Fine for my backyard, not my neighbour’s

Perhaps we should simply scrap planning permission altogether, writes Tim Harford

‘Eric Pickles has promised a hasty rethink of proposals to let homeowners bulldoze their back gardens without planning consent in another setback for government efforts to streamline the planning process.’
FT.com, April 16

I am never entirely reassured by the words “hasty” and “rethink” in proximity.

Proximity is what this is about – Mr Pickles, the local government secretary, was trying to pass a law that would enable people to build substantial home extensions without planning permission.

How substantial?

Eight metres, which would consume my entire back garden and half of the garden beyond that. But the idea looks like it will be modified, because many Conservative MPs, local councillors and others don’t like it. Zac Goldsmith, who has led the rebellion, said it was a “recipe for community disharmony” and suggested instead that developments should go ahead by default if neighbours did not oppose them.

Sounds reasonable.

Sounds nonsensical. Moving from a scheme where you decide what you build in your garden to a scheme where your neighbours decide what you build in your garden may change what gets built, but does nothing to reduce community disharmony. The same people will argue about the same things. Close neighbours often have conflicting interests about development – which is one reason why we have planning rules in the first place.

So what is Mr Pickles trying to achieve?

He wants more building. British homes are prohibitively expensive because we haven’t built enough of them – new homes are being built at about half the rate that new households are forming. What’s more, it’s a good time to make up some of the shortfall. The economy is depressed and construction activity would be a good stimulus. Unfortunately the government’s attempts to kick-start construction have not yet borne fruit.

Don’t lose hope. Perhaps George Osborne can delay the recovery so that Mr Pickles can make a difference.

Ha! Perhaps. I wonder, though, whether Mr Pickles shouldn’t think differently about planning reform. His current proposals will benefit homeowners with plans to expand, rather than large developers – whom journalistic ethics require me to describe as “canny”.

What would you suggest?

The basic problem is simple enough. The market tells us there is a huge pent-up demand for building new homes – converting some shops and offices, but in particular building on green space. However, we are wary of letting the market allow any building without planning permission, because of the possible spillovers – new developments can clog roads, raise the risk of floods or simply look ugly. Building new luxury homes all over Hyde Park would be profitable in its own right but awful for London; a similar, if gentler, consideration applies to building in any field or garden. And so we have rules aimed at figuring out what should be allowed.

And do they work?

Not really. Casual observation suggests that planners allow all sorts of monstrosities while imposing a huge cost on homeowners – although probably not on “canny developers”, whose knowledge of the intricacies of the planning system is a barrier to pesky competitors.

So what is to be done?

We could scrap planning permission, of course – the system was introduced in 1947 and it’s far from clear that the UK’s cityscapes have improved since then. But I suspect most people believe the island is too crowded to return to pure libertarianism. A more practical approach could retain the existing system, which gives planners widespread authority to determine what is best for a local area, but use market signals to persuade planners to approve more.

How might that work?

One proposal, floated by the think-tank CentreForum, would allow councils to reap the financial benefits of granting planning permission – which in some parts of the country can increase the value of agricultural land to a few million pounds per hectare. The landowner enjoys all that windfall – why should that be so? The duly motivated council would still be democratically accountable; considerations of safety, environmental hazard, congestion and aesthetics would remain on the table; and local taxpayers would benefit from local development. And yet we’d see more houses. All without fighting with the neighbours.

Also published at ft.com.

The ins and outs of organ donation

If we automatically put people on the donor register we’d presumably see more transplants

‘NHS achieves ground-breaking 50% increase in deceased organ donors’
National Health Service press release, April 11

That’s good news.

Absolutely – although about 1,000 people a year die waiting for an organ. Half of those who receive kidneys wait more than three years, and being on dialysis is not fun. So we need to do more. And it turns out that economists are experts on allocating scarce resources.

You are about to propose a market for human organs?

No, I think we can agree that the idea of a market for live kidney donations is a non-starter. Except in Iran.

Iran?

Yes, buying kidneys is legal in Iran. Can we move on? Proposal number two is to establish a different way to exchange kidneys. The idea is simple: many patients have friends, spouses or siblings who are willing to donate a kidney but cannot because of incompatible tissue or blood types. In 1986 Felix Rapaport, a leading transplant surgeon, floated the idea of putting together patients and donors to allow each donor to give a compatible kidney to the other donor’s loved one. Even now the idea is called “paired donation” because “exchange” might sound too much like a market.

