Adam Smith Institute

The US economy, as a whole, is just staving off recession yet there are some states that seem intent on making their own localised versions of the downturn worse by excluding the very people who could help. It appears that in many states lawmakers facing tight budgets are fishing for income amongst those who own private planes or yachts via use tax laws. For example, in Maine if your private choice of transport is in the state for longer than 20 days then you are charged at 5 percent of the purchase price (only for the year post purchase) and if their judgement relates to a previous year then there's interest to be added. The quote from Mr Khan (who is being asked for $25,000 relating to 2003) sums up how people will act, "I know of half a dozen pilots who have cancelled their vacations to Maine and are going to some other state where they feel welcome. It's definitely going to hurt their business."

Maine isn't alone in shooting itself in the foot, other states with similar laws include Florida, Illinois and Washington, and due to the downturn they are all replicating Maine's actions. Whilst the US is in this precarious position states should not be turning visitors away. They should be encouraging the wealthy to visit in order to aid growth and redistribute wealth in the natural way rather than through the use of legislation and the threat of inhibiting people's freedom. The money that the state will take from a handful of people may cover up some revenue shortage, but after it has leeched through the state government the people of Maine will not benefit as much as had the wealthy been allowed to spend it has they saw fit.

The legislators in Maine have just ensured that their State's downturn will be slightly worse; other states though are opening their arms and welcoming the wealthy and the benefits they will bring to their communities.
 

So we're getting the actual numbers in now. No, the current global food problems are not as a result of India and China getting richer, no, they're not a result of more meat eating. Nope, sorry Greenies, people are indeed starving and rioting because some bright sparks thought we should put food into cars. Well done!

It does look like the Great Moderation continues: what recession?

Evidence again that public subsidies to things that can be done by markets unaided might not be the very bestest use of resources.

Further evidence that the profit motive does indeed get things done: even when governments don't want that thing done.

And how about evidence that those who run governments are sometimes driven by the thought of personal profit?

Vintage Boris: there are at least some aspects of American life which (despite his actually having been born there) he won't be importing into London.

And finally, if even Ezra Klein thinks you're being a condescending elitist git then it's a fairly safe bet that you are indeed being a condescending elitist git. Even in a restaurant review.

Jim Manzi has managed to get me to at least rethink one of my long held beliefs about climate chaange and what we should do about it. Rethink still, not quite change my mind.

My basic position has always been that climate change is indeed happening and that we now need to look at the economics of the situation: it's not, as many insist, either an immediate or catastrophic problem, rather a low level and chronic one. Thus I reject the Gore and other catastrophists (including the Stern Review) thoughts that we need swinging carbon taxes (or cap and trade agreements) now: I'm rather more inclined to the Nordhaus view that low carbon taxes now, with a road map for their gradual rise over the decades, will provide the incentives for the necessary changes. Such taxation being, of course, revenue neutral, so that other taxes should fall as they are imposed. One thing that rather underlies my complacency about such taxation is that on things like air travel and oil we already have the necessary levels of green taxation recommended: not just by Nordhaus, but by Stern. So we've already done what we needed to do, we just need to wait the time that such changes in relative prices will take to influence behaviour as the stock of cars, heating systems and the like is replaced.

I'm also aware of the Hayek point: that we can't actually know what, exactly, the correct level of such taxation should be, but again, low and gradually rising taxation doesn't worry me all that much, not over decades.

However, Manzi goes further and makes me think that quite possibly I'm wrong in all of the above. That is, that the political system is so disfunctional, so appallingly corrupted by special interest pleading, that it will never be possible to roll out such carbon taxation across the economy without the price soaring above any possible benefits. If he's right, and he is indeed very convincing, then that leaves only one path we can possibly logically follow.

Technological development and whatever adaptation we need to do to fill in the gaps. I can't say that that worries me either really: my day job is on the fringes of said technological development and the one thing we really do know about human beings is that we adapt pretty well.

All of that said, I do urge you to read Manzi's post. Perhaps this is another of these problems which is simply too important to be left to politics?

Last week's local elections were pretty disastrous for the prime minister, Gordon Brown, and his ruling Labour Party. They lost hundreds of council seats – not just in marginal areas, but in the Labour heartlands too – and were beaten into third place in the popular vote by the Liberal Democrats. Even worse, Labour lost the London Mayoralty to Tory Boris Johnson – and the support of the capital city is correctly regarded as a pre-requisite for any general election success. All in all, these were the worst local election results Labour has endured since the 1960s, so I'd say 10 Downing Street is not a happy place to be right now.

