.
The first of these shows the median annual earnings in the U.K from the period of 1999 to 2019, adjusted for inflation:
As we can see over the course of 2 decades, the median annual earnings in the U.K has increased by over £10,000. Roughly £20,000 in 1999 and just over £30,000 in 2019.
If we break this down further, we can see the median hourly earnings in the U.K from the period of 1997 to 2019, adjusted for inflation:
Here as well we see that hourly earnings have had a dramatic increase over the course of just over 2 decades, by over 90%.
So where does the briefly mentioned reform to the Income Tax come into play?
Well let’s assume the worst case scenario that an increase in immigration sees an influx of workers, causing the median annual wages to drop by 5%; from £30,000 to roughly £28,500, then we minus the Income Tax from our worker’s wages by 20%, leaving him with £22,800 annually.
In the ideal scenario of abolishing the Income Tax, our worker in the short term has £28,500 in the worst case scenario of a reduction in wages by 5%, however, after a market adjustment in the long term, he has access to his full wages.
In the case where the Income Tax is not abolished but is reformed to a flat rate of 5%, in the short run adding the scenario of 5% reduction in wages, plus the flat rate 5% Income Tax, our worker is left with £27,075. After market adjustment to the new demand and supply, in the long term our worker has access to £28,500 of his wages.
Sure, there is still a short term reduction, and in the case where the Income Tax was reformed to a flat rate of 5%, he would earn less, but the living cost imposed by government in the long term with the current tax rate is a much higher burden than that imposed by the immigrant in the short term, while the market adjusts; it’s not immigrants that hurt the income of workers and their ability to put food on the table, its government.
The added bonus of abolishing the Income Tax or reforming it to a flat rate of 5%, is that this will lead to more people having access to more expendable income; which will lead them to either spend more on current consumption, thereby increasing demand for jobs, goods and services to satisfy consumer wants, or it will lead to people saving more for future consumption; allowing for more investments in new businesses, the expansion of existing industries or investment into the expansion of capital goods to produce more goods and services in the future, thereby increasing future living standards.
The value we can obtain and the benefits from abolishing or reforming the Income Tax, far outweigh any perceived benefit of restricting immigration.
A Better Immigration System
So what is a better immigration system to adopt? The economic arguments for the free movement of labour is on similar lines to that of free movement of goods and services.
In his book The Wealth of Nations; 1776: Book IV Chapter II, Adam Smith stated “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.” The Concept underlying this statement is straight forward: To create more wealth, it is more efficient to carry out production activity where it is most productive; where it creates the most output for the least expense. This is what is known as ‘Comparative Advantage‘.
This is an underlying concept of the division of labour; allow people to produce and specialise in what they’re skills are best suited for. Rather than have an individual worker in the production of shoes make the laces, cut the material, come up with the design etc, we have people who specialise in a particular area of production, so their time can be dedicated to what they’re most skilled at, rather than inefficiently using their time to focus on all areas of production. The same is true for immigration.
Immigrants tend to complement our labour market, and immigrant labour tends to be different to the domestic labour by bringing a different skill set.
Often when immigrants move to another country they’re either very highly skilled, or very low skilled; a lot of the domestic labour is somewhere in the middle.
This compliment to the labour market allows native workers to free up their time to areas of the market that they are more efficient at, rather than inefficiently being active in areas of production that they’re not as highly skilled at, or on areas which requiring trading off time in other areas where they could maximise their productivity; the best wine may come from France, but the best Whiskey comes from Scotland.
This is the primary economic argument for the free movement of the labour market alongside goods, services and capital. There are of course philosophical and social reason for the free movement of people, as well as for the upcoming proposal; but at the moment we’re just here to go over the political and economic.
“When the Know-Nothings get control, it [the Declaration of Independence] will read ‘all men are created equal except [African Americans] and foreigners and Catholics.’ When it comes to this, I should prefer emigrating to some country where they make no pretense of loving liberty-to Russia, for instance, where despotism can be taken pure, and without the basic alloy of hypocracy…” ~ Abraham Lincoln, 1885.
Taking The “R” Out Of Free Movement
The better immigration system I’m proposing could be charmingly called ‘Fee Movement’.
Rather than having a points-based system for immigration, take a market approach to immigration by having residency tickets, and have the price be elastic; adjusting to the supply of tickets and the demand for the particular ticket in question.
This would give people migrating to the U.K the ability to freely work and live in the country; thereby freeing up the time of processing, while also having a 5 year probation period where they’re not a full citizen yet, and so cannot run for positions of government. Immigrants with serious criminal backgrounds would be refused entry. However, this would be based in relativity of our own laws; for example if an immigrant from Saudi Arabia wishing to reside in the U.K has a criminal record under his native country’s law for being a homosexual, he would not be denied as we hold no law against it. Once the 5 year period reached its end, the immigrant would be given full citizenship.
To get into the details, suppose we produced 500,000 residency tickets, each costing £10,000 when, ceteris paribus, supply equally met demand. Assuming there is no larger quantity over 500,000 of immigrants who wish to reside in the U.K, and no less, each year the residency tickets would bring in £5 Billion.
Compared to the size of our economy; being just over £2 Trillion, this may seem like a drop of rainwater into an ocean, but that’s only if we look at things from the perspective of the short term, and also don’t consider where the money would go.
In the long run if the money was put straight into the bank, this would provide the U.K with an additional £5 Billion each year; ceteris paribus, into investments for the expansion of capital goods, loans to new and developing businesses, housing construction and furthering production to provide a larger supply of goods and services to people for future consumption.
Some may say it would be unfair to discriminate by charging immigrants to reside in the U.K, to that I have two answers:
Being a market approach there would be nothing stopping a charitable citizen for paying the bill for an immigrant voluntarily; or the immigrant’s family from helping with the costs. There also wouldn’t be any law against the immigrant setting up a “Go Fund Me” of sorts, or a private charity or foundation being set up to help cover the costs of the residency ticket. As long as the costs aren’t socialised and forced to be paid by the taxpayer then there really isn’t a problem; voluntary and consensual exchange is the key.
Discriminating on the basis of who is able/willing to pay for a good or service, is more fair than discriminating on who gets to enter the country based on their nationality, religion, or whether the government has a good relationship with a foreign government.
The additional benefit of a market based immigration system is that it removes the politicisation of immigration by putting it in the hands of the market process, signalled by the pricing mechanism. This will ensure there is a barrier between the movement of the international labour market, and special interest groups who benefit from the government having control over immigration.
“As a free and unfettered commercial intercourse between two countries is advantageous to both, for by the exchange of their commodities the producer and the consumer are both benefited, so also must the unrestricted circulation of the human race be advantageous to all countries concerned…it…must be viewed in the more comprehensive and enlightened scope of the enormous benefits it confers upon the human race at large.” ~ Emile Levasseur, French Classical Liberal.
