The Pin Factory Blog

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.

If asked which groups posed the greatest threat to individual liberty in modern Britain, I would unhesitatingly cite two groups. These groups are, broadly, the medical profession and those who are generally called 'celebrities' - pop stars, film stars and so on. You may think that I am being somewhat tongue-in-cheek (and in some ways I am), yet there is a serious set of issues at stake here.

Firstly, the medical profession. Hardly a day goes by without some group of doctors or medical scientists calling for a ban on this or some sort of government intervention in that. The latest example seems to be the attempt to set a minimum price of alcohol sales, a terrible idea which, hopefully, has failed. Consumption of tobacco, salt, sugar, fat plus associated advertising are all deemed dangerous and suitable subjects for medics to attempt to ban or circumscribe via price increases . Medics also see fit to spend public money to instruct us how to live our lives and what choices we ought to make.

Some of the rationale for this comes from the doctor's protective monopoly, the NHS. As the health costs of unhealthy lifestyles are born by the state, it seems quite justified for doctors to call for bans and price hikes. Naturally, this simply demonstrates the lunatic incentive structure that state-provision of healthcare creates, especially free-at-the-point-of-delivery healthcare which externalises the costs of unhealthy behaviour. However, the chief threat from doctors lobbying stems from their apparently impartial and expert position as guardians of health and security. Unfortunately, most of their calls ignore the Public Choice and Knowledge Problem implications of the state interventions which result.

Celebrities have an even less programmatic threat to liberty, unsurprisingly for such a diverse group. They usually adopt a single-issue approach. For a long time we have had Bob Geldof and Bono calling for state spending on international aid. The greatest current threat stems from Hacked Off's campaign against a free press. Celebrities will often lead opposition to reductions in public spending or state activity such as Arts Funding. They have a powerful ability to rally strong public opinion for or against a cause, no matter how strong the case against - whilst Joanna Lumley's campaign to allow Gurkha's to settle in the UK hardly represents a major threat to liberty, although it has had some unintended consequences for Aldershot, it serves to demonstrate the power without responsibility that celebrities wield.

In distinction to the recent past, where ideological opponents of liberty tended to possess a coherent ideological programme of state intervention and control, these groups are far more pragmatic and opportunistic. Thus, in many ways, they are far more dangerous because they cannot be so easily shown to be a threat. It must be said that both groups 'mean well' - they cannot really be accused of a malign plot to oppress people. However, both represent a serious threat to liberty.

Regulations and public spending, once in place, are rarely repealed and tend to expand as they crowd out private responses. Innovation is prevented and alternative solutions are foregone. Bans and prohibitions create black markets and often serve to create other problems without solving the first (viz. recreational drugs). Whilst everyone has a right to free speech, those lobbying for state intervention need to be aware of the consequences and problems created by their support for the insidious expansion of the state into yet more aspects of our lives.

George Kirby is the winner of this year's Young Writer on Liberty Prize, beating out dozens of applicants. We are delighted to post his excellent winning pieces to the blog over the next few days, and look forward to seeing much more of him in the years to come.

Article 3 of the Universal Declaration of Human Rights holds that “Everyone has the right to life, liberty and security of person.” Through this right to power over one's own body, it is legal to donate a kidney, whether to a friend or relative (Human Organ Transplants Act 1989), or to a general waiting list as a 'stranger' donation (legalised in the Human Tissue Act 2004).

Yet these Acts stipulate that “making payments for the supply of organs for transplantation or advertising a request for, or offer of, such organs for payment” is an offence. Concerns about the possible exploitation of the healthy poor by the nephropathic wealthy have led to more state control of the free market. Meanwhile, “three people a day die on the UK kidney transplant list”, according to the BBC.

This should change. A surprising example of a legal kidney market is that of Iran. Two state-surveyed charities match those who need a kidney with those who are compatible and prepared to sell. The vendor “is compensated by both the government and the recipient”. This system means that “there is no shortage of the organs”. A similar system in the UK would save thousands of lives and help alleviate the financial strain on the NHS, which spends more than £1.4 billion each year treating chronic kidney disease.

