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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

Happy 65th birthday NHS, maybe it's time to retire?

Written by Pete Spence | Friday 05 July 2013

65 years after the creation of the National Health Service, its fans say it's the envy of the world. But does it deserve that reputation, and could there be better alternatives?

We shouldn't just pay attention to the headline grabbing stories. You could point to the thousands of possibly needless deaths revealed by the Francis Report or the high costs of our NHS. The error of those who think we can deliver healthcare by committee is more fundamental. It's absurd that we trust politicians to know how to deliver something as important as our hospitals.

Imagine if the state supplied our food. Without prices, officials can't know when items run scarce. In the marketplace, a supermarket that runs out of food can raise the price for it. This prevents queues, and importantly alerts suppliers that they should divert resources to where there is scarcity.

Whenever governments have tried to control food production, this lack of co-ordination has seen people die in their millions. See the Great Chinese Famine. Governments can't tell if they're producing too much food or too little.

When it comes to the NHS, we're similarly ignorant about how well it's performing. Are we diverting too many resources into cosmetic surgery, too few into cancer drugs? There's no way of knowing, when patients have limited ways of indicating their preference, and we can't price the alternative uses of the NHS' resources.

There are good arguments to be made that we should be concerned by the high health costs that many incur due to conditions beyond their control, but this is an argument for systems that seek to reduce those costs.

Markets are a system that achieve just that. Health entrepreneurs can launch their ideas into the marketplace, and see if they work. Their success is easily gauged, will customers pay for them?

Letting us test health innovations against each other allows us to reveal the best ways to treat patients. Prices co-ordinate all of this information about what patients want, and without it NHS managers are flying blind, trying to make poorly informed guesses. After 65 years, the NHS experiment has been a failure, and we should put that system to rest.

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Opportunities for students this spring

Written by Pete Spence | Friday 04 January 2013

2013 is shaping up to be a good year for young fans of liberty. Here are some opportunities available to them.

Free Books for Schools
In October we began sending out books for A‐Level students studying politics, economics and philosophy. By December we mailed out over 1,000 books to Sixth Form students. The books available are listed below, and we can provide up to three copies of each to your school.

Freedom 101 (Free PDF)
Freedom 101 gives answers to 101 common errors made by opponents of free markets and open societies.

A Beginner’s Guide to Liberty (Free PDF)
A short, accessible introduction to liberal ideas from free trade to banking to legalized drugs.

The Condensed Wealth of Nations (Free PDF)
An explanation of Adam Smith's The Wealth of Nations that uses Smith's own words and explains them for a modern audience, point-by-point, to allow his great ideas to shine through.

Win £500 in our Young Writer on Liberty Competition
If you’re under 21, there is still time to enter our writing competition before the closing date on February 1st. The first prize includes £500 and an internship at the Adam Smith Institute. You can find more information here.

Independent Seminar on the Open Society (ISOS) March Student Conference
The Independent Seminar on the Open Society (ISOS) is a free one-day seminar for sixth-formers, held in London twice a year. This March the conference will focus on free market economics. Topics covered will include:

Limits of knowledge
The benefits of trade
The fallacy of evidence-based policy
The private supply of public goods
Debate: Should we be able to sell our organs?

Students are welcome to attend independently, or with teachers. Refreshments will be provided.

If you are interested in finding out more about any of these, do contact us at info@adamsmith.org.

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Cheaper drugs are a feature of legalization, not a bug

Written by Pete Spence | Friday 14 December 2012

Even advocates of drug legalization concede that the move risks an increase in drug use. Milton Friedman, a passionate advocate of drug legalization, noted that a fall in price would be expected to bring about a greater level of demand. Those who advocate decriminalisation of drugs, rather than legalization, often make this point in defense of their position.

Indeed, if marijuana were legal, it might be incredibly cheap. One book estimates that a joint may be as cheap as things we commonly regard as free (such as sachets of artificial sweeteners).

In practice, the effects of drug legalization on total consumption are unknown. The Netherlands, with its liberal drug policy, provides some interesting insights, but it is impossible to say whether these would carry over in other countries. For example, adult use of marijuana in the Netherlands is about the same as in other European countries.

It is important to separate total consumption from the more important factor: the impact of legalization on addicts. A rise in non-dependent users of drugs should not be a cause for concern. If people can use drugs recreationally without feeling reliant on them, then all the better. We should embrace the different ways in which people choose to enjoy their lives. It is those who become addicted that we should be more concerned for.

