It's something of a breakthrough in Whitehall. For the first time since the start of the Cold War, British security has recognized that there is life beyond government.

The spooks at MI5 have of course been planning for decades what people should do in the event of a nuclear holocaust, and more recently, a terrorist one. But until now, the only people they have directed their advice to (very secretly and privately, of course) have been national and local government politicians and officials.

So "the people needed to run the country" have been OK. Yes indeed. As contractors were demolishing the old Department of the Environment building in Westminster, they were astonished to discover nuclear shelters with 12-metre thick reinforced concrete walls, protected by a steel door so massive all they could do was leave it there. So the Westminster and Whitehall elites would be OK - but the rest of us could fry.

Then suddenly today, MI5 has put up on its website advice for all of us about what to do in the event of a terrorist incident. At last, they seem to be admitting that "to run the country" you don't just need politicians and civil-servants, you need hard-working individuals and businesses. Indeed, the country would probably run better if the politicians and civil-servants retired to their bunkers and never came out!

It seems unfair that parties are not represented in legislatures in proportion to their support in the country. Margaret Thatcher, first elected 25 years ago, never won a majority in the country. Part of the original New Labour 'project' was to enact PR so that centre left coalitions would be the norm. It was buried by Labour landslides.

After listening to the theoretical arguments for proportional representation, it helps to look at the practical experience. PR tends to deny overall majorities, and to proliferate smaller parties. Coalitions are the norm, with very small parties wielding disproportionate power in return for their support.

Proportional representation thus embodies the politics of the smoke-filled room, of the deals struck in private between the political bosses. The first-past-the-post system may bring to power parties with less than 50% of the popular vote. What it does not do is to give excessive power to very small parties. One has only to look at the disproportionate influence of the extreme orthodox parties in Israel. With a handful of seats they have exercised a major influence because their votes were needed to build coalitions.

It should also be said that proportional representation makes change difficult. Elections tend to bring small adjustments in the balance between the parties, and to result in coalitions of slightly different composition. There are times, though, when a change is needed, as could be said of Britain in 1979 and 1997. The first-past-the-post system is very good at turfing out governments which people are tired of.

State-dominated Britain worries too much about inputs and not enough about
outputs.

Everyone at the recent Reform conference in London on school choice was truly inspired by Kole Knueppel, Headteacher of St Marcus, a 'choice' school in the middle of a drug-invested, crime-ridden, impoverished black area of Milwaukee. His teachers walk the streets and hit the phones to recruit new kids to the school - unlike the UK, Milwaukee's 'choice' system means that schools only get money if they attract and retain pupils and satisfy parents.

They get some really rough kids, but through hard work and commitment - starting at 7.45am, finishing at 4pm, then maybe putting in another couple of hours helping particular kids - and being available to the kids 24hours on the mobile phone - they turn round those kids and enable them to make something of themselves. One new kid had got up and punched both him and a school visitor: but through this 'tough love' approach, went on to become a star pupil.

Nice talk. Then popped up a representative of the National Union of Teachers, who condemned him for making light of long hours and assaults on teachers. "After all, teachers have rights."

"Well, I'm interested in the right of disadvantaged kids to learn and make something of their lives," he replied. "If a potential teacher came in to me and the first thing they talked about was their own rights rather than the needs of the kids, I'd tell them they were in the wrong profession."

Absolutely. Nice to see the NUT person skewered. But it shows you how far the energies of our public servants has become focused on their own interests rather than those whom they are supposed to serve. It's going to be hard work to turn that around.

When markets do not have a perfect outcome, it is often automatically assumed that government intervention is justified. Instead, we should compare the reality of markets with the reality of government, not a perfect rose-tinted view of government. Quite often government attempts to solve market failure end up producing worse outcomes than the market did. As Milton Friedman said, "The government solution to a problem is usually worse than the problem."

After the fall of communism, some left-wing academics argued that the USSR was not real communism, and not what they were arguing for. They said that nowhere in the world has there ever been a truly communist state. However, to make fair comparisons between capitalism and communism, you have to treat like by like. There has never been a truly capitalist state, either. But when you compare capitalism and communism, as they have existed in real life, you quickly see which is better.

