Bruno Prior's blog

Lies, damn lies, and government statistics

I listened this morning to Nick Ross and James Brokenshire (Tory spokesman on Home Affairs) arguing about crime statistics on Radio 4. Brokenshire claims that the statistics show that violent crime is on the increase. Ross accuses him of cherry-picking from the figures, which show an increase in certain figures but a more general decline. Brokenshire says that the figures he is looking at are the important ones, and anyway his constituents tell him what is really going on.

It is the latter point that really counts, though it is unverifiable. If Brokenshire is lying about what his constituents are telling him, he is at risk of being voted out at the next election. MPs' impressions from their communications with constituents may not be a reliable guide to reality, let alone the correct course of action, as they are necessarily subjective, but they are a more reliable guide to people's experiences than any number of government statistics.

The problem with many debates nowadays is that they rely on statistics, without considering the reliability, accuracy and relevance of those statistics. The Government has helpfully provided (at the time and expense of those who fill out their forms and of taxpayers who pay for it to be processed) a range of statistics for almost any circumstance. Surprise, surprise - amongst these, a statistic can always be found to argue, however obliquely, that the Government is succeeding in its objectives. But as Sir Josiah Stamp observed (quoted in Paul Seabright's The Company of Strangers):

"the Government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But you must never forget that every one of these figures comes in the first instance from the village watchman, who puts down what he damn well pleases."

It is mostly middle-managers rather than village watchmen filling out the forms nowadays, but the result is the same, if not worse, because there is no prospect that the middle manager or his employer may be rewarded or punished according to the accuracy of the information provided. Their optimal strategy is to waste as little time on it as possible, and to tell the Government what it is in their interests for the Government to believe, not necessarily the truth. Not very different to the village watchman, but with even fewer consequences of dereliction of duty.

Nevertheless, we regularly hear people claiming that crime has risen or fallen, rather than that recorded crime has risen or fallen; or that inflation or unemployment is rising or falling, not that the Government's measure of inflation or unemployment is rising or falling; or, as reported in the news today, that children under 16 are drinking twice as much as they did only a few years ago, rather than that children of that age say they are drinking more. The distinction is crucial, because it is just as likely, perhaps more so, that what has changed is the reporting of a phenomenon, not the actual phenomenon itself.

When we see a Third-World election where the incumbent wins 95% of the vote, we know that it is probably a fraud. In the First-World we are more subtle - governments know that absurdly high numbers are not credible, and anyway most bureaucrats are not consciously corrupt enough to deliberately distort the figures. We have a more subtle form of corruption, but also a more pernicious form because of its subtlety. It is the form of corruption that was seen most strongly in the Soviet Union, where government by central-planning and targets was more successful at delivering ever-increasing volumes of ever-improving statistics, than at actually delivering the goods that the statistics were supposed to be measuring.

In this regard, we are living in a neo-Soviet Britain. We are governed and incentivized and judged - in short, we are micro-managed - by targets and statistics. No wonder people's efforts become focused on improving the figures rather than the underlying products. We see it most glaringly in the grade-inflation in our education system, but it is ubiquitous in every aspect of our lives. We no longer believe the figures that the ruling and chattering classes love to cite, because we know that they bear little resemblance to reality. And we are right not to believe them. It is no more credible that the educational attainment of our students has improved every year for quarter of a century than that a despot would be supported enthusiastically by 95% of the population.

When Brokenshire and Ross argue about what the statistics tell us about crime levels, they are engaging in entirely sterile debate. We will form our judgments about levels of crime from our experiences, the experiences of people we know, and from the stories we see in the media. If Brokenshire's constituents really are telling him that they feel less secure (and I don't doubt that they are), he should rest his case on that, and not get sucked into bandying unreliable statistics with people who believe that levels of reported crime are the same thing as levels of crime.

Fixing the energy market

The Institute for Paternalism, Protectionism and Regulation today published a report on Energy Security. It is, in the most part, a rehashing of received wisdom, without understanding or insight, but one phrase in the Executive Summary stood out for being more than just vacuous. It is symbolic of the way that this sort of organization, and their friends on the centre-left and centre-right, view the role of government:

"Clearly there is no one-size-fits-all solution to these challenges and undoubtedly a mix of policy measures will be required."

Sounds innocent enough, but consider if you applied the logic in other fields. What about the field from which the phrase is drawn? There is no one-size-fits-all solution for clothing, so the Government needs a mix of policy measures to ensure that the correct balance of sizes is supplied. There tends to be less demand for the smallest and largest sizes, so to reduce the risk that the market may not provide equal choice to these consumers, we will have a policy to encourage or require production of extra-small and extra-large sizes. The larger sizes use more fabric and therefore cost more to produce, so we will have a policy to subsidize outsize clothing, to avoid people being "discriminated" against for their size. There are a range of collar, bust/chest, waste, hip, inside leg and thigh sizes, so we will have policies to ensure that sufficient quantities of each size is produced. And these different measurements occur in a range of combinations. Shall we have policies to try to calculate the incidence of the various combinations, and mandate that production match these calculations? Or shall we mandate the mean or median combinations, as government is fond of doing in other fields (people's deviation from the mean being a "second-order" issue)? How shall we allocate responsibility for production of different sizes and shapes to the various design houses? Should every range have to comply with all these policies, so that no one is deprived of a choice that someone else has, in accordance with the principles of equity? How will small lines survive when they have to satisfy rules that compel them to service the whole market? How much variety will be on offer? And how will new styles, designs, and innovations occur when designers are bound tightly by rules that determine the sizes and shapes that they must offer?

