Odds and ends, 6/9/11

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Here's a list of the best things I've read online over the last week or so. We're trying it out as some might find it interesting – it's a trial, so leave your suggestions in the comments.

The Most Important Economics Debate of the Interwar Period – Steven Horwitz

Austrian school economist Steve Horwitz says that the Hayek-Knight capital theory debate was the crucial economics debate of the 1920s and 1930s. Horwitz says that disagreements over the nature of capital and how decisions about its allocation are made that are at the root of both the socialist calculation debate and the Hayek-Keynes debate about economic stimulus and recessions.

Russia's Economy: Putin and the KGB State – Paul Gregory

Economist and Russian historian Paul Gregory argues that the street gangs of the Yeltsin era have been overtaken by the state KGB gang under Vladimir Putin. He says that weak property rights, a cronyist banking system and the insecurity of foreign investment in Russia will cause the Russian economy to stagnate.

North Korea: The Long Coma – Alex Tabarrok

Reviewing Barbara Demick's extraordinary study of ordinary people's lives in North Korea, Nothing to Envy, Alex Tabarrok reflects on the insulation that North Korea has had from the rest of the world, even compared with the Soviet-era Eastern Bloc. This was so tight that many North Koreans believed that their dystopian state was prospering relative to the rest of the world.

Labor is Not Fungible – Sheldon Richman/"Dhanson" 

Why didn't the Obama stimulus work? Because jobs are not the same, and labour is not homogeneous. An economic stimulus package disrupts the normal economy (by pulling some workers out of their gainful employment and by changing reskilling incentives for others) and boosting aggregate demand does nothing if the problem is a supply-side problem with finding the right people for jobs that really are in demand.

What is Wrong with Global Warming Anyway? – David Friedman

The key point here is uncertainty. Anybody who claims to know what any economy will look like in one hundred years is being foolish. We have little idea about the costs and benefits of a warmer temperature – or how rich, say, Bangladesh will be in a century, which is a very important factor when determining what (if any) action we should take to try to prevent global warming.

"the tax on freddos" – e-petitions

Thank goodness somebody is finally raising this important issue (Freddo bars). This is what e-petitions were made for.

Free schools good, profit motive better

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I went on the BBC News Channel yesterday afternoon defending free schools against the charge that they would lower standards and lead to social segregation.

First, it is worth re-capping what the ‘free schools agenda’ is all about. Essentially, it has two purposes. The main one is to increase the supply of good school places by letting independent providers set up new schools, and receive state funding on a per pupil basis. The idea is that this allows parents to exercise a meaningful choice over where their child is educated. That drives schools to compete for pupils, which increases accountability and drives up standards. The second purpose of the free schools agenda is to give schools greater freedom from bureaucratic interference: let them innovate, let them focus on teaching the child in front of them, and stop thinking the man in Whitehall always knows best.

School choice may be a radical idea, but it isn’t a new one, and it has worked where it’s been tried – most famously in Sweden, that well-known socialist nirvana. Moreover, it is hard to deny that the British education system is in need of serious reform: despite the fact that spending has practically doubled in real terms over the last decade, Britain has tumbled down the international league tables. Academic research has even suggested that 17 percent of British 16-19 year olds are illiterate, while 22 percent of them are functionally innumerate – a shocking indictment of a failing system.

Moreover, the claims made by the critics of free schools do not hold water. They suggest that free schools will promote inequality, but this has not been the experience in Sweden or the US. In fact, American evidence suggests the opposite: that privately operated schools can be better integrated, since attendance is not as closely linked to where one lives as it is in the state sector. Indeed, it is worth remembering that our current schools system is deeply unequal precisely on these grounds – in many cases it amounts to little more than segregation by house price. Live in a nice area, and chances are you’ll get to attend a fairly decent school; live on a sink estate, and you probably won’t be so lucky. Free schools offer an escape route.

At this stage, however, it is worth making a point about the profit motive – which Nick Clegg today ruled out of bounds vis-à-vis free schools. The trouble with not allowing for-profit companies to run free schools is that it dramatically narrows the pool of potential school operators. Fewer new schools will be set up, and those that are established are more likely to be concentrated in relatively affluent areas, where parents have the time and the ability to push for them. By contrast, if we were to allow profit-making free schools, we would get far more of them, and see more of them being set up in deprived areas – where both the demand and the need for them is greatest. Whatever Nick Clegg says, the profit motive in education could easily be a force for social mobility, not against it.

Finally, a point on standards: there simply isn’t any convincing evidence to suggest that free schools will provide a lower standard of education than state comprehensives, or that standards at those state comprehensives will suffer because of the existence of free schools. True, part of the rationale behind school choice is that irredeemably bad schools should go out of business. But that is surely as it should be: a system where good schools can grow and be replicated, and where bad schools are not kept interminably on life support, will lead to standards being driven up across the board.

