The Pin Factory Blog

Over at his personal website, Madsen discusses why people like the BBC, and says that it has radically departed from the impartiality that once made many people value it:

In fact traditional support for the BBC is more likely to have arisen from its role as an unbiased reporter of events, rather than as a campaigning organization doing investigative work.  People valued the BBC’s level take on national and world events, and trusted it to be accurate.

That reputation was undermined not by the incompetence of its investigative teams, but by the way it allowed what some call the left-wing mindset of its culture to bias its reporting.  Its enthusiastic endorsement of all things pro-EU, its hostility to business and enterprise, its refusal to use the word ‘terrorist’ to describe those who murder civilians in causes it approves of, and its selection of news to highlight on the basis of a pro-state intervention agenda, have systematically alienated those who used to trust it and support it as the embodiment of all things British.

Read the whole thing.

The world’s first fat tax will soon also be the first to be abolished. Denmark has taxed saturated fats since October 2011, and the experiment has been a failure. Danes are worried that the tax has increased food bills (which was the point of the tax) and that it could be threatening the food industry. One poll found that 70% of Danes felt the tax was ‘bad’ or ‘very bad’ and 80% said it had not changed what they ate.

At the same time, fat prohibitionists tell us that what Denmark really needed was a much higher tax to have the desired effect. Multiple studies find that a tax as high as 10% (much higher than the Danish tax) would reduce population bodyweight by less than 1%. Most of us tend not to change what we eat based on a change in price — foods like butter and bacon are relatively price inelastic. To get people to change their behaviour you have to set punitively high rates.

It is a good idea to question why the health-obsessives are going after saturated fats to begin with. Many believe that a good diet includes saturated fats, as they have been linked to increased testosterone, boost the effects of omega-3 fatty acids, and improved immune system function.

Simple economics tell us that when you tax something, like saturated fats, enough to cause a change in behaviour then their consumption will fall in favour of a substitute. In most cases, that substitute will be carbohydrates. The nutritional science is far from settled on whether carbohydrates are worse for us than other macronutrients (protein and fat). Politicians are unlikely to know better. The tax on fat could be making the 20% of Danes that changed their diets less healthy. That the impact of the tax is largely unknown is a good enough reason not to mess with the food on our plates.

Of course, there is a more fundamental liberal point. Why should we be coerced to be healthy? If someone decides that they prefer Danish bacon once a week to the last (probably quite uncomfortable) five years of their life, that certainly isn’t a ‘wrong’ choice. It is hard to coerce ‘healthy’ behaviour, and government should not try to. Sadly, politicians know that they can appear to attack the scapegoat of the unhealthy citizen, while taking more money from our pockets.

My colleague, Dr Eamonn Butler, was quite right to castigate Alex Salmond, Scottish First Minister, for his disparaging remarks about Adam Smith and the Institute that proudly bears his name.  Every few years some left-winger, usually a politician, tries the claim that Smith was really a sort of proto-socialist.  It is never convincing because he was nothing like that.

At the ASI we always stress Smith's "Theory of Moral Sentiments" as a companion and precursor to his "Wealth of Nations."  The left seem to think we treat Smith as someone who promoted selfishness, whereas the opposite is the truth.  He said that our most salient characteristic is our ability to empathize  (he said feel sympathy) with others.

The act of wealth creation, which requires trade, puts our co-operation with our fellow men and women right at the start of market economics.  They trade so that each gains greater value than they had.  Without that co-operation there would be no exchange and no wealth-creation.

Eamonn's very apt put-down of Alex Salmond was this:

“I shall be pleased to send him copies of Adam Smith – A Primer, my dummie’s guide to all of Adam Smith’s work. It includes not just the Theory of Moral Sentiments but his lectures on jurisprudence and on literature, which Alex may not be familiar with.”

I've said this before and no doubt I'll say it again. But inequality in the UK just isn't quite what people generally say it is. We're in an unusual situation: we've in London one of the great commercial cities on the planet. The rest of the UK is pretty standard high income European stylee. A goodly part of the recorded inequality in the UK is between these two economies. We can see this in this report on the latest ONS figures:

The least inequality was in Wales, where the highest earners had wages seven times higher than the lowest. The top 10 per cent of earners in Britain earned at least £26.75 an hour last year. Of these, 36 per cent worked in London, indicating that more than a third of the highest-paid jobs were in the capital.

London is, of course, significantly less than 36% of the total population (more  like 12% or so). Which does indeed lead us to two important points about nationwide inequality.

The first is that we all know that London is vastly more expensive to live in than other areas of the country. So measuring inequality by inequality of incomes is going to hugely overstate the consumption inequality we have. Consumption inequality being the only one we should even theoretically worry about given that it's what people get to do with their lives which could conceivably important, not the numbers on their paycheque.

