Climate Change - The confession of a Watermelon

This post should be seen as a call for reason within the Climate Activism movement. 

The other day, thousands of people around the world marched for the Climate. In UK, over the last year, what has been in focus for is the Divestment Campaign, calling for funds and Universities to divest their holding of fossil fuel stocks.

I have essentially two objections to this; minimal impact of campaign (thus the rising opportunity costs of doing it) and the lack of influence over dictatorial State-run oil companies. Note, this is not a discussion over climate change, over exact impact of fossil fuel-usage, temporal effects of damaged or the causation problem in arguing a "Stop Climate Change" reasoning. This is simply an observation to how the suggested means relate to the alleged ends.

But first, let me make a confession; I used to be a watermelon too. I see the temptation in these campaigns and I can follow the Kantian approach of "If it's wrong, don't do it". Also, the argument posed heavily by the people over at 350.org is pretty convincing:
"If it's wrong to wreck the planet, it's wrong to profit from that wreckage".

Problem here, though, is twofold. The first part involves a two-step "very-low-chance-of-success". That is, first you need to get all Universities and pension funds aboard - which has a very low chance of happening - secondly, the impact of the entire thing should you pass the first obstacle, is very limited. In order to show this, I grabbed some numbers from ShareAction, a similar organisation calling for pension funds to divest.

On its own account, the ShareAction campaign claims that the UK private pension system has more than £3 trillion worth of assets. Let's exaggerate and use £4 trillion to be on the safe side, also including some private savings and University Endowments etc. (£4trillion is about 1,5x the British Economy, by the way, so adding another trillion is not just a rounding error..).

Let's also assume ratios of fossil fuel exposure to rest of portfolio at between 2-5%, as seen below (from the Oxford Stranded Assets Report).

5% of £4 Trillion = £200 bn. 

The total Market Capitalization of the Big Five oil companies (Chevron, Exxon, BP, Shell, Total) is around £730 bn. If using this number, again, numbers will come out on the side of overestimating the effect Pension Funds have, because there are quite a few additional fossil fuel companies - but I'm using these companies as a proxy for the entire industry, thus benevolently exaggerating the effect the campaign might have: £200bn/£730bn = 27%. Interestingly, the share prices of these companies have had differences between top and bottom price over the last few years larger than 30%.

That is the entire chunk of fossil fuel investments (all British University Endowment, Pension funds etc) represent a value in these companies less than what regular share appreciation/depreciation already does in normal markets.

In other words, even if the campaign would be instantly accepted, face no objections and all funds/Universities would sell off their fossil fuel assets, the effect would be minimal. This, again, not even considering that there quite possibly would be neutral buyers for these shares, counteracting the effect aimed for by the Fossil Fuel Divestment campaign.

The Oxford report on divestment of Fossil Fuel companies concludes exactely that:

In this report we find that the direct impacts of fossil fuel divestment on equity or debt are likely to be limited. The maximum possible capital that might be divested by university endowments and public pension funds from the fossil fuel companies represents a relatively small pool of funds. .  - Stranded Assets Report Smith School of Enterprise and Environment

My Second Objection

Going after publicly-traded fossil fuel companies in the west is misdirected. Why?

This chart explains it pretty neatly; the vast majority of fossil fuel production is made by National Oil Companies, predominantly in dictatorship or questionable democracies (Russia, Venezuela etc).

That is, the argument about divesting obviously has a further aim than just to annoy oil companies. Climate Activists want to stop the production of oil, so that the impact of climate change is halted. But going after the companies in the West that represent a minor piece, some 20% of global production, is misdirected. If these countries (Saudi Arabia, Iran, Qatar) won't even accept internal criticism and protesters are violently put down, why would foreign University students protest be any of their concern?

A formula for success would look something like this:

Result = (Large IOC share of global production [x] percentage Unis/pension funds hold [x] chance they would comply with the Campaign demands)

We know roughly two of these componens, (Share of IOCs = 20%; and percentage all Funds can affect, estimated to less than 27%). We don't know how successful the campaign might be, but it is reasonable to assume that not all will divest. Still, 0,2 x 0,27 x Y = a very small amount, even if Y turn out to be close to 1.

