Thursday, 19 April 2018

Cattle news

From The Soaraway Sun:

IN THE MOOOOOOD Hilarious moment horny bull sneaks up behind female moped driver and tries to hump her

From the BBC:

Escaped cows herded into Darlington front garden

Car hits house - with a bad ending

From The Bristol Post:

A woman has died and residents have been evacuated after a car crashed into a house in Clevedon.

The woman who was killed was in the house and the occupants of the vehicle, a man and a woman, have been arrested and are currently in police custody.

The incident took place shortly before 8.30pm last night (Wednesday, April 18), on Yeolands Drive.

I've not tracked down the house on Google Maps yet, but I guess that like in most of these cases, the house is at the top of a T-junction or similar.

Top tips:
- don't buy a house at the top of a T-junction;
- if you own one, replace your front garden wall with concrete blocks;
- town planners and developers, please don't put houses at the top of T-junctions.

Wednesday, 18 April 2018

Stats confirm, don't build houses if you want to increase incomes.

In response to Ian Mulheirn's thorough de-bunking of the supply shortage narrative of the housing crisis, Capex has let John Myers, aka London YIMBY, have yet more publicity to rally the troops against the dissenting voices.

The article is just a re-heat of the same old tosh, however one thing that did catch my eye was this graph from the Resolution Foundation showing the relationship between rises in house prices and the increase in housing stock per capita. Myers comments "... the think tank’s report also contained the encouraging — and unsurprising — revelation that countries building plenty of homes have generally not seen huge price rises, despite low interest rates and a big banking sector."

Myers goes on "Accounting for changes in incomes would likely make the picture even clearer, as the government’s own numbers to justify the Housing Minister’s comments on immigration showed last week, because rising incomes greatly boost demand for bigger and better homes"

Leaving to one side that in Myers' articles, it's never location that is the biggest factor in the differences in prices across the UK, the point he raises is obvious. So for a bit of fun, let's correlate changes in incomes within countries during the same period(OECD data) with changes in housing stock:

What this shows is that an increase in housing stock per capita correlates with lower increases in incomes within countries at 0.61, which is probably about as strong as the scatter plot for price increases vs stock. It's interesting how Ireland is the outlier, probably due to their over supply on the run up to the crash.

On the face of it, it appears that if you want to enjoy bigger increases in incomes, the last thing you want to be doing is build loads of housing.

Of course, this is wrong. But my point is, without putting things into their proper context, all sorts of misleading conclusions can be drawn. I'm afraid that's why the current policy of blaming planning and under supply for housing issues is wrong. It's being pushed by those with a very narrow field of vision.

For the record, I think a land value tax would result in a huge amount of redevelopment. Only it would then be property facilitated and directed by planners with the right incentives i.e. to maximise aggregated land rents. Instead, in large part due to the supply side fanatics, we'll yet again end up with the worst of both worlds i.e. more crap and not much/no improvement in affordability.

Tuesday, 17 April 2018

Most employees pay far more National Insurance than Income Tax

The 'earnings threshold' for NIC is lower than the personal allowance for income tax; and for basic rate taxpayers, total NIC is 25.8% of earnings above the threshold but income tax is only 20% of earnings above the personal allowance.

At the top of the basic rate band, it's £9,786 NIC and £6,900 income tax.

Above that, it flips over, NIC is 'only' 15.8% of earnings but income tax is 40%.

The break-even point at which you pay the same amount of NIC as you do income tax is about £58,300, which you can check here, so only the top few per cent of employees actually pay more income tax than they do NIC.

VAT raises approx. the same amount as National Insurance, meaning that a majority of employees probably pay more in VAT than they do in income tax as well.

Just sayin'.

Monday, 16 April 2018

Daily Mail surpassing itself today

Sabrina Kouider, 35, and boyfriend Ouissem Medouni, 40, tortured Sophie Lionnet in their £900,000 Wimbledon home before killing her on 18 September last year.

