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

You've got to understand a problem before you can try and solve it

Written by Tim Worstall | Monday 10 February 2014

We've yet another dodgy report from yet another dodgy think tank being written up today. You know it's dodgy when the writye ups, to create the narrative, arrive before the full paper can be checked to see what they're really saying. But here's part of the report:

While most people will live to state pension age and beyond, a large proportion are unlikely to get there in good health, especially in more disadvantaged parts of the UK – places like inner city Glasgow, where the healthy life expectancy is just 46.7 years – close to 20 years lower than the national average of 65.

No, that's not really true.

The difference in disability-free life expectancy between women born in the most and least deprived areas was 11.6 years in 2001-04. By 2007-10 it had increased to 13.4.

And that's absolutely not true. The problem, here is that no one is understanding what these numbers are, how they're collected, and they are thus using them in highly inappropriate manners.

Lifespan, healthy lifespan, these are not the numbers from people born in certain locations. Nor of people in certain income bands, social classes or anything else. They are collated from the places and ages at which people die. It's vital to understand this difference.

As an example, consider two people who live at some point in their lives in those inner-city areas of Glasgow. One is born there, joins the Army, retires to Eastbourne and dies at 90. The other is born in Eastbourne, drifts along, gets tied into drug addiction and dies at 40 in some squat in Glasgow with a needle in his arm.

That first person, given that we count these things as where people die, leads to the average age at death in Eastbourne rising: that second, for the same reason, lowers that average age at death in Glasgow. But clearly and obviously neither of them have anythiing at all to do with the average age of death in their birth places. And yes, people do indeed move around: and one of the greatest prompters of people moving is a change in their economic circumstances. So, therefore, a goodly part of what we're seeing here when poor areas have lower lifespans than rich ones is not that living in a poor area kills you but that people self-select into poor or rich areas based upon their wealth.

Another way of approaching the same point is to consider the mistake that Michael Marmot has been making for decades. There is most certainly a link between economic inequality and health inequality. Living in a disease ridden slum will indeed make you more susceptible to said diseases. However, there's also an obvious link between health inequality and economic inequality. One acquaintance was hit with a series of severe illnesses in his mid-40s. Sufficiently bad that he entirely dropped out of the workforce for four years. All terrible of course: but his subsequent economic inequality was a result of his initial health inequality, not the other way around.

If we start to assume that this lifespan inequality is a direct and sole result of economic inequality then we're going to get any plans to solve it all entirely wrong. It's vital that we also accept that health inequality happens, as does movement of the population, and that both of these will lead to the economic inequality that we see.

 

 

View comments

You're not fired

Written by Jokesmith | Wednesday 10 June 2009

Having seen the success of British TV's The Apprentice, France is going to do its own version. The format is exactly the same, except you're not allowed to fire anyone.

Headline from the Health and Safety Inspectors' Gazette: 'Old Lady Who Swallowed A Horse "Should Have Been Stopped Earlier"'.

View comments

You're allowed your own opinions on taxes

Written by Tim Worstall | Saturday 19 June 2010

But please, don't try to invent your own facts. The TUC has a paper out on how we really ought to raise Capital Gains Tax. You know, stick it to those rich people. A paper in which they say the following:

There was an unambiguous rise in the effective tax rate with regard to Capital Gains Tax when the tax rate rose from 20% in 1987/88 to be set at income tax rates throughout the rest of this period. In other words, the tax rate increase resulted in extra revenues. The so called “Laffer” effect, where it is claimed that increased tax rates result in reduced revenues did not happen.

The first problem here is the logical misunderstanding of what the Laffer Curve is trying to point out. Sure, a rise in the nominal tax rate is going to raise the effective tax rate. Raise income tax from 10% to 90% and the effective tax rate on incomes will rise.

*Shrug*.

What we actually want to know, and what the Laffer Curve is indeed all about, is does a rise in the effective tax rate lead to a rise in revenue collected?