The millions of blogs in existence form a decentralized information source, which interact spontaneously and freely without top-down instruction. Each individual blog is very much private property with an author, or team, who post material. If you want to make an impact on the 'blogosphere', you have to go away and set up your own blog. If it's good, others will link to it.

Conversely, wikis represent a form of voluntary collectism. Like blogs, they let information be published on the web very easily. But, unlike blogs, wikis normally let the general public update them without the need for a password or even peer review. It is easy for people, anonymously from an internet cafe, to maliciously delete articles, or publish inaccurate or offensive ones. Using a Wiki is like leaving your front door wide open. Like other collectivist experiments, they have problems.

The March issue of Wired ran a fascinating interview with Patrick Moore, co-founder and former president of Greenpeace, under the title Eco-traitor. Patrick Moore now criticises Greenpeace for scientific illiteracy, arguing that it often promotes scare stories rather than getting the facts of a situation. His detractors attack him for "selling-out". The Wired article is a good read: if you're interested in environmental policy, check it out.

Some on the left tell us that talk of freedom is hypocritical and one-sided unless it deals with 'real' freedom such as freedom from hunger and the freedom to work.

There is a profound difference between freedom, which involves the lack of coercion by other persons, and power over circumstances. Freedom involves people making their own decisions without having the views of others imposed upon them. This includes freedom of speech, of expression, freedom of enterprise, freedom to buy and sell, and freedom of movement.

To be 'free' from hunger means having the resources with which to eat. To be 'free' to work means having a job available. Neither of these involves arbitrary restraints or subjection to the will of others. It may be that the power over circumstance is important and necessary, but is rather devalues language to call it freedom.

There is a difference between not being able to take a train ride because you cannot afford the fare, and not be able to do it because the state forbids it. In the former case you can hope to raise the fare, or to rearrange your priorities so you can afford it by cutting down on other things. You have those choices. Where it is state power which prevents it, you have no such options.

It may be argued that a free society should be a humane one, and that people should voluntarily relinquish some freedom of spending power in order that poorer people can enjoy decent living standards. This is a legitimate argument, and people may well make such a decision. They are trading freedom, though, not serving it.

Entrepreneur and impresario Raymond Gubbay supposedly has the luvvies choking on their Sancerre. The best seats in his new Savoy Opera cost fifty pounds while similar seats at the Royal Opera cost four times more (there, a ticket in the stalls costs 150 pounds to you and 50 more in taxpayer subsidies). Charging just a quarter of the full Covent Garden cost, Mr Gubbay pays his cast and orchestra, pays theatre rent to the Savoy, and all his other costs, and still makes a little something for his considerable risk and effort. Luvvies are upset because he shatters their old lie that opera cannot survive without taxpayer subsidy.

And what's it like? Accessible (it's in English) and terrific entertainment. In his ongoing Barber of Seville at least two voices are of very high quality and the rest are plenty good enough. And director Aletta Collins has done an international caliber job staging Rossini's potentially complex tale, enhanced by brilliant comic turns that you'd never see in stuffy old Covent Garden. The couple next to me nearly needed oxygen.

It really is The People's Opera. If you think that opera is all egghead music sung by fat ladies in tin brassieres, Mr Gubbay's production shows why it is so madly popular in so many countries among people of all varieties. It doesn't draw blood from taxpayers, and it won't bust your bank account to give it a try.

Frank J.'s IMAO has long been one of my favourite blogs. Unlike many of the blogs highlighted on these pages in recent times, it is neither deep nor intellectual, just very funny - if, that is, you have the right sense of humour.

From the quirky observations of Bite-Sized Wisdom to the outrageous satire of In My World to the T-shirt friendly Know Thy Enemy, Frank's writing is often laugh-out-loud funny, although perhaps not to everyone's taste.

Politically, Frank is a Bush supporter - much more so than I am, I must add. It has always seemed slightly odd to me that he so often satirically portrays the Bush administration along the lines of the left-wingers' preconceived views: Bush as an over-aggressive idiot who is only a symbol for an administration which is really run by his advisers, Rumsfeld as a mad, bloodthirsty warmonger, and so on down the line. I certainly can't see the Republicans using IMAO as campaign material for the forthcoming election! Perhaps, though, this approach serves to highlight the ridiculous nature of the caricatures perpetuated by so many of Bush's detractors.