Daily Mail on top form

Man is arrested after woman in her 30s is stabbed to death in south London road where houses sell for £1.3m

Sunday, 15 April 2018

Economic Myths - imposing a minimum wage will always lead to falls in employment and output

Opponents (broadly, "right wingers") say that wage levels are set in a competitive market, so if the minimum wage is higher than this, this will cost jobs and reduce output. Defenders of minimum wages (broadly, "left wingers") say that it levels the playing field between exploitative employers and exploited workers and insist that any small fall in employment is a price worth paying.

Each side puts out their studies which purport to prove their theory. I'm not really convinced by either set of 'facts' as people are highly selective and tend to find what they are looking for.

(I personally am heartily indifferent about the National Minimum Wage, my view being that the best guarantee of workers' rights is a growing economy and full employment - i.e. get rid of VAT and supertaxes on employment income such as National Insurance Contributions. We can back this up with a Citizen's Income, which strengthens the bargaining position of potential workers slightly, especially when it comes to low-wage jobs.)

I have recently stumbled across a theory that says, evidence shows that the negative impact on employment and output was not only nowhere as bad as the doom-sayers predicted, but that in some situations, imposing a minimum wage can actually increase employment and output.

Sounds very counter-intuitive, but actually it makes sense. This is because most businesses have some monopoly/monopsony power (they are two sides of the same coin).

Let's start at the very beginning with a business in a perfectly competitive market where labour is the only variable cost with a given supply curve and a given demand curve. The level of output of the business in question would be 9 units, wages £10.40 and selling price £11, being the highest level of output before the business tips into losses:

The columns for marginal cost and revenue are the total cost/revenue at that level of output, minus the total cost/revenue if one unit less were produced and sold. The relevance of this will be explained further down.

(I am perfectly aware that no business knows exactly what its marginal costs per unit are, let alone what its marginal revenue per unit it, and that most businesses do some sales at a loss, whether by accident (budget overrun or customer doesn't pay) or by design (loss leaders). Nonetheless, businesses must have some collective intuitive grasp of this or they'd all be bankrupt. 'Home builders' are the crassest example of this, in the short term, more supply depresses prices and costs would increase rapidly).

So if a minimum wage of £12 is imposed, the business in a perfectly competitive market has to reduce output to 8 units, wages £12 and selling price £13, being the highest level of output before the business tips into losses. This is bad, and what the opponents predict:

As we well know, most businesses have some monopoly power (can restrict supply) and, especially if there is permanent un- or under-employment, a stronger bargaining position than potential employees, which we shall consider monopsony power for the purposes of this debate.

Such businesses (or industries) do not end up setting prices at just above costs, which is the optimum position for the economy as a whole. They choose the level of output which maximises profits, and you can't fault them for that. Some interpret this to mean that businesses (should) set output at the level at which any further increase in output means that marginal costs would exceed marginal revenue.

So this business restricts output and employment to 5 units sold for £16 each, total profits £44, wages of £7.20 per hour. There's no point going to 6 units - marginal costs £12 exceed marginal revenue £10 and profits would fall.

What happens if the minimum wage is set at £8 per hour? While average wages go up, the marginal cost goes down to a flat £8 for the first six units of labour. The new profit-maximising level of output is now 6 units sold for £15 each, total profits £42, wages of £8 per hour.

Higher wages, more jobs, more output, lower prices and monopoly profits (rent) shaved back a bit. What's not to like?

Yes, I know this is all hypothetical, but there are simply too many studies showing that there is no measurable negative impact of minimum wages on employment levels to simply be dismissed out of hand, however biased the authors. So I think that there is something in it, however difficult it is to explain.

Or maybe both sides (left wingers and right ringers) are half-right and the extra jobs in monopoly businesses cancel out (or outweigh) job losses in competitive businesses. This would still be a good thing, if those competitive businesses are only competitive because wages are depressed.

Friday, 13 April 2018

In reply to Bayard's question about why people spend so much on housing.

From here

Me: If your point was that land prices are the inverse of interest rates and/or proportional to credit availability, you are clearly correct.

Bayard: Yes, but why? Why do so many of us spend more on land when we have more to spend? We don't tend to spend more on food, cars or holidays in quite the same way. Most people walk into a car showroom with an idea of which car they would like to buy and try and buy it for the least they can. The same people walk into an estate agent's with an idea of how much they have to spend and try and get the best house they can for that money. That's the quirk.

