Springtime for madcownomics

Should Creutzfeldt and Jakob get the Nobel prize in economics? Probably, except that they are dead, and did not really foresee how the mad cow disease would hit the economic sphere.
Under the impulse of Eurostat, European Countries are now supposed to include parallel activities — in particular drugs and prostitution — in their GDP computations. The pro argument is that these are mutually profitable transactions, and, as they are legal in some countries, it will facilitate cross-country comparisons. A similar adjustment takes place for owner-occupied housing, which contributes to GDP in the form of imputed rents. This allows to eliminate the bias that countries where renting dominates have an artificially greater GDP than those where owning dominates.

Where the mad cow disease strikes is here: How can the same government decide that an activity is illegal, ergo harmful, and at the same time include it in GDP, i.e. decree that it raises welfare? And, furthermore, if it is illegal, how are we supposed to measure it? And why should national accounts be harmonized between a country which thinks that drugs are bad and a country which thinks that drugs are good? [1]

Another pro argument, beyond ludicrous, is that those computations will mechanically reduce the debt/gdp and deficit/gdp ratios, making European countries look better in terms of “Maastricht”. Except that the reason why we divide debt or deficits by gdp is that we want to express them in relation to some measure of the tax base that will serve to pay back the debt. Including an illegal, and therefore untaxed activity is therefore absurd.

There is no limit to what can be included in GDP. When you watch TV, your TV is performing a service. The TV channels’ advertising revenues widely underestimate the value of this service (in fact they value a totally different service, the grabbing of your attention, which generally comes as a deduction of yoour own utility of watching TV). We could well impute the value of watching TV in GDP. There is no logical difference between doing this and imputing owner-occupied housing. In both cases we put a price on a service that people provide for themselves with the capital they own, so as to make it comparable to the same service sold on the market.

It turns out that each French person above 4 on average spends a daily 3 hours and 50 minutes in front of TV. Let’s make it 4 hours. We can value that on the basis of the price of movie theaters, which is something like 8 to 10 euros for a 2 hour sequence. As many people watch TV because they are not willing to pay that amount for what they see, we have a little bit of a truncation bias here, so let us divide this amount by 2. This eventually values the hour of TV watching at 2 euros per hour. Let us make these 4 hours 2 hours, because some people actually watch pay-tv, which is recorded in GDP. Putting these things together, the value of watching TV is evaluated at 2*2*365 = 1500 euros per year. There are some 60 million French people above 4. We should therefore raise French GDP by 90 billion euros, i.e. 4.5 points of GDP.

[1] In France and other places, the buying of sex is illegal, but the selling of sex is not. Similar absurdities prevail for drugs. For Marxists, feminists, and their ilk, there are no such things as good actions and bad actions; only good people and bad people. A voluntary transaction between a good person and a bad person is therefore good and bad at the same time. From there the Marxist/Feminist has two escape routes. He can claim, in an Orwellian fashion, that good = bad. Or, he can decide that good people are not endowed with free will, implying that the transaction is not voluntary. In the latter case, the life of the good people (women, the poor, etc) has to be regulated by the government. But, if good people have no free will, regulation can only be enforced by bad people…




A recent law, effective July 1, prohibits the lighting of offices, buildings, churches and shops during the night. We are being told that such practices are useless and wasteful, therefore they should obviously be prohibited. Such a prohibition is good for the Planet and is meant to allow city dwellers (as in cloudy Paris) to watch the night sky, which UNESCO has recently classified as part of mankind’s heritage (it is unclear to me whether UNESCO has officially recognized that we share that heritage with aliens).

Of course, conceivably, some people may want to light a building for good reasons. For example the mayor of a town may want to light a historical building during some celebration. Or, say, a fashion house may want to light its headquarters on the Champs-Elysées, which contributes to the “image of France” abroad.

Well, in this case there is no problem. You just have to ask the “préfet” (a local official nominated by the central government) for a derogation. This is the same guy who decides where and when you may want to open your shop on sundays or have a sale.

You cannot get a derogation for murdering you grand mother or having a picnic on your neighbour’s yard. But you can get a derogation for violating the curfew or opening a shop on sundays. There are crimes for which the degree of criminality is a matter of judgement.

You see, everything is simple and nice. What’s the point of having this outdated concept called “rule of law” if people abuse it to do useless things and harm the Planet? Instead, let’s have people submit their motives to bureaucrats, and let them decide on a case by case basis which motives are noble and which ones are ignoble. And since the government is the source of morality (otherwise there would be no point in letting it grant derogations to the prohibitions it has made), there is no need for public officials to ask for a derogation to the curfew should they want to break it. By definition, their motives are noble.

For example, the “Nuits Blanches” is a cultural event sponsored by the Paris municipality which precisely consists in engaging citizens to spend the entire night out, visiting museums and attending cultural events (this link gives you an idea). A naive mind might ask why it is good that these events, which could happen during the day, or at least not during the curfew (which the law sets at 1 am – 7 am), have to be scheduled at a time when most people normally sleep, and why suddenly the health of the planet is no longer a concern when politicians stage massive festive events, while it remains so when it is the private people who want to have their own festive events.