Halogen bulbs and the road to serfdom

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bulbLast week, EU law came into effect that makes it illegal to sell traditional 60-watt tungsten light bulbs, reported by The Telegraph. The Today programme said this was to “encourage” people to use energy efficient bulbs. But banning things isn’t encouragement it’s enforcement.

The reasons given by Gunther Oettinger, the EU’s Energy Commissioner, may seem reasonable enough: the bulbs are inefficient; the average family will easily save 50 euros a year; the environmental benefit is the same as taking seven million cars off the road. Whilst halogen bulbs cost more they can last twice as long, and they use less electricity.

The real reason is that the EU is committed to cutting energy consumption emissions by 20% before 2020 (as if that will make any difference).

However, despite these advantages, people are stocking up on the old bulbs. Shops are allowed to sell them until they run out of stock. And people are reportedly buying as many as possible. Despite their benefits, these new bulbs cast a yellow glow on the room, release mercury fumes when broken, and they are too dim. It is also thought that they cause migranes, and that there may be dangers associated with the ultra violet light they emit, especially for Lupus sufferers.

Dictat cannot resolve an issue like this: planning is not the solution. Taking seven million cars off the road would undoubtedly have a large (maybe positive) environmental impact. It would also be an economic catastrophe. And saving 50 euros a year is only good if you can choose where to save it. Banning the sale of milk would save families money as well. As always, this sort of law cannot conceive of its consequences. As Donald Rumsfeld would say, there are “unknown unknowns”.

In The Road To Serfdom Hayek suggests that when there is a technological advancement (assuming halogen bulbs are an advance) “it is at least possible” that forcing everyone to use the same thing will be beneficial by lowering costs. But, he points out, limiting variety now, although it may have short-term benefits, will prevent material progress later. “The argument for freedom is precisely that we ought to leave room for unforeseeable free growth.”

The EU is here using the Climate Change orthodoxy to institute planning, to remove choice and limit liberty. It might be a small, almost inconsequential, example; but, as Hayek said, liberty is our most “precious inheritance…if we want to preserve it we must guard it more jealously than ever.”

In a country where political apathy, dislike of the EU, and preference for old fashioned light bulbs are all high, this might be something to use to gain real leverage in the long overdue debate on whether we ought to leave the EU. Mr Oettinger assumes the discussion is over, and has chosen for us. Now is the time to revive Burke’s description of America, and apply it here at home to the EU and “augur misgovernment at a distance; and snuff the approach of tyranny in every tainted breeze.”

Parental responsibility in schooling depends on choice

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It would appear that the reason why the UK¹s education sector will remain closed to private investment, innovation and entrepreneurship for the foreseeable future is because Nick Clegg and his Liberal colleagues personally dislike the idea of giving highly efficient and successful for-profit companies the opportunity to transform the way education is designed and delivered across the UK. That said, Nick Clegg is now also calling for more parental responsibility in education which sounds like a positive development. Mr Clegg can’t have his cake and eat it too.

If parents are responsible for their children’s education then they can only fulfil this responsibility if they are free to choose the nature and form of education which their children receive. As a result, if the freedom of parents to choose is restricted then this will also undermine parental responsibility. Parental responsibility and the freedom of parents to choose are therefore intimately linked and are best viewed as two sides of the same coin.

Governments therefore have a clear choice. They can either promote parental responsibility in education by guaranteeing that they have the greatest possible variety of educational opportunities to choose from or they can undermine parental responsibility in education by restricting the variety of different educational opportunities which parents are free to choose from.

Therefore, by refusing to allow a variety of different education providers to compete on a fair and level playing field, Nick Clegg is continuing to undermine parental responsibility in education. Any rhetoric about wanting to increase parental responsibility in education should therefore be challenged as being in direct conflict with his position on refusing to allow for-profit companies to compete in education.

Think piece: "War or Class or some combination of the two"

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loot

The London riots seemed to confirm everybody's worldview, however different those views were. Was there some overarching lesson about class or the state, asks PJ Byrne, or were the riots simply a sad reminder that we are all animals, capable of good and bad choices?

Last month, Tom wrote that he was "glad to be out of London while the rioting and looting was going on", for while "it may have been chilly and damp in the Lake District... it was also peaceful and quiet." Nonetheless, he added, "watching the footage on the news, I couldn’t help thinking that most of those responsible were ‘looters’ long before they started smashing up JD Sports and setting shops on fire." Tom then provided an example of what he meant by quoting an extract from Ayn Rand's epic novel Atlas Shrugged, staple fare for any libertarian firebrand, where key protagonist Francisco D'Anconia said:

"when a society establishes criminals-by-right and looters-by-law—men who use force to seize the wealth of disarmed victims—then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality."