Man’s mobility; his own untampered travel and the free movement of his goods and services, is the road to peace, wealth, and human evolution.
Let us uphold, not tear down, man’s mobility.
Let us believe in the three ‘L’s that allow us to flourish:
Did Brexit get done? Brexit in its most pure & perfect form was never going to happen; not just because of the bureaucracy of political negotiations, but because there were an array of subjective & political visions of what Brexit “should” look like. Personally as a Libertarian (to some degree a “Bleeding Heart Libertarian”). I was saddened by the removal of free movement & the introduction of a points based system; giving the government central power over the planning & shaping of the international labour market. However, the dangers of being with an intergovernmental system of central planning, managed by a large bureaucracy, with the ability for MEP’s from Spain to vote on bills which can affect people in Britain & vice versa, was far too much political power for any system to hold for the benefit & liberty of free movement. Hopefully free movement can return without bureaucrats being in control of it in the future, but in terms of the fundamental aspect of leaving an intergovernmental bureaucratic system; yes, Brexit got done.
How do you hope the U.K. will use the new found freedoms? Already a small good has been made with the elimination of the tampon tax which was brought about by the EU, & we continue to negotiate free trade deals with other nations; India, Turkey, Japan, Australia & New Zealand; I remain hopefully that a free trade agreement will be reached with the USA, but even if we are unsuccessful with our American neighbours & other nations, we should look to eliminate all tariffs on imports regardless of any deals present. Tariffs in the end hurt the citizens of the nation which imposed them, forcing consumers to pay higher prices for goods they value & that bring a higher living standard. Removing all tariffs also show good faith that we are against protectionism & for freedom on entry into competition, in addition to putting pressure on foreign governments by their citizens to lower or remove their tariffs, since their governments would be forcing them to pay an artificially higher price while we pay the actual market price.
What constitutional reform would you like to see happen next? The next step that should be considered seriously, is now that we’ve seen that we can remove ourselves from an intergovernmental bureaucracy, we should look to show no exception to our own bureaucracy. Make reforms by reducing if not removing our own bureaucracy; the nanny state in all its forms, & moving towards a system of decentralised political power, by devolving power from Westminster to local councils. Finally, we should not show hypocrisy in the face of those wishing to leave a political union. There appears to be growing desires for Wales to seek independence, & if this is a serious desire, then it should be listened to; with a warm hand outstretched to say goodbye to a housemate, but hello & good luck to a friend.
What do you think is next for the EU? It all depends on the outcomes of Brexit in the future & the attitudes of the citizens in remaining EU nations, but I think it likely more nations will follow in leaving, I think it’s possible that Italy will be the next to leave. Originally during the yellow vest riots I would’ve said France, but this is heavily unlikely as if France left it would likely be the end of the EU for good; bureaucracy & political power doesn’t die that easily (sadly).
Did Brexit get done? Yes, the UK has officially left the EU, the legalism and stalling that followed has been the result of inadequate and inept politicians from the UK and aggressive negotiation tactics from the EU.
How do you hope the U.K. will use the new found freedoms? A move towards further devolution, for many libertarians Brexit was the first step towards dissolution of big government in all its forms, I would like to see a second referendum in Scotland, however there are simple Monetary policy changes I would like to see first and legal restraints on fiscal policy.
What constitutional reform would you like to see happen next? Having a real constitution would be a start! A move towards a constitutional republic with federal states who agree to be in the union voluntarily if at all.
What do you think is next for the EU? With Biden in power they should have their NATO bills covered, but I think that Germany is aware that they need to up their military defences, some concessions will have to be made to Hungary and Poland in terms of this as well. The focus should be on protecting Europe from Russian influence. That is the should, what they may do is fall into their increasingly overburdened administration and red tape, with more rules and regulations for every aspect of life while ignoring the real global threats on their doorstep.
Did Brexit get done? Yes, despite everybody and everything tilting against it, Brexit was done. We managed to make a deal, which won the UK some welcome trading stability for now, at a time when we’re feeling bruised by the physical and economic effects of the Covid pandemic. But the trade-off sacrificed some of the interests of our fishing communities and our financial institutions. We’ll need to see how these can be managed in the longer term. British people who own properties in an EU country feel short-changed over matters that can surely be ironed out in the short term. But our capacity to make decisions for ourselves as nations and regions has been gained and it’s cause for celebration. Now we, the people, need to make it work for us.
How do you hope the U.K. will use the new found freedoms? The Referendum saw the UK population express its will, in the case of the majority, against the wishes of those in power. I’d like to see the population continuing to speak out and guide the actions of our political representatives. New economic, health and education concerns remain with us, so we all need to be involved in making these work better than before. We also need to find a way of a way of conducting national debates that don’t involve cancelling people we disagree with. Because we’re worth it.
What constitutional reform would you like to see happen next? Electoral reform – I say that with some trepidation. But our current first past the post came about when there were only two political forces in the UK electoral system. Nowadays it encourages tactical voting and overrepresents the two main parties and the regional nationalist parties in numbers that do not reflect the ambitions of the electorate. I’m aware that every voting system has its disadvantages, but I don’t think FPTP can help sustain democracy into the future.
And we need to look again at the use of judicial review to overturn political decisions. Political decisions are the responsibility of the people and its elected representatives: judicial review has taught us to rely on an unaccountable judiciary rather than ourselves.
What do you think is next for the EU? In the medium term, Mediterranean EU countries will continue to struggle with economic decline and fight to make sense of their EU membership – or leave and reorganise. Germany will continue to cultivate its economic and political relationships with its Central Eastern European backyard, with increasing competition from China and Russia. The European Central Bank has a major debt crisis resulting from the structuring of the Eurozone, now exacerbated by current economic crises – it’s looking like a slow motion crash and one that the UK is better off out of. I worry for the people of the EU.
In the longer term, the EU is likely to become a geopolitical backwater, except perhaps as Germany’s merkin as it remilitarises. Only the USA will have the economic and military might to challenge Chinese global ambitions, as India and perhaps Brazil continue to find and assert their voice on the global stage. Our historical close relationship with America is likely to gain in significance as China looks to extend its economic and military power. The UK will need to box clever to retain its position as the fifth largest global economic power, developing and extending its relationships with African and Asian nations previously locked out by EU trade policies and tariffs.
The market economy and the environment are often seen as at complete odds with one another; with pollution, deforestation, animal extinction, and a whole host of other issues, the easy option is to blame profit seekers and other apparent villains in the world.
The go-to argument for environmentalists; or rather, watermelon environmentalists (green on the outside, red on the inside), is to tax, regulate, ban, and in some instances nationalise, because the market has failed us. On the contrary however, the market hasn’t failed us, because one of the key aspects of a market system has been failed by governments refusal to protect it; namely the institution of private property rights.
I wish to present to the reader the concept of Free Market Environmentalism. This concept decrees that protection of the environment is a losing battle without the acknowledgement, the expansion and the upholding of private property.