But surely nobody could object to such a thing.

It has caught on and been made more effective by the efforts of economists such as Al Roth, a recent Nobel laureate based at Stanford University. They have designed algorithms to maximise the number of successful transplants. Another idea, the brainchild of a surgeon, Michael Rees of the University of Toledo, is to set up long chains of donations, beginning with a single altruist who is willing to donate a kidney to a stranger without needing to enter some sort of paired donation arrangement.

Are such schemes making their way over to the UK?

They are indeed; we have several kidney sharing schemes here. But they are small compared with the number of people waiting for kidneys. And it is not so easy for a living donor to offer a heart or a lung.

Any other brilliant economic ideas?

Here’s a curious observation, from a 2003 paper written by the behavioural scientists Eric Johnson and Daniel Goldstein: in countries where people must opt out if they don’t want to donate their organs, “consent” rates are typically close to 100 per cent. In countries such as the UK, where people must opt in to become donors, consent rates are much lower. This leads to the natural observation that if we just automatically put people on the donor register unless told otherwise, we’d see more organ transplants and more lives transformed. Wales looks likely to adopt this position.

And rightly so, I’d say. Thank goodness for behavioural economics.

Not so hasty. It’s not at all clear that presumed consent would help. Many deceased donors were never on the register and many people on the register end up not being donors. One of the reasons why more transplants are taking place is because the NHS is getting more competent – and has clearer legal authority – at making sure they happen. This means identifying donors, persuading families to give consent and even performing procedures on patients who are not yet dead.

So a lot of this is actually about medical practice and bureaucratic efficiency?

Of course it is. And what families feel about it is also important. If we fill our donor registry with auto-enrolled donors, will that really persuade distraught families to support transplants? In any case, behavioural economics suggests a more elegant alternative.

Do tell.

Prof Johnson and Dr Goldstein are often cited in favour of presumed consent. But they also discovered that if you demand a yes or no answer, most people willingly join the register. You don’t need to sneak them on to it by default: you can just request that they express a preference. Since July 2011, people applying for driving licences in the UK have been faced with just this choice. The majority of new donors now arrive on the register in this way, although disappointingly the “not now” answers outnumber the “yes” or “already registered” answers by more than two to one. But, encouragingly, a new trial will be experimenting with different prompts, words and images with the aim of discovering what approach works best. That’s good. When doctors and nurses are trying to win approval from grieving families, it will be far more helpful if people are registered donors by choice, not by default.

Also published at ft.com.

Microjobs have a massive potential

A new company aims to pair the least-skilled and most excluded workers with jobs that need doing on a more industrial scale

The internet has a wonderful habit of creating new markets. eBay is the most famous and enduring example of bringing together people with something unusual to sell and other people who want to buy it. (In 1995, its creator, Pierre Omidyar, listed a broken laser pointer for sale; when he received an offer, he repeated his warning that the thing was broken. The response: the buyer collected broken laser pointers. Bingo.)

More recently, sites like Airbnb and TaskRabbit allow people to rent small spaces, or work at small tasks. While they are commercial, they retain an emphasis on personal connection and community. Rising to prominence in 2012 was Kickstarter, which helps people with projects raise money in small chunks from enthusiastic backers.

A new company, Upstart, offers fundraising for people who don’t even have projects. The typical Upstart is a precocious Ivy League graduate, all set to walk into a job at Google, Goldman Sachs or Exxon, but instead seeking backers to provide them with the financial security to be an entrepreneur.

All this is exciting. But oddly, despite the prodigious ability of modern computers to process data, each of these new sites works on a very human level. Every TaskRabbit task, every Kickstarter project is unique; the website merely facilitates personal connections.

“It’s all a bit 1995,” says Wingham Rowan, a technology journalist turned entrepreneur. And while the slick, user-friendly new sites are a world away from the text-based blue hyperlinks of the early web, Rowan has a point. Underneath the glitz, TaskRabbit operates much like an efficient small-ad board at your corner shop.

Rowan is now strategic director of a company called Slivers-of-Time, and he sees a missing opportunity: to bring the sophisticated market-making technology to the least glamorous end of the British labour market – to the poorest, least-skilled and most excluded workers.

