In short: stimulate demand, and don’t just throw money at the problem

Good day my good friend.

You know, I will never understand you lot. I spend loads of time on one newsletter and none of you read it. But the one I knock out in 45 minutes you can’t get enough of. What are you like? Anyway, here are today’s links for you.

James

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Learning the lessons of building back better, from places that have built back better

There has been a lot of talk over the last 18 months about building back better. What does it mean? Particularly in the context of transport, which has been taken to mean a lot of things. Here’s an idea: humans have been incredibly resilient, and other places have built back after being decimated. Let’s learn the lessons from them about how we actually do it?

This is why this report by the Asian Development Bank on Disaster Relief Management in Fiji struck a chord. The result conclude:

Our results indicate that a targeted increase of government spending in times of crisis could be beneficial for the economic recovery of Fiji. However, short-term trade-offs emerged with respect to financing options. Debt-financed recovery allows a faster and less painful recovery but requires quick and preferential access to foreign borrowing. Tax-financed recovery can compensate for short-term foreign borrowing needs but comes at the cost of more detrimental impacts on the GDP and private sector consumption.

Simply, to recover needs financing. That financing depends on consumption recovering to finance repayments (through tax reciepts). So government’s are caught in a bind. Finance things that generate an income and stimulate growth (hello car travel), or try and recover through other means that, while sustainable, may be detrimental to GDP (everything else). This is why you need to know how this sort of thing is financed!

How do you effectively subsidise transport?

I know what some of you are probably thinking right now. It’s easy. Get the taxpayer to fund the things I like, and leave the rest to the private sector. It’s a classic example of the simple answer usually being the wrong one. Subsidy has all sorts of unintended consequences, and subsidy regimes need to be design to understand their impacts on behaviours and market dynamics. Its not just throwing money at the problem. There is a reason why we have State Aid rules.

Recent analysis on subsidy for intermodal freight in China reveals that for transport, the optimal subsidy is forever in a state of flux. This is because travel demand and supply is forever in a state of flux. Maximising welfare benefits is often seen as a great subsidy goal, but that does not necessarily result in the most economically efficient outcome. Throwing public money at subsidising services is a blunt instrument. It needs careful consideration.

Random things

You know the drill.

• UK’s antitrust watchdog is very angry and has written a letter telling Apple and Google how angry it is with them (The Register)

• Murals Helping Reinvigorate Rural Communities (The Daily Yonder)

• The Scramble for EV Battery Metals Is Just Beginning (The Wall Street Journal)

• Going the last mile (International Monetary Fund)

• Give councils power to target land value to fund affordable housing, urges new report (Joseph Rowntree Foundation)

Interesting things

Just a reminder that not everyone uses the internet all of the time, even in Europe.

If you do nothing else today, then do this

Watch this.