Friday, 20 December 2013

Income is meaningless

The analysis of political issues in terms of “income” quartiles can get pretty misleading. A married couple where dad earns £65,000 a year and mum works part time bringing home £15,000 a year is in the fourth quartile of the income distribution. A 70 year-old widower whose £2 million in savings bring him an annual income of approximately £80,000 is also in the fourth quartile. But their policy-relevant economic interests are unlikely to have very much in common since in reality their financial situations are entirely dissimilar.

Let us take this a step further.

Suppose the old guy with £2 million earned £200,000/year for 40 years, and was a high saver. Suppose his twin brother had the exact same income, but spent all his money. The twin brother lives on Social Security. Who is better off? Neither. Both had the same lifetime wage income, and hence equal resources.  Economists take a “lifetime consumption” perspective. The only difference between these brothers is one chose to spend the money when young and the other chose to spend it when old. It is as if one lived by himself in a house and the other lived with roommates in an apartment. No sensible person would say you are better off [than someone who chooses to live alone] because you share an apartment with others and thus pay less rent. These are consumption CHOICES.

The guy with £2 million has already been fully taxed on that wealth, and should of course pay no tax on his capital income. That is why smart progressives like an American called Yglesias favour progressive consumption taxes, at least where it’s possible to clearly identify and separate wage and capital income, as with someone surviving on their 401k mutual funds.

In all probability the guy with £80,000 in retirement income earned far more wage income when younger than the hypothetical family discussed by Yglesias, where each member made an average of £40,000/year. So on utilitarian grounds he should have paid a higher rate of wage tax during his earning years than the hypothetical family making a total of £80,000 in wage income.

So how does a government decide on taxes?

Thursday, 19 December 2013


Vince Cable has said he does not think banning zero hour contracts is a solution.

"A growing number of employers and individuals today are using zero hour contracts," Cable said. While for many people they offer a welcome flexibility to accommodate childcare or top up monthly earnings, for others it is clear that there has been evidence of abuse around this type of employment which can offer limited employment rights and job security.

He went on to say  "Our research this summer gave us a much needed insight into both the positive and negative aspects of zero hours contracts. Our consultation will now focus on tackling the key concerns that were raised, such as exclusivity clauses and how to provide workers with more protection.”

Employers need flexible workforces and people should have the choice in how they work. But this should not be at the expense of fairness and transparency.

John Wastnage, head of employment at the British Chambers of Commerce, said: "Zero hours contracts are valued by many workers and employers, but there is not a clear definition of what they are or how they should work.”

Alexander Ehmann of the Institute of Directors, said: "The IoD is pleased that the Government has recognised the important contribution that zero hours contracts have made in keeping people in employment and offering flexible ways for employers to manage fluctuations in demand.”

However, the growth of zero hours contracts is one of the reasons why so many hard-working people are fearful for their jobs and struggling to make ends meet, in spite of the recovery. But while the Government has identified some of the problems faced by those with zero job security, it is desperately short on solutions to curb the use of these contracts. It is regrettable that the Government is not outlawing the use of zero hour contracts even though it admits there is abuse.

this blog might stop as Google has fucked up connectivity again...

Tuesday, 17 December 2013

Food banks are not getting enough coverage

Cuts to benefits have pushed thousands of families to the edge, not just a few, thousands! Welfare needs to be paid on the basis of need, not within some artificial limit.

Food bank use in south east England, the region known for its wealth and relative prosperity, my home, is up over 60% this year and thousands of families face the prospect of relying on emergency food handouts this Christmas. A decade ago, food banks were almost unheard of in this area but there are now 59 across the region.

We know this thanks to a report from Green MEP Keith Taylor, who’s released ‘Hungry Christmas‘, a report into the spread of food banks in his region. The report is published ahead of a debate on food banks in Parliament on Thursday, which came after the public demonstrated its understanding of the issue, with more than 100,000 people signing a petition on the subject within four days, possibly a record for the official government site. A group of public health experts have concluded that the rate of food poverty in Britain should be classed as a medical emergency.

As this report highlights, three new food banks are set up every week to help meet demand. Cuts to benefits such as housing benefit, child benefit and council tax benefit have pushed people to the edge. Increasing use of unreasonable sanctions that leave already desperate households with no income at all, force them to turn to charity. But the rise of food banks is not just a result of government’s welfare policies, but it does show how welfare cuts are a critical part of the process, and that’s certainly what Keith’s report demonstrates for this one region.

A living wage is a salary people can live on, feed themselves and their children. It would give people back some control over their lives and the ability to plan for the future rather than live a hand to mouth existence. Now that really would be a Merry Christmas.

