Institute For Economic Common Sense - Second Lesson

Proportional Representation

Clearly an absolute necesssity. Consider the following analogy:

10 friends are going out for dinner. They decide to pick the restaurant democratically. Here's how they vote:

• 4 want restaurant A (and hate B)
• 3 want restaurant B (and hate A)
• 2 want restaurant C (and hate A and B)
• 1 wants restaurant D (and hates A and B)

Under the awful British system of first-past-the-post, the friend group ends up going to restaurant A. The majority of diners hate that restaurant.

Under proportional representation, the largest of the minorities does not get to impose its will. They get together, rule out A and B as most unpopular and probably end up eating at C or D (or even find there's a restaurant E which everyone is more or less happy with). The point being that no one ends up somewhere they hate and everyone gets something they can tolerate.

Politically, it has been argued that proportional representation leads to governmental paralysis as coalitions find it difficult to agree long enough to build a programme for stuff like govering the country.

But why govern the country in a direction that most people don't want, simply because you're the largest minority? Wouldn't it be better to wait until you can find something that the majority of people can get behind, or at least don't have a strong objection to?

And what's wrong with paralysis anyway? Are there problems so desperately urgent that you need to fix them RIGHT NOW? And even if that is the case, why should that be an opportunity for you to make changes that most people don't want? If there's something bad going on, using the opportunity to get up to shady stuff doesn't say good things about you.

At time of crisis, a government of national unity is the best solution anyway, i.e. get as many differing voices as possible in the room and try to hammer out something that works for everyone. And at times not of crisis, what's the hurry to ram through legislation that most people find objectionable?

Consider the current (14 September 2020) British government.

Off they go, full of vim and bluster, ignoring conventions, threatening to break the law, ignoring dissenting voices, because they can. The majority of the population did not vote for them but they are the largest majority and they will go a-hunting wheresoever they please.

Under proportional representation, they would have been forced to find common ground if they wanted to get anything done. Yes, get all the voices in the room and try to bring the country along with them, as a whole.

With all due respect, that's not happening right now. Watch this space to find out how it ends...

Institute For Economic Common Sense - First Lesson

It is a truth universally acknowledged, that every single nation that wishes to be respected by economists, must be in want of continuous growth.

The dreaded GDP, gross demonic domestic product, must always be on the up because otherwise, ooh, there be dragons or something.

How does this work? Apparently, an ideal GDP annual growth rate is 2-3%. At 2%, over twenty years, that means the economy must become half as large again (i.e. every £1 in GDP becomes £1.49 to be exact). And over fifty years, we're looking at becoming two-and-a-half times bigger (every £1 becomes £2.69). If you think that's crazy, we need to be at £7.24 after a century.

One of the (many) problems with GDP is its horrific statistics cherry picking. Essentially, anything that is difficult to measure is ignored. Health, happiness, environment, waste - no thank you, we won't worry about any of that. And so we end up with these scenarios:

Scenario 1 (good for GDP):

• Boy visits grandmother.
• Grandmother gives him toy which she bought for him, made in a factory by badly paid people in uncomfortable conditions.
• Boy is polite and thanks grandmother effusively.
• Boy's mother collects boy, gives grandmother box of biscuits in thanks for childcare. Biscuits use cheap ingredients bad for environment (e.g. palm oil).
• Grandmother is polite and thanks daughter (boy's mother - keep up) effusively.
• Boy and daughter leave. Grandmother throws biscuits in the bin because she doesn't like them.
• Boy arrives home. Boy throws toy in the bin because it's not very nice.
• Next visit - grandmother has bought two toys because boy likes them so much.
• Next collection - daughter buys grandmother two boxes of biscuits because she likes them so much.
• Result - GROWTH! GDP is happy. More unwanted garbage in landfill, more pointless work done by workers in unpleasant conditions. More use of limited world resources - from ground to factory to shop to house to buried in the ground again - in a pointless cycle of waste.

Scenario 2 (bad for GDP):

• Boy visits grandmother.
• Boy climbs tree in grandmother's garden to pick tasty fruit that she can't reach.
• Grandmother teaches boy how to make a tasty pie from the tasty fruit.
• Daughter arrives to collect boy. They all enjoy some pie.
• No need for gifts - boy has obtained fruit for grandmother, grandmother has made pie for boy and daughter.
• Result - NO GROWTH! GDP has not increased, therefore this transaction has no merit and must be stopped. Also, no garbage in landfill, no pointless work done in unpleasant conditions. Instead - happiness and sharing has raised moods, but this cannot be measured so is worthless.

GDP was a tool to get a rough idea of how economies are getting on. It has mutated horrifically into a be-all-and-end-all (which can be abbreviated to bell-end, if you prefer) and has become a driver of what should happen instead of an approximation of what has happened. The ignored factors severely restrict its application to the real world.

And infinite growth is clearly ridiculous.

Discuss.