It's ridiculous, of course, but it is no less ridiculous to apply this approach to the many fields, such as energy, where the Government and bodies like the IPPR believe that it is essential to intervene with a wide range of targeted measures. The truth is exactly the opposite. It is precisely because there is no one-size-fits-all solution that it is important for the Government to intervene as little as possible. We need to allow the market to function without skewing it, so we can discover the optimal balance of options.

Capitalist pigs of the media

Tim Worstall picked up yesterday on George Monbiot's rant against "neo-liberalism" and its promoters in the Mont Pèlerin Society and elsewhere. George names a large number of participants in the global conspiracy to promote the view "that we are best served by maximum market freedom and minimum intervention by the state", but

"the most powerful promoter of this programme was the media. Most of it is owned by multimillionaires who use it to project the ideas that support their interests. Those ideas which threaten their interests are either ignored or ridiculed. It is through the newspapers and TV channels that the socially destructive notions of a small group of extremists have come to look like common sense."

Which publication could be more representative of this global capitalist conspiracy in the media than the Financial Times? So it was interesting to see the stories they covered that same day, and the angles they took on those stories:

  • "One-third of biggest businesses pays no tax". The fact that many of our largest companies pay no tax suggests that there is something inequitable in our corporation-tax regime. Interesting way to promote the virtues of capitalism.
  • "'Hundreds of millions' in failed debt for Barclays". One of our leading capitalist institutions has been incompetent in its management of our money, and is implicated in the larger losses suffered by Sachsen LB, an East-German state bank.
  • "Sarkozy pushes to widen EU's global role as a policy 'priority'". Promoting the virtues of the super-state.
  • "Cutting red tape 'could weaken HSE'". The unions tell us how important it is for the Government to wrap everyone in cotton-wool and rules.
  • "Shoppers to pay as demand rises for milk powder". Oh look, we've found another area where the capitalist system doesn't seem to be delivering benefits to the people.
  • "Earnings gap adds to welfare state's hard task". Yet another piece of effectively socialist research from the LSE given plenty of attention by our capitalist cheerleaders.
  • "EU referendum calls are misguided" (Leader). The Contitutional Reform Treaty is a "tidying-up exercise" necessary to ensure that we do not have a "do-nothing Union", and the "motley band" calling for the Government to honour its pledge to hold a referendum are "misguided" and acting against "the national interest". That'll be more big government on the capitalists' wishlist, then.
  • "The Republicans' jockeying on terrorism is terrifying". Coupled with an earlier story on "Democrat victory as another Bush ally steps down", this wasn't exactly shoring up the morale and credibility of one of the supposedly leading forces for unfettered capitalism.
  • "Exeunt private equity's prima donnas". Schadenfreude at the comeuppance being experienced by some of our most excessive and irresponsible capitalists.
  • "'How I did it' books give me a sinking feeling". We have nothing to learn from some of the world's leading entrepreneurs, who turn out to be semi-literate fools, judged by their writings.
  • "The cost of hidden bias at work". Even managers of our capitalist institutions can be victims of its rampant aggression and inequity.

I'd say George has nothing to worry about. When the media's supposed high representative of free markets is loaded down with this much material critical of markets or supportive of big government, it's those of us who believe in freedom that need to worry, not twats like Monbiot who think they know what's best for us. Which leftward slant amongst even our supposed market advocates is not very different to the intellectual climate after the war, which led Hayek, Friedman and co to judge that they needed to found a society to preserve the idea of freedom and to discuss how to promote it. Plus ça change.

Cap-and... oops-nothing-to-trade

Cap-and-trade mechanisms scored early successes when deployed within national boundaries against pollutants like SO2 and NOx. That success led politicians and economists to think that the approach could be extended to all emissions, and to international arrangements. In particular, they hoped it would provide a relatively pain-free way of tackling carbon emissions. They should have consulted sports scientists: no pain, no gain.

We have seen recently the failure of the most high-profile of the carbon cap-and-trade mechanisms - Phase 1 of the EU Emissions Trading Scheme (EU-ETS). This was, apparently, unpredictable, and anyway Phase 1 was just a trial period. Phase 2 will be much better, we are told.

