ja_mageia

One reason why Britain has rising inflation is because we deem it unseemly to fire a Governor of the Bank of England. It is thought humiliation enough to require them to write to the Chancellor when inflation comes in above target. Unfortunately, now that such letters have become monthly occurrences, the humiliation has subsided. There is no price for failure. If there were, the deliberations of the MPC would certainly become a good deal sharper.

According to a commission set up by the Scottish Labour Party, in order to reduce alcohol consumption, a “floor price” for alcohol should be introduced together with a levy on alcohol retailers. Its report also suggests a limit on the number of licences available for retailers and a halt to the sponsorship of sporting events. However, under scrutiny these suggestions may be ineffective.

A minimum price for alcohol aims to raise the price of the “loss leaders”, i.e. drinks that are priced below cost (in order to attract customers), hence the minimum price will be set at/below the market price. Therefore a minimum price will not reduce the actual alcohol consumption, since it will only reduce the excessive demand for alcohol. Moreover, retailers will just switch the “loss leaders” to drinks that cost more than the minimum price, and price these drinks less than their costs while still charging more than the minimum price.

Even if levies and minimum pricing do manage to raise the price of alcohol, they will hit sensible drinkers as well as binge drinkers. Although binge drinkers are more sensitive to price changes, it will be the sensible, drinkers who will have to reduce their consumption. For binge drinkers, alcohol is an every-day necessity with few or no substitute, a Giffen good, to put it in economic jargon. A rise in the price of alcohol will mean that alcoholics will have to reduce the consumption of other goods in order to maintain their budget for alcohol, and as a result their alcohol consumption will not decrease. In contrast, alcohol is a normal good for sensible drinkers, and a rise in the price of alcoholic drinks will reduce their ability to purchase. Hence levies and minimum pricing would not be an effective or fair solution.

Limiting the number of licences will reduce the availability of alcoholic drinks, making them more expensive and harder to buy. Again this will hit sensible drinkers the hardest, for the reasons stated above. It may well encourage black markets to grow, increasing the cost of policing without reducing alcohol consumption.

At the ASI, we like the Government’s free schools policy. However, we agree with the outgoing chief of Ofsted’s comments that it would be more effective were private firms allowed to establish and run publically funded schools at a profit.

Here are two good reasons why:

1. Adding the profit-motive to the mix would bring a host of new providers into the free schools fold. From entrepreneurs to private schools, many people and organisations currently lack the incentive to establish or run free schools. Allowing them to make a profit will change this, directing new talent at the provision of state-education. The rationale for free schools policies is the truth that greater competition for pupils lifts standards. Permitting more (and more diverse) providers to compete, as in Sweden, lifts standards to greater heights. Whilst having third sector groups competing with the state is good, having the third sector, profit makers and the state all competing with each other is better.
2. Private firms are better placed than most parent, teacher and charitable groups to finance capital expenditures on new school buildings, etc. Encouraging them to provide this finance, by, shock-horror, allowing them to make a return on it, will improve the policy in two ways. First, it’ll ease its impact on the taxpayer, allowing more new schools to be established at less cost. Second, it will accelerate the creation of such schools. If their construction can be paid for privately, The Department for Education will not need to limit their number in line with its capital budget.

Despite these reasons, opposition to introducing the profit motive into state-education remains strong. It’s worth scrutinising two of the more common objections.

1. ‘Having firms profit from children’s education is wrong!’ Really? Let’s go back to basics for a second and consider why we have an education policy at all. A sensible answer is, unsurprisingly, in the name: to educate. It thus seems off the point to quibble about means; if we accept that private involvement with free schools will raise standards, it should not matter whether profits are made.
2. ‘Having firms take a slice of public funding as profit means that less money is spent educating the child than would be with state provision’ So far so true. If the state provides, say, £3000 per annum for a child’s education, the firm can only make a profit if it spends less than £3000 educating the child. However, we must be careful not to make the (rather New Labour) mistake of confusing money-in with education-out. Whilst profit-making firms may spend less per head than the state or voluntary groups educating the child, their expertise and greater incentive to minimise costs likely enable them to achieve better educational outcomes whilst spending less per child.

We have, then, a slight policy adjustment that would yield better results and isn’t all that objectionable. Come on Gove, let’s really set schools free.

Reports that the Department of Transport is kick-starting a ports privatisation programme should be welcomed. There are currently over 50 Trust Ports, all steeped in history. Most are subject to legal complexity: a similar situation applied to the many former Statutory Water Companies prior to water privatisation in 1989.

