The Economic Freedom of the World: 2004 Report recently released by Canada's Fraser Institute rates countries according to their economic freedom. It shows that free nations attract nearly $11,000 of investment per worker, 12 times more than the $845 investment per worker in unfree economies. Free economies attract $3,117 of foreign direct investment (FDI) per worker, compared to $68 for the least free nations. Economically free nations experienced 3.4 percent growth a year from 1980 to 2000, compared to just 0.4 percent for unfree nations.

Nations in the top fifth of economic freedom have an average per capita income of $26,100 compared to $2,800 in nations in the bottom fifth of economic freedom and economic freedom benefits the lives of all people including the poor. In nations in the top fifth of economic freedom, the average income of the poorest 10 percent of the population was $6,877 compared to just $823 in the least free nations.

Prosperity is as possible in Asia and Africa as it is anywhere else in the world. It is not related to natural resources or to climate or to population density but only to better or worse governance. Two of the most free and prosperous nations on earth are in Asia. Botswana is the freest country in sub-Saharan Africa and also enjoys much higher levels of income than the average in the area. In 1970 Botswana's per capita GDP was less than the average in the region at US $590 but by 2003 it had risen to $3,950 while the average had shrunk to US$564.

Linda Whetstone is chairman of the International Policy Network.

Education at Britain's state-run universities (that's basically all of them) used to be free. Indeed, the state gave you a 'maintenance grant' to pay your living expenses. To many, it was a three-year holiday, paid for by the state, and the universities found them queuing up for it. But taxpayers' pockets are not so deep, and a few years ago the maintenance grant was replaced by a student loan system. But the courses themselves remained free to UK students.

Whereupon - this isn't rocket science, is it? - the universities started recruiting more and more students from overseas, because only they could be charged the full cost of the courses they took.

But still the books didn't balance, so the Blair government said it would allow universities to charge fees. Not at market rates, of course: that would be unfair. Just up to a maximum of £3,000 a year. Whereupon - obvious, again - most did indeed set fees at this maximum figure.

Even so, they are overstrained. Cambridge University says that charging students £3,000 a year will not safeguard its future. Its annual accounts published this week show that the university is nearly £17 million in the red, with teaching and research losing £15 million.

The solution? As long as the universities are in thrall to government, they will never be free from political interference and will never be allowed to charge what their product is worth. It's really time for a velvet divorce from the state. Charge the market rate, build up capital endowments to help poor but able students, and serve your students: not the politicians.

A report on wind-power commissioned by the German government has been sent back for 're-editing' after it reached unwelcome conclusions, according to Tony Paterson (Sunday Telegraph). Germany plans to double its current 15,000 turbines in 10 years. But Paterson tells us:

The findings of the unpublished report were leaked to Der Spiegel magazine last week. They suggest that if Germany presses ahead with its plan to double the number of wind turbines, annual energy costs for consumers will rise from €1.4 billion to €5.4 billion (£1 billion to £3.7 billion), increasing the average annual household bill by €44 by 2015. The report also states that the government will have to spend an extra €1.1 billion on laying almost 600 miles of new cable and that power plants will have to be replaced or adapted to cope with the inherently large fluctuations in wind-derived energy.

More damningly, the report concludes that the same reduction in 'greenhouse' emissions could be achieved at far less cost by installing modern filters at fossil fuel plants. Meanwhile in Britain David Harrison reports on the likely effect of proposed wind farms in parts of Humberside and South Yorkshire. Country views will be ruined, and property prices cut by a third, warn estate agents. But conservationists are also alarmed, Harrison reports:

Conservationists say, however, that the threat posed by the wind farms to some of Britain's finest wet moorland is even greater than the threat to the residents' quality of life. The wind farms will form a "ring of steel" around the sites, they say, blighting the landscape, damaging the habitat and leading to rare birds being killed by the turbines' propellers. The biggest fear is for the nightjar, whose population has been falling for several years and which is listed as a "priority bird" in the Government's bio-diversity action plan. Campaigners say that it could be extinct in the area within five years if the wind turbines are built. Thorne and the nearby Hatfield Moor contain thousands of rare plants and animals. Thorne Moors has more than 5,000 invertebrates and plants, including cotton grass, cranberry, bog rosemary and sundew.

The UK Government is pushing the development of wind farms in an attempt to reach its target of producing 10 percent of Britain's energy from renewable sources by 2010. Given the high energy costs of wind power, the negative effect on both human and animal life, and the availability of cheaper ways of achieving the same environmental effect, it has to be supposed that wind farms are being pushed for their totemic status. Perhaps they symbolize a commitment to the environment, regardless of whether they provide a net benefit.

Last week's eco-disaster story was Nature magazine's "biggest ever climate simulation" project. Using time on thousands of home computers, this (we were told) showed that "temperatures may rise by 11 degrees Celsius".

It showed nothing of the sort. In fact it was a research exercise to find out just how sensitive climate-model assumptions were to their eventual warming predictions. And the answer they found was: a lot. The researchers ran the model 2000 times, with slightly different assumptions in each case. They discovered, with some surprise that some (apparently unrelated) assumptions cancelled each other out, while others reinforced. Only the very highest guess suggested an 11C rise, while others actually predicted a fall. Most came out forecasting a rise of around 3.4C.