Except EU-ETS wasn't the first, and it isn't the last. In July 2006, two economists (David A. Evans and Joseph A. Kruger) published a paper titled "Taking up the Slack Cap: Lessons from a Cap-and-Trade Program in Chicago", looking at Chicago's Emissions Reduction Market System (ERMS), and its lessons for larger mechanisms like the EU-ETS. They summarize its performance thus:

"ERMS is particularly relevant to the questions outlined above because the first years of its operation reveal a curious outcome. Despite expectations to the contrary, emissions have been significantly below the annual allocation of emission allowances, and allowance prices have been much lower than predicted. Trading has been limited and many allowances have expired unused. Essentially, it appears that a fundamental prerequisite for a tradable allowance program is missing - there is no scarcity of allowances."

Sound familiar? Now we hear that the Regional Greenhouse Gas Initiative (RGGI), "the United States' first foray into cap-and-trade programs for greenhouse gases", is "over-allocated by 24 million short tons or 13 per cent of the cap in 2009".

Three cap-and-trade mechanisms that were all over-allocated, leading to a collapse of prices in the market. And all of these were a surprise? Or did we need three trials, because no one could work out beforehand that if the cap was set higher than the level of emissions that industry could easily achieve, the market would collapse?

The real lesson of the Tories' campaign on hospital closures

The Times reports that the Tories' hospital campaign "was in disarray last night". One can pontificate on whether the campaign was the right point of attack (no), whether the mistakes are serious (in credibility terms, yes), and whether the media's reporting is biased (maybe, but it didn't half invite the criticism). But those aren't the main points. The main lesson is that the Tories are sadly lacking in critical faculties. Whether it's the activists, who militate for policies that owe more to instinct and prejudice than reason (even if many of those instincts are sound), or the researchers, who seem unable to provide coherent material for the many points of attack left gaping by an incompetent government, or the political representatives, who are unable to point the researchers in the right direction and to sort the wheat from the chaff of the material provided to them, there seems to be a general dearth of smarts on the right.

Is it the left-wing bias of the universities, which means that the part of our population most inclined to go into politics receives a thorough schooling in interventionism and socialism? Or that the smarter people on the right can earn a better living in careers outside politics, whereas politics is the pinnacle of ambition for many of the intelligentsia of the left? Or that politics is now a career to be embarked on straight from university, which means that the right can no longer rely on the real-world experience that would once have been their trump card? If you don't have extensive experience of life outside politics, it is hard to understand the damage that well-meaning intervention can do, which makes it hard to put together a convincing case against such interventionism.

There will be smart people there, as there are anywhere. But are they being allowed to rise to the top? Or are they being dragged down by political triangulation, which judges the merits of a proposal on the basis of whether it is an acceptable compromise between the opinions of the dumb and the not so dumb, and the merits of a person by how well they can justify such semi-dumb compromises?

A real classical-liberal party would be about encouraging quality to prosper, whether in the economy or within its own ranks. Chances are, this can't be done in a party that likes to think of itself as a broad church welcoming uncritically a range of perspectives. If everyone's opinion is equally valid, how will you distinguish between them?

UPDATE: I wrote this before I saw the other article in the Times, on the comments of Sayeeda Warsi. QED.

Quangocracy - euthanasia or liberation?

Not for the first time, I have been scattering observations on an issue, in comments dotted around the place, rather than pulling the strands together for a piece on here. This time, the topic is the rising cost of the quangocracy. As a subject particularly close to my heart, I thought I'd pull the comments together before I forget where they are.

Dan Lewis, of the Economic Research Council (and some time of the Centre for Policy Studies), has produced an analysis of the increasing size and cost of our quangocracy. (It will be available on the ERC's site from Thursday 23rd August.) The Sunday Telegraph produced a piece on this analysis, in which the overall cost of the quangos ("nearly £170bn a year") was highlighted and compared with the budget of the Ministry of Defence (£32bn). Tim Worstall picked up on this article, and posted a brief comment arguing for the complete abolition of the quangos and the use of the savings to abolish income and corporation tax. Nothing wrong with the principle, but there is a bit of a problem with the calculations, as I commented on Tim's site (though rather too late to be helpful, as it turned out):

No one could be more opposed to quangos and determined to see most of them shut down than me. But a couple of things to bear in mind on the cost:

1. Around two-thirds of that total cost is attributable to quangos associated with one department of government - the Department of Health. Effectively, the NHS is a giant set of quangos, amongst which are the Primary Care Trusts and the NHS Trusts (which as a pair make up over £100bn of that sum).

2. Of the executive NDPBs (the busy-body, rather than funding quangos, which is what we usually have in mind when we rage against them), over half of the total cost of around £36.8bn lay within another department - the Department for Education and Skills. But the lion's share of this cost is also attributable to two quangos - The Learning and Skills Council (responsible for post-16 education and training) and the Higher Education Funding Council for England. It turns out, then, that although they calls these NDPBs "executive", most of their cost lies (like the NHS quangos) in the allocation of public funds.

This shouldn't diminish the attacks on the wastefulness of our quangocracy, but we should bear in mind that it is the sclerosis induced by bureaucracy that is their really harmful aspect. They cost and waste money, but only a fraction of that headline figure. We can probably save several billion pounds by scrapping most of them, and that's money worth saving, but we can't save anywhere near £167bn.