In all, while not always of direct interest to British readers, IMAO is usually good fun, and if your sense of humour matches Frank's, it can really brighten up your day.

Andrew Medworth is a student at the University of Cambridge.

Defenders of state services sometimes argue that only the state can guarantee a universal service. If private competition is permitted, 'cowboys' will come in to make profits on the easy parts ('skimming the cream'), leaving the state to struggle along with the less economic, but still essential, parts of the service.

At its heart, this argument basically justifies state monopoly because it enables cross subsidy, with profitable parts being used to fund the less profitable ones. It was advanced in Britain at the time when state industries and utilities were being privatized. Those 'cowboys' would compete on telephone, gas, and air services and the others where there was easy money to be made, but would leave the outlying areas with nothing.

In fact the private sector has shown a remarkable ability to make money from services which the state either felt incapable of supplying, or which imposed huge losses on the taxpayer. A large range of additional services has been added profitably by private firms to what were, in the state's hands, inadequate and loss-making services. Motivated by profits, and unhindered by a history of working practices, the private firms have proved more innovative and resourceful. The spur of competition and the fear of bankruptcy, absent from state provision, have proved powerful influences on the private successors.

This is most evident, perhaps, in telecommunications and the budget airlines, but it has been true of most other industries. It would probably be true for postal services, too. The theory might say that the state can guarantee services, but the reality seems to be that it is an enterprising private sector which best provides them.

The Prime Minister has today declared that global warming is the most serious environmental problem. Last month, the government's Chief Scientific Adviser said that it "is the most severe problem we are facing today, more serious even than the threat of terrorism". That seems a little implausible.

All spending involves trade-offs. If as a society we spend more money on reducing carbon emissions, it means we have less money to spend on other things, like ridding the world of unsafe drinking water, or eliminating malaria from Africa. The Prime Minister gets this. But his prioritization is puzzling. If Kyoto were adopted and followed by everyone - even including the USA and Russia - global warming would be delayed by only six years this century. In other words, despite the cost, Kyoto does not solve the problem.

It is also likely that in the future, scientific advances will enable us to reduce man-made emissions without, or with little, impact on our wellbeing. As the price of clean energy drops, and as we develop the likes of hydrogen cars, carbon emissions will reduce. We will be richer and have better technology, and be able to deal with climate change more effectively.

Some supporters of state education in Britain accuse selective schools and private schools of creaming off talent which would otherwise remain in the state comprehensive schools to benefit the other children. Parents who choose these alternative schools are accused of selfishness.

The argument has interesting assumptions. In Britain those who pay towards their child's education receive no rebate. They have to pay for the state education they do not use as well as the fee-paying one. They leave more resources in the state system as a result of their choice, which does not seem selfish.

The idea that academically gifted children, if they attended sub-standard state schools, would somehow inspire and motivate the others, is strange. It seems to belong to the fairy tales which social engineers tell each other round the camp-fires. In the real world such children are often bullied and demotivated, and scorned because study lacks any street-cred. Educated with others of their kind, however, they can become high achievers.

More offensive is the notion that bright children are a precious resource, owned by the state, to be shared out equally. Their own hopes and aspirations, and those of their parents, apparently don't count. They are to be treated instead as the mere instruments of an egalitarian state. We know where that leads.

It might be more productive to devise ways in which the choice of a better school can be extended to all parents, without anyone being forced to take the sub-standard, producer-dominated model which is far too prevalent.

The economics department at George Mason University one of the very best, so it should be of no surprise that we again single-out a blog from that source. Marginal Revolution is named after a very important development in economics, from the 1870s, which explained the relationship between a product and its value in the marketplace.

The blog recently discussed whether free trade means saying goodbye to the welfare state, and concluded no. There's also a piece on Australia television and whether national content should be protected from international content for cultural reasons.