The media's coverage of this exercise, stoked up by the environistas, is just as naïve as when it cried doom over the "1.4C to 5.8C" rises predicted by the International Panel on Climate Change a few years back. But again, most of those simulations bunched around 2C, and 5.8C was only an extreme view.

This huge exercise has indeed found what it set out to find. Not that we are soon going to bake, nor even that the next ice age is on its way (though it inevitably must come sometime). But that the results of our climate models change when we change the assumptions. Surprise!

Catching on rather late to the way Blair and Brown are leading initiatives against poverty, Jacques Chirac has produced one of his own. The Economist suggests this might be an attempt to grab some limelight (for non-subscribers: p78 of current issue).

Chirac proposes an 'international solidarity levy,' which is a tax to the rest of us, to finance development directly. He proposes a tax on international financial transactions, a levy on countries which maintain bank secrecy, and a special tax on fuel used in air and sea transport, or a $1 levy on airplane tickets.

The tax on financial transactions is, of course, the Tobin tax which has been kicked around for more than 30 years. It would hit liquidity and could not distinguish normal trading from speculation. In covering all transactions, including those by private individuals, it would incur immense bureaucratic and administrative costs. It would not work unless it were universally applied and enforced equally.

The levy on bank secrecy can be taken as part of the EU attempt to harmonize taxes, and to punish places like Switzerland which allow people to escape from this imposition. This has more to do with stopping people escaping the high tax policies of many EU countries than with helping Africa.

Aviation fuel taxes or ticket levies are popular with some environmentalists who want air travel restricted to the rich, and think budget airlines are an environmental disaster. They, with Chirac, might want to see an end to the opportunities and choices which cheap air travel has brought to millions, but many disagree. The airline industry is in such poor financial shape that new burdens like this could knock it for six, knocking with it the industries which depend and thrive upon it, together with the employment they sustain.

Blair and Brown, instead of seeking compulsory new international taxes with all the consequences that would follow, have chosen to persuade rich countries to help fight AIDS and Malaria, and to support debt relief. Jacques Chirac might command more respect if he handed to those causes the subsidy France gives to its national airline, plus the subsidy which France and the EU give to his farmers.

An inquiry commissioned by the BBC has found that the state broadcaster suffers from an "institutional mindset" that leads to a "reluctance to question pro-EU assumptions".

According to The Times of London, the report "says that BBC journalists are often ignorant about how the EU works; they portray the EU largely through Westminster politics and fail to show how much of British policies originate in Brussels. It also criticises managers who 'appear insufficiently self-critical about standards of impartiality'. The report concludes that 'the BBC is getting it wrong, and our main conclusion is that urgent action is required to put this right'."

Sir Samuel Brittan's new book, Against the Flow, is a splendid collection of insightful short essays on international affairs, political economy, and modern thinkers.

I was drawn to his chapter "Why be interested in Ayn Rand?" because ASI has a seminar on Rand coming up on Wednesday 2 February, with excellent speakers including Elaine Sternberg, Kenneth Irvine, Tom Burroughes and Andrew Medworth.

And why be interested in Rand? Well, says Brittan, her politics were not straightforward. Though she claimed her views were based on pure reason, her life and values (he says) were coloured by the fact that she was born (Jewish) in pre-revolutionary Russia, had to take refuge during Russia's civil war, and maintained deeper personal connections in Russia than she chose to admit.

The second point of interest, says Brittan, is that she made her impact not through academic or political tracts, but through novels. Viewed as fiction, these are of 'decidedly mixed' quality, with 'ideal' but cardboard characters. Yet she writes with verve, and through this medium has reached far more people than some dusty academic tract ever could.

Thirdly, Rand is interesting because of the fundamental challenge she poses to collectivism: saying that what people create is theirs, and any attempt to tax it or regulate its use is immoral. Well, maybe: but there is no doubt that the political debate of today could use a dose of her radicalism.

All plans of government which suppose great reformation in the manners of mankind, are plainly imaginary.

David Hume, Idea of a Perfect Commonwealth.(Essays, Moral, Political and Literary, part II, XVI)

For minor illness people have often resorted to self-medication, preferring an over-the-counter service at their pharmacist to the time-consuming visit to a doctor. Remedies are advertised which help us to cope with assorted aches and pains and coughs and colds. Many people use products which contain vitamin and mineral ingredients. Not for much longer, though.

The EU Food Supplements Directive which comes in on 1st August knocks 5,000 health products off our shelves. 300 vitamin and mineral ingredients out of 420 will be banned. They may be harmless, and may have been so for centuries, but now they have to be proved harmless before they can be sold. To get on the approved 'positive' list involves a very expensive testing process, estimated at £80,000-£250,000 per ingredient, beyond most small suppliers.

It's that old difference again. The Continental European tradition is that the law lists what you are allowed to do: in the English tradition you can do anything not specifically prohibited. It's rather akin to a presumption of innocence. Now this mighty EU hammer is poised over the tiny walnut of vitamin and herbal remedies. All is not lost yet, in that a coalition of those involved in complementary medicine (the Alliance for Natural Health) has put up a strong case. The ruling could be overturned in the courts before it reaches us, although the UK government is supporting the ban, which it railroaded through the Commons, according to Mary Ann Seighart.

This is just part of a daily encroachment on freedom from the EU bureaucrats. If you remit your watch for a moment you are lost. Unfortunately the remedy against loss of freedom is not some easy thing with vitamins and minerals in it. It might involve major surgery.