Furthermore, selling a kidney helps the vendor. Sue Rabbitt Roff, a researcher at Dundee University, suggests students could use the money to pay off university debt.

Those who oppose such a proposal argue that the state is the best judge of the individual's interests. Dr Tony Calland, chairman of the British Medical Association's medical ethics committee, said,

"Introducing payment could lead to donors feeling compelled to take these risks [of donation], contrary to their better judgement, because of their financial situation."

As it is, the dangers are greater for those selling organs via the illegal market, where advice, safe surgery and support are lacking. The government's policy against the trade of kidneys makes it more dangerous for who will sell anyway, needlessly costs patients' lives and, most fundamentally, infringes on individual liberty on the grounds that it is for our own good.

Is to look at peoples' reactions to what you're doing. If, for example, you decided that you wanted to clean up the MPs' expenses system and every MP then started howling about how we mere ignorant citizenry aren't supposed to control them then we'd know that we were on the right track. Similarly, if every criminal in the country (to the extent that this is a different group from MPs) starts to complain about the length of sentences after just and righteous trials then you would at least begin to suspect that you might have created sentences which have a deterrent effect.

And when you're doing supply side reforms to the economy if you start to hear loud wailing from those suppliers being reformed then you've got a pretty good indication that you are achieving your goal. As with this letter to the Telegraph: 

As doctors and health-care workers, we are concerned about the Government’s proposed secondary legislation (under Section 75 of the Health and Social Care Act) to force virtually every part of the English NHS to be opened up to the private sector to bid for its contracts. These regulations were proposed on February 13 and will become law on April 1 unless MPs first insist on a debate and then vote them down. Parliament does not normally debate or vote on this type of regulation, but it is possible. We urge parliamentarians to force a debate and vote on this issue to prevent another nail in the coffin of a publicly provided NHS free from the motive of corporate profit.

There then follows 1,000 or so signatures. Which is, as I say, a signal that something is going right. The aim and point of the NHS reforms is indeed to introduce a market. Competition among suppliers that is. The reason for doing this is that in the absence of competition the producer interest will dominate, not that of the consumer. This is why we insist upon more than one electricity supplier in the economy, welcome that there are many sources of food (whether trivially in shops or more importantly from many different farmers and producers), sell off four licenses for mobile telephony at a time, not just one.

We desire to have this competition because it stops that producer interest from ossifying and then taking over the entire system. Very much to the detriment of the consumer who is the person we're actually concerned with.

As a result we've got those producers howling about how just ghastly it is that people will be able to compete with them. Screaming about how undignified it is that such august personages might have to consider what consumers want rather than what producers might deign to provide.

Great eh? It's working!

Complain about anything in an NHS hospital and you will face a wall of unknowing. Not sympathy, not a recognition of the mistake and certainly not an apology.  This has nothing to do with a lack of care or humanity by NHS staff and everything to do with the scale of legal costs and fines faced by the NHS.  The sums are now huge (£15bn in 2010 according to the Daily Telegraph, 3rd August) and rising fast, thus draining the funds that should be spent on front line care.

The reality is that transparency by the hospital (or whatever) will simply provide evidence for the ensuing law suit.  If patients and their relatives are given more information about their treatment, then that too can be used in evidence.

Harold Wilson is to blame.  When the NHS was set up, patients could not sue and everything was more open.   Those are the days of caring we look back on with a warm glow.  The reason they could not sue is because there is no contract between NHS and patient: the patient does not directly pay for NHS services, the state does.  So the patient had none of the usual customer’s rights.  Harold Wilson was lobbied by patients’ representatives saying this was unfair and they were entitled to recompense when things went wrong.  The law changed and the patient became the customer with a right to sue for damages.

The unintended consequences are now plain: lawyers instruct NHS staff not to admit liability, or indeed anything.  The costs to the NHS are not just the lawsuits but lawyer interference in management at all levels.  Sweep the cock-ups under the surgical gowns and no one will learn from mistakes or even know about them.

