The Pin Factory Blog

Most of the restaurants that I frequent in the USA are cheap places outside Philadelphia, New York, and New Haven, Connecticut - not exactly the kind of cities renowned for their polite people or friendly service at, say, store counters. But it took a summer in London for me to appreciate just how good the wait-staff service is at restaurants near home. It’s not a far stretch to attribute this to the much stronger culture of tipping in the USA, which means that waiters can realistically expect to substantially increase their incomes by delivering exceptional service. 

The government has just announced a new law that would prevent tips from being counted towards the minimum wage in service industries. Now, we here at the ASI aren’t huge fans of minimum wage laws in the first place. But just to clarify, these waiters and waitresses were being paid at least minimum wage - but some of that came from their tips. Effectively, the law now says that the minimum wage for the service industry is minimum wage plus tips. The likely outcomes of such a law are higher prices at restaurants due to more staffing costs and less tipping, since the waiters are already taken care of. Neither of these will be good for the vast majority of consumers.

I will put in one caveat. Perhaps if restaurant owners do not need to use tips to ensure that they meet federally mandated minimum wage, they will be less likely to require that people in the service industry pool their tips and divide them equally. The positive incentives provided by tips are far more effective when the person who earns the tip gets to keep the money. There’s certainly no guarantee that this will be the effect of the law; if it is, however, and people keep tipping despite the increased charges, maybe there’s a silver lining to what is otherwise most definitely a cloud in the way of good service.

At university, I've heard people advised not to take economics because "it's just codified common sense."  Be that as it may, people are quite bad at codifying and generalizing common sense when they aren't forced to, and the kind of common sense that economics deals with is fundamental to the functioning of society. That's why I was so depressed to read the following sentence on the BBC's website:

Only three economics teachers were trained on teacher training courses in the whole of England last year.

Three?!  Out of 38.000 new teachers? No wonder Labour is in power. Right now, twice as many students study Media Studies as study economics, and economics' popularity is expected to dwindle with the number of teachers.  The decline in popularity means that universities are also having a harder time getting students to study economics.

The more I hear the public discuss policy, the more convinced I am that the world would be a much better place if more people took the time to study economics.  We all vote, and at least understanding the basic language of economics is crucial to making sense out of policy. A functioning democracy requires an informed citizenry.  If economics continues to be neglected, I must say, I fear for the future...
 

A study suggests that most "international experts" (whoever they are) think that people should be prevented from having IVF if they have lifestyle factors that damage their chances of conceiving, like smoking or obesity.

Since IVF is covered by NHS, but more than 70% IVF doctors work privately, it's hard to know what to do with this information.  On the one hand, if taxpayer dollars are spent on a non-critical procedure for people whose lifestyles are preventing them from conceiving, it is completely reasonable to refuse service unless they stop smoking or eliminate other negative behaviours.

On the other hand, if private individuals are willing to spend money to conceive, even with a lower success rate, they should be able to do so- it's their money.  They should of course be aware that it is less likely to be successful, and of any risks to themselves that they might incur.  But if the only relevant difference between obese smokers and healthy non-smokers is the success rate of treatment, then the people who are spending the money on treatment should be the ones to decide whether it's worth it.  If it doesn't work, who cares? It's their money.
 

The New York Times recently ran a delightfully informative Q&A blog about food and farm subsidies with Freakonomics author Stephen Dubner asking agricultural economist Daniel Sumner the hard hitting questions.  He's blunt but polite and eminently reasonable.  Here are some particularly charming segments:   

On bad rationalizations:
Q: I have heard that the reasoning behind farm subsidies is to keep farmers farming when market prices are low, so in the event of a demand shift the capacity would be there to meet the need. Do you think this supposed benefit outweighs the negative effects of market interference?

A: This rationale, or rationalization, for farm subsidies makes no sense.

I'm not sure whether to be more disturbed that an American asked this question, or happy about Dubner's answer:

Q: What are your thoughts on passing a mandate for gardens in the United States?...

A: Do you really think “we" were ever willing to accept the backyard inspectors that would come around and check that I planted the government approved crops? Hard to picture John Adams or Ben Franklin happy about opening up their homes to the Crown or the Feds.

And the most succinct, dead-on answer of all:

Q: Are there any good arguments that support farm subsidies? If so, to what extent and in what manner may they be justified?

A: No.

It's nice to see someone telling it like it is to a pretty wide audience.  In any case, check out the article; there's much more, and Sumner explains the intricacies of just how stupid farm subsidies are much more eloquently than I could.

The UK's land-use system drives up housing prices. Though academics have been telling the government that for decades, apparently a few more MPs have just noticed this.  The question is whether they'll actually do something about it. At the moment, they seem to get about half of the problem, and half of the solution... hey, that's better than normal! Zoning restrictions and complicated bureaucracies drive up land prices. When supply is artificially restricted but demand increases, amazingly, prices go up! 

The problem is not simply the "stratified communities" or a lack of warm fuzzy feelings that these MPs seem to be concerned about. Land restrictions benefit exactly one group: wealthy homeowners.  Everyone else suffers the consequences, from the obvious (higher housing prices) to the subtle (higher food prices). There is a vast body of research that suggests that zoning laws redistribute wealth from the poor to the upper and upper-middle classes.

