ja_mageia

In Sunday’s Telegraph, David Willetts, the Minister responsible for universities, suggested that universities aren’t doing enough to accept bright pupils from poorer backgrounds. He contests that many such pupils’ educational backgrounds prevent them from meeting the demanding offers set by the top universities and recommends offering them reserved places at lower grades than required by their better-off counterparts to correct this discrepancy between potential and places. Yet this solution seeks to address a discrepancy that does not exist. Willetts assumes that universities do not already consider an applicant’s potential when offering her a place when, in fact, they do.

The vast majority of universities offer students places based on three pieces of evidence: AS grades, personal statements and teacher references. Whilst the first is admittedly concerned with a candidate’s attainment, the others offer scope for the display of her potential. Personal statements are used to demonstrate her extra-curricular successes, motivations and interests, whilst teacher references highlight the student’s pace of development and attitude to her work. A standard UCAS form contains a multitude of measures of potential, all of which are considered before a university makes an individual offer.

Further means of assessing potential are utilised by Oxbridge and the Russell Group universities, presumably the targets of such a quota (no-one hears about London Metropolitan’s failures to further social mobility). Not only do they require the completion of entrance exams with a more IQ-test feel than the standard A level for some courses (such as the LNAT and BMAT), they also tend to invite applicants to interview for places. These give admissions tutors an opportunity to examine how candidates think, by subjecting them to a line of questioning designed to reveal thought processes. Were a candidate with mediocre AS levels to truly dazzle at interview, the university would have few qualms offering her a place, complete with realistic grade-requirement suitable to her educational background. Indeed, I’ve met people to whom exactly this has happened.

Universities already take the applicants whom possess the most potential. They have both the means to identify them and the incentive to reduce offers in line with personal circumstances; allowing the best candidates in can only raise the university’s position in the league tables. Universities do not need government instruction to act in their own best interest, and recruit the best applicants thereby.

Gold reached a new high of £1234.55 per ounce last Thursday. Though Keynes might have dismissed it as a 'barborous relic', there is no doubt that people have much more trust in gold than in the paper currencies that are printed by their national governments. Particularly at a time like this, when governments are printing (quantitatively easing) the stuff like mad just to pay their debts. So should we protect ourselves from inflation by adopting an honest-to-goodness gold standard? I ain't convinced.

The six-year-old daughter of a friend of mine asked me one of those childlike questions that fetch you up: 'How much money is there in the whole world?' I got international economist (and Adam Smith Fellow) Gabriel Stein onto it, and his best guess was $60,000bn. I then asked myself how much gold there was in the whole world, and the accepted answer seems to be about 10bn ounces. So if we replaced all the paper money in the world with gold, its price would soar to about $6,000 an ounce.

That would be a nice windfall for rich folks with a lot of gold jewellery, which of course is one reason why the rest of us would never permit it to happen. But there is a second political problem: there just isn't enough of the stuff to make it fit for purpose as a currency.

Now a lot of people have casually dismissed a gold standard on the grounds that there just isn't enough gold. I always thought that was nonsense. Sure, on my calculations you would need to weigh out about one ten-thousandth of an ounce of gold to buy a pint of milk, which isn't a very practicable way of doing your shopping. But there's an obvious answer: you issue paper certificates for such tiny quantities of the gold, and use them as your currency. The paper works because, well, it's as good as gold.

But I've been re-reading Milton Friedman's Capitalism and Freedom as part of my researches for a new book on his policy ideas, and he makes what seems to me to be a very strong practical case for why this apparent monetary paradise is a mirage. Once people start trading in gold certificates instead of gold itself, there is wide scope for fraud – over-issue the certificates and you can make some nice extra money. Since the certificates hang around in circulation for years, and people don't usually come in all at once to demand the actual gold for their certificates, your fraud is unlikely to be discovered.

The upshot is that, inevitably, some authority has to get in on the act to ensure that the contract – a certificate for an ounce of gold entitles you, on demand, to just that is properly enforced. Which means that government, with its monopoly on coercion, is going to get involved – as it always has, even under the supposed 'gold standard' of the past. Worse – and as before – the temptation of the government to get into the gold-certificate fraud itself will be overwhelming.

If governments were angels, then gold might work. But Friedman's conclusion is that a commodity standard such as gold is neither feasible nor desirable. Better, he thinks, to let them print money – but have strict limits on the quantity they print. That system is more obvious, and easy to control.

Well, Milton, good luck with that one too.