Tom's implication was, at least to me, abundantly clear: the looters were merely acting as they had been taught by the welfare state, by assuming that they were entitled, by right, to the property of others in a topsy-turvy world where the role of government, "instead of being a protector of man's rights... is becoming their most dangerous violator; instead of guarding freedom... is establishing slavery; instead of protecting men from the initiators of physical force... is initiating physical force and coercion in any manner and issue it pleases". (Rand, 1964) [Continue reading...]

What a tangled web we weave

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A recurring story in UK journalism is the exposure of mendacity on the part of some prominent left-wing journalist. Hailed as a darling of the left, and with a devoted following of those whose prejudices they confirm, periodically one of them is exposed for lack of journalistic integrity. Sometimes they misattribute quotation or quote selectively to mislead, sometimes they pass off completely fabricated stories as true reporting. Commonly they use statistics dishonestly to lend their opinions more support than the real facts offer.

Patient work and fact-checking by critics, usually from the blogosphere, can expose a pattern of deceit that ultimately shames and discredits the journalist concerned, leaving the left bereft once more of one of their rising stars. The self-justifications and half-hearted excuses are to no avail. "My work expressed the spirit of the truth." "Perhaps I did cut corners, but it was to expose wrong-doing."

The regularity of these events poses the question as to why it happens. What is it about promising left-wing journalists that leads some of them to blur the truth? The answer could be a simple one. It is that the real world does not fit their ideological view of it. They want a world in which people feel collective solidarity and are content to pay high taxes to have 'society' (by which they mean the state) provide services that enlightened people think appropriate. And they want equality.

In the real world people want to improve their lot and that of their families. They prefer to allocate their resources on the things they think important, and have scant respect for the collectivist views of 'enlightened' thinkers. They are more concerned with opportunity than with equality, and don't mind some people being richer if they have the chance to better their own lot.

In a nutshell the real world itself is centre-right. When left-wing journalists find it fails to conform to their ideology and their preferences, some of them are tempted to lie about it. They gloss over key facts and evidence that would falsify their preferred interpretation, and interpolate fabricated material to make it fit their Procrustean bed. They lie, in other words, because the truth itself would refute them.

Planning has given us the ugly environments it was intended to prevent

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I heartily recommend this intelligent piece on rural planning and development by Charles Moore in the Daily Telegraph. His paper have been running a campaign against the British government's proposals to ease the planning system, on which countless South East of England NIMBYs ('Not in my back yard') and BANANAs ('Build absolutely nothing anywhere near anybody') have vented their spleen in its letters columns, complaining that the whole of the Cotswolds are going to be covered by factories and wind turbines.

Moore points out that the government aims merely to devolve, imply and liberalise the planning system – which, he believes, is essential for the rural life that the 'Disgusted, Tunbridge Wells' campaigners want to preserve. After all, the charming rural farmsteads and mills, like that at Flatford painted by John Constable, were, paradoxically, the industrial development of the time that gave us our rural environment. The mineral wells around Tunbridge are what caused the prosperous and pretty town to – I can't think of a better word – spring up. The people who built these commercial enterprises had to live in them or near them, and generally speaking they built wisely, practically and beautifully. That is the origin of the countryside that people love.

Now, of course, we have instead the socialist principle of planning. As Moore points out, modern planners would probably reject the idyllic Flatford Mill as an unwarranted industrial intrusion into the landscape. People complain about ugly, squashed-in housing developments around towns and villages, but these are brought about because of the planning system. Large companies buy up vast acreages because they know the planning system is slow, bureaucratic and fickle, which means that land prices are driven up, and the price of land that is approved for development rises even more spectacularly. Planning has in fact given us the ugly environments that it was intended to prevent. We need instead for our development to grow organically, as they did in the past when they created the rural environment that campaigners want to preserve.

Jobs are costs, not benefits

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As I've been saying here and elsewhere for a number of years now. Jobs are costs of a plan, not a benefit of one. No, not claiming credit for this simple point being made by another, just noting that it is being made in this excellent report on green jobs.

The first level is that of projects or programmes. Here he makes the fundamental point that in appraising these, prospective labour inputs are to be viewed as a cost not a benefit: labour costs should be counted as such, along with other inputs (such as energy). Hughes notes that if the objective of policy is to reduce CO2 emissions, the right course of action is to minimise the costs of any such reduction; and these include the costs of labour.

The report is worth reading in full for it also goes on to examine the role of "green jobs" in the macroeconomic sense.

Please do note that the thrust is not that "there's no climate change so we don't have to do anything so Yah Boo Sucks! Greenies!". Instead it's the much more subtle points that, as above, jobs are a cost not a benefit. We should not applaud a specific anti-climate change policy because it "creates more jobs", this is entirely the wrong way around. We want to, just as in any other economic adventure, perform the task, that minimization of climate change, at the least cost in resources, whether those resources be labour,capital, energy or anything else.