Dover, a leading Trust Port, is effectively up for sale, with a tentative £300 million price tag. Obvious bidders include the French ports sector - given the heavy freight volumes between Dover and Calais - and other UK ports companies. In fact, apart from the publicly-quoted Forth Ports, which – though Scottish-based – owns Tilbury, most major ports are owned by private equity, whose shareholders place a high premium on their solid earnings. Indeed, the UK’s leading privatised ports group, ABP, was bought out by private equity in 2006 for an impressive £2.8 billion, partly due to its property assets.

At Dover, a local consortium is to the fore; whether it can prevail against the larger funds wielded by both French ports groups and private equity is doubtful. Other Trust Ports may be up for sale, including Blyth, Harwich, Milford Haven, Poole, Shoreham and Tyne. More generally, it is encouraging that the Coalition is pursing privatisation, both through the sale of High Speed 1 and by launching into the complexity of Trust Ports – experienced lawyers in this arcane area should expect heavy bonuses.

In the ASI’s recent publication, The Party is Over, it was estimated that £16 billion could be raised from privatisation sales – prior to any disposals of the Government’s bank shareholdings. The £1 billion earmarked from the sale of Trust Ports may need upgrading.

Given that the venerable Dame Vera Lynn of ‘the white cliffs of Dover fame’ has already set out her views about the planned Dover sale, is the process now underway?

We are told, breathlessly and repeatedly, in The Guardian, that Bjorn Lomborg has recanted and is now fully on board with the "OMG we're all gonna die!" wing of the environmental movement over climate change.

Oh Aye? From his first book, The Skeptical Environmentalist:

I shall argue further that an economic analysis of the costs and benefits of an immediate reduction in CO2 emissions clearly shows that the world as a whole would benefit more from investing in tackling problems of poverty in the developing world and in research and development of renewable energy than in policies focussed on climate change.

From todays' revelations:

Examining eight methods to reduce or stop global warming, Lomborg and his fellow economists recommend pouring money into researching and developing clean energy sources such as wind, wave, solar and nuclear power, and more work on climate engineering ideas such as "cloud whitening" to reflect the sun's heat back into the outer atmosphere.

My, that is a real backtrack, isn't it?

Back to that first book, he uses the Willam Nordhaus DICE and RICE models to argue that the damage done by CO2 emissions is $7.50 per tonne. Applying both the Nordhaus and Stern Review view that damages should be covered by a Pigou tax he is now stating that:

He suggests this could be funded by a $7-a-tonne tax on carbon emissions, which he says would raise $250bn a year.

The tax is at the level of damage being done: this is hardly a change now is it?

Oh, and Lomborg makes, repeatedly, the point that renewables, most especially solar, are coming down in price and that (in his estimate) by mid this century will be properly price competitive. So much so that we'll naturally switch to using solar PV. We might build a large solar power station in the Sahara for example. Oh, we are, aren't we? Or solar panels might be installed upon houses because by that mid-century it'sll be cheaper than taking fossil fuel generated electricity from the grid.

Oh, lookee here. Jeremey Leggett says that it will happen by 2013:

Monbiot bets me £100 that my prediction that solar PV electricity in homes will be no more pricey in 2013 than conventional electricity will be wrong.

So, it looks like Lomborg hasn't in fact gone through some Damascene conversion, rather, he's making the same points he's always made. That climate change is happening, that we're causing it and that the economics of the whole shebang tell us that we should be trying to reduce the cost of low and non carbon power generation to deal with it.

His only really major failing seems to be that he was too pessimistic about how quickly technology would advance.

Ho hum.

The BBC asked “Should British pupils give up studying French?” However, the key issue isn’t whether or not children should be learning French, but the fact that schools are encouraging children to take easier subjects so that the school scores well on the league tables. Crucially this is not always to the advantage of the children, especially if they plan to apply to elite universities.

Independent schools tend not to do this because their reputation requires that they take greater interest in their pupils. In contrast, many state schools are taking the easy way out. Without radical reform of the education system, the government will only be able to choose between the blunt tools of either compulsion or league tables. Both have undesirable unintended consequences.

Others in the article echo my point. For example, the language learning expert Paul Noble states that "the core reason is because pupils know French is difficult to pass, and difficult to get something out of it”, while Michel Monsauret, attache for education at the French Embassy in London, points out that subjects such as religious studies are on the increase because they are perceived to be easier. Mr Monsauret correctly states that “languages are taught more extensively at private schools in the UK, and their pupils go on to dominate places at Oxbridge and the other best universities."

