Blog RSS

The Pin Factory Blog

"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

Osborne's Surprise

Written by Dr. Madsen Pirie | Friday 21 March 2014

The most exciting part of George Osborne's fifth budget came as a total surprise.  This was the complete overhaul of the pensions system, and it achieved two of the Adam Smith Institute's long-term objectives: simplification combined with tax reduction. 

The previous rules, complicated and cumbersome, arose from the Treasury's lack of trust in people's ability to manage their own affairs competently.  The Treasury tried to micro-manage how pension pots should be drawn upon.  They limited the amount that could be taken in cash, and capped the amount that could be drawn in annual income to a small amount, with a punitive 55% tax on anything in excess. 

The Treasury's concerns were twofold.  They didn't want high earners to use pension pots to circumvent income tax, and they didn't want people drawing so much that they had insufficient left to support them and might become a burden on the state.  People were compelled at one stage to buy an annuity, despite the poor value these have represented.

Osborne's bold budget has introduced the revolutionary idea that people are better at judging their own interests than Treasury officials are.  At a stroke he has given them the choice of how much to draw and when to draw it, and abolished the 55% rate.  Anything they do withdraw will be taxed at their marginal rate.  Significantly, the Chancellor pointed out that those on his side of the House know that lower tax rates can sometimes bring increased revenue, and he expects it will happen in this case.

Saving for retirement has suddenly been made more attractive, and since much of this saving is in equities, it means more investment will be available to create and sustain jobs and to boost growth.  It also means that fewer people will choose to be dependent on the state in their old age.

The Chancellor has expressed his confidence that people will behave responsibly and with due regard for their own interest.  Bravo.  It is an admirable sentiment and one that should be adopted in other Departments.  The ASI will be encouraging them to do so in the months ahead.

View comments

Why Gove is right to back for-profit schools

Written by Dr. Madsen Pirie | Tuesday 02 July 2013

A report in the Independent based on alleged leaks by Department for Education civil servants suggests that Michael Gove is preparing plans to allow academies and free schools to be run as profit-making institutions, bringing cash into education from hedge funds and venture capitalists. Although many on the left are hostile to the idea of profit-making schools, as they are to profit-making in general, the evidence suggests that Gove is right, and that this could result in the rapid expansion of free schools delivering a high quality education.

It is obviously a good thing when parents, teachers and local businesses work together to establish a free school, and there have already been several examples that point to an extension of educational opportunity as a result. But they only have the motive to do this once and in their own area. Any lessons they learn stay relatively local, and the numbers of such schools set up depends on the availability of capital. The advantage of for-profit schools is that they bring investment. The cash needed to set up a new school is a major hurdle to be climbed, and outside investments helps it to be climbed. Secondly, the lessons learned can be applied to other schools set up in other areas by the same investors. Once there are chains of schools, the successes achieved by each can be extended to the others and built upon. When for-profit investment is allowed, the numbers of new schools will increase dramatically. 

In Sweden, which pioneered free schools and permitted for-profit ones to be established, the free schools are now one in five of the total, and 65% of the independent ones are for-profit schools. Since the mid-90s free school numbers have gone from 122 to 1,091, and parental satisfaction with the for-profit schools there is far higher than it is for the government schools.

The argument that for-profit schools "divert money out of the classroom," as opposition spokesman Stephen Twigg has alleged, is absurd. This is akin to saying that for-profit food stores divert money from the table. In fact our food is supplied both plentifully and cheaply and of high quality by suppliers doing it for profit. That is why it has attracted the investment to make it widely available. We do not need to imagine what food would be like if it were provided at state outlets on a non-profit basis. We do not need to imagine it because we saw the example in the Soviet Union: low quality, short supplies and interminable queues. If the leaks are correct, Gove should be applauded for doing the one thing that will give millions of children an alternative to the low quality education that still pervades parts of the state system.

View comments

Check your fallacies

Written by Dr. Madsen Pirie | Friday 21 June 2013

The latest game on the left is called "check your privilege," and if you make any point about others perhaps less advantaged than you, you are given to understand that you cannot really comment objectively, given your advantage.

It’s quite an old game.  Marxists used to call it "sociology of knowledge", but the rules were similar.  All of your opinions were alleged to be only the product of your class interest, and could therefore be discounted.  If you advocated market economics and classical liberalism, for example, this was simply an expression of your class interest as a member of the bourgeoisie.  It has the advantage that the intellectual content of your views can be ignored.  Opponents do not have to argue with what you say; since it represents only your class interest it can be ignored.  There is an exception.  One group is sufficiently detached from the class system that their views have objective import.  These are the Marxist intellectuals, of course.

The fallacies in "check your privilege" are straightforward and easy to identify, though Herbert Marcuse (remember him?) would no doubt have dismissed them as part of "bourgeois logic."  First is the argumentum ad hominem In which what is said is discounted, not because of any flaw or fault in its argument, but because of something pertaining to the arguer.  It is not the substance or sense of what is said that is being criticized, but the status of the person putting it forward.  The fallacy lies in the fact that the argument itself is not addressed, but irrelevant material is considered in its place.