By reducing the price of drugs, we can help to free the vulnerable from the costs of their addiction. It is the high prices of drugs (as a result of their legal status) which causes users to resort to crime to pay for their vice. It is these high prices, and the inelastic nature of the demand addicts have for the product, that causes users to reduce their consumption of other goods rather than of drugs. This in turn means that drug users face worsening diets and unsafe living conditions. These can be more threatening than the drugs themselves.

There are many other benefits that would follow from liberalising drug policy (such as taking the economic activity of drug distribution out of the black market), but our chief concern in considering the issue of drugs should be those most at risk. Government intervention that drives the most vulnerable to commit crime is heinous indeed. By compounding the problems of addicts with higher costs we make their position worse. Addiction need not be so devastating.

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Three reasons to oppose new regulation

Written by Pete Spence | Friday 14 December 2012

During a downturn, calls for regulation to protect the most vulnerable grow more common — and more worrying. The costs of regulation are costs on goods and on jobs, and likely to reduce the availability of both. When the economy is floundering, further regulation will serve to put the brakes on growth. Here are three reasons to oppose more regulation.

Regime uncertainty

If businesses can’t be certain of future regulation, this disrupts their future planning. Even in the absence of the state it is difficult for entrepreneurs to anticipate future patterns. Often heavy handed and clunky regulation is thought out by those with little knowledge of the businesses they attempt to control.

Regulators can also be captured by large businesses who find it easy to be compliant with more regulation. It is small businesses who can not cope with this complexity who suffer most. Rather than protecting the public, a climate of meddling regulation can scare off new businesses, and in turn new activity and jobs.

Old regulations become obsolete

You have probably seen a compilation of ancient and bizarre laws still on the statute books. Rules on how horses and carriages may be used are still around. While no government has deregulated in such areas, innovation has made the rules all but redundant. As the electric telegraph replaced the letter, the phone replaced the telegraph, and so now do voice over IP and other forms of electronic communication replace it.

We can rely on human progress to invent new things that politicians have not yet found ways to restrict. It is interesting to note that since the financial crisis it is technology, the least regulated sector, that has performed best. If government does not introduce new regulation, then politicians need not pay so much lip-service to deregulation. Human creativity will do the job for us.

Markets do it better

The good news is that government is not the only regulator. Voluntary exchange leads to market-based regulation. It is in the interest of firms to not sell a product that poses a risk to the consumer. Companies do not tend to sell dangerous furniture. If a product is poorly constructed, such that it may cause injury, the producer could face reputational damage. It is this direct feedback mechanism of profits that makes the businessman accountable to consumers. To truly empower the 99%, the regulation of the market over firms is direct, as opposed to sluggish democratic processes.

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Young Writer on Liberty 2012/13

Written by Pete Spence | Wednesday 12 December 2012

This year we ask students to submit three essays for the ‘Young Writer on Liberty’ competition on the theme:

Three policy steps to a freer, better world

The title of each article is entirely up to you.

1st Prize:
£500 cash prize
3 articles published on www.adamsmith.org/blog
3 books on the subject of liberty
2 weeks work experience at the ASI

2 Runners up:
2 articles published on www.adamsmith.org/blog
A collection of Adam Smith Institute books

Entrants must be 20 or under on the closing date, the 1st February 2013. All articles must be under 400 words. All entries and questions should be submitted to pete@adamsmith.org. Good luck!

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Matt Zwolinski on Social Justice

Written by Pete Spence | Tuesday 11 December 2012

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Denmark admits its fat tax failure

Written by Pete Spence | Monday 12 November 2012

The world’s first fat tax will soon also be the first to be abolished. Denmark has taxed saturated fats since October 2011, and the experiment has been a failure. Danes are worried that the tax has increased food bills (which was the point of the tax) and that it could be threatening the food industry. One poll found that 70% of Danes felt the tax was ‘bad’ or ‘very bad’ and 80% said it had not changed what they ate.

At the same time, fat prohibitionists tell us that what Denmark really needed was a much higher tax to have the desired effect. Multiple studies find that a tax as high as 10% (much higher than the Danish tax) would reduce population bodyweight by less than 1%. Most of us tend not to change what we eat based on a change in price — foods like butter and bacon are relatively price inelastic. To get people to change their behaviour you have to set punitively high rates.

It is a good idea to question why the health-obsessives are going after saturated fats to begin with. Many believe that a good diet includes saturated fats, as they have been linked to increased testosterone, boost the effects of omega-3 fatty acids, and improved immune system function.

