Stuffing their mouths with Gold
Crushing the anti-growth coalition will bring electoral defeat, it's time to bribe them.
The route of our problems as a nation is a mysterious cabal made up of Labour, the Lib Dems, the SNP, the Unions, talking heads, remainers and extinction rebellion - the anti-growth coalition - or at least that's what you’ll hear if you talk to our beloved Prime Minister. Some would call it conviction, others stubbornness, but mentioning the word growth 29 times in a half hour Party Conference speech does imply that you at least care about the concept.
So, is she being fair by placing the blame here? In some ways, completely. The housing crisis that is responsible for so much of our post-WW2 stagnation is almost entirely caused by local opposition making it difficult to build more houses, and a huge amount of the energy crisis is from our inability to build sufficient supply regardless of whether it be through nuclear, wind, solar, fracking or anything else. Even water shortages can be explained through this - we haven’t built a reservoir in over 30 years.
However, it is not hard to sympathise with these people. If you bought a house because of its view which is then ruined by development, then naturally you would not be happy. Similarly, if a new nuclear power station increases road traffic through your town then your enjoyment of it would fall. Any sane self-interested person, as most people are, would object to these things, and if the planning system enfranchises their views, then it’s only natural that they would use it to their advantage.
Typically when people think of efficiency they are referring to making sure that all the inputs are used to make as much output as possible. Applying this to land use it would mean that we should build whatever is worth the most money regardless of any other considerations. Yet politically this obviously is not a smart move. If people do not want a house next to them, then they sure are going to be more likely to vote for whoever will make sure this does not happen. This is why every pro-housebuilding minister has failed over the last several decades - indeed, we’ve had 13 Housing Ministers since David Cameron’s election just 12 and a half years ago.
Luckily, economists have long moved past this form of efficiency. One model, known as allocative (or pareto) efficiency, occurs where someone will gain but no one is worse off. This is probably closest to what our current planning system aims to support. Given the strength of local objections, then anything that has a lot of objections likely won’t be built. However, these situations are rare; indeed, if they were more common, then we would actually build more stuff, and not be in our present troubles.
However, the works of Cambridge economists Nicholas Kaldor and John Hicks provide a better option - the so-called Kaldor-Hicks improvement. What this does is compensate the loser by using a proportion of the money from the winners. For example, the building of a nuclear power plant may lower one’s personal valuation of their home by £30,000. If the firm profits exceed the amount of loss that nearby residents suffer, then why not just pay them. The firm will still profit, the country will benefit, and a nuclear power station making less money is better than one that does not exist.
Britain does have a history with this practice. When the introduction of the NHS was discussed, to get rid of objections from the British Medical Association, the then Health Secretary Aneurin Bevan famously declared to have “stuffed their mouths with gold” by letting them continue to see private patients if they accepted NHS patients. Had this not been allowed then many doctors would have lost out, but Bevan understood that sometimes in politics to get a win you must accept a slightly smaller one than you initially wanted.
Liz Truss could benefit from this lesson. Simply walking over your enemies is a great way to lose elections, and the polls are showing this. Politicos Poll Aggregator currently puts Labour 25 points ahead. Going for growth is absolutely necessary to getting this country back on the right track, but you cannot do that from the opposition. Liz Truss needs to understand the logic of Kaldor-Hicks and find ways to compensate the losers from her policies, else they are doomed to fail.