The second fallacy is the genetic fallacy.  Despite the name this has nothing to do with Darwin or Mendel, but involves a dislike of where an argument comes from.  People are less inclined to accept views from those they dislike, whatever the merits of the actual views.  The mistake is to suppose that the source of an argument affects its validity.  A common meme is to assume that eventually someone will associate one side of an argument with Adolf Hitler, but it is still committed if you think that the views of rich white males can be discounted because of the three categories of those holding them. 

Other fallacies are touched on, but all belong to the category of informal fallacies of relevance (intrusion), and represent considering that qualities pertaining to the arguer somehow undermine and diminish the argument.  They don't.  In its latest form it is simply an anti-intellectual way of doing down what the other side is saying without facing the difficulty of considering their argument.

View comments

Ten reasons why the Left should like the ASI, 10: Jobs

Written by Dr. Madsen Pirie | Monday 20 May 2013

The Left should back the ASI's proposals to increase the numbers of jobs available, especially for those of relatively modest skills.

The ASI takes the view that the best welfare measure of all is paid employment.  Someone in a job that pays wages or a salary can meet their needs and advance their status far better than anyone dependent only on state support.  The ASI supports measures than can boost job-creation by making it easier and cheaper to employ people.  It is made easier by reducing the paperwork and regulatory compliance required of would-be employers, and it is made cheaper by reducing the tax burden that falls on them.

Since about two-thirds of new jobs are created by small employers, the ASI has concentrated on the small business sector, proposing a lighter regulatory environment for them than for business in general.  The large firm can afford the costs of compliance more readily than can the small or start-up business.  One of the ASI proposals is that small firms should be allowed to treat their workers as self-employed, removing the need for employers to calculate and handle PAYE and NI payments, as well as reducing the non-wage provision they are obliged to provide for employees.  This would greatly boost the number of jobs, and be particularly effective at encouraging the one-person business to overcome the barriers that discourage it from taking on its first employee.

Although part of the Left wants to concentrate on securing more rights for those already in jobs, the rest of them should support ASI proposals that could greatly increase the jobs available and therefore the employment opportunities for those seeking jobs, especially young people.  They should also note that it is today's start-ups that will secure jobs in Britain's future, and support the ASI's commitment to an expanding future for employment.

View comments

Ten reasons why the Left should like the ASI, 9: Choice

Written by Dr. Madsen Pirie | Sunday 19 May 2013

The Left ought to support our campaigns to put power over these services into the hands of the people who use them.

Some elements on the Left want the state services used to mould an egalitarian society, but others should side with the ASI in wanting to concentrate instead on improving those services in line with the needs and wishes of their users.  The ASI views the centrally-planned top-down model as unsatisfactory and unresponsive, in that it delivers what its administrators think should be provided.  The ASI instead has advocated and backed reforms that have state services responding instead to the choices made by recipients.  Patients should have choices over where they are treated and, in consultation with their doctors, over which treatments they prefer.  Parents should be able to choose which school their child attends.  In both cases the state funding should follow from those choices and be directed to the institutions favoured by patients and parents.

Not everyone is equally equipped to make such choices, of course, but the ASI thinks that the choices made by those who are informed will lead the way in improving standards generally as others follow their lead.  Much the same effect happens in the production of private goods and services; it is the informed customers who improve the goods and services for everyone else as suppliers try to attract them.

This introduction of choice to allocate state funding is not only a superior model in theory.  It works in practice in some of the Scandinavian countries in both health and education, and succeeds there in raising standards as well as consistently attracting high levels of popular satisfaction.

View comments

Ten reasons why the Left should like the ASI, 8: Immigration

Written by Dr. Madsen Pirie | Saturday 18 May 2013

The Left, traditionally supportive of immigration, should admire the ASI's stance in consistently arguing that the UK benefits by welcoming immigrants to our shores.

ASI writers have consistently pointed to the benefits that immigrants bring to the UK.  Their skills help generate economic activity and augment output and wealth-creation.  This is more obviously true of those with qualifications and a degree of expertise in some professional field such as medicine or finance, but it is also true of those with more modest skills.  As long as immigrants have a command of English, some education, a willingness to work and a readiness to respect our culture and values, they can make a positive contribution.  Their willingness to take on demanding jobs at relatively low wages benefits the population by enabling UK goods and services to be more widely available and to be produced more cheaply.

But migrants make more than an economic contribution.  Over the centuries successive waves of immigrants have been absorbed into British culture and have enriched it by their contribution.  From Flemish weavers and Huguenot glass-makers to Italian ice-cream manufacturers and more recently the celebrated Polish plumbers, they have made a cultural as well as an economic contribution.

Obviously any would-be immigrants not prepared to work and to integrate into our culture come into a different category, but the majority of our immigrants, and certainly most of those from other European countries, are not like that.  They want to work and get ahead, and can make a contribution to our society.  The degree of immigration matters, as does its concentration in certain areas, in that it should be within our ability to cope with the extra demands resulting from their arrival.  But these are problems that can be solved, and in no wise affect the principle that immigrants should be welcomed.

View comments

Current search

  • (-) Dr. Madsen Pirie

About the Institute

The Adam Smith Institute is the UK’s leading libertarian think tank...

Read more