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Archive: economy

The value of GDP

10 September 2009 13:32

Categories: Books, Current affairs, Economics, Politics, Work

There was an interesting blog post over at the Telegraph by Geoffrey Lean over the weekend. He asked if GDP is “past its sell by date”, noting that “the EU is due to publish a paper which will conclude that GDP is too limited a measurement.”

I agree with the view that GDP doesn’t tell you the whole picture. I have written before about the obsession that the media and others have with what this or that will “cost the economy”. These stories normally come along with some kind of figure of the effect some trend or other will have on GDP.

GDP is quite a useful measurement in a lot of ways. As a barometer of how things are ticking along, it isn’t bad. When GDP rises steadily things are ticking along quite nicely. When it decreases people generally feel it. In truth, no-one needed to wait for the GDP figures to come round to work out that things were bad. But GDP does give us a vaguely useful way to quantify how things are going.

However, it omits a lot of useful information that might help us to measure our quality of life. Perhaps most strikingly of all, it takes very little account of leisure — surely the best part of life.

You can be fairly certain that the economy is producing more between 8am and 8pm than it is between 8pm and 8am. The economy goes into recession every night! But in which part of the day is your quality of life higher? The part where you’re slaving away in a stuffy office, or the part where you’re relaxing with a cold beer?

Enjoying yourself and relaxing, whether it’s having your nightly kip or spending an afternoon in the park, often means removing yourself from economic activity. This in turn leads to a reduction in GDP. That is “the cost to the economy”. This is despite the fact that sleeping and having a stroll in the park are both very valuable activities.

I am currently reading The Armchair Economist by Steven E. Landsburg (I’m only 15 years late to the party). This book points out that GDP is also unable to account for the value of housework. If you pay someone to do your dishes, the value is counted in GDP figures. If you do them yourself, GDP is unaffected. But in both cases you have a rack of clean dishes of equal value.

Geoffrey Lean also points out that GDP fails to take the environment into consideration. An economist would say you need to internalise the externalities. But the question is how? (Pigovian taxes are a nice idea.) Some extreme environmentalists go further and advocate zero growth, an idea rightly lambasted by Adopted Domain.

I guess it all depends on what you want an indicator to tell you. GDP has become the one everyone talks about as a proxy for our standard of living, but clearly has deficiencies in that it leaves out important elements that contribute to our standard of living.

Unemployment figures are a possible alternative. On one level, it can be said that unemployment is the main thing that worries people. Despite the often-made point that unemployment is a lagging indicator, for many it is the bottom line.

But this has many of the same problems as using GDP. We look forward to our weekends, our holidays, and ultimately our retirement. Not working is actually a good thing. Few people want to work. They only want the money they earn from working. That brings us right back to GDP.

In recent years there has been a bit of hype about happiness economics (which I have previously written about). This field likes to measure Gross National Happiness. But this too is fraught with difficulties, not least the fact that it relies on shaky survey data based on people’s varying interpretations of what “happiness” is.

Perhaps you could stop paying attention to aggregate statistics in general. On one level, what really concerns me is my own personal well-being. How much I earn, how much disposable income I have, whether I have a job and how happy I am all concern me greatly. I am less concerned about other people’s well-being.

But that’s not quite right either. Even though I, like most people, am primarily worried about myself, I do care about the general well-being of other people.

It looks like we have to make do with GDP as the main measure to be concerned with. However, it does seem that it is creaking a bit with old age. No doubt there will be plenty of criticisms of GDP to come in the future, particularly from environmentalists.

Beware of the alternatives people advocate though. They will probably all be biased one way or another. Any proposed new measurements will probably be put forward by some interest group trying to manipulate the terms of the debate in its favour. Were that scenario to arise, I would rate myself 3 out of 10 happy.

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Where is our referendum on face-slapping?

