Oct 212011
 

This is the 3rd of 3 articles criticising The Intergenerational Foundation:
Some fallacies in “Hoarding of Housing: The intergenerational crisis in the market”
Simple example of how The Intergenerational Foundation is wrong about housing
(This article)

“Intergenerational analysis” is a popular topic (and more discussion across the world can be expected in future). There are many people, associated with a number of organisations, campaigning for it.

There is nothing inherently wrong about campaigning for any form of fairness, as long there is a reasonable definition of “fair”. But there rarely is, because it is in the eye of the beholder. Here are some types of people who can cause damage because of their biases:

  • People with special interests who risk “the law of unintended consequences”. (The sort of people who run this risk are those who try to cure the obvious symptoms instead of understanding then curing the underlying cause. For example, trying to cure the “problem” of “unoccupied bedrooms” in the up-market houses of older people by getting those people to sell those houses).

Some basics

I wonder if all parties could agree with the following? (I suspect not, because it would defuse some of the arguments used by such organisations).

All generations
  • Each generation will be in conflict with both older and younger generations. Today’s younger generations who envy or resent the status of older generations will themselves be resented by future generations.
  • The vast majority of people (probably greater than 99%) never have their hands on the levers of power, but simply live in the country and do the best they can with the opportunities available. Their decisions are typically little different from those that people from different generations would make in the same circumstances.
  • There are no “jobs for life”. (Arguably, that didn’t apply to some people who have long retired, but it applies to just about everyone up to state pension age and somewhat beyond).
Older generations
  • Being born earlier gave these generations earlier access to scarce resources, such as housing, than those born later. (First come, first served!)
  • Having (hopefully) worked for decades, these generations have accumulated more wealth than younger generations have yet had time to. That includes having had time to (mostly) pay off mortgages. This is a matter of time, not of special conditions applying only to these generations. Obviously older people will own a high proportion of net housing wealth (price of bricks and mortar minus remaining mortgage) simply because of what people can achieve over decades.
  • When they were younger, people of older generations had access to labour-intensive jobs, such as in mining and on the railways, that have typically now been lost.
  • When the older generations die, their accumulated assets will become available to later generations. (It is just a matter of time; perhaps some younger generations would prefer those people to die a bit sooner!)
Younger generations
  • Later generations live in a more enlightened world.
  • Later generations live in a higher-technology world. This can be good, (for example, medical treatments giving longer, healthier, lives), or mixed, (for example, replacement of lots of menial and labour-intensive jobs by information technology, resulting in more of a struggle for jobs).
  • Later generations have greater education opportunities. In 1965 about 5% of people went to university. Now it is more like 30% to 40% at least.

What do generations owe one-another?

There is no logical reason why any generation owes the next generation a better or even similar life in any sense. It would obviously be foolish to promise the next generation that they would be financially at least as well off, because there is no reliable process for delivering this promise.

(It has been quoted as The Promise of Britain by Ed Milliband and repeated by Tessa Jowell: “each generation who has worked hard would be more prosperous and have more opportunities than the last”. But that was simply a glib campaign speech, not a contract. And Tessa Jowell said at the link “… I explicitly made the remark that I could not endorse the report in full”.)

Some tasks are ethically sound rather than formal contracts. I suggest:

  • Leave the country in a sound financial state. Obvious examples include at worst zero deficit, and preferably reducing debt, hence “negative deficit”. But the “off book” commitments such as PFI contracts are an intergenerational worry.
  • Do no long-term damage to the environment. (This is one of my “extra commandments“, to replace the incompetent “10 Commandments” that religions promote).

Commentary on The Intergenerational Foundation


The Intergenerational Foundation

This is the latest “intergenerational fairness” organisation, and has got off to a bad start with their sloppy Hoarding of Housing: The intergenerational crisis in the market. Here is a quote from that report displaying naked envy:

Policy options include: … ­ ‘nudge’ policies such as the withdrawal of some ‘universal’ benefits for those living in houses worth over £500,000

Young people can’t afford such houses, so it is none of their business what the owners do. (I’m not arguing that those wealthy people should get benefits from the state. But policies should be directed at ensuring they pay their taxes and are not any sort of burden on the state. There is no good reason to coerce them to sell their houses, and there are good reasons not to; young people shouldn’t want those people competing against them for cheaper housing).

According to the Daily Mail (mission: “to keep middle England angry and frightened”) the parents of  Angus Hanton of the Advisory Board live alone in a £1.5 million five-bedroom home. But why not? (And Angus Hanton may not agree with the “Hoarding of Housing” report anyway; it is a pretty skewed report).

Here are quotes from The Intergenerational Foundation’s website.

We believe that each generation should pay its own way, which is not happening at present. British policy-makers have given undue advantages to the older generation at the expense of younger and future generations.

That statement, in bold near the front of their website, defies analysis! What does “… each generation should pay its own way” mean? All generations are initially largely paid for by earlier generations. (For example, the taxes I pay, such as income tax on my private pension, VAT, and Council Tax, help to pay for the education of younger generations, and help them with the cost of raising their children. Disclaimer: I am childfree and not yet old enough to claim any benefits such as a state pension). And what are (or were) these ” … undue advantages …”?

  • Perhaps they refer to advantages that once existed but are now withdrawn, for example, free tuition at university? Put that into context: in 1965 about 5% of the population got to university, and then got free tuition. Now up to 40% get to university, and no longer get free tuition. So the current best 5% can justly complain that they have lost something that previous generations had; but the other 35% (or whatever the number is) get to university when they would not have done decades ago!
  • Perhaps they refer to specific changes in advantages over time, such as the increase in the state pension age? Those are partly the elimination of unfair discrimination against men, and partly a consequence of increasing life expectancy. Both are reasonable changes.

Another quote, from “About IF“:

Affordable housing, well-paid jobs with prospects and fair taxes are the basics of a well-balanced society. The Intergenerational Foundation will provide ideas to ensure that the next generation get them.

Empty words! Every political party has such things in their manifesto, so why should we expect The Intergenerational Foundation to do any better? Especially when it it published a report about “unoccupied bedrooms”, diverting attention from the real problem which is “not enough houses”. (At least the Coalition government admits that “Governments don’t ­create jobs, businesses do“).

So far, The Intergenerational Foundation shows signs of being largely motivated by an ideological bias against older generations. It remains to be seen whether they overcome their politics of envy and begin to tackle the real underlying structural causes.

And see this article about one of the people behind the Intergenerational Foundation:

The man who says pensioners should leave their ‘empty nest’ homes… and the £1.5m five-bedroom des res where his parents live alone


Further reading

The myth of the UK baby-boom
The myth of a baby-boom-led housing crisis
Some fallacies in “Hoarding of Housing: The intergenerational crisis in the market”
Simple example of how The Intergenerational Foundation is wrong about housing

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