September 28, 2007

Home ownership increases unemployment

The BoE MPC member Professor Danny Blanchflower points out that owning homes makes for a less mobile workforce and therefore tends to increase unemployment. Sounds plausible. So the implication is we make people more mobile by promoting home rental. Unfortunately people like to own their homes, so we could make business more mobile. It seems to me there was some promise to encourage businesses to move to the provinces quite some time ago by Tony Blair. It appears there was insufficient action on that one. I think some guaranteed periods of low and gradually increasing corporation tax combined with relocation advice might be a nice carrot. Perhaps a gradually increasing corporate tax rate for the highest density areas of business would provide a good stick.


Social Engineering by Jacqui Smith

Ms Smith espoused “zero tolerance of antisocial behaviour” at the Labour Party conference. I love the rhetoric and wish it were translated into real action, but I have heard this many times before and not much happened then either. A showpiece pronunciamento to improve her image no doubt. Wouldn’t it be great though if she turned out to be a Mrs Thatcher of the Home Office and tackled our thugs, we can only dream.
Antisocial behaviour ruins living in this country. We have created a class of untouchable antisocial children that evolve into criminals and both blight our lives. Children test their boundaries, and it is for the adults to say no quickly and decisively when they go too far. They are given so many hollow warnings they keep pushing and pushing until they do something outrageous and finally the law takes action. It is too late by then, that behaviour is well embedded. The action should be swift and early. If we must afford them the rights of adults when they are still children (and I think we are too ready to do so) those rights need to be snatched back quickly when they do something wrong. We have created a culture where children’s rights matter more than adults. This inverted logic is backfiring. They are not sweet innocents learning their way. Anyone with sense knows they need moral instruction and social attitudes today prevent anyone form providing it. So yes we need some social engineering here, but the whole attitude to the treatment of children needs changing. We must tackle the root causes early, not belated apply a feeble ASBO and expect the child to fix itself.

September 27, 2007

Education and the Economy

Filed under: Economics, Ideas — Tags: — conceptualizer @ 3:57 pm

Empirically speaking, nations are advantaged by application of advanced technological understanding and high gearing of that understanding. Such a system requires specialists. The quicker we can create specialists the greater and longer will be the advantage. The current UK education system is too loosely structured, it needs a tighter focus, it needs to be purposeful in its direction of students toward their chosen area of interest. Specialisation should begin as soon as interests are identified, not at some prescribed age. General qualifications should be incidental. Such a highly directed focus will not only benefit the economy but also the individual as they narrow quickly onto what interests them. Naturally there needs to be some constraints, we can’t have a large fraction of the male population training as footballers. There is no reason why people could not have several specialisations, or continue in generalist education until they decide.

September 25, 2007


Filed under: Musings, Politics, War — Tags: , , , , , , — conceptualizer @ 1:46 pm

Current events in Burma remind me of dire situations in many countries. I have to wonder if those countries ever will have a government of hard working, well balanced, honest, intelligent and visionary leaders. It seems that they are always lost to the lowest common denominator in their people.
Western governments too are a very long way from perfect, even though they like to crow about their high moral principles. It is relative I suppose. They very rarely torture or kill protestors and dissenters, or nakedly display the turpitude and corruption of their executive. However, a clear unadulterated vision seems to elude them, lost in the fog of petty bureaucratic hegemony they flounder. I suppose they would answer that things are not as simple as they seem to the uninitiated, but perhaps would also admit that somewhere along the route they strayed.
Is it inevitable and a symptom of human nature that people who end up with positions of power will be corrupted and misuse them? Or is it that the most corrupt and corruptible peruse power most earnestly? Are people improving over history, or not? Or, in this is a dog-eat-dog world, do people on balance tend get what they deserve, after all, their leaders are culled from among them?
I like to think that things are changing for the better, but it is hard to make a good case for the notion. My own country (the UK) recently took war to another country that was no threat to it at all. A shameful state of affairs, however it was arrived at, via incompetence or lies. Can this be the best of all possible worlds?

September 21, 2007

Mad as a balloon!