9 September 2009 13:41

Categories: *, Current affairs, Politics, Scotland

Last week the SNP set out its legislative plan. The headline grabber was the long-promised independence referendum bill. Today I saw Caron’s post asking, “why bother with a referendum?” She has a good point. It is widely recognised that the result of any referendum would almost certainly reject the SNP’s favoured proposals.

“Ah, but!”, say proponents of a referendum. Opinion polls consistently suggest that around three quarters of people would like there to be a referendum on independence. This is supposedly a good enough reason to actually hold a referendum.

It strikes me as a bit daft though. Imagine the scene. You’re sitting on a park bench eating your lunch. A chap with a clipboard approaches you. He’s from a polling organisation. “The Monster Raving Loony Party,” he begins, “plans on giving everyone a slap on the face.” Your eyebrows raise. The prospect of the Monster Raving Loony Party being in a position to give everyone a slap in the face feels a bit distant. But the pollster continues: “Would you like a referendum on face-slapping to be held before this policy is pursued?” Yes, of course, you reply.

Of course people say they’d like there to be a referendum. If you asked people if they wanted a referendum on legislation about chewing gum wrappers, they would most likely say yes. In fact, I wonder what is going through the minds of the quarter of people who say they would not like a referendum. They probably can’t be bothered with the campaigning. Perhaps they dread the prospect of politicians hogging the box, or maybe they think their vote isn’t worth anything.

Nevertheless, in general, ask people if they would like a right, they will take it with both hands. The right to vote on Scotland’s constitutional future is appealing. But it is just one appealing thing out of an infinite number of appealing things that may be offered by a government. We have unlimited wants, but the government has limited means.

That is the essence of the argument put forward by those who would rather there wasn’t a referendum on independence. Opponents such as Alistair Darling say there are more important issues facing the voters, not least the economy. It would be wise to tackle them first before concerning ourselves with “distractions” like the independence debate.

I don’t quite agree with that perspective either. It is perfectly valid (though, in my view, incorrect) to say that economic and other woes may be fixed by Scotland becoming independent. In fact, I think it is quite dangerous to dismiss any analysis of the constitutional position as a “distraction”.

I am in favour of constitutional reform. I do not agree with the sort of extreme reforms that the SNP would like to make. But certainly I would favour some degree of fiscal autonomy. I would like the UK to adopt a federal structure. And I think there is a pressing need for reform of the voting system.

I do not support such reforms because I think it would be a bit of distracting fun. There is nothing particularly satisfying to me about the calculations the single transferable vote system would entail (though it might be another matter for some political geeks). No, the real reason I favour constitutional reform is because I believe it will fundamentally improve the governance of the country. To dismiss constitutional debates as “distracting” is a bit of an insult. The constitutional structure is fundamental.

The reason to oppose a referendum on independence is not because people don’t want a referendum. And it is certainly not because it is a distraction. The reason is simply that there is no appetite for independence.

Some people have a peculiar obsession with referenda. But it’s worth remembering that they are actually quite a recent addition to British democracy, and have only been used a handful of times. The UK’s first referendum was held in 1973. Since then, a further eight have been held. Only one of them was held across the UK. Only another two have been Scotland-wide.

The idea behind holding a referendum is to make bloody well sure that the major constitutional change which is proposed is actually favoured by the people of the country. So rather than having a mere parliamentary majority, you make sure there is a majority favour among the people too. If you like, a referendum seeks a second mandate to go ahead with the change.

You see where I’m going with this? There hasn’t even been a first mandate yet. Although the SNP forms the Scottish Government, it is a minority administration. A majority of MSPs oppose independence.

You cannot even convincingly argue that the 2007 election result demonstrated momentum towards MSPs that favour independence. Although the SNP made large gains, this was mostly at the expense of other parties that favour independence. The Greens had their representation cut by two thirds. The SSP were totally wiped off the map. These two parties saw their share of the vote cut more than any other parties. Meanwhile, the three main opposition parties saw stagnant levels of support — they dropped, but not by that much.