So, why don't we have a look at what revenue was collected when the effective tax rate rose? That information is here.*

Well, when the CGT rate rose, the amount collected, the actual revenue from the tax, fell. In fact, when we account for inflation (those HMRC numbers are nominal, not inflation adjusted) the revenue from CGT did not rise to its 1989 level until 2006/7 (they just peeked over the earlier level at the very peak of the internet and stock market boom in 1999, to be entirely accurate). By which time of course CGT rates had been lowered again.

So, contrary to the claims of the TUC the revenue collected from Capital Gains Tax in the UK does indeed seem to show Laffer curve effects. A raise in the rate led to a fall in revenue collected and a fall in the rate led to a rise. It's still entirely open for people to argue that this is correlation, not causation, of course: but the claim that a rise in the rate led to increased revenues is simply flat out wrong.

In the spirit of comity and amity which we here at the ASI are famous for (and myself being both a paragon and exemplar of that, of course), might I suggest to the TUC that they find someone new to write their tax papers? I have a feeling that I know who wrote this one but to spare blushes won't point any fingers. I would very strongly suggest though that the employment of someone who has a grasp of both economics and data would be a good idea: however vague that grasp might be, some connection with reality is to be hoped for.

* My thanks to fellow Fellow at the ASI, Richard Teather, for pointing me to this table.

View comments

You're a what?

Written by Steve Bettison | Saturday 19 September 2009

I love Jeremy. I love fast cars. I love progress. But I learnt some things and those things terrify me. I learnt that climate change will make my future unrecognisable. I know that I’ll not have the same choices that Jeremy has now. If we keep on loving the fossil-fuelled lifestyle then by the time I hit 49 the world will be too busy coping with the impact of climate change to bother about how big an engine is possible. I’m the biggest libertarian of them all – I’m dumping dung at Clarkson’s gates so he might understand that his attitude will land us all in [it].

So said Tamsin Omond after dumping a load of manure on Jeremy Clarkson's lawn. Oh dear. This graduate seems to be using words she doesn't understand. Perhaps she should go back to university and find out what it means to be a libertarian.

Libertarians certainly wouldn't dump manure on the gardens of those who held views that were opposed to their own. They adapt to their surroundings and/or compensate others who they impose upon. What they don't do is run amok based upon some perceived future that may or may not actually occur. They found their beliefs in fact based upon a thirst for knowledge. Libertarians change their own lives so that they can live happily with themselves. They refrain from imposing their views on those around them recognising, maturely and respectfully, that they have no ownership over others. This is undertaken so that they themselves do not have their way of life infringed.

Sorry Tamsin, but you are not a libertarian. You're an enviromental-fascist. Please leave us alone so that we can avoid having our progress hindered and our futures' ruined via inhibitive enviromental legislation aimed at saving mother Earth.

View comments

You won’t find this glass in Harrods

Written by Jessica May | Saturday 26 April 2008

If you picked up the Daily Mail this week and came across this article you may have been quite cynical. Glass, in bones, that heals? They must be joking! Well, no, it is true.  Scientists at three English universities (Imperial College London, University of Kent, and Warwick) are working together to develop just that – a glass to heal bones. 
 
Now, before you go thinking they’re crushing up windows and putting them in people, glass can be (simply) defined as: a brittle, transparent solid made from silica without a crystalline molecular structure.  Back in the 1969, Larry Hench developed BioGlass (pictured left), after being challenged by a US colonel to help Vietnam War vets with devastating injuries.  BioGlass was the first man-made material to bond with living tissues, and has many uses today, including dental, middle ear implants, and orthopaedic applications.
 
In patients where grafts are necessary, often there is little spare bone to graft from one place to another. Animal grafts or bone from donor banks introduce immune responses, and require lots of medication to prevent rejection. This research aims to eliminate that need altogether.
 
Today, scientists are working on improving this glass, making it more bioactive and like the shape of trabecular bone.  Researchers at Imperial College were the first to take BioGlass and make it into a 3-D porous structure. The improved shape allows cells to grow and form tissue, while providing strength and support like native bone. 
 
When implanted, these bioactive glasses gradually release necessary ions, such as calcium and phosphorus, stimulating the bone to mend itself.  They are also biodegradable, and slowly break down as the bone re-grows, preventing a loss of strength while repairing. These glasses are now being combined with other materials on the nanoscale, widening their potential applications in the body. These implants have the potential to greatly improve patients’ quality of life and change the future of medicine.

