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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

The twelve days of state bureaucracy: 4-7

Written by Dr Eamonn Butler | Monday 30 December 2013

Day 4

Dearest Grandmama, four Environment Agency officers came round today and said the pear tree was unsafe as it might blow down in a gale. No gales are forecast, but they still say it has to be fenced-off or removed immediately. So we had some builders round to erect a sturdy fence. I will write more tomorrow.

Day 5

Dearest Grandmama, five traffic wardens arrived today, saying the neighbours had been complaining at the number of vehicles that had been calling. They gave tickets out to everyone parked in the street including several neighbours which only made them angrier. I will write more tomorrow.

Day 6

Dearest Grandmama, six security contractors arrived today. The traffic wardens had complained of harassment from the neighbours for giving them tickets so the local council were installing CCTV to ensure a safe working environment for the traffic wardens. I will write more tomorrow.

Day 7

Dearest Grandmama, the floodlights that the CCTV contractors installed really light up the tree and the partridge nicely, but seven of my near neighbours have organised a protest picket outside the house because they cannot sleep at night and the traffic and noise keeps them awake during the day. I will write more tomorrow.

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From the annals of standard bureaucratic behaviour we bring you the RSPCA

Written by Tim Worstall | Monday 30 December 2013

It is most politically incorrect to attack the RSPCA: after all, they're the guardians of those animals that we English treat so much better than our own children. But I'm afraid that it does have to be done. For we're now seeing standard bureaucratic behaviour from said RSPCA, something straight out of C. Northcote Parkinson:

Pet owners should be forced to join a register, buy a licence and pass a competence test to help tackle the abuse of animals, the RSPCA’s chief vet has suggested. James Yeates said the introduction of such measures would “make it clear” that owning a pet was a “privilege and a responsibility”.

A privilege that you'll only be abe to enjoy if the RSPCA approves of both you and your pet no doubt.

And yes, I know, the organisation is claiming that this isn't quite what anyone means but then we've all seen kite flying of this type before. Further, we know absolutely that any such licence scheme would be a costly monstrosity. We used to have dog licences and the system cost far more to administer than any revenue that came from it.

But the real point comes from what this suggestion tells us about those inside the RSPCA. They're a bureaucracy just doing what bureaucracies do. Which is, as Parkinson pointed out to us, simply exist for the sake of existing. Once established, once past that first flush of success in addressing whatever it is, the point and purpose of a bureaucracy is simply to maintain its own existence and, if possible, expand the budget and size of it. And that's it.

Which is precisely what the RSPCA is doing here. There is no point or purpose to licencing all of the nations pets other than to give the RSPCA something to do. Which is why they have suggested it.

And, of course, why we should tell them where they can get off and the horse they rode in on.

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Isn't it wonderful how student loans are starting to actually work?

Written by Tim Worstall | Sunday 29 December 2013

I thought this was an amusing little complaint from some recent student. They seem to have rather missed the entire point of having student loans to pay the tuition fees in the first place:

I see friends of mine recently out of university struggling to find graduate schemes, permanent jobs or anything beyond zero-hour contracts. My degree has been vital to my job, but it saddens me to say that, were I 18 again, I wouldn't choose the subject about which I felt passionate – I'd make my choice based on job opportunities and pay.

What amuses me about this is that of course this is the very reason that the system was changed.

There was indeed a time when it didn't matter all that much which subject you did at university. And it was also at that time that you not only didn't have to borrow to pay the fees, you got a government grant to support you while there. But the other side of that system was that only 10% of the age cohort went. Thus a degree was indeed a signifier of having some brains to get in and further, the persistence to then graduate as well.

Now we have near 50% of the age cohort going. And thus the simple possession of a degree is not going to be a useful signifier to future employers. And it's also true that with 50% going it's not going to be the taxpayer that picks up the entire bill. Which leads us to our system of loans to pay the fees. And look at what then happens as a result of that.

Students start to think about where the pay will be good after they graduate. Good pay for any particular job of course being a signal that there is a (relative) lack of people both qualified to and willing to do that job. So by making the students responsible for their own costs (in however subsidised and dilatory manner those loans are collected) we have actually provided them with the incentives to study something that is of use to the rest of us.

Isn't it wonderful, introduce market signals into the university system and we get people preferentially studying for those careers where we've a shortage of good people? My word, quite remarkable, markets and incentives work.

One more thing we might note: there have indeed been some governmental actions over recent decades that can be said to have worked just as this one has. They're always when the government decides to bring in more of those market incentives and price signals though. There might be a more general lesson in that somewhere....

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The net migration cap is hurting Britain

Written by Sam Bowman | Saturday 28 December 2013

This morning's Guardian carries a letter by the ASI, the Institute of Economic Affairs, the Institute of Directors, the Centre for Policy Studies, the Entrepreneurs Network and Conservatives for Liberty, on why we oppose the government's migration cap. I wrote about why more free marketeers should care about immigration recently — we're lucky that the UK's foremost free market think tanks do.

