The Pin Factory Blog

Yesterday researchers at Bristol University released a report claiming to prove that league tables create better results in schools. The report’s authors have shown that schools in Wales, where league tables were abolished in 2001, are achieving worse results than those in England. In principle, it makes sense that the existence of information for the consumer would increase competition and therefore the quality of the school. But, as I have argued before, in their current form league tables are broken and inhibit educational success.

Setting aside the other factors that may have affected this result, it still seems that Wales made the right decision to abandon league tables defined by government targets. The report’s release coincides with the Chief Executive of Ofqual calling for the abolition of the very targets that make up these tables, arguing that the current system of tables is an inadequate provision of information. “Simplistic” league tables, which only consider whether a child has achieved five GCSE of C or higher, narrow children’s learning and create a tendency to “teach to the test”. There are many other factors other than simple results that create a good school.

Obviously it is good for pupils to gain as high a grade as possible. However, this is not parents’ only priority when it comes to their children’s education. It seems that rather than Wales being wrong to abandon league tables, it was the inability of the government to create a more effective way of providing information to the parents. This meant that there was no way to compare schools and thus competition was not fostered.

Privatizing league tables would make them accountable to the consumer rather than the government, and would provide a broader ranking of schools. If the government stopped crowding out private companies’ league tables, competition would allow private tables to use wider criteria than government targets, and in turn spark greater competition between schools. 

Via Reason Magazine's Hit & Run blog. Things were better when politicians spoke their minds about each other rather than treating us like children.

What would a British version look like? Suggestions in the comments section.

The article on the dangers of drugs published yesterday by Professor David Nutt is a welcome development in the drugs debate, but I am afraid that it may be a false dawn for people who want to liberalize drugs. The crux of the article is that alcohol has a greater social cost than most drugs, and that certain Class A drugs like ecstasy are less harmful to users than legal drugs like tobacco and alcohol. This is welcome ammunition in the fight to liberalize drug laws, but relying on it heavily may leaves the pro-liberalization side exposed.

Most people know that ecstasy and the like are less dangerous than alcohol. To have a widely-respected public figure like Prof Nutt saying so, and being publicized widely in the media, is a very good thing and a step towards destigmatizing open discussion about drugs. This open discussion is needed so we can have a clear, level-headed debate about drugs and an acceptance that people must be free to make their own choices even if those are bad choices. The article is a useful demonstration that the dangers of drugs compared with legal substances are not clear-cut, and not something that the state should try to make blanket bans on.

The problem is that using expert testimonies like that of Prof Nutt is playing with fire. Yes, this article shows that drugs are not unequivocally harmful compared with alcohol and tobacco, but that is only a part of the argument for legalization – the other part being that the state should not make laws to protect adults from themselves. This is the part that is motivated by a love of liberty, rather than a technocratic harm reduction analysis.

The liberal side of the pro-legalization argument is fundamental to belief in a free society – that adults should not be treated like children. Many things carry risks and benefits, and the cost benefit analyses involved in choosing which to use and which to reject is a personal, subjective one.

My worry is that embracing Prof Nutt too closely will undermine the philosophical argument for drug legalization, and leave liberals and libertarians vulnerable to changes in Prof Nutt’s calculations about harm causation. I welcome this article, and I’m encouraged by the ripples it has made, but at best it is a small part of a much bigger argument.

The foiling of a terrorist plot on Friday has once more pushed the issue of national security into the headlines. Apart from the direct security risks, a worrying consequence of this is the impact it will have on counterterrorism laws that are currently being reviewed.

There has recently been cause to question the Coalition’s commitment to civil liberties, particularly in regards to the existence of control orders. When the government appointed Lord Macdonald to carry out the internal Home Office review of counter-terrorism measures, it seemed that that it was showing a commitment to civil liberties – MacDonald’s liberal views on this subject are well known in Westminster.

However, recent statements from the Home Secretary suggest that the government is only listening to the concerns of the security services instead of those of the country and Parliament. The attempted terrorist attacks may have been given control orders a stay of execution.

Since the introduction of control orders in 2005 there has been much debate about their legitimacy. Their stated purpose was to restrict the movement of any kind of suspects, including British nationals, targeted by the Home Secretary – a huge infringement on our civil liberties. This raised serious concern about the growing power of the government at the expense of our freedom.

When the Coalition was formed back in May, one of the key policy areas that united the two parties was a commitment to civil liberties and to revoke some of the authoritarian policies put in place by the Labour government, including control orders.

Unfortunately, it seems that what was said in opposition seems to count for little in power. We can only hope that the cries for the abolition of control orders from prominent MPs on both side of the Coalition – notably David Davis, who has pledged to vote against their continuation – will help to restore some of our lost civil liberties.

