A Christmas calculation

There is a simplicity to being cynical which cannot be denied. An easy way to sum up human interaction as nothing more than self interest. It is a view which personifies much of economics and which has shaped the world we live in.
Instead of trying to take that leap into the darkness, where we can see that not everything is motivated by greed and desire, we take the path of least resistance. We assume as a species that the actions of others will be to maximise their own gains with no regards to the repercussions on those around them. Logically it falls on each of us to only think of ourselves and try and get the best deal we can before the rest of the world catches up, otherwise generally known as backward induction where you use your knowledge of what the last move will be to work backwards in an attempt to ensure you get the best deal in each round.
The depressing notion of self interest falls down in one key respect though, it fails to take humanity into account.
The last 12 months have seen some of the most devastating scenes in our generation. The mass exodus from Syria, the attacks in France and Tunisia, bombings in Lebanon, wars and terrorism throughout Nigeria, Afghanistan, Iraq, Ukraine, Yemen, Gaza and Israel, Egypt and repeated mass shootings in America are all only a tiny fraction of the pain and misery the world has suffered through.
In the face of such acts of violence and callous disregard for the lives of others the principle of self interest is clear and understandable. Where it is undermined however isn't in the grand headline grabbing actions of a crazed minority. It is in the selfless acts, those who when the first shots were fired didn't run from the chaos but put themselves between the bullets and others. Humanity has shone through as people have fought to retain that glimmer of hope for those who need it most. Those who didn't shut themselves off against the storm but threw their doors open to refugees and those who still strive to do just what they can to make others lives better.
A focus on Game Theory demonstrates that self interest is not always the most profitable approach. By collaborating individuals may not achieve the Parreto optimal strategy, where you cannot become better off without someone else losing out, they can however achieve a dominant strategy, or more simply the best course of action for each player knowing what the other player will do.
Self interest is fine for modelling strategies but it is not realistic when applied to the real world.
At this time of year that feeling of collaboration should be stronger than ever. It is all too easy to see the holiday season as nothing but an excuse for even greater crass commercialisation than usual. For many western high street retailers it is a season where the laws of supply and demand are everything as sales account for approximately 40% of their annual earnings. It is so much more than that though. It is a time when we can think about what really matters. A time of reflection and peace. It is most of all though a time to realise that there is so much more to this world than the maximisation of self interest. If the old economics is to be overturned it won't be through campaigns against capitalism or shouting slogans. It will be about taking a moment from our own selfish ideals and thinking about others. If we act on those thoughts then just imagine the benefit to all.

COP21 must act as catalyst for construction industry

The success of the Paris Climate Change agreement must be tempered by a realisation of how difficult it will be to achieve.
For the construction sector in particular it provides a challenge which will be hard for some countries to overcome. At present the construction industry is responsible for more than 30% of the world greenhouse gas emissions. As the delegates at the climate change conference fly back to their home nations on private airplanes it will fall to the construction industry to ensure that they can meet the target of below two degrees for global warming.
Recent statistics have given rise to the prediction that the global population could be nearing 10 billion by 2050, about the same time that global greenhouse gas is expected to rise by 70%. With such a dramatic increase in population comes and equally dramatic need for construction. 10 billion people need homes to live in, hospitals to be born and treated in, schools to be educated in, factories and offices to work in, shops to buy goods in, roads to travel along and on and on. The construction industry is set for a period of growth, even taking into account that the majority of those born between now and 2050 will be in developing countries without necessarily having access to all of the facilities which would be hoped.
If the global construction industry is going to meet the needs of these dual issues then it is going to need to start adapting to new technologies and embracing some existing ones.
The construction of Passivhaus builds for example could become the norm as an increasing number of architects and contractors see them to being the solution to meet the current climate change targets. “With innovative new technologies and expected cost reductions, climate-damaging emissions can be further cut, leading to an eventual complete decarbonisation of the sector”, Oliver Rapf, Executive Director of the Buildings Performance Institute Europe (BPIE) writes on the subject in a publication for the think tank Friends of Europe.
The principles behind Passivhaus design are quite simple, and play nicely to the principles set out in the Paris Climate Change Agreement, Carbon Dioxide emissions are reduced as the energy consumption of these build is limited by their heat retention capability. Likewise in hot weather the buildings ability to maintain a constant temperature internally through its design prevents the need for air conditioning or other energy intensive measures. Even with a new focus on renewable energy the increased efficiency of Passivhaus builds is likely to be an area of growth in the future, after all preventing the need for the energy consumption is preferable to needing even green energy sources.
"Renewable energy is absolutely essential for climate protection, but better efficiency offers even greater potential", says Dr. Wolfgang Feist, Director of the Passive House Institute.
Forty-five years from now the world and the construction sector in particular will be a very different place. The evidence for this is simple just look at the construction industry in 1965 compared to today. By embracing new ecological and sustainable building practices the industry in 2050 can still be the driving economic force it is now, more importantly though it could potentially be the driving environmental one as well.