Throughout this article we will go over a few key areas; these include:
The One-Dimensional Scarcity View of Environmentalists.
Time Fallacy of Market Short-Sightedness.
Negative Feedback Mechanism.
Relative Prices vs Absolute Prices.
The Kuznets Curve.
After these key areas have been covered, we will go into a few primary areas of environmental concern; these are:
The Environmentalists seem to have a One-Dimensional view of scarcity, with regards to non-renewable resources. The argument being that the more and more non-renewable resources we use, the more we leave drastically fewer; if not zero, for future generations. This has tended to be one of the arguments for recycling. However, there are serious issues with this theory.
The use of natural resources or non-renewable resources in the current time frame does not mean we risk reducing the options for future generations in future time frames; instead, it provides future generations with a whole host of different options. This does not mean that there is no argument for recycling however, there is an argument in favour of recycling for the purposes of reallocating how we dispose of non-biodegradable resources, so as to pollute as little as possible; what is not an argument for recycling is the One-Dimensional Scarcity view, which runs contrast to Back-Stops and the fact of capital goods being Multi-Specific.
Back-Stops refer to a close substitute resource which can be utilised for a particular price. The ability and options for the substitute or “back-stop” to be swapped in, places a limit on the price increase of said given resource. If the back-stop is competitive and has multi opportunities for use, the original scarce resource it is a substitute to will eventually leave the market. However, if the back-stop is competitive in only a limited number of uses; or in solely one, then the price of the original scarce resource will continue to rise. (This ties into the Multi-Specific quality of capital goods.) The use of the original scarce resource will be allocated to those purposes that the substitute is a less effective replacement. Some may argue that this only encourages us to squander resources until we can no longer meet traditional demands; an alternative argument however, would be that this adjustment has allowed us to incorporate a cheaper substitute, that is just as effective; if not more, for meeting demands.
A historical example would be the substitution of coal for firewood in England during the period of 1450 to the 1700s. Around 1500 a shortage of firewood had occurred. John U. Nef in his book, The Rise of the British Coal Industry, noted that:
“All the evidence suggests that between the accession of Elizabeth and the Civil War, England, Wales, and Scotland faced an acute shortage of wood, which was common to most parts of the island” – page 158-161.
As expected, the substitution of coal proceeded at different rates for different industries due to time patterns; Nef further notes that:
“There were a large number of industrial situations in which coal could not be substituted at all until some technical alteration had been made in the process of manufacture. It was necessary either to free the coal from its damaging properties or to invent a device to protect the raw material from the flames and fumes” – page 215.
Relative Prices vs Absolute Prices
This type of change in market activity cannot be expected to occur however in a situation of absolute changes in prices. Confusion or misunderstanding in the real price can occur if absolute prices; due to an overall inflation, are not seen as separate to relative prices.
As stated above, an overall price increase occurs due to inflation, we can predict the effects on energy use or the use of another good or service based on relative price changes against other market prices. Only when the prices are relative, will they have an effect on how consumers utilise these resources, how much they take in, and how much are saved for future consumption based within an allocated time preference. However, when the price of energy, wood, water; or any other consumption good or capital good, sees an increase that is due to a general increase in prices, the incentive to economise on resources is no different than if prices had not been effected and a reflection of inflation. Thus, the argument mentioned above with regards to substitution, must be based in changes to the price of the particular good or service, relative to other prices.
This talk of relative and absolute prices brings us on to the subject of the Negative Feedback Mechanism.
Negative Feedback Mechanism
One of the ways Economics shares similarities with Ecology, is with regards to the negative feedback mechanism found in nature; which works on a similar basis in economics.
In nature, a negative feedback mechanism occurs within an eco-system when a stimulus provokes an offsetting response; a similar mechanism exists in the market, and ensures that the market can operate as a conserving system. For example, let us suppose new information is discovered which indicates previously perceived stock ‘x’ resource is incorrect and overestimated. Resource owners will react to this by adjusting their prices upward to meet expected demand in relation to the new understanding of the supply levels. This adjustment to an expected higher future price will create a time preference for future consumption as opposed to current consumption. The reduced supply of ‘x’ resource will hold consequences for the present. Prices for current consumption will be forced to rise in order to meet equilibrium. In addition on the demand side, users of ‘x’ resource and its by-products will be incentivised to limit their consumption of the resource or to find substitutes which can satisfy their marginal utility. The incentive to develop techniques that economise on the use of ‘x’ resource will be increased. Similar will occur with regards to the supply side. The search for new deposits will intensify and lower-grade sources will become profitable to use. This is a core aspect of the pricing system. It acts as a measuring line of value and a feedback mechanism for achieving many of the responses desired by the environmentalists. Consumers are faced with incentives to limit their consumption, and producers are faced with incentives to limit their use or; due to the multi-specific nature of capital goods, find substitutes or back-stops to meet production requirements of inputs; so long as the marginal costs do not outweigh the returns.
This pricing system we talk about; if allowed to operate and not face intervention from busy bodies and self-declared angels which skew market signals and give us false information, ensures that the market system can work perfectly, as it is able to calculate the marginal values of the consumers, against the marginal costs of the producers; or in other words, the costs/risks verses the profits/benefits; so long as the price paid by users reflects all benefits derived, including aesthetic and other benefits.
This price system and the negative feedback mechanism, ensures that decision makers are faced with prices for resources at all times in the future. Any resource owner is able to sell his resources at the times that are to his greatest benefit. Resource owners must decide how much to use today and how much to save for the future. If the resource owner is economically rational, he will look to gain the most he can for his resources by comparing current prices with prices he expects in the future and plans his use of the resource accordingly. The higher the price he expects in the future, the more the owner will conserve his resource so as to increase profits.
Time Fallacy of Market Short-Sightedness
There is an assumption among environmentalists that the market system, business owners and other property owners are short-sighted and only look to short term gains, this however could not be further from the truth.
The private ownership of property and the means of production incentivises people to maximise the value of their property, and in so doing, look to analyse the cost and benefits of their market activity. The private ownership allows the owner(s) to understand their opportunity costs for and against current consumption, plus for and against future consumption.
It should be stated however, that even in the event of selling a resource at a current time frame for current use, this does not mean this is the only available alternative as opposed to the resource being saved for the future. If the original resource owner sells his property to a willing buyer, and said buyer expects prices to be higher; at least enough to cover the costs, the buyer who plans to buy the resource will be willing to not only pay more than the present users, but will have an incentive to conserve his new property, in relation to the time preference of interest. Therefore, even though the time frame for one particular owner may be short-sighted, the preservation of the resource will be achieved by the transfer to different investors, and to those entrepreneurs who see an untapped area of the market, to which there is disequilibrium.
Time frames over resources are not simply seen directly, they are also shown in the indirect holding of resources; particularly non-renewable resources. Institutions such as the stock market, stock exchange and mutual funds, ensure and allow for the continual buying and selling of resources, and claims to ownership. These play an important role in how we incorporate the future preferences into current decision making.