The Guardian reports that graduate unemployment is at its highest rate for the last seventeen years. Is this a surprise to anyone? You don't need an economics degree to figure out what happens when you oversupply something without the demand for it.

One of the policies of the last government has been to squeeze as many people through university as possible, irrespective of the need for more university graduates, in the naïve believe that having more university graduates is an infinitely good thing.

As today’s report shows, this view was wrong. There is an oversupply of graduates caused by government subsidies for university education, just as there is an oversupply of farm produce caused by government subsidies for farming. This oversupply has depressed wages and, as today’s report shows, created mass unemployment for graduates.

Today’s report should be a wake-up call to the government, hammering home the damage that social engineering policies can cause. If some of the now-unemployed graduates had spent the last four years in the workforce, developing skills that were needed by employers, far fewer would be in their situation.

Top-down attempts to reshape society rarely work as their planners intend. The experiment with creating a ‘knowledge economy’ by creating a massive number of university graduates has failed, by creating a supply where there was little demand. Had the government not skewed market incentives for school-leavers by subsidizing university educations, the one in eleven graduates who are now unemployed might not be in this situation.  

I’m a pragmatist who’ll take a cut in spending as it comes, so I’m broadly supportive of the cuts to child benefit. But the plan to penalize people who fail to comply with the Treasury’s quick-fix method – requiring mothers to disclose the incomes of their cohabitees – underlines how broken the current benefits system is.

‘Universal benefits’ are not really universal at all. In the case of child benefit, they are a transfer from childless people to people with children – not a vertical transfer from rich to poor, but a horizontal transfer that rewards one life choice over another. (Some would say that society needs children to be born to support the old age pension system. But since we already have a declining birth rate, this is more an argument for pension reform than for maintaining child benefit.)

What this means is that arguments in defence of child benefit that say that cuts to child benefit will favour one group at the expense of another are mistaken – they already favour one group (people with children) over another (people without children).

The cuts to child benefit are good and should go further, but they’re being implemented in a way that is so ham-fisted a way as to make even the most committed cutter wince. Plans to fine anybody who doesn’t comply with the measures are misconceived – if you are a family who has a lodger and don’t know how much they earn, prepare for a hefty fine. Furthermore, setting the bar at the higher income cap will only increase the disincentive to work for people on the margin and reduce overall economic output. Now is not a time to discourage economic activity.

We need a more radical approach – child benefit should be scrapped altogether.

If there are very poor people who cannot afford to support their children, either let this be included in the ‘Universal Credit’, or allow private voluntary charities to provide for them. But horizontal wealth transfers that reward one lifestyle over another should be ended both because they are unjust and they skew incentives. The government claims not to want to ‘pick winners’ in the economy, so why do they pick winners in society?

 Have you heard of NEST? If not, you probably will – and soon.

The National Employment Savings Trust was created by the previous Labour government to facilitate implementation of the Pensions Act 2008 which aims to greatly increase the number of people saving towards their pension. The Act requires virtually all employers to automatically enrol their staff into a qualifying workplace pension scheme. The new coalition government confirmed this week that the scheme will go ahead as planned in 2012.

In broad terms, the Act calls for employers to put in a minimum contribution, together with the jobholder's contribution and the government contributing the rest in the form of tax relief. Specifically, all employers will have to contribute a minimum of 3% of a jobholder's qualifying earnings which, when added to tax relief and the jobholder's contribution, gives a total minimum contribution of 8% of qualifying earnings. The contribution level will be phased in to reach the 8% minimum by 2017.

The role of NEST is to offer “a new workplace pension scheme…designed specifically to meet the needs of low-to-moderate earners and their employers.” In effect, it’s a basic and simple scheme, offering smaller employers an easy way to introduce the now-mandatory pension-savings requirement. Its structure is that of a non-departmental public body, accountable to Parliament through the Department of Works and Pensions (DWP). In other words, a government agency.

The NEST website goes to some length to stress its independence from the government through its trust-based structure and limited mandate to serve the low-paid and the smaller employer. And, to be fair, the folks running NEST, both Trustees and management, do mostly come from outside government.

The risk, though, is that NEST soon becomes too big for politicians to not meddle. Consider NEST’s own numbers. It points out that some 750,000 employers currently offer no workplace pension scheme at all. Since most of these would be small businesses, it’s not hard to imagine most of them signing up for NEST’s quick and ready offering. The DWP itself is hoping that “between four and eight million people will start to build up savings…in a workplace scheme.”

Coincidentally, The Pensions Regulator (TPR) this week reported that only some 2.5 million people currently have pension savings in a Direct Contribution (DC) scheme but that just 1 million are actively contributing. (By contrast, some 2.5 million are contributing to private Define Benefit schemes, a dying species.) TPR notes that some 130 large schemes dominate the DC business but also notes that there’s another 44,000 schemes with fewer than 12 members.