Filed under: Economics, Worries — Tags: , , , , , , , — conceptualizer @ 12:38 pm

We are all encouraged to sell our work before we have even done it, for those nice shiny things. Lenders understand human nature and the future of money management ~ see Debt to save the world. If you are a prospective first time UK house buyer I sympathise, you are trapped. It has become a competition of who dare take on the largest debt. There are plenty of 125% mortgages available and several 130% offers! Those of us who are not trapped need to resist the temptation, or at least understand it.
This crazy situation can only be reversed if financial services regulators prevent large salary multiples, high loan to valuation, very long repayment periods and fractional (shared equity) mortgages being used to calculate the acceptable size of a loan. Unfortunately such regulation would be a very unpopular move with lenders and in the short to medium term with borrowers. Perhaps it is best implemented at the bottom of a house price cycle when there will be more acceptance of it, especially if it were be phased in gradually.
I will not be surprised when lenders start offering us mortgages before we have even left school. That way lenders can extract even more from the most successful in society; people will always go the extra mile for their children. This will, like private schools, tend to perpetuate advantage and an elite successful class, making the idea of social mobility even more farcical.

September 11, 2007

Jobs for which Britons?

Filed under: Comments, Economics, Politics — Tags: , , , , , — conceptualizer @ 4:34 pm

Does Mr Brown’s notion of “British jobs for every British worker” perhaps exclude the hundreds of thousands of people already working in Britain that the labour government allowed in from abroad in recent years? It certainly seems to disadvantage future economic migrants. Meritocracy not birth right is the way forward, I seem to remember something like that was a Labour party principle in the past. A job for everyone should be the goal and preference given to those who are best suited to the job.
This country has always had a dynamic population coming from all over the world. It occurs to me that in every trip to London I can recall almost every job I came across was taken by someone from another country. If we rigorously enforced this principle London would be deserted.
I think setting entry requirements is a good idea and they should certainly check for criminal records. We have enough feckless and criminal types already. I think if they are serious about this they should not give any money to anyone without some form of work done, even if it is simply litter collecting or cleaning.

Debt to save the world!

Are you wondering how the problems in the US sub-prime market can be so pervasive? I am. Surely that market can’t be that big and not all of those borrowers are going to default. I suspect the problem is more to do with a lack of confidence afflicting the markets. They have had such a good run for so long people are suspicious and looking for that next crash. This probably says as much about human nature as it does about debt. However, in general the amount of debt is increasing while savings decrease (lowest household savings ratio since 1960), so should we be concerned? If we extrapolate carefully from this situation we can uncover some interesting trends that will impact on us all.
The US sub-prime problem is a personal debt problem rooted in the combination of: widespread lending to people at the limits of their ability to cover repayments, at low interest rates, with high loan to value conditions, in a confidence lead rising property price market with big property development programs. Later, increased interest rates were the trigger that pushed those closest to the edge over it and once enough had succumbed the price bubble burst. With increasing repossessions, declining property values and high loan to value conditions lenders suffered big loses. They then tried to increase their margins to recover their positions by increasing interest rates on their most risky situations and pushed more borrowers into the red exacerbating the situation.
Significant personal debt was once a facility only available to a small fraction of people, but recently it has become available to almost all people. This broadening of the debtor base to include less wealthy and financially sophisticated customers tends to encourage debt commoditisation. Commoditisation reduces profit margins, consequently money is chasing larger customer volumes and larger fractions of the market. This change militates against the small lender, increasing pressure to consolidate into fewer global money managers (GMM) providing credit and debt services. When they become large enough their financial power will eventually succeed even that of central banks to influence interest rates and so governments will gradually relinquish some economic control to them.
In addition to growing personal debt, governments are not shy about creating a public debt on our behalf. This has been the case for a long time, such as when financing the second world war effort, for which we could not reasonably have been expected to save as we did not plan it. Outside of unplanned costs like war, how can it be that a whole country can’t live within its means? Like any individual, government should save for expenditure rather than use the more expensive option of borrowing. Unfortunately, saving is a long-term strategy that is not encouraged by our current system of government. It is much easier to ride a wave of popularity fuelled by spend from debt than to tell everyone we have to save. The end effect of this is again to imbue the GMM with greater control as they increasingly own the money lent to the individual and the state.
The rise of the GMM will have some interesting consequences. Firstly, interest rates are facing long-term downward pressure as the GMM seek to encourage every person and country to become a customer, essentially owning some of their generated wealth. So the GMM will seek to make debt easier to afford with lower rates and savings are going to be less remunerative due to tighter margins between their credit and debt services. This will be a problem for savers (who fund the GMM) if inflation is not restrained. One corollary to this situation is increasing pressure on governments to keep down inflation. This will lead to tightening on expenditure, for example leading to more frequent disputes with public sector workers over pay. Another corollary to this is that those seeking higher rewards will increasingly become financial instrument market speculators, so we should see an explosion in speculation management services specialising in certain sectors of the markets and on specific classes of investor. For similar reasons as in the creditor consolidation, international financial market consolidation is inevitable and already ongoing. Protectionists economies lack vision and will find their markets increasingly sidelined until they capitulate, but then their influence will be much smaller. Secondly, economic power will increasingly rest with the GMM, with governments forced to recognise their influence. This should eventually resolve in GMM taking a moderating role in international disputes, becoming the ultimate non-partisan authorities that no government ever can be.
So, in the short term those debtors existing at the margins will have a tough time in several countries, but the problem is too small to cause lasting or widespread damage. In the medium term this is a lesson about hubris being tolerated. In the long run the GMM will ultimately convert our own desire to get things without saving first into a stabilising international force. The emergence of the GMM and their concomitant economic power is a defining characteristic of our age.