Interesting view from the excellent Richard Jeffrey, chief economist at Cazenove Capital Management, on why inflation has stayed so high even though growth has been weak. Normally, when the economy is suffering, you would expect prices to be more restrained – producers can't push up prices when their customers are losing their jobs, suffering pay cuts, or generally short of cash.

True, there have been various upward pressures on prices – like oil prices and transport costs, which affect just about every product. The falling pound has made imports dearer. But even this does not explain the high rate of inflation in the UK.

Jeffrey's answer is that families have been very focused in how they have economised during these difficult times. They have cut out big- ticket items like air travel. But equally, plummeting interest rates have left them with more day-to-day cash in their pockets – which they have spent on more day-to-day items like clothing and footwear (with spending on these up 4.8% in real terms). So despite the depth of the recession, retail spending has actually increased.

It's time to abolish the minimum wage. Yes, I want to see pay and conditions improve for the lowest-paid workers just as much as anyone else. But it is now obvious that the minimum wage is keeping out of work those – like younger people, unskilled workers, women and ethnic minorities – who need job opportunities the most.

Of course, there is an economic downturn going on, so jobs are harder to get and unemployment is higher. But where is it highest? Yes, precisely among these groups. Despite billions spent on New Deal packages to get young people in the 16-24 age range into work, roughly a fifth of them are unemployed. Even graduates can't find work. But the really shocking thing is that almost half the black people in this age group are now unemployed. And across all age ranges, the worst hit by the downturn are young women with no qualifications, again, nearly half of them out of work.

When the minimum wage was introduced, our report Minimum Wage Costs Jobs predicted that it would cause problems for young and unskilled people and for women and minorities in particular. In the event, the minimum wage was set at an unexpectedly low level, and the economy was booming, so the effect was not clear. Now that the boom has subsided, though, it is all too clear.

This should be no surprise. For a start, it wasn't unemployed poor, unskilled, young women and minorities who campaigned for the minimum wage. It was the mostly male, mostly well-off, mostly white, fully employed trade union bosses,. They wanted to elevate the entire wage scale by raising the wages of their lowest paid members. And by definition, that means people in work, not people out of work. The groups who have been denied work by the minimum wage understand exactly the nature of low-paid work. It is not something they aim to do for very long: it is something that pays them money while giving them the experience they need to qualify for a better-paid job. Immigrants know they are often not as valuable to employers because they may not perfectly understand the culture or language; women know that, despite plenty of anti-discrimination law, employers prefer men; young people lack skills and the habits of work; too many young black people in particular are let down by failing inner-city state schools, leaving them less qualified.

We can devise any number of costly New Deal programmes to help train up those who have few work skills. But where can you get the best possible training for a job? Yes, in a job. The Adam Smith Institute is always inundated with requests from interns and school students to work a week, or a month or a summer, because they recognise the value of simply being in a work environment. We like to help young people, and we like having them in the office. But are they really worth the minimum wage to us? No; we do more to help train them than they do in useful work for us. And as far as properly commercial employers are concerned, however much they might like to help people in need of experience, they would risk being undercut by less generous competitors if they did. So they don't. And that's why, New Deal or No Deal, unemployment is soaring among young and unskilled people. It's a wicked system, and we should scrap it.

During the halcyon days of late August, October 20th seems some months distant. But Public Expenditure (PE) Day, when the Comprehensive Spending Review outcome is announced, will have momentous consequences for the economy.

Indeed, PE Day on 20th October may well be compared with two other infamous days in UK financial history – 13th October 2008, when the £37 billion bank bail-out was announced as Royal Bank of Scotland (RBS), unbelievably, came close to total collapse; and Black Wednesday on 16th September 1993 when the UK was humiliatingly ejected from the Exchange Rate Mechanism (ERM).

Yet, there seems to be little general understanding about the forthcoming budgetary cuts, which will be wide-ranging, controversial - and probably vicious.

Encouragingly, since the last Budget, gilt yields have fallen – both bringing down borrowing costs and reassuring foreign lenders. When the Coalition was established, the benchmark 10-year gilt yield was 3.9%; it is now just over 3%.

Although widespread spending cuts are inevitable, their impact is less clear. As outlined in the recent ASI publication, The Party is Over, most of the savings should be demanded from the big five spending departments.

Currently, social security cuts are being widely debated. A shrinkage policy, as outlined in last week’s blog, is the best option.

Although the Coalition has ring-fenced the NHS from cuts, much-needed administrative savings are already underway.

In terms of education, capital expenditure savings have recently been confirmed – and generated controversy following the shambolic nature of their announcement.

