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"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

Farewell for now: Back to the US of A

Written by Adam Scavette | Friday 17 April 2009

Today will be my final day as an intern for the Adam Smith Institute. Working here has been an enlightening experience in allowing me to expand my understanding of economics and British policy through independent research, meetings, and events. Since I started in mid-January, through the excellent events and meetings I met Lionel Barber, Guido Fawkes, and many members of parliament. But in the meantime I kept myself busy researching everything from tax policy to bailout plans. I have written a slew of blogs and a report that will be out later in the year.

But besides the allotment of knowledge on policy I have procured, I also learned a few other useful tidbits regarding British culture. For instance, that drinking cold tea is “borderline criminal" and that travelling south of the Thames is a risky business.

Overall, interning at the Adam Smith Institute has been a great experience and I would recommend it to any student of politics or economics. I hope to contribute blogs from the United States every once in a while, so you certainly haven’t heard the last of me.
 

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Virginia Tech in retrospect

Written by Adam Scavette | Thursday 16 April 2009

Two years ago today I woke up and walked to my Monday morning class, introduction to macroeconomics, and on the way I was informed by a friend about a tragic situation. In my economics seminar we did not discuss fiscal or monetary policy, not even inflation or unemployment, instead we discussed the unwinding events occurring at a school a few hours south of mine, the Virginia Polytechnic Institute and State University, more commonly known as Virginia Tech. Amongst the students and professor, various topics were thrown around from a need for increased security on college campuses to calls for strict gun control, but the connection that most students made in the discussion was to a similar event that happened on our own campus four months earlier.

On Wednesday December 6 2006 a fleeing criminal fired shots on police officers in the suburbs of Philadelphia, and upon escaping from the police he entered the campus of Villanova University to hide. This happened around 3:15 in the morning, and by 4 the entire campus was under lockdown. As students tried to leave their residence halls for early morning classes they were sent back to their rooms by Resident Assistants. By 10:20 AM the university was cleared and classes went on as scheduled. No one was harmed at the university because swift action was taken in response to a threat.

Although the circumstances surrounding both situations were vastly different, it made me realise that it is quite difficult to predict or fully prevent events such as these from happening. What matters more is how people respond to the situations when they do happen. Fortunately, my university was competent enough to respond to the matter in an effective way. Under similar pressure, Virginia Tech was unable to respond to the first shootings that morning as effectively, failing to prevent 30 additional murders. 

Consequently, because terrorist events happen does that mean students want metal detectors at every university door, security cameras staring down their neck as they walk out of class, or administrators reading their e-mails and message conversations to ensure their safety from attacks? I assure you most students would not desire these measures to be taken. I feel much sorrow for the students who were murdered in the Virginia Tech tragedy, but I do not believe any of the above precautions would have prevented the attack. More likely, those measures would be used to arrest intoxicated students, fine them for dropping trash, invade their privacy, and keep them from getting to class on time.

Following the Virginia Tech incident, my university responded by providing a voluntary service that sends text messages to students’ mobile phones with instructions during emergencies. Since setting up the service, one more shooting occurred near our campus by an outsider, but students were immediately informed [via text] of the location and nothing was harmed, not even our personal liberties.
 

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Rockonomics

Written by Adam Scavette | Wednesday 15 April 2009

While browsing the excellent free-market website Division of Labour, I stumbled upon an interesting page called From ABBA to Zeppelin: Using Music to Teach Economics. In order to teach fundamental aspects of economics, lyrics from selected popular tunes are examined with an economic assignment for the listener. The lessons range from using Oasis’ “Cigarettes and Alcohol" as an example of the discouraged unemployed to rebutting Alvin Lee’s cries for income distribution in Ten Years After’s “I’d Love to Change the World." Although slightly gimmicky in nature, the lessons are well thought out and range various topics in economics while the lyrics cover enough genres to hold a sixth-form or college student’s interest. One of my favourite lessons uses “Thousands are Sailing" by The Pogues to tackle the topic of immigration:

The island it is silent now
But the ghosts still haunt the waves
And the torch lights up a famished man
Who fortune could not save

Did you work upon the railroad
Did you rid the streets of crime
Were your dollars from the white house
Were they from the five and dime

Did the old songs taunt or cheer you
And did they still make you cry
Did you count the months and years
Or did your teardrops quickly dry

Assignment: What is the effect of emigration on the country of origin? What is the effect of immigration on the host country? Do you think most immigrants work (for example on the railroad, or as police officers) or do you think they take government assistance (dollars from the White House)? How quickly do immigrants assimilate into a new country: is it “months and years" or do their teardrops quickly dry?

Who said economics has to be the “dull science?" I’ll be waiting for the lesson where they explore fluctuations in commodity prices using The Rolling Stones’ 1971 hit “Brown Sugar." Or wait, maybe that song is about something else…

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Coke and aidpods

Written by Adam Scavette | Monday 13 April 2009

Simon Berry’s simple idea to add ‘aidpods’ inside of crates of Coca Cola distributed to developing countries is gaining some force. After years of trying to get the plan on the map, last year he finally started gaining major support from activist groups and individuals through social networking sites and other online resources. Berry is now working with Coca Cola and an international aid organisation to finalize the best method of preparing the aidpods. He will have to get information from varying regions in order to include the most appropriate medicines & materials in each of the packages. Berry is certainly on to something.

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The G-20 and our discontents

Written by Adam Scavette | Sunday 05 April 2009

“The era of bank secrecy is over," said Gordon Brown during the G20 conference on Thursday. The conference agreed upon imposing stricter regulations on financial markets, in addition to regulating hedge funds. The bonus crisis was also touched upon in their decision to strictly regulate executive pay. Furthermore, the final statement encourages the IMF and the World Bank to lend to poorer countries by pledging $250 billion.

