What an excellent argument against the BBC licence fee this is

Not that Ms. Reynolds means it this way of course, she thinks she is producing the concluding argument for the retention of the BBC’s licence fee:

Anne McElvoy makes several sound points (“‘The Beeb is not facing involuntary euthanasia’”, Comment). Her easy assumption, however, that BBC radio operates with an unfair advantage – “a serious radio competitor, for example, has never got off the ground…” – must not pass unchallenged. Commercial radio in the UK competes seriously and successfully wherever there is a mass audience to be attracted. It does not, however, compete in “serious radio” because the audience it would attract (for features, documentaries, drama, comedy, etc) is not sufficient to justify the higher costs entailed. What “serious radio” commercial competitor would, for instance, underwrite her regular Radio 3 arts review, Free Thinking, or her Radio 4 series on Charlemagne and his legacy, or even the show where she has now also become a regular, Radio 4’s Moral Maze? Meanwhile, as a frequent visitor to New Broadcasting House, it cannot have escaped her eagle eye that further cuts to BBC radio budgets will seriously threaten the continued existence of any kind of “serious radio”.

Gillian Reynolds

Radio critic, Daily Telegraph

London W2

The point being that there really are things that must be done and can only be done by government and the power to tax. Radio not being one of those of course. There’s also a weaker argument that there’s things it would be nice to have and where it’s worth taxing the masses to produce a benefit to said masses. But what there isn’t is a space for the argument that the proles must be taxed in order to provide something of only minority interest. For if something does not justify the costs then we should not be doing it. If producing “serious” radio costs more than can be gained from doing so then this is an activity which makes us all poorer.

The BBC licence fee is a tax of course. And we’re really sorry to have to point this out but the point of mass taxation is not so as to provide sweeties for some small section of the metropolitan intelligentsia.

That not many people are interested in “serious” radio is an argument against the tax funding of it: that it doesn’t, as claimed, cover the costs of its production is an argument against doing it at all, not in favour of taxing those who are uninterested in it.

Subverting the urge to regulate

Two golf clubs on the Costa Geriatrica north of London play by different rules. Club A pours out regulations and spreads little instructional notices around the course. The new health and safety leaflet is only picked up because it looks like a score card. No one ever reads it. The club even specifies the socks gentlemen are allowed to wear. Club B has none of that. If their Captain suggests a new rule, he is quietly taken to one side and urged to lie down in a dark room until the urge passes. No prizes for guessing which club is the more harmonious.

Brussels and Whitehall both trumpet the need for deregulation and then do the opposite. Last week’s Research Note “EUtopian Regulation” discusses whether total regulation could be reduced by competition between the three factories, global, EU, and member states, and concludes that competition might decrease or increase total regulation. It is not the mechanism that matters, i.e. who regulates, but the will to deregulate. We need to take a hard look at the fundamental causes of the urge to regulate and then consider how the vice can be cured.

Yes, it is a vice. For example, complaints about the NHS have grown proportionately to the increase in its “management”, while malpractice in the City has grown in proportion to the number of regulators. I’m not suggesting that correlation is causality, merely that rule-making has improved satisfaction neither in the NHS nor in the banks, nor in golf clubs.

The drivers of regulation are at least threefold:

Cause One is the rise of the lobby group. Unions, NGOs and save-the-worlders all claim to represent ordinary people in pressing for additional regulations. Alongside all those telling government how to spend other people’s money, are those telling government to stop us doing whatever we happen to be doing. In a democracy, we should be free to express our opinions but that is not the same as getting the law changed to remove our freedoms. We should be governed by those we elect, not by those who think they know better. They should be taxed, for a start, on their gross income in order to compensate society for the amount of governmental time they waste.

Cause Two is the excessive number of levels of law-making and law-makers at each level. Every single one of them, like the Captain of a golf club, wants to leave his or her mark on society, to be famous for some Anti-X Act. We even hand out CBEs to these controllistas. Much better would be to reserve medals and pensions for those civil servants who can show that they have simplified and improved our lives. Performance should be measured by outcomes, not activity, i.e. the net reduction of regulation they have achieved.

Cause Three is the excessive number of supposedly independent regulators who have become arms of government. Margaret Thatcher introduced regulators to provide proxy-markets where competition did not exist, e.g. telecoms. The idea was to benefit consumers. Some still push prices down from time to time but too many are now working against consumers, e.g. imposing “compliance” costs, in order to carry out the wishes of government. As government in other colours, we should insist that regulators are funded not by levies on the private sector, but transparently by the government they represent. The squeeze on public expenditure to balance the books would then help bring sanity to regulation.

How can we subvert the urge to regulate? These three solutions should help but we need a much bigger change in the establishment mindset than that. It happened when nationalisation was found to fail and it will happen one day when we recognise the dangers to innovation, entrepreneurship and competition created by these factories of regulation. Bring it on.

Time for Time Limits

A new ASI report, Time for Time Limits: Why we should end permanent welfare, finds that a 5-year limit on Jobseekers’ Allowance (JSA) across workers’ lifetimes could save the Treasury £300-350m per year, as well as boosting labour markets and putting a break on self-fulfilling cycles of dependency.

The paper, authored by Peter Hill, a lecturer at the University of Roehampton, reviews President Bill Clinton’s ‘Personal Responsibility and Work Opportunity Reconciliation Act’ (PRWORA) which coincided with a massive decline in welfare rolls from 5 million to less than 2 million families by 2006. The act is credited for saving the US government over $50bn between 1996 and 2002.