Monday, 16 December 2013

British Aid

There have been several instances recently where who we give aid to has risen the odd eyebrow, however, the Daily Mail has shown that we are still giving China millions of pounds every year in aid when we also see they have just successfully landed a spaceship on the surface of the moon.

While I have no reason to dampen the achievement they have made, I am surprised that we feel we NEED to continue to send millions of pounds required by Britons half way across the world to China which currently happens to be the second largest power in the world.

Are our politicians really that fucking stupid?

Sunday, 15 December 2013

Solving game problems

In 1913 French mathematician Émile Borel proposed the infinite monkey theorem: A monkey hitting keys at random on a typewriter keyboard for an infinite amount of time will almost surely type a given text, such as the complete works of William Shakespeare. Now while there is a certain resemblance to the internet :), collective problem solving on the internet works in fact much better than randomly hitting keys. While an individual player might be solving a problem in a game by trial and error, he can then exchange the results with others via various internet platforms, either in written or video form. With many people collaborating to solve a game problem by exchanging what works and doesn't work, the speed of problem solving becomes a lot faster than infinite.

That does have repercussions on game design. If you have a puzzle in your game, you not only need to think about how different players might have different skills to solve your puzzle, but also take into account that some will tend to try to solve it alone, while others will look up the solution before even having seen the puzzle. But even more striking is the effect of collaborative problem solving on game balance. If your game has an optimum path, players will find it through collaboration.

I was thinking about it when reading various blog posts about Hearthstone. I played a lot of Magic the Gathering in paper and online form in its time, and Magic the Gathering was reasonably well balanced: While at any given expansion a certain deck might be found to be "the best" of a specific play style, there was always a stone-paper-scissors meta-game in which one play style would do well against another, but lose against a third. And I am not certain that Hearthstone has that stone-paper-scissors meta-game, because the little I have watched of it so far shows it to be a much simpler game than Magic. It is also a CCG [collectable card game] not a TCG [trading card game].

Now of course it is hard to judge from excited blog posts about one deck being completely overpowered to judge the actual state of the game. But to me it seems that Hearthstone is more likely to "get solved", that is an optimum deck found for any given set of cards. While every expansion or nerf then changes that optimum, once the fundamentals are understood, the collective problem solving will find the new optimum while the changes are still on the test server. It is quite likely that the release version of Hearthstone will "get solved" before even leaving the beta. That will affect the game's longevity.

At the very least some cards will be found to be better than other cards. So while the game pretends to have a certain number of different cards, those in the know will work with a much smaller card pool. And those who absolutely want to win will have to spend more money to get sufficient numbers of that smaller, better card pool, because suboptimal cards keep popping up in the booster packs they open. It is not possible to have 600+ cards all with the same power, and I hope that too much tinkering does not spoil the final game.

Friday, 13 December 2013


Is this a civilised society?

Kim Jong Un's Uncle Jang Song Thaek has been 'Executed By Machine Gun Fire' In North Korea apparently.

He is believed to have been accused of plotting against the regime, as well as partaking in gambling and womanising.

North Korea said in a statement via the state news agency on Thursday night that a military tribunal had ordered the execution of Jang Song Thaek, the first public killing of a senior official in many years.

In a message displayed on billboards and played in metro stations, Pyongyang declared the bespectacled man once considered the second most powerful official in North Korea "a traitor to the nation for all ages who perpetrated anti-party, counter-revolutionary factional acts in a bid to overthrow the leadership of our party and state and the socialist system."

South Korean President Park Geun-Hye said the South feared a wave of purges would follow, as 30-year-old Kim seeks to further cement his leadership.

"North Korea is now engaged in a reign of terror while carrying out a massive purge to consolidate the power of Kim Jong-Un," she told a cabinet meeting.

I am not surprised that she is worried...

Thursday, 12 December 2013

University gender segregation

There was a piece on the Today programme concerning this topic that I was not aware off.

Apparently universities have been advised by legal teams that they must enforce gender regulation when certain speakers are on campus. Whatever happened to human rights I hear you ask.

In a statement, UUK [Universities UK] said: "The guidance was approved by senior legal counsel as properly reflecting the law. It is not prescriptive. Universities are independent institutions and will make decisions on a case by case basis.”

Their new guidance to universities on external speakers states that the segregation of the sexes at universities is not discriminatory as long as both men and women are segregated side by side rather than women being made to sit in the back. Would racial apartheid have been non-discriminatory if white and black people had been segregated in the same manner? In fact that is the very argument the apartheid regime of South Africa used when faced with criticism: separate but equal.

This just smacks off taking the point too far and hopefully they will see the folly of their ways and retract this enforcement.