While the market system allows for the values of future generations and future time frames to hold an influence, the link between future scarcity and the preservation of resources can be broken; and often is broken. For example, the mechanism cannot be expected to function when ownership rights to a resource are limited. The temporary owner of the resource will not gain from any future value that the resource may hold, nor from the higher prices of consumer future time preferences for consumption. Due to this limited tenure, there is less emphasis on preservation of the resources and a stronger incentive to sell the resource at a current time frame. As an example of this, if there was a regulation in place over a natural resource; such as a forest, to which if an owner had a fixed time period they were permitted to sell this resource, after which it would go into public ownership, the incentive to preserve the resource for future consumption based on expected higher prices, would be in the negative.
This link can also be broken under permanent ownership, if current resource owners believe the rules are about to change, such as the nationalisation of resources presently owned by private bodies. The threat of nationalisation creates the same short-term incentives for current time frames as that of the limited mentioned above. The soon to be former owner faces no advantage from the higher prices or marginal values of future time frames that occur after the nationalisation, and so faces no opportunity cost in selling his resources all at once; it very much makes the term “use it or lose it” a reality, and a dangerous one at that.
Within the market system, we must understand that the individual consumer is sovereign. This consumer sovereignty refers to the uncoerced freedom for consumers to choose goods and services from a wide host of sellers and producers; competing with each other who in addition provide information about their output, to best serve the satisfaction of their customers. The sovereignty of the consumer is limited however, as a producer will not allow himself to sell goods and services at a price that does not cover the costs; just as a consumer will not pay a price higher than his marginal value of the good or service. What is to be produced is determined by the money votes of consumers; not every 2-4 years at the polls but every day in their decisions to purchase this item or not that item.
Note: consumer votes themselves do not on their own determine what goods are produced. Demand has to meet supply of goods; so business cost and supply decisions alongside consumer demand, assist each other in determining what is produced.
The Kuznets Curve
The Kuznets Curve is a relationship between environmental quality and economic output; measured by per-capita income.
What the curve shows is that when economic activity first starts to develop and wealth begins to develop, the environmental quality; for a period, becomes worse off, because now activities are being enacted which impact the environment, but there is not enough wealth or monetary productivity to incentivise the maintenance and clean-up of the environment.
As a country becomes richer; or on a micro level as a household becomes richer, the costs of maintenance in proportion to income becomes so that, maintenance becomes a desired activity as the environment becomes what is known as a normal good in economics; as we get richer, we place a higher value on this good and are more willing and able to keep it clean. So humans; as their incomes increase, have a better environment overall.
However, if we were to measure the environment purely from how humans experience it, then rather than being a curve, it would be a line continuously going up:
The reason for mentioning the second is that, prior to industrialisation, the environment for humans was of low quality. As an example anyone who has ever gone camping knows that they will get the smoke all over them; that’s air quality. What the Kuznets Curve is making look like a worse environment; when looking at it from an external perspective at the beginning, is really a better human environment than the previous point as it continues.
This in no way discredits the Kuznets Curve; merely it gives a more internal human perspective as to how humans experience the environment around them, rather than solely the external environmental perspective. If we take into consideration that all human activities have trade-offs, and one of the core differences between humans and other animals; being that other animals must adapt themselves to their environment, whereas humans must adapt their environment to them, we realise that both the curve and the line need to be taken into consideration, when considering the trade-offs of economic and environmental activity.
Now that these key areas have been looked into, let us delve into a few core environmental issues that tend to be high up on the list of concerns. While all of these will have some degrees of difference when it comes to the problems and the solutions, they all share two traits for solutions in common:
Privatisation and Property Rights.
We will delve into how each will be benefitted by these institutions as we go into them.
You cannot possibly talk about environmental issues without getting into the topic of pollution; you could say it pollutes the discussion…get it? Anyway my dry humour aside.
Pollution occurs as a by-product of producing goods and services that satisfy consumer wants-needs. When we talk about pollution we are primarily taking into consideration spraying fumes into the air, dumping garbage into the ocean, and throwing items such as empty plastic bottles on to the ground. Many nations have tried to solve these problems by issuing fines, enacting regulations, banning certain products and a whole host of other solutions; the problem is these solutions aim their sights on the approximate cause rather than the ultimate cause.
The activities themselves are the approximate cause; or they could be seen as negative incentives; the ultimate causation comes down to the following:
The Tragedy of the Commons.
“The Public Good”.
Lack of Private Property Rights.
The Tragedy of the Commons refers to when everybody or nobody has a claim of ownership to a resource, which leads to a lack of opportunity cost; for example if I have no claim to ownership over a piece of land where lots of herbs grow, since I nor anybody else has a claim of ownership there is no opportunity cost for extracting all of the herbs for myself, because if I didn’t I wouldn’t have them anyway, and so resources under The Tragedy of the Commons are at risk of becoming depleted or damaged.
Many governments have tried to solve this problem by telling private firms they’re only allowed to take a certain percentage of the resource; such as cutting down a certain number of trees. The issue here is that the problem of the commons still persists; because the private firm has no incentive based on an opportunity costs (due to there not being one), it will simply take the maximum of what it is permitted to take.
To put this into a bit more of a perspective, suppose you have a garden as part of your private home, because of the private ownership there is a high incentive to keep the garden clean in order to maintain the value of the home; however if the garden, and the entirety of the home were to have no claim of private ownership, there would be no manner to measure the cost and benefits of maintenance due to there being no opportunity cost. This would lead to (A) the occupant facing no incentive to keep the home clean, and (B) his community as a whole misusing the resource and using it as a dumping ground. If we then magnify that, it reflects the problem we have with the pollution of oceans, air and land.
Another area mentioned above is the concept of “the public good”. The problem with the public good concept, is that if a particular industry is seen (by government) to offer a large enough social/public benefit, any pollution it brings about is fair game; regardless of any private property rights being infringed. A modern day example of this concept manifested into political policy would be HS2 and the policy of Eminent Domain.
Eminent Domain provides the government with the power to seize the private property of citizens, or demolish landscapes in order for the enactment of projects seen to be within the public interest. These political powers can also been given to private companies if their endeavours are seen to have a high net public benefit. Under the law of Eminent Domain, if the firm or government department running the operations requires land that private property is situated on, the property owner is legally required to participate in compulsory purchase; where in most cases they are given a set amount of “compensation”; usually below the value of the property, and are required to accept the set amount; if the property owner should attempt to refuse, they will either have their property demolished without payment, or they will be taken to court.
In addition, another issue with the concept of “public good” is that it creates negative incentives, as if you are an environmentally friendly business owner and you want to produce goods that are ecologically safer, under the guise of public good you’ll be at a competitive disadvantage; your competitors don’t face any injunctions for damaging private property if their endeavours are seen to be in the public interest, so overall it costs you more to be environmentally friendly than it does for your competitors to damage property and infringe on property rights.