The government's net migration cap is hurting Britain's economic recovery and long-term fiscal health. It can take around three months for a business to apply for a visa for a prospective employee, a significant unseen cost of the cap, and international firms may prefer to base themselves in countries where they can bring in staff from abroad more easily than they can in the UK.

Entrepreneurship is being affected, too: more than a quarter of Silicon Roundabout startup founders are foreign-born, and more than half of tech startups in California's Silicon Valley are founded by immigrants. The cap on immigration is a cap on the innovative industries Britain needs to thrive.

According to the Office for Budget Responsibility, without net immigration of at least 260,000 people per annum, public debt will approach 100% of GDP by 2060 as we struggle to pay for a ballooning pensions and healthcare bill. Countless studies have shown immigrants create jobs, raise natives' real wages and even boost productivity.

Public concerns about benefits tourism are legitimate but are better addressed by reforms that restrict access to the welfare state. The migration cap does not discriminate between the small number of would-be welfare tourists and the many people who would like to work productively to create a better life for themselves and their families. The cap is hurting Britain and should be scrapped.

Sam Bowman, Research director, Adam Smith Institute,

Mark Littlewood, Director general, Institute of Economic Affairs,

Simon Walker, Director general, Institute of Directors,

Ryan Bourne, Head of economic research, Centre for Policy Studies,

Philip Salter, Director, The Entrepreneurs Network,

Thomas Stringer, Director, Conservatives for Liberty.

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In which we introduce the word superfetation

Written by Tim Worstall | Saturday 28 December 2013

Over at Voluntary Exchange we are introduced to the word "superfetation". Strictly speaking it refers to a second pregnancy that starts while a woman is already pregnant. But it is often used colloquially to have a wider meaning than that. And it is this wider meaning that we should perhaps popularise:

This came up in a discussion of Obamacare:

… The new American mandatory insurance system has shortcomings that are not necessarily related to the idea of mandatory insurance - as instead with the bureaucratic superfetations of such a system engendered by the way the US Administration has planned it.

I like that idea: layers of bureaucracy being added onto existing layers of bureaucracy (perhaps, because the earlier layers aren’t working well). I’ve always described bureaucracy as continuing revisions of a Frankenstein monster: it didn’t quite work the first time, so we’re going to staple on some new part and hope for the best.

Now I have a word for that: superfetation.

The Chancellor announcing help for people to buy houses then the Bank of England raising interest rates in order to cool house prices: superfetation. The government subsidising green energy plants with vast feed in tarrifs, then having to restrict the number of green energy plants in order not to bust the budget: superfetation.

A word I think we should use more and I've no doubt that you can provide further useful examples and definitions in the comments.

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Why not US healthcare? Because we want something much more free market than that

Written by Tim Worstall | Friday 27 December 2013

It's a standard part of the debate about reform of the NHS: as soon as it's mentioned everyone hares off down the road of insisting that we don't want to have anything like American health care. And the strange thing is that they're right, we don't: we want something much more free market than that. As John Cochrane puts in the WSJ:

The U.S. health-care market is dysfunctional. Obscure prices and $500 Band-Aids are legendary. The reason is simple: Health care and health insurance are strongly protected from competition. There are explicit barriers to entry, for example the laws in many states that require a "certificate of need" before one can build a new hospital. Regulatory compliance costs, approvals, nonprofit status, restrictions on foreign doctors and nurses, limits on medical residencies, and many more barriers keep prices up and competitors out. Hospitals whose main clients are uncompetitive insurers and the government cannot innovate and provide efficient cash service.

We can go further too: it's not even legal to purchase health care insurance from a company in another state. The end result is a system where no one is really exposed to true market prices or true market forces. And that's just not the way to run anything at all.

What would be a better system, both for us and for the Americans, would be something like the Singapore system: where absolutely everyone is indeed exposed to market prices and market forces. However, the government  steps in to make sure that those who genuinely cannot afford treatment get it. They also happen to run many of the hospitals: but those hospitals are indeed exposed both to competition and pricing. In essence Singapore has medical savings accounts for routine expenses. If you don't spend the money then it gets added to your pension. For catastrophic care there is a proper insurance scheme. There is no haggling over the price at which someone will be scraped up off the road and treated: none of us would particularly like there to be so either. But there is such competition and haggling about the price of drugs, of routine treatments. Everyone is exposed to market pricing and market forces.

That could be, although obviously mere correlation is not causation, why the Singapore medical system is as good or better than either the UK or US one but costs only 4% or so of GDP. That is, something like a third of the UK system and one quarter of the US one.

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The twelve days of state bureaucracy: 1-3

Written by Dr Eamonn Butler | Thursday 26 December 2013

Day 1

Dearest Grandmama, we're having a lovely Christmas here at Green Acres, and thank you so much for the wonderful present we opened today, a partridge in a pear tree. I planted the tree and the partridge looks very happy perched in it. I will write more tomorrow.

Day 2

Dearest Grandmama, after I planted the tree, two animal welfare inspectors came round. They wanted to know if you were licensed to trade in game. And apparently just keeping the partridge in a tree would break all sorts of animal welfare rules, so I had to buy a proper bird house for it. I will write more tomorrow.