The second is that a good piece of even the income inequality being recorded across the nationwide figures isn't, in fact, a nationwide difference between the oppressing capitalists and the ground down workers. It's that we have, in one city, a part of the great global high end economy. In a manner that no other European country really does. Given that there is indeed a difference in wages between that high end global economy and the usual standard European economy we therefore have higher recorded inequality.

And if I'm honest I really can't see a problem with this. That we've got one part of our economy that really is world class, world beating, seems rather cheering actually, not a cause for woe and despondency.

I can't say that I've ever really understood this idea that we must all eat only the things that have been grown in our own region. "Region" of course is a variable thing. It seems to depend on how deep the green of the fool recommending it is. Something from "the nation" to "your back yard" is the spectrum. But as I say, I've never really understood the point.

For we know what happens when food supplies are indeed restricted to just the region one is actually in. We've been there before, back before we had decent roads. And what used to happen is that when the local crops failed then everyone died of starvation: even if 30 miles away there was a bumper crop. Quite why anyone wants to recreate the bad parts of the Middle Ages I'm really not quite sure.

As a modern example, think what would be happening in the near future given the near failure* of the American corn crop this year. We would currently be awaiting the news that Mid-Westerners were keeling over from the shortage of corn dogs no doubt. Then have a look at this other piece of news from this past week:

Chinese farmers are reaping a third record corn harvest even after a typhoon wiped out some of the crop, easing demand for imports at a time when the U.S. drought is driving sales from the biggest exporter to a four-decade low. The harvest rose 3.6 percent to 199.74 million metric tons, according to a survey of farmers in China’s seven biggest producing provinces by Geneva-based SGS SA (SGSN) for Bloomberg. The country’s stockpiles last month were at a nine-year high, and the U.S. Department of Agriculture expects a 64 percent drop in imports. The agency will raise its estimate for U.S. reserves by 2.4 percent when it reports Nov. 9, the average of 29 analyst estimates compiled by Bloomberg shows.

As you can see, no one is predicting that China is going to start exporting corn to the US. My point is, rather, that bad weather doesn't affect every part of the world at the same time. Thus harvests that are bad in one place can be offset by good ones in others.

Or if we are to put it in the terms usually reserved for this argument, the term "food security". We can only have a secure food supply if we grow all our own food. Which is nonsense of course, for our food growing is at the mercy of our weather. True food security comes from having a multitude of suppliers in many different parts of the word so that we can play that game of averages with that weather.

You know, this trade idea. The one that our greens seems to be so strongly against?

*Yes, I know, it wasn't anything like a failure but you wouldn't know that from the news stories.

There is a damaging focus on taxation instead of growth.  Media and politicians, egged on by ideological enemies of business and markets, are talking about ways of making corporations and 'rich' individuals pay more in taxation.  Tax avoidance and use of the legitimate means people use to reduce their tax liability are being denounced as wicked, and ways are being sought to curb this activity.

The emphasis is totally wrong.  Those who think the economy would be in better shape if more of its resources went to government are simply wrong.  Government does not use those resources as wisely as private citizens do.  It neither spends nor invests as effectively.  It is prone to vast wastage and to the direction of expenditure to serve the ends of politicians rather than those of private citizens.

The agenda is misguided.  Instead of concentrating on ways that would give government more of our resources, it should be focused on ways to allow us to generate more resources.  Investment and job-creation should be made more attractive by a policy of lower taxation and lighter regulation.  If it is easier and more rewarding to engage in economic activity, people will do more of it.  The aim should be to have fewer resources directed to government, and more of them to growth.

The weather might not be predictable, but one thing is almost certain; when natural disasters strike, you can be sure that someone will claim this is a good thing. Sure enough, journalists have made the case here, here and here. It is claimed that Sandy will provide a stimulus for the US construction sector as damage estimates approach $50 billion. It is argued that in turn this growth in the construction sector will move through into other areas of the economy, this new activity driving growth.

Those who make this case could do worse than to read Frédéric Bastiat’s “What Is Seen and What Is Not Seen”. Rather than simply generating new economic activity, destruction is not costless. The cost of rebuilding devastated areas will be a cost at the cost of other alternatives. People who might have spent money on improving their homes may now have to rebuild them entirely. They have not gained wealth; they have lost the improvements to their homes that they would have otherwise enjoyed.

If it were true that destroying homes was good for growth, we should be smashing buildings as they spring up. By this logic we would be richer as a result. These arguments are seen not just in the case of natural disasters, but also when war occurs. World War II famously saw huge production numbers as nations clawed for scarce resources to build bullets and tanks. This was not production that improved the quality of people’s lives. Railings from parks and schoolyards were melted down to build bombs.

Similarly, while many breakthroughs were made in the form of new inventions during wartime, this came at the cost of other alternatives. It is impossible to compare with what might have been, but that does not mean that it is not important. Had World War II not happened then we would have been free to pursue research and development directed at improving the quality of lives, not at winning wars.