A typical Slivers-of-Time worker is looking for a couple of hours’ work here, a couple of hours of volunteering there, either because personal circumstances make it hard to commit to regular hours, or because a full-time job isn’t available. A Slivers employer could be anything from a supermarket to a local council, a call-centre to a café, looking for a little assistance with the lunchtime rush, a product launch, or staff holidays. Slivers creates a searchable database, almost in real time, to allow an employer to find suitable workers at short notice, for a reasonable rate and with the right qualifications – anything from a food safety certificate to a driving licence.

This approach is finding some takers – Tesco and several local councils use the technology. But it is slow going. Slivers-of-Time is less cute than the “hire someone with a nice photo to pick up some dog food” approach of TaskRabbit. It aims to pair unused labour with jobs that need doing on a more industrial scale. And as Rowan argues, it cannot reach its potential without a lot of government work to sort out the regulatory environment.

Benefits need to be reformed so that doing a few hours’ work a week is encouraged rather than penalised. (In principle, the new universal credit should allow this. In practice, it’s not easy.) Governments also need to reform their information infrastructure: providing secure and selective access to databases so that driving licences, criminal records or professional qualifications can be checked instantly.

Yet such markets are potentially very important. Development gurus have long emphasised unlocking the potential of the poor by cutting red tape, establishing property rights and providing access to affordable credit. But jobs are typically what lift people out of poverty. And if it’s possible to develop microcredit in Bangladesh, it should be possible to develop microjobs in Birmingham.

Also published at ft.com.

Nudge nudge

A behavioural economics guru gets the chance to put his ideas into practice

Simpler: The Future of Government, by Cass Sunstein, Simon & Schuster, RRP$26, 272 pages

There’s a point early on in this book where Cass Sunstein describes the distressing process of being confirmed as administrator at the Office of Information and Regulatory Affairs in Barack Obama’s White House. Everything Sunstein has said needs to be vetted and, “unfortunately for my vetters, I have written countless speeches, well over 400 articles, and a lot of books. The vetters had to sift through thousands of pages.”

We can consider ourselves fairly warned. Ideas pour out of Sunstein and on to the page – but this is not a man who has the time to step back and produce a little structure or storycraft. Simpler contains some important thoughts, written by an intelligent and experienced observer, apparently in haste. The reader is going to have to do a bit of work. This is ironic, because the book’s key message is about presenting information to ordinary people in the simplest and most useful way.

Sunstein was co-author, with Richard Thaler, of Nudge (2008), a book that aimed to show the relevance of behavioural economics to government policy. In particular, Nudge argued that the way forms are designed and default options selected, even the way cafeterias are laid out, will influence our behaviour, and that policy makers should exploit this fact to do good without spending money or infringing personal liberty. People could, by default, be enrolled in their company pension plan; efficiency labels on cars could list “gallons per 100 miles”, which by a mathematical quirk turns out to be far more informative than “miles per gallon”.

Nudge didn’t have the catchy anecdotes of Dan Ariely’s Predictably Irrational (2008), nor was it as comprehensive as Daniel Kahneman’s Thinking, Fast and Slow (2011), but because of its inventiveness and practical policy bent, it is perhaps the most influential of the recent crop of behavioural economics books.

What, then, of Simpler? If Nudge had never been written, this would be an important work, but instead Simpler feels like an echo of its predecessor. Sunstein spent time running OIRA and most of the book is Nudge shifted to the past tense: instead of writing “this would be a good idea”, Sunstein writes “we did this, and it was a good idea”.

Policies set out in Simpler include well-designed labels; treating people who take no action as though they had actively chosen some sensible default; using personal information to tailor these defaults to individual circumstances; cost-benefit analysis of new regulations; testing and piloting new policies and practices; continually re-evaluating regulations and forms; and making it easy for citizens to provide feedback on what works and what does not.

These are well worth a try. A particularly promising concept is “smart disclosure”, in which government departments and corporations allow us to download our own data in machine-readable format. I could send my mobile phone or electricity usage data to a third-party comparison website, which could tell me the perfect deal given my personal circumstances.

Yet since there is little here that was not already in Nudge, the added value of Simpler is unclear – although US political junkies may find Sunstein’s war stories engaging. What would be really useful now would be an independent analysis of how well all these “nudges” are working. Since Sunstein dreamt them up, he is not the man to tell us whether they are performing as hoped. Simplicity is a sound ambition but in a complex world we should also check for unintended consequences.

