Levy on gambling

2729

levy-on-gambling

It had been reported that plans are afoot to introduce a change in the levy placed upon bookmakers in order to help combat gambling addictions. Previously, this levy was a voluntary one, with all revenue going to the 'Responsibility in Gambling Trust’, a government run charity. Now the government is concerned that not enough firms (mainly small independent bookmakers and arcades) are paying this voluntary tax.

Approximately £1.2m needs to be raised by the government to balance the books of this Trust, so now this levy will become compulsory to all firms. I think the government seems to have confused the concepts of charity and tax collection. As soon as firms are forced to pay this levy The Responsibility in Gambling Trust becomes a public service provider, not a charity.

The firms hardest hit by this new compulsory levy will be smaller independent bookmakers. This could force them out of an already tough market (since the boom of internet bingo and poker websites) as well as force the increased costs onto the punters. Possible externalities of this route could be the growth in foreign internet gambling sites or unlicensed bookmakers.

This government has already banned smoking in public places, happy hours and relatively cheap drinking. Now they intend to make it more expensive to gamble. There really is a direct correlation between what they discourage and the pleasure people get from it. Ironically, the politicians were not so righteous and prudent whilst gambling with our public finances, economy and future prosperity.

Blog Review 834

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blog-review-834

In one way we could think of the second stage of the stimulus as being like the Battle of the Somme. So far our tactics haven't worked so let's go large!

Even Obama's new advisor seems to be indicating that fiscal stimulus won't work.

And of course a stimulus fired by spending leaves us open to the most egregious pork.

One such piece of infrastructure pork here in the UK is a broadband rollout. There is a better way.

There is of course real world evidence that there is a slowdown: oil stocks are booming.

This fall off in car sales. It's not all about the recession you know.

And finally, conclusive proof that soccer is becoming more popular in the USA.

Printing money: the Zimbabwean solution

2723

printing-money-the-zimbabwean-solution

It

seems

that Gordon Brown may be planning to resort to a Zimbabwean policy to get himself and us out of the credit crunch – simply printing more money. It will probably have the same effect – stagflation. Like we had in the 1970s under Brown's predecessors Harold Wilson and James Callaghan.

Printing money is supposed to make us all feel richer, so we go out and spend. But money is like anything else. When there is more of it about, it loses its value. People may not notice this immediately. They just see they have more money in their pockets, and feel better off. But then prices start to rise again, and they realize that they're actually no better off at all. They've just spent their savings, so they're actually worse off, or they've invested in new business ventures that will come to grief because eventually people will see that their new riches were illusory.

Money is a very powerful economic tool – it runs through every bit of the economy. You shouldn't use it to try to correct temporary ups and downs in economic performance. It should grow at a constant rate, reflecting growth in the economy. If you try to adjust it in fits and starts, you will just make things worse.

Frankly, this is a time for sound money that we can trust. And it's a time for investment decisions to be driven by market rates of return – not by politicians taking our money with one hand and giving it out with the other in the attempt to create high-profile jobs. Only from a solid, market foundation will the economy recover.

Printing money: the Zimbabwean solution

2724

printing-money-the-zimbabwean-solution

It seems that Gordon Brown may be planning to resort to a Zimbabwean policy to get himself and us out of the credit crunch – simply printing more money. It will probably have the same effect – stagflation. Like we had in the 1970s under Brown's predecessors Harold Wilson and James Callaghan.

Printing money is supposed to make us all feel richer, so we go out and spend. But money is like anything else. When there is more of it about, it loses its value. People may not notice this immediately. They just see they have more money in their pockets, and feel better off. But then prices start to rise again, and they realize that they're actually no better off at all. They've just spent their savings, so they're actually worse off, or they've invested in new business ventures that will come to grief because eventually people will see that their new riches were illusory.

Money is a very powerful economic tool – it runs through every bit of the economy. You shouldn't use it to try to correct temporary ups and downs in economic performance. It should grow at a constant rate, reflecting growth in the economy. If you try to adjust it in fits and starts, you will just make things worse.