All this suggests that NEST has the potential to get very big, very fast and, in the process, squeezing out many smaller private schemes. Remembering that National Insurance began life as a pure insurance scheme against illness and unemployment, NEST’s development over the coming years will bear close monitoring.

It's one of the traditional moans here in the UK: that supermarkets just suck the life out of a community. One day there's a nice little High Street, the butcher, the baker, the ironmonger, all ready with a cheery greeting and loal prices for local people, next there's a supermarket and nothing is left but a howling economic wasteland.

That no one ever gets forced into a supermarket seems to get missed in this story: as does the obvious point that if the inhabitants of this Barsetshire town really did value the cheery greeting and the local prices the opening of a supermarket wouldn't change their behaviour, would it? It would be the supermarket that went bust, not the local traders.

But, in an attempt to prod people a little into thinking about what it would be like with no such national chains of supermarkets, why not look at somewhere that doesn't have such? Detroit perhaps?

Just in time for the winter holidays, the government has announced that it plans to hike the Air Passenger Duty by up to 50%. The measure is defended as a revenue-raising ‘green’ measure, but it fails on both counts. What’s more, it’s the worst kind of tax – one which directly penalizes fun.

The first defence of the levy is that it will raise revenue for the government. Maybe so – any form of taxation will do so. But this is the sort of tax that has a strong disincentivizing effect on people’s decisions about where to travel. The levy for European flights is one sixth of that of, say, a flight to the Caribbean. The government already massively taxes air travel, and adding more taxes will simply kill the goose that lays the golden eggs. The Laffer curve applies as much to consumption taxes as to anything else – tax something too much and revenues will decline as the cost of that activity outweighs the benefits.

The second defence of the levy is that it is ‘green’. Again, this is partially true – if you stop people from doing things that generate CO2, you will marginally reduce the amount of CO2 in the atmosphere. But the Air Passenger Duty is a blunt tool – it doesn’t differentiation between airplanes of differing CO2 output, and it taxes flights to the Bahamas (4,347 miles from London) more than to Los Angeles (5,448 miles) or Hawai’i (7234 miles). I’m not convinced of the need for any anti-CO2 measures, but even I was, this would be a bad way of going about it.

This duty hike is especially rotten because it taxes one of the most fun things most people have in their lives. Spending months toiling in boring jobs, with even lower-rate taxpayers already forced to pay nearly 40% of it to the government through income tax and VAT, is often only bearable because of the hope of a few weeks away in an exotic country. Certainly, the ministers behind the hike won’t be affected, and like cigarette and alcohol duties this is a regressive tax that will hit the people least able to pay the hardest. Adam Smith once wrote that taxes should be proportionate, nonarbitrary, convenient and low. I’d add one point – that they don’t try to stamp out fun.

And Plod finds him searching under the lamp post. "Is this where you lost them?" "Nah, over there!" " So why are you looking here, under the lamp post?" "Because this is where there's the light to find them!"

No, I didn't think it was all that funny when I first heard it when I was five either. However, it is a useful description of what some people do. Look where it's easy to look rather than where they might find something. And is this true of economists? Is there, for example, much too much research done on the economies of rich countries and too little on those of poor ones?

Fact 1: “Just” Income: There is a strong correlation between GDP and publications—a doubling of GDP leads to a 37 percent increase in the number of publications on the country. The US is bang on the regression line relating GDP to publications—a lot more is produced on the US because it is big and rich. Surprisingly, most countries in Sub-Saharan Africa are also on the regression line! In fact, there is no “SSA penalty” in the production of empirical research—there is very little work on most SSA countries mostly because they are poor and small.  That 36,649 papers were written on the US between 1985 and 2004 relative to 4 on Burundi, 5 on Benin or 20 on Niger is largely explained by income and population size.

You could read that as a yes: and you probably will read that as a yes if you're subject to the great folly of our times. That it is poverty that needs to be explained, poverty that is unusual, some even insist that poverty is created. Something which simply isn't so: poverty is the natural condition, poverty is how all of the world has lived until recent centuries and poverty is how far too much of the world still lives.

It is the creation of wealth which is the historically unusual thing: indeed, the existence of an economy complex enough to be worth studying which is the exception. So it makes perfect sense that economic research should concentrate on the rich countries. They're the place that have economies to study for a start. But much more important, it's riches, wealth, that are the keys we are searching for: that they happen to exist where there are the lamp posts of universities, libraries and a really good cup of coffee to imbibe while researching is convenient, sure, but then that's just another way of saying, the existence of universities, libraries, and good coffee, that these places have economies worth studying.

Plus, of course, the surplus over and above day to day survival for the population sufficient to support researchers to try and work out why there's a surplus capable of supporting researchers.