In some states, there was a decrease in benefits caseloads of 96%, as well as an unprecedented drop in female unemployment and improvement in their financial status even in low paying jobs, and a drop in child poverty. Furthermore, comprehensive econometric analyses suggest that 6-7% of decreases in unemployment counts (and 12–13% of those in female-headed families) are as a result of the introduction of time limits. Although difficult to estimate the exact impact on the UK labour market ex ante, a similar effect on Claimant Count Unemployment could be expected; this translates to an estimated reduction in the benefit bill of £300–350 million based on current spending.

Though Universal Credit is innovative in tackling benefit withdrawal cliffs that make working very unattractive to some households, it does not put any limits on its unemployment insurance provisions. More radical reform like time limits has potential beyond the government’s current schemes.

Just as the US ended welfare as an entitlement programme, the paper argues that the UK should also take the radical step of ending JSA being funded from general taxation and instead return to a form of ‘Unemployment Insurance’ funding from NICs. This would mean operating the welfare system as a genuine self-funding insurance scheme managed through the UK Government Actuary’s Department.

Click here for the full press release.

Why do rich parents give birth to rich kids?

The kids and grandkids of the wealthy tend to be wealthy.

Well: that’s not quite true. Kids of American football players and lottery winners and those who get wealthy through luck often squander their inheritance. And while giving your kids money makes them richer, it doesn’t tend to make their kids (i.e. your grandkids) richer.

This little paradox has driven researchers to wonder why wealth is persistent, if it’s not purely handing down the cash. Traditionally, scholars have divided into two camps: nature and nurture.

Families stay rich because they have prudent genes that stop their ancestors from squandering their fortunes, and because they have genes that make them good at earning more money. Or families stay rich because they give their kids skills through schooling, speaking lots of words at home, having books around for them to read, pushing them into high prestige careers, and linking them up with connections.

Lots of research points in the direction of genetics, finding that genetics explains about 50% of every important human trait, while the other 50% is largely down to ‘nonshared environment’—rather than ‘shared environment’ (i.e. family upbringing).

For example, the gold standard meta-analysis, recently published in Nature, one of the three premier journals in the science world, looked at 17,804 traits over 2,784 publications studying 14,558,903 twin pairs, and found that the average genetic contribution to a trait was 49%.

This extends to complex facts about a person, like lifetime income and wealth. For example, among Swedish twins wealth was found to be about 20-40% heritable (i.e. down to genetic factors), while 20-year average income in men was about 60% heritable.

But comparing identical and non-identical twins isn’t the only valid study design for dissecting the differing impacts of nurture and nature (though it is valid). You can also look at twins reared apart and you can look what happens when a child is adopted into another family—do they end up looking like their biological or adoptive parents?

We know that adoption can temporarily boost IQ but other evidence suggests this may be driven by non-randomness in the study design or peter out once the child leaves the family environment. What’s more the gains might boost measured IQ but not intelligence.

But a new study suggests that adoptive parents are the main drivers of children’s wealth, with biological parents unimportant by comparison. However, this new study finds that the result is not through transmitting human capital down the line or even through children earning higher income, but simply through transferring cash or learned prudence—i.e. kids investing better.

The paper (pdf), from Sandra E. Black, Paul J. Devereux, Petter Lundborg, Kaveh Majlesi, looks at a sample of 2,519 Swedish adoptees born between 1950 and 1970, and finds that the rank of a child’s wealth is correlated 0.23 with their adoptive parents’ wealth (and 0.65 when bequests are taken into account). By contrast it correlates only 0.12 with the rank of their biological parents. The results for levels of wealth, rather than ranks in the wealth distribution, are very similar.

So does this tell us that the rich buy private school, tutor their kids, make them learn violin, and help them with connections and so on? No! The authors rule out this possibility, and suggest only two possible options: financial gifts (which they cannot track) and learned prudence (which they provide evidence for in another paper).

I work for a think tank so I think about policy conclusions and I think this fits pretty nicely with Adam Smith Institute ideas. What can you do to raise people’s wealth? None of the things that pushy parents do seem to help their kids be rich except two: give them cash, and teach them to save more and save better.

The latter seems a bit more politically practicable, but the problem is that most financial education schemes seem to have no impact. Maybe the only way you can teach this stuff is something as long-lasting and comprehensive as being adopted. (I’m open to being wrong here—it would be great if there were doable financial literacy interventions that had lasting impacts.)

But we can give people cash. And funnily enough that is ASI house policy.

A certain disconnect from reality here

The idea that prisoners should be banned from smoking in their cells has reared its ugly head again. The true reason that such a ban is not in place is that, for the time of their sentence, their cell is their home. We do not ban people smoking in their own homes: we therefore do not ban prisoners smoking in their cells. We also do not want to give the government, any government, the power to ban people doing something entirely legal in their own homes: thus we do not want to grant this power to ban prisoners smoking in their cells.

However, even given all of that, this does show a certain disconnect from reality, doesn’t it?

Deborah Arnott, chief executive of charity Action on Smoking and Health, said there was no evidence to support claims that depriving prisoners of tobacco could lead to riots.

“Prisons all around the world have gone smoke-free with few problems and, in the UK, all high-security psychiatric facilities have already gone smoke-free, as have prisons in the Isle of Man and Guernsey, without any trouble,” she said.

Not paying much attention to the news, is she?

On Tuesday, hundreds of prisoners lit fires, broke walls and smashed windows in a 15-hour riot at a Melbourne prison in what authorities believe may have been a reaction to a smoking ban at the remand facility.
It was one of the worst prison riots in recent memory and authorities and commentators moved quickly to either condemn or support the state-wide prison smoking ban.

No, she’s not:

Police armed with tear gas and water cannons were on Tuesday evening still attempting to contain a riot that broke out at a maximum security prison in Victoria earlier in the day, after prisoners became angered by the introduction of a smoking ban.

All staff were evacuated from the prison in Ravenhall, Victoria, after several hundred prisoners rioted.

This happened only a few weeks ago…..at the end of June.