26 February 2006

The costs of subsidised parking

In the US city governments … require developers to provide extensive off-street parking. … The required parking lot at a restaurant usually occupies at least three times as much land as the restaurant itself. Daniel Klein reviewing The High Cost of Free Parking by Donald Shoup.
As Klein says, the extent of free parking is so enormous and so normal that people just think it nature’s endowment, like air. Everyone feels entitled to free air and free parking. Hence, Shoup points out ‘most people do not see it as being any subsidy at all …Because parking costs so much and motorists pay so little for it, the hidden subsidy is truly gigantic.’ Shoup estimates the value of this subsidy to parking in the US at between $127 billion and $374 billion a year.

If we also count the subsidy for free and underpriced curb parking, the total subsidy for parking would be far higher. . . Do we really want to spend as much to subsidize parking as we spend for Medicare or national defense?

The answer seems to be yes, just as we apparently decide to subsidise other aspects of car use, other forms of transportation and other environmentally destructive activities, including: oil-intensive agriculture, energy production (mainly in the developed countries) and consumption (developing countries), and over-use of water.

Actually, it's probably not as bad as that: these subsidy decisions are made without reference to ordinary human beings. They don't reflect our wishes; rather they result from a corporatist agenda, where the corporatists are government agencies just as much as big business. It's only because policy goals are expressed in terms of spending decisions, activities, institutional structures and priorities, and Mickey Mouse micro-targets, that the corporatists can get away with it. If they were to come clean and admit that one of their targeted policy outcomes was to subsidise the destruction of our planet, then it's unlikely, I think, their policies would be adopted so enthusiastically.

In an increasingly complex and interlinked world, I believe it's essential that government re-orientate its policies so that they reflect the wishes of real people. This means determining what broad social and environmental outcomes we wish to pursue and rewarding the achievement of those outcomes. Under a Social Policy Bond regime, the market would ensure that this achievement would be carried out with maximum efficiency.

22 February 2006

Current policymaking is limited

There is no doubt that mankind is taking over the reins of global geochemical balance. Industrial production of fixed nitrogen for fertilizer now matches the natural rate of nitrogen fixation on the planet. Rates of fossil-fuel CO2 emission dwarf the natural rate of CO2 release in volcanic gases. Source

It is a real worry that mankind is now so dominant that the mistakes our governments make threaten our environment as well as our societies. Our intellects cannot cope with the enormous number of variables that make up a single human economy, let alone a global ecosystem. And policymaking, which will decide our ecological fate, has become an almost entirely intellectual process. It excludes insight and imagination and tends to rely overmuch on information that (1) is available and (2) is quantifiable. This is not always where where attention is most urgently needed, but it’s an understandable tendency and, you may ask, what’s the alternative?

My suggestion would be first to thrash out the outcomes that policy is being designed to achieve. Rather than try to anticipate what might, for instance, cause a global environmental catastrophe, I would first try to define the effects such a catastrophe might have, and then issue Social Policy Bonds that target and reward the sustained absence of these effects. Just how a global catastrophe might come about cannot be anticipated by a limited number even of well-meaning government employees with a long time horizon – they are too few and their training is inappropriate. A bond regime would require that they have the humility to recognise this, and contract out the actual achievement of their targeted objective – the maintenance of positive aspects of the status quo – to the private sector.

It might sound outlandish, and indeed the Social Policy Bond idea probably does need discussion and refinement, then small-scale application, before it’s applied on a global level. But the real question is: given that mankind does now control the global environment, how else is it to be managed?

19 February 2006

How many synonyms for 'insanity' are there?

From Open Europe Bulletin, 17 February:

Retired farmers continue to collect CAP subsidies.