In the 1983 movie War Games, a young Matthew Broderick hacks into the US nuclear weapons system. The movie represented the fear - popularized at the time - that computerization brought with it a serious security threat.

Hacking is great headache for IT departments, especially in the political world where strong political views at work. In 2003, the Labour Party website was hacked by people opposing the war in Iraq. In 1999, several US government websites were hacked. Databases and information sources are hacked all the time.

In Californian universities last year, university ID card systems were hacked, resulting in the details of over 1,000,000 students being released. George Mason University recently had 30,000 student records nicked from their ID card database. Similarly, the ID card database at the Georgia Institute of Technology suffered from 57,000 people's details being stolen, and the University of Texas at Austin had 55,000 records stolen.

The reason identity card databases are attractive to hackers is because the information on them is valuable. The UK's proposed national identity card database is supposed to make us feel safer. But the possibility that a copy of the database could end up being sold to Al Qaeda does not give me a great deal of comfort.

Alan Greenspan, chairman of the US Federal Reserve, is to deliver the Adam Smith lecture at Kirkcaldy in Scotland, Smith's birthplace, on Sunday February 6th. The visit coincides with Edinburgh University's award of an honorary degree to Mr Greenspan. Smith lived in Edinburgh and is buried there, and it is there that a statue is to be erected in his honour.

The Adam Smith lecture, under the auspices of Fife College, will be to an invited audience at St Brycedale's Church in Kirkcaldy, which was the town to which Smith returned to write An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776, having already made his name with the Theory of Moral Sentiments, published in 1759.

"A tiny step on a long journey, perhaps, but headed in the right direction" is how celebrated Times columnist Irwin Stelzer describes Tory proposals to cut government waste and taxation. At the ASI we tend to suppose, as Adam Smith did, that people generally spend their money more wisely and effectively than government does. Stelzer outlines the Gordon Brown view of the government’s role:

…in his view the State should appropriate to itself well over 40 per cent of all the wealth produced in the country, and spend it on everything from adding capacity and bureaucracy to the NHS, to schemes to induce reluctant teenagers to enter the labour market.

The Tories have, says Stelzer, opened up a contrast and a choice.

If you think that spending on a "standing committee on euro preparations", or a "well-being project", or a "sector skill development agency", or agricultural wage committees, or strategic health authorities, is a national necessity, to be preferred to lower taxes, Labour is the party for you. If, instead, you think that many of these functions vary from useless to harmful, or that allowing patients to choose their own hospitals makes it unnecessary to spend more than £600 million annually on regional strategic health authorities, the Tories should be your party of choice, other things being equal.

Most people know their circumstances and needs better than government does. They care more about their future and that of their family. They are more cautious spending money they have worked to acquire. When they choose how to spend it, they are exercising the freedom to express their tastes, preferences and values. Government, by contrast is profligate and thoughtless.

Gordon Brown prefers to spend our money inefficiently and wastefully on projects which he values, rather than the ones we would choose. Governing in a democracy gives him the power to do that; but it does not give him the right.

The cheque from the EU might come to farmers in the mail, but the spy comes from overhead. To guard against those cheating on the Common Agricultural Policy, the EU has pioneered a satellite surveillance system which can watch what farmers are doing. The Times reports that "the camera is so powerful it can even pick out a farmer ploughing the land. It can see the furrows in a field, measure field margins and even check on the state of hedgerows and footpaths." Farmer Jeremy Cooper was shown trial images of his Essex farm.

[He] was shocked to learn that his farm has been inspected by the satellite as part of a trial. He looked at the image and immediately recognised every slope and corner of his land, his five-bedroomed brick farmhouse and outbuildings…..He was amazed by the detail, especially the tractor lines and the ponds in his fields. "I had no idea we had been spied on like this," he said. "I'm more than surprised and can honestly say I'm shocked by what you have shown me. I'm rather an easygoing kind of person but other farmers will definitely think this is Big Brother."

With the subsidy comes the spy. If public money is going to farmers, the authorities try to ensure it is for the purposes intended. A story, probably apocryphal, had it that when the late communist government of Hungary subsidized bread, a whole new police branch had to be set up to prevent its misuse. It was now so cheap that people were feeding it to pigs and building barns out of it. The subsidy was reportedly scrapped when the policing costs exceeded its benefits.

Today it is farms which are inspected. Tomorrow it might be planning authorities watching for unauthorized conservatories or greenhouses. Maybe after that, hunters in pursuit of foxes. Of course technology would have to advance before they could spot and identify individual smokers. But they'll try.

Like most people in Britain I am nervous about the idea that people should be allowed to carry guns. My grandfather was a gamekeeper, so I have lived with guns, handled guns, discharged guns and cleaned guns. I just don't like the idea of any crackpot carrying them near me.

But this article by Richard Munday reminds us just how recent Britain's anti-gun legislation really is. In 1896, the police actually borrowed pistols from passing pedestrians to bring a pair of gun-toting 'anarchists' to book! Licensing came in in the 1920s, but it was not until the late 1940s that things got really restrictive.

Munday goes on:

For a long time it has been possible to draw a map of the United States showing the inverse relationship between liberal gun laws and violent crime. At one end of the scale are the "murder capitals" of Washington, Chicago and New York, with their gun bans... at the other extreme, the state of Vermont, without gun laws, and with the lowest rate of violent crime in the Union (a 13th that of Britain).