That is why I oppose the idea of holding a referendum on independence. There simply isn’t anything going for it. There is no groundswell of support for independence among the voters. And there certainly isn’t enough appetite for it within the Scottish Parliament.

Those in favour of a referendum cling on to the fact that most people would like there to be a referendum. But that in itself is pretty meaningless because, as I have said, people will always prefer to have a referendum on anything, even if it’s on getting a slap on the face.

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Patrick Hannan — A Useful Fiction

28 July 2009 00:39

Categories: Books, Current affairs, Politics, Reviews, Scotland

Have you noticed that there is a lot of introspection about devolution just now? I suppose it underlines the fact that devolution is a process rather than a settlement that everyone is still looking at how to tweak it. Maybe it is just the newness of it. The Scottish Parliament is very young as these things go, just ten years old. As such, there is inevitably a sense that we haven’t quite got it right yet.

Mind you, you can never get it “right”, in the sense that everyone will be happy. Westminster is as well-established as they come, and yet people are constantly suggesting reforms from every angle imaginable. That has, of course, gained even more momentum in the past year or so, particularly with expenses scandals and the like.

So it is only natural that people should be wagging their jaws about devolution all the time. But the chat has seemed particularly intense of late. The SNP are having a National Conversation, while the other major parties have thrown their lot in with the recently published Calman report.

I guess you can put a lot of this down to the fact that the SNP are in government. That was an epoch; completely new territory that demanded introspection. What are the reasons for the SNP being in power? Unless it is an anti-Labour vote (which, to be fair, is highly likely), it may be because people are unhappy with the constitutional situation as it stands. An SNP government is perceived to be a major step towards independence, even if a number of major hurdles remain.

The tenth anniversary of the Scottish Parliament is also a good excuse to look back on how devolution has panned out so far and to work out how to refine the system for the future. All of this has been a useful hook on which to hang Patrick Hannan’s latest book, A Useful Fiction, of which I recently received a copy to review.

But that is largely a marketing device. The tenth anniversary of devolution is barely, if at all, mentioned. Meanwhile, thoughts on the Calman Commission feel as though they have been slightly shoehorned in, rushing to mention it lest the book feel out of date by the time people get round to reading it.

But the book could not have been written six months ago. Indeed, the sheer amount of important events that actually happened in the past year or so (chief among them the credit crunch and the collapse of RBS and HBOS) become quite clear as you read the book. For that reason, it probably will feel out of date by the time many people get round to reading it. But that is the peril of writing a book about current events, especially a process as unpredictable as devolution.

Mind you, not all of the book is about current political events. That is simultaneously the book’s main strength and its main weakness. On the one hand, it ensures that the book isn’t completely preoccupied with political points that are very salient in 2009 but will be fish wrapper come 2010. On the other hand, any politics geeks who read the blurb and expect to be able to immerse themselves in interesting constitutional arguments will be disappointed.

While the second half of the book focuses very much on the politics of devolution, it takes a while for the book to reach that point. Much of the front end of the book is preoccupied with more general points about national identity. I spent a lot of my time thinking, “well there’s plenty about cricket, rugby, the meaning of flags and other cultural issues; but not much of the politics I was looking for”.

That is not to say the early part of the book is useless; far from it. These reflections on Britishness and the nature of national identity are fundamental to the subject, not to say interesting to read about. But I did feel as though the book was taking its time to deal with the questions I was seeking answers for.

But when the book does move on to ask these questions, answers are few and far between. In his review of the book, Will Patterson said that A Useful Fiction is a book for moderates, which is a good way of putting it.

It is not exactly to say that Patrick Hannan constantly flits cowardly around the middle ground. I did raise my eyebrows from time to time in the course of reading this book. But after making an interesting suggestion, he often fails to commit it. The reader feels almost like the victim of a practical joker who looks like he is passing you something only to snatch it away as you reach out for it.

This left me finishing the book feeling as though I had read an interesting book, but one that lacked any central themes or arguments. It makes me wonder what Patrick Hannan sat down to write the book for, other than to set out an interesting collection of thoughts on Britain’s constitutional situation.