"This month the Scottish Executive published details of CAP payments to farmers for the first time. The Scotsman reported that recent reforms mean that nine people living outside Scotland who have retired from farming received a total of 177,000 pounds in 2005. (3 February) Aberdeen Press and Journal reported that Scottish Water received 170,000 pounds, part of which was an annual premium for a sheep flock sold off in 2002. A deer farmer from Auchtermuchty was quoted saying, "It seems to me that this is the scandal to beat all previous Common Agricultural Policy scandals. It is widely known that there are hundreds of retired farmers who are nominally renting naked acres on barren hillsides that they neither visit nor do anything with and getting huge sums." (14 February) The third 'auction' of Single Farm Payments - the first of which have allowed people to bid for subsidies sold at around 2.5 times their value - is due to take place on 17 February, and a fourth on 3 March."

16 February 2006

What happens when you subsidise big business?

Small and independent shops may vanish from the UK's High Streets by as soon as 2015, politicians have warned. BBC
How is big business subsidised? Our old favourite, the Common Agricultural Policy, has been shown overwhelmingly to benefit large agribusiness corporates and wealthy landowners. Central government also finances a transport infrastructure that heavily favours the large and global at the expense of the small and local. A - sometimes well-meaning - regulatory environment tries to deal with problems that are very often generated only by big business, but small businesses also have to comply at much higher proportionate cost. Large firms can more readily convert income into capital gains, and so pay lower taxes than most small business proprietors and of course the financial and administrative costs of compliance as a proportion of revenue are generally much lower for big businesses than small. The result can be seen in the high streets not only of the UK but of many other countries in both the developed and developing countries: small local businesses selling out to large, often trans-national chain stores.

We need reminding that it's not consumers nor markets that have led to this global takeover: it's government and big business scratching each other's backs.

14 February 2006

Costs of doing business

The Doing Business website provides objective measures of business regulations and their enforcement. The Doing Business indicators are given for 155 countries, and give some idea of the regulatory costs imposed on business. New Zealand does well: it is actually named as best performer in the overall category of 'Doing Business' and is best performer in the sub-categories of registering property and protecting investors. Particularly interesting from my point of view are the costs, expressed in terms of average income of certain regulations. For instance: compare the costs of starting a business in sub-Saharan Africa compared with the OECD: 11 procedures, versus 7; 63 days versus 20; and 215% of per capita income versus 6.8%. Minimum capital requirements for sub-Saharan Africa and the OECD are 297% of per capita income and 41%, respectively. The website allows analysis of individual countries.

12 February 2006

Letting go

[U]nless you ‘inhibit’ the stimulus, say, of sitting down or standing up, you react in the tense and distorted way which it is necessary to change. Wilfred Barlow, The Alexander Principle, 1973 (page 174)
Many of us carry tension in our bodies most of the time. Our bodies have adopted patterns of misuse that make it impossible to relax properly. We are constantly tense; in the back of the neck, shoulders, throat. If you’re lucky you can have lessons in, for example, the Alexander Technique and re-educate the body to its proper functioning; but most of us haven’t the resources to do that – or have so lost sight of our original unstressed state that we don’t see any value in it.

Mentally too, we rarely stop thinking. There is very little space between one thought and another, and our minds are constantly chattering. Meditation is one way of calming the mind, of realising that we have powerful faculties other than thought – insight, intelligence – with which to approach life. But few of us rarely meditate, and thinking is dominant.

Thought is the response of memory, experience, knowledge. Knowledge, experience, memory, are always old and so thought is always old. Therefore thought can never see anything new. J Krishnamurti, You Are the World, 1972 (page 52)
Physically and mentally then, we are tense, preoccupied, under stress and have to re-educate ourselves to a relaxed, intelligent state. Most of us cannot or will not do that: it requires time out and goes counter to our established patterns of doing and thinking.

Is there a parallel in the world of policy? Not just in the way we approach issues, but in the self-entrenching features of policies that are inefficient? Perverse subsidies are costly, wasteful examples: these are policies that are hugely expensive, socially inequitable and environmentally destructive. Yet they persist. Democratic governments in Europe and US, beholden to the interest groups that fund them, lack the will or the ability to stop them.