I'm not pleading to end gun control in Britain. But I do think that this is yet another example of where politically popular laws, inacted in the wake of some major misfortune - a financial scandal, a rail crash, whatever - actually seem to do the opposite of what was intended. The trouble is, by the time you have discovered that, you are in a right mess and just undoing the law is not necessarily going to get you back to where you were.

One thing is clear. Whatever the issue is, we need to study the evidence before we let legislators loose on us. Perhaps we should make it a rule that, whatever the scale of the public outrage, there should be a gap of at least two years between the introduction of a law and the incident that made people call for it. Then maybe cooler heads will rule.

The environazis disperse this myth about peasant farmers being at one with nature. Sometimes the myth is so idyllic that I think they want us all to become peasant farmers. Anyway, the idea is that while big, grasping corporations are ruining the planet, if we just thought smaller and more rustic we could turn things round.

Wrong, says Matthew Parris in this week's Spectator. A former Conservative MP, he is now a journalist who derives much of his output from his long travels to developing countries all over the world. He is just back from Ethiopia, and says the idea that peasant farmers manage the land well is just risible. That is why he want to rid the planet of goats.

Goats? Yes, indeed. A herd of goats is a great asset for a family. They provide milk and meat, and more goats, which you can sell. The trouble is they eat anything that grows, and, wandering for miles in search of it, they don't care much whose land it's on. So if your neighbours are trying to raise crops, their best course would be to forget it before every last seedling has gone, down hoes, and get some goats of their own.

This, says Parris, has contributed to the desertification of many of the poorer countries he has visited. It utterly destroys the ecological balance across tens of millions of square miles. In his words:

The degradation of our planet owes as much to the poor as to the rich... A million small-scale farming operations satisfying individually modest needs can wreck a landscape and extinguish every competing variety of bird, animal, insect and plant life. Hunger is no steward of river, land and forest, and the poor may ravage their environment more cruelly than those of us who enjoy the luxury of treating outdoors as a kind of garden. Thus have the poor and their goats teemed beneath the radar of our environmental surveillance systems, and daily destroy more land than rising sea-levels will ever do.

Worth the urban romantics reflecting on. The environment is a luxury that the world's poorest can't afford to bother about. The only solution is to make the world's poor farmers rich. And - Bush is right - the only way to do that is to spread democracy, the free economy, and trade across the planet.

The Social Affairs Unit has a fascinating article on 'anti-economics' by Dr William Coleman:

The anti-economist is he who sees economics as a bane. Economics is harmful; it is "pernicious". No germ of good can be found within. No value can be salvaged from it. It contains no rudiment of insight; it is "dead", "bankrupt", "collapsed". The world would be better off without it. Therefore, its teachings should be discredited, its honours abolished, its representatives barred from public institutions, its institutional identity effaced, its centres of propagation encumbered or eliminated.

Read the full article here.

J D Wetherspoon, the UK pub chain, has announced that it is to ban smoking in its pubs. Initially the ban will apply to 10% of pubs starting in May, but a complete ban is planned for 2006. The company believes that its customers would prefer to not have smoking in its pubs. The move seems consistent with the sort of ethos Wetherspoons is trying to achieve - it doesn't play music, for example, wanting to encourage people to go there to talk. It presumably wants to attract customers who don't like smoke. Offering a smokeless pub environment will be a selling point.

On the other hand, the company's shares fell 3 per cent after the announcement. So there's some disagreement as to whether the move is a good one. Fortunately, in a market, experiments about what consumers want can take place. If the ban on smoking is good for Wetherspoons, good for them. If not, they'll soon get the message. Do we really need the clumsy foot of big government to interfere?

Liberty Cadre is the latest blog to emerge from the London political world, written by Andrew Dodge and friends. It does not hold its punches, mauling Identity Card advocates and anyone involved in NHS anti-smoking adverts... and high-tax politicians, too. Well worth a look.

The flat-rate tax revolution is gathering momentum, Allister Heath tells us in Sunday Business, and quotes Andrei Grecu (ASI author of Flat Tax) that a flat tax "could provide a stimulus to work, produce, invest and save, promoting economic growth and job creation." He also quotes Alvin Rabushka, a life-long advocate of flat tax, "Adopting a flat tax would give the UK a great competitive advantage over its western rivals." This year Rabushka has welcomed Romania and Georgia to the countries using flat tax.

The case is that a single low rate of income (and preferably capital) tax will make tax simpler and fairer. The various bands and exemptions which encourage tax-avoiding behaviour, are replaced a single rate which is low enough to make extra risk and effort more worthwhile. Three things should happen.

1. The rich, those in the top percentiles of income, pay a lower rate and experience a stimulus to extra effort. The poor pay nothing.

2. Within a short time economic growth means that the rich are paying more in taxation despite that lower rate. Although a higher sum, it is a lower proportion of their income.

3. The rich soon pay a higher proportion of tax receipts, even at the lower rate.

Heath confirms that the Thatcher tax cuts, down to a top rate of 40%, led to a surge in receipts, with the top 10%, who had contributed 32% of the tax take before the rate cut, paying 45% of it afterwards. Those (like Charles Kennedy) who argue for a higher tax rate for the rich, are missing the point. It is lower tax rates which can lead to the rich paying more tax, and a larger share of the total.