What I am saying here is that the campaign is completely misdirected; if you care about climate change (which watermelons normally do) you'd be much better off/having a much greater impact if you went vegetarian, got a your bike instead of driving or switched your electricity provider to a non-fossil-fuel one.

Review of Steve Keen's talk at the Uni

I am now finally back in Glasgow, ready for yet another exciting semester at the University. Classes don’t start until Monday, but that doesn’t stop societies to hold events and guest lectures. One of these was the visit from Steve Keen, the Australian controversial economist routed in the post-keynesian tradition.

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I wasn’t too familiar with his works beforehand and I really enjoyed learning a bit more of his approach to economics. Some of the data usage, especially his simulation program MINSKY was beyond me, though. Nevertheless I found some interesting points in his talk.

He’s a heterodox economist, very fond of attacking the neoclassical consensus, which is also his focus. For instance he made a splendid explanation for how certain models used in conventional micro economics (Perfect Competition; Indifference curves;  Demand Curve Aggregation) are not only unrealistic but also internally incoherent. This was refreshing, as was his pounding away at the “Money Neutrality” idea in macro. Neoclassical economics normally argue that money is neutral in transactions going on in the economy, i.e. money is the common denominator of heterogeneous goods and services simplifying exchange of these goods and services, but that it doesn’t impact the transaction itself. However, it also argues that money is just a number, and what matters is the ratio between the values of goods. The prime example is, if the money supply would double overnight and everyone suddenly would have twice the amount of money they had yesterday, neoclassicals say this won’t affect the economy because prices would also double, maintaining relative prices as they were before. This is one of the reason they see inflation as harmless. 

That is of course mistaken, as money supply increases doesn't happen that way; they flow through the economy from bank lending and (artificial) credit expansion, where some groups access those new money before other groups do – also, as Keen pointed out, we consume predominantly out of habit, habits used to certain numbers for certain goods. Even if I suddenly have access to twice as much money on paper, I might still hesitate before buying goods of twice its “normal” price, regardless of the rational approach such an action would entail. 

On the disappointing side was more profound issues in the approach to economics. There was a comment from the audience saying that economics is unscientific when it uses a priori axioms, suggesting its methodology should mirror the hard sciences. Surprisingly, Keen agreed, and added that he doesn’t view economics as a science – rather a discipline. Perhaps a mere tautology, but it is ironic to the point of laughter, when he ten minutes earlier praised the usage of mathematics in economics. 

That’s funny, Professor: see, mathematics is a science that solely uses a priori axioms, just like geometry or logic. Demote a science on the basis of incorrect methodology is an adequate critique, but then it should be held consistently, even to "your own" sciences.  

I don't think Keen is actually placing these disciplines in the same category of “unscientific academia” as economics, but that's what his comment yesterday implied. On the contrary, and this is a point over which Austrians and Neoclassicals fight, you have to use a priori axioms in economics, or else you’re fumbling in the dark. The Economy is us. We are always changing, reacting to new conditions and information. Thus, contrary events can occur simultaneously. If you disregards a priori axioms and only rely on data collection like in the hard sciences, you might have instances where these events cancel out, or even produce a reverse effect, leading the scientist to mindless conclusions. Since economics involve people's actions, which are prone to change at whims and desires, we cannot simply observe data and draw conclusions from those, such as a biologist would. Keen's claim is nonsense. 

That leads me to the second disappointment in Keen’s approach. He’s firmly dedicated on using data, putting into his MINSKY simulation, yielding predictions and explanation of how the economy would work given certain inputs. Again mistaken on his own grounds; people are not “chess men you move on a board”, (to quote the Keynes vs Hayek rap video), "their dreams and desires ignored". Believing that you can map every event in future economic conditions smells of the same convictions Hayek viciously attacked in his Nobel Lecture Pretense of Knowledge in 1974. I thought we were past that...

Murphy and Callahan, back in 2001 when Murphy was still at NYU, added several striking critiques to Keen’s work in their review, for instance about labour economics. Keen does an excellent job taking down the labour theory of value, then turns around and constructs a “real price theory of value”, falling in the same Marxian trap of ignoring the subjectivity of costs.

Overall I must admit I was glad to finally get a taste of his work. After running into his name now and then does yield some interest in a person. Though I'm far from convinced. He has several methodological as well as logical flaws to account for.