Frankly, this is a time for sound money that we can trust. And it's a time for investment decisions to be driven by market rates of return – not by politicians taking our money with one hand and giving it out with the other in the attempt to create high-profile jobs. Only from a solid, market foundation will the economy recover.

Hedges and markets

2715

hedges-and-markets

There's a hole in my hedge. This is very worrying for me, because it shouldn't be there. I used to have a small shed which went up to the hedge and blotted out the light, so the hedge itself became thin just there. When the shed went, there was a large and obvious gap. No problem, I thought, it will soon grow back.

It's grown back a bit, but there's still a hole. Why don't the surrounding bits of privet just colonize this free space? Yes, I guess my new shed blocks out the light, which doesn't help. And it's been cold and there hasn't been much sun. So I don't suppose that helps. I know that eventually, it will grow back. But I want my hedge back now.

Markets are like hedges, or any other ecosystem for that matter. When things go wrong, purists expect them to correct and fill all the gaps instantly. Politicians, who have all been taught by their economics lecturers that markets are perfect, just can't bear it when markets don't correct instantly. They say it's a market failure, and propose to plug the gaps themselves. As if government failure wasn't worse.

Markets – if they are competitive, and free from government-sponsored monopolies and restrictive regulation – do adjust. But it takes time. Markets aren't perfect. Markets are people. And while people might see that investment is in the wrong place – in houses bought at inflated prices with cheap credit, for example – it takes them time to adjust. They need time to make a judgement about what they think will succeed in the future. They need time to assess a number of possible alternatives. They need time to unwind their current commitments and put their money, time, and expertise into other areas. And they need time to build the plant, equipment and networks they need to capture those new opportunities. Some of those guesses won't work, and there will be further setbacks. Some initiatives will fail because other people got to the same place faster. Others will stumble because other entrepreneurs are buying up the resources they need for completely different ventures. Market adjustment is never smooth, predictable, and perfect.

And meanwhile, unemployment will persist. Just like the hole in my hedge. But it will grow over eventually. There's no point in me creating a hole somewhere else in the hedge in order to plug the one I've got – just as there's no point in governments raising taxes, borrowing and spending that costs jobs in one part of the economy in order to try to boost it in others that are more politically troublesome. Hedge transplants and job transplants don't always take.

Adam Smith Institute named world's No.10 non-US think tank

2720

adam-smith-institute-named-worlds-no10-non-us-think-tank

The Adam Smith Institute has been ranked as the No.10 think tank outside the US in a major new study for Foreign Policy magazine, making it the highest-placed domestic policy think tank in the UK. The ASI was also listed at No.5 in the 'Top 5 International Economic Policy Think Tanks' category.

The 'Think Tank Index' – which is based on a worldwide survey of hundreds of scholars and experts – is published in full in the January/February issue of Foreign Policy. It was compiled by James McGann, Assistant Director of the International Relations Program and Director of the Think Tanks and Civil Societies Program at the University of Pennsylvania.

Naturally we are delighted to feature in the top 10 of such an authoritative international study, and to be considered one of the five leading economic think tanks in the world – despite having a much smaller budget than many of our competitors. We put it down to many years of solid effort to produce timely, well-researched and practical policies, an eye to cost-effectiveness, and the continuing loyalty of our many supporters among the general public.

It has in fact been an excellent month. In Ian Dale's End of Year awards, the Adam Smith Institute was voted to be Think Tank of the Year. With big plans for 2009...

Capitalism and Catholicism

2716

capitalism-and-catholicism

At a luxurious black-tie fundraising dinner this week, Cardinal Cormac Murphy O'Connor, head of the Catholic Church in England and Wales, pronounced that capitalism had been killed by the events of Autumn 2008 just as surely as communism had been killed by the events of August 1989. He should know better.