Bloody hell!!!

Global coal production, 1971-2006

Can we finally stop pretending that cap-and-trade and our other half-baked "carbon-pricing" mechanisms aren't simply offshoring our carbon?

Global coal production has increased by one-third in 3 years (and by over 50% since the turn of the millennium). Three-quarters of that increase is attributable to China.

Back in 1973, nearly three-quarters of the world's coal was produced in the OECD or the USSR. China accounted for less than 20%. We're producing nearly two-and-a-half times as much now globally, of which just over a third (35.3%) comes from the OECD and the former USSR. Nearly half (46.2%) of this much bigger total is produced in China.

And they're using pretty much all of it themselves. They export only 2.5% of their production. Their exports have actually declined in the past three years (from 93Mt to 63Mt), even as their production has rocketed (from 1,502Mt to 2,481Mt). And their imports have increased over the same period. At 37Mt/year, they are now the seventh-largest importer of coal in the world.

At this rate, all the coal in China will be gone in 46 years.* And that's if they stop adding to their consumption right now. As that graph indicates, they are showing little sign of slowing down. We know they are building a coal-fired power station (or two) a week. And they haven't stopped building factories either. If they carry on like this, they'll have used up their coal within 30 years. They'll have a massive infrastructure dependent on coal-burning whose costs have only partially been recovered, and will be dependent for fuel on imports at a scale that suppliers cannot begin to supply. Great plan!

But of course, this isn't purely for their own benefit. Whilst a decent share is going to internal development and consumption, a large share also goes to the production of (usually cheap and nasty) goods for exporting, much of it to the OECD. And despite dumping most of our energy-intensive production on the Chinese and importing many of the nick-nacks we either used to produce here or never realised we needed, we manage to carry on increasing the amount of energy we consume within our own border, and yet persuade ourselves that we are somehow virtuous because our direct energy-consumption and emissions are increasing less quickly than they otherwise might have done, and than they are doing in other parts of the world.

So don't blame the Chinese - they are just responding rationally to the incentives. Why the hell we want to create incentives to do this, though, I can't imagine. Scrap Kyoto and EU-ETS now, before they do any more harm.

Graph and figures from the IEA's recently-published booklet, Key World Energy Statistics 2007 (and the earlier, 2004, version).

* Chinese reserves based on figures from the 2007 BP Statistical Review of World Energy. According to BP, despite the rampant extraction, Chinese reserves have not changed an iota between 2003 and 2006. Now, I can understand that additional discoveries or reclassification of previously uneconomic reserves may replace worked reserves, but so precisely that the figures are identical every year?! I think not. It appears that BP cannot get recent data on Chinese reserves, and are therefore sticking with the figures they've got. In which case, there is every likelihood that real reserves are lower than given in their latest publication, and they will run out sooner.

Planes, trains and automobiles

Tim Worstall has challenged, in a recent post, the logic of the DfT's suggestion that Air Passenger Duty (APD) needs to be increased further to take full account of the contribution of aviation to carbon-emissions. By Tim's calculations, taking Stern's figure of $85 as the social cost of a tonne of carbon-dioxide emissions, the cost of carbon emitted by air travel is "around and about the amount currently charged" under the APD.

One could raise a number of reservations about this estimation, but let's say (for the sake of argument) that he is right. It raises interesting questions, either about Stern's calculations, or about this approach to welfare economics.

Tim cites approvingly the DfT's explanation of the principles underlying Pigovian taxation. The DfT does indeed reduce the idea to its most basic essentials, but it seems to me that the essence has been corrupted or lost to some extent in the act of reduction. Let me see if I can set out the idea clearly, so we can judge mechanisms like the APD for how well they embody the economic theory that underlies them.

Economics, if it treats only of monetary values, is subject to the Wildean criticism that it knows the cost of everything and the value of nothing. Economists have therefore felt it important to consider the impact of actions on utility (or, simplistically, happiness). Welfare is the notional sum of utility or happiness amongst a group (ignoring for the moment that it is ridiculous to aggregate something incommensurable like happiness). Welfare economics is the study of economics from the perspective of maximizing welfare.

In theory, if all participants in a transaction agree voluntarily to its terms, then they must all feel themselves at least to be no worse off from the transaction, and some of them presumably feel themselves to be better off, or why would they have agreed to it voluntarily? This satisfies the condition needed to demonstrate that an action has increased general welfare. By definition therefore, free markets increase welfare. This (and the inability to make the same case for coerced actions, such as those obliged by the state) is the basis of the libertarian philosophy.

In practice, however, it is often the case that people not party to a transaction may be affected by it. The classic example is a factory whose effluent is discharged into a river. No matter whether all parties engaged in commercial transactions with the factory-owner do so voluntarily, the contribution of the factory to the general welfare may be negative, if the benefit to the direct participants is outweighed by the impact on those who use the river downstream from the factory. The pollution of the river is, in the language of economists, an externality - a value (negative in this case, but they can be positive too) that is attributable to someone's activities, which they are not able to capture (if positive) or obliged to incur (if negative).