Nonetheless, I would say it is well worth reading A Useful Fiction because it is an interesting collection of thoughts. It certainly provided me with some fresh perspectives and Mr Hannan is an engaging enough writer.

But if you think you’ll want to read it, I would hurry up before it gets overtaken by events.

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The FIA shuts its ears

18 June 2009 09:13

Categories: Opinion

This week in F1 has mostly been about the FIA’s diarrhoea of the press release. Rather than looking for a compromise, they have instead gone on the attack, launching press release after press release and slamming the door shut on Fota’s suggestions (oh, and saying goodbye to Lola — good work, Max!)

This week the ACEA, the European Car Manufacturers’ Association, came out to say that the “current governance of the sport can’t continue”. The FIA’s retort was predictably arrogant and bitter. One thing that particularly interested me was this irrelevant paragraph at the end:

The FIA understands that Porsche did not support ACEA’s Formula One resolution and has instructed the ACEA secretariat to make this clear in response to any press enquiries.

Grasping at straws, this was the one thing the FIA found to attack the ACEA with (and how typical it is of Max to go on the attack with a straw man like this rather than methodically argue their case — probably because their case is filled with holes). It’s odd that they should find the view of Porsche within the ACEA so important. This is a manufacturer which was last involved in F1 way back in 1991, and not very successfully either. They have shown very little interest in returning to F1.

Indeed, a certain revelation last year put paid to any slim chance that Porsche might enter F1 while Max Mosley is in charge. Wolfgang Porsche said last year: “After the affair with Max Mosley and the women it would not be very savoury to get involved (in Formula One) now.”

Funny how Max Mosley didn’t pay so much attention to Porsche’s views then, isn’t it?

It strikes me as odd that Mosley should bang on and on about how the current recession means that the manufacturers must be told how much they will be able to spend. Somehow I think the ACEA is in a much better position to know where than manufacturers stand.

Yesterday, the FIA released to the media a further exchange of letters between the FIA and Fota. Presumably this is again supposed to show Fota in a bad light. But Fota’s letter is conciliatory in tone and the content clearly seeks a compromise. Fota propose solutions in four key areas. Max Mosley’s response? Four doors slammed shut.

On governance, Mosley wants the teams to agree to extend an 11-year-old Concorde Agreement and from that point negotiate forwards. This would involve the teams placing a huge amount of trust in the FIA, and the FIA have shown themselves to be a distinctly untrustworthy organisation. Slam.

On resource restriction, the FIA still contends that “a fundamental problem with the Fota proposal was the absence of a clear figure”. In other words, unless the budget cap is on the table, the FIA will not discuss it. Slam.

On the two-tier system, the FIA confirms that even though it says there will be no two-tier system in F1 next season, the technical regulations will still in fact be rigged in favour of teams running the Cosworth engine which will not have a limit on its performance, as all other engines do. Slam.

Bye-bye compromise. And it’s all thanks to Max Mosley. The letter looks as though it was formulated in order to tweak the teams’ tails. It leaves F1 facing the serious prospect of a breakaway.

It pains me to say it, but I am beginning to find the idea of a breakaway very appealing. By the FIA’s own admission, next year’s budget capped cars will not perform to F1 standard. All of the top teams in F1 currently do not stand on the FIA’s side, and the most promising of the new teams were not given a slot on the entry list last week. As things stand, the FIA Championship will have no teams of a high pedigree.

As for drivers, as things stand the FIA Championship will have no Champions on the grid. Fernando Alonso, Felipe Massa and Mark Webber have all spoken out against the FIA’s budget cap proposals, lamenting the fact that it would bring to an end the notion of F1 being the pinnacle of motorsport. All three drivers would sooner drive in a breakaway series than drive in a budget capped series.

