Madsen Pirie

Many people are ignorant of many things.  This is not surprising and entirely forgivable, given how much knowledge there is to be had, and how much of it is highly specialized.  What is less forgivable is how people feel free to spout off and propose things without the slightest idea of the complexities they are dealing with.  The French revolutionaries blithely imagined they could create a whole new society with its own rules, just by thinking it up.  They ended with a bloodbath in a pigsty.

This tendency seems nowhere more true than in economics.  The average ignoramus hesitates to propose how theoretical nuclear physics should proceed, but feels quite at ease making economic proposals that seem plainly daft to anyone who has the slightest knowledge of the subject.  If anything, economics could well be more complex than theoretical nuclear physics because it deals with objects that are profoundly dissimilar in more respects. Yet some people think they can make a new economic reality simply by wishing it so.

They blithely suggest new taxes on various activities without the slightest inclination of how this will change behaviour, or what incalculable damage might be done.  They suppose that taxes on fatty foods or a minimum price for units of alcohol will suddenly somehow change everyone’s behaviour and solve health problems.  From their protected middle class balconies they have not the slightest idea of how this might impact upon the lives of the poorer people down below.  The people who pushed through biofuel subsidies and had hungry people competing with cars for food crops probably never thought about the effect on food prices.  Some economists did, but politicians and campaigners didn’t realize the depths of their own ignorance of the subject.  They rarely do until it is too late.

I wrote “Economics Made Simple” to redress some of that ignorance, but it’s an uphill task made harder because people are unaware of their need either to learn or to stop making economically illiterate proposals, or preferably both.

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I was thinking of making sloe gin for Christmas, but it comes more naturally to those who have sloe berries growing in their garden.  I do not, but I did discover I can buy them readily on the internet.  They come in lidded plastic boxes and are, according to friends who’ve gone down this route, pretty good.  You can even get frozen ones shipped to you.

The formula is not magic.  Sloe berries + sugar + gin has to be added to time.  I am told you need to allow about 6-8 weeks.  You have to prick each berry so that the juice flows out to flavour the gin, and even then, you are supposed to swirl the bottle round every few days to stir things up.  At the end of it you get sloe gin.

I went the shorter route and bought Gordon’s sloe gin, on special offer at £15 a bottle.  I tested it neat, and then with ice.  On the rocks it’s a fantastic drink, a great cup of Christmas cheer.  I will visit friends this Christmas and try their home-made version to compare it with.

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The elections for Police and Crime Commissioners may have averaged about 14.5 percent, a record low.  But does it matter?  It’s a new post, and few people know what its significance might be.  Low polls were also reported in by-elections that took place on the same day.  A significant fact has been the success of independent candidates, often with a police background, who stood without the support of mainstream political parties.

Does it matter?  Probably not.  These are new posts, not understood by many, and the odds are high that once the new PCCs have established the worth and importance of their jobs, the turnout will be higher in future.  The crucial test will be whether it makes a difference to have someone with authority in policing who is answerable to voters, rather than part of a police culture that sees itself as an interest group aloof from the public and anxious to protect its own status and interests. A few high profile disputes in the years ahead could make all the difference.

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Although that was the title of the speech I delivered in Paris (and in French!) the first part was about what a think tank should not do.  It is not, and should not behave like, a political party.  It does not stand for election, take decisions, or implement legislation.  It tries instead to advise those who might listen.

It is not like a business, in that people do not buy its product.  It should develop and explain its ideas, and seek support from anyone who approves of what it does.  It should not be a lobbyist for particular businesses or sectors, or its ideas will be discounted as representing only a commercial interest rather than the public good.  A think tank should not solicit funds by offering to introduce lobbyists to ministers.

It should not tie itself to any particular politicians, because politicians go down as well as up, and some have quite short sell-by dates.  While closeness to a politician might bring immediate attention, it is not a formula for long-term influence.  A think tank should beware of depending on public funds, local, national or European, or it will find itself serving the interests of its paymasters.

What should it do?  My answer was that it should be independent and seek to influence events by influencing thinking.  One that can change the intellectual climate can ultimately change the policies that result from that climate.  I’m not sure what my Parisian audience made of this, but they said they liked my book, Think Tank.

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I was invited to dinner by the Hong Kong Trade Development Council.  The theme was “Think Asia, think Hong Kong,” and took place in the ballroom of the Jumeirah Carlton Tower in London.  It was a glittering affair with 350 present, and was addressed at the reception by Chancellor George Osborne, and at the dinner by Carrie Lam, Chief Secretary of China’s Hong Kong Administrative Region, and then by Lord Green, Minister for Trade & Investment.