Churchmen should not pontificate about economics. What do they know about it? As much as I know about theology, probably, which is almost nothing. What they know about economics is what they read in the papers – not the business pages, but the headlines – and hear on the BBC. Most ordinary journalists have little grasp of how the great world economy actually works, and even those that do don't have the space or the time to explain its intricacies to listeners and readers. But politicians can shout louder than any economist, so the prevailing wisdom becomes what the politicians want us to believe, not what the economists know is true.

Right now the politicians want us to believe that it is capitalism, markets, bankers and all things business that have failed. In reality it is the politicians who have failed, and who have caused this crisis. They engineered a 20-year boom built on easy money. With credit cheap, we could all afford whatever we wanted – luxury goods, cars, holidays, houses at £400,000 and beyond. It was a great party. Now we're suffering the hangover.

The good Cardinal sees and worries about this hangover – people unemployed, families in despair. But these are not the effects of capitalism. They are the effects of its perversion by governments and their wild spending with no thought for tomorrow. Meanwhile, capitalism has at last begun to pull billions of people in India and China out of abject poverty – after decades of state socialism which did nothing for them. The Cardinal should be praising capitalism, and scourging those politicians who have managed it so badly.

Blog Review 833

2718

blog-review-833

It might be that medical research by private companies is not the best: but government research would face its own set of incentive problems too. Might even be worse.

Why is that so many people think the New Deal "worked" when at least half of economists think it didn't?

How the world has changed now that the political regime is about to.

So, can the US actually afford the Keynesian stimulus being talked of?

More evidence that the SEC really should have cottoned on to Madoff before he confessed.

If you'd like to understand what is really going on with Russia, the Ukraine and gas supplies....

And finally, it's curtains for curtains.

Regulation, the FSA and the Bank of England

2713

regulation-the-fsa-and-the-bank-of-england

Edmund Conway, writing in The Telegraph this week, says he thinks he's partly to blame for the recession. At an interview meeting at the Bank of England a couple of years ago, he saw some scary charts suggesting that the banks were lending far more then they had in their vaults. And that if a problem arose, they would have great difficulties covering the shortfall. Yes, he did report these worries at the time. But in hindsight, he says, he should have made far more of them.

But Edmund and his media colleagues aren't really to blame. The real culprit is Gordon Brown, who took banking regulation away from the Bank of England in 1997, and shipped it out East to the Financial Services Authority, in their Canary Wharf tombstone. The fact is that the Bank knew what was going on in the markets, while the FSA hadn't a clue. The Bank knew what the banks were doing, and which of them were coming in to borrow money to cover their short-term embarrassments. The FSA was more interested in making sure they all ticked boxes and treated their customers nicely.

So the real cause of the problem was that the Bank had all that information, and couldn't do anything about it. Apart from tell the FSA, which they did. But the FSA didn't do anything like enough to check out such problems and get the banks to balance their books.

Brown took banking regulation away from the Bank of England for the best of reasons. He thought it might conflict with the new power that he had given them, the power to set interest rates (and for giving them that power, he has been rightly applauded). But that was still a mistake.

Alexander Stoddart: Her Majesty's Sculptor in Ordinary in Scotland

2711

alexander-stoddart-her-majestys-sculptor-in-ordinary-in-scotland

At the end of 2008, Alexander Stoddart was given the prestigious title of ‘Her Majesty's Sculptor in Ordinary in Scotland’. An honour justly deserved, if only for the excellent statue he created for us of Adam Smith on the Royal Mile in Edinburgh.

Following the unveiling of the statue of Adam Smith last summer, Stoddart spoke of the many people needed to build the magnificent statue. Upon receipt of this title he paid tribute once more to the work of others:

 What I might have done to have this honour conferred upon me is in large part owing to the steady support and great skill of the foundrymen, plaster-workers, stone-masons and carvers, architects, planners and engineers with whom it is my privilege to work, in Scotland, England, Italy and America.

Thus, the division of labour leads not only to an increase in the quantity of production, but the skills of men and women come to together to produce such quality as Stoddart’s work. As such, Adam Smith is now well placed to stand firm against the vagaries of fashion and those cold Scottish winds.