Also published at ft.com.

Rich pickings for scientists

Should we feel queasy about the growth of abstract, deeply technical thinking in finance?

Amidst all the glories of belle époque Paris, the troubles of an aspiring physicist can’t have amounted to much. In 1888, Louis Bachelier had graduated from school with excellent grades and high hopes of studying at the elite grandes écoles – until both his parents died suddenly, leaving Louis responsible for his sister and his three-year-old brother. He ran the family wine business for a while, was drafted into the army, and by the time he extricated himself from that and sold up, he was too old to do anything but study at the less-prestigious University of Paris. With his siblings to support, his study of physics had to be nocturnal. By day, he worked at the Paris Bourse.

Bachelier’s enthusiasm for physics quickly spilled over into finance, and he began to ponder the processes that governed the price of government bonds. He developed the idea of the random walk; he wrote up his ideas and defended a dissertation on the physics of financial speculation. He was almost laughed out of academia, and only secured a PhD at all with the help of a powerful mentor, Henri Poincaré.

Bachelier was ahead of his time even as a physicist. His research anticipated by five years a hugely important paper on Brownian motion by a young chap called Albert Einstein. But as a financial thinker, he was more than half a century ahead of the curve. His early research was discovered by the mathematician Leonard Savage and economist Paul Samuelson in 1955, a decade after Bachelier died. The first person to improve upon his ideas was arguably the physicist Maury Osborne, fully 59 years after their publication.

The sad story of Bachelier is told in an excellent new book, The Physics of Wall Street (US) by James Owen Weatherall. The role of physicists in finance is now a commonplace, even if financial physics is, like its founder, not quite academically respectable. But modern financial physicists – the “quants” – differ from Bachelier in one respect: some of them have made an awful lot of money. The most successful is Jim Simons. He was once a serious player in the high physics of string theory. Now, as founder of Renaissance Technologies and its flagship Medallion fund, he is one of the richest men on the planet.

Should we feel queasy about the growth of abstract, deeply technical thinking in finance? Weatherall is a cheerleader. For one thing, he says, Medallion returned more than 70 per cent in 2007 and 80 per cent in 2008. That proves quantitative finance can be privately profitable –but not that it is profitable in general, or socially desirable.

A more convincing defence of financial physics, and the sophisticated statistical analysis it deploys, is that it provides fresh perspective, revealing patterns that had been missed. A famous example is Didier Sornette’s use of stress analysis to predict not only earthquakes and failures of pressurised fuel tanks, but also severe crises in financial markets.

Still, physics alone will not be enough. Understanding the financial crisis, or the economy itself, should be a multidisciplinary effort. Unpicking the flaws behind stinky structured finance products required somebody to take an interest in messy real-world details. No purely academic approach would have delivered that.

Unfortunately multidisciplinary work remains difficult. Even the physicists have trouble being taken seriously by economists, despite the latter’s respect for mathematical sophistication. As for psychologists, sociologists, anthropologists … It’s a tough thing for any self-respecting economist to swallow advice from disciplines that appear to deploy such vague theories.

Still, nothing concentrates the mind like the potential to make money. And nothing fosters interdisciplinary work like a problem that scorns boundaries. Finance offers both the problem and the potential. Watch this space.

Also published at ft.com.

What Oxbridge can learn from YouTube

The British educational establishment should ignore online open courses at its peril

A couple of years ago, I showed my daughters a video put online by the Khan Academy, which has become famous as a pioneer in open-access education. The video was an amateurish but charming explanation of basic arithmetic. We had fun but the girls were not transformed into mathematical prodigies. Their mathematical education remains the sole responsibility of a rather traditional school in North Oxford. The only thing YouTube has taught them is how to draw manga cartoons.

That experience would not surprise the British educational establishment. Massive Online Open Courses (Moocs) are all the rage but the top universities seem to regard them as mere amusements, unlikely to threaten traditional methods, which may be costly but are exclusive and of excellent quality.

The vice-chancellor of Cambridge university, in a speech in January, said that online courses would “challenge the nature of higher education” but that they would not change what happened at Cambridge.

Educational expert Karan Khemka seems to agree, explaining in this newspaper’s comment page that the Mooc approach would eventually improve higher education, but “through incremental change rather than massive disruption”.