Given the Ernst and Young Item Club's forecast of spring tax rises to fill a hole of £10bn, and tax-hike warnings from the Institute for Fiscal Studies and the Centre for Policy Studies, a study of flat tax in Britain is called for. It is unlikely under a Chancellor whose taste is for complexity, so the ASI's first objective is for a Treasury working party to be appointed by Gordon Brown’s successor to study the idea. This will give it official status and prompt public debate by economists and financial analysts. Given this stimulus, momentum to adopt it could build up, and it could make as big an impact as privatization did in the 1980s.

The FT’s New Delhi bureau chief, Edward Luce, paints a depressing picture of India’s failure to reform its "chronically unaccountable bureaucracy." [FT by subscription] Much was expected of Manmohan Singh’s new government, which made public administration reform a priority. Luce tells us why.

There was no point, it was argued, in increasing spending on priorities such as health and education – services for which Indian voters were crying out – until it could be ensured the money would reach the beneficiaries (as opposed to being pocketed by the bureaucracy).

In fact taxpayers' money is now coming thick and fast, on defence and social projects, as well as a promise to double the health and education budgets. But Luce tells us that "when it comes to the indispensable reforms - making civil servants sackable and setting up an effective anti-corruption system – there is little sign of action."

The reason may be that India’s economy is still growing at 6.5% this year, independently of government, so there is some cause for satisfaction and a temptation to postpone difficult decisions. The real reason might be that too many of the key players are already aboard the gravy train and don’t want it stopped. Public Choice Theory leads us to expect no less, but the story Luce tells is bleak.

A third of state school teachers are absent on any given day, according to a recent survey. The same applies to the country’s primary health clinics, which are more often empty than staffed. Parents and patients alike are powerless.

It is partly because India is a democracy that civil service reform is so difficult to achieve - many of the coalition partners wish to protect their stake in the status quo. Democracy is not a problem for China, India’s chief rival in the Asian growth stakes, but they, too, have a bureaucracy seeking to maintain its advantages and retarding progress. One route to reform elsewhere has been to transfer whole functions of government to the private sector, exposing them to choice and competition. It could work in India or China if either had the resolution to do it.

Many analysts have been taking a second look at nuclear power. The Nuclear Industry Association has jogged their thoughts with a MORI poll showing that 35% in Britain would support more nuclear stations, with 30% opposed (which, though hardly overwhelming, is down from 60% opposed). The economics of wind farms seem less secure, as do their environmental effects. And they need back-up when the wind doesn’t blow.

Environmentalists worry about storing radioactive waste, while economists wonder about the bottom line once the costs of decommissioning are factored in. Against this stand the claims that nuclear power does not increase atmospheric emissions, and is more proven and cost-effective than wind power.

France has gone 80% nuclear, and sells us power across the Channel. China and India rely 80% on fossil fuel power, with lots of new coal-burning stations. The UK was doing quite well on emissions targets by moving to natural gas power stations until the Labour government back-pedalled on that to slow down job losses in the coal industry.

The nuclear option, backed by some big-name conservationists such as James Lovelock and David Bellamy, seems to be gaining momentum. But Graham Searjeant, Financial Editor of the Times, doubts that the UK can do it, given EU rules, European politics, and a government more concerned with gestures than results.

Richard Layard’s new book on Happiness is reviewed in The Economist. It looks at the things which make us happy, and suggests that we are not necessarily happier for being richer. Bo Derek’s take on it was slightly different, though. She said

Those who say money can’t buy happiness just don’t know where to shop.

In more serious vein Layard, an LSE professor and Labour peer, deals with some of the things conducive to happiness. Have good personal relationships, be involved in communities, have the security of religious convictions, settle into a lasting marriage. More controversially he suggests that relative status is a source of unhappiness, and that one person’s pay rise creates misery in another. People would rather out-earn their peers, even settling for a lower income if they can do so. He suggests using the tax system to curb the high flyers whose success make everyone else unhappy.

I often suggest to school audiences that it might be progress if we can remove some of the unnecessary sources of unhappiness. They may be unhappy in future because they are dissatisfied with the way they look, or because personal relationships don’t work out, but they probably won’t be unhappy because their child died of cholera or because their parents starved to death.

Many philosophers have proposed that happiness lies in moderation, and that the best goal is an above-average level which avoids the peaks of ecstasy and the troughs of despair. Few have followed Layard in suggesting that our personal happiness should drive public policy. As the Economist reviewer points out, if it does,

where then is the call to make divorce harder, given the pain that he says broken homes inflict on children? Further, where is his desire to compel the worship of a higher being, also on his list as a source of happiness? Thankfully, both are absent, but he never mentions the obvious reason for why they are: namely, that most people value freedom as a greater good than enforced happiness.

It seems Cuba is emulating one of the "progressive" policies from our part of the world, banning smoking in public places.

However this act begs the question: what is a public place? In this BBC article, it mentions "theatres, buses, taxis, trains, schools, food preparation areas and sports arenas". These are all public places in Cuba, being a socialist island as it is.

In the UK thankfully we have much less communal property. Taxis are the property of the driver (or the company that employs him), likewise restaurants and pubs. What are the implications of this? Well since these areas are privately owned, surely it means the owner is in control of their property? For the majority of events and functions, "management reserves the right to refuse admission" for people who do not meet the dress code, or are too intoxicated. The final decision is with the owner.