At least politicians now realize where the solution lies: to reducing the barriers to production. But they aren't willing to go far enough. The government wants to continue to play social engineer in the attempt to artificially impose a sense of community onto towns by requiring that new homes be low-cost and sold only to local labourers. So they'll lift one layer of restriction, but create a whole new set of restrictions and bureaucratic processes for developers to deal with.

The economic impact of the lack of a real market in land in the UK is widespread. At the moment, I'm working on a paper that seeks a middle ground – a market-based solution that will give residents control over their own neighbourhoods but prevent them from imposing the costs of their preferences on the rest of society. In the meantime, any action that actually lifts the barriers to building affordable housing would be a welcome step.

In the past 11 years, the government has come close to doubling the number of laws that allow police to enter your home without permission - and it's not as if there weren't enough of those laws to start with. No, the magic number now is 1,000, up by almost 420 in the last decade. 

That's right; there are now 1000 reasons that a policeman can give you and you will be obliged to stand aside while they remove your old refrigerator or check if you're illegally gambling.  Don't want the state barging in? OK, but be prepared to pay a £5,000 fine for refusing entry.

Parliament is set to approve 16 more such laws in the coming weeks. The Centre for Policy Studies hits the nail on the head with their major criticism of these laws; when police can demand entry to "search for non-human genetic material" or look for "undeclared carbon dioxide," it is impossible for people to keep track of exactly what their rights are.

After all, what the heck is "undeclared carbon dioxide?"  If I've been breathing more than normal, need I allow the police in? Does the mosquito I swatted last night count as non-human genetic material? If the police came knocking said they were looking for carbon dioxide, most people would have no idea whether they had overstepped their legal bounds. What's not so difficult to see is when the laws themselves have overstepped the bounds of reason, and having 1000 laws that allow the state into homes is definitely over that line.

It will surprise no one that I’m not a fan of the 130 demands that unions handed to Gordon Brown last week.  Most, if not all of them will hurt far more people than they help. Requiring the adult minimum wage for apprenticeships and 18 year olds, for example, will certainly not encourage companies to hire young folks (which probably explains why they also want some companies to be required to guarantee apprenticeships.  Hooray for solving the bad results of one policy with another bad policy!). The fact that anyone seriously thinks that running train companies as not-for-profits will be better for customers is also mind-boggling. 

The funniest item on the list, however, is definitely the call for tax deductions for union membership.  That’s right- they basically handed the prime minister a list of expensive demands, and then said “oh, and our members want to pay less taxes, let someone else do it."  Not that this is unusual for labour, but this just seems like a particularly flagrant declaration of that philosophy and demand for pork.  Though Brown has rejected many of the propositions, it is likely that at least some will pass.  As Auberon Herbert once asked, “how should it happen that the individual should be without rights, but the combination of individuals should possess unlimited rights?" Good question… how indeed?
 

When I was 11, I spent most of my free time in a fantasy world, pretending to be shipwrecked and building a fort in the woods behind my house.  When Steve Sayer was 11, he was starting a business that has given the now 14-year-old over £4,500 in the last 3 years.  The schoolboy sweeps up and sells manure from his father’s horse farm.

Now, you might think that a local government would want to support this kind of behaviour, or at least would not actively stand in its way…  but you would be wrong.  In 2006, Steve discovered what so many entrepreneurs do; that advertising would help his business.  He bought a small £100 sign and leaned it between two wheels on his father’s property.   A year later, the local council decided this sign was “illegally placed," and the boy had to remove it.  He spent the next 10 months collecting signatures, applying for approval, and appealing the rejection of his application before finally being allowed to put the sign back up.

If it’s this hard for a 14-year-old kid to sell manure, how much harder must it be for adults to start or advertise for a small business? I understand not wanting giant billboards to appear in the middle of a farmland, but really, should placing a knee-high sign leaning against some wheels on private property require a year of time, effort, and lost revenue?  I’m sure the local commission had the best of intentions.  But when we make it difficult for people to use their own ingenuity and stifle this kind of enterprise, we help no one.
 

In response to the widespread increase in knife crime, the Devon and Cornwall police have instituted “Operation Goodnight", a new curfew program that will allow anyone younger than 16 found on the street after 9 PM to be “removed."  Children under 10 will be sent home after 8 PM.

Now, no one is saying that it’s a good idea for 9 year olds to be running around late at night without their parents, and the rise in knife crime is certainly troubling.  But is treating all kids who are socializing in the evening as criminals really the way to change a culture or to discourage them from behaving badly?  Do we really want to live in a society where 16-year-olds who walk home with friends or buy a soda after an 8PM movie are looking over their shoulders, worried they’ll be shooed home?

After all, in the summer it’s still light out at 9 PM, and realistically, many schoolchildren with time off will not be headed to bed for a few more hours.  But that is not even really the issue.  The question is, should the government be deciding what bed-time is, or should the onus be on parents?  A mentality that emphasizes the government over the family, and in which all youth are potential criminals will do little to help what is, at its root, a cultural problem.