I am not so sure. Clayton Christensen of Harvard Business School has become famous for his explanation of how “massive disruption” tends to happen. A new technology appears, and it’s cheap and cheerful. Examples: small hydraulic shovels when the standard was large cable-driven mechanical diggers; small steel mills devoted to melting down scrap metal; slow, low-capacity hard drives in a world of mainframe computers. The dominant players in the industry look at the upstart technology and ignore it. This isn’t just a case of snobbery: their customers don’t want the new cheap technology either. They are already paying for a high-quality product that fits their needs perfectly.

The cheap technology is embraced by new entrants, who supply a totally new customer base. Construction companies didn’t want cheap, weak hydraulic shovels but landscape gardeners did. And then, of course, the new technology got better and better. Eventually it overtook what the incumbents had to offer and, despite all their advantages, they had absolutely no idea how to make or deploy the upstart technology that had become the state of the art.

My colleague Michael Skapinker has dismissed Clayton Christensen by providing a (perfectly reasonable) list of the ways in which a face-to-face learning experience beats a YouTube lecture hands down. It is most unlike Michael to miss the point.

Of course, a few online videos, chat rooms and multiple choice questions pose no threat at all – for now. Why go online when you can receive expert tuition in small groups, receive an exclusive stamp of achievement on your CV, and still have time to get drunk with the future masters of the universe? Online courses have little to offer current students at the world’s top universities.

That is why they are such a disruptive threat: if Oxford and Cambridge ignore Moocs now, what happens when the digital component of education has evolved to become indispensable?

If “content on demand” isn’t a killer application, then the ability to measure each student’s progress and tailor courses accordingly may well be.

The wise move has to be to follow MIT and Stanford, and indeed the UK’s Open University, embracing Moocs not for what they offer now but for what they might one day become. It is time for the UK’s greatest educational establishments to learn a few lessons themselves.

Also published at ft.com.

Statistical tomfoolery spins in Treasury

Osborne has hurled himself down the slippery slope, writes Tim Harford

‘I’m going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them.’
George Osborne, chancellor of the exchequer, Budget speech, March 20

Did he?

George Osborne was very good at levelling with people about how bad things are in the eurozone and how badly Labour managed the economy. He wasn’t quite so keen to draw attention to the plank in his own eye.

Nobody can be surprised that Mr Osborne spun things to his own advantage. But are you actually accusing him of statistical tomfoolery?

Of course I am. I’m ever more struck by the bizarre symmetry between Gordon Brown and Mr Osborne: both enormously pleased with themselves; both ideologically pre-committed to a particular course of action, regardless of the evidence; and both absolutely addicted to statistical fiddles.

But Mr Osborne established the independent Office for Budget Responsibility. You have to give him credit for that.

But he is in danger of making the OBR look ridiculous. The OBR is indeed independent and appears to be perfectly competent too, but it is obliged to respect statistical conventions. The chancellor has exploited those conventions without shame.

For example?

It is very important to Mr Osborne to be able to claim that the deficit is falling by some tiny amount – and equally important to his opposite number, Ed Balls, to be able to claim that the deficit is rising by some tiny amount. Just for the record, these are the only two men on the entire planet who care. Nobody else gives a flying fiscal target about it. But because these two overgrown school bullies care, Mr Osborne must manufacture a falling deficit, no matter what. He has done so through transparently shabby means. The most shamefaced is that he has informed the OBR that he will not be mailing his cheque to the World Bank until the next tax year, which begins in a fortnight.

Why does that help?

In practical terms it makes no difference to anything, except perhaps to mildly embarrass us in Washington. Nothing about the UK’s fiscal position is changed if Mr Osborne accidentally leaves that stamped addressed cheque to the World Bank in the glove compartment for a fortnight. But the OBR is obliged to recognise the spending as taking place next year. Mr Osborne could even change his mind about delaying the payment to the World Bank, now that the OBR estimates have been published – although even he might find that embarrassing.

What other tricks has he used?

He has moved cash from the Bank of England to the Treasury. The Office for National Statistics has decided that the appropriate way to account for this is to reduce the deficit. Any sane observer would conclude that the underlying economic reality has not changed.

At least he hasn’t used the off-balance sheet tricks so beloved of Mr Balls and Mr Brown.