Wednesday, 11 December 2013


They are starting to build up on the Prime Minister of this coalition.

We all know that politicians can be pretty flexible but most of them maintain some sort of identifiable core. And of course it is not just possible but right for people to change their minds thanks to thought and experience. What does Mr Cameron believe?

One minute he wants to commit us to war in Syria, so grieved is he by the plight of its downtrodden people. The next, he is denouncing the alleged horrors of the Sri Lankan regime.

Then off he goes to China, the world’s largest police state, dotted with prison camps, which also happens  to be the world’s most aggressive colonial power, and his hectoring voice diminishes to a humble squeak.

He denounces ‘banging on’ about Europe, crime and immigration, then he bangs on about them.

He moves from condemning wind farms as ‘giant bird blenders’ to being a green zealot, then lets it be known that he is tired of ‘green c***’. He has been down a similar twisting lane on the subject of homosexuality.

Not much of this has any meaning. Pledges to curb immigration have turned  out to be as empty as when he first made them. He said he would bring down net migration. It increased, because we cannot stop EU citizens entering our territory. Did he not know that? Of course he did. I just don’t think he cares.

Is it safe to have somebody like this in charge of a government?

Tuesday, 10 December 2013

Opinion - silly season

Recently we have seen a theory that monetary injections are deflationary because you need lower inflation in order for people to be willing to hold larger cash balances. Little did we know that inflation would fall!

Then we have the chancellor informing us that a huge rise in the minimum wage, hard on the heels of a previous increase, will actually create new jobs. And yet I don’t see many liberal economists accusing him of “voodoo economics.” But that term’s passé, as even liberals now claim that deficits pay for themselves in terms of economic growth.

Apparently if the Portuguese do not do something quickly they might end up looking like Germany, a country with 5.2% unemployment where the top 10% earn a scandalous 31% of the income. I would guess the top 10% of my earning years while I was still working have produced about 31% of my lifetime income, which means that Germany is as unequal as a country containing 80 million people, all at different stages of their life. I guess liberals have finally realised that they have no answers to high unemployment, so they will focus instead on “inequality.”

And then there is the ECB, assuring folks not to worry, they have a 2% inflation target and intend to meet that target [despite the fact that they are falling ever further behind]. Please take your time before “reflecting” on solutions; there is no hurry.  It is not as though the Euro zone has been in recession for 6 years.

Monday, 9 December 2013

Shadow Chancellor

Last week the shadow chancellor replied to the autumn statement given by the chancellor and it was not much good. I am not a professional at giving public speeches but considering the opposite benches went hell for leather to put off Ed Balls and the speaker is about as effective as a chocolate tea pot, I would have done exactly opposite from what Ed Balls did and talk quietly, very quietly until the speaker had interrupted so many times every one else pissed off and I could give the speech properly. Not sure if that would work, but shouting louder and louder certainly does not!

It might be time for a change, so who is in the running?

Alistair Darling - The favourite. Labour needs someone who can give them at least semblance of economic credibility. Darling has the experience, all things considered is relatively liked, and his plan for the economy was arguably more austere than what we have ended up with from Osborne. [If Mrs Darling doesn’t mind…]

Yvette Cooper – Might make things at home a bit awkward. [The new Plan B is to get Cooper in as the next leader post-Miliband, so would she even take the job?]

Alan Johnson - Things could have been so different if it had not been for that unfortunate “personal reasons” business back in 2011. [Would be the ultimate revenge for the former Shadow Chancellor].

Chris Leslie - Balls’ deputy and Brown’s photocopy boy, Leslie has spent the last few months looking like a rabbit in the headlights in TV interviews that his boss wanted to dodge. [A brave bet on account of his general incompetence].

Rachel Reeves - In charge of the Shadow Chief Secretary to the Treasury brief until the reshuffle, perhaps boring, snoring Rachel could bore the Tories into submission in 2015. [Has friends with Ed’s ear].

Liam Byrne - Baldamort rises again? Ed could do worse than sending for the acceptable face of Thatcherism to sort out his party’s economic policy. [If only he were not too scared of the unions, and of course he would spend every penny he could get his hands on].

Chuka Umunna - Deeply unpopular within his own party, though his background at shadow BIS [Business, Innovation and Skills] puts Labour’s pretty boy in the frame. [Lord help us].

Stewart Wood - Would be nice for Miliband to have a friend as Shadow Chancellor. [A long shot given he is a Lord].

Hilary Benn - Has an economic background, and it would be fitting for a Bennite to take over the Labour Party. [At least Owen Jones would be happy].

Peter Mandelson - Would get rid of some of the wealth-creator bashing rhetoric, though is more interested in working for third world dictatorships these days. [They could not afford him anyway].

