The impact of interest groups on public policy

Madsen’s lecture, as Senior Visiting Fellow in the Department of Land Economy at the University of Cambridge, has now been posted on the ASI site.

The topic deals with the way in which interest groups impact upon public policy in ways that might be to their own advantage, though not necessarily conducive to the general good.  Madsen identifies with the various ways in which they exert influence on legislators.  He goes on to show how policies can be crafted to deal with their influence and turn it to advantage if possible, and circumvent it if necessary.  He gives examples throughout.

The full text of the lecture can be seen here.

There’s things that are true but entirely unimportant

It’s a standard part of the analysis of government that there’s some things that must be done and there’s also a group of things that only government can do. Government activity, in our view at least, should be limited to those things which are in both groups. Only government can declare war on EastAsia, but that doesn’t mean that it must be done. A criminal justice system for 65 million people must be done and only government can do it.

We can use much the same logic to divide things into those that are true and those that are important. The false, those that are untrue, we can reject of course, but we should also not worry about that fourth quadrant, those things that are true but which are unimportant:

France’s ecology minister, Ségolène Royal, has rankled the company that makes Nutella by urging the public to stop eating its chocolate hazelnut spread, saying it contributes to deforestation.

“We have to replant a lot of trees because there is massive deforestation that also leads to global warming. We should stop eating Nutella, for example, because it’s made with palm oil,” Royal said in an interview late Monday on the French television network Canal+.

“Oil palms have replaced trees, and therefore caused considerable damage to the environment,” she explained.

We’re perhaps not quite as worried as many others about the replacement of one kind of tree by another. But let the argument made stand. Palm oil’s not a good thing. So, how important is Nutella in this?

A quick google around tells us that there’s 365,000 tonnes a year of the gooey goodness consumed. It’s 20% palm oil, meaning some 74,000 tonnes of palm oil contained. Global production of palm oil is 50 million tonnes a year or so. Thus chocolate hazelnut spread is some 0.14% (yes, that’s 0.14%) of whatever the problem is. Or, unimportant.

This simply isn’t something that government should be spending its time considering. Nor politicians that we (or our French cousins in this instance) have to pay for. Just as government should be limited to those things that both have to be done and can only be done by government, it should be limited to those things that are both true and important.

Excellent, so that’s some 90% of what government currently does ruled out as being something that government shouldn’t be doing, minarchy here we come!

We shouldn’t have to care who has political power

An extremely good point made by Scott Sumner:

I consider myself to be reasonably well informed. I generally know which party is in power in countries like Sweden. And yet at no time in my life could I name a single Swiss political party, or political figure. There’s a lesson there somewhere. Perhaps the lesson is that you don’t want to live in a country where it matters a lot who gets elected President.

Our knowledge of Swiss politics is similarly deficient. We’re not even sure if they have a party political system. Yet it does have to be said that the country runs pretty well. So perhaps the agonising that we have to do over who does gain political power here is what the problem actually is. Our recent ability to chose between a scion of the haute bourgeoisie and a man intellectually bested by a bacon sandwich may not have been the most edifying spectacle, but the problem is that we had to worry about it at all.

The point about politics is to come up with some method of getting the bins taken out. And that’s a reasonably simple task and one that the Swiss most definitely have a handle upon. It’s also necessary to have someone called “the government” simply because visiting dignitaries expect there to be one. But over and above that the place that seems to be governed best is the one where pretty much no one pays any attention to who is governing simply because it’s not very important who is. Because politics simply doesn’t intrude much into anyones’ life.

We recommend it as a system. Anything important can be decided by the people in referenda, there’s a bit of bureaucracy necessary and then let people just get one with things as they wish. Something of a plan, eh?

George Osborne’s political economy

We should stop teaching economics in universities and instead teach only political economy. Because every economic policy – every economic law, regulation and rule – has a political origin and a political consequence. (And not always anintended consequence.)
Take, for example, the UK Chancellor George Osborne’s proposal for a UK balanced budget law, under which Chancellors would have to seek the permission of Parliament to run a deficit. Pure economists have of course dismissed this as economic illiteracy. When times are bad, they say, government has to spend more, and run deficit budgets, in order to sustain welfare payments and pump-prime the economy.
I’m not even sure this is good economics, since most people can probably spend their own money far more productively than the government can, so leaving people to make their own investments is probably better than having the state invest it for them. And debt is not free – you have to pay interest on it, and that then curbs your freedom of action and makes you poorer.
What I am sure of is that deficit budgets are lousy politics. No, not in the sense that they don’t win votes – often, they do – but in the sense that they corrupt and damage the political system. If there is no restraint on how much governments can borrow, then their every incentive is to borrow more and more. Then they can spend more and more (and buy more and more votes) without having to raise taxes. They simply pass the bill on to the next generation.
This is a one-way choice that no human being should be asked to make. The high-spending, high-borrowing route is just too beguiling. You would need to be an angel to resist it, and our politicians are not angels.
This is of the main reasons why political economists from Adam Smith onwards have been worried about the very existence of a national debt. Once you admit the principle, there will be no stopping things. Forget the idea of asking Parliament – yes, it might embarrass them, but they will always support the majority party’s spending. Far better to have an inflexible rule that all budgets must balance … or if you want flexibility, that all budgets must balance over the five-year term of a government. And if not, there are consequences.
Terrible economics, some might complain. But very sound political economy.