Simple economics tell us that when you tax something, like saturated fats, enough to cause a change in behaviour then their consumption will fall in favour of a substitute. In most cases, that substitute will be carbohydrates. The nutritional science is far from settled on whether carbohydrates are worse for us than other macronutrients (protein and fat). Politicians are unlikely to know better. The tax on fat could be making the 20% of Danes that changed their diets less healthy. That the impact of the tax is largely unknown is a good enough reason not to mess with the food on our plates.

Of course, there is a more fundamental liberal point. Why should we be coerced to be healthy? If someone decides that they prefer Danish bacon once a week to the last (probably quite uncomfortable) five years of their life, that certainly isn’t a ‘wrong’ choice. It is hard to coerce ‘healthy’ behaviour, and government should not try to. Sadly, politicians know that they can appear to attack the scapegoat of the unhealthy citizen, while taking more money from our pockets.

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Broken windows: still not good for the economy

Written by Pete Spence | Thursday 08 November 2012

The weather might not be predictable, but one thing is almost certain; when natural disasters strike, you can be sure that someone will claim this is a good thing. Sure enough, journalists have made the case here, here and here. It is claimed that Sandy will provide a stimulus for the US construction sector as damage estimates approach $50 billion. It is argued that in turn this growth in the construction sector will move through into other areas of the economy, this new activity driving growth.

Those who make this case could do worse than to read Frédéric Bastiat’s “What Is Seen and What Is Not Seen”. Rather than simply generating new economic activity, destruction is not costless. The cost of rebuilding devastated areas will be a cost at the cost of other alternatives. People who might have spent money on improving their homes may now have to rebuild them entirely. They have not gained wealth; they have lost the improvements to their homes that they would have otherwise enjoyed.

If it were true that destroying homes was good for growth, we should be smashing buildings as they spring up. By this logic we would be richer as a result. These arguments are seen not just in the case of natural disasters, but also when war occurs. World War II famously saw huge production numbers as nations clawed for scarce resources to build bullets and tanks. This was not production that improved the quality of people’s lives. Railings from parks and schoolyards were melted down to build bombs.

Similarly, while many breakthroughs were made in the form of new inventions during wartime, this came at the cost of other alternatives. It is impossible to compare with what might have been, but that does not mean that it is not important. Had World War II not happened then we would have been free to pursue research and development directed at improving the quality of lives, not at winning wars.

This story betrays an alarming obsession with GDP. GDP does not usefully describe the health of an economy. What is important is that people have more of the things that they want and natural disasters destroy this prosperity. Bastiat’s classic essay dispelled this myth in 1848, yet it is clearly still rampant.

There is a good news story here, but it's not one of false stimulus. It is one of the continual process of development and production. The damage in the US has been much lower than in less developed countries also struck by Sandy. Development has helped to save lives. As we lift more people out of poverty, we can expect natural disasters to be less lethal.

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The scariest thing you'll see this Halloween

Written by Pete Spence | Wednesday 31 October 2012

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Independent Seminar on the Open Society - October 2012

Written by Pete Spence | Wednesday 17 October 2012

 

The Adam Smith Institute’s Sixth Form conference - The Independent Seminar on the Open Society - was attended by over 280 students this October. The event focused on economics, offering students an insight into some aspects of the discipline which are not covered by the A-Level syllabus.

Dr Madsen Pirie began proceedings by speaking on the importance of economics. He debunked concepts such as the Marxist Labour Theory of Value and explained the impotency of mathematics in explaining human action. Those interested in such arguments should watch Madsen’s series ‘Economics is Fun’ which now has over 113,000 views.

Steve Baker MP put the case for markets as promoters of moral actions. While any moral code we know (including the secular portions of the commandments) have not been able to make all act morally, neither can markets make us moral. However, market institutions do promote and encourage moral behaviours.

Emily Skarbek introduced her research on the Chicago fire of 1871, a fascinating existence proof for community responses to natural disasters. The ability of local people with particular knowledge of the needs they faced calls into question the commonly held view that governments are best placed to deal with such tragedies.

Tim Evans reminded students that we do not have a free market in the United Kingdom. In fact, even the money we use is controlled in a distinctly soviet fashion. Indeed, the Berlin Wall of today is in our pockets. It is this state control of money that Tim argued will be responsible for the next financial crisis.

Chris Snowdon and Tam Fry debated the need for a fat tax to combat obesity in the United Kingdom. While Tam argued that obesity posed a coming crisis for the NHS, Chris argued that a tax would be ineffective and against the paternalistic tones of such a measure. The students voted against a fat tax.

The event attracted students from around 30 schools, with most rating the day as Good or Excellent. Teachers and students should note that our next ISOS event is planned for the Spring of 2013, and they can e-mail pete@adamsmith.org if they wish to receive further details.

 

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