Gordon Brown - Things are not that bad. [Well, not quite].

Friday, 6 December 2013


Yesterdays autumn statement did show some confidence in the coalitions past three years of activity, but to me it sounded more like a party political broadcast than a financial statement.

The growth forecast for the next seven years by the OBR [Office for Budget Responsibility] did not have any correlation with what the chancellor had to say. He considers that the current 0.2% growth will turn into 2.7% by 2020, now that is optimistic.

Nice help for small businesses though in the form of business rates in England to be capped at 2% rather than linked to RPI inflation, with some retail premises in England to get a discount. Businesses moving into vacant high-street properties will have their rates cut by 50% and employer National Insurance contributions are to be scrapped on 1.5 million jobs for young people.

It does appear they are worrying about the 2015 election, because if the voters do not see an improvement in their personnel situation, then the grass will look greener on the other side.

Thursday, 5 December 2013

London Mayor

Boris shifts his message and admits "there is too much inequality".

After previously denouncing efforts to reduce inequality as "futile", the mayor concedes that the gap between the rich and the poor is too large.

As well as failing an IQ test and revealing that he doesn't know the price of a tube ticket, Boris Johnson's appearance on LBC this morning also saw him subtly shift his message on inequality. In his Margaret Thatcher lecture last week, the mayor presented inequality as both inevitable and desirable, denouncing efforts to reduce it as "futile". But yesterday he qualified this message by conceding that at the moment "there is too much inequality".

He said: "If you look at what’s happened in the last 20 to 30 years, there’s been a widening in income between rich and poor – there’s no question about that, and what hacks me off is that people with ability have been finding it very difficult to progress in the last 20 years and we’ve got to do something about that."

Boris's declaration that the gap between the rich and the poor is too large sets him apart from Tony Blair and other New Labour figures, who tended to respond to questions on the subject by quipping that they didn't go into politics to make David Beckham earn less money. He is also entirely right to recognise the link between social mobility and inequality.

But Boris's belated acknowledgment that inequality is too high only intensifies the question of why he is in favour of policies, such as a reduction in the top rate of tax [he has called for the government to consider a 30p top rate] and the return of grammar-style schools, that would make the gap even wider.

Wednesday, 4 December 2013

Green shoots!

Britain is having an unusually robust recovery this year.

That is not 100% clear, as the GDP numbers are good but not awesome. Even so, I do see there seems to be lots of high frequency data suggesting that more good GDP numbers are on the way.  So let us take it as a working assumption and try to identify the causes.

I always start from an AS/AD perspective, keeping in mind the two can and often are “entangled.” So we need to start with the inflation/RGDP splits. It looks to me like inflation has averaged 1.8% during the first three quarters and RGDP growth has averaged 2.5%, for a total of 4.3%. I see two ways to interpret these numbers from a supply-side perspective:

1.  The split is not all that impressive from a supply-side perspective, at least for a deeply depressed economy such as Britain.

2.  The split is much better than the abysmal splits seen in recent years, where inflation was often much higher than RGDP growth.

Put them together and it suggests not so much a very strong positive supply shock, but rather an ebbing away of previous negative supply shocks. Perhaps oil production is falling more slowly, or contracting finance is no longer a net drag, or VATs and other fees are no longer being raised. When you stop hitting yourself with a hammer, you feel better!

Also on the supply-side there is the “self-correcting mechanism,” but that begs the question of why so much more this year than past years.

And finally, the top income tax rate was cut from 50% to 45%, which is a modest plus for the supply-side. If rich Frenchmen are drawn to London, that boosts AS.

The 4.3% NGDP growth rate does seem to be faster than in previous years, so demand-side factors probably play a big role in the speed up in growth. But this area is even trickier than the supply-side.

Monday, 2 December 2013

The truth behind excess energy bills

A lot has been said recently that the green levies are crippling the energy companies, the truth is that profiteering by the energy cartels has been excessive and needs to be controlled.

The big six energy suppliers have been accused of "cold-blooded profiteering" after official figures showed they had more than doubled their retail profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills. The industry regulator Ofgem, which produced the estimates, said profits per household would reach £100 over the next 12 months.

Other new figures obtained from British Gas, EDF and the four other suppliers showed their profit margin from power generation, a separate part of the business averaged more than 24% in 2011. They are believed to have risen since.

This cold-blooded profiteering has to stop, but piecemeal market reforms will not go far enough, especially given the threat of a dash for gas that will send bills through the roof. It is quite clear now that the Prime Minister David Cameron has realised that a problem exists as they have started a panic in the civil service to find an answer before the next election of May 2015.