Barbarian at the gate.

Keir Starmer’s request that the government publishes the evidence supporting the idea of a 10pm pub curfew is entirely justified. It is unclear how this step can have any impact on the spread of the virus, while it is self-evident that it will cause damage to the licensed trade and restaurants. The Scottish approach is more convincing, since a temporary total closure is much more likely to be effective.

Having said that, I have to admit to a degree of schadenfreude about the news that Greene King is to close a number of its pubs:

https://www.bbc.co.uk/news/business-54451739

The reasons for my malevolence lie on the border between proper economic/cultural analysis and pure spite.

The proper part relates to disappointment with the expansion of the company across the country and indeed around the world, since I strongly favour food and drink companies (I will avoid the term ‘brands’, because that is part of the problem) with a strong local connection. If consumers thought about this aspect more before buying, then the country and our localities would be better for it. In this respect, anyone still buying Doom Bar because of its alleged connection to Cornwall needs to have a hard look at themselves:

https://www.bbc.co.uk/news/uk-england-cornwall-33175395

The fact that Sharp’s brewery is owned by Molson Coors is also related to the cultural problem with Greene King, itself taken over by CK Assets Holdings, based in Hong Kong and registered in the Cayman Islands. It’s not even a drinks company but a property developer. 

The spiteful part is that a series of ales that formed an important part of my developmental years have declined terribly in quality in recent years, although it is clear that the quality of a beer has, unfortunately, got very little to do with the economic success of the company that produces it.

Let’s have a nice cup of coffee:

https://www.bbc.co.uk/news/world-us-canada-48631129

At the producer level the price of coffee is dropping, despite increasing prices for Western consumers for the finished product. The first thing we have to point out is that there is absolutely zero connection between the two things.

The price we are willing to pay for a cup of coffee is…the price we are willing to pay for a cup of coffee. It doesn’t even relate to the cost to the coffee shop to produce it, although if they can’t make an adequate margin from the business they will simply shut down loss-making branches. Across the entire supply chain, the lion’s share (I’ve never been entirely sure what lions have got to do with this) of the profit will go to the single point of scarcity. Up until recently that point, in wealthy cities with vibrant economies, has been the provider of the premises. Now, of course, changes in the high street mean that premises are no longer scarce, not even here in Cambridge, and it’s not yet entirely clear where the new point of scarcity is. Based on casual observation I suspect it may in fact be the customers. If I am right we can expect prices to drop soon, or outlets to close.

One thing I am absolutely certain of is that the point of scarcity is not with the growers, which is why prices for their product are at a ten year low. One factor in this is the two years of surpluses from growers in Brazil, where apparently there’s an awful lot of coffee. Reading between the lines I believe coffee growing in Brazil is relatively productive, in contrast to other parts of the world:

‘Across Africa, where the market is largely made up of these smaller, subsistence farms, this cycle is proving exceptionally challenging.

“In Africa we are likely to see a lot more suffering than elsewhere because our yields are quite low,” Fred Kawuma, Secretary General of the Inter-African Coffee Organisation (IACO), told the BBC.

“The amount of coffee that a farmer gets out of his farm is so limited compared to, for instance, an Indian or Vietnamese coffee farmer.”’

I have some advice for these African coffee growers: unless your product is able to command a price premium, stop growing it and let places that are more efficient do the job instead. The correct response to a glut of supply is to stop producing the damn stuff in such large quantities. At least OPEC understand this, even if the policy implementation is not entirely effective. In fact, one of the tensions that makes agreeing global oil production limits so difficult is an exact mirror of the coffee situation – the cost of getting the stuff out of the ground is a lot lower in Saudi Arabia than, say, Russia, so the Saudis can live with a lower price per barrel than other producers. This especially suits them because one of the countries low oil prices hurt is Iran.

Countries and individuals do not get rich on the basis of agrarian economies. Even the production of raw materials such as oil and gas is a poor basis for development, since national economies will always be at the mercy of the world market. The trick is to add value through ideas, efficiency and innovation. Anything else is the road to ruin.

There’s a story in the Times today that I like, not because it says anything especially surprising, but because it demonstrates a principle so clearly. The headline is “Renters may face price rises as landlords cash in on property” and the opening paragraphs read:

“Hundreds of thousands of landlords are planning to cash in big gains from a decade of rising property prices as the government’s assault on buy-to-let encourages an exodus from the market.

More than one in four landlords intend to sell at least one of their properties over the next year, risking a crisis for tenants, according to a survey by the Residential Landlords Association (RLA).”

https://www.thetimes.co.uk/edition/news/renters-may-face-price-rises-as-landlords-cash-in-on-property-znjlzdmnq

The underlying problem is that the government is in the process of removing some tax breaks for private landlords. It also recently announced proposals intended to provide greater protection from eviction for tenants.

That increased level of protection may make sense for the government (including local government) in the longer term, since if families with children become homeless there is an obligation on the public authorities to rehouse them, which clearly has a cost. Nonetheless, it still increases the risks and hence ultimately costs for the landlords (and consequently tenants), which may make some reconsider their investment.

