Why are we ruled by the ignorant?

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It's a very cuddly idea, isn't it? That if only women had been running the banks then we wouldn't have had the crash.

Some women MPs have claimed that the 'testosterone-fuelled' financial meltdown could have been avoided if there had been more women in decision-making positions.

As we all know instinctively, there are no power crazed Gorgons and it was entirely the testosterone pumped out by all those unutterably horrid men that led to the banks falling over.  Unfortunately, as so often happens,  instinct isn't all that good a guide to complex matters.  Before we go off and do the feminine thing of what feels right, perhaps we should go and look for some empirical evidence to support our prejudices? You know, be horribly male about it all?

Hmm.

This paper investigates whether exposure to the opposite sex induces greater risk-taking in both males and females.....Both males and females viewing opposite sex photos displayed a significant increase in risk tolerance, whereas the control subjects exhibited no significant change.

Yet another beautiful theory destroyed by an inconvenient fact. The truth is that if we want to reduce risk tolerance in the banking system we have to entirely purge women from it. Or men of course.

To be honest, I don't mind all that much about being ruled by those with prejudices. I've a few of those myself. But I do mind being ruled by those that are ignorant. After all, they've got £660 billion a year of our money to educate themselves with, don't they? Couldn't they use it on something a little more productive, perhaps measuring their knee jerk reactions against reality, rather than the dross they currently splurge it all on?

Is this a free market?

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I noticed a piece in the Times last week which has stuck in my mind since then. The paper reported that government advisers had recommended that the number of skilled jobs open to immigrants from outside the EU should be cut by 270,000 because of the recession and rising unemployment.

On inspection, I find that the posts of 'quantity surveyor' and 'construction manager' are to be taken off the list of occupations with a recruitment problem. And the Migration Advisory Committee said the posts of all social workers, apart from those working with children and families, should also be removed.

I'm still troubled by this information. I really can't see why employers shouldn't be able to recruit skilled workers from anywhere in the world. After all, they may have better skills than local people, or be more motivated to work hard, or whatever – shouldn't it be up to employers to decide who they want, not Home Office bureaucrats?

It indicates too just how far the quangocracy intrudes into our lives. Yes, we have a Migration Advisory Committee – all on some vast salaries, no doubt. And yes, we tell employers who they can hire and who they can't. And then we blame our ills on the 'free market'. Sadly, our "free market economy" is free only in name.

Dr Eamonn Butler's new book, The Rotten State of Britain, is now available to buy now. Click here to find out how.

Europe Day

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Today is Europe Day don’t you know? A day to celebrate the wonder that is the victory of social(ism) democracy and bureaucratization through the back door of a proto-federalist union of what were once nation states.

Despite the disastrous tumour of political institutions that permeate the political landscape of Europe, a short read of the original Declaration – the anniversary of which you are probably not celebrating today – did not necessarily set European relations on the path it sadly followed.

The Declaration calls for the creation of the European Coal and Steel Community (ECSC) in order to promote peace in Europe. In other words it was an acceptance of the classical liberal belief that “If goods don’t cross borders, soldiers will" (Bastiat); even though it was framed in socialistic rhetoric and regulated by a “Higher Authority".

We all now know what this led to and there were clues in this original Declaration. For example this sentence is simply beyond parody:

Conditions will gradually be created which will spontaneously provide for the more rational distribution of production at the highest level of productivity.

So happy Europe Day! No need to raise a toast to the bureaucrats of Europe, these nameless parasites will be toasting your good health. After all it is you who picks up the bill.

An unappreciated generation

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It was brought up in PMQs this week that British youths are the unhappiest in Europe. 1 in 3 eleven year olds are illiterate and record numbers are turning to drink and anti-depressants. Also, it is this generation who are now going to be forced to pay off the colossal government debt. The story is very negative, but politicians are making it worse, intent on blaming the youth for the state’s failings. Instead, the youth need to be encouraged and made productive rather than demonized and disincentivized.

The welfare state is failing the youth as this story shows. It focuses on a seventeen year old who drinks a litre of vodka a day, spending her £47 per week benefits on alcohol (that must be cheap and nasty vodka!). This is clear evidence that a benefit culture has reached an excessive level in the UK. The 17 year old in the article does not work or attend school – but then why bother when the state will give you free money to spend on whatever you like, illegal or not.

It is immoral that the government can tax hard working individuals in order to encourage the illegal drinking of others. This sends out signals to younger citizens that it is acceptable to expect the right to be bailed out by the state if they don’t fancy working. This is clearly counterproductive towards society; if there is no incentive for young people to work or go into further education, that demographic of the economy will stagnate – making the process of paying off Gordon Browns debt gloomier than ever.

Younger generations are the lifeline of our future economy. Currently the government seems to underestimate their importance, seeing them as scapegoats for their failings in education and burdens on the labour market; set them free and see the benefits they can bring to society.

"I'm not a Conservative, I'm a believer in freedom"

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Milton Friedman on self-interest and the profit motive

Blog Review 955

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Yet anopther reminder that it doesn't matter so much what resources you pour into the public education system. Much more important is what you do with the resources you have.

Free markets aren't without regulation. The major differrence in regulation between free and unfree markets is that in free markets the regulating is done by people who actually know what they're doing.

Today's installment of "incentives matter", the game every economic actor plays: "Interestingly Dick Cheney's first daughter, Elizabeth, was born 9 months and 2 days after the Selective Service System announced that childless married men were to be drafted."

Those who have done nothing wrong do have a great deal to fear.

How to decode bureaucratese.

Finally, someone standing up to state sponsored theft.

And finally, how to decode politicianspeak.