A great way to start the semester – I really hope for more occasions to discuss the essence of economics. 

Feminist Economics - an extension

This is the 7th part of the "Leftie Serie" which I created after attending the People & Planet Conference on the 8th of March 2014. 
Here are links to the other posts: Feminist Economics, Inequality, Financial Crisis, Layoffs vs. Bonuses, Defending the 1%, The Austerity Myth

After a few very rewarding discussions following my post on Feminist Economics the other week, I had enough material for an extension on the subject.

Most of the critique I had regarded the idea that I, simply, missed the actual point of feminist economics. Also, when a friend of mine explained how naturally the alleged wage gap disappears when accounting for all variables (including say lifestyle choices), that moved my perception a bit further. Great discussion!

Anyways, his argument was as follows: if we assume a patriarchy within the workforce, women systematically being discriminated against, rewarded less wages for their labour regardless of experience/knowledge etc. The entire feminist story, essentially. If we assume that, we'd consequently have to assume that women value certain things (say leisure, or providing care, or rather stay home with the kids etc) more than do men. My argument is based entirely on this valuation, where I claimed it was inherently individual and thus acceptable. However, my friend pointed out, what if - given said assumptions - women are taught to value certain things more than they naturally or individually would have done absent such teachings?

Such a statement could obviously be questioned epistemologically. But, if taken at face value it does change the outcome of the argument, and I would be inclined to accept the raison d'être of feminist economics.

However, obvious criticism occurs. Questioning why an agent value a good or service in a certain way, which is at the bottom of this new foundation of feminist economics, leaves the field of economics. Economics take valuations and actions by individuals, corporations or government as given. We question what incentives govern the outcome and how these incentives and actions change; but economists regularly don't take into account why an individual prefer a certain type of goods over another. It is simply taken for granted, assumed to be beyond the field.

Also, examining why individuals value certain actions over others is the subject of other fields; psychology or sociology instantly comes to mind. Thus, the sociological/political notion of feminism, adjusted for economics with a somewhat different point of view (including differing valuations between individuals/groups of individuals) instantly sends it straight outside the field again.

In this sense, feminist ideology applied to economics might be more relevant. However, it also firmly distinguishes itself from economics as an academic field, thus making "Feminist Economics" look like an oxymoron. 

Why Bonuses and Layoff have nothing in common

This is the 4th part of the "Leftie Serie" which I created after attending the People & Planet Conference on the 8th of March 2014. 
Here are links to the other posts: Feminist Economics, Inequality, Financial Crisis


I wanted to add "or the struggle for incentives" to the end of this post, but my posts already have very long names. That would, however, be a substantially shorter answer to the issue of Layoffs vs. Bonuses.

This discussion originates in articles like this one, comparing two essentially different business activities with eachother - simply because they seem to be in contradiction with one another. The general idea, and which was also lifted among the Lefties with whom I spend last weekend, is that laying off workers at the same time as paying bonuses to excecutives is inherently immoral, evil and straight out bad; they could cut the bonus and keep the worker instead! The top (usually rich) is getting wealthy at the expense of the bottom (poor). Shame!

I'll argue the position that this is not the case. My point is that two different business activities (1: Excecutive Payroll, 2: employment/worker's salaries) can occur at the same time, without affecting one another. Why is that? In order to answer that question we need to outline what excecutive bonuses are and what worker employment is.

First: employment, considered from a firm's perspective. Employment occurs when the benefits yielded from an employee outweights the costs associated with employing this person. (that is, the work/knowledge this worker provides is, for different reasons, more valuable than the costs of wages, taxes, providing him/her with office/phone etc, etc). In a normal market economy those numbers are very close; if benefits are substantially above costs, other competitive firms would gain advantage by offering that person a higher wage, thus reaping the benefits instead of the initial firm. If the costs are substantially above the benefits, the company is essentially making losses employing that person, and yet again competitive firms would gain advantage by employing workers at lower wage than the initial firm. Employment is determined by the differences between benefits and costs, as well as demand for that particular skill/knowledge or need for the work provided by the worker.