As you may have noticed, our blog has become part of our main website. If you have us on your blogroll, or in your brower's bookmarks, you might want to update the link to www.adamsmith.org/blog

A disturbing feature of collective service provision emerges when it is used to justify further coercion. Payment for Britain's NHS is compulsory, leaving about 90 percent unable to afford private alternatives as well. Because illness then 'costs society money,' this is used to justify all kinds of controls, ranging from compulsory seat-belts to smoking bans. Indeed, in some cases NHS personnel have tried to deny smokers life-saving operations, even though they had paid for them.

The argument is that since society has to pay because of the NHS, society is entitled to regulate the behaviour. Smoking and seat-belts lie at one end of the wedge, but further back are found salt, sugar, burgers and alcohol. If consumption of these will increase illness, the same arguments can be used to justify controls and compulsion. The notion that the individual makes a choice and takes the consequences is now over-ruled. Having forced people into a collective provision, those once-private choices now impose costs upon others.

The logic seems to be that once you have taken away some freedom from people you can use that fact to take away much more of it.

Some of Britain's major health problems have similar features. Smoking, obesity and sexually transmitted diseases all have it in common that they are to some degree self-inflicted. People do not have to smoke cigarettes, eat fatty foods, or engage in high-risk sexual activity, but they do.

The problem seems to be that of a short time horizon. People are aware that the activity carries future costs, but the immediate gratification counts for more in their eyes than the long-term consequences. Many young people cannot imagine they will ever be old, let alone pay for their youthful pleasures.

The British government spends huge sums on these problems. It assumes the answer is more information, and spends taxpayers' money to provide it. It is difficult to suppose that smokers these days are unaware of health risks, given the one-inch high black on white letters on the pack telling them that SMOKING KILLS. The same is probably true for obesity and STDs. They know that the double burgers and extra fries will make them fat, but today's pleasure outweighs that future cost.

The money spent on 'information' is probably wasted. A strategy which has people giving greater weight to the future might be more successful. This is much harder than advertising, in that it involves trying to restrain a culture of gratification. When people could not afford excessive indulgence there was some external restraint: now there is less.

It does seem that educated and high-income people are less affected by these problems. Richer people could afford to over-indulge but most of them do not. It may be their education and affluence, or perhaps their background and upbringing, which have given them longer time horizons. Spreading these attitudes does not seem like something to be done easily by advertising campaigns, however.

One of the way opponents of the market economy gain support is by using terms which make alternative positions more difficult to argue. Thus, opposing economic development in poor countries becomes 'sustainable development'. Who, after all, could be against being sustainable?

The Dictionary of Dangerous Words, published by the Social Affairs Unit, is a useful tool in fighting back. It takes words commonly used in the political arena, and gives their real meaning.

Here is an example. It defines 'social' as:

An adjective which automatically reverses the meaning of any noun to which it is attached. Thus a 'social market economy' is not a market economy, a 'social worker' is not a worker, 'social democracy' is not democracy, 'social theory' is not theory, 'social democracts' are not democrats and 'social justice' is not justice - indeed its pursuit involves and leads to injustice.

Latest figures put Chinese economic growth at an annual rate of nearly ten percent. There are price rises reported throughout the economy. Many firms have had to increase domestic wages to enable workers to meet increased food and fuel bills. Exports show the biggest increases because there is some official pressure to limit domestic rises. There is a growing differential between the two in such areas as chemicals and fertilizers.

Will price controls work? Dr Eamonn Butler co-authored Forty Centuries of Wage and Price Controls, pointing out that since the clay tablets of Hammurabi recorded price controls for such things as haircuts 2,000 years BC, price controls imposed by governments have never done more than hold back events for a time.

Prices are signals which tell people the relationship between the availability of goods and services and the demand for them. If something is in short supply the price rises, limiting the demand and encouraging more supply onto the market. Government price controls tell nothing about supply and demand, but only about what someone thinks prices 'ought' to be. Artificial price caps work neither to limit demand, nor to increase supply. It may buy popularity to limit by law what plumbers can charge, but only until there are no longer enough plumbers to fix the pipes.

Prices rise when money chases scarce goods, and can be influenced by making money more expensive through increased interest rates. The problem for China is that they want to keep their currency under-valued, and while you can control either interest rates or exchange rates for a time, you can't do both together. The odds are that prices, interest rates and the currency will all rise, and that government controls will fall.