Smoking is surely no different from this. Shouldn't owners be free to allow, or similarly not allow, smoking on their property? Consumers equally should be free to accept or reject particular establishments based on their smoking policies. The result of this market process is that many restaurants have already banned smoking. They believe people prefer not to have smoke contaminate their food. Others have separate sections - smoking and non-smoking.

In short, government intervention is not needed. The desires of consumers will be attended to so long as we respect free markets and private property.

Anatole Kaletsky challenges conventional wisdom in Tuesday Times. He asks why the USA and the UK have fairly good growth and low unemployment, whereas the French and German economies have not.

Many assume the answer is: "over-regulation, inflexible labour markets, high taxes, absence of start-ups, inadequate R & D." Yet despite these factors, many European companies, as opposed to countries, have done rather well, with share prices holding up as well as their US and UK counterparts. Moreover, says Kaletsky,

America is hardly the free-market paradise that is so often suggested. Some forms of regulation are far costlier and oppressive than Europe's. The uncertainties and costs of litigation hugely increase the risks of doing business in the US. European regulations have never bankrupted entire industries in the way that US litigation has bankrupted companies involved in asbestos and toxic waste. US labour regulations may make it easier to fire workers but trade unions are more stubborn in their defence of work rules and financially ruinous contract provisions than their counterparts in Germany or France.

Yet since the mid-1990s the European economy has seen weak growth in per capita GDP, plus high jobless levels. Britain has largely followed the US since that divergence began. What macroeconomic event at that time, asks Kaletsky, occurred in the Continental economies, but not in the US and UK?

The answer is obvious — the Maastricht Treaty, creating the single currency, was negotiated in 1991 and began to be rigorously implemented from 1993 onwards. From that point onwards, European countries lost their ability to manage macroeconomic demand or use their exchange rate to increase growth and employment.

He still thinks Europe needs reform: "More economic freedom, lower taxes, less generous unemployment benefits, and lighter labour regulation." But, more controversially, he thinks none of these will work until Europe seems more demand growth.

Europe must stimulate demand with an Anglo-Saxon-style monetary policy, explicitly designed to achieve full employment as well as low inflation .… Demand management and supply-side reform must both be applied at the same time. That is the one clear and unambiguous lesson from the Anglo-Saxon economic model's recent successes. But will the Europeans ever understand?

It would be ironic if the Euro, designed to cement the EU as top economic power, has doomed it instead to below par performance.

Identity cards are a very controvertial government policy, but public debate on the subject has been pretty small. The campaign group no2id complains that the government has "consistently failed to show up and defend its position at public meetings". So we felt it was time we helped readdress the balance, and last night the Insitute held a seminar on compulsory identity cards. Kali Mountford, a Labour MP, came to support the scheme on behalf of the Home Office.

On the other side of the fence was Peter Lilley MP, a Conservative MP who is a former Secretary of State for Social Security (in Britain, social security includes welfare generally, like benefits to unemployed people, not just pensions). He argued that the TV series Yes Minister is remarkably true, and that civil servants really do interact with politicians in the way they are portrayed in the series. Every time a new Minister is appointed, they are pursuaded of the virtues of the ID scheme. This has gone on for decades. It is portrayed as a solution to all of our problems. But the fact that no government departments are willing to put up money from their existing budgets suggests that they really don't think it will be a huge help to them.

Sarah Arnott of the IT industry newspaper Computing said that ID cards could have benefits to ordinary people, but not as the scheme is currenty designed. Currently all the benefits go to government. But most of us are willing to give up some privacy if we gain from it - such as with supermarket loyalty cards.

Finally, Seamus Heffernan pointed out that the reasons for introducing identity cards keep on changing. We should be suspicious of government policies when the government itself doesn't seem to be clear about their purpose.

There are signs of agreement on international development, with a focus on ending subsidies and opening markets. A seminar on the subject at the Foreign Policy Centre last week featured a speech by Hilary Benn, the cabinet minister responsible. Many free marketers would agree with most of what he said. He wants policies which bring practical results, and he conspicuously avoided the old dogmas and clichés.

There are strong links between more open trade and growth. In a group of eighteen developing countries that became much more open to trade after 1980, the average growth rate has accelerated. This group included most of the world's poor people - among the eighteen countries are Bangladesh, China, India, Ghana, Nepal, Uganda, and Vietnam. Growth in turn has helped reduce poverty. As you know, poverty in China has decreased by two thirds since 1981 and in Vietnam, poverty was halved in a decade. I call that progress. However, in sub-Saharan Africa where trade and growth have fallen, poverty has almost doubled since 1981.

Mr Benn pointed out that the aid given by rich countries is cancelled out many times over by the economic damage which their subsidies and tariffs inflict upon poorer ones.

We need to tackle trade distorting subsidies and further open our markets. Total support to agriculture by OECD countries was US$318 billion in 2002 - roughly 5 times more than all of the aid which the rich world currently gives. Agricultural protection is damaging to developing country producers. It costs them $20 billion a year by shutting them out of EU markets.

He did not support protectionism for developing countries either, because it can lock countries into sectors in which industries fail to innovate and lose competitiveness.

Governments need to resist pressure from inefficient industries demanding permanent protection - governments, as history has shown, can't always pick winners!

Amen to that. The cross-party convergence which is emerging on development gives us a real opportunity to make 2005 the year in which we do something effective to lift humanity from the poverty which still afflicts too much of it.

