Public choice theory

2522

public-choice-theory

The essential (and often thought to be rather cynical) point of public choice theory is that politicians and bureaucrats do not do what is good for us, or the citizenry, the country, but what is good for politicians and bureaucrats. This concept is of course rejected by those with a more starry eyed view of the State and those who direct it. Like, perhaps, the great liberal newspapers of the nation....say, The Observer.

Alistair Darling has admitted that he will 'almost certainly' have to deliver a second dose of financial life-support to Britain's ailing economy as soon as next spring if his unprecedented £20bn tax-and-spending package fails to contain the recession. In an exclusive interview with The Observer, the Chancellor conceded that his pre-Christmas VAT cut might not be enough.

An Ipsos-Mori poll for today's Observer confirms public scepticism. Conducted after last Monday's pre-Budget report, it shows no dramatic political benefit for Labour from Darling's move, with the Tories holding on to a solid 11 per cent lead over Labour.

Fascinating really, that a liberal newspaper judges the effect of economic intervention on whether it makes the politician directing such more or less likely to gain re-election. That is, the sort of left liberals who reject public choice theory are judging according to said public choice theory.

Have the politician's actions benefited the politician rather than something more relevant such as, say, benefited the economy, the citizenry or the country?

Trust me, I'm a doctor

2523

trust-me-im-a-doctor

What previously was a matter of professional self-regulation is soon to be taken over by new government-regulated bodies. The conduct of GPs, in particular, will soon be subject to much greater bureaucratic scrutiny thanks to pending government legislation. The legislation will enforce the appointment of a ‘responsible officer’ for every doctor’s office in the United Kingdom.

This is all about risk. By comparison: GPs in Germany pay only about 400 Euro per year for professional insurance. British GPs pay as much every month. The best explanation for this huge discrepancy seems to be the strict gatekeeper role of GPs in the UK. Whereas in Germany everybody is eligible to see a specialist of his or her choice, in Britain NHS (and even private) patients need a referral from their GP for each contact with a specialist. This inevitably results in delays for state-of-the-art diagnosis, often leading to unnecessary suffering and postponed treatment. This is certainly the weakest point of the paternalistic NHS system, which incorrectly prides itself on equal access to health care.

Trying to mend this with a validation system overseen by an imposed, personal ‘responsible officer’ for each doctor is likely to make things even worse. GPs managed to retain their basic freedom as self-employed contractors in 1948 when the NHS was set up, but are set to lose as responsibility for their conduct is transferred to a state-regulated officer. Inevitably, doctors will be infantilized in the same way as NHS patients have always been – and patients’ access to specialist care will be limited even further. Because GPs just don’t have the same diagnostic equipment at their disposal as hospital doctors, putting them in charge of specialist referrals is, at best, an imperfect system. But putting government-sanctioned ‘responsible officers’ in charge is even worse - ‘responsible officers’ will not be able to make effective clinical decisions because they will, most likely, not even be trained doctors.

A market-based solution would be to give patients open access to specialist care. They would be happy to exercise their natural responsibility for themselves.

Blog Review 795

2520

blog-review-795

While we have of course moved on from thinking that this is all purely about American real estate it is worth noting that the housing bubble was in fact highly geographically concentrated.

A classic case of governmental spending crowding out a private sector competitor.

Another unhappy manner of spending the taxpayers' money.

Puzzled by synthetic CDOs? Here's the simple explanation.

Christmas presents do get stranger every year. Netsmith could get his head around a voucher for a charitable gift, even a goat for Africa, but an abortion voucher?

They said that the press, the newspapers, were biased. And they were right!

And finally, yet another Downfall spoof.

Missing the point on innovation

2519

missing-the-point-on-innovation

Over at the Economist blog there's what I regard as a bit of missing the point.

IF AMERICA does not continue to innovate, will its economy continue to grow? Basic growth theory teaches that capital and labour can only take you so far, and that the only factor providing increasing levels of prosperity is new technology. But an article in last week’s business section channels Amar Bhide in wondering if in a globalised economy America need innovate at all.

Innovation typically comes from scientists and engineers. China and India have arguably developed a comparative advantage in those fields. Mr Bhide believes America’s comparative advantage lies in the service sector. If we have a truly integrated global economy why not have India innovate and America provide the financing? That's an uncomfortable idea because traditionally countries that innovate are among the wealthiest. But of course the countries that play catch up often grow the fastest.

I'm really not sure that it matters who does the actual innovating....if we're defining the innovating as the science and engineering which leads to a new product or service. Yes, of course, Nokia and their domination of the mobile phone market is very nice for the people that own it and there are spill over effects into the rest of the Finnish economy. But those things are trivial compared to the value that we the users get out of being able to use mobile phones. That is, after all, why we buy them, because they are valuable to us.

William Nordhaus, in what might be my favourite economics paper of all time, outlined this here.

We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

It's actually only 2.2 % of the value that goes to the innovators. The rest goes to the users of the products.

Which leads to an interesting policy conclusion. We shouldn't be worrying (or at least, not very much) about subsidising basic research, the creation of new products. Rather, we should be worrying about making sure that the economy is flexible enough that we can swiftly deploy those new ones, whoever they are created by. After all, that's where 97% or more of the wealth creation comes from so that is what we should be concentrating upon.

Not by the hair on my chinny chin chin

2511

not-by-the-hair-on-my-chinny-chin-chin

Researchers working at the Centre for Analysis of Social Exclusion (CASE) at the LSE have released a report suggesting that the government develops a ‘time poverty’ target for parents alongside the existing child poverty target.