A blanket ban on psychoactive substances makes UK drugs policy even worse

It is a truth under-acknowledged that a drug user denied possession of their poison is in want of an alternative. The current ‘explosion‘ in varied and easily-accessible ‘legal highs’ (also know as ‘new psychoactive substances’) are a clear example of this.

In June 2008 33 tonnes of sassafras oil - a key ingredient in the production of MDMA – were seized in Cambodia; enough to produce an estimated 245 million ecstasy tablets. The following year real ecstasy pills ‘almost vanished‘ from Britain’s clubs. At the same time the purity of street cocaine had also been steadily falling, from over 60% in 2002 to 22% in 2009.

Enter mephedrone: a legal high with similar effects to MDMA but readily available and for less than a quarter of the price. As the quality of ecstasy plummeted (as shown by the blue line on this graph) and substituted with things like piperazines, (the orange line) mephedrone usage soared (purple line). The 2010 (self-selecting, online) Global Drug Survey found that 51% of regular clubbers had used mephedrone that year, and official figures from the 2010/11 British Crime Survey estimate that around 4.4% 16 to 24 year olds had tried it in the past year.

Similarly, law changes and clampdowns in India resulted in a UK ketamine drought, leading to dabblers (both knowingly and unknowingly) taking things like (the once legal, now Class B) methoxetamine. And indeed, the majority of legal highs on offer are ‘synthetic cannabinoids’ which claim to mimic the effect of cannabis. In all, it’s fairly safe to claim that were recreational drugs like ecstasy, cannabis and cocaine not so stringently prohibited, these ‘legal highs’ (about which we know very little) probably wouldn’t be knocking about.

Still, governments tend to be of the view that any use of drugs is simply objectively bad, so the above is rather a moot point. But what anxious states can do, of course, is ban new legal highs as they crop up. However, even this apparently obvious solution has a few problems— the first being that there seems to be a near-limitless supply of cheap, experimental compounds to bring to market. When mephedrone was made a Class B controlled substance in 2010, alternative legal highs such NRG-1 and ‘Benzo Fury’ started to appear. In fact, over 550 NPS have been controlled since 2009. Generally less is known about each concoction than the last, presenting potentially far greater health risks to users.

At the same time, restricting a drug under the Misuse of Drugs Act 1971 requires evidence of the harm they cause (not that harm levels always bear much relation to a drug’s legality), demanding actual research as opposed to sensationalist headlines. Even though temporary class drug orders were introduced in 2011 to speed up the process, a full-out ban still requires study, time and resources. Many have claimed the battle with the chemists in China  is one lawmakers are unlikely to win.

And so with all of this in mind, the Queen’s Speech on Wednesday confirmed that Conservatives will take the next rational step in drug enforcement, namely, to simply ban ALL OF THE THINGS.

In order to automatically outlaw anything which can make people’s heads go a bit funny, their proposed blanket ban (modelled on a similar Irish policy) will prohibit the trade of ‘any substance intended for human consumption that is capable of producing a psychoactive effect’, and will carry up to a 7-year prison sentence.

Somewhat ironically for a party so concerned with preserving the UK’s legal identity it wants to replace the Human Rights Act with a British Bill of Rights, this represents a break from centuries of British common law, under which we are free to do something unless the law expressly forbids it. This law enshrines the opposite. In fact, so heavy-handed and far-reaching is the definition of what it is prohibited to supply that special exemptions have to be granted for those everyday psychoactive drugs like caffeine, alcohol and tobacco. Whilst on first glance the ban might sound like sensible-enough tinkering at the edges of our already nonsensical drug policy, it really is rather sinister, setting a worrying precedent for the state to bestow upon citizens permission to behave in certain ways.

This law will probably (at least initially) wipe out the high street ‘head shops’ which the Daily Mail and Centre for Social Justice  are so concerned about. However, banning something has never yet simply made a drug disappear. An expert panel commissioned by the government to investigate legal highs acknowledged that a 50% increase in seizures of Class B drugs between 2011/12 and 2013/14 was driven by the continued sale of mephedrone and other once-legal highs like it. Usage has fallen from pre-ban levels, but so has its purity whilst the street price has doubled. Perhaps the most damning evidence, however, comes from the Home Office’s own report into different national drug control strategies, which failed to find “any obvious relationship between the toughness of a country’s enforcement against drug possession, and levels of drug use in that country”.

The best that can be hoped for with this ridiculous plan is that with the banning of absolutely everything, dealers stick to pushing the tried and tested (and what seems to be safer) stuff. Sadly, this doesn’t seem to be the case – mephedrone and and other legal and once-legal highs have been turning up in batches of drugs like MDMA and cocaine as adulterants, and even being passed off as the real things.  Funnily enough, the best chance of new psychoactive substances disappearing from use comes from a resurgence of super-strong ecstasy, thanks to the discovery of a way to make MDMA using less heavily-controlled ingredients.

The ASI has pointed out somanytimes. that the best way to reduce the harms associated with drug use is to decriminalise, license and tax recreational drugs. Sadly, it doesn’t look like the Conservatives will see sense in the course of this parliament.  However, at least the mischievous can entertain themselves with the prospect that home-grown opiates could soon be on the horizon thanks to genetically modified wheat. And what a moral panic-cum-legislative nightmare that will be…