This story betrays an alarming obsession with GDP. GDP does not usefully describe the health of an economy. What is important is that people have more of the things that they want and natural disasters destroy this prosperity. Bastiat’s classic essay dispelled this myth in 1848, yet it is clearly still rampant.

There is a good news story here, but it's not one of false stimulus. It is one of the continual process of development and production. The damage in the US has been much lower than in less developed countries also struck by Sandy. Development has helped to save lives. As we lift more people out of poverty, we can expect natural disasters to be less lethal.

The year 1776 was a revolutionary milestone for individual liberty, with the publication of Adam Smith’s The Wealth of Nations setting forth the path of economic freedom and a Declaration proclaimed by thirteen American colonies ringing the tocsin for political independence.

But a solemn spectre of ’76 hung over the United States this November as Americans voted for representatives and senators in Congress and a Chief Magistrate to occupy the White House — for the promise of economic and political liberty has turned dark.

The spirit of ’76 was animated by the desire for personal freedom, both in our relations with others and in our transactions with them.  Adam Smith wrote against the mercantilist system which thwarted innovation and entrepreneurship, while the Declaration of Independence affirmed that ‘all men are created equal’ and ‘endowed ... with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness’; that we establish governments to protect these rights, said governments ‘deriving their just powers from the consent of the governed’.

Continue reading.

No, Mitt Romney wouldn't have been any better. But the video above shows the reality of the situation Barack Obama now has four years to resolve. It should be a welcome respite from the politics-focused treatment of the election today. What the Eurozone is now so painfully learning may soon be taught to the United States. In the end, politics can't trump economics.

Tonight, we’ll find out whether Americans have voted to give Barack Obama four more years in the White House or to give Mitt Romney a go. All signs point to Obama, though apparently a surprise Romney win isn’t impossible. If I’m completely honest, I doubt if it would make a difference either way.

The real shame is that by far the best candidate in the race hasn’t had a shot since the word go. Indeed, Gary Johnson, a two-time former governor of New Mexico, is probably the best candidate to run for President in many decades. (I like Ron Paul too, but running for the party nomination doesn’t count – he only ran for president in 1988.)

What’s remarkable is the contrast between the mainstream candidates and Johnson – where they have tussled over ludicrous non-issues like funding for PBS (0.01% of the Federal budget) and state funding of birth control (which costs about $10 a month), Johnson has made issues like immigration, the war on drugs, and spending cuts (the trillions of dollars of cuts needed to balance the budget, not the billions that the two mainstream candidates play with) major planks of his candidacy.

Partially because of this, he probably won’t do very well. His campaign is hoping for 5% of the national vote but, to my untrained eye, that seems far-fetched. But I think libertarians in Britain and the US still have a lot to learn from Johnson, particularly the attention he’s (rightly) given to immigration and drugs policy.

In the US and the UK, immigration would be a profoundly positive injection of new talent and productive workers to ailing economies, and would in all likelihood create more jobs for native workers too.

Libertarian objections to the drug war are often misunderstood by non-libertarians. In the US, the problem is that drug prohibition destroys the lives of millions of people who have harmed nobody else, and has had such a disproportionate effect on black people that it seems certain to be one of the biggest causes of poverty and social breakdown in black communities. It’s not just because libertarians want to get high: these laws are destroying innocent people's lives.

And Johnson has resisted the temptation to focus on small-fry economic reforms, advocating a full-blown reimagining of the state and its relationship with the people. One Bloomberg blogger's condemnation of Johnson's economics (cutting state spending and banning bank bailouts) is, inadvertantly, a wonderful endorsement of the man. With enemies like this, who needs friends?

Johnson, it seems to me, has a joined-up view of what the state does to us. He sees ‘social’ issues like immigration and the drug war as being central to the harm that the state inflicts on society and the economy, and is not willing to ignore them in order to focus solely on ‘economic issues’ like marginal tax rates, and so on.

He’s also an optimistic, sunny guy. (Maybe you have to be to run on the Libertarian Party ticket.) And his time as Governor of New Mexico proves that a libertarian can govern in a way that doesn't send the electorate running for the hills. (Update: In the comments, Tommy gives a nice example of this: "He vetoed 200 of 424 bills in his first six months in office – a national record of 47% of all legislation – and used the line-item veto on most remaining bills. In office, Johnson fulfilled his campaign promise to reduce the 10% annual growth of the state budget. In his first budget, Johnson proposed a wide range of tax cuts, including a repeal of the prescription drug tax, a $47 million income tax cut, and a 6 cents per gallon gasoline tax cut.")

He won’t win tonight, and his campaign hasn’t had the media breakthrough that he hoped. But libertarians and classical liberals have taken note. If he inspires a new approach by them, then maybe Gary Johnson, the libertarian who talks about surprising things in a surprising way, will have a much bigger legacy than anyone ever expected.