Externalities skew decisions, such that the options that provide the greatest benefit to society (maximize welfare) may not be the ones that offer the greatest benefits to the participants in transactions. The way to ensure that markets provide the optimal outcome for society is to internalize the externalities. In effect, this means ensuring that the party responsible for the externality is attributed the cost or value of that externality.

A Pigovian tax (named after Arthur Pigou, the Cambridge economist who first set out a detailed exposition of welfare economics) is a mechanism whereby the cost of a negative externality can be internalized to the producer of that externality. If the impact of the effluent from the factory results in losses to those downstream at a rate of £100/litre, a government may impose a Pigovian tax of £100/litre on the factory, so that the factory-owners' decisions take into account the full costs of any choice, and not just those incurred directly. The Pigovian tax provides an incentive for the factory-owner to minimize the discharge of effluent or even to locate elsewhere where the external costs of disposing of the effluent are lower.

However, the application of the Pigovian tax is not sufficient in its own right to ensure that welfare is maximized. It may be that the factory-owner has few feasible alternatives, and decides to continue to discharge and pay the tax. In that case, the damage (or disutility) to those downstream is no less than before, and the utility of the factory-owner has also been reduced by application of the tax. The utility of the government (or taxpayers generally) may have been increased by the revenue from the Pigovian tax, but it is not the government or taxpayers generally who were being harmed by the externality. The Pigovian tax can only be said to have achieved its objective if it represents an accurate valuation of the harm and if it is distributed as compensation to those on whom the harm is inflicted, proportionately to their share of the harm. In other words, a tax (or charge) cannot be said to be an effective mechanism to internalize externalities unless it either deters the externality or fully compensates those who experience the effect of the externality (or a bit of both).

Greenhouse-gas (GHG, or, in the vernacular, carbon) emissions are an externality. They are a particularly difficult example, because the impact of the harm is uncertain and because most of those who may experience the harm are remote, both geographically (e.g. inhabitants of vulnerable countries) and temporally (i.e. future generations). It is important that mechanisms to internalize the carbon externality reflect the remoteness and uncertainty.

If we applied that tax of £100/litre to the factory-owner in the above example, but recycled the revenues to him by some subsidy or tax-break, there would have been no point applying the Pigovian tax in the first place. Similar could be said if we recycled the tax-revenues to his customers - the amount that he had to increase his prices would be balanced by the extra amount that his customers were able to pay for them. The tax would be neither an effective deterrent, nor an effective means of compensating those who experience the harm. It would simply be an inefficiency in the market, perhaps effective at salving consciences, but of no real value. Indeed, if it is effective at salving consciences, it may exacerbate the harm, because customers may consume more of the good, freed (superficially) from the responsibility of considering the impact of their choices on those affected by the externality.

In the case of carbon emissions, most of us, metaphorically, own shares in the factory, and most of us live downstream. But some own more shares in the factory and suffer less of the impact of the pollution than others (e.g. rich world vs poor world, this generation vs future generations). If we impose a Pigovian tax on the factory, but recycle the revenues to those who own most of the shares, we have not effectively internalized the externality. We may have exacerbated the harm by letting the factory's customers think that they now need not worry about the impact of the factory's externalities. This is exactly what most of the rich-world mechanisms to internalize carbon externalities, including the APD, are doing.

Osborne finds 14 billion new ways to waste our money

George Osborne has welcomed the report of John Redwood's Economic Competitiveness Policy Group, which identifies £14 billion that could be saved by cutting red tape and bureaucracy and recommends tax cuts of £10 billion, as "the most impressive and comprehensive analysis of the state of the British economy produced by any political party in recent times".

Pickles' rubbish economics

Fly-tipped asbestos in Thornton (from The Times, 17/08/06)Here is Cameroonian Conservatism in action. If people are inclined to avoid paying for goods, get taxpayers to pay for them, so they appear to be "free" at the point of consumption, in order to reduce the temptation to commit unlawful acts.

The specific example is that Eric Pickles, the Conservatives' Shadow Local Government Secretary, thinks it is wrong to charge people proportionately for the waste-disposal services that they require:

"We all want to increase the level of recycling but bin taxes will harm the local environment by leading to a surge in illegal dumping and backyard burning. Whether they can't pay or won't pay, many irresponsible people will dump instead."

Having discovered this radical, socio-centric approach to law & order and public welfare, there is no limit to the ways in which this logic can be applied in other fields. The Tories will doubtless wish to propose:

  • The extension of this model to all other waste producers. The image (right) associated with this article in The Times illustrates that fly-tipping of commercial and industrial waste is a more common problem. Shouldn't we also relieve businesses of the temptations of illegality, in the interests of society?
  • As many burglaries and thefts are committed in order to fund drug habits, we should legalize drugs, and if that doesn't make them sufficiently cheap, provide them free to ensure that junkies are not tempted to steal to fund their habit.
  • Provide free snacks and drinks outside convenience stores, so shoplifters are not tempted to steal. The same, of course, will go for a selection of the latest fashions outside clothes stores, and phones and ipods outside electrical-goods stores.
  • Make cars and motorbikes freely available to young people, so they don't have to hotwire someone else's vehicle.
  • Free taxi-rides from pubs and parties, so no one is tempted to drink and drive.