Following Prince Harry wearing a Nazi outfit to a fancy dress party, the European Union may now ban the swastika symbol following calls from German Members of the European Parliament to do so.

Why don't we go further? I suggest banning the star of the Soviet Union. After all, the Soviet Union murdered at least 60 million of its own people, probably many millions more. Perhaps there could be a committee set up to root out more symbols of oppression and ban them.

Alternatively we could try and get a degree of perspective on things. No law is needed in order for people to wear black at funerals or keep quiet in cinemas. The social stigma Prince Harry has experienced in the media should prevent a repetition just as being hushed in the cinema or theatre embarrasses one in to a greater degree of consideration. As for the idea that fascist views would be reduced by banning the swastika, this is absurd.

Under the proposed ban, would we be allowed to watch films about the Second World War involving the sinister Nazi officer with the duelling scar beneath his left eye wearing his swastika and iron-cross? Maybe this would be allowed in an historical context but what of Mel Brooks' musical The Producers?

John Lloyd, editor of the FT magazine had a thoughtful piece in the Jan 16th issue (limited to subscribers) about politicians and the broadcast media. Many observers have noted, some to deplore, the way in which political interviews have become contests, rather than attempts to elicit truth. Paxman's question "Why is this bastard lying to me?" speaks of a superiority and contempt difficult to reconcile with any truth-seeking mission of journalism. The aim seems no longer to be to elicit truth, but to humiliate and degrade the subject. Many viewers are irritated that the personality of the journalist overshadows anything the politician might be trying to tell us. Indeed, the constant interruptions actually prevent it. Lloyd suggests that:

The broadcast media class has, in the past two or three decades, positioned itself - economically, socially and morally - above the political class, and therefore treats it with jovial scorn and condescension.

He quotes from a game on the BBC Newsnight website. The game, Deadringer Game - NewsFighter II, tells you that "You’re about to enter the NewsFight studio and take control of Kirsty Wark. Can you defeat Tony Blair and make him answer the question, or will he walk all over you?" Lloyd tells us that:

Being the best, in broadcaster's terms, is what it says: being better than the politicians and other public figures, who must be either seen to be defeated, or they will be seen to "walk all over you." The political interview becomes an exercise in confirming superiority – or in suffering the loss of face and sense of shame which any upper class would feel when bested by an inferior.

These days the media journalists are often bigger celebrities with higher incomes than the politicians who must jump through the media’s hoops in order to speak to their electors. This does not mean people trust them more. In the MORI poll of trustworthiness, repeated annually, the only group which regularly scores lower than politicians is that of journalists. And while the mainstream media might exult in their superiority over the lowly politicians, there are now guys in pyjamas sitting out there tracking their every move and being just as merciless to them as they are to their subjects, as Dan Rather discovered.

This sounds really parochial, but it could be the start of something big. The Borough Council in Swindon, west of London on Brunel's famous rail line, is set to become the first local authority to outsource its service management to another. The Council will pay £3.6 million to Kent County Council in a three-year deal to improve the effectiveness of its zero-star social services department.

One of the problems in local government, and the reason why Britain's Council Tax is so high, is that they too often insist on doing everything themselves. You have four or five little places all running useless and inefficient payroll systems, for example, when they really ought to capture the benefits of scale and just get one of their number - or an outside contractor - to run it for all of them. But officials fear it is shameful to acknowledge that some other council might be better at running things than they are.

So this is a welcome trend. Let's hope that efficient local authorities will market their services to others; and that inefficient authorities will be brave enough to buy in their help. Then some of our most dire public services might just be improved.

The UK government's been telling us that we've never had it so good, but the Britain section of The Economist this week takes issues with their headline claims.

'Britain has had the longest period of sustained economic growth for 200 years' - On quarterly GDP estimates maybe, but annual figures show unbroken growth between 1949 and 1973, much longer. In any event, the present growth spurt started in 1992, under the Conservatives.

'Unemployment is at its lowest for 29 years' - True on the very restrictive official figures, says the Economist, but what about the 'economically inactive' folk who are not counted?

'Inflation is lower than at any time since the 1960s' - It has been lower, true, but now it is 3.4%, the highest since mid-1998, so that looks bad.

'Mortgage rates are ower than they have been for 40 years' - Yes, but that is because inflation is less: real borrowing rates haven't changed much.

Perhaps it's no wonder that people don't trust politicians any more. Or their economists, for that matter.

Ross Clark has a neat piece in The Times on the precautionary principle. What's that? Well, it's where you say that, even if something has not been proved to be harmful, it's better not to take the risk.

Well, it's better not to take the risk if you are a politician, at least. There may be no proof today that cellphones or high-voltage cables give people leukemia. But if future research does show that, and you haven't acted, then you are in deep political do-do. The media will parade out the victims and then you're done for.

It was the precautionary principle that threw Britain's railways into slothful chaos after the 2000 Hatfield crash ("Who knows? Maybe other points are faulty"), and that closed down the countryside during foot-and-mouth in 2001. In both cases, the cure was worse than the disease.

And that's literally true in the case of medicines. New drugs have to go through years of testing before anyone can benefit from them. If you are facing a life-threatening condition, that's not what you want to hear. Better to have something now that has potential side-effects, than to have something later, after you're dead.

There are lots of nice examples of how stupid policymakers are in dealing with these risks in John Adams's ASI report, Risky Business. And our forthcoming report on deregulation by Tim Ambler and Keith Boyfield will expose its ill effects, particularly in terms of the oppressive regulation that comes out of the European Union.