Proposed defence cuts are generating savage service in-fighting: it seems probable that the RAF will suffer badly. New aircraft orders will be cancelled and bases closed: the Navy will also have to cut back sharply.

Local Authorities, too, are under real pressure to cut back on their many excesses.

But will the Coalition survive the political fall-out from PE Day?

 As it’s the first anniversary of Scottish ministers releasing Abdelbasset Ali al-Megrahi, on medical advice suggesting he only had months to live, it’s interesting to re-examine the logic of his release.

Three months was posited as a “reasonable” life expectancy, but a year on Megrahi’s still alive and kicking (albeit still terminally ill and under palliative care only), whilst Libya continue to celebrate his homecoming, and a Foreign Office spokesperson comments: "The government is clear that Megrahi's release was a mistake.”

But there is a logical flaw underlying the entire debate over whether or not he should have been released. Commercial pressure is one thing, but the argument is defective. Megrahi was sentenced to life imprisonment. “Life” does not literally mean life. If it did, it would be certain that he would die in prison, whether or not that death was foreseeable (i.e. he was terminally ill).

As it is, he was to serve a minimum term of 27 years, which was backdated to 1999. This would take him to the age of 74. As Libyan male life expectancy is 72 (and Megrahi, a Libyan, has lived in Libya for most of his life), there was still a strong likelihood that he would die in prison.

Therefore, terminal illness was not a logical reason for early release, irrespective of the accuracy of the prognosis. If it were, you could have said, at the time of sentence, that he was only likely to live to 72. Therefore, he should only be sentenced to 25 years – indeed, a bit less than that to give him the opportunity to go home to die.

If his conviction was unsafe, then the appeal should have taken its course. But, of course, there is the problem that this might have taken longer than he had to live. The given medical prognosis would have been a valid reason to fast-track the appeal.

If (which we still don’t know for sure) there was compelling fresh evidence, then the court could have granted him bail pending appeal (an appeal which he then dropped). It might even have allowed him back to Libya, (this would have involved the UK, rather than the Scottish, Government). This would have been regardless of his medical condition. As it stands, the debate still rests on medical opinion, when really that seems to be irrelevant.

Martin Kettle gets very worried about the fact that we in the UK seem to be much more interested in the Anglosphere than in Europe:

In the 20th century, political, cultural and intellectual Europe was a reality. Sometimes a threat, often an opportunity, but always a presence. That's not true now. In the 21st century, to a degree we seem slow to recognise, let alone think about, our minds have never been more narrowly oriented towards the English-speaking world, above all the US.

If we're culturally attuned to the Anglosphere and not Europa, perhaps we should simply detatch ourselves from Europa and go off and join the Anglosphere then? We are indeed united by language, in a way we're not with Europe. Similarly the law, we all have some variation of the Common Law system which nowhere in Europe does.

Yes, yes, I know, I'm hardly the one to be even handed about this given my well known hatred of all things European Union. But just one further point that we might make.

One of the original points of the EU was that we should all be trading with each other more. Trade is indeed good, so why not? And trade with those geographically close to you is a better idea perhaps. Certainly it reduces transport costs. But one little point that gets missed in these mutterings over trade. Since 1957, when it all started with the Treaty of Rome, the technology of trade has changed completely. Geographical distance is almost irrelevant now, it's whether you are on the container shipping lines or not that does matter. Birmingham to Barcelona or Brindisi is little different in cost than Brum to Brisbane if you're in a container: and if you're not in a container then the cost is exorbitant for any of them.

In fact, the first containerised ship set sail 6 months before the Treaty of Rome was signed. Not to crow or anything but just yet another example of markets solving problems before politicians can.

But as to the larger point raised by Kettle: if we really are more attuned to the greater world rather than Europe, why is everyone trying to shoehorn us into Europe and cutting us off from the wider world?

This week the last Catholic adoption agency in the UK has been forced to cease adoptions following the ruling of the Charity Commission. Catholic Care, a Leeds-based social care organization, only offers adoption services to heterosexual married couples. The Commission has ruled that their religious views do not justify its refusal to place children with homosexual couples. Gay rights campaigners may see this result as a victory, but I believe it reflects a growing trend of trampling on religious groups’ liberties and will mean young, vulnerable children will lose out.