Secondly: Excecutive. The role of an excecutive within a company is quite different from that of the worker. The entire field of management is filled with different theories for how to improve performance. The rationale for paying high salaries is essentially incentives (in economics called efficiency wages); that is, if payed more handsomely, it will 1) attract better-performing applicants, 2) will perform better because the oppurtunity cost of loosing the job is higher. But this is not always efficient or even enough, and often create what economists call Principal-Agent problem. Essentially, the owner of the business/board doesn't necessarily know if the excecutive is doing everything he can in order to improve the business; the excecutive is payed regarless if he does a splendid job or just a rather decent one.

Bonuses, then, are used as means to align the interests of the excecutive with the business. Often they're made through awarding shares in the company (if the company performs well, shares tend to rise in value, thus providing the excecutive with incentive to increase value of company), but also bonuses if certain targets or criteria are achieved. Essentially, the purpose of bonuses are to create incentives and enhance performance.

This is how these two effects are completely unrelated; bonuses paid if criteria achieved, worker's salaries/employment occur when the benefits they provide outweight the costs they incur.

Student Analogy (we're still at a University, dooh)

I'll try to explain this using an analogy most students would be familiar with. I, as a student, take up student loans to finance my studies and my living expenses while I study. What I do occurs in two different actions:
1) I take loans,
2) I spend that money.

The idea for this analogy to work is that if I change my way of spending money, I could take on less loan. Since loans are generally considered to be a bad thing, less loans would essentially be better for me as a person/my financial wellbeing.

Arguably, money that I spend on one hand, can be said to be in direct relation to the loans I take up. For instance, it's not impossible to make the case that I'm taking up loan in order to consume chocolate. The statement is, in essence, true; I take up loan, and parts of those funds are used to purchase chocolate from time to time. If I didn't purchase that chocolate, I could take on less loan. Most people inherently sees how this is a riddiculous way of approaching the subject, however it's no less true.

But it's also incorrect from the point of view that 'chocolate' and 'student loans' fulfil different tasks; I take loan in order to pay expenses (say food or rent) that are required to pay regardless. And I eat chocolate to keep focus, concetrate better on my studies (essentially, enhance my performance) - also, occationally enjoy/relax, which in turn can be argued to be a neccesity for improving my studies.

Same with a company; yes, in essence it could cut the bonuses and keep more staff around, but that's not the purpose nor the aim of the company. They are two different actions, occationally occuring at the same time.

So yes, in principle, I could eat less chocolate (thus, perhaps performing worse) and with less expenses take on less loan. But because chocolate helps me study longer/focus 100% on lectures thus enhances my performance, skipping chocolate might also reduce my performance and result of my studies. Those studies then, were the initial purpose to be here in the first place => it would defeat the purpose.

All in all - sometimes things seem to be contradictory and especially in the case bonuses vs. layoffs, it bothers people. But when broken down into pieces, they are actually quite different things, whose purpose are different and are determined by very different backgrounds. Thus, they are not contradictory in any sense; laying off workers at the same time excecutive is recieving bonus is not contradictory, bad, greedy or even wrong.

_____________________
Analogy Translation:
Chocolate = Bonuses;
From a certain perspective deemed useless/waste of money, but from individual or firm, it represent the incentives/measures with which performance is increased.

You're entitled to your own opinion - Not to your own facts

So, tomorrow there's this lefties conference at one of the Student Unions. Exciting! I've talked myself into going with the intention of keeping quiet and listening carefully to all the arguments and positions I will encounter. How thoughtful of me, not to ruin their conference with unconventional views!

Anyway, as a pre-runner, I'm doing some reasoning regarding freedom of opinion - your right to think whatever you want. Fundamental pillar upon which our western democracies rest. Let's go.

One of the most interesting clashes of politics is facts vs. opinion. We all, predominantly, recognize that other people are entitled to their views, just as I am entitled to mine. However, what happens when such opinions are countered with plain facts, insofar that such facts can be obtained?

First, fundamental difference:
Opinion: I like Ice-Cream
Fact: Ice-Cream contains cream (unless it's vegan, made differently, lala).

Regardless of my opinion about what Ice-Cream contains, or my right to excercise that opinion, it doesn't change the fact that cream is a component of Ice-Cream - thus, it renders my opinion ridiculous, superfluous and straight out silly.

So, what happens when opinions are based on or fully rely on facts? That is, what happens when the relation between the two are established?