Both of these areas culminate under the issue of a lack of private property rights, and a lack of property rights being upheld.
So we have a basic premise of the problem, so what is the solution?
While there are certain degrees of difference with the solutions, they all would fall under the promotion of privatisation and private property rights.
We can give a historical example of how private property rights would work for the environment.
In the 1830s and 1840s, there were a number of lawsuits in the United Kingdom, the US and Canada against pollution from coal factories, by property owners who had received damages. Typically a woman would go to court under the common law of nuisance and complain that a coal factory was spewing smoke soot and dust particles over her property, resulting in her laundry being dirty and damaged. Or in other instances a farmer would complain about a rail train that would pass by and sparks would fly from the tracks, resulting in his haystacks catching on fire. The individual in question in other words would allege that their property rights were being violated, and would appeal to the courts for payment to cover damages and for an injunction to stop the polluter. In most cases, especially in cases where the property owner had homesteaded, the courts would rule in favour of the accuser.
If taking into consideration the historical example, the issue of pollution could be solved, if we were to privatise land and uphold the protection of private property rights.
The way in which to do this would be to first conclude who holds a claim to what. This feat would be achieved by using the Lockean theory of Homesteading. The theory of homesteading states that he who uses the land first for his labour is the one with a legitimate claim of ownership. Heathrow airport as an example has consistently come under criticism for expansion after expansion, and for continuously looking to expand further. However, many communities have existed in the area long before expansions were sought after, and so under the Lockean theory of Homesteading, if eminent domain laws were abolished, the rightful owners of the land would be the home owners and Heathrow airport would have to either set up a contract with the community detailing what they’re permitted to do in terms of air/noise pollution levels, buy out the land from the home owners, or they would have to find alternative ways to expand without expanding on noise pollution or air pollution, keeping within the vicinity of the area they themselves have homesteaded; i.e. encouraging innovation. If they failed to do this and they were found to have damaged private property, the property owners would be able to bring Heathrow to court for an injunction and to cover damages.
Many may say that such privatisation wouldn’t work when it comes to roads; that you couldn’t bring every car owner to court if they polluted over a certain amount that would damage others property.
It is true that it would be unfeasible to sue each and every car owner, however if we had private roads, then in the case where a car owner’s car was spewing dust and soot to the point that it brought damages to another’s private property, then the owner of the road would face an injunction to cut down on the pollution and be faced with paying for damages. The private road owner would also face incentives to reduce the pollution on his road, due to wanting to maximise the value of his property, in order to gain long term value; as stated previously, if a private owner faces not being able to reap the benefits and the full value of his property, he will not look to maintaining it due to the fact he is unable to benefit from it; if we had private ownership of roads, then the owner would look to maintain the value of his property for the long term and therefore would add into the costs of using his road the costs of maintaining the road. This would ultimately be reflected in the prices drivers face; for example it could be seen that the price for using the road would be 50p per mile for hybrids, £1 per mile for cars, £3 per mile for lorries, and £5 per mile for vehicles over a certain age that were more at risk of producing higher levels of toxicity.
In addition this would ensure that, costs known as negative externalities would have a way of being measured into the marginal costs, so as to better communicate into the pricing system.
The figure above shows the costs of negative externalities added into the equation of road use. The congestion costs reflect the type of external effects of using said road. For motorway congestion, the costs to the individual driver are the time costs of travel, plus vehicle operation costs (quantity of petrol used). The costs to all drivers will increase with the number of drivers making the trip; in other words the total cost to the road owner will be the cost of holding the car on his road, plus the congestion cost this imposes on his road, external property owners and other drivers. The costs are shown diagrammatically.
In the diagram above there is a clear distinction between the costs to an individual driver (MC n) and the costs to the road owner and other drivers (MC s). We understand negative externalities when it comes to human activity, if the privatisation of roads was brought about, owners of the roads would reflect these “unseen” costs in their prices; the issue is not “market failure”, because there has never been a market for road ownership.
Another simpler way of explaining this would be as follows.
Most people understand the standard supply and demand curve, and both meeting in equilibrium.
Suppose we were to take our example of a privatised road, private property rights and external diseconomy (negative externalities) into account. The private road owner, due to him being able to reap the benefits from returns, would be looking to the long term and be seeking to maximise the value of his road. Let us assume at peak periods, he has a lot of gas guzzling lorries on his road; the excess fumes from these lorries will produce a lot more damage to his road as well as potential damages to property owners nearby. Our road owner; ceteris paribus, will include the cost of using more resources to maintain his road, that could’ve gone into other ventures into the total cost to the drivers; taking into account the scarce supply of road space during this peak time.
The additional charge for potential damages to property owners nearby, will be taking into account because if he hosts too many gas guzzlers on his road and the fumes damage their property, the road owner is the one who will receive an injunction from the courts and have to pay for damages; and so the road owner will be looking to minimise as much excess fumes produced on his road as possible, while seeking the highest profit from the use of his services (providing a road).
Okay, so how would private ownership of the ocean work?
That I must admit is far beyond my understanding. Certain private ownership is easy to comprehend; ponds and lakes as an example would be owned by those who own private parks, and they would face an incentive to maintain these ponds and lakes in order to reap the long term benefits if there were a high enough consumer value for recreational use; oceans however is where I have to put my hands up and say “it’s beyond me”.
This however does not mean that we should just leave the oceans at the mercy of the tragedy of the commons and ignore the ultimate cause because it’s hard to comprehend; property rights and what they entail evolve; the farming industry is a perfect example of how property rights evolve and become better at adapting to distinguish between different claims. It is entirely feasible to have private ownership of what is “in” the ocean while we learn how to hold private ownership over bodies of the ocean itself. Private ownership and private property rights over coral, seabeds and creatures living “in” the ocean would not just allow for the domestication of these resources, it would also incentivise the maintenance of them and create market incentives to restrict pollution so as to avoid injunctions. I will go over further details of this in the section on animal extinction.
I talked about recycling to an extent in a previous section of this piece, explaining how recycling for the purposes of preserving resources so they don’t run out falls into the one-dimensional scarcity trap, as it ignores substitutes and the multi-specific nature of capital goods. However, as stated there is absolutely an argument to be made for recycling for the purposes of reducing pollution; particularly from non-bio-degradable materials.
Let us take the example of paper bags vs plastic bags. Now unlike a plastic bag this should be something fun to wrap your head around (excuse my awful sense of humour).