I had personal experience of this when a famous London hospital nearly killed my uncle by not following standard hygiene procedure during his operation. The infection was serious and kept him in hospital for quite a while. My uncle did not want to make a fuss, still less sue, but I insisted on having a discussion with the surgeon.  I hit a brick wall.  Most people would have given up but eventually, after giving assurances that we would not sue, we met.  He was accompanied by a young man whom I took to be a lawyer.  He tried to write everything down until, by now quite cross, I reminded them that we were not suing.  The meeting was entirely to ensure the surgeon understood what had happened, since we had no reason to believe he did, and to press him on how these things could be avoided in future.  I got some satisfaction on the former and none on the latter which was, in fairness, not strictly my business.  There was no apology.

The idea that mistreated patients deserve some recompense is now so ingrained that we are unlikely to revert to the pre-Wilson era.  But the present system is lose-lose: it contributes to the problems such as those now exposed at Mid Staffs whilst simultaneously destroying the NHS budget and the costs are escalating.  Following Mid Staffs all sides are issuing platitudes about transparency but, with the lawyers circling the sky like vultures, it will not happen.

One solution is to have a menu of damages that an ombudsman can award once the facts have been transparently exposed.  In the event the hospital, or the patient’s representative, is less than open, the damages are doubled or eliminated following the more arduous investigation.  Any hospital playing the odds, i.e. getting doubled too often, would be required to discipline, and possibly sack, the manager most responsible for the lack of transparency.  In this solution, no lawyers would be allowed to participate on either side.

This week a medical journal reported that the British 'stiff upper lip' contributes to its low cancer survival rate. It seems that people simply don't want to bother the doctor when they feel ill. So their cancer goes undiagnosed, and the chances of survival diminish.

I know the feeling. I am registered with an NHS general practitioner, but now I usually go instead to a private doctor when I am ill Yes, it's expensive at £100 a go. Yet I find myself going to the fee-for-service doctor more than I ever did to the 'free' NHS one. It's not that I'm sicker. I am just more inclined to go.

Why? Well, there are costs other than money. With the NHS doctor, the first problem was getting through to the surgery on the phone. The line nearly always seemed to be busy. When you did get through, you could rarely get an appointment within the next two days. You did not know which doctor you would see. When you were seen, and discovered you needed antibiotics, the doctor would be reluctant to prescribe them. If you did coax out a prescription, you would have to traipse along to the chemist and wait to pick it up. Add up all that time and hassle, and visit to the 'free' NHS doctor became very expensive indeed.

For my £100, though, I get a phone that is answered immediately, an appointment the same morning, the doctor of my choice and, if I need medicines, they are handed to me there and then. Job done.

But there is something other than mere financial and time/effort cost in this equation. I reckon that there are many people with more serious conditions than my niggling cough. I can well see that, when medical services are rationed by queuing rather than by price, responsible citizens like me might well figure that we don't want to waste the doctor's time when there are much more deserving folk. It's another reason why I found myself simply not going, when I should have done.

I have no qualms at all, though, in going to my private doctor. It is a straight commercial transaction: I want medical treatment, this person is prepared to sell it to me. The price clears the market, and no other patients of that doctor are denied appointments or told to come back in three days. And I am treated as a valued customer rather than a necessary inconvenience.

Just maybe, if people were expected to pay for general practitioner services, they might forget the stiff upper lip and demand the medical care they actually needed.

It does get very annoying when we've all the usual prodnoses telling us that we must eat our five a day, stop puffing on the gaspers and limit ourself to one small brown ale a week for the sake of our livers. This is all to "save the NHS", or to save the public accounts from the costs of dealing with us cancerous lard tubs as the cirrhosis explodes. Other than the ghastly nonsense of the puritans (you know, the worry that someone, somewhere, might be having fun), the despicable reduction in the freedom and liberty to chart our own course the the inevitable grave, there's really only one other major problem with this point.

It ain't true.

Most certainly it's true that treating these diseases of a life well lived costs the NHS money. But not hacking out the pickled and fatty liver in our 50s costs the NHS much more. For people do go on to survive a decade or more of senile dementia, just as one alternative and even more awful fate. This costs more.