The opportunities are endless, now that we can forget about economics and focus on the good of society.

It's not charity if the Government makes you pay for it

One of David Cameron's big ideas, perhaps the biggest in his "sociocentric paradigm", is to rely on the voluntary sector to deliver more of the services currently provided by government. It seems, though, that this is less a big idea, and more an enhancement of the extensive use that this Government already makes of charities.

We learn today, from coverage of a National Audit Office report in the FT, that 12 of the largest charities receive £700m a year of taxpayers' money between them from "several thousand different funding streams", and that they invest considerable resources (£381,000 each per year on average) "simply managing these multiple sources of money". All charities combined "received £10.7bn of public money in 2004-5".

It is hard to know whether to be more critical of the unbelievable bureaucracy that can produce thousands of funding streams, the waste and distraction that must stem from managing this, or the broader issue that what makes charities what they are is precisely that they are not beholden to government and serving the government's purpose, and that making them clients of the state threatens to gradually turn them into little more than extensions of the Greater Bureaucracy.

Certainly we shouldn't underestimate the bureaucratic impediment and distraction. The FT reports that "charities complain that the public sector is a difficult customer, often demanding masses of information and paperwork when tendering, not paying the full cost of services or staff provided and requiring burdensome compliance procedures. Contracts can be too short and include inappropriate terms and conditions."

But on balance, it's the latter that matters the most. In coopting their services, Labour and the Conservatives are in danger of corrupting them, and killing the goose that lays the golden eggs.

[The title of this entry is a reference to a quote from P.J. O'Rourke, which you can find here]

Education stagflation?

A lot of commentary today on the results of Key Stage 2 tests of 11-year-olds' abilities at the "Three Rs" (Reading, Writing, Maths and Science). As a statistical observation, the problem appears to lie particularly with the Writing part of the "Three Rs". 33% of children did not achieve the standards in Writing (and possibly some of the others too). Only 7% seem to have reached the necessary standard in Writing but failed on one or more of the other elements.

I'd be interested to know to what extent language played a part in this, but the much greater success in reading than in writing suggests it is not just a question of language. Dyslexia ought to have impacts on both reading and writing, and is anyway pretty thoroughly detected and allowed-for nowadays. Is it problems of coordination (hand-to-eye)? Or could it be problems with imagination and application? If the latter, are the quick-fix adrenalin-buzz and hypnotic effects of computer games and TV in some way related? Or is this to make the false assumption that things have got worse? In recent years, results indicate that things have been getting better, but we know to be sceptical about grade-inflation - even the Government has admitted it has been occurring.

Or is it about self-motivation and -discipline? Reading, maths and science are all about responding to questions or performing tasks as instructed. Writing requires you to work out what you want to say and the best way to say it. It is (in the ghastly lingo) more proactive and less reactive than the others. Could we be knocking up against a simple constraint in the range of human natures and abilities, that some people prefer to follow than to lead, and that this may mean that some people are irredeemably poor at expressing themselves?

Whatever the causes, critics ought to remember that they can't have their cake and eat it. It is inconsistent to complain about grade-inflation one day and lack of sufficient improvement the next. For myself, I am more concerned about grade-inflation, so in a perverse way, the fact that there has been little overall improvement this year is reassuring. Unless, that is, we have education stagflation, where falling standards and inflating grades result in apparent stasis masking chronic decline.

RIAs - Regulatory Impact Assessments or Results In Advance?

The Adam Smith Institute blog pointed to the new publication on Regulatory Impact Assessments (RIAs) from the Centre for Policy Studies (CPS) a couple of days ago, but this is a sufficiently important issue that I didn't want to simply let it go past because I hadn't had time to comment immediately.

All proposed legislation and regulation nowadays comes with an RIA attached. They are supposed to weigh up the costs and benefits of the proposals, to ensure that those proposals are not unduly burdensome.

The CPS publication entitled "RIAs: why don't they work?", prepared by Keith Boyfield for submission to the new Business Council for Britain, assesses RIAs and finds that they have failed in their objective. This will be no surprise to those who have suffered the effects of most legislation and regulation enacted since RIAs were introduced. It would be hard to argue that the burden of the state has fallen more lightly on the shoulders of its citizens in recent years.

Mr Boyfield provides an accurate diagnosis of many of the causes of the ineffectiveness of RIAs. They could be summarised as "no one in government wants anything more from them than a fig-leaf behind which to hide any flaws in a pre-determined set of measures". They are exercises in self-justification, not critical analysis.