But this sort of paralysis goes further. What is it that policymakers are afraid of? It’s not saddling their citizens and the third world with disastrously wasteful and destructive policies, otherwise there would be no perverse subsidies. No, the worst thing that can happen to a policymaker is to be seen to try something new that doesn’t work. Existing policies that are proven spectacular failures are fine. Tried and tested are the main justifications for existing policy. If they’re tried, tested and failed, no matter.

Even more crucially, policymakers don’t want to relinquish control. They’re no different from us as individuals: whatever else we can say about them, we can’t accuse them of being relaxed, unstressed and unhurried. They’re constantly working and extremely reluctant to give up any part of their portfolio; as of course are their officials in the bureaucracies. They’re becoming incapable of not intervening, just as physically and mentally, we’re incapable of reverting to a switched-off equilibrium.

The result is that our insight, our great intelligence, is rarely brought into play in answering the big questions: how to end war, how to eradicate world poverty, how to deal with global environmental challenges such as climate change. Instead we get bureaucratic responses: tired old approaches that meet administrative requirements, more funding for established bodies and more control by government agencies. We get more centralisation and so more distance from real people, less diversity of approach, and less responsiveness to changing events.

With a nuclear-armed Iran or any of a number of looming potential catastrophes: a clash of civilizations, climate change, genetic engineering mistakes, bioterrorism or whatever, the bureaucratic approach is not good enough.

Policymakers should think about backing off. Not completely: democratic governments are quite good at articulating society’s wishes, and if they formulated policy in terms of outcomes, they’d be much better. They are also very diligent in raising revenue. But they are proven failures when it comes to actually achieving society’s goals. For that we need inventiveness, intelligence and insight: those qualities, energised by a powerful incentive system, that have generated most of the world’s wealth.

Social Policy Bonds would see government giving up control over how to solve our social and environmental problems. Government would still articulate our objectives and raise finance for their achievement, but bondholders, motivated by their financial self-interest, would actually do the achieving. Under the current system the bodies supposed to be solving our social problems don’t have much incentive to do so. They certainly don’t have incentives to try out innovative, imaginative solutions. A Social Policy Bond regime would change all that. Investors would be rewarded not for their activities, their celebrity status, media savvy or political astuteness, but for actually achieving society’s goals. Just as we can learn to let go and so become more supple physically and mentally, so our policymakers, by giving up total control and issuing Social Policy Bonds, could profoundly improve our quality of life.

09 February 2006

Immigration and public policymaking

Western governments, through laziness or incompetence, should be held partly responsible for such outrages as London bombings of last year and the current madness about the Danish cartoons. Why so, and what has all this to do with Social Policy Bonds?

First, western governments, by blocking imports of clothing, textiles, footwear and agricultural products, have made life difficult for would-be entrepreneurs in developing countries. They have done this over decades, and continue to do so, beholden as they are to their own corrupt politicians, self-interested subsidy-disbursement agencies, and big business corporates; all of whom are the real beneficiaries of perverse subsidies. The effects of these trade barriers are incalculable. (One think-tank puts the human cost of the European Union’s trade barriers alone at 275 deaths per hour, mainly in Africa.) They help to make life so unpleasant that the most rational option for energetic people in poor countries is very often to migrate to the west. Their migration can be legal or illegal, but either way it tends to be reluctant.

Second, western countries' immigration policies appear to be decided mainly not by ordinary people, but by a combination of big business (which wants low-cost labour) and ideologues in high positions (who say they believe in multiculturalism and are possibly coveting senior jobs at the United Nations). But something as fundamental as immigration should not be left to these usual suspects.

Only under the current system, where policy is made for the few by the few, could billions of dollars be transferred annually from the poor to the rich, and the entire composition of our societies be transformed without reference to the wider public. Many in the west have no objection to immigration, provided people come to the west willingly and are accepted willingly. A Social Policy Bond regime would be a big improvement over the current system, in that it would most probably lead to the abandonment of trade barriers that enrich the wealthy and impoverish the third world and at the same time bring more people into the policymaking process. Immigration would still occur, but it would be of willing migrants and it would have the blessing of our existing citizens – something that would benefit the migrants and existing citizens alike.

