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Thursday, July 11, 2013

Getting Out Of Recession 2 - longer than my actual speech

As Bill Clinton so charmlessly acknowledged the prime issue in almost any peacetime election is "the economy, stupid". This will be so in spades in Britain because after 5 years and counting of recession none of the traditional parties claim to have any ideas of how to achieve growth. Looking at growth in the rest of the world it is obvious that growth is possible, if the will is there.

Britain and the EU are in recession but the "world recession" which is so often blamed is a myth. The IMF recently put world growth at 4.8% and growth in the Commonwealth at 7.3%. The EU & UK being respectively parts of these groups and in recession means that you can add at least 1% point to reach the averages of the rest of the world and rest of the Commonwealth.

This is an average world growth rate unmatched in human history and suggests that far from growth being unsustainable and us being in an era of "Limits to Growth" - this year being the 40th anniversary of that infamously well publicised "computer model" that proved we we had no more than 20 years until resources run out and civilisation collapses. I believe that, at least since then, western civilisation has had 40 years of unnecessary low growth sold on a deliberately promoted false pseudo-environmentalist scare story. In the rest of the world growth is on a rising trend that can continue for perhaps centuries. That will make everybody alive then as rich as today's billionaires in the same way that everybody in Britain today is, in most material terms, now richer than Alexander the Great.

There are a number of factors producing such economic success and I hope we will get a chance to discuss in a more serious way than in what normally passes for politics, what we can do to promote progress in an era when our political classes, particularly those who call themselves "progressives" seem to have set their faces firmly towards a return to the middle ages.
Scots Professor Peter Cameron, professor of international energy law and policy at the University of Dundee said "In modern times the main driver of economic growth has been, and continues to be, energy" and Mike Haseler, UKIP's Scottish Energy spokesman will discuss the implications of that and of UKIP's policy of free marketism in energy, as outlined by Roger Helmer.

Another Scots professor, Adam Smith, writing in an era when electric power was not a consideration put economic freedom at the heart of economic success saying

"Little else is requisite to carry a nation to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things"


He was writing just before the era when steam engines started making energy, other than muscle power, widely available so he cannot be faulted for not knowing the transformative effect modern energy sources would have. But even then, generally, the societies with the most economic freedom have been most able to develop plentiful inexpensve energy sources.

Thus over 2 centuries later a statistical examination of the world's various economies, available online under the title "Habits of Highly effective Countries" came, once again, to the conclusion that "economic freedom is a necessary and perhaps sufficient condition" for economic success.

Ivor Tiefenbrun who has hands on experience of exactly what is required to build up a world class company from nothing, will be speaking on the value of economic freedom.

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I would now like to take this opportunity to speak a few words in favour of technology as the 3rd necessary and sufficient driver of growth and in turn of X-Prizes as a little used & valuable tool in promoting it.

An X-Prize is an award given for a specific proven usually technological achievement, such as the first non-governmental vehicle to enter space. It need not be intended for a vehicle which is itself commercial, though it may be, but usually for a breakthrough which can then be developed into a commercial industry. It is open to anybody, or anybody within the national community, to win. It should not involve government oversight for anything other than confirming the objective has been achieved and the winners are eligible. For a true X-prize the innovators would tell any government bureaucrat who tried to muscle in beyond that to go to Hell.

They are usually not intended to defray all the costs of the inventors - it is a way to encourage what will ultimately be commercial development not to replace free market pressure.

One major advantage is that if an objective chosen is not possible under current technology, as an early Spanish Longitude prize wasn't it will not be won. Ditto if it is impossible, like finding fairies at the bottom of the garden or building a commercial sea-turbine. In which case the nation bears no costs - as they do when government offers grants for such "research". There is, literally, no national downside to X-Prizes.

Almost all economic progress over the long term depends on technological and scientific progress. Alexander the Great did not lack mobile phones because there was nobody with money to invest in them or because the unions had not been able to negotiate enough pay for Macedonians to afford them, but because the technology didn't exist. Patents were developed in Europe at the end of the Middle Ages as a way of rewarding and thereby encouraging invention. However they aren't and almost certainly can't be as effective at rewarding invention as Capital & Labour are rewarded for their efforts.

There is a long record of X-Prizes working spectacularly well compared to the more traditional government grants. This is not so surprising because grants tend to go only to the great and connected whereas prizes are open to anybody; grants are given, for the promise of activity, while prizes only go for actual achievement. Prizes work most cost effectively when they do not fully match the money invested and thus enhances rather than replacing the commercial case whereas cost plus government grants can make any sort of idiocy, like windmills, into a good investment.

Traditional government grants, give the state power of patronage, a considerable influence over establishing a "scientific consensus" and in some cases such as America's Mohole project, a blatant way to reward donors.The usually require significant administration by government bureaucrats. This explains why grant funding is greatly preferred by government bureaucracies even though it doesn't work as well.

Politics being what it is this means that politicians sometimes talk the talk of prizes while in fact sticking to grants.

For example the original American programme of X aircraft (not actually paid through prizes but done in the proper hands off manner) was wildly successful up until the name was appropriated for conventional programmes.