September 10, 2007

When will the UK become a democracy?

Filed under: Observations, Politics — Tags: , , , , — conceptualizer @ 2:57 pm

In the UK we never get a chance to tell our government how we feel about important issues and it seems this is not about to change soon. How important must an issue be before we get consulted? It seems we can’t be trusted with a vote on giving more power to Europe. Without any reference to the people, our politicians have: rundown our defence services and used the remainder in wars we don’t need, made our law subservient to EU law, given more of our tax revenue to Europe, increased the tax burden and public debt, introduced charges for education, made it easier to gamble and provided no effective pension, transport or immigration strategy. However, they complain that we don’t show much interest in the political process when a rare chance for a vote comes along. Why are they surprised, the only thing we get to vote on is which of them to give total control to next. This is less a democracy and more an authoritarian regime. Give us democracy!

February 12, 2007

Improving Democracy

Filed under: Debate, Ideas, Observations, Politics — Tags: , , , , , , , , — conceptualizer @ 1:20 pm


The fundamental feature of a government system is a hierarchical structure of permanent fulltime positions. All government systems require this feature to effectively manage the requirements of the people they govern. A flat structure becomes increasingly problematic to coordinate as the number in government increases. As workload increases in volume and complexity, temporary and part-time positions become untenable. Below are some of the reasons why a government system benefits a country:

  • Greater specialisation is possible, giving the potential for better results; for example specialists in national security.
  • Centralisation enables cost advantages in the acquisition of inputs; for example purchase of construction materials.
  • Benefits from being managed by a single authority and hence with a single strategy; for example a homogeneous transport infrastructure.
  • Some requirements are only manageable at a macro scale; for example space exploration.
  • Mundane requirements can be deferred to government; for example refuse removal.

Democratic Government

The fundamental principle of democratic government is the control over those that govern by the governed. Specifically, the power of investiture and removal of people from government positions and control over strategy. This principle tends to encourage good stewardship in those elected and so over time may be responsible for the fact that the world’s most powerful and successful countries are predominantly democracies.
Another common feature often associated with democracy is the equality of all its members. Although a popular idea this is not essential in a democracy, nor is it strictly true, as some groups have more rights than others in some situations. Further, it is not always practiced where it is intended to be and many good arguments exist concerning its inadequacies.