Sadly, Mr Boyfield's prescription is to try to improve the process by which RIAs are prepared, rather than simply to scrap them. My objection is not that efficiency in government isn't important - it is vital - but that asking government (or its sub-contractors) to measure in advance the effectiveness of its own proposals is bound to end up with skewed results, however many refinements you introduce. Better to aim for clarity on the actual (rather than predicted) costs and impacts of government, and then let voters judge every five years or so whether they are getting value for money.*

BBC - The Broadcasting Bollocks Corporation

Chinese recycling
Photo courtesy of

In Radio 4's Home Planet today, Dr Lynn Dicks, pronouncing on the relative merits of recycling and landfilling, in terms of energy-consumption and carbon-footprint, said:

"Various people have looked at this from the point of view of greenhouse gas emissions, and again there are various different estimates from different people, but one particularly academic piece of research that I found was a full Lifecycle Assessment of the greenhouse gas or the CO2 emission from waste - either disposal of paper, including manufacturing of new paper and disposal to landfill, or recycling paper [Presenter interjects: And the lorry-loads that would be involved in that because that's something that Phil mentioned] and including taking the waste to the recycling facilities, disposing the residual waste after recycling... This was done by a consortium of people at UEA (University of East Anglia) and University College, London in 1995. It was all based on Milton Keynes, and what they found was that... oh well, I'll give you the figures - recycling paper produced about 50 kg of CO2 per tonne; if you disposed of it in landfill and made new paper, 550 kg of CO2 per tonne. So, it's much better to recycle."

1995! Our information and waste disposal techniques haven't improved since 1995? Oh well, if this is what the recycle-nuts want to hang their hats on, let's have a look at it. You can download it from here.

Take this, from p.11:

A second problem that occurs at the manufacturing stage is the scarcity of data, particularly with regards to the manufacture of products using secondary plastic materials. Whilst information concerning energy use is sometimes available, data for the remaining environmental inputs and outputs is either commercially sensitive or simply unreported. In this exercise, the process data (emissions arising directly from the process) has been taken as being identical for both primary and secondary plastics, but an energy saving (and thus the associated emissions of generation) of 77% is obtained by using secondary materials, as suggested by White, Franke and Hindle (1995).

Or to put it more succinctly, "we don't know how much energy is used in production of items from recycled feedstock, so we're going to assume it's 77% less than in the same processes using raw materials." That's how to get the "right" result. Use assumptions that make sure you get the desired outcome.

Even more questionably, from p. 13:

For each average tonne of waste which is disposed of to landfill in the UK, 81% by volume of the gaseous emissions are released to the atmosphere, 13% are flared, and 6% are used in landfill gas generating schemes (Williams, 1994 and Bellingham et al, 1994). This paper uses this average data when calculating the amount of electricity recovered. The electricity generated will displace emissions from old coal-fired power stations, and this study gives credit for these.

This probably wasn't even true in 1993 (the most recent year for which the Williams and Bellingham papers are likely to have had data). As I have mentioned before, I ran (until recently) the company that sold many of the flarestacks used on British landfills, so I know that a lot more flares went into landfills before 1993 than is usually assumed in government studies aiming to maximize the claimed reductions in landfill-gas emissions since then (which undermines the Government's claims that we are on target to meet our Kyoto obligations, but that is another story).

Whatever the case in 1993, nowadays this is absurd. The usual figure quoted for the capture-rate of methane from landfills over the lifetime of a modern, engineered landfill is about 85%. This is the figure used as standard in the government-approved model (GasSim) for estimating emissions from landfills. During the period when the gas is contained (i.e. after the phase has been "capped") and being converted (i.e. until the gas quality falls so low that it can no longer be flared), the capture rate is probably close to 100% in modern, engineered landfills. The 85% represents an allowance for emissions from the uncapped phase being tipped at any one time (the usual source of any odour), and slow seepage of the tail-end gas once it is no longer possible to flare it, by which time you are talking low volumes and low percentages of methane. Given sensible incentives, it would be possible to further reduce these emissions so that the overall capture-rate was over 90%, but let's take 85% as a reasonable average. Of that, provided that sensible incentives are maintained for its utilisation, the vast majority will be converted to electricity.

The impact on the LCA of assuming 19% capture, of which 6% utilisation, rather than the current figures of 85% capture of which perhaps 80% utilisation, is enormous. Methane (CH4) has a Global Warming Potential 23 times higher than carbon dioxide (CO2). If you assume that most of the carbohydrates in your waste are converted into landfill gas (roughly 50:50 CH4 and CO2), that most of that gas gets out, and that very little of it is used to displace fossil-fired generation, the comparison between landfill and any other form of waste disposal will be a no-brainer. Of course landfill is the worst technique if it's simply belching methane into the sky.

But this is bollocks. Methane isn't belching out of modern landfills - it is being captured and used to provide the largest single source of new renewable electricity in the country. Last year, landfill-gas generators produced nearly 4 TWh of renewable electricity. Onshore wind projects produced 2.8 TWh, offshore wind less than 0.7 TWh, while co-firing of biomass with coal, and refurbished hydro plants produced almost 2 TWh each.