Profits get a bad press. It is not just hardened anti-capitalists who rail against profits, many ordinary people find the notion of profits uncomfortable at times. The idea that people should push for higher wages is generally regarded as a perfectly acceptable thing to do. But when it comes to profits, something is different. Profits feel too much like creaming money off the workforce. It is suspected that profits are earned in return for nothing useful.

As Mises pointed out, profits are gained by discovering a gap in the market and filling it. The bigger the gap, the bigger the adjustment needed, and the bigger the reward for filling that gap. Because entrepreneurs can earn profits, the market is a constant process of entrepreneurs trying to serve society better. Far from being earned for nothing useful, profits have an important social role in directing production towards the consumer.

A report in Science last week suggests that adding iron to the sea could absorb CO2 build-up, by up to 15 percent in the Southern Ocean alone. Each atom of iron added to the sea could pull between 10,000 and 100,000 atoms of carbon out of the atmosphere by encouraging plankton growth.

Iron is essential for plant growth. Most of it reaches the oceans through winds carrying eroded, iron-rich soils from dry areas on land. But changes in climate and vegetation since the end of the last glacial period are believed to have diminished the iron supply to the ocean. Advocates of the technique argue that they are simply restoring iron in the ocean to its previous level.

Californian marine researchers found that when iron sulphate was seeded, lots of biomass was indeed created and consigned to the depths of the ocean, either as dead algae or fish excrement.

The problem with this is that it helps towards a solution without necessitating a change in our behaviour, or learning to 'live more simply,' which many environmentalists want. For similar reasons they don't regard planting extra trees as a valid or preferred solution either. However, methods like these do seem to work.

Governor Schwarzenegger is reported by John Fund of the Wall Street Journal to favour a part-time legislature in Sacramento. The governor says that "Spending so much time in Sacramento, without anything to do; then out of that comes strange bills." He could be referring to rogue proposals to regulate the size of children's backpacks, control the amount of water a dishwasher can use, or prohibit the declawing of exotic cats. Indeed, the Legislature is about to debate whether to incorporate feng shui, the Chinese art of spiritual harmony, into state building codes.

Only three other states, Michigan, New York & Pennsylvania have full-time state legislators, and California only since 1966. The new governor has proved able to mobilize popular support to push through his reforms, and persuade interest groups to negotiate changes. If he were to press for part-timers, it would cut not only the cost of government, but the cost of its impact on the citizens and businesses of the state. It could be a popular item.

The future shape of the NHS in Britain begins to show its outlines, and they are those of a mixed economy.

It is reported that Britain's largest private hospital group, Nuffield Hospitals, is offering to provide operations and healthcare procedures at costs equal to, or lower than their present cost to Britain's NHS. Given Tony Blair's desire to see private health groups provide 250,000 extra NHS operations, it seems that 'going private' will soon be part of the normal NHS experience.

A patient requiring treatment in future may be treated by NHS medical staff, but it will be increasingly likely that the work will be contracted to private groups in private clinics. The introduction of health 'passports' by the Tories would give the patient this choice, but it looks set to happen anyway.

The picture will then be of a core NHS which has the responsibility and which allocates its resources to organizations, state, private and non-profit, which enable it to discharge those responsibilities. This will have many of the features of an insurance-based healthcare system, and could easily acquire some of the others.

Inspired by an e-mail from Anthony Evans, we'd like to publicise UK free-market students who are blogging. Anthony was particularly interested finding blogs by UK economics PhD students - after his Liverpool undergraduate degree, he went to GMU in the States in order to do postgradute study in a free-market department.

If you are a student (undergradute and postgraduate) who blogs and have an interest in free-market economics, drop us a line in the comments and introduce your blog.

A welcome new addition to the blogosphere is Cafe Hayek, named after the Nobel Prizewinning economist F. A. Hayek.

Cafe Hayek is run by two lecturers from the Economics Department at George Mason University in Virginia: Prof. Russell Roberts and Prof. Don Boudreaux.

Their blog is topical, covering topics like how the market will correct overzealous offshoring, and why with trade policy why we should avoid Keynes's phrase: "In the long run, we're all dead."

A highly recommended blog.