Fernando Alonso:

I prefer to race in any other category before in the new F1. A model similar to GP2 or F3 is not interesting for any driver, for any sponsor or for any circuit or television network. In that case it would be a category without any sense.

Felipe Massa:

…we need to look seriously at what is the best option: as the teams appear to be united, then maybe it is time to look at doing something different that could be better for the sport.

Mark Webber:

Collectively everyone has played a role in trying to help and protect the sport and you just see all that effort down the years being devalued or diluted through some pretty radical ideas.

It’s good to have some stability, to be able to predict what’s going to happen, not have different things going on every six months.

All the drivers share the same view. We want to drive for the best teams and race against the best drivers. If it’s not the FIA Formula 1 world championship, so be it. It’ll still be the most prestigious championship.

Mark Webber’s opinion is particularly useful to pay attention to, as he the most senior member of the GPDA, the F1 drivers’ union, to have a race seat. He therefore has an intimate knowledge of what the drivers are thinking, and he has pointed out that “All the drivers have the same view.”

So the teams are against the FIA. The drivers are against the FIA. And the fans are almost universally against the FIA (see, for example, here and here).

I sense that there are a few journalists who have taken the FIA’s side. However, it is well known that journalists who speak out against the FIA sometimes find themselves having “problems”. After The Sunday Times received a writ for libel from Max Mosley following a column written by Martin Brundle, he had this to say:

I’m tired of what I perceive as the “spin” and tactics of the FIA press office, as are many other journalists. I expect my accreditation pass for next year will be hindered in some way to make my coverage of F1 more difficult and to punish me. Or they will write to ITV again to say that my commentary is not up to standard despite my unprecedented six Royal Television Society Awards for sports broadcasting.

The FIA vets journalists, so they must be seen as another F1 institution that is inherently biased towards the FIA’s point of view. In that sense, it is amazing that a few journalists have decided to speak out. See, for instance, Richard Williams (who I believe does not attend grands prix anyway as Maurice Hamilton is The Guardian’s main F1 correspondent) and Ed Gorman.

Unless the unthinkable happens and Max Mosley capitulates, we as fans (who have been given no say by the FIA, unlike Fota who have conducted proper market research) will have to endure his rotten vision of F1 anyway. At least with a breakaway we will have a choice.

What do we want? Max Mosley’s dungeon dictatorship which, like all dictatorships, will run his playthings into the ground? Or the best drivers racing the best cars at the best circuits? It’s surely a simple decision.

19 comments

European Parliamentary Election literature: small parties

4 June 2009 00:19

Categories: Current affairs, Politics, Scotland

The decision to vote

A series of posts

A pathetic situation
Five disturbing things about democracy
How should politics be reformed?: Part 1
How the new politics might look: part 2
European election leaflets: The main parties
European Parliamentary Election literature: small parties
A second opinion
I decided! And I decided to vote

BNP

Needless to say, the BNP is a pathetic party of mindless xenophobes with moronic policies. Their election leaflet has come in for a ton of criticism too, and rightly so.

My dad picked up on their use of a Spitfire at the very top of the leaflet:

The Spitfire was used in a war against your philosophy, you cretins.

Amusingly enough, the Spitfire pictured on the leaflet was actually used by Polish pilots, not British ones.

On the other side, the following is listed: “TRAFALGAR – THE SOMME – DUNKIRK – D-DAY – THE FALKLANDS”. What is this? Some kind of war-mongering jizzathon?

The leaflet also says you should vote for the BNP: “Because it’s not racist to oppose mass immigration.” Well, maybe it’s not racist. But it is downright moronic and fascistic for these reasons.

There doesn’t appear to be any attempt to tailor this message to a Scottish audience. A paragraph rants about “Lab-Lib-Con” — but there is no mention of the SNP, Scotland’s largest party. And the leaflet contains absolutely no information whatsoever about any of the BNP’s candidates.

Beneath this, is the by now familiar section on “Why We’re All Voting BNP”. You know, the one containing stock photographs which have been used in this way without permission. And the models aren’t even British. The “pensioners” are actually an Italian couple who do not hold the BNP’s views.