Day 3

Dearest Grandmama, after I erected the bird house for the partridge, three building inspectors came round saying I needed planning permission. They have given me until Twelfth Night to demolish the bird house, or they will come and bulldoze it. Still, I will have the tree, even if I have nowhere to keep the partridge, so thank you again. I will write more tomorrow.

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So why do companies pay lobby groups?

Written by Tim Worstall | Thursday 26 December 2013

To the simpler minded among us business lobbies against regulations because such regulations would hobble business. And of course those who would impose regulation upon business are the very driven snow in purity, seeking as they are to restrain the depredations of business upon the citizenry. However, it doesn't really work that way:

But the fact that corporations also fund big-government organizations raises questions about this narrative. If regulation hurts corporations, why are they funding think tanks which promote it? The truth is that most regulation is written by and for incumbent businesses to erect barriers to entry and to buy advantages over their competitors.

I'm afraid that it's true. Big business just loves regulation for it prevents those pesky upstarts from muscling in on their profitable territory. Examples abound: Uber is prevented from offering an electronic method of hailing a cab because this would affect the incomes of the incumbent cab owners. The regulations on copper smelters in the US are such that it would be impossible to build a new one and actually meet them. All of the extant smelters are of course grandfathered in to those same regulations. There can be no future competition. Here in the EU it takes 10 months just to get planning permission to set up a new industrial production line. And yes, they have just made the rules stricter, this applies to any sized production of anything.

Big companies don't mind this as they have the time to fill in the paperwork: and the €10,000 to file it. A new company, an upstart, would find it most difficult to stay alive during a process of such length. Which is why the big companies just love such regulation and there's no countervailing pressure for less regulation of course. For how can the companies that never come into existence impose political pressure for less regulation?

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All I want for Christmas is the abolition of corporation tax

Written by Tim Worstall | Wednesday 25 December 2013

I think it's about time we abolished corporation tax don't you? As this paper shows, the effects will be pretty good. The rise in other taxation as a result of increased growth won't quite cover the revenue loss but it'll be a near thing:

We simulate corporate tax reform in a single good, five-region (U.S., Europe, Japan, China, India) model, featuring skilled and unskilled labor, detailed region-specific demographics and fiscal policies. Eliminating the model’s U.S. corporate income tax produces rapid and dramatic increases in the model’s level of U.S. investment, output, and real wages, making the tax cut self-financing to a significant extent. Somewhat smaller gains arise from revenue-neutral base broadening, specifically cutting the corporate tax rate to 9 percent and eliminating tax loop-holes.

There's a major difference between the US version and the UK. Here, those in receipt of dividends gain a tax credit for the corporation tax already paid. If we abolish the corporation tax of course we would abolish that credit and dividends would be taxed as normal income. So it's entirely possible in the UK system that the revenue effect would be positive.

As to why we want to abolish it it is disguised taxation. 90% of the country believes that it is actually the companies that pay it. The other 10% of us are aware that it is the shareholders and the workers (in the form of reduced wages) that do. So better to lay the taxes openly on those who really bear the burden than disguising the cost of government from people.

And finally, one reason that we collect this tax at the corporate level is because it is convenient to do so. But as you may have noticed with the furore over Google, Amazon and so on, it is no longer convenient. So, let's stop doing this inconvenient thing and tax directly.

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This strange allegation that Britain isn't eating

Written by Tim Worstall | Tuesday 24 December 2013

I'm afraid that this campaign and poster, "Britain Isn't Eating", confuses me greatly.

In a striking billboard advert that says ‘Britain Isn’t Eating’, the charity Church Action on Poverty uses the famous image from the Conservatives’ 1979 election poster, ‘Labour Isn’t Working’. The highly political charity poster features the same long line of people used to illustrate dole queues under Jim Callaghan’s ailing government, but this time places them outside a food bank.

OK, more people are using food banks than before. And what, pray, is wrong with that?

For the launch of the Britain Isn’t Eating campaign, Church Action on Poverty said on its website: ‘The explosion in food poverty and the use of food banks is a national disgrace. It undermines the UK’s commitment to ensuring all its citizens have access to food – one of the most basic human rights.’

Umm, but, aren't food banks providing food to people? Aren't people thereby being provided with one of the most basic human rights, access to food?

I'm perfectly willing to agree that in a country, by historical or global standards, as rich as the UK is today that we can make sure that all have access to a basic and nutritious diet. The thing is, I'm very confused by the people who are part of the system providing this, those food banks, insisting that their own existence proves that this isn't being done. For there's absolutely nothing at all that insists that such provision should be met by government. Or benefits, or pay, wages, jobs or anything else of that type. The insistence is that food should be available and that it is available through the charity of our fellow citizens is not some scandal that blots our society. Quite the contrary, it is a wonderful signifier that we do indeed still care for our fellow man.

Something that at this time of the year is a rather appropriate thing to be reminded of perhaps?

It claims ‘the single most common reason for people to need food aid is that their benefits have been changed, delayed or stopped’.

Government is incompetent and we the citizenry step into the breach. This is somehow a bad thing?

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