View comments

You want more money?

Written by Disgruntled Democrat | Monday 27 October 2008

I have a little confession. I've been a member of the Obama campaign for nearly a year. I signed up when the inspiring, energetic junior Senator from Illinois was the long-shot candidate struggling against the Clinton machine and its sense of entitlement. As a member of the campaign I get regular updates, letters from the candidate, and the occasional request for a campaign contribution. But lately I have been stunned by the deluge.

With less than two weeks till the election, almost every day, I receive emails asking me to donate money. Emails from Sen Joe Biden, the would be Vice-President, from Mr Plouffe, the manager of the campaign, from Mrs Obama, the lady who would be first, and from Sen Obama himself. Pleading, cajoling, prodding. Telling me of their desperate need. Urging me to give. I've been scratching my head in bewilderment. Sen Obama has raised more money than any other presidential candidate in history. By recent count he has raised in excess of US$ 600 million (over US$ 150 million in the month of September alone). He has raised more than twice the sum Sen McCain has raised and is out-spending the Arizona senator, several times over, in almost every state and county. How much is enough?

In response to the most severe financial crisis in 70 years, Sen Obama often crows about the economic hardships that hard working, blue collar Americans face. Yet with this gross, bloated, obscene political treasure chest, Sen Obama has the temerity to ask these people who struggle to feed their families, to pay their rent or mortgages, to school their children, for more money. It's simply astonishing. During the Great Depression, men would pull the tongues of their trouser pockets out to show they were penurious. They called them Hoover Flags, as a sock to the then President. I've just reached into the pocket of my neat Saville Row suit and pulled the tongue out. I'm waving it at the Obama campaign. Joe the Plumber, Tito the Builder, and Ed the Dairyman ought to do the same.

View comments

You tube: the playlist

Written by Anonymous | Wednesday 17 June 2009

View comments

You really cannot just plan economies you know

Written by Tim Worstall | Tuesday 30 July 2013

It's one of the standard conceits that the man with a plan can make society better for us all. The standard response to this conceit is Hayek's point, that no one can have enough information in sufficient time to be able to make or manage such a plan. That's why we have to use markets as they're the only information processing and calculation engine we've got that is capable of doing the job. There are, of course, people who prefer to shout that Hayek's all wet and that their plan would undoubtedly work. Fortunately we've already run the experiment, we generally call it the 20th century, and we now know that Hayek was indeed right.

All of which leads to this interesting little tale:

Migration statistics are "little better than a best guess" and probably understate immigration to the UK, a parliamentary report has revealed. With immigration again set to be a key battleground during the next election, a report released today by the Public Administration Select Committee warns that the statistics are not fit for purpose.

Because of the unreliability of the figures, the report adds, the Government should aim for a target of 50,000 if it wants to reduce immigration to under 100,000 by 2015. Estimates of immigration, emigration and net migration are primarily based on a sample of 800,000 people interviewed at ports and airports each year, known as the International Passenger Survey. But only about 5,000 of those tend to be migrants and, in addition, the report comments, these "may be reticent to give full and frank answers, to say the least".

This means that the Office for National Statistics and the Home Office are producing "blunt instruments for measuring, managing, and understanding migration to and from the UK", which do not, the report says, measure the impact of migration on local areas, the social and economic impacts of migration or the effects of immigration policy.

Or as we might put it, we cannot "manage" immigration or the effects of it because we've got no clue at all about how much of it there is. We don't, in fact, know how many people there are in the country, let alone how many of them are native born (it's actually Polly Toynbee who has been saying for years that sewage processing requirements show that there's more people in the country than there are on the books). In such circumstances we simply cannot go about trying to manage things like housing: given that we've no clue of the number of people we can't decide how many houses and or flats there should be. We can only start to look at what the markets are telling us: prices are rising, in fact are at Ungodly levels, and so we need to have more houses and or flats.

How many more? I don't know, you don't know and the government can't possibly know. Just more until we stop having house price inflation.