Some will recognise this as the argument that Philip Morris paid to be presented to the Czech Government. It was roundly condemned at the time as being a quite disgusting piece of pro-tobacco propaganda. It could even have been so but it did have the saving grace that it was actually true. For as a rough and ready guide, those things which kills us from chronic diseases around and about our retirement date cost the state much less than our surviving to a google old age does. And we've even got a Congressional Budget Office report making the case for us now:

In terms of the policy's effect on the budget, lower health care spending per capita would push down federal spending, but increased longevity would have the opposite effect. Throughout the first decade of the policy, reduced health care expenditures (primarily for Medicare and Medicaid) would mean that the federal government would spend less than it would have otherwise. The reduction in federal outlays would total $730 million over the period between 2013 and 2021. During the second decade, however, the effects on longevity would begin to dominate and federal spending would be higher than it would have been otherwise — an effect that would continue through 2085. The two principal drivers of that increase in spending would be Social Security and Medicare. Improvements in longevity from a reduction in smoking tend to have their greatest effect on the size of the elderly population and thus tend to boost spending on programs aimed at that population. Spending for Medicaid, by contrast, would be reduced throughout the period of the projection — a reflection of the wider age range of that program's beneficiaries.

The odds are that if you want to live a long life you shouldn't smoke. Nor eat nor drink as I do. But it still is really true that those of us who go out in our 50s and 60s from these diseases of an excess of indulgence save everyone else money by their not having to pay our pensions or health care bills for decades.

Stopping these behaviours may well produce longer lives: not that it's any of your damn business how other people decide to treat themselves. But it most certainly won't save any money.

I know that this brings fits of the vapours to the more maiden auntish of the British left but there really is a very good reason why we want to have a more market orientated health care system in the UK: 

The NHS was criticised as having among the slowest processes in the world in dealing with new drugs and clinical trials, scientists and experts said at a conference in London organised by Novartis, the Swiss pharmaceutical giant. A source at the meeting of more than 100 clinicians and scientists said a key conclusion was that “NHS environment needs to embrace new medicines more rapidly, not as at present more slowly, than other countries.” In addition NHS “trusts and clinicians need to be supported to be able to carry out research, for example by freeing up senior consultant time to do research or by incentivising investigators to do research.”

The other way of describing this is that the NHS is slow at innovation: the process of actually using nerw inventions to do things rather than that creation of new inventions in the first place. And there's good economic research on this very point too.

William Baumol has been pointing out for years that either planned or market based systems can do that invention. But planned, centralised, systems are very bad indeed at getting that innovation going. People actually using those inventions to do new things, or old things better, faster or cheaper. Market based systems do that innovation vastly better.

Thus, given that we'd rather like new treatments, new drugs, new and better ways of doing things, to percolate though the NHS thus we'd like there to be a market structure there.

Note that this doesn't, necessarily, mean that the government has to stop financing it. But it does mean that we want to have competing suppliers: of any ownership structure you like. Co-ops, charitable, for profit, mutuals, that part of it really doesn't matter for this point. But we do want people competing in a marketplace, even if it is competition for tax funding. For that's what drives innovation, the existence of the market. And given that the NHS seems to be worse at this than everyone else, as well as being just about the only health service with no market at all in it, that all seems to tie up logically doesn't it? Introduce markets in order to make the NHS of tomorrow better than the one of today.

This week sees the 70th anniversary of the Report of the Inter-Departmental Committee on Social Insurance and Allied Services, commonly known as the Beveridge Report, which is often credited as the underpinning of the welfare state in the UK (and several other countries which emulated the UK approach). To some extent this is an exaggeration as several aspects of the welfare state existed before 1942, especially in the area of education. Thus Beveridge represents a major expansion of an already existing shift away from private and philanthropic welfare and towards state provision.

It is salutary to note the timing - in 1942 Britain was in the midst of the greatest expansion of state activity it has ever witnessed. Government reached into and controlled nearly every aspect of socio-economic activity, allocating and planning resources, prices and labour to a minute degree. This philosophy, which proved highly successful for fighting a total war, was retained in peace time and employed as a mechanism for providing goods and services which had hitherto been privately provided. Many industries were nationalised and those areas of the economy which were left 'private' were heavily controlled. It was this state of affairs which promoted Hayek to publish The Road to Serfdom in 1943.