Let me give you an example. Consider a fairly easy statement, "Cats are the best animals!"
An opinion, easy enough, and a very subjective statement. How is "best" to be defined, or even measured? We can't do anything about it, and the freedom of opinion applies fully.

If we add the next layer: "Cats are the best animals, because they have most legs!"
Now we've established a relation to measurable fact, and the person has also implied the indicator for how "best" is to be measured: the amount of legs.

But here facts come in: There are a number of other animals with more legs than cats, say spiders or ants. Applying the person's own measure for why cats are the best animals (namely amount of legs), his/her opinion is invalidated. Cats simply are not the best animals, regardless of this person's view or opinion. He or she is wrong. Not from my point of view, but from any point of view.

How is all of this relevant for a Leftie Conference?

I tend to encounter socialists or people on the left that carry certain ideas and believes that I find preposterous. Fair enough, we're all entitled to opinions, which is a major criticism I get when I say they're wrong or should change their views: "We're all entitled to our own opinions, why don't you let me have mine?"

Well, insofar as
1) an indicator for measuring that opinion is provided,
2) facts for that indicator can be obtained, and
3) there's a straight relationship between the indicator and the opinion, i.e you use that indicator to say why exactly your opinion is prefered,
then your opinion can be made as useless and incorrect as the one about cats above.

That is, if I can prove to you, within these three conditions, that your ideology is incorrect, your statements invalid and your facts wrong - then no, you're no longer entitled to have that opinion.

This is, I think, essentially why I wanna go tomorrow. If I can prove to lefties that their perception or ideas are factually incorrect, they are obliged to change their position, those perceptions and ultimately their entire ideology.

Seems easy enough, why do we still have socialists around?

The Invaluable Socialist Logic part #2 - Perspective

Link to the first part of Socialist (lack of) Logic

One of these socialist features of University Life is portrayed in certain subjects; sociology is the prime example, but also Public Policy, a subject I had the great (mis)fortune to study last semester. When basing its raison d'être on the right of Government to control and intervene, it obviously becomes very biased toward socialist frameworks/attracts students with those values. Not to mention all the students mopping around about 'intersectionality' or staff going on strike every other day. Where are all the freedom-minded students?

Anyway, here's a fun example from Public Policy course of last semester.

Apart from continuously reading from Fredrich Engels, taking his words for granted, my lecturer had such a striking example of socialist logic:

Before Industrial Revolution
First she explained to us a view of 18th and 19th century Great Britain, before the technical and economical changes of the Industrial Revolution. She depicted an awful environment, vividly describing how poor women in rural areas had to spend their entire day on sewing tiny, tiny laces which were used for table decorations in Upper-class homes. For this, they made the equivalent of 2 pence. Oppressive, horrible life, lots of them became huckle-backed and blind from working in the dark. Let's just neglect the discussion of historical accuracy of this description and take it at face value.

After Industrial Revolution
Now machines were invented that could do 10-20 or even a 100 times what these women had been capable of doing in a day. My lecturer, consequently, condemned the change in society, arguying that these poor women no longer could spend their entire days on sewing laces, because machines took their jobs - and they became unemployed! Horrible, oppressive unemployment.

You'd think that if sewing these tiny laces all day, which were sold for essentially nothing, was such a horrible treat, finally getting rid of it and being able to dedicate yourself to somethink less harsh - that'd be a good thing. Nono, not in Socialist Logic. Whatever happens, whatever the reason, the oppression of poor workers is taken as given. Also, it's a terribly convenient position to take; when workers do a, they're oppressed. When they finally are relieved from doing a, they're oppressed. Falsifiability, anyone?

Especially awkward is this description of 19th century life when the lecturer appropriately forgot to mention that the standard of living between 1780-1860 increased some 150% for regular poor people like these. Well, well. Nobody accused socialists for being thorough. Or even coherent.

Socialist Logic: Everything is always bad and capitalism is oppressive. Period. Especially when capitalism/globalisation over the last 20 years lifted some 900-1000m people out of poverty. Awful, really.

A personal account to why Publicly-funded Universities is a very bad idea

The tutorial is about to start. Of the 15 students supposedly in this group, only 6-7 are present. The tutor shrugs and starts anyway. He briefly outlines the content of today's class and moves on to the first topics.