Alex Salmond has, several times, made speeches about the Saltire prize for developing a commercial sea turbine in terms of it being an X-prize but in fact it is not - it does not have specified winning conditions (I suspect a commercial turbine is impossible but they could at least have specified the amount of power produced and the period of time it had to stay operational). Also this scheme is closely overseen at every level by civil servants which is not conducive to innovation and very expensive.

In even sillier vein David Cameron has said he wishes to offer a prize for a range of unspecified challenges such as "the next penicillin" (penicillin having saved hundreds of millions of lives). For whoever invents this Cameron intends to offer the magnificent sum of "one million pounds". The only actual idea he has suggested is that somebody needs to invent an intercontinental aircraft which gives off no CO2 which would effectively be a high powered perpetual motion engine. Such is the downside of having political leaders who studied PPE and are thus complete scientific illiterates.

Real X-prizes involve simply a very specific technological winning tape and only enough administration to ensure the winner is a qualified British person or citizen. This is the wording proposed by Pournelle for an orbital shuttle:
"The Treasurer of the United States is directed to pay to the first American owned company (if corporate at least 60% of the shares must be held by American citizens) the following sums for the following accomplishments. No monies shall be paid until the goals specified are accomplished and certified by suitable experts from the National Science Foundation or the National Academy of Science:

1. The sum of $2 billion to be paid for construction of 3 operational spacecraft which have achieved low earth orbit, returned to earth, and flown to orbit again three times in a period of three weeks.

2. The sum of $5 billion to be paid for construction and maintenance of a space station which has been continuously in orbit with at least 5 Americans aboard for a period of not less than three years and one day. The crew need not be the same persons for the entire time, but at no time shall the station be unoccupied.

3. The sum of $12 billion to be paid for construction and maintenance of a Lunar base in which no fewer than 31 Americans have continuously resided for a period of not less than four years and one day.

4. The sum of $10 billion to be paid for construction and maintenance of a solar power satellite system which delivers at least 800 megaWatts of electric power to a receiving station or stations in the United States for a period of at least two years and one day.

5. The payments made shall be exempt from all US taxes.
That would do it. Not one cent to be paid until the goals are accomplished. Not a bit of risk, and if it can't be done for those sums, well, no harm done to the treasury."


He has since said that, with the scientific progress, particularly in materials science, since he first put up that proposal, that $500 million (£300 million or less than 1 year of what we give to ESA) would suffice to produce a spacecraft to low orbit.

Examples:
The Ansari X-Prize - led to Virgin galactic

The Longitude Prize offered by the British government and won by John Harrison - the exploration of the Pacific and discovery of Australia and new Zealand can be directly credited to that so it was worth the money.

The Ortega Prize won by Lindberg

The king of Syracuse offering money to whoever could come up with a way of determining if gold was pure - won by Archimedes.

The M-Prize for extending the life of a mouse - something vital in experimental search for a way of extending human life span but not instantly commercial.

Napoleon's prize for a way of preserving food, from which the whole canning industry was developed and, less importantly, helped supply his armies and so conquer Europe.

The billiard ball prize - a non-governmental prize put up by a billiard ball manufacturer in 18-- worried about a coming shortage of elephant tusks from which balls were made - this was won by the inventor of celluloid, progenitor to the entire plastics industry.

A whole range of aerial prizes in between 1900-1920 by Lord Rothermere and others which certainly enhanced the air travel industry.

Most recently DARPA put up a prize of £$3 million for development of a computerised system that could drive 50km without a human driver. They said that it would have cost $100 to attempt this with conventional funding, and they might well have spent the money without result. Already such vehicles are road legal in Nevada Silicon Valley and within a few years will probably be a new mass industry.

I'm not sure if Lord Wolfson's £25K prize for how to leave the Euro counts. It probably depends on how much economics is a science rather than an art.

A recent Harvard study of a century of small prizes totalling £1 million put up by the Royal agricultural society showed that they had had a significant effect,out of proportion to the cost, in advancing agricultural technology. Or as one already established manufacturer complained prizes had proven to be "an undue stimulus to innovation"

All in all these and other small prizes previously put up have had an enormous effect in establishing new industries and a new continent, out of all proportion to their cost.

I believe we should have a number of British X-Prize Foundations funded with a significant proportion of taxes from high tech industries, even were it only a few % of what we spend on useless quangos. For example the £300 million a year given to the ineffective and bureaucratic ESA put into such a foundation would get Britain a commercial orbital shuttle. Nigel Farage has committed UKIP to doing this with ESA funding and Lord Monckton has expressed his enthusiastic approval of such prizes as a general principle of public funding.

This "undue stimulus to innovation" would be a massive "undue" stimulus to the UK economy and indeed a secondary but perhaps unmatched, contribution by us to the technological development of the entire human race. A stimulus that will be applied by UKIP and no other party's leaders and which, after 5 years of recession and 65 years of lowering growth - is long overdue.

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Comments:
You stated ..
"Napoleon's prize for a way of preserving food, from which the whole canning industry was developed and, less importantly, helped supply his armies and so conquer Europe."

Less importantly ????

Surely this was the whole point of Napoleon's Prize. Again if there were to be similar style prizes offered by any British Government, then they too would have ulterior motives, far different from their declared motives. This is the role of the "Public Prize".
 
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