Sugar tax leaves a sour taste

THE figures are startling and should be cause for concern however imposing ill thought through taxes is not the answer
According to recent figures one in three children leaving primary school is overweight, or obese. This is not to say, as some newspapers have claimed, that this same proportion of children are obese, just that they are over the recommended weight for their size.
The Common’s Health Committee is now proposing a tax on sugary drinks to help combat the epidemic of obesity which they see as infecting the country. A pigovian tax on sugar in the UK would fail to do anything more than cause even more fear among those parents already aware of the dangers of too much sugar and penalize families from the lower end of the income spectrum though. At best it would create a temporary decline in the amount of sugary drinks being consumed as a result of the media coverage; however, the overall impact in the long term would be negligible on the consumption habits of individuals.
Much has been made of the impact a similar tax has had in Mexico. Proponents of the legislation are only relying on a micro focus rather than looking at the larger picture. In Mexico the tax is based on per litre servings of sugary drinks. While the data shows that there has been a drop in the consumption of larger bottles experts have calculated that this reduction can be explained by people shifting to purchasing smaller servings. One such study led by Emilio Gutiérrez, a professor at Mexico’s ITAM University calculated that this shift in consumption habits from larger to smaller servings could account for 60% of the documented drop, while not actually creating a decline in the overall amount of sugary drinks being consumed.
Pigovian taxes are intended to address problems associated with negative externalities in the market, such as the health risks linked to too much sugar. By imposing these taxes states hope to combat inefficient market outcomes by imposing a cost for negative behaviours. They are already used in regards to smoking and alcohol and it has been suggested that such taxes should be imposed on fatty goods as well as sugar.
One of the key problems in imposing them though is in ensuring that the negative social consequences of the good, or action being taxed, is correctly calculated to ensure that it is balanced against the rate of tax being imposed.
Due to the overall costs of sugary drinks the level of taxation on each bottle would result in minimal revenues and marginal, overall, increases cost of the end product. In Mexico the tax started at about 10c on the dollar before being reduced to 6 cents. This type of increase would in most case be absorbed by the producers, who will still be making supernormal profits on their goods, and in cases where it isn’t is unlikely to be enough to deter people from making the purchase.
The cumulative effect of the increase, in the cases where it is passed onto the consumer, is most likely to hit those at the lower end of the income threshold. The theory of the tax increasing the substitution effect fails to take into account behavioral triggers which drive particular groups to purchase specific goods. Certain labels have a cache about them which creates a system of conspicuous consumption, particularly among the young and less educated, which will not alter with the creation of the tax and won’t be altered by any amount of substitution factor.
The concept of the tax has been drawn up by well intentioned individuals who haven’t realised the real draw of sugary drinks. There is a reason why people buy Coke and not the supermarket own brand. It isn’t about the cost. If obesity is really to be tackled then taxes on sugary drinks won’t do it. Increased education about health issues and more exercise programmes in school may be the way to go, if only we could find a way to fund them.

Sugar tax leaves a sour taste

THE figures are startling and should be cause for concern however imposing ill thought through taxes is not the answer
According to recent figures one in three children leaving primary school is overweight, or obese. This is not to say, as some newspapers have claimed, that this same proportion of children are obese, just that they are over the recommended weight for their size.
The Common’s Health Committee is now proposing a tax on sugary drinks to help combat the epidemic of obesity which they see as infecting the country. A pigovian tax on sugar in the UK would fail to do anything more than cause even more fear among those parents already aware of the dangers of too much sugar and penalize families from the lower end of the income spectrum though. At best it would create a temporary decline in the amount of sugary drinks being consumed as a result of the media coverage; however, the overall impact in the long term would be negligible on the consumption habits of individuals.
Much has been made of the impact a similar tax has had in Mexico. Proponents of the legislation are only relying on a micro focus rather than looking at the larger picture. In Mexico the tax is based on per litre servings of sugary drinks. While the data shows that there has been a drop in the consumption of larger bottles experts have calculated that this reduction can be explained by people shifting to purchasing smaller servings. One such study led by Emilio Gutiérrez, a professor at Mexico’s ITAM University calculated that this shift in consumption habits from larger to smaller servings could account for 60% of the documented drop, while not actually creating a decline in the overall amount of sugary drinks being consumed.
Pigovian taxes are intended to address problems associated with negative externalities in the market, such as the health risks linked to too much sugar. By imposing these taxes states hope to combat inefficient market outcomes by imposing a cost for negative behaviours. They are already used in regards to smoking and alcohol and it has been suggested that such taxes should be imposed on fatty goods as well as sugar.
One of the key problems in imposing them though is in ensuring that the negative social consequences of the good, or action being taxed, is correctly calculated to ensure that it is balanced against the rate of tax being imposed.
Due to the overall costs of sugary drinks the level of taxation on each bottle would result in minimal revenues and marginal, overall, increases cost of the end product. In Mexico the tax started at about 10c on the dollar before being reduced to 6 cents. This type of increase would in most case be absorbed by the producers, who will still be making supernormal profits on their goods, and in cases where it isn’t is unlikely to be enough to deter people from making the purchase.
The cumulative effect of the increase, in the cases where it is passed onto the consumer, is most likely to hit those at the lower end of the income threshold. The theory of the tax increasing the substitution effect fails to take into account behavioral triggers which drive particular groups to purchase specific goods. Certain labels have a cache about them which creates a system of conspicuous consumption, particularly among the young and less educated, which will not alter with the creation of the tax and won’t be altered by any amount of substitution factor.
The concept of the tax has been drawn up by well intentioned individuals who haven’t realised the real draw of sugary drinks. There is a reason why people buy Coke and not the supermarket own brand. It isn’t about the cost. If obesity is really to be tackled then taxes on sugary drinks won’t do it. Increased education about health issues and more exercise programmes in school may be the way to go, if only we could find a way to fund them.