Oh, right. Some background. These tutorials have weekly excercises to be made in preparation of each tutorial. They're rather elementary tasks based on lectures as well as textbook. A few months into the semester, not to mention that the format didn't change during Christmas, even weak students should be rather aware of this by now.

An introductory question is launched at the group, only to strike dead silence. Today, I'm not answering all the questions, I decided in advance. Next question. I can't bear this silence anylonger, I'll do it. These bunch of caffeinated and regular-looking students, pens ready, doesn't seem to follow more than a few lines of thought at once.

15 minutes after the class starts, the first two latecomers rumble into the room. One of then instantly picks up a question, greatly to my delight, only to destroy that initial boost of happiness when the truth is revealed; she has no idea, answers diametrically opposed to what the tutor is asking. Cool enough.

5 more minutes, and the guy who most closely resembles the quarterback in some typical american movie bangs the door, drops his bag on the floor and takes a seat, staring at the tutor. Wait, striking resemblance to, erhm, elementary school.

Speaking for the remainer of the tutorial: the tutor, me or the girl who's basically got everything wrong. 
_____

Now, let me ask a few questions. If you come to a tutorial, why don't you participate? If you don't do the tasks or know what they're about, why do you show up? If you intend not to speak/participate, why do you bother showing up 20 min late (on a bloody 50 min tutorial)? If you're not into studying, why are you even at a University to begin with?

Let me get to my point. This country, as does my native country, provides people with free-of-charge education. They allow and accept tons of students. What does this give us? It gives us people who don't want to be here, and shouldn't be here because  1) it's expected of them, 2) they have nowhere else to go, as socialist governments ruin their labour chances by minimum wage laws, restriction and interventions etc.

Also, basic ECON101, what happens to demand of a service when price is artificially held at 0*? Heavily increased. What kind of people? Those who wouldn't pay should there have been a price tag. That is, in econ talk, those who value the opportunity cost for giving up labour over the benefits of University. Now, with a 0-based price tag, their calculations change, sending lesser-motivated students into Universities.

Final remarks. Publicly-funded education may produce these events; students lacking motivation, students being used by governments as a labour market initiative. Oh, and most importantly, standards are reduced so that the general student population (now less able, less productive etc) can keep up.

That's amazing. I'm so glad tax-payers' money is used for completely silent tutorials. Lovely.


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* = ignoring the effects of certain elasticity levels etc.

University Unions on strike AGAIN

Ok. Apparantly some of the University Unions are on strike today (again, since they shut the Library down just a few weeks ago).  So, here we go.

I'm not a fan of Unions, big surprise, and I'll explain why. But first we have to begin with what an employment is. An employment occurs when someone (employer) values the services someone else could provide (employee) higher than the cost for that service (wage + social costs). Likewise, an employee voluntary sells such service when the value of the wage exceeds the cost affiliated with that service (time, unpleasantness, opportinuty cost etc). If some of these conditions are unfullfilled, there's no employment. Essentially, employment is a voluntary exchange of goods and services just like anything else (additionally, there's a bunch of regulations and government restrictions for that when employment occurs, but that's beside the point). It is also influenced by the demand of such services relative to the accessability to it, that is supply.

Only this far, striking would make little sense. If you, as an employee feel you can provide better services elsewhere or you're selling your service for too low amount, the only action for you is leaving. Go to the place that'll value your abilities higher/more accurately. Stop messing around waving signes, playing socialist revolution. Consequently, if you prefer the wage payed to you for the service you provide over whatever your alternative might be the action is staying. Provide that service, and stop hindering the lives of others (in this case, students who require access to the Library; you could even argue that the Unions are liable to reimbursing the tution-paying students for losses due to the strike, but that's also a bit beside the point).

Ok, second of all, now let's consider the points and demands the Union's actually making. The core of it, like most strikes, involves increased payroll. The argument is that 1% increase in salary is actually a cut, because current UK Inflation is at around 3%, thus the salary recieves is worth ~2% less than a year ago. That is correct, in real terms it is a pay cut. And they argue that to be unfair, especially since the UK Universities aggregate surplus is £1 billion a year, or something like that.