Upon discovering that better educated single-mothers are in less ‘time poverty’ the work concludes:

Government support could take a number of forms: regulation, to ensure employers provide adequate time off for employees studying for work-related qualifications; extension of childcare tax credits to cover parents’ study hours as well as paid work; and taking a more long-term view of the value of studying for qualifications in ‘welfare to work’ rules: a qualification beyond basic literacy and numeracy will not necessarily have an immediate payback in terms of employment, but it is an investment for future that in the long run will produce better job opportunities.

The report also suggests that the government set a minimum of 'quality' time parents spend with their children in order to guide policy. More regulations for businesses are unarguably a bad idea. More benefits will lead to perverse incentives and in this financial climate would prove remarkably unpopular. There is even a suggestion to raise the minimum wage. I am not sure what planet this report was written on, but it is not of this world.

Like most of the very worst public policy, the impulse to interfere here is full of good intentions. However, the time that parents spend with their children is a matter that should not be the concern of the government. This is the sacred preserve of the family and any invitation for the state to enter is a most unwelcome one. Like salesmen, once you open the door to the state, there is no getting rid of them.

Quote of the week

2517

quote-of-the-week

The state school system: "Usually a twelve year sentence of mind control. Crushing creativity, smashing individualism, encouraging collectivism and compromise, destroying the exercise of intellectual inquiry, twisting it instead into meek subservience to authority."

Walter Karp, Editor, Harper's Magazine

Blog Review 794

2513

blog-review-794

The correct Thanksgiving prayer, possibly modifiable for Christmas. To the global economy, the division of labour and trade.....

Yes, it really is the international bureaucracies that are imposing this terrorist legislation upon us.

How to reduce poverty with the stroke of a pen.

And of course, it's morally wrong to take money from the poor....so why do we tax them?

Why on earth is everyone insisting that we want to increase mortgage lending? Reduce it, surely?

Something of an argument. Who benefits most from the presence of the State? Low skill workers perhaps?

Pollution or plant food?

And finally,

Of course, if one defines "grownup" as a person who agrees with Paul Krugman, and "hack" as a person who does not, then one might come to a different conclusion.

A very important question

2514

a-very-important-question

Neal Lawson of Compass tells us that:

The state and public services do need to be reformed and yes modernised. But not through the market.

So how are we to reform and modernise public services if not by using market mechanisms? By more target setting? By calling for Stakhanovite efforts in tractor production?

Instead we should be looking at ideas such as co-production, whereby users and staff work together to redesign services and therefore obtaining levels of productivity and efficiency that no cost cutting private consultant could ever achieve. There is huge latent potential in workers and citizens that could be unleashed if we build them into the reform process.

Sounds fun.

And the crisis does give us a chance to rethink state structures and strike a new deal between a centre that should focus on equality and a periphery of local delivery that can innovate and encourage participation.

Innovation, eh? My word, he makes it all sound so simple. Which is because, in very large part, it is indeed simple. Users and staff work together to redesign: that is the interaction of the producer and the consumer, the demand of the one and the desire to supply of the other. Leading, as noted, through a series of iterations, to greater productivity and efficiency. The innovation that results from such participation then gets sorted by our looking at which innovations work and which don't. Those that do we copy and roll out in other areas. Now we have a name for these sorts of things: market processes. Here, specifically, a market in methods of organisation.

So Lawson's idea is that in order to reform our public services without using the market we must use the market.

Which leads us to our very important question: how do people so confused end up having influence over public policy?

Dissent will not be tolerated

2516

dissent-will-not-be-tolerated

The emerging story regarding the arrest of Tory frontbencher Damian Green would be absurd if it did not represent such a continuing degradation of age-old liberties. As Janet Daley commented, ‘anybody who thinks that the Conservatives are creating an overblown fuss over the arrest of Damian Green is making a genuinely grave mistake’. Many people may dismiss the Tory response as political showmanship, and think that as Green was only questioned and not charged, we should forget the whole sorry saga. But this episode cannot simply be swept under the carpet and forgotten.

At the moment the details of the arrest are still slightly hazy but essentially, Damian Green was arrested on Thursday by anti-terrorist police and held for nine hours, because he had made public leaked Home Office information related to his brief as Shadow Immigration Minister. Some Tories have alleged that the authorization for the arrest was made from the upper rungs of the government itself – a claim that the government deny, saying this was an entirely police matter. Either way it seems clear that the information disclosed by Green (that the government was employing illegal immigrants in 'security-cleared' positions) was a legitimate matter of public interest.

But the details in this story are not the most worrying element. What is so hard to comprehend is the idea that an opposition Member of Parliament can be arrested by counter-terrorism policy, held for nine hours, have his home and his parliamentary office searched (seemingly with the consent of the Speaker), simply for daring to hold the government to account. This is a blatant and undeniable encroachment on the civil rights of the British people. The arrest of an MP by special operations units is the type of scene witnessed under tyrannical dictators.  (Well, I suppose Gordon Brown is unelected...)

The worrying thing is that there have been no sweeping invasions of our privacy, they have been snuck in through the back door under the veil of anti-terrorist measures, surveillance cameras and ID cards. The Tories are right to make a big deal out of this arrest, it would be difficult to blow this one out of proportion, but they need to make sure they make real changes when they come into power.
 

Blog Review 793

2512

blog-review-793

So just what was Damian Green arrested for? Other than doing his job that is? And more. Yet more.

And would you believe yet even more? Netsmith thinks that Daniel Finkelstein wins the competition for the best post on this matter.

A useful comment upon government and efficiency. Google actually provides, for free, a better snapshot of flu outbreaks than the Centers for Disease Control (very definitely not free).

A rather alarming chart of net worth per person in different countries.

Another commentary on the same basic facts and asking the question, are we bust yet?

More on whether the war did in fact end the Great Depression. Well, only if you think that blowing things up adds economic value seems to be the answer.

And finally, the husband of the year awards.