I should end here with a clarion call to something or other. But I'm not sure that this rises to that level: perhaps a clarinet call. We really have run that experiment about planning and markets. Given that we've received the results, can we please start paying attention to them? We simply do not have, cannot have, the information we need to plan things. That's why we have to use markets.

Simples really, isn't it?

View comments

You like the Red Skelton painting?

Written by Philip Salter | Sunday 19 October 2008

Simon Jenkins is quite possibly the most engaging journalist around. His book Thatcher and Sons is certainly one of the best critiques of modern politics as it is practiced today. However, his recent article in The Guardian shows that, like self-proclaimed 'non-libertarian' David Cameron, he is not a libertarian.

In fact there are many similarities between the Tory leader and Jenkins in this article. We have of course the inevitable rant against people being paid too much, but we also have echoes of Cameron's argument last year that it is the job of politicians to make people happier. Jenkins writes:

We might even see a resurgence of the "happiness" movement of the early 1970s; of Schumacher's "small is beautiful" economic theory. We might find a new appreciation for the king of Bhutan's edict on the importance of "gross national happiness", and for John Ralston Saul's remark that the American mission of "life, liberty and the pursuit of happiness" was nothing to do with money. Saul called for a more subtle understanding of contentment, "to escape the 20th-century idea that you should smile because you're at Disneyland".

Of course, Disneyland is not for everyone, especially it seems members of the Canadian Intelligentsia such as John Ralston Saul. Much better a night at Toronto's Opera House, I presume. Yet such judgements are limited. Better that everyone is free to enjoy their lives without the judgement of others; especially the judgement of the King of Bhutan, living in exquisite luxury, while his underlings just survive.

Jenkins writes that Britain might even "inch up the University of Michigan's world happiness survey from its present miserable ranking of 21st, below Mexico and the US". I thought all this nonsense about happiness had gone away. Any attempt politicians make to turn this into policy will result in incursions upon our freedom as well as being destined to fail.

Freedom is what matters when it comes to happiness, because happiness comes in many shapes and sizes. To quote the great Dennis Miller: "You like the Red Skelton painting? Buy the Red Skelton painting. You like "Home Improvement"? Tape it and go over it like the Zapruder film. It's your life; live it on your terms".

View comments

You know the world's gone crazy when...

Written by David Homer | Tuesday 06 March 2012

Current political debate ahead of the UK budget puts me in mind of the set of jokes originally inspired by the US comedian Chris Rock. Chris Rock’s original quip went like this: 'You know the world is going crazy when the best rapper is a white guy, the best golfer is a black guy, the Swiss hold the America's Cup, France is accusing the U.S. of arrogance and Germany doesn't want to go to war.’

But now we have a world where the Liberal Democrats argue for tax cuts, the Labour party calls for wider tax cuts, and the Conservative Chancellor is at pains to damp down any speculation that he is about to make tax cuts.  This of course isn’t as funny and isn’t quite the political reality. Osborne has constraints on what he can achieve in next month's budget, both in terms of what the market will accept and what his coalition partners will allow.

But even if he doesn't have the scope for big tax cuts to help the economy, there are some useful pro-growth measures that the chancellor might include in his budget. The MP John Stevenson has suggested that stamp duty to be altered so that is borne by the sellers of properties. This is a reasonable idea: it could enliven the housing market by moving the cost from first time buyers onto those (the sellers) who are more likely to be able to afford it.

However, much better would be allowing small and medium sized businesses (SMEs) to opt out of onerous health and safety rules, a whole host of labour market regulations, and the minimum wage. This is where the chancellor could really help the UK economy, and it wouldn't cost the Exchequer a penny.

It is self-evident to anyone who deals with small businesses that HSE directives don't make workers any safer, that labour market regulations unnecessarily restrict employment, and that the minimum wage is higher than a free market would bear. Party political cross-dressing aside, the government's continued failure to deal with the onerous (and sometimes plain ridiculous) legislation imposed on SMEs is no joke. The forthcoming budget is a good opportunity to turn the tide.

View comments

Pages

About the Institute

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

Read more