Meanwhile, the reduction in tax allowances is one of those things that may instinctively appeal to many, who might feel that more tax on landlords can’t be a bad thing. However, the return that investors expect on their money is dictated by other factors altogether. If the difference cannot be recouped through increased rents (bad for tenants) then the owners will sell up and put the proceeds elsewhere, leading to a decrease in supply and a resulting increase in rents (bad for tenants). If supply and demand were more evenly matched then we might expect an offset from the increased supply of property for sale, leading to a drop in prices, but in the parts of the country where the housing market is tightest this won’t be big enough to make property affordable for those who rent.

I suspect people tend to see tax deductions as a benefit for the landlord rather than what it really is, which is a subsidy from the government to private tenants. It’s perfectly possible to argue that such subsidies are a bad thing, but if that is the reason for the policy change then the government ought to explain it clearly. And of course it isn’t the reason – I doubt very much that they thought it through at all. At best some thicky in the Treasury might have thought it would raise tax revenue, when anybody but a jackass can see that it won’t.

I’m always puzzled by situations in which governments could achieve the results that they want at no cost to themselves (meaning us), but choose to do something else instead. The only way that the costs of housing will be reduced is to increase supply of housing in the places it is needed most. This means both relaxing and speeding up the planning process, which can be done with the flourish of a pen (or email: can you flourish an email?). Apparently that is far too easy.

I note, with something between scorn and disinterest, that users are whining about an outage on Facebook:

“Users of Facebook services criticised the company on Twitter, with some likening the unavailability of Instagram to a “Horror movie” and “a millennial’s worst nightmare”. Others said the inability to access Facebook itself could leave elderly people isolated”.

Really folks, get a life. There are books to read – even ebooks work just fine without Facebook – walks to take, instruments to play and bread to bake. Rather than posting your tedious photos on social media, email them to your nearest and dearest, incidentally reigniting the art of personal communication, rather than putting them somewhere that is in no way private.

Even less interesting, it seems that there may be financial consequences for the ‘thousands of businesses’ that advertise on Facebook and Instagram. I have news for you, thousands of businesses: every time I see an advert on a social media site I make a mental note to boycott the product. If you want me, and anyone else with at least half a brain, to consider your company as somewhere I might wish to splurt money, then please advertise in proper media that pays proper journalists to do a proper job. And yes, proper media is something that people have to pay to get, not some drivel reposted from a conspiracy website by a sweaty onanist living in a bedsit in Hartlepool.

 

 

The BBC website is carrying a handy guide on how to tell painted wolves apart:

http://www.bbc.co.uk/programmes/articles/3F4YD5bVS9zgB9m570LLY1K/painted-wolf-id-guide?intc_type=promo&intc_location=news&intc_campaign=dynastieswolfguide_article&intc_linkname=bbcone_em_low_c2

“Faced with a pack of 30 painted wolves coming towards you, you want to know you are pointing the camera at the right animal”. No, that is not what I want to know. What I want to know are my chances of outrunning the wolves, or alternatively of outrunning the cameraman.

There is an excellent economic lesson in the protests about increases in fuel taxes in France, now apparently postponed by the government:

https://www.bbc.co.uk/news/world-europe-46437904

If you want people to use less of something, put the price up. This is, as far as I can tell, a universal truth. It came up in an opinion piece by Oliver Kamm in the Times yesterday, on the topic of minimum alcohol pricing:

https://www.thetimes.co.uk/article/minimum-pricing-will-help-society-to-deal-with-problem-drinking-djg57dm05 (£)

If you want people to drink less, put the cost up. The thing that really impressed me about Mr Kamm was that he raised the question that always comes up:

“There is a persistent criticism levelled by politicians on both right and left that minimum pricing and levies on demerit goods are regressive: they hit lower-income consumers of alcohol, sugary drinks and tobacco hardest”

And went on to answer it correctly:

“It’s not a strong case. If you’re concerned about social and economic inequality, a better remedy is redistribution through the tax and benefits system”.

Exactly. And that is the answer to fuel pricing in France, as it will be the next time a government here tries to increase fuel duty. Incidentally, this is something that every economist worthy of the name knows. Politicians not so much.

Here we have the touching tale of the woman who took in a concussed squirrel and has nursed it back to health:

https://www.bbc.co.uk/news/av/uk-england-somerset-46404867/woman-takes-in-grey-squirrel-found-injured-in-somerset

I was amused by the description of the woman as a “squirrel carer”: shades of Philomena Cunk there, and I’m wondering if it was intentional.

I like squirrels. They’re lovely to watch in the garden, despite the fact that they strip our hazel tree as soon as the nuts are ripe enough to eat, which is a long while before they are ripe enough for us to eat. Indeed, they planted the hazel tree in the first place, so I supposed they are only harvesting their own crop. We currently have a sunflower that has sprung up in one of the beds and that was their doing too.

Furthermore, I am not put off by the jibe that “they’re only rats”. I like rats too, delightfully intelligent creatures that make excellent pets. Perhaps squirrels do as well, although you need a licence and would have to watch out for them chewing their way into food cupboards and, for that matter, through electrical cabling. Although, come to think of it, that might be a good thing and perhaps it’s the only way of preventing humanity evolving into drooling Kardashian and I’m a Celebrity addicted vegetables.