In today's Times, Owen Beith has a letter expressing disbelief at why the EU is growing sugar:

There was clearly a case for Napoleon to develop sugar beet production while the British naval blockade was cutting France off from its natural source of supply in Haiti. We in Britain were forced to rely on beet sugar when the U-boats cut us off from our overseas suppliers of cane sugar during the Second World War.

But in today's global economy EU production of subsidised sugar that is dumped at rock-bottom prices in the markets of efficient producers such as Mozambique is economic madness. The fact that, according to Oxfam, the EU is spending €3.30 in subsidies to export sugar worth €1 would provoke wry laughter if it weren't for the fact that what we are actually doing is destroying the livelihoods of farmers in poor countries that should have a natural competitive advantage.

Free-marketeers have always been against the EU's sugar subsidies. Now groups like Oxfam are coming out against subsidies as well. Subsidies make the peoples of the EU worse off, and hinder the economic development elsewhere. It is time European farmers operated in a free-market, not a warped market that tries to be 'fair' to them.

The Russian economy seems healthier these days, with President Putin given credit. In fact much of the expansion is in primary produce, notably oil and gas, plus ores and raw materials. This is fueled by a world economic recovery. China, in particular is sucking in energy, metals and chemicals to feed its manufacturing surge, boosting Russian commodity exports in the process.

Russia's task now is to change its economy away from too much dependence on commodities and raw materials and into a more high-tech supplier of sophisticated goods and services. It is already well in advance in key areas such as aerospace, and could exploit advantages in others.

At risk of over-simplicity, the Middle East view seems to be that oil output should be controlled so that value is left in the ground for later. President Putin may take another view, concluding that the world's economies may not be dependent on oil and gas in 25 years time. Oil has value now, but perhaps not for much longer as the hydrogen economy develops. If this is correct Russia should be producing and selling as much as it can now, while it still worth something, and using the revenue it earns to fund the transition in its economy. This policy has the advantage of bringing in the money now, when it is most needed, and incidentally keeping down price rises in oil which might threaten world recovery.

One of the wishes of the anti-globalization lobby is that we should be more content with what we have. Part of this is based on the discredited view that economic growth leads to a net harm to the environment. Instead, economic growth enables societies to spend more on the environment. The richer Britain gets, the better the environment gets. That is why London's air today is the cleanest since records began in 1585.

But the argument against growth is not just environmental. One of the other arguments is moral. It is unvirtuous to not be content with what we have. A counter-view to this is put forward by Ludwig von Mises in his book The Anti-Capitalistic Mentality:

To content oneself with what one has already got or can easily get, and to abstain apathetically from any attempts to improve one's material conditions, is not a virtue. Such an attitude is rather animal behaviour than conduct of reasonable human beings. Man's most characteristic mark is that he never ceases in endeavours to advance his well-being by purposive activity.

Some holding religious views would disagree with this sentiment. But Jonathan Sacks, the Chief Rabbi, also believes that growth is legitimate aim for society. In Morals and Markets, he explains why Judaisim supports the free-market process:

the rabbis favoured markets and competition because they generated wealth, lowered prices, increased choice, reduced absolute levels of poverty, and in the course of time extended humanity's control over the environment... Competition releases energy and creativity and serves the general good.

Yet some churches in Britain effectively teach that Christians should oppose economic growth. This may be because Christianity places more emphasis on the afterlife than Judaisim, and is thus more 'other-worldly' than Judaism. But it may just represent the unhealthy influence anti-globalizers have managed to build within the Christian sphere.

Brands certainly put pressure on people to conform, particularly teenagers wishing to be fashionable. To some they are simply coercive, pressuring people through clever marketing to pay more for the 'name' product than its equally good but less famous alternative. Quality and price are not the only factors, however. Often we consume not only the product but its associations.

To young people in developing countries Scotch whisky is an 'aspirational' drink. They imbibe not only the taste and the effect, but the feeling that they are on the way up, expressing their identification with future success. These intangibles are among the most durable of all consumer goods. Long after the whisky has gone, together with its hangover, the memory of that feeling can remain untarnished and unaged.