Here we have a few issues. First of all, pooling all the surplusses of the 150+ Universities in the country is greatly misleading, but obviously screaming "1 BILLION A YEAR" sounds a lot more intimidating than the actual truth. What's the real deal? So, let's have a look at Uni of Glasgow Financial Statements for 2012:


Uni of Glasgow Financial Statement 2012
Income               £440m

Expenditure       £430m

Surplus:               £10m
Margin:                2,27%

This income consists of some £150m straight from governmental funds, making the income rather risky; political instability, changes of government budgets or conditions for student loans etc can occur rapidly, putting the University's financial position at risk. Hence, if the Scottish Government decided to cut Higher Education expenditure by some 10% or so, the University will be showing red digits. Apart from that, if faced with a reduction of students, not even substantially large, same thing would happen; red digits.

But still, £10, can't the margin be reduced a little? On the contrary, arguying from a financial stability point of view, it should be increased. Tesco, for instance, runs with 5-6% profit margins, and financially healthy companies such as H&M or Apple carries some 40-50% profit margins. Definately no, 2,27% margin is not excessive in any way.

Following that line of thought, if the margin is low already (and virtually can't be reduced), what effects would an increase of wages have? Three options: 1) fire some staff, while others get their salaries increased, 2) allocate more funds to wages than other University costs such as facilities, technology, library etc, 3) demanding more money from the government (essentially, increased taxation).

If 1), you redistribute money from some people to pay others, 2) you reduce the service/usefulness of facilities, university buildings, lecture halls etc, 3) through taxation, you take money from everybody in Scotland, in order to pay for University staff. In either case you're taking money from other groups in order to met your demands, some of which could arguably be a lot worse of an outcome than a general ~2% pay cut. Typical Union thinking.

So consider the entire argument for a bit. The bottom line for this strike is that "University Staff deserves more". That, in turn, relies on the propositions that they can't "make their ends met", implying that they're underpaid. From quickly googling the avarage salaries of Uni of Glasgow staff, I found digits of around £15 000/year for the lowest paid staff (somewhat around the levels of relative poverty line, which I discussed the other week). Probably not accurate for all serviced the staff provide, and I'll look for some more digits later today when I talk to the strikers. Putting that amount into comparable sites such as Global Rich List, gives us the following result:
£15 000 amounts down to top 3,23% income-earners world wide. I hear 'Solidarity'? 'Decent wage', you say?

Ok, striking per se, is absolutly preposterous and riddiculous. BUT, even considering the Unions' demands, the picture turns even uglier; people, top 3%-earners in the world, are refusing to fullfill their commitments on the ground that they're underpaid. For real? Is that some kind of sick joke? An insult to anybody else earning less than that?

To the rest of the world, or anyone with a pair of working glasses, that's like Bill Gates (or any other super-wealthy guy) refusing to work because he finds his wage too low. Get real, and stop striking.

UK 'Help to Buy', or just a regular party at Uni?

After a first turbulent decade of the new century, with artificially-low interest rates, Subprime crisis and housing booms you'd figure Governments around the world learned a thing or two about what just happened.

As perhaps a few students have experienced over the years of University life, curing an awful hangover with more booze might work for a day or two (or weeks, as Fresher's Week taught us), but the nasty, horrible hangover will return - worse than before.

"The Hangover is not the problem. The Party was." - Johan Norberg

What a bum, saying yesterday's epic party was the problem! How dare he? Luckily, he's referring to the economy and its crisis witnessed over the last few years rather than your fabulous party.

The US government created the largest financial crisis for generations by lowering interest rates, the economic equivalent of free shots to everyone. The political purpose of 'every american a home owner', made sure the government buddies Fanny & Freddie bought every mortage loan available, no matter how risky or insecure that mortage was (that is, book U2 and Green Day for your livingroom party - someone else's dad will pay for it). On top of that, we had the issues of foreign currencies streaming into the US, that is; invite everyone you know. All set for an epic party, right?

When we all woke up from that heavy hangover of ours, we found ourselves in a weird situations; our economies didn't work properly. We had debts all over the place - and nobody to pay for them. Clearly, that bum's dad didn't pay U2 enough, now we're all screwed!