The authors of the paper carefully ensured that it was not possible to trace their calculations from their assumptions to their conclusions. So it is not possible to reconstruct their calculations with more accurate assumptions. But even where they state their results, without showing how they were calculated, further errors intrude. On p.17, it is assumed that 13,000 grammes of methane are released per tonne of plastic landfilled (around a quarter of the methane emission-rate of paper). Ah yes, that famous putrescible plastic. This is such a beginner's error, that you have to wonder whether the authors had ever set foot on a landfill, or spoken to a waste-disposal operator.

And there is more. Landfilling of aluminium is assumed on the same page to produce 206.5 kilogrammes of methane per tonne of aluminium. Biodegradeable aluminium joins biodegradeable plastics in these academics' parallel universe. And thanks to what I can only assume is a labelling error, it is magnified by a factor of one thousand - not 206.5 g/t, but 206.5 kg/t in their scheme, or four times as much methane as is released from landfilling paper.

This study is so wrong that it isn't even in the right ballpark and so obfuscated that it is impossible to correct. And yet it is on studies like this that recycle-nuts like Dr Dicks rely to justify their brain-washed mantra of "reduce, reuse, recycle". That may be the right approach, in some circumstances, but where appropriate (as indicated by relative costs), not as a rule. The current EU Directives on waste disposal, the Government's dirigiste waste strategy (in compliance with the EU), and councils' complex collection schemes (in compliance with the Government's strategy), are based on nothing more than incompetence and distortion.

LibDem magic - it will be so because we say so

Last Friday, the LibDems launched "new transport polices to create a zero carbon transport system by 2050." And no one noticed. Not even their website, which carried the press release, but doesn't seem to carry the document, Towards Carbon Free Transport.

We are given a few hints how they might achieve this mighty ambition, but are otherwise left to speculate. The hints are:

  • Introducing a distance charge on road freight, related to weight and emissions, as an incentive to shift freight to rail, raising at least £600m a year
  • Establishing a new 'Future Transport Fund' to fund a programme of investment on our railways; removing bottlenecks, providing more trains and reopening lines
  • Backing new North-South and East-West high-speed rail lines to the best European standards to replace internal flights
  • Toughening new legal limits on the average emissions of new cars sold in the EU, to be reinforced with a steadily declining total that reaches zero by 2040
  • Introducing a new 'Climate Change Charge' on internal flights, except life-line routes, starting at £10 per ticket to help fund the 'Future Transport Fund,' which will generate at least £150m a year

So we will still be using trains, planes and automobiles, but they will somehow magically become zero-carbon vehicles. I'm looking forward to discovering how the full document explains how they will achieve this miracle.

UPDATE: They have now (Monday, 8th August) provided a link to the report. As expected, it is a mixture of the sound and the fantastic. Detailed analysis is provided in the Comments.

Sun King Ken

Molly and City Hall

SUMMARY: Ken Livingstone's solar panels for City Hall are nearly ready to switch on. They cost something over half a million pounds, and could reasonably be expected to deliver around 75 MWh a year (not enough for 20 typical houses). For the same money, you could get over 2,000 MWh from a wind turbine, maybe 8,000 MWh from conversion of waste to energy, and yet more carbon-savings if invested into renewable heat or insulation improvements for London houses. Or he could simply have let taxpayers keep their money and make their own decisions about what to do with it. What follows is an examination of whether there are any rational grounds for this sort of wasteful expenditure, or whether this is a classic example of the triumph of style over substance.


Demos recently published a booklet called The Disrupters, on the subject of low-carbon innovation. There's a lot of nu-speak, and not much consideration of hard economics, but it's not a bad publication - some of the examples cited are genuinely interesting, and some of the lessons taken from their experiences are the right ones. It provides the jumping-off point for this post not because of the publication itself, but because of a picture that they casually used today to promote their podcast on the subject.

It is a picture of City Hall, home of Ken Livingstone and the Greater London Authority, in which solar panels can just be seen being installed. I hadn't realised they were going solar at the GLA, but, photovoltaics (PV) being the least economic of all renewables, I thought I'd look into it a little to see what we could learn from this case.

The most detailed information available comes from the London Climate Change Agency (LCCA), which states that they are installing 70 kW of panels, which will generate "3.1million kWh of renewable electricity over their lifetime". This, they say, "will reduce the CO2 emissions of City Hall by 3,000 tonnes in its lifetime – enough to fill 3,000 hot air balloons". Elsewhere, we find the Authority scaling this down to 1,000 tonnes of CO2-savings over a 20-year lifetime, though still filling 3,000 balloons. 3,000 tonnes is quoted on another site. Let's assume the intended figures are 3,000 tonnes and 20 years. How does that stack up?

Weather updates

Following my report of predictions of floods for London and a worse-than-average hurricane season, there has been some refinement in both regards. Piers has updated his forecasts for August (attached), though this has not resulted in any major changes - he is still warning strongly of more floods, including for London.