A crisis of capitalism?

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Flicking through a copy of Dr Madsen Pirie's Freedom 101, I found a prescient paragraph [p.66] on capitalism and the business cycle:

 In recent years independent central banks have tried to smooth the business cycle's severities by combining the pursuit of sound money with making credit easier when economic downturn loomed. It has been a precarious act which cannot necessarily be sustained, but this is not a crisis of capitalism either. It may just be problems arising from one type of financial management. 

This was written well before most commentators even realised there was a financial crisis.

Joanna Lumley gets A* for politics but fails economics

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Now is not a good time to be critical of Joanna Lumley.

The former New Avengers and Absolutely Fabulous star has been in the ascendant, recently, championing the "right" of Gurkhas to settle in the United Kingdom. In the process she has managed to facilitate a defeat for the Government in the House of Commons on a Liberal Democrat motion (the first time the Government has lost on an opposition motion since Jim Callaghan in 1978) and box Gordon Brown into a corner.

This is not the place to debate whether such a ³right² does or should exist. Suffice to say that in as far as a ³right² is an entitlement granted in law it is clear that no such right does exist, but that there may be a compelling case for creating such an entitlement, considering the sacrifices that these men were willing to undertake on behalf of the British people.

My concern, however, was triggered by a flippant retort that Ms. Lumley made in response to a question about the cost of admitting potentially thousands of Gurkhas. Asked how the government was supposed to find the alleged £1.4 billion required, Ms. Lumley paused for thought and then responded ³Borrow it!² She and those around her laughed, some a bit nervously.

And they should be nervous. The government has already shown a slipshod attitude to the public finances, with borrowing rising to an oceanic £175 billion (in which the cost of supporting the Gurkhas would, admittedly, be a mere drop). While debate may continue about the extent to which it is necessary for the government to bail out banks and support the economy, it is quite clear that borrowing money for discretionary spending is partly responsible for our being in this state in the first place.

What Ms Lumley¹s comment demonstrates is the extent to which a belief in lax fiscal discipline permeates the privileged classes. Rather than ask the tough questions about how much should be spent, by whom, and on what, they are all-too-ready to issue a few billion in bonds to pay for their favourite pet projects, and assume that one day it will all come right.

After her recent successes, a few enthusiasts started asking whether she should become Prime Minister. Perhaps. But let us hope she never becomes Chancellor.

Friedrich Hayek

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On this day in 1899, Friedrich Hayek was born. He went on to become a Nobel Laureate in Economics, and indeed he did groundbreaking early work on the economics of business cycles. He showed that it is governments that start business cycles. Thinking the economy (and no doubt their opinion polls) could use a boost, they create cheap credit. That makes it cheaper for producers to invest in productive processes that, in normal circumstances, would be unviable. Production expands, and more is produced and consumed. But it's a fake boom, and credit can't be kept artificially cheap and plentiful for ever. When it becomes scarce again, all those investments on marginal production processes are shown to be a mistake, and people suffer real losses as factories are closed and the economy re-adjusts back to reality. Prescient, you might think, of the fake boom that Gordon Brown and his colleagues created, and the pain of re-adjustment that we are now suffering.

But Hayek's main contribution was in political science rather than economics, with his development of the idea of the unplanned or spontaneous order. Human – and animal – societies demonstrate an amazing degree of order, without anyone necessarily ordering them. Flocks of geese fly in formation, but not because some head goose tells them which positions to take up. Human society has language with the most intricate grammar, but it evolved naturally – it was never planned out by some government or committee. The order comes, not because it is imposed from the top, but through the individuals following common rules. The geese fly at a sensible distance from one another, we use words in ways we can all understand, and in doing so, patterns or orders of social organization simply emerge.

Through this analysis, Hayek gave the world an intellectual understanding of the free society. Just because a society is not planned by politicians and officials does not mean that it is chaotic or inefficient. Indeed, the interactions of millions of individuals, responding to their local circumstances on the basis of general rules of action, employ far more information than the minds of planning officials could ever conceive. That is why the market responds far more quickly, and more rationally, than government planners; and why the free society is also a humane society.

Happy birthday, Hayek.

Dr Eamonn Butler's new book, The Rotten State of Britain, is now available to buy now. Click here to find out how.

The big four clubs

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“Andy Burnham, Culture secretary, is calling for an overhaul of English football finances to break the domination of the ‘Big Four’ clubs", The Times has reported. Why would the Government get involved in such a matter? Have they no more important issues to be worrying about? It is no surprise that the Culture Secretary is an Everton fan.

Undoubtedly, the top four teams have been hugely dominant for over a decade. Manchester United, Chelsea, Arsenal and Liverpool have been at the forefront of English football and because of this end up becoming richer every season. New and better players have consistently chosen these football havens as a place to learn their trade, ultimately leaving the ‘smaller clubs’.

It is understandable that this has become an issue as a mini league has now been created between these teams and the lesser teams fight for fifth place downwards. However, Burnham is demanding the top four redistribute their earnings from the Champions League. This ridiculous stipulation is both embarrassing and disgraceful. The Champions League is a competition where the best four teams from our country fantastically represent the Premier League and of course acquire extra revenue. Why should the teams who do not even play in this competition gain extra money for doing absolutely nothing? If Everton were part of the ‘Big Four’ would Mr Burnham be making such a fuss?

Once again people who seem to know very little of football and the beauty of the game are involving themselves in how it is run. Burnham also raised the issue of quotas for English players to help make the Premiership English. Nevertheless, there is a simple reason why there are so many foreigners in our League. We want to have the best League in the world; therefore, we attract the best players in the world. And alas, the best players in the world are too rarely English.