It is hard to believe that breaking the curfew in order to have the Nuit Blanche would follow from a pure utilitarian argument.  After all, if the happiness of the Planet is important enough to warrant a curfew, surely the utility loss from having the Nuit Blanche events during the day instead of the night must be small (assuming it is a loss at all) compared to the marginal unhappiness inflicted upon the Planet.

So the reason why Nuit Blanche 2013 will stand despite that the government just passed a law making these sort of things illegal is that the event has some special moral meaning. In a recent interview, the Paris Mayor, Bertrand Delanoë, gives us a hint on the true meaning of the Nuit Blanche: “Nuit Blanche has a political dimension. The night is not owned. The night is shared”.

I suppose Mr. Delanoë really meant that the night is shared under the terms of those who own it. And the Nuit Blanche and the curfew both remind us who owns the night.

This week in social engineering

The French government has been in great shape lately and this week it has launched a number of policies to make the country a better place to live. I would complain however that they sound unimaginative, a disappointment coming from the country of nouvelle vague, nouveau roman, nouvelle cuisine and nouveaux philosophes.

For one thing the subjects — sorry, the citizens — have been reminded that they do evil things with their lives, in particular smoking and driving, which victimize public health and the planet respectively. Therefore the price of cigarettes (80 % of which consisting of taxes) is going to go up again by a large amount. And similarly, to save the planet (which presumably means making more room for the emissions of Chinese coal plants), the price of gasoline (80 % of which consisting of taxes) is also going to go up again.

I suppose Messrs Sunstein and Stern would happily argue that there is something like an optimal cigarette tax level and an optimal carbon tax level. But the governments here and there take it as meaning that these two things should ever be growing. First because once you have set a policy instrument at its optimal level, you have nothing else to do, and you won’t be in the media. Second because it would be so much nicer if nobody drove and nobody smoke at all.

In the case of smoking I have my little theory. Once a number of people have quit smoking, the remaining pool of smokers consists of those who are far more hooked. Therefore they are more price inelastic which makes it tempting to go for another round of taxation in order to generate revenues. Perhaps a similar story could be told for gasoline taxes. Once more people in cities have switched to public transportation, the remaining drivers are those that are “stuck” in the countryside.

First you tax the good because it is “bad” and you want to deter consumption (a “Pigovian” tax). Second you tax it again because your first tax has made demand inelastic (a “Ramsey” tax). There is always a theory out there which allows you to get away with whatever you planned to do in the first place. This is why theories exist.

Of course sometimes the theory goes wrong, even by the standards of those who use it opportunistically. It is  a bit mysterious, though, why educated people failed to predict that wheat could not grow in Siberia, or that organized crime would increasingly be involved in the French tobacco retail activity, as discussed in this fascinating web site (in French)?

Then considerable advances have been made on the front of “gender equality”. Too many men are involved in sports and too many women breast-feed. We need more men breast-feeding and more women playing rugby. For this reason the government has reduced the parental leave for mothers (now known as Parent 1) and increased it for Parent 2 (formerly known as fathers). And the government has decided that no “gender” will account for less than 25 % of the boards of sports leagues and associations. But since the government also tells us that “gender is a social construct”, and plans to teach it to 6 years old, because it is presumably as important as reading and writing, it is easy for sports leagues to comply with the law. They just have to socially construct themselves so as to declare that whatever proportion of people in their board are women (or whatever they call them nowadays).

Also the scope of the law imposing a quota of 40 % of women in corporate boards has been broadened and the associated penalties have been increased. This quota is good because the Norvegians have it. Obviously, everybody knows that whatever the Norvegians do should be imitated.

It is not obvious to pin down which theory is being used here, because most of the intelligentsia holds as self-evident that “gender equality” is good and similarly that whatever       the government does in the area indeed promotes “gender equality”. So we can only speculate.

There is the idiotic theory of gender equality, which states that the optimal proportion of women in whatever activity is 50 % regardless of the activity. This presumably explains why a fishing permit in France costs less than half for women than for men. Yet I don’t see many women fishing, perhaps one should pay them to do it? However I will have doubts about this theory until I hear about men quota in nursing or teaching.

There is the tautological theory of gender equality, which says that we need more women in sports, because sports are good, and sports are good, because this is what men do. This theory manages to be both tautological and self-defeating. It is counter-performative. Once you have increased the proportion of women in an area, it is by definition no longer good. If you believe in this theory you will always be unhappy and frustrated.

There is the patriarchy theory of gender equality, which holds that men dominate and exploit women. For example, men are more in executive positions than women, therefore the latter are exploited by the former. Let’s have more women in executive positions so that we will have more women dominating and exploiting other people. It is hard to see a mechanism by which not breast feeding or injuring oneself in a football match is a form of exploitation, but I’m sure there is a theory on that.

It must be depressing to be in government:  People constantly organize themselves to do the opposite of what you planned for them, and then you are forced to pass all those laws to correct that. Why don’t people just realize what is good and bad instead of giving the government such a hard time? This is unfair!