From: smee@bristol.ac.uk (Paul Smee)
Newsgroups: soc.culture.british
Subject: Re: Currency problems
Date: 6 Oct 92 15:07:23 GMT
Reply-To: P.Smee@bristol.ac.uk (Paul Smee)
Organization: University of Bristol

In article <qnaanr0@zola.esd.sgi.com> livesey@solntze.esd.sgi.com (Jon Livesey) writes:
>In article <1992Oct5.094830.26769@bristol.ac.uk>, smee@bristol.ac.uk (Paul Smee) writes:
>|> In an ideal world, I might be persuaded of that.  However in today's
>|> Britain, it is often the case that the OVERALL costs of eliminating the
>|> jobs is more than would be the cost of sufficient subsidy.  This is
>|> basically because there are not alternative jobs for the displaced
>|> people to take, so that they end up on unemployment (direct cost), and
>|> not paying taxes (indirect cost).
>
>I've been hearing this argument most of my life.   There's always
>just "one last generation" of people in an industry who need a
>little subsidy to make it to the end of their careers.   But if you 
>think of it, there are people risking their lives down coal mines
>today who weren't even born when the Govt. took over, and started
>protecting, the coal industry.

I will admit freely that there are times when industries need to be
closed.  It doesn't hurt my feelings at all, for example, that the
great British buggy-whip industry has gone to the wall.  (Don't know
why I said that.  Some bright spark will now, almost certainly, pop up
to tell me that there is in fact a thriving, and world-renowned,
buggy-whip factory in Nempnett Thrubwell, or something.  Never mind.)

However, I question the criteria used for closure.  In simple
economist's jargon, I believe that the financial criteria should include
the externals, both cost and benefit, as well as the internals.
Applying *my* criteria, the coal industry should be supported at
present because the TOTAL cost of closure is actually higher than the
total cost of staying open.  The catch, which is why the Government
doesn't see it my way, is that the internal book-keeping indicates
that, for the coal industry in isolation, it is cheaper to close the
pits.  

The added costs which tip the balance in my favour (by my accounting)
are external to the industry itself -- increased unemployment benefit
spending and decreased tax revenue, both made worse by traditional
market multiplier effects -- and so don't show up in British Coal's
balance sheets.  They do, however, come directly out of MY pocket.

(There's a similar argument can be done with regard to British Rail
line closures, which I'll pop up in here with shortly, I hope, which
again indicates flaws in the Government's methods of accounting.  I'm
trying to find time to work up a simple (but realistic) arithmetic
demonstration of what's wrong with it, though, in order to make it
easier to discuss.  It's already a bit easier than coal, because it
doesn't involve invoking mysterious 'externals'.)

The only thing that surprises me, Jon, is that given your frequently
expressed concern about how the Government wastes 'my' money, you don't
accept the method I suggest of saving some of it.  Is it the figures,
or the principle, which you doubt?

-- 
Paul Smee, Computing Service, University of Bristol, Bristol BS8 1UD, UK
 P.Smee@bristol.ac.uk - ..!uunet!uknet!bsmail!p.smee - Tel +44 272 303132