People who choose particular brands are sometimes engaging in self-expression. Their choice indicates something about their taste and sense of style. Sometimes it may be simple conformity. To young people in the process of discovering and asserting who they are as individuals, brands can provide a ready-made refuge.

The feeling which people experience when wearing the sunglasses, the trainers or the t-shirts which their peer group currently esteems, are part of the value they pay for. Some smart ones try to have that value without the cost. The Hong Kong 'Rolex' looks the same, and only the trained eye can see that the second hand jerks every second instead of rotating smoothly. The 'Gucci' handbag and the 'Hermes' scarf bought in a far East street market have a similar effect.

Brands provide some guarantee of quality, as the company tries to protect its asset. The real Gucci handbag might survive the rain better. Reputation also encourages companies to behave ethically. They may pay higher than average wages and better work conditions in their source countries out of altruism, but it may be a desire to protect the brand image.

While there are negative aspects to brands, there are enough positive ones to suggest that some people who choose to buy them might be gaining something worth the extra cost.

For the past three weeks the Institute has benefitted from Mark Cornish's presence in the office. He has been on holiday from Warwick University where he is a first-year studying economics.

Among other things like writing for this blog, he has been busily working on an internet edition of The Book of the Fallacy, which will be launched soon. That's him in the photo.

Take a look at one of the most basic stationary objects: the pencil. On first impression, it is a very simple thing. But it is unlikely that any one person in the world could produce a pencil by him or herself.

The example of the pencil in economics was popularised by Leonard Read. He pointed out the complexity in manufacturing such a product. The first stage of the process involves the felling and transportation of the wood. The wood is then milled into slats and a groove is carved length-wise to accommodate the lead. The graphite for the lead is mined in Ceylon, transported, treated and refined to make it smooth and strong. The lacquer for the paint involves a great deal of chemistry, even the little rubber holder on the end - the ferrule - needs to be constructed entirely separately. The manufacture of this little brass ferrule would take another few hundred words to explain. And then the most important part for those error-prone among us – the rubber - contains rape-seed oil, sulphur chloride and various chemically-complex agents.

Yet despite the complexity in making a pencil, no one is centrally planning the manufacturing process. The company selling the pencils probably has no idea which tools should be used to process the wood. Thousands of people have come together to make the pencil on your desk, yet it costs a tiny sum. What force has got all these thousands of people - of different nationalities, religions and views - to work together and specialise? It is the 'invisible hand' of the marketplace.

In 1975, the Ethiopian government nationalised the land. It meant that food production was controlled not by the profit motive but by need. It put people before profits. The result was that the people starved.

It is an indisputable fact that free-markets have brought prosperity never before known to mankind. However, many people take the view that although free-markets work better, socialism is morally superior.

Are we subject to what Bernard Mandeville descibed as the paradox of "private vices, public virtues"? On the other hand, is it not strange that the world would be ordered such that the economic system with the most virtuous outcomes would also be the one based on dubious moral inputs?

Let's look at the foundations of each system. The free-marketeer says that people should be free to make decisions about their lives, and their interaction with others should be based on consent. The socialist says that people should be able to control others without their consent. The socialist thus bases his economic policy on force. Respect for each other - and for humanity - is only present in a free-market. This, centrally, is why the foundations of the market are moral, and the foundations of socialism are immoral.

If something is running out, the price goes up. In 1980, the economist Julian Simon bet a prominent environmentalist, Paul Ehrlich, that after a period of ten years, a set of natural resources (decided upon by the Ehrlich) would be cheaper in constant dollars than they were at the start. He won the bet.

Scarcity of a resource encourages businesses to make their operations more efficient, to invest in new ways of finding the resource, or to develop new technologies to harness alternative resources. Over the last forty years, wheat production has increased from under 2 tons per hectare to over 6 tons. More efficient farming techniques, such as the use of genetically modified crops, will mean that food production will continue to grow and be more than enough to cope with increasing population. Improvements in technology will mean that natural resources in general will continue to be used more efficiently. Consequently, in 2050, the vast majority of natural resources will be much more plentiful and affordable than they are today. This has always been the case historically, and there is no reason to believe it will not be the case in the future.