If we were to have private rubbish collection and private rubbish dumps, then an owner of a private dump would be looking to maintain and maximise the value of his land. In order to properly dispose of a plastic bag, it takes a lot more time and resources than it does for paper. By allowing for a private market of waste disposal, the private owner would calculate the cost of disposing of the plastic into the price. This is because this creates an opportunity cost for the owner; if he uses the extra resources for disposing of a plastic bag, these are resources that could have gone into other avenues of production, and so he must reduce or remove those endeavours; in addition the extra cost for disposing of the plastic bag, is to ensure the owner can maintain the value of his land, as since the plastic bag is not bio-degradable, the pollution from it would bring greater harm to his land, and thereby reduce the value if not disposed of properly.
These factors would be expressed and signalled in the pricing mechanism. If the total cost was able to be reflected in the pricing mechanism, then instead of 1p for paper and 10p for plastic, if the total cost for disposing of the plastic was £5, then it would be reflected in the price the consumer pays as being 1p vs £5. This example is shown in the higher cost of disposing of the plastic bag and the last opportunity for the used resources reflects in a higher price to consumers, whereas the lower cost of disposing of paper and the fewer resources needed for the disposal; resulting in a reduced opportunity cost for the resources alternative uses, results in a lower price for consumers.
This cost will incentivise consumers to purchase the paper bag if their marginal utility and time frame for using the bag is expected to diminish very quickly. If however, the individual consumer values the plastic bag more than the £5, and seeks to utilise it over an extended time frame, they will be more inclined; ceteris paribus, to purchase the plastic, as it takes longer for its utility to diminish and so is able to better satisfy the consumers multiple uses.
If consumers hold long term value for the plastic bag and the majority of consumers continue to buy them, then this will create an incentive to innovate new, less costly ways of disposing of plastic bags, so the land owner does not have the expense of using multiple resources for the disposal of one plastic bag; as opposed to fewer resources for multiple paper bags, which will reduce his opportunity cost, thereby freeing up his resources to be used in more long term, profitable endeavours.
The next topic to discuss is animal extinction and how to solve it. How can the market solve the problem of animal extinction? Not all animals can be saved, as some will go extinct not by human hands but by natural selection, and it could be highly counterproductive to tamper with nature in such a way, as to play the role of mother nature; the only way to supress natural selection in the animal kingdom to avoid extinction, would be to supress dietary needs and could spell disaster for different habitats in different ways; ask yourself the question: what would the impact on habitats and food chains in the animal kingdom be, if say the dodo survived? For the sake of the topic at hand, we’ll only be discussing human impact.
Let’s ask the question: why is it the buffalo came dangerously close to extinction, yet the cow has not only never come close, but is more prosperous than ever?
The reason is the tragedy of the commons. Because nobody could own buffalo the opportunity cost of shooting one was zero, because if they didn’t kill it someone else would come along and shoot it. On the other hand for the farmer, the opportunity cost of shooting a cow is extremely high; namely he doesn’t have a cow tomorrow. This is especially true if the cow is pregnant, as then he not only doesn’t have a cow for more current productions of milk and cheese, but the killing of the baby also means he has few resources for future productions of milk.
If we were able to privately own and domesticate all animals, the opportunity cost for killing too many would be much higher to the private owner. This doesn’t mean private ownership can only fall under owning say a tiger as a pet instead of a cat, or a great white shark instead of a gold fish however; over the last few years we’ve seen a large expansion in animal conservation, where private organisations own certain animals and put them under their care; privatisation of animals would allow not just this industry to expand further, but would allow others to develop.
In a previous section I spoke about privatising creatures in the ocean; having private ownership of sharks, jellyfish and other creatures would not only remove the tragedy of the commons so as to better maintain them, but also ensure that injunctions could be brought against polluters who’s chemicals reached the privately owned creatures.
Suppose I own a factory that has an external diseconomy of spewing chemicals into the ocean, and you happen to own a square of 100 metres x 100 metres of seabed, where within this space you have coral and a host of different species of fish. If my chemicals spread into your space; thereby damaging the environment your fish and coral reside in, you’ll be able to bring me to court and seek an injunction and receive payment for damages. The risk of this; especially if I’ve already been brought to court by you, will incentive me to either spray my chemicals into an unowned area; thereby homesteading it, to cease dumping chemicals, or to invest in a filter that will ensure my chemicals can’t reach your owned space. Even in the case where I choose to homestead an unowned area, I would still have to find ways of restricting my chemicals to my homesteaded area, or risk other injunctions from my chemicals reaching other seabed owners.
Trying to wrap up this piece as it is already longer than intended, we come to the final topic, that being deforestation. There are other areas to go into, however just like pollution, you can’t really talk about environmental issues without talking about deforestation; the one that always comes to mind when the word comes up, is the rainforest.
The thing to note about trees is that they fall under what is known as, renewable resource; the more demand there is for the particular resource, the more there will be of said resource; if forests were privatised, this would be fully realised.
So why is it we continue to hear about deforestation? The Tragedy of the Commons.
It is for the same reason as to why there are many species of animal that are at risk of extinction; due to there being no private owner(s), there is zero opportunity cost to be recognised from cutting down a whole forest, and no long term benefits to be reaped as returns.
Governments around the world may try to combat this by implementing a maximum amount that a company may cut down, but due to the tragedy of the commons persisting, no subjective valuations taking place, and no market pricing mechanism signalling supply and demand, companies simply take the maximum; the very essence of the tragedy of the commons is, “if I don’t take it, someone else will, so I better take all of it.”
How would the privatisation of forests work? Let us suppose that an environmentalist organisation purchases a large area of land; say 10 square miles. In order to maximise the value of its land, it will open the land up for recreational use by tourists who will pay to use the recreational facilities of the land. The profits from this venture will signal to the owners that consumers value the use of the land for recreation, and so will seek to expand the land they own, or invest in capital goods to make the trees healthier and live much longer.
If we take our private ownership of animals into account as well, the owners of the land could see profits to be made from privately owning wild animals, and so could purchase a variety of endangered animals to attract more customers for recreational use; such as red squirrels, owls, foxes etc. The profit motive and the incentive to maximise the value for long term, will create jobs to guard the land from those littering or damaging the land that would disturb the species located within its vicinity, and market arrangements with vets in order to maintain the health of the animals.
Let us then suppose I work for a factory that needs wood and I come to the land owner seeking to buy a large stock of the trees they grow and maintain.
The owner could decide to sell me stocks of trees that are away from the section of land where the animals are located. If they do this, they have fewer trees as part of their land; however the additional financial capital could go towards incorporating more animals under private ownership if consumer demand and long term gains are seen to be higher for viewing the animals. Another outcome could be the owner, with the additional financial capital could use the money to invest in a larger amount of tree seeds, so as to have a much higher return in the long term; which outcome the owner chooses will demand on their subjective value of the land and how long into the future their time preference is, with regards to the reproduction of their capital goods.
Could they sell land which occupies animals? Yes, the owner certainly could, but if the cost of rehoming the animals is great, the owner is likely to charge a lot more; a whole lot more, for trees that are based in land where the owner’s animals occupy.