On the macro side, here we are in Bastiat territory. Sure, we can see those jobs being created building windmills. However, how many other jobs in the economy are being destroyed by higher energy costs? Those higher energy costs we have to suffer to employ the people to build the windmills? The Spanish experience has been 2.2 jobs lost for every one created: that's on a generous interpretation of the results.

I know that I'm a little out of step with many on this climate change thing. I annoy one group by being quite willing to believe that it's happening and perhaps we should do something about it. I annoy those who agree with me there by continually pointing out that most plans floated to "do something" are appallingly awful and would ashame three year old children if they were to propose them.

Which is, if I am to be honest, why I like this report so much. The argument is that if we are going to do something can we at least make sure we don't do this long list of very stupid things that people are currently proposing? Please?

Sounds like a plan to me.

Will they ban salt?

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saltShould the government micromanage the contents of food? This is the key question when alarmist statements, such as this morning’s ‘Excessive Salt in Bread’ are splashed all over the news.

There are two ways of approaching this issue. Either you leave individuals free to decide for themselves what they buy or don’t buy; or you let the government decide what’s on the shelves. The first you can achieve by information and labelling; the second by state diktat. For cigarettes and alcohol there has been a clear move towards the second option of state coercion.

Let’s take salt. I’m not going to dispute the science on this. Salt is probably not very healthy. Though our defences should start to go up when we hear statements being qualified with the lawyery ‘may’ (damage your health). Or when The Telegraph headline shouts that ‘Some loaves are as salty as seawater’, when in fact, not a single one of the 294 investigated breads was. Less than 1 % of the loaves contained more than half the salt of seawater.

The Consensus Action on Salt and Health was set up by well-connected experts to expound the view that salt is bad, and to encourage us to do something about it. Nothing wrong with people who have a bee in their bonnet about an issue to try to convince the public – we believe in free speech. But the situation changes when their views are imposed upon all of us by law. On their website, they list as their main achievements that they convinced the Department of Health to commit to salt reduction; and they encouraged the Food Standards’ Agency to pick up salt as one of their key campaigns. In other words: the taxpayers are now funding the CASH views on salt.

Today it’s salt; tomorrow it may be sugar, maltesers, coffee, or meat – all of which may be very harmful if taken in excess. A small group may become obsessed about a specific food product, start campaigning, and succeed in turning its views…into laws! Will we soon have to buy a pot of salt from behind the counter, by the gramme? Will we see black labels with two inch letters shouting ‘SALT KILLS’ ?

Choosing for state coercion instead of trusting the free choice of individuals reflects a particular view of humanity: that we, individuals, are not intelligent enough to make our own decisions; and that we need to be protected against ourselves. In this world, the scientists and the politicians become the shepherds, and we the sheep (that is: the lesser beings or animals). Here at the ASI we still believe that people are humans: that is, individuals who know what is in our own interest and who can make their own decisions.

By all means, allow the CASH to convince us that salt is bad and that we should be careful. If they succeed, the manufacturers will have an interest in labelling clearly what’s in the food. Food with less salt will sell better.

Irreplaceable Jobs

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Jobs

Virtually no Chief Executive has been as vital to the success of his company – and to its share price – as Apple’s CEO, Steve Jobs. Due to recurring serious illness, he has recently resigned as Chief Executive; his effective departure is a massive loss to Apple which he founded in the 1970s. 

Following his return in 1996, Apple has thrived, due in part to the staggering success of iPhones, iPads and iPods, notwithstanding selling over 60 million computers since 1997. tOnly recently, Apple became the most valuable company globally, a status that oil giant, Exxon, has now regained. Significantly, too, Apple’s market value lies far ahead of Microsoft, whose Bill Gates is the only realistic competitor to Jobs as the sector’s leading light.

Increasingly, Jobs is being regarded as one of the great entrepreneurs in history. His business philosophy is based on the intricate design of electronic appliances that millions of consumers covet. Who would have thought, perhaps a decade ago, that iPhones would become a global phenomenon, especially amongst young people? Indeed, history may rate Jobs alongside such legendary names as the peerless Thomas Edison, arguably the world’s first professional inventor; Henry Ford, the father of mass production; and leisure’s Walt Disney. 

Apple has thrived on the back of entrepreneurship, brilliant design and identifying consumer trends with a ruthless zeal. Its success has not been driven by endless subsidies that so many western nations offer across various industries: the UK chemicals sector is a particularly egregious example. Apple has thrived in a generally open market. As such, along with Microsoft, Apple has created a vast number of jobs in recent years, both in the US and throughout Europe.

As the media eulogises Steve Jobs on his retirement from day-to-day management, remember that the open market commercial environment, in which Apple has prospered, is key to its success.