Yet it remains very unlikely that Gordon Brown's leadership will be challenged. The Parliamentary Labour Party are much less prone to coups than their Conservative counterparts and, besides, there is not yet anyone who can realistically challenge the prime minister. On the Blairite side, David Miliband is not sufficiently established, Alan Johnson not sufficiently ambitious, and Charles Clarke not sufficiently popular. If there is trouble, it is more likely to come from the left of the party – John McDonnell, perhaps – who think old-fashioned socialism is the best route to electoral success. It isn't, of course, and most of the Labour Party knows it, so Brown should be safe for now.

The question remains though, what should he do with his leadership? On this front, it is vital that he is seen to be bold and decisive. He needs to set out a clear direction for his party, make radical policy proposals and then stick with them. How about this – in order to fight poverty, he should take the poor out of the tax system altogether and eliminate the absurd marginal tax rates which condemn millions to a life of state handouts. And in order to reduce inequality, he should reform public services, so that everyone is free to exercise consumer choice – and not just the rich who can afford to go private.

No, come to think of it, I can't see that happening either.
 

I was in Oxford last week for a Union debate. The motion was "This House believes City pay is indefensible in light of growing social inequality." Naturally I was in opposition, along with the Telegraph’s Damian Reece. I put the case that it mattered more to have a richer society than a more equal one. When a country becomes richer, it often happens that income disparities increase, because some can manage wealth creation faster than others. Modern China is an obvious example. Fortunately, unless the rich store their money in brass pots in the garden, it circulates. What they save or invest provides capital pools to create more economic expansion; what they spend creates jobs, be it in the auto or travel industries, in services such as restaurants, or in areas like interior design.

Furthermore, with capital and talent never more mobile, attempts to limit rewards in London would simply drive both to more amenable surroundings, with loss to the UK of the economic success they bring. I don’t know if our eloquence won through, or whether the Oxford students were looking to the rewards of their own future careers, but the motion was defeated, as the house voted not to criticize the high salaries.
 

So are economists actually describing the real world? Or are they simply projecting the biases of those who become economists onto it? Perhaps a test here. Does this economic explanation for monogamy convince?

Apparently it was Guido Wot Won It. As to what to do now there seems to be some conflict between auditing all those special advisors and getting them out of the building immediately.

This food crisis thing: what we actually need is more large scale commercial agriculture, especially in Africa. Worth noting that Zimbabwe was a food exporter not so long ago...

Enquiring minds would like to know. Was this in fact Labour's worst result since WWI?

Economies continue to become more energy efficient, meaning the price of energy becomes ever less important.

Just how non-lethal is the non-lethal Taser?

And finally, spam was 30 years old yesterday while the office computer revolution seems a little younger.

But I think I'll put the boot in anyway, because I'm nice like that. Richard Spring MP has given the details of his income as an MP on his blog here.

Firstly, my own monthly salary. After deductions it is exactly £3,250.53. Deductions include 10% of the gross figure of £5151.67 for the parliamentary pension scheme (£515.17).

Certainly that's an interesting example of average tax rates on a not especially large salary: adding back in the pension contribution, that's 27% off the top in taxes. Now while many around here disagree with me I'm of the opinion that the number of people clamouring to become MPs means that the wage paid should fall, but leave that aside for a moment. The point I really want to look at is this: 

By June next year I will have been an MP for 17 years. If I were to stand down as an MP then and elect to draw my pension, my pension would be £22,952.41 per annum, slightly above the average parliamentary pension.

Well, 17 years of £515.17 a month (clearly it would have been lower in earlier years, but bear with me) would be a pension fund of £105,000 ish or some £7,000 a year as a pension. Hmm, yes, getting a £23,000 a year pension off that fund would be rather an achievement, wouldn't it? Even if we compound the interest at 8% on the payments into the scheme it gives us a fund of only £225,000 (and that's being absurdly generous, assuming that the payments in have been at £515 a month for 17 years). Given current annuity rates for a 60 year old, that would give a pension of some £14,000 a year.

But whether readers of this blog feel that my own contributory pension is generous enough to be described as ‘platinum plated’ or a ‘goldmine’ is for them to decide. I simply state the facts.

Platinum plated or a goldmine is indeed in the eye of the beholder: but I think the stated facts would support such a description?

Anyone who talked to voters on the doorstep in the run up to the London elections will have found themselves explaining time and time again exactly who the Greater London Assembly (GLA) are and what they do. The problem is that with such large electoral areas – typically equivalent to three regular constituencies – assembly members have a low-profile and are difficult to hold to account.

Now the New Local Government Network has proposed an effective solution. In a new research paper James Hulme argues that the GLA should be scrapped, with its power to scrutinize the London Mayor transferred to a London Leader’s Council (LLC), consisting of the 32 elected council leaders in Greater London. Hulme argues that:

The crux of the problem is that, put simply, members simply don’t have enough to do to justify full time engagement….Through day-today interaction with their local communities, Borough Leaders would be best placed to offer first-hand guidance on the views and aspirations of ordinary Londoners.