Mr Brown was a master at this. He launched his unsuccessful election campaign in 2010 in a brand new hospital in Birmingham that was paid for using the private finance initiative – or to be more precise, which we are therefore all still paying for and will be for many years. But Mr Osborne’s big flourish this week was an attempt to pump air into the UK’s slowly deflating housing bubble by borrowing extra money and lending it on to homebuyers. He said proudly, “because it’s a financial transaction, with the taxpayer making an investment and getting a return, it won’t hit our deficit”.

But he’s still borrowing extra money – isn’t he?

Of course he is. But it’s off the balance sheet. It’s true that Mr Osborne is borrowing to invest in equity in British housing and so it’s possible that he will make a profit on the deal in the long run. But Mr Osborne could equally, and more wisely, borrow to invest in much-needed infrastructure. That could also pay off in the long run – but the accounting is less convenient.

This is ridiculous. Isn’t somebody supposed to be stopping him getting away with this kind of thing?

My colleague Chris Giles fears the ONS has been losing its independence.* But I suspect the truth is that if politicians decide to twist the statistics, they will succeed in doing so. And it will always be a pyrrhic victory. Whether or not you back Mr Osborne’s policies, nobody takes his statistical spin seriously any more. Mr Balls no doubt understands how that feels.

Also published at ft.com.

EDIT: Because of an editing error, the starred sentence above was originally published reading “The ONS has been losing its independence.” I respect Chris’s views but they are Chris’s views and not mine.

Geoengineering, a monster of our own making?

The core case against the science is a radical uncertainty about its consequences but it would likewise be irresponsible to turn our backs on it

While holidaying in the Alps with Lord Byron and Percy Bysshe Shelley, the young Mary Godwin was stranded indoors by unending rain. Stuck for activities to fill the days, she dreamt up a horrific story of a brilliant scientist whose hubris has tragic and unpredictable consequences. She later became Mary Shelley, and the story later became Frankenstein.

We now know that the dreadful weather of 1816 was induced by the vast eruption of Mount Tambora in Indonesia. Two centuries later, the use of imitation volcanic clouds is being seriously contemplated as an antidote to global warming. The word “geoengineering” is on the lips of the world’s atmospheric scientists.

The trigger for the discussion of geoengineering was a 2006 article by Paul Crutzen, a Nobel laureate and expert on the ozone hole. Many scientists share his concern that substantial climate change can no longer be prevented: we are emitting too many greenhouse gases and our plans to stop are tardy and timid.

Geoengineering proposals fall into two broad categories: we can try to remove carbon dioxide from the atmosphere, or we can try to reflect sunlight away to counteract the greenhouse effect that carbon dioxide produces.

Both ideas are superficially tempting. Carbon dioxide lingers for many decades, which means that, even if we stopped pollution tomorrow, warming would continue. Removing carbon dioxide would allow us to undo past harms more quickly and might prevent some tipping point being reached.

Solar radiation management – by creating reflective fluffy clouds to screen the dark oceans, or by using the volcano effect and pumping sulphur particles into the stratosphere – has its own attractions. For one thing, it seems absurdly cheap. So what’s the catch?

The catch is obvious enough. The world’s climate is complicated and we don’t really know what the consequences might be of interfering with it. We can guess at a few: some modelling suggests that a stratospheric sulphur shield could lower global temperatures to where we want them, but would not prevent the oceans acidifying, might affect the monsoon in India, and would cool the tropics while failing to cool the poles.

There are other risks, of course. What if geoengineering becomes a weapon? Clive Hamilton’s otherwise useful book, Earthmasters, is marred by dark mutterings about the connection between geoengineering and Lawrence Livermore National Laboratory, a centre for nuclear weapons research. This doesn’t worry me much. We have far simpler ways to obliterate our enemies.

No, the core case against geoengineering is a radical uncertainty about its consequences. But this cuts both ways. Global warming is a threat not only because of the likely scenario in which the climate changes in harmful ways but we adapt; but in the less likely (but plausible) scenario in which some runaway process makes the planet uninhabitable as we know it. For example: reflective ice melts, exposing dark oceans that absorb heat; warming accelerates; methane is released from the melting tundra; methane exacerbates the greenhouse effect; repeat.