We treat all billiard balls as identical when we measure them rolling down inclined planes, though we know they are not. Electron microscopes show great differences in the surface molecular structures. We ignore this because it is on a scale which makes no measurable difference to their behaviour on inclined planes. It is micro compared to macro.

The problem with human beings is that when we postulate laws about them, the differences between them are often on a scale similar to that which is being measured, and can lead them to behave differently. People have their preferences and priorities, their moral codes and their drives. These lead them to make decisions which differ from each other, and make general laws of behaviour elusive.

Furthermore, observers are not billiard balls and do not necessarily become involved with their subjects. They are people, however, and look on such subjects in a less detached manner. We can examine the economic decisions which people make individually, and we can add them all up afterwards to detect statistical patterns in them. But this is far removed from any economic 'science.' Inputs do not produce their predictable outputs in quite the routine way they do with billiard balls.

And billiard balls rarely decide to roll differently in future because they have had a near-death experience or witnessed a beautiful sunset.

Today is Tax Freedom Day in the USA - the earliest since 1967 - according to the Tax Foundation. For those of us living in Britain, we will have to wait until May 30th.

Home Secretary David Blunkett's view is that we need identity cards in order to protect us from terrorism. But, as Tom Utley writes in today's Daily Telegraph, identity cards will not work:

I cannot think of a single terrorist atrocity that would have been prevented by an ID-card scheme. (All Spaniards have to carry them from the age of 14, but that wasn't much help to the victims of the Madrid train bombs.) Nor will ID cards help to fight benefit fraud. The problem there is not that claimants are hard to identify. It is that they tell lies.

Identity cards are a cost without any benefit. At "up to £77 each, plus that extra £60 a head to implement the scheme" they are not likely to come cheap, either. America, even after September 11th, does not have identity cards. Australia dropped them in 1987 after widespread protest. Does the government not realise that the scheme will just mean more taxpayers' money going down the drain?

Why is there such a pathetic turnout in UK local government elections? Only about 39% of us made it to the polls last year.

Governments say it's 'apathy' and try to dream up all sorts of ways to make themselves and elections more exciting. And to make voting easier, with all sorts of online and postal voting initiatives.

It's not apathy, it's commonsense. Since 75% of what local governments spend comes from Whitehall, that's where the power lies. So who cares about local councillors? And, of course, much of the 25% that is raised locally (mostly through the Council Tax) has to be spent in ways and on things that the central government determines. So that just reinforces the electorate's conclusion that local government is not worth bothering about.

Clearly, we need a new way of funding local government, so that taxing and spending decisions are made locally. As they are in other countries: most European nations raise far more at the local level than the UK does. But we don't just want an extra tax: we want to replace the present mess with something better.

Local government spending is a meaty £60 billion or so. And by chance that is the amount brought in by VAT. So, asks Douglas Carswell in a new ASI report, why not turn VAT into a proper sales tax and leave it for local authorities to administer? Then there would be competition between councils to keep their taxes low and their output high. And since councils were actually raising what they spent, they would be free of central government and able to respect the wishes of local people... who might then start coming out for the polls!

The drive for private space flight accelerates. SpaceShipOne, the vehicle of Scaled Composites, has just made a second powered flight, this one to Mach 2 at nearly 17 miles high. Meanwhile the US govt has awarded it the first licence to conduct manned spaceflights.

Scaled Composites is among those competing for the $10m X-prize from a private foundation, to be awarded to the first private group to take a manned three-person vehicle into space, and to repeat the flight within two weeks.

The use of prizes to speed progress has a distinguished past. The British spurred on the measurement of longtitude this way, and previous prizes attracted efforts to race the English Channel, cross the Atlantic, and achieve man-powered flight.

An interesting feature of such prizes is that are usually result-driven. That is, they specify the objective, and leave the way open for different creative solutions to be tested. Government regulation, by contrast, is usually process-driven, in that it specifies in detail what technology is to be used to achieve the required result. This limits opportunities for creative thinking, and for more cost-effective and efficient solutions to be developed as alternative to those already known.

Perhaps governments might copy the prize-givers, and leave open the methods to be used to achieve the required objectives? As someone who has already paid towards a private space flight, I think I stand more chance of success without governments requiring everyone to do it in very costly traditional ways. More creative opportunities make for faster progress.