I have attempted to give the reader a short (not so short) introduction to Market Environmentalism with examples of where the watermelons go wrong, and what market measures could, and should be taken. There are many other pieces of literature on the subject from economists and environmental researchers such as Professor Walter Block and Terry Lee Anderson.
In order to properly protect the environment, we require a mass privatisation of land and resources so as to remove the tragedy of the commons, and we need to relearn that private property rights; for the poor and the rich, must be protected, and not seen as petty complaining; treating property rights as “petty” or “selfish” is what has allowed horrendous laws such as eminent domain to come into existence, and they will not go until someone says the uncanny phrase, with all seriousness:
What We Can Learn From Sweden, South Korea and Japan For Fighting Covid In 2021
Opinion Piece by Josh L. Ascough
It is now roughly 9 months into the Coronavirus pandemic, and the United Kingdom has been placed into another national lockdown.
It seems to be the case that Einstein was right with his definition of insanity: “Doing the same thing over and over again while expecting different results”; by that definition, it’s not just the UK to which insanity has overtaken; Italy, Spain, Germany, Australia and many other nations have taken the approach of trying to focus on cases, when this is a fool errand.
Due to the nature and the way in which Covid-19 spreads, everyone is going to get this virus at some point; just like how at some point, everyone is going to get the flu, a cold, chest infection, or any other form of virus that spreads person to person; but this does not mean everyone is at risk of dying from the virus, nor does it mean death from the virus is inevitable.
It is very similar to the boom/bust cycle and how the Keynesians wrongly view the bust as the problem, but ignore the boom; when it in fact is the artificial boom that should concern people, the bust is merely the inevitable effect; we’ve been trying to prevent the inevitable cases, to try and stop the preventable deaths; the way we should have been handling this virus, is to accept the inevitability of cases but have measures in place to prevent as many deaths as possible.
This does not mean people should actively seek to get the virus; unless they are not vulnerable and are looking to donate plasma, so further testing on anti-bodies can be done; but to not panic if cases rise or if you get this virus. Remember, we should be looking to reduce the preventable (deaths) not the inevitable (cases).
I want to address three countries in particular that have taken different approaches to fighting this virus compared to most “lockdown enthusiast” countries; namely Sweden (I can already hear the lockdown lovers screeching at that name), South Korea, and Japan. Before I get into that however, let us briefly go over what it is we, the United Kingdom did wrong.
Covid – What We Did Wrong.
On the 23rd of March 2020, the United Kingdom went into a national lockdown. In hindsight it was a terrible choice, but considering the healthcare system we have, it is understandable to have seen it as the only option on the table at the time. The purpose of the lockdown was simple (though it appears forgotten): We have a lockdown to spread out the cases and deaths, so as to not overwhelm the NHS to the point we have to make the choice of who lives via treatment, and who dies by neglect.
The UK currently, at the time of writing this on the 10th November 2020, has 1.23 million cases, and 49,770 deaths related to Covid-19 (key word being related. This has been a problem since the pandemic first began, where if someone contracts Covid-19 then dies from a car crash, they are marked as a Covid “related” death; not from, related). With a population of over 68 million and an elderly population close to 12 million, the case rate amounts to 1.8% of the population so far being infected, and out of the UK population 0.07% have Covid-19 “related” deaths, and out of the percentage that have been infected 4.04% have died; again, “related” to Covid-19.
The lockdown was never meant to stop deaths or cases, merely to spread out cases so we didn’t have to neglect saving people. The problem is we did neglect people.
When the lockdown first came about, cancer treatments, diabetes treatments, and many others were cancelled to save room for Covid patients, so the idea of not neglecting people was a complete lie. The NHS did neglect its patients; it neglected to allow cancer patients to choose whether they wanted to go through with their treatment, taking into consideration the risk of Covid; the choice was made for them, that Covid was more dangerous and more deadly than their cancer. Sky News insultingly reported that roughly 1 million breast cancer screenings had been “missed” because of the pandemic. No, 1 million women didn’t “miss” their screenings because of the pandemic; as if there was a choice, 1 million women had their cancer screenings cancelled for them; not by them, because the government decided it had the authority to decide which conditions were worth treatment…so we could save lives.
It is very anecdotal, but I’ve had many conversations on this subject, and the response is always, “well my uncle’s friend has cancer and he was okay with his treatment being cancelled”. My response to this is always: okay, but what if they weren’t? What if they were more scared of their untreated cancer progressing and killing them? What about the people who aren’t okay with their treatment being cancelled; whether it’s cancer, diabetes, arthritis, or heart transplants?
The typical rhetoric against attempting to rationally consider the positions taken and use critical thinking skills is often the following:
“Well you just want people to die. You’re selfish.”
To that I say fine, we can play that game.
In the UK, there is likely to be at least as many if not more preventable Cancer deaths than Covid-19 deaths, because of the diversion of resources into Covid. Richard Sullivan, Professor of Cancer and Global Health at King’s College London and Director for its Institute For Cancer Policy stated that:
“The number of deaths due to the disruption of cancer services is likely to outweigh the number of deaths from the Coronavirus itself. The cessation and delay of cancer care will cause considerable, avoidable suffering. Cancer screening services have stopped, which means we will miss our chance to catch many cancers when they are treatable and curable such as cervical, bowel and breast. When we do restart normal service delivery after the lockdown is lifted, the backlog of cases will be a huge challenge to the healthcare system.”
On the 6th October Matt Hancock stated:
“Cancer Patients may only be guaranteed treatment if Covid-19 stays under control.”
Even though the NHS was never overwhelmed, millions of cancer screenings were cancelled to “Protect the NHS” and to “Save Lives”. If this is the crowd that claims to care about people’s lives, and proclaim that sceptics of lockdowns are “selfish” and “want people to die”; I think it may be safe to say that pro lockdown individuals have some form of mental deficiency.
Let us turn to the countries I mentioned at the beginning; what exactly can we learn from them?
Let us first take a look at the now most hated country, Sweden.
Sweden holds a fairly small population of just over 10 million. Out of those 10 million, 162,000 have been infected with Covid-19, which equates at 1.6%, and out of the population 6057 have died, which is 0.05%; out of the percentage of people infected, 3.73% of those infected have died. This may still seem scary, but remember lockdowns only postpone current cases and don’t do anything to prevent deaths overall, and these are deaths and cases overall so far. But if we expand the perspective a bit and look at the rates and the directions they have been moving in, Sweden is doing pretty well for itself. Sweden hit its peak death rate on April 15th at 115 deaths in one day, and just recently hit its cases peak on November 5th at 4766. Yet since April 15th when it had its peak death rate, Sweden’s death rate has been drastically decreasing, and continues to do so, with its current death rate per day at the time of writing being 3, and it has been on low double digits to single digits; sometimes zero, since the 3rd July when it was at 8 deaths per day.
Sweden never had a lockdown, nor did it impose really any restrictions. The government took an advisory position for the elderly and other vulnerable people, with social and moral pressure for individual self-restraint and responsibility.