Without tracing the history of the past 70 years, it is clear that whilst some aspects of the World War II legacy have been rolled back - for instance the denationalisation of many industries during the 1980s - much of the philosophy of the Beveridge Report remains essentially intact. Whilst the nature of the welfare state has evolved, the mechanisms for provision are broadly identical to those introduced in 1945. For instance, the NHS remains a 'free-at-the-point-of-delivery' system in contrast to the Netherlands which dropped this approach and switched to a 'Bismarckian' one (nonetheless retaining the third-party payer problems inherent in all major health systems including the US one).

Readers of this website will hopefully already be convinced that the Beveridge inspired welfare state has been an unmitigated disaster for the provision of welfare in the UK, so I won't rehearse the arguments and the evidence. For those wanting a good introduction, James Bartholomew's classic The Welfare State We're In is a sensible place to start. Suffice to say, and despite the pernicious prejudice of many statists, Classical Liberals like myself care deeply for the plight of the poor, sick and needy. However, instead of clinging to failed and bankrupt systems which do far more harm than good to both recipients of welfare and society as a whole and especially to those at the bottom of society, we seek a different approach. Of course, those opposed to the status quo adopt a variety of positions: from those who argue for different modes of provision (school vouchers for instance); to those who desire a much smaller welfare state which only offers aid to the very poorest in society; to those who wish to do away with state welfare altogether

On the one hand, it is quite clear that opponents of the welfare state have - for the most part - utterly failed to convince the majority of the case for radical reform and retrenchment. Some tentative steps have been made in the field of school and higher education reform but healthcare, pensions and social protection remain largely untouched and any genuine and far-reaching attempts to do so would be political suicide. The forces of vested interests so clearly described in Public Choice Theory indicate why this is so - nonetheless the only means to overcome the barrier of vested interests is via the dissemination of ideas and ideological support so we must continue this effort. Moreover, recent years have seen the resurgence of the regulatory and license state - an activity which grew popular with the denationalisations of the 1980s and has been compounded with the recent Banking Crisis into a widespread belief that markets cannot function properly without state intervention. Many of these interventions are logically underpinned by the existence of state welfare provision; e.g. alcoholism is creating a burden on the NHS so should be prevented. Strike at the welfare state and we strike at the root of this approach as well.

On the other hand, we must continue to propose sensible mechanisms for moving from the status quo and towards private provision. As I have argued before, this is probably best done piecemeal. Given that opposition to the welfare state spans a spectrum of opinion, it is also sensible to move from reform of provision towards much greater privatisation and then ask the question of whether we need any state provision of welfare at all. One major area to target would be universality. This was one of the key principles of Beveridge and is one of the most unnecessary and expensive aspects of welfare provision - witness pensioners donating their winter fuel payments to charity. Universality was also introduced in order to engender support for the welfare state amongst the better off, remove it and that plank may also disappear.

Reformers must be careful, however. I would argue that the creation of so-called 'internal markets' and use of private providers in such areas as PPI and the NHS may actually be harmful to the cause of privatisation. Government is a poor customer and its size means it prefers to deal with large, equally bureaucratic companies such as Capita and Serco rather than SMEs - this assists large companies in dominating market sectors and leads to monopolistic outcomes. Bad privatisations such as the railways lead to the discrediting of privatisation in general. Failures discredit attempts to privatise properly as the many PPI scandals and the G4S scandal show. Pseudo-markets are likely to lead to exploitation of consumers by entrenched market-occupants protected by state regulation and intervention - witness the energy market or banking.