Predictably the National University of Teachers (NUT) is appalled: “The policy drift on modern foreign languages is unforgivable”. Children, according to the NUT, aren’t adequately equipped for life in a global society. A bit rich coming from an organization set up to protect the interests of teachers even when against the benefits to parents and children; an organization that is the biggest impediment to reform. Asking the NUT what is best for children is like asking a turkey what should be eaten at Christmas – the goose will always be cooked.

Whether one’s child should be taught French, German, Cantonese or Chamicuro should be solely that of the parents. Of course, they will be limited by what is being offered, which is an argument for a dynamic and competitive system – one driven by the free market, not bureaucratic oversight. That learning a language involves no literature shows how bankrupt the teaching is many of our schools. As such, the lamentations of Aida Edemariam and others are frankly irrelevant.

The teaching of French – or lack of it – is symbolic of the wider failure of bureaucratic control of the education.

The spot-fixing scandal that hit cricket over the weekend, when the News of the World revealed that two Pakistani bowlers had, seemingly, bowled no-balls at pre-arranged moments in return for money, is a great shame for Pakistan. If ever there was a country in need of some good news, this it it. Yet now they face being banned from international competition in their national sport.

It is also a tragedy for cricket. Mohammad Amir, the 18-year old fast bowler responsible for two of the dodgy no-balls, is inarguably one of the most exciting prospects in the game and – until Sunday’s revalations – had a brilliant career ahead of him. But if the allegations in the News of the World prove to be true, he may be banned for life. With the sport so worryingly devoid of fast-bowling talent, this is depressing beyond belief.

But one thing this scandal isn’t is an excuse for greater government intervention in gambling in the UK. Monday’s Times suggested that sporting authorities are already lobbying for a crack-down on gambling, citing French moves to regulate online gambling and tax sports wagers (effectively outlawing betting exchanges like Betfair in the process) as an example worth following. The Times also notes that ‘unregulated gambling’ in India is behind much of the corruption in cricket, implying that government action is the solution to cricket’s woes.

But this paints a very misleading picture. As former England captain Michael Atherton points out in the same paper:

The only only bookmakers who offer markets on elements of the game open to so-called micromanipulation are those in India where bookmaking is illegal and designed to avoid tax and service the black market. Ladbrokes wouldn’t give you a price on Mohammad Amir bowling a no-ball in the third over. [Empahsis added]

And this is the crucial point. Gambling in India is only ‘unregulated’ because it is prohibited (with the exception of 13 casinos, horse-racing, and state lotteries). But prohibiton doesn’t mean that the prohibited activity doesn’t take place, it just means that organized crime takes over. Corruption like that alleged in Pakistani cricket is the inevitable, inescapable result. Taxing sports wagers in the UK is a wholly irrelevant red herring.

Anyone doubting the existence of The Invisible Hand should pull up a chair on the street terrace of the Star Ice Cream Parlour on Iskan Street here in Erbil, the capital of Iraq’s autonomous region of Kurdistan. What else can explain the sights, sounds and smells that soon prevail?

Just 20 years ago, Saddam Hussein invaded Kuwait, fresh from his genocide of untold thousands of Kurds. Fifteen years ago, the Kurds were mired in their own mindless civil war. Ten years ago, George Bush was drifting towards the presidency even as al-Qaeda was plotting 9/11. Five years ago, post-invasion Iraq was ablaze in vicious sectarian violence.

Today, it’s just gone 7:30 pm and Iskan Street will soon be bursting at the seams from heaving crowds eating, chattering, laughing, ambling, driving or shopping with no apparent need unfulfilled. The sun has set, the temperature has retreated from the 45c earlier and the Imam from the nearby mosque has given the all-clear to resume eating and drinking during this Ramadan period of day-time fasting.

Within minutes, the street comes alive. Fancy SUVs, Mercs, Beemers, Corollas, Meganes, even a Hummer jam the street. Every second or third business along has a dozen chickens roasting or kebabs grilling, the smells tantalizing the fasters. Tea houses fill the pavements with loud chatter. Merchants’ wares spill from bursting counters. Arrays of baklava beckon. Mobile phones ring to connect friends and family.

Where did all this stuff come from? How did it get here? The quantity, the variety, the affordability, the availability - all seem completely natural and expected.

Unless you think about it for a bit. There was no Ministry of Planning that decided how many Toyota Land Cruisers in white or black were needed. No Ministry of Agriculture that methodically allocated chickens to each kebab joint. No Ministry of Communications handed out mobile phones.

No, it was the Invisible Hand – a miracle.