Japan is another success story.
Japan is home to a population of over 126 million people, and an elderly population of just over 36 million. Out of its population of 126 million, 110,000 people have been infected with Covid-19, which is 0.08%, and out of the population 1840 have died, equating to 0.001%; the percentage of people infected who have died is 1.6%.
Japan as well, never had a lockdown, though they took slightly stronger measures than Sweden did with regards to masks, and recommending shops close and vulnerable people isolate; these measures however apart from mandatory masks, were not legally punishable.
Japan hit its peak in cases back on the 3rd August when it reached 1,998 infections per day, and currently from the time of writing this, on the 10th November was at 899 infections per day. The death rate is equally impressive. Japan reached its peak death period on the 22nd April with 91 deaths per day; on the 10th November these deaths had dropped to 11 deaths, and has continued to stay at a stable, low double digit level since around mid-July.
The last success story to mention is South Korea, which is most probably the closest to home in terms of population size overall and in terms of elderly population.
South Korea is home to just over 51 million people, and holds an elderly population size of roughly just over 7.6 million.
Out of its population of 51 million; at the time of writing this on the 10th November, 27,799 have been infected, which is 0.05%, and out of the population 487 have died, equating to 0.0009%; the percentage of people infected who have died is 1.7%.
South Korea, like the others mentioned, never had a lockdown. The nation did however hold very local restrictions in terms of isolation if infected.
There are a few additional pieces of information to give context to South Korea. Due to the wounds from the SARS virus still in people’s minds, the general public was very cautious from the start of the pandemic. In addition South Korea has a predominantly private healthcare system, and so with the profit incentive being allowed to function, mass production of testing kits and ventilators were produced and sold; the market process quite literally saved lives.
South Korea hit its peak infection rate all the way back on the 1st March; where it was at 1062 cases per day. Since then it has seen a dramatic decrease in overall cases, where they dropped to double to single digits as early as April. It has since late August however seen a rise into triple digits, however this has been on a decline since the 1st September; the current case rate in South Korea; at the time of writing this, stands at 146 cases per day.
South Korea’s death rate has remained impressive. the nation reached its peak in deaths on the 23rd March at 9 deaths per day, and began to see a decrease in April; South Korea has never exceeded single digit deaths per day throughout the pandemic. The current death rate in South Korea from the time of writing this, on the 10th November, stands at 2 per day.
So what can we learn from these countries, and what can we do differently towards the coming new year?
These three nations; Sweden, South Korea and Japan have shown that it is not the case rate to be concerned with; it is the death rate. They have shown that lockdowns are ineffective and do nothing to curb overall deaths or cases, and merely postpone cases to a future time frame.
I’m sure there will be some mad raving lockdown loony, who will try to say I don’t take the virus seriously; to which I say I do take it seriously. I live with a vulnerable person, and funnily enough I’ve made choices that aren’t part of government “guidelines” which better suit my life and my circumstances; most of the time while travelling before the 2nd lockdown I took a taxi everywhere because it would limit who I had to interact with during my journey, meaning I could have better control of my situation.
What measures could be suggested that we take via influence from Sweden, Japan and South Korea? I believe the following would be the most pragmatic if we were to focus solely on preventing deaths rather than inevitable cases:
End the National Lockdown.
Localise decision making to local councils in terms of what restrictions they are to have in place based on demographics of age, medical vulnerability in relation to infection rate. For example if a local area has few elderly residents, few individuals who are medically vulnerable and a double digit infection rate, the local councils could set low restrictions. It would be similar to the tier system but on a much more localised scale, allowing local governments themselves to decide their own restrictions; not on their behalf by Whitehall.
Allow private establishments to choose whether to mandate mask wearing if they are capable of upholding social distancing.
Allow individuals who are consenting with one another to meet for gatherings unless they contradict with local measures.
Mandatory mask wearing in hospitals and care homes. These are vulnerable areas where people are seeking treatment.
Allow for the expansion in private companies producing and selling testing kits and allow individuals to purchase these kits outside of the NHS for home use. Allow businesses such as Boots, local pharmacies and such to sell these testing kits and correlate positive tests back to local hospitals and GP practices.
Allow for the expansion of businesses producing and selling ventilators and leave the decision of whether to purchase or not to local governments in correlation with hospitals within their region, with regards to their demographics of age, medical vulnerability and infection rate. This will ensure that we are not focussed on preventing cases but have the means in the local areas where they are needed to prevent as many deaths as possible.
Do not imprison residence in care homes. If the residence and their families would feel safer leaving the care homes to live with family, allow them to do so; do not make the same mistake of imprisoning care home residence to simply wait for death. In addition do not imprison students at university; if the students feel safer in returning home or staying, the choice should be theirs to make with advice from the student bodies.
Offer financial incentive to people who have tested positive to donate plasma so an expansion in testing on anti-bodies can occur; this should especially be encouraged among young adults.
Allow private establishments to decide the maximum capacity in one group they will allow, in relation to whether they can uphold social distancing .
Allow businesses and business owners themselves to decide whether to open or close. It is immoral for the government to decide who is essential and who is not; your livelihood is essential to you, it doesn’t matter if a politician thinks otherwise.
Allow patients to decide whether they want to take the risk of cancer and other treatments during the pandemic. It is completely abhorrent to allow the government to decide whether people should have treatment; that choice is to be made between patient and doctor alone.
The essence of these suggestions boils down to more decisions being made at the local level based on demographics, not one-size-fits-all approaches that may be needed in one location but are overboard in another. This approach allows individuals to make their own judgements of what is best for their circumstances, and what risks; if any, they are willing to make, while local governments who know their constituents better than the central government in Westminster to make the political choices and work with hospitals and the private sector for producing ventilators and testing kits. We’ve done the one size approach, and it has failed, we’re trying it a second time, and it is still failing; the nations that didn’t take a national lockdown approach; whether they took small measures of restrictions or no restrictions, they are showing success by having an ever declining death rate.
It is inevitable there will be people who say I’m being selfish for wanting to socialise with loved ones; but man is a social animal, and we know the mental and emotional effects prolonged isolation can have on people. If we are to believe that self-interest and selfishness are evil, what is more evil is believing everyone apart from yourself has to take responsibility for your health; the number one person responsible for your health, is you; not the man who decides to go drinking with friends, not the woman who wants to open up her small business to provide for herself, not the grandparents who nearing the end of their lives want to see their family and not be forced into isolation, and it is certainly not the responsibility of young people who have their whole lives ahead of them; who’s progress we have halted by force; it is your health, your responsibility.
Life is about living, not simply existing and doing everything to remain “safe” so you can keep on simply existing. Yes, making choices to ensure you are safe from death is important; but the timeframe for living is very limited, and if you keep pushing that timeframe into a smaller and smaller margin, eventually it will expire, and sooner than you think.