Yet, as Clark says, far from rethinking government attitudes to risk, Tony Blair told the Royal Society in 2002: "Responsible science and responsible policymaking operate on the precautionary principle." Oh dear. Soon they will stop us doing anything. Just in case.

This week the giant A380 is rolled out, promising to take 550 passengers at a time, maybe more, on a double-decker ride which may or may not be equipped with cinemas, bars and shops. Boeing, by contrast, thinks more people will want less crowded flights direct to their destinations, and is banking on its smaller, lower cost, greener 7E7 Dreamliner. Meanwhile Fly First, a new UK airline, plans all-business class transatlantic flights, complete with Concorde-style service, albeit in the subsonic Boeing Business Jet or the Airbus 319.

There’s much at stake, including more covert subsidy to Boeing and Airbus than is good for either European or US taxpayers. No-one knows whether Airbus will get it right, as Boeing famously did with its 747. The British and French governments got it wrong with Concorde when they thought that the future lay in faster, rather than cheaper, flight. It is a sign of the current uncertainty that Airbus is trying to raise cash to build the A350 as a spoiler to Boeing’s 7E7.

It doesn’t matter too much to customers, in that we get to choose which we prefer. Investors could lose a great deal of money if they back the wrong one, or make a great deal if they call public tastes correctly. It could even work out that the air market will fragment and grow sufficiently large to make all of them right. Enterprise is a great thing: you makes your choice and you puts up your money. It should be private investors taking those risks and putting up that money. Governments are not very good at it, and we all have to pay when they get it wrong, as they so often do.

Britain’s Conservatives have identified savings of £35b in Civil Service costs, reports David Cracknell. They appointed financial expert David James to see where cuts can be made. He recommends chopping £1.6b off the Home Office budget by adopting an Australian system of immigration quotas.

James also identifies big savings in health (£7.9b), education and skills (£5.6b), defence (£4.6b) and local government (£4.4b). An estimated 235,000 Civil Service jobs would disappear. Labour says that this will mean service cuts. One of their tactics has been to translate the savings into average service cuts in each electoral district, claiming that "this will mean the loss of 157 school places in your own constituency," which plays big in the local media.

Anyone who has seen Whitehall from the inside can identify waste. The Adam Smith Institute used to run an Economy in Government competition with prizes for the winning suggestions; and Civil Servants featured prominently among the winners. The Thatcher governments found that the most effective way of cutting costs was to move whole areas of responsibility into the private sector. Industries which had made losses for decades were privatized and revitalized once outside the domain of government.

The problem with 'government saving' is that every programme has its defenders, and government soon becomes exhausted with the meagre gains achieved after epic struggles. The Adam Smith Institute plans a different approach. It will appoint a team of political and business experts to do the exercise using zero based budgeting. Instead of starting with the status quo and looking to reduce costs, they will start at zero and ask what government should be doing, and how it might do it efficiently. Their proposals will feature a government much more efficient, and very much smaller.

Unfortunately for the Tories, this will report after the next election, and too late to help them.

After decades of failure to make projects and grants work, we seem to have learned little about poor countries. The Chancellor is currently in Africa, but a week will leave him no wiser. It takes years at grass roots level to understand how a poor country works, especially in Africa. There is an enterprising spirit, but it struggles in a sea of corruption. No medicine in hospital is given without a consideration for the nurse. No entitlement at the end of a queue is dispensed without a bribe. When Nigeria decided to give farmers free fertilizer, the farmers still had to pay the bureaucrats to get it. No rent remains uncollected in efficient local markets.

Poor countries, following their previous colonial administrators, are quite capable of crippling their own trade. For long periods in W Africa the export tax on cocoa was around 90% of export price. The farm gate price is seldom more than 1/5 of export price. Work out how much the grower received compared with what government took.

In Sri Lanka when the price of tea went up by 1p on world markets the government took it all as tax - a 100% marginal rate. Similar rates applied to rubber, coconuts, palm products and other farm products in the mid-eighties.

In corrupt countries aid cash goes into a black hole, often via Swiss bank accounts. Many countries remain poor because they are corrupt. It is not aid cash they lack, but good government. Adam Smith wrote of the need for peace, easy taxes, and a tolerable administration of justice. The lack of tolerable justice thwarts property rights, contract enforcement, and much that is essential for wealth-creation.

We can fund the fight against Aids and Malaria, and help with access to clean water. But please, no more talk about development aid. It is more useful to negotiate bilateral deals which erase corruption in return for trade access. That’s the way to reduce poverty.

I'm currently reading Philippe Legrain's book Open World: The Truth about Globalisation. In it, he takes apart many of the myths about globalization, carefully considering both sides of the debate.

Are campaigners working in the poor's best interests when they argue against globalization? Legrain points out that globalizing countries grew by 5 per cent in the 1990s, compared with only 1.4 per cent for non-globalizing ones. Poor countries that have adopted globalization are catching up with rich countries. These poor countries include the likes of China, India, Brazil, Mexico, Vietnam and Bangladesh. The bad news is is the poor countries that are not globalizing - like most of Africa and many Muslim countries - are staying poor.

As for the argument that poor countries should keep their tariff barriers, he shows that whenever poor countries do this, it is counterproductive. "In the 1960s," he says, "the fashionable p