And please don’t give me any nonsense about invasive species endangering our native red squirrels. Apart from this sounding altogether too UKIP, anyone who says this about squirrels but doesn’t advocate the extermination of domestic cats, another invasive species that kills off wildlife, is a grade A hypocrite.

I have been musing on ideas, sometimes superficially attractive, that make things more expensive to buy. One of those ideas currently in circulation is the idea of an “Amazon tax” for goods bought online, the argument being that this might help “save the high street”. Today Colliers International, a property consultancy, has suggested that online retailers should pay a higher rate of VAT than ones with a physical presence do.

 

This is one of those things that seems superficially appealing, until you start to think about the detail. Consider a pensioner living in a village, covered by erratic bus routes, who has no car. What we would be doing is penalising such an individual, who is reliant on online purchasing, in order to support those who have cars and/or live in cities, who are generally going to be better off anyway.

 

A far better idea would be to reduce business rates to something resembling the actual cost of the municipal services that they use. When you think consider it properly, high levels of rates are a disincentive for businesses to have a high street presence.  What government, both national and local, is doing is using business rates as a source of general income, rather than doing what they should do, which is increase taxes on some combination of income and wealth. This has the consequence of pushing up prices for everyone who shops on the high street (or indeed the retail park), instead of directing the tax burden at those with the greatest ability to pay.

 

I am also rather puzzled about what would happen with retailers who both trade online and have a physical presence. I have been known to stand in John Lewis, looking at an item I want, but which is either too heavy or too inconvenient to carry home. What I do is open up the JL app on my phone and order it on there to pick up from their out of town collection point the next day. Does anybody think it makes sense that I should pay more for taking the collection option?

 

Disturbing stuff from Sir Keir Starmer, the shadow Brexit Secretary, over the weekend. In case you haven’t noticed he’s been protesting about the award of the contract to print the new blue British passports to a French company, whose bid just happened to be £120 million cheaper than their British rival. Leaving aside the irony that said British company currently prints passports for 40 other countries, what we now know is that the Shadow Secretary clearly does not have enough grasp of basic economics to be in the job. Not that the actual Brexit Secretary, David Davis, does either of course: this isn’t a partly political point. If our political leaders can’t grasp the idea that leaving the European Union cannot be used to justify dumb-arse economic nationalism then Britain is doomed to head down the fiscal toilet sooner rather than later after exit.

One of the interesting points made – and there are a lot of them – in Tim Harford’s The Undercover Economist Strikes Back is that there is a strange habit of governments following exactly the wrong type of policies for a given set of economic circumstances. What happens, mentioning no Gordon Browns in particular, is that we overspend and over-borrow during times of economic growth, when surpluses should be accumulated to deal with the inevitable recession that is just around the corner. When we get round that corner we get governments that cut back on spending, especially capital spending, at exactly the time when the economy could do with a stimulus. The reason they pick on capital spending is because it’s less politically sensitive than other parts of the budget. However, it is precisely well-chosen infrastructure projects that can help to kick-start the economy when it is in recession. This, by the way, is blindingly obvious, but apparently not obvious enough for our leaders to grasp it.

 

I saw them before they were famous you know.

I’m disappointed that David Davis is reassuring people that Britain will not be “plunged into a Mad Max-style world borrowed from dystopian fiction” after Brexit. http://www.bbc.co.uk/news/uk-politics-43120277 I was rather looking forward to it. That might seem strange, but I am fond of Croydon so I know what I’m taking about.

I heard a couple of things on the radio this morning that made my ears prick up. The first was to do with the steel industry of which the person being interviewed was a representative. The logic was most strange, with an assertion that poorer parts of the country need the steel industry because it offers jobs that pay significantly more than the average in those areas, while at the same time acknowledging that globally there is oversupply of steel. Let’s make it clear: you cannot sustain well-paid jobs in an industry with oversupply, at least not without eliminating most of those jobs and automating in order to reduce costs. A proper industrial strategy (yes I know, it’s the way I tell ‘em) would focus on identifying something else that could bring decent jobs to former steel areas.

The other snippet concerned post-Brexit agricultural policy https://www.theguardian.com/politics/2018/feb/20/brexit-farming-standards-nfu-trade-eu and I suppose we have to accept it’s pretty unlikely that one would have come up with something sensible. So far I haven’t seen much apart from Gove’s idea of rewarding animal welfare rather than ownership of land per se. However, I’m going back to my default Plan A: penalise the behaviour you don’t want to see rather than subsidise that which you do. If it’s a good idea to enforce payments that discourage the use of disposable plastic – and in my view it is – then it is probably also a good idea to impose a levy on livestock farming that doesn’t meet appropriate welfare standards. If this is done properly then farmers follow those standards will be able to get higher prices for what they produce and make it more likely that compassionate farming is economically self-sustainable. And yes, the impact of such an approach would be to drive up prices for cheaper products, but since a subsidy regime is also a charge to the public the end result is unlikely to be, in overall terms, more expensive.

Apologies for being so shallow, but I find the KFC saga really funny:

http://www.bbc.co.uk/news/business-43124259