While it would be irresponsible to rely on geoengineering to get us out of our present fix, it would also be irresponsible to turn our backs on the possibility that it might one day prevent catastrophe. Geoengineering experiments are, in any case, already happening – and they are cheap enough for a rogue nation or even a rogue Bond villain to have a go at something quite ambitious. It is time to start thinking about this, and quickly. As Mary Godwin realised, science plus overconfidence can produce an awful mess.

Also published at ft.com.

Budget 2013: Five ways to fix our national joke

The chancellor should start by abolishing national insurance, writes Tim Harford

In his opening words, George Osborne dismissed the idea of “easy answers to problems built up over many years”. A shame. There may be no way through our economic swamp, but there are plenty of things Mr Osborne can do to sort out the national joke our Budget process has become. Here are five.
The chancellor was keen to encourage hard work, but offered instead a national insurance exemption for small businesses that looks vulnerable to abuse.
Here’s an alternative: scrap national insurance entirely, and raise the lost revenue through income tax instead. If NI ever made any sense it was as part of a system of social insurance, designed for an age of the male full-time breadwinner, in which workers chipped into a central pot and withdrew contributions when needed. We no longer have that system.
This means that NI is just another income tax. It is an income tax levied on a narrower tax base, penalising workers and favouring those who live off capital. It is an income tax levied on a different basis and calculated in different ways, breeding cost and confusion. Mr Osborne has raised income tax allowances but NI has not kept pace. When the chancellor boasted of 2m low-paid people being taken out of tax altogether, it was untrue: almost all of them will still pay national insurance.
If NI was replaced with an equivalent but broader-based income tax, the effective tax rate on employment would fall, creating jobs and encouraging aspiring people to work harder – exactly what Mr Osborne says he wants. It would create some very vocal losers and would reveal that income tax rates are not quite as modest as they appear. That must be why neither he nor any of his predecessors has had the courage to scrap national insurance.
Mr Osborne’s second reform should be to impose value added tax on almost everything, including a VAT-like tax on financial services. VAT is an excellent tax: it is broadly based and it does not much distort decisions. VAT targets consumption rather than income, which makes it a good way to tax people’s long-term income prospects rather than their transitory income. This also encourages people to save. But VAT has so many exemptions that these benefits are frittered away. Many of these exemptions are arbitrary: children’s clothes are zero-rated but educational toys are not; Jaffa Cakes are spared VAT but chocolate biscuits attract it. The reduced rate for burning fossil fuels to heat our homes is just perverse.
The obvious objection to a broad VAT base is that it would be regressive. It would indeed be if Mr Osborne did not offset it, using income tax and benefits to cushion the blow. The Institute for Fiscal Studies believes such a reform could be introduced in such a way as to compensate pretty much everyone, while still generating £3bn of extra revenue.
Item three: Mr Osborne should scrap business rates, which are a distortion to the process of doing business, and introduce a land tax, which is not.
And for item four, the chancellor should replace council tax with a straightforward proportional tax on the value of property, a simpler and more progressive approach. He should scrap stamp duty on property: even if you gave a roomful of special advisers all year to try, they would be hard-pressed to invent a clumsier and more foolish tax.
All these ideas suggest themselves quite naturally to anyone willing to step back and survey the tax system as a whole. Most of them are explored in tremendous detail in the Mirrlees Review, published by the Institute for Fiscal Studies in 2011. The review has been quietly absorbed by Treasury officials but has made no discernible impression on the chancellor himself.
The one genuinely praiseworthy measure in Mr Osborne’s Budget – an attempt to encourage parents into work by providing tax breaks for childcare – could have emerged from a reading of the Mirrlees Review. I am willing to bet that it is a happy accident instead.
None of this is Mr Osborne’s fault alone. Successive chancellors have seized the occasion of the Budget to juggle, to conjure, to deceive and to wait for the applause. Mr Osborne’s announcement of cheaper beer, a penny off the price of a pint, was a parody of these tricks. The chancellor almost laughed as he announced the wheeze, and he knew that the newspapers would play along with the joke.
And so, a fifth and final suggestion for Mr Osborne. He should abolish the twice-yearly circus of Budget and Autumn Statement, and start thinking as seriously about his long-term strategy for tax as he thinks about his long-term strategy for re-election. It is time for William Gladstone’s famous old red box to seek its rightful place in a museum.

Originally published in the Financial Times

“You’ve never had it so good” – my brief history of British living standards