Even if everyone suddenly saw sense and decided to tear down the features of the welfare state, it would still take many years of consistent reform to return to private provision in order to build up the necessary markets and charitable endowments which the original government interventions so comprehensively destroyed. There would also have to be sweeping reforms in other areas: radical reform of planning laws to allow housing to become more affordable, large scale tax cuts and endowments funded by sell-offs of state property and - perhaps most critically - a return to sound money to allow people to save sufficiently for their futures instead of being impoverished by government inflationism. The welfare state has taken 70 years to build into its present appalling and oppressive form and it may well take 70 years or more to repair the damage, even if that were the general consensus. Still, there is no time like the present... 

The government will announce today the launch of its public consultation into minimum pricing. These consultations tend to be something of a charade—the Home Office has already said “We will introduce a minimum unit price for alcohol”—but in case you should wish to respond, here is a non-exhaustive list of reasons why minimum pricing is a terrible idea.

It is regressive

All indirect taxation is regressive, but minimum pricing is carefully calibrated to be as regressive as possible by targeting drinks that are disproportionately consumed by people on low incomes. Doctors on six figure salaries can rest assured that the champagne at the British Medical Association Christmas dinner will not be affected and the House of Commons bar will continue to be subsidised. Cheers!

Evidence is non-existent

As we reported on Monday, the excitable predictions about how many lives will be ‘saved’ by minimum pricing are based on a single computer model which uses dubious methods and false assumptions to come to a preordained conclusion. The truth is that nobody has any idea whether the policy will reduce alcohol-related harm. The only certainty is the majority of ordinary people will be out of pocket.

It’s just the start

Even minimum pricing’s most optimistic proponents admit that ratcheting up the price of drink is not a ‘silver bullet’.  What they mean is that minimum pricing will merely be the start of a sustained temperance campaign in the mould of the anti-smoking crusade. If the medical lobby is allowed to get its hands on one of the key levers of competition (price), we can expect endless demands for the minimum unit price to move upwards. David Cameron has proposed a 40p unit price but the British Medical Association are already demanding 50p. Others want it to be 60p. Whether alcohol consumption goes up or down, you can be sure that the ‘next logical step’ will be to have a minimum price escalator. Think of the children!

And why not? The same dodgy evidence can always be used to justify higher prices. The Sheffield computer model predicts that a 40p unit price will reduce the number of alcohol-related deaths by 10 per cent. At 70p, it claims the number of alcohol-related deaths will fall by more than 60 per cent! The model doesn’t go beyond 70p, alas, but presumably once it gets to 90p all alcohol harm is abolished and at 95p the dead begin to rise from the grave. What are we waiting for?

The moral panic is bogus

Since 2004, Britain has seen the sharpest and most sustained decline in alcohol consumption since the Second World War. The statistics are striking—less than half of 16-24 year olds have had even one drink each week; the proportion of young men who ‘binge-drink’ has fallen by more than 50 per cent; overall alcohol consumption is only slightly higher than it was in 1980. These facts are rather inconvenient for nanny-staters and so they have ignored them and pressed on with a narrative of ‘booze Britain’ that makes for better headlines. Trebles all round!

It is illegal

It’s rare to find the words ‘good news’ and ‘European Union’ in the same sentence, but the good news is that minimum pricing is illegal under European Union law. Previous attempts to limit the free market in this way have been rejected by the European Courts, such as in this judgement from 1978. Referring specifically to proposals to introduce minimum pricing in the UK, the European Commission has said that they “have a problem with the compatibility of the minimum pricing plans under Community law” and that it “causes problems with the compatibility with the EU Treaty”. Several wine-growing countries have already complained that minimum pricing is anti-competitive and, although David Cameron has vowed to fight the European Commission for his right to pick our pockets, if the EU does not stand for free trade between member states it stands for nothing at all.

It won’t help pubs

Winston Churchill said that "an appeaser is one who feeds the crocodile hoping it will eat him last." A few of the pub chains have formed an unlikely, unseemly and unholy alliance with the forces of temperance in the hope that higher off trade prices will drag in some of the punters that the smoking ban drove out. This is a desperate gambit. Minimum pricing will not make beer any cheaper in pubs. It will merely make everybody a little bit poorer so they have less money to spend in pubs. On this occasion, Wetherspoons’ boss Tim Martin has called it right, saying that minimum pricing is “utter bollocks, basically.”