Problems With Democratic Government

Democratic government, like all forms of government, is problematic. The consequences of those problems are occasionally obvious and reported on as news. If we believe that democracy is good and to be more democratic is better, then we need to enhance adherence to the democratic principle. That requires strengthening the control of the populace over who is in government and what strategies they use. There are three root causes to the problems with democratic government and all concern the democratic principle:

  • the timing of elections
  • control of strategic decisions
  • the suitability of the people in government positions

Elections to government positions are mostly at fixed time intervals. Where flexibility exists it is at the discretion of the incumbents, rather than the voter. Unfortunately time interval based elections are not likely to be aligned with the people’s need or desire for change. They are an historical remnant that should be replaced by elections based around need or desire for change; i.e. election timing should be event based rather than time interval based.
The strategies employed by democratic government are supposed to express the will of the people. Unfortunately government strategy is sometimes out of step with the will of the majority of people. This is in part because policies are bundled together by each government. It is also in part because potential new systems have not yet been implemented to devolve more power to the people. Some politicians may believe that they should be setting the strategic agenda rather than the people. They are not democratic in their political philosophy and should be excluded from a democratic government. There is a degree of indolence when it comes to advancing democracy and I believe that it is in part down to the inadequacies of the current politicians and in part a reluctance to advance democracy. The later is perverse in the sense that they only have there political position because of democracy.
If government positions can be filled with more appropriate people we will have improved government. As positions are filled by election, improving elections is vital and they have two main influences: the candidates allowed to stand for election and the people allowed to be voters.

Improvements to Democratic Government

Election Timing

Computers and the internet have made it possible and cost effective to replace time interval based elections with event based elections driven by need or desire for change. Such elections are more responsive to the people and so are more democratic. They also encourage better stewardship, because the behaviour of those in government is not skewed by a predetermined election timetable. They are forced to face the consequences of their actions every day.
Some care needs to be exercised to prevent knee-jerk reactions spawning elections. This could for example include a sustained period of strong disapproval to trigger an election. Straw polls and intermediate votes can be used to gauge attitude without triggering elections, creating a hierarchical system of voting. This would be preferable as people are better at making decisions after considering things more than once. Recording of opinion by voters can also be tracked so each voter can see the variability of their own views over time and correlated to events.

Strategic Control

Technology also allows government to gain a better understanding of public opinion on strategic decisions. Carried through to its logical conclusion this would obviate the need for party politics. Each position could be individually elected and their strategic goals defined by the voters. This would also circumvent the old problems in party politics such as those around proportional representation and the role of tradition in choice.

Appropriate People

To be more discerning when electing people to government positions we need to consider both candidates and voters.


Enthusiasm is not enough. Important positions need open minded, informed, honest, hard working, balanced and mentally agile people. I propose that before anyone may become a candidate for election, they must take and pass a course that covers the range of possible ideologies and the historical causal effects of choices made. If government positions are considered important and worthy of respect then it is the duty of government to ensure that people who aspire to those positions are as good as they can be.


My proposals so far have significantly shifted power into the hands of the voter from the politician. That power shift must be balanced by checks on the veracity of the voter. Tradition and prejudice are not enough. In a democracy everyone may have the right to a vote, but only the interested, open minded, informed, honest and balanced should be allowed to exercise that right.
Voters must for example be able to prove at least a basic understanding of the major policies of the main candidates or parties. Also, voters that show little interest in the process by failing to vote could be suspended from subsequent voting rights, until they have applied to have their suspension lifted. Suspension could also be applied to those convicted of serious breaches of the law. The application for resumption of voting rights could require for example a hand written summary of the major candidates or parties top policies. The important point however is that some effort must be made to get voting rights reinstated. This system does not prevent anyone from voting, but presents an opportunity to make voting sufficiently discriminatory as to get a more considered result.
Lastly I think that in a true democracy the principles of democracy should be held at high value. People intentionally subverting, or attempting or planning to subvert the systems principles should be treated very harshly. That should include a long mandatory prison sentence and a punitive financial penalty followed by deportation if they have another nationality. Strong treatment should also be applied to those who learn of subversion but do not inform the system immediately.

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