Energy use and technical progress

If you wanted an example of technical change in action, look no further than the fall in energy use per unit of GDP.  The idea that somehow we will need more and more energy to get out more and more GDP is just not right.





Fromthe Economist, https://www.economist.com/blogs/dailychart/2011/01/energy_use

Refugees: Evening Discussion @Imperial

I’m speaking tonight at a student-led evening on Refugees at Imperial. To prepare, I read “Refuge” by Alexander Betts and Paul Collier.  Here are some thoughts.

1.       The book differentiates refugees from economic migrants. It argues we owe a duty of rescue to refugees, but not economic migrants.

2.       A lot of focus is on Syrian refugees.  Despite all the huffing and puffing, almost all of them are in countries very close to Syria and very few are in Northern Europe (p.viii, amost 50% in Turkey, 11% in Jordan, 18% in Syria: contrast with 0.2% in France, same for the UK, Spain, honourable mention to Sweden with 1.9%, Germany 7.9%). 

3.       Should refugees have a right to come to, say the UK?  The fact is that N Europe has a well developed welfare state.  To the extent that refugees put strain on it, their rights clash with current residents’ rights.  So not clear.

4.       There is a terrifying chapter explaining the nightmare around the Schengen agreement.  Here’s my take.

a.       The architects of Schengen realised that the agreement was only as strong as its weakest border.  There is no border force, the EU volunteer Frontex is useless (p.66 on Christmas they all go home and leave the border unguarded).

b.      So for example countries like Portugal, Malta and Hungary, who sell passports in return for investment promises can undermine the system (Hungary, 360K Euro).

c.       So came the Dublin Regulation: an asylum-seeker has to be either sent back or given haven in the first country in the Schengen where they arrive (p.64).  This solves the weak link problem: you accept ‘em, you keep ‘em.

d.      All this did was promote lack of registration: refugees would arrive, not be processed by country A and sent on their way to country B. Where would they like to go?  The UK with a free labour market is very attractive, hence the Jungle.

e.      In August 2015, Mrs. Merkel decided to let refugees into Germany. This turned everyone into a economic migrant and simply encouraged other countries to pass refugees through to Germany. 

f.        When that fell apart due to political worries, the Germans simply paid the Turks to keep them and promised visa free travel.

5.       P.188 sets out the four big ideas in the book

a.       Ethical duty to rescue displaced

b.      Best place for them is where they can get to easily, which is basically near to their past homes.  If that is a relatively poor country, rich countries should help out financially.

c.       In those areas, refugees currently live in camps and often cannot work, this must be changed so they can contribute

d.      If they work they can then, if they return to their original homes, bring skills and experience to help recovery.

Why regulation is hard

http://marginalrevolution.com/marginalrevolution/2017/04/the-spirit-of-the-law.html

House price to earnings ratio in London, 1969-2014

This is remarkable....




Figure 9 of Working Paper 72
House prices in London – an economic analysis of London’s housing market
Joel Marsden
November 2015

Common Cognitive Biases

A number of bloggers, such as Chris Dillow or writers such as Danny Finkelstein write insightful stuff which blends economics, politics with cognitive biases.  I found the following table of commonly studied cognitive biases from Wikipedia very helpful as a summary:

Name

	Description
Fundamental attribution error (FAE)	Also known as the correspondence bias (Baumeister & Bushman, 2010) is the tendency for people to over-emphasize personality-based explanations for behaviours observed in others. At the same time, individuals under-emphasize the role and power of situational influences on the same behaviour.
Confirmation bias	The tendency to search for or interpret information in a way that confirms one's preconceptions. In addition, individuals may discredit information that does not support their views.[29] The confirmation bias is related to the concept of cognitive dissonance. Whereby, individuals may reduce inconsistency by searching for information which re-confirms their views (Jermias, 2001, p. 146).[30]
Self-serving bias	The tendency to claim more responsibility for successes than failures. It may also manifest itself as a tendency for people to evaluate ambiguous information in a way beneficial to their interests.
Belief bias	When one's evaluation of the logical strength of an argument is biased by their belief in the truth or falsity of the conclusion.
Framing	Using a too-narrow approach and description of the situation or issue.
Hindsight bias	Sometimes called the "I-knew-it-all-along" effect, is the inclination to see past events as being predictable.

More on how regulation can get in the way of competition

A follow up to http://haskelecon.blogspot.co.uk/2015/06/the-too-big-to-fail-subsidy-in-uk.html.


The CMA's inquiry into banking is coming to an end.

The challenger banks have written, Letter from 8 challenger banks, to say the main problem is their disadvantaged funding, via a regulatory formula that means they have to set aside much more capital than a large bank, something they thing is tied up in the Too Big to Fail Category. They say



In reply, Letter from Professor Alasdair Smith to 8 challenger banks, the CMA say two things.

First, "it is an important provisional finding of the CMA investigation that the funding advantages of the incumbent banks derive in large part from the inertia in the customer base. I believe that the remedies package we have put forward will create a more fluid market"

But second, in response to the regulation question they delegate it to others.

"In our view the issue should be taken forward by the bodies which have primary responsibility for the safety and soundness of the banking system"

and

" It would be in no one’s interests to create ambiguity about regulatory responsibility in this area in particular given the international context in which reform will be required. This is also the case for addressing the ‘Too Big To Fail’ issues you raise, which are being tackled by the Bank of England and the Financial Stability Board’s reforms to the resolution regime for global systemically important banks."

I had hoped the CMA inquiry was going to be a chance to address the Too Big To Fail issue. It would seem not.

(See also this exchange of letters with Sir John Vickers, Sir John Vickers (11.7.16) CMA response to Sir John Vickers (11.7.16)).