Today, in 2013, we're still deep down in debts. Most Western governments run major budget deficits (Pay for the booze with your credit card), and the UK Government figured they'd do something about the expensive Housing Market. Clearly, those venues for your crazy party ideas are a bit too expensive, are they not? Earlier this year, Help To Buy was introduced, as a way of "helping young people onto the property ladder" - by providing them with free loans for the first 5 years, and taking on responsibility for 20% of the mortage value.

Absolute rubbish! How do you think we got into this mess to begin with?

A Crisis caused by too low interest rates, perverse government intervention and mortgage loan for everyone, CANNOT be solved by LOWER interest rates, MORE government stimulus and MORE mortgage loans. 

Ask any student if more drinks will solve that horrible hangover. I guess even governments like to keep partying.


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Financial Times has a nice run-through of the Help to Buy Scheme.

I absolutely recommend Johan Norberg's book. It will blow your mind

Why Social Scientists need to learn math

Obvious statement: math is useful for a lot of things.

Yesterday morning I had an infamous lecture of Public Policy. It's interesting in the sense that you can predict the kind of socialist ideas that'll come out of it;

1. Thatcher was bad, 
2. Critique of Neoliberalism, 
3. The horrible effects of market economy

Yesterday was a special day in that the third was arguably not even included. However, the Professor did give a good start, critizising neoliberalism ideology after a mere 9 minutes of speaking. Even better, I think he set some kind of record; 4 minutes into the class, his first severe charge against Thatcher was laid. Impressive.

Not to say that this example means anything in particular, but I suppose it's fair to assume that Public Policy at University of Glasgow foster a rather strong hatred towards anything non-socalist, especially if it can be connected to Thatcher & Co.

Enough, what I wanted to convey today was the surprising lack of math insights and how that cripples the social scientists. This was his example:

Amount of UK Labour force in Manufacturing employment:
1978      28,5%
2009      10%

Conclusion; only a third of the people who worked in manufacturing 30 years ago, remain in that industry today.

Wait. Read that again.

Ok, well, no. First of all, people change jobs. They can change occupation/exit or enter industry, especially over a 30 year period. Second, a fair share of the people employed in 1978 will have moved on to enjoying a life of retirement by now. But 10/28,5 = 0,35, so the math still works out, doesn't it?

Math issue: between 1978 and 2009 the population (and the distribution of people in working age) have changed significantly. Thus, if inputs in a %-figure changes, the output changes. That is, 10% of the Labour force in 2009 is most likely not 1/3 of 28,5% of the Labour force in 1978.

Additionally, I've even stopped being suprised of the cases where people misuse Percentage for Percentage Point, ending up with completely flawed conclusions. My point here is that social scientists tend to have a limited understanding of math and what affects the numbers (especially regarding %). And, as they use statistics and math in describing their field, they inevitable end up with flawed or unsupported conclusions. That's a serious issue, heavily diminish the value of their study, should this be a theme for a larger part of social scientists. Let's hope it isn't.

If you're to use math or statistics, you need to understand what comprice and influence them. If you don't, you'll end up misinterpret data. Some kind of "know-thy-limitations" argument, I guess.

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This lecturer also gave me some idea to why there are so many socialists in University environment - and what happens to them afterwards. Well, in his case, some of them seem to remain at Uni, teaching Public Policy (or some other fluffy subject like sociology).

Welcome to Libertarian Uni!

Hey!

Welcome to the Libertarian Uni blog!

As a first entry I'd like to describe what will be the future of this blog. I am a libertarian writer, originally from the country held as 'the Heaven of Welfare', and I am strongly opposed to socialism. Travelling and languages marvel me, if such personal desires are interesting enough. I study Economics and Economic history at the University of Glasgow and I'm fairly new to the UK life. Fascinating in many ways!

Enough mumbo-jumbo. This is a blog about libertarianism. It involves some economics, most likely influenced by the Austrian School of Economics to which I belong, and a whole lot of socialist 'welfare state' ideas. It came about a few weeks ago, when I had been bumping into socialist anti-capitalism ideas, calls for the government to do this or that, media articles about rent controls, regulations and overall student ideas.

After certain events, I found that I needed to channel the reactions I had from such experiences. Upset Facebook-posts only go so far. All in all, this is how I channel the everyday socialist, interventionist and plainly weird ideas University Life gives me.

Enjoy!