Catholic Care has been offering adoption services for over 100 years, successfully placing children with families and offering post-adoption support services. It has a much better record than a lot of adoption agencies run purely by local authorities and receives its funding from the Catholic Church. By removing the agency’s right to offer adoption to heterosexual couples only, the Commission has effectively cut off funding for this service, as the Church will not give money to support a service that acts contrary to their beliefs. As a result, orphans and vulnerable children will lose out as a respected provider of these services is forced to close. It remains to be seen whether other agencies will be able to increase their provision in the area to make up for this.

Secondly, although the agency chooses not to help homosexual couples adopt, it does not actively prohibit it or encourage homophobia of any sort. Catholic Care is not stopping gay people adopting, it is just refusing to be forced into helping them do so. Homosexual couples are free to adopt using other adoption service providers in the area.

Lastly it’s wrong that, for the sake of the government’s crusade against discrimination, this quango is ending the good work Catholic Care do in the community. Their decision will bring no benefit to the local community and only continues to stoke concern over the growing limitations the government is placing on religious groups who seek to serve the community in accordance with their convictions. Our religious liberties are important civil liberties that must not be treated as an inconvenience or inferior to the apparent greater God of anti-discrimination laws. Therefore the Charity Commission’s decision represents a saddening defeat. As Pope Benedict XVI argues, it imposes unjust limitations on the freedom of religious communities to act in accordance with their beliefs and ultimately results in a less free society.

President Barak Obama has now got his dream car, the hybrid car Chevy Volt, produced only after intervention from government and labour union- owned Government Motors.

In one way it reminds us of the German predecessor: the Volkswagen. A car not produced according to market demand, but for dubious ideological targets. However, the new ‘Voltswagen’, on sale for $41,000, costs, when all subsidies are accounted for, about $81,000. Not only is it worlds apart from the original Volkswagen, but its creation signifies a distorted economy: taxpayers funding a vehicle which can only lead to loss and a shortage. In addition, comes the government subsidy of $7,500 for purchasers of the car, a nice addition for ‘upscale urban liberals’, some of Obama's strongest supporters.

People who are trying to justify such immense subsidies argue that this is necessary to get the electric car industry up and running, because they are in their infancy. The truth is that electric cars of some sort have been around for a century and the market still did not absorb them. Why supply when there is no demand?

But would it be a good thing if we all switched to electric cars? The point is to reduce CO2 emissions, right? But in some regions, we get our electricity from CO2­spewing coal. The more electricity pulled from the grid, the more coal is burned, essentially replacing dirty oil with dirtier coal (which is why some coal backers see much promise in electric cars). Studies confirm that China – which is allegedly “beating us” in the race to a green economy – would produce vastly more greenhouse emissions if it switched to electric vehicles.

Government intervention stymies market forces. Furthermore, the creation of the ‘Voltswagen’ blatantly derives an ‘is’ from an ‘ought’: there should be electric cars, whether supply is economically feasible or demand is there.

Goodhart's Law was used as an explanation of why those monetary targets used by Maggie et al in the 80s would never work: my, how the clever people mocked. Of course, those oh so clever people then went on to do exactly the same in spades: we ended up with targets for waiting times in emergency rooms, targets for child poverty and I'm sure it was only the intervention of an election which stopped us having targets for sheets of toilet paper successfully soiled.

For, while originally formulated to deal with certain problems in economics, Goodhart's Law really says that whenever you use a proxy as a target for what you really want to happen either the proxy will stop connecting to the target or people will game it. Thus we had patients waiting in ambulances so they wouldn't be in A&E, policies to bring those families just under the poverty level over it while ignoring the truly poor and, yes, those monetary targets going haywire two and three decades ago.

To see this on the hoof, taking all of the politics out of it, have a look at this:

By counting the cars in Wal-Mart’s parking lots month in and month out, Remote Sensing Metrics analysts were able to get a fix on the company’s customer flow. From there, they worked up a mathematical regression to come up with a prediction of the company’s quarterly revenue each month.

How excellent, we've a method of predicting the financial results from seeing how many people are going to the store. But of course as soon as this is known there will be gaming of the system. Sticking more cars into the parking lots will raise expectations of the financial performance. But no, you wouldn't want to do that, buy the shares and then stick cars in the lots. No, you stick the cars in the lots, wait for the shares to rise on the excellent results to come, then sell them short. As the satellite photos turn out to have been counting the cardboard models you've been putting up the shares will fall of course and you can buy back and retire on your ill got fortune.

Yes, it probably would be illegal, yes, it probably would be market manipulation but that's not the point here. Only that it's an example of what happens when we all decide to start using some glorious new metric to measure performance: as soon as we do someone starts gaming it and our new metric is now useless.

Sorry folks, but setting targets just doesn't work.