Not only would this make both the Mayor and those who scrutinize him more accountable to ordinary Londoners, it would also save a great deal of the £8.7 million allocated in the 2008 Mayoral budget to run the London Assembly. In fact, the report estimates that removing the Assembly would save £6.6 million – that’s an extra 165 police officers on London's streets.

I'm very pleased to see a new book by my friend David Starkie (no, not the TV historian, the transport analyst) called Aviation Markets. It comes in at a pricey £25 but it's a heavyweight item of 250 pages.

Basically, it's a collection of 17 reports that David has done over the last 25 years, including extensive editing and updating. They're organized in thematic sections, and put in context so that you get an understanding of the background to the issue, and can appreciate each paper's wider significance – including the extend to which current policy has been changed as a result of it.

But the main focus is one close to Adam Smith's heart – the role of the market and how economic and political policies help (or more often, hinder) it. Starkie is a great believer in the power of competition to solve the problems that politicians just can't fix. A useful message to everyone involved in transport: and not lost, I would hope, on people who work in or regulate other utility industries.

Buy it here.

Yes, of course the news is dominated by BoJo today. Guido has a situation vacant ad, Wat hopes they are indeed listening, Fraser thinks BoJo simply sends a certain type mad, might the Archbishop of Montevideo be far behind and finally, simply gloating.

Google might solve energy problems: although it's worth noting that while every inventor of a great breakthrough was at first told he was mad, so have the mad been told so over the years.

Prices are solving at least part of the problem, as markets tend to do.

Environmentalism is of course causing part of the problem as well.

Cuba has lifted its ban on citizens buying certain products: anyone who then buys one faces a tax investigation.

Defending (in part at least) the FLDS and polygamy. A liberal society should indeed have room for such alternative (as long as voluntary) lifestyles.

And finally, no, absinthe does not make you spaced out because of the wormwood. It makes you pissed because of the 70% alcohol content.

Much of Ken Livingstone's historic electoral success has been his ability to put himself across as a man of the people, in touch with the concerns of everyday folk.

Why, then, did he put climate change at the centre of his campaign?

Only 21% of respondents to a March Yougov poll thought that climate change should be in the top three priorities of the Mayor. Respondents considered issues like crime, transport, housing and tax to be of far greater importance.

For most Londoners, it seems, the promises of a candidate with regards to climate change is of marginal importance compared to things that are affecting their lives here and now.

Quite right. After all, is it a sensible use of the Mayor's budget to spend millions of pounds addressing a threat that may or may not impact on the children of our great-grandchildren, when there are pressing concerns that need to be dealt with today?

The people of Peckham, for instance, need better policing far more than subsidised low energy lightbulbs.

Meanwhile, Ken's initiatives to tackle climate change – such as raising the congestion charge to £25 for 'gas guzzlers', and implementing the low emission zone – achieve little except making London even more expensive than it already is.

Moreover, if the economy continues to grow, it is highly likely that future Londoners will be sufficiently rich and technologically advanced to deal with whatever the climate throws at them – hot or cold.

Ken's decision to campaign hard on climate change was a strange lapse of political judgment. He may have won the dubious honour of being selected as the ‘greenest’ candidate by Friends of the Earth, but this has little resonance with the ordinary, cash-strapped Londoner.

Still, Ken will not let electoral defeat stop him from contributing to the climate change cause. His retirement will mean hot air emissions from City Hall will instantly plummet by around 95%.

I was on Radio Five yesterday morning, discussing whether we should all have to reveal how much we earn. A survey by Hudson, a recruitment consultancy, had found 60 percent of people would be happy to reveal what they got paid. The trades unions leapt on this, saying that all salaries should be disclosed in order to tackle pay discrimination in the workplace. I was on the other side of the debate.

My first argument was that this was a fundamental issue of privacy. How much someone gets paid should be between them and their employer. If people want to tell their co-workers their salary, fine. And if a company wants to adopt a fully transparent pay policy, then that's entirely up to them. But we ought to be vary wary of government legislation forcing their hand – frankly, it's none of the state's business.

My second point was pragmatic. In most businesses, the ability to negotiate pay and conditions privately with individual members of staff is vital. Imagine you are running a business, and you have a team of four or five people doing the same job. You know, however, that one of them is more valuable to you than the others and that he or she is likely to be poached by another firm. You will want to reward that person more, but without upsetting the others. That becomes much harder to do if pay deals have to be disclosed to the whole staff.

I didn't get the chance to make my third point, which was that 'pay discrimination' is itself a misunderstood concept. Men are paid an average 15-18 percent more than women doing the same job, but the evidence does not support the view that it's the result of discrimination. On the contrary, it seems to be the result of life choices that women freely and rationally make – i.e. to have children and take time off to look after them, to work part-time or flexible hours. Europe-wide research last year found that unmarried, childless women actually earn three percent more than the average man doing the same job.