Christian Party – Christian Peoples Alliance

I got no leaflet, so I took a quick look at their website. I am not a Christian, so I haven’t spent long looking at the website. Reading their manifestos, their main policies include beginning each meeting of the European Parliament with Christian prayer and enforcing “an EU-wide day of rest” every Sunday.

A bit like the Greens, they also want the economic system to be controlled more, but are vague on how to go about it. Apparently limits will be placed on “complex instruments”. All-in-all, they actually seem very similar to the Greens, but with a God bit in the middle. Not a party for me, but they don’t seem quite as nutty as I first feared.

Duncan Robertson (independent)

It’s a complete mystery. Does anyone know who this person is?

Jury Team

No leaflet again, so I took a look at the website. There is not much there policy-wise apart from a general hatred of party politics. Understandable given recent events, although I am not totally against political parties as I outlined in the previous posts about how to reform politics in the UK.

There is something quite refreshing about Jury Team though, which is that the candidates are apparently totally independent of any kind of party control. Jury Team’s number 1 candidate in Scotland, Alan Wallace, has a blog which is an interesting read. He seems like a measured chap and in the (admittedly rather little) research I have done, there has been nothing that has offended me in the slightest.

There really is very little information policy-wise though. Indeed, Alan Wallace’s blog goes out of its way to point out that it doesn’t really matter what the policies are — what counts is that he will be open and transparent. It’s very well saying that, and I don’t doubt it. But it would be better if there was a little more information on exactly what I might be voting for if I place my cross next to “Jury Team”.

No2EU – Yes to Democracy

Cheese-a-rama. Where have I seen this before? Does anyone really think that the current rise in unemployment has been caused by the EU?

The message from Bob Crow makes No2EU sound a bit like UKIP, but with added socialism thrown in for good measure. Loon-tastic. Like most frustrated socialist parties, they seem to long for a way of life that hasn’t been seen since… well, 1972.

My dad noted that the party’s logo is quite odd. The way it’s written looks like “no²eu”. I wonder what the rationale behind turning the word “to” into a number 2 then the squared symbol is!

Amusingly, this Scottish leaflet invites voters to an “Eve of poll rally — Euston, London”. I’m sure all those out-of-pocket Scottish workers will really easily find the time and money to attend.

A bit of research reveals that No2EU is actually a coalition made up of the following organisations: RMT, Alliance for Green Socialism, the Communist Party of Britain, the Indian Workers’ Association, the Liberal Party, the Socialist Party, Socialist Resistance and Solidarity. Communists? Solidarity? Indeed, Tommy Sheridan is number 2 on the list in Scotland. Yup, that seals the deal. I shan’t be voting for these people.

Socialist Labour Party

We got no leaflet, so I looked at the website. It’s a little bit scary. The design is garish and primitive, and the first words apart from the title are: “Scargill. VOTE SLP JUNE 4TH” That’ll be Arthur Scargill’s vanity party then.

Click on the link and you are told that this is “one of the most important elections since the Second World War.” Eh?

Ukip

This Ukip leaflet has the same sort of naff symbolism as the BNP one, with a huge image of Winston Churchill dominating the front of the leaflet and making an appearance on the other side. “Say no to the European Union”, the leaflet proclaims, seemingly oblivious to the fact that Winston Churchill actually called for a “United States of Europe”. Ho hum.

Ukip provides some information on their candidates. Their qualifications? One is “Scotland’s best-known horse whisperer.” Another is an “experienced geophysicist.” Still, at least it underlines the point that “Ukip candidates are real people, not career politicians!” — and there’s nothing wrong with that.

Still, you wouldn’t catch me voting for this lot. In these corruption-aware times, it would be a bit silly to vote for Ukip, who are kings of the art. They also have a track record of telling massive porky pies about the EU.

For another view, I liked Currybet’s take on the election leaflets he received.

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