It has something to do with marginal utility.

For most people on OK incomes, mass produced stuff like cars, food, holidays, are all relatively cheap. Everybody has their own preferences about how to split their money between cars, food, holidays.

Let's take cars, some people want to have the shiniest, newest model, whatever it costs, but most are are happy to buy second hand (most cars are bought and sold several times, so most car purchases are second-hand). Those people get less enjoyment from buying a car that costs £1,000 more than they would from spending that £1,000 on something else.

That car is their "ideal" car, and for most people is easily affordable. For me, the "ideal" car costs about £2,000, anything more than that is money down the drain (repairs, on the other hand...). Even if I earned three times as much, the £2,000 car would still be my "ideal" car. (Knowing me, I'd just buy more £2,000 cars. MGF is next on the list).

Housing on the other hand is incredibly expensive, bearing in mind how long ago the bricks were piled up and how little ingenuity it took to do so.

Each household's "ideal" home is the home where the extra enjoyment from buying one that costs £10,000 more would be less than the extra enjoyment from spending £10,000 on something else. And for most people, this "ideal" home is way out of reach, financially, they simply don't have the extra £10,000.

So our only choice is to pare back 'other spending' and set our housing budget as all income not needed for 'other spending' - and then spend all of that housing budget on getting the nicest we can afford within that budget.
There's also the point that people assume house prices will go up and up, so they don't really view it as a cost, they see housing as an "investment" which generates capital gains and income (which it does, or at least, it saves paying rent). On that basis, spending every last penny on housing makes sense from an individual's point of view.

From the point of view of society as a whole, it is madness because we are all trying to outbid each other and so the monopolist (the land owner) is the only winner. If an entire generation of tenants and first time buyers formed a cartel and agreed that none of them would spend more than 10% of their income on rent or mortgage repayments, then they'd all end up in the same homes as they would have done but at one-third of the current cost.

Wednesday, 11 April 2018

Method or Madness?

I, like most people, assume that Donald Trump is just an overgrown spoilt brat child who has no concept of his actions having negative consequences, it's all just "I want, I want, I want".

When he threatened North Korea with "fire and fury" or started the tit-for-tat tariff game with PR China, I, like most people, thought, Oh fuck, where will this end?

But possibly, he is a tactical genius, was just bluffing and planned this all along, headlines from the last few days:

North and South Korean leaders to meet for historic summit on April 27

Secret, direct talks underway between US and North Korea

China's President Xi promises to CUT car import tariffs as he buckles in trade war with Trump and warns against ‘Cold War’ mentality

Or possibly, he won't realise what a dangerous/stupid game he is playing and this will just spur him on to make ever more outrageous demands. Like threatening to nuke London if he doesn't get an invitation to that wedding thingy to which - if the MSM is to be believed - everybody wants an invitation?

Home ownership doesn't make you happy

I recently read that Finland had been ranked the happiest country in the world by the UN's Sustainable Development Solutions Network, which got me looking into its housing. After all, it has long been a tenet of this blog that home-ownership is a Good Thing, so perhaps the Finns were big on that.

Wikipedia gives a list of countries ranked by rates of home ownership and Finland, at 30th place with 72.7% is not hugely different from the UK at 42nd place with 64.5%. Indeed, of the top twenty countries by home-ownership rate, only six appear in the list of the top fifty happiest countries, with only Norway with 82.8% and the second happiest and Singapore with 90.8% the thirty-fourth happiest, having more than 80% home-ownership. Meanwhile Switzerland, the fifth happiest country, just scrapes in at the bottom with 43.5% home-ownership.

Finnish housing policy comes in for some plaudits but closer examination shows that it is not markedly different from the UK's. OK, they have a better attitude towards social housing, but they are still big on second homes (A Finnish saying is "Happiness is having your own red summer cottage and a potato field"), so housing wise, we do not have far to go if we are going to be more like the happiest country in the world. Just don't count on it making us any happier if we get there, though.