What Gordon Brown really meant to say is that the era of privacy is over. Now the government will have their nose in every area of bank operation, imposing regulations and removing growth incentives for smaller firms and hedge funds, not to mention the pay incentives for executives. The rest of the measures taken will have questionable effects on the world market. More money is being pumped into the grinder, but until when?

The key question not being asked by many in the media is can we solve the problem with more spending and regulation?

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Bailing on AIG

Written by Adam Scavette | Friday 27 March 2009

Executive Vice-President of American International Group’s financial products division, Jake DeSantis sent his letter of resignation to CEO Edward Liddy on Tuesday. Init he deplores the politicians who have outright condemned the employees at AIG, saying that those responsible for the mess quickly found other jobs and escaped the current dilemma. DeSantis feels as though current AIG employees should be supported rather than victimised, as they have been in the media the past weeks. The ones who stayed are committed to helping the company; DeSantis himself was working for a $1 annual salary, with the expectancy of a bonus.

The AIG bonus debacle has been quite nerve-racking for politicians, AIG executives, and American citizens. Reading this letter will allow citizens to see through politicians’ and the media’s attacks on all AIG executives. Not every employee is responsible for this crisis, and most of those still remaining are trying to re-stabilize the company. Are these the people we want to be victimising? Jake DeSantis appears to be a very intelligent and successful employee. He has also been with the company for over 10 years, so it’s quite a loss for the company. Whether you agree with the bonuses or not, we need not demonise all executives.
 

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Philadelphia Budget Balance

Written by Adam Scavette | Thursday 26 March 2009

Yesterday, the Economy League of Greater Philadelphia released a budget challenge in which all can participate. The goal of the challenge is to balance the city’s current 200 million dollar debt by either raising select taxes or cutting funding from city programs. All of the choices reflect current decisions being made in city government. Try to help Philadelphia get back on the right track. If you are an anarcho-capitalist this might prove rather easy.
 

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Decisions, decisions

Written by Adam Scavette | Tuesday 24 March 2009

As most of the world knows, the AIG bonus situation is quite a sore spot for the United States right now. Even though the company received $182 billion in bailout money, AIG will have distributed $165 million in bonuses total to over 400 executives by the end of March. The bonuses were written in a contract created in late 2008, so there is a limited amount of options the government can take at this time.

There are two aspects of the solution that the government should look toward. The first involves incentives, meaning that the original intention of this bailout was to help save a company that the country’s commerce depends upon. The media has already begun demonizing every executive at AIG, even though many of them are opting out of the bonuses. What this means for the future of the company is not difficult to predict. Employees from AIG will seek jobs at other companies, whose names might not bear the same stigma. The company will soon lose the most talented individuals who were able to find other positions, possibly resulting in a worse performance than if those employees had stayed. This is not what the United States was originally hoping for when they signed off on the bailouts.

The second aspect of the solution deals with the constitutionality of government intervention in such a situation. Obama has been evaluating the house’s bill, passed last week, which will place a 90% tax on bonuses received by employees with salaries above $250,000 at companies receiving federal aid. This is a pretty serious move by the House, it is essentially breaking a contract that the US government approved quite a long time ago.

Obama himself said on 60 Minutes that, "As a general proposition, you don't want to be passing laws that are just targeting a handful of individuals. You want to pass laws that have some broad applicability. And as a general proposition, I think you certainly don't want to use the tax code...to punish people."

Whether the bonuses are ethical or not, it is no small matter if the government uses the tax code to sidestep contracts. Let’s see what Obama decides…

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One small step for Brown, one giant waste of time for the rest of us

Written by Adam Scavette | Friday 20 March 2009

In the midst of a complicated recession, Gordon Brown proposed a small solution to improve the status of public service in the UK. Brown wants to integrate user reviews into the NHS system: “He proffered a vision in which patients choosing a family doctor or parents looking for child care could benefit from the same kinds of reviews and ratings that are now available for books and other products on internet sites like Amazon."

Gordon Brown wants the public focusing not on why they are jobless, but on a public complaint forum where citizens review NHS professionals, centres, and hospitals. The problem with this plan is that people simply do not have enough choice of where they can be treated in the first place. These reviews will simply bring people together to complain about the problems they face at NHS clinics. Why have information without choice? It is like living as a prisoner on bread & water exclusively, but if one day the warden decided to display menus for some fabulous restaurants in the mess hall. You can look all you want at restaurant menus and reviews, but meanwhile you know what’s going to be on your plate when you sit down to eat.

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Sex Sells

Written by Adam Scavette | Wednesday 18 March 2009

The BBC has an interesting article on the status of the prostitution industry in New Zealand since it was legalized in 2003. The reception of legalization in the past six years has been overwhelmingly positive. The industry has changed quite a lot since 2003, with women receiving more legal protection in terms of their rights as sex workers, and their ability to gain protection from police when they are abused.

Some of the interviewed prostitutes claimed that the brothel conditions are quite good, and that since they now have more options they no longer have to put up with abusive owners or clients. Although the trade is not socially accepted, prostitutes are now treated with respect and feel safer.

Legalization seems to leave both prostitutes and their clients in a better situation. Clients no longer have to go to seedy back alleys to pick up workers and prostitutes are much better protected. Europe [the Dutch excluded] should learn the leson and legalize prostitution. It would help protect some honest hard workers and provide tax revenues for the state.

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