06 February 2006

Why I don't like Proportional Representation

I don’t like Proportional Representation because it widens the gap between ordinary people and the people who are supposed to represent them. It does this in several ways. First, it hands more power to the party hacks who compile the lists. They can make it impossible for people to vote out someone they don't like. Second, on all the evidence, PR gives more power to smaller parties, who use it irresponsibly. Third, many ordinary people simply can’t understand complicated PR systems, such as New Zealand’s Mixed Member Proportional system.

But most of all, I dislike PR because it institutionalises the corrosive assumption that a Member of Parliament can represent people only in their capacity as voters for a particular political party, rather than as citizens with interests beyond party politics. It's an assumption that entrenches widespread cynicism, because under PR Members of Parliament they can hardly be expected to question the party line: their party is after all their only imporant qualification for being an MP at all. Under PR MPs see it as their duty to represent only the people who voted for the party that employs them, and I think that's worse than what went on under first-past-the-post, where there was a hope, even an expectation, that Members would act responsibly on behalf of all their constituents. The theory and practice of PR entrenches the worst aspects of party politics.

03 February 2006


The 2002 reforms to the CAP mean that farmers now receive subsidies based on the historical value of the land and crops produced. This means that farmers who have retired or moved abroad since 2002 can still claim subsidies – often up to tens of thousands of pounds - provided they rent a hectare of land and meet the European definition of a “farmer” at the time of transfer. Source
It's not just the insanity, it's the persistence of it over the decades that makes one despair. Climate change, nuclear proliferation, genetic engineering mistakes ... what hope is there that we can tackle any of our serious problems if we cannot even stop corrupt, stupid and entirely self-inflicted disasters such as the Common Agricultural Policy, even after decades of solid evidence about its catastrophic economic, social and environmental effects?

01 February 2006

Subordinating policy to outcomes

Social Policy Bonds are about defining policy goals in terms of outcomes that are meaningful to real people. ‘Outcomes’ as distinct from activities, organisations, inputs (spending) and outputs; and ‘real people’ as distinct from government agencies or corporations.

Without going any further, subordinating policy to outcomes would screen out a lot of wildly expensive lunacies, such as EU or US agricultural policies, allegedly designed to help small farmers, but in fact consumer- and taxpayer- funded subsidies for wealthy landowners and large agribusiness corporates. It would also bring into question the lazy assumption that increasing spending for an organisation with high-sounding ideals will actually help bring about the organisation’s stated objectives. Giving billions of dollars in ‘aid’ to bodies such as the United Nations or corrupt governments doesn’t alleviate poverty. It is gesture politics at its worst. Likewise increasing domestic spending on health or education doesn’t necessarily improve health and education outcomes – as UK taxpayers (for instance) are finding.

But subordinating policy to outcomes would, in fact, go a lot further. For a start, meaningful outcomes are more comprehensible to ordinary people than the process-driven platitudes and obscurities that justify policies under the current regime. Being more comprehensible, they are more open to public participation: an end in itself, as well as a means to better policymaking. People would be entrusted with making real decisions rather than delegating them to a group of people who are experts at nothing other than gaining power and serving their party. Example: crime rates are rising. Under the current system, anybody interested in dealing with this problem would have to bone up on police structures, legislation, the state of the justice system, prisons etc. It’s too complex and arcane for non-specialists. But in a Social Policy Bond regime, crime rates would be explicitly targeted. Not spending on the police versus spending on prisons; not whether parents, schools, alcohol, drugs or the media are to blame.  Not any number of genuinely difficult questions that even specialists cannot definitively answer. No; all the public would be asked under a bond regime is: “should we spend more reducing crime rates, given our other objectives, and if so, how much?”  

Thanks to the market for Social Policy Bonds, and the mass of constantly updated information that their market prices would generate, people would also have a pretty good idea as to how much crime reduction they could buy for each marginal dollar.  

Subordinating policy to outcomes has other benefits. One is that targeted outcomes would most likely be more stable than the views of ruling parties. They would be less subject to political interference or media images. This is critical for long-term goals, including global environmental goals.