I learned some intriguing facts about Hong Kong.  It is the world’s 10th largest trading economy, and was the world’s largest IPO market in each of the last 3 years.  It is the 3rd largest foreign exchange market in Asia, and the 6th largest in the world.  Its stock market is the 3rd largest in Asia, and 7th in the world.

All of this means that by any standard Hong Kong is a major player in the world economy, and it is good to see it still thriving, still booming some 15 years after sovereignty passed over to China and the “one country – two systems” rule was established to preserve its distinct culture and political traditions.  Long may it prosper.

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Matt Ridley gave a superb Adam Smith lecture, drawing parallels between the ideas of Charles Darwin and Adam Smith.  Evolution develops through mutations and a selective death rate, in which the least fit fail to survive.  The market works through innovation, and a selective attrition rate in which those businesses that cannot cut it go to the wall.

What makes evolution faster is sex, the exchange of genes, and its parallel is when ideas have sex, and interchange with each other, creating new combinations and new ideas.  The more we trade and exchange, the more we exchange ideas and innovations, and the more we progress. Powerful stuff.

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The International Energy Agency (the other IEA) says that the US will overtake Saudi Arabia as the world’s biggest oil producer by around 2020.

The IEA also expects the US to overtake Russia as the world’s biggest gas producer by 2015, and the reason is the technology that gives access to shale oil and gas by fracturing.  Although opponents raise concerns about minor earth tremors, these seem to be less than those caused by coal mining.

The world will have to adjust to two new realities. One is that there will be no energy shortage in the decades ahead and maybe beyond. The second is that the US and perhaps the West will no longer be dependent on supplies from politically unstable regions, or at the mercy of a price cartel that impacts upon supply.  These factors will have crucial geopolitical consequences, and could diminish the economic importance of Middle East and oil-rich countries, with consequences for their own economic and political stability.

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Following the resignation of the BBC Director General, George Entwistle, in the wake of the Corporation’s mishandling of child abuse issues, Lord Patten, Chairman of the BBC Trust has been speaking.

Twice in one interview he mentioned New International in unfriendly, if not hostile, terms.  Since that group publishes the Times, Sunday Times, the Sun, and broadcasts Sky TV, such comments might not seem appropriate from the Chairman of a publicly-funded broadcaster required to be impartial.

Lord Patten also spoke of the BBC’s vital role in investigative reporting, and seemed to think this was the main reason for its one-time reputation.  In fact traditional support for the BBC is more likely to have arisen from its role as an unbiased reporter of events, rather than as a campaigning organization doing investigative work.  People valued the BBC’s level take on national and world events, and trusted it to be accurate.

That reputation was undermined not by the incompetence of its investigative teams, but by the way it allowed what some call the left-wing mindset of its culture to bias its reporting.  Its enthusiastic endorsement of all things pro-EU, its hostility to business and enterprise, its refusal to use the word ‘terrorist’ to describe those who murder civilians in causes it approves of, and its selection of news to highlight on the basis of a pro-state intervention agenda, have systematically alienated those who used to trust it and support it as the embodiment of all things British.

It might be more than the “thorough, radical and structural overhaul” called for by Lord Patten that the BBC needs.  It might also need a change of culture, and that comes harder to achieve.

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There’s a great story this weekend about advances in machine translation, this time of speech that can be translated almost instantly in real time, while capturing the intonation of the speaker so that the translated voice sounds like their own.  The advance is made by “using deep neural networks that learn to recognize sound in much the same way as brains do.”

“Software that can translate spoken English into spoken Chinese almost instantly has been demonstrated by Microsoft. The software preserves intonation and cadence so the translated speech still sounds like the original speaker.”

I used to predict this in speeches over 25 years ago.  There is such an obvious demand for simultaneous real-time translation that it was almost bound to come.  As it becomes more refined and even less error-prone, it is easy to think of what it can do for international trade, as well as for international understanding. Expect before very long that the first summit conference between world leaders will take place with the assistance of this technology, so they can talk to each other directly, instead of through the cumbersome medium of interpreters.  And as for those EU meetings with dozens of different languages…..

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I think all this talk of corporate tax avoidance is diverting us from the real agenda.  If anyone seriously thinks our economic problems are going to be solved if the Treasury rakes in more money for the government to spend, they should seriously consider studying some economics.

Governments spend less effectively because they care less.  It’s someone else’s money being spent on someone else, and never as good as when people spend it themselves.

As I say on the Adam Smith Institute site, the real agenda should not be to take more money out of the private sector for profligate governments to spend wastefully.  It should be to having more resources directed towards growth.  Lower taxes and lighter regulations can achieve that.  If something becomes easier and more worthwhile to do, people will do more of it.  Corporate tax clampdowns are the wrong way forward; unleashing enterprise to boost economic growth is the right way.

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