Why big business just loves environmental regulations

Sometimes at least they do. This is part of a very interesting interview with Bruce Yandle, the guy who gave us the whole concept of Bootleggers and Baptists.

I was working on the White House staff reviewing newly proposed regulations during the end of the Ford administration and the first part of the Carter administration, in a unit of the Council on Wage and Price Stability. My beat was the EPA. I reviewed the copper smelter standards. I would get their big regulatory bundles and review them, and we would make comments in an attempt to try to reduce the cost of accomplishing the goal. EPA had an excellent economic analysis. The last section said when this regulation becomes final, there will never be another copper smelter built in the United States of America. How would you feel if you had a copper smelter?

You’d just been told you will never have any new competition.

This is a stage further than the more usual complaint, that large companies can afford the people to deal with new regulations that small ones cannot. This is about the way in which regulations can completely abolish any possibility of new upstart competition.

It's worth reading the whole thing: the way that the US regulated sulphur emissions from coal is a wonderful example of political lobbying. Western coal is low in sulphur, Eastern coal high. So, to reduce sulphur emissions all that was actually needed was a standard for emissions. Those who wanted to burn the cheaper Eastern coal would have to install a scrubber: those who would pay for the more expensive Western would not.

However, the Eastern miners (and owners) were more politically organised and managed to get the legislation changed to insisting that everyone had to have a scrubber. An entirely non-optimal solution to an admitted problem brought about by the exercise of political power and lobbying. Bismark was right on that law and sausage making thing.

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Who pays the piper?

Late last month, without much fanfare, scientific titan CERN released new evidence that could dramatically alter the balance of the global warming debate. Potentially vindicating the Danish physicist Henrik Svensmark, new CERN research from their CLOUD project demonstrates that cosmic rays provide a seed for clouds. As a result tiny changes in the earth's cloud cover could account for the earth's variations in temperature. Such a revelation throws into question whether anthropogenic global warming is actually happening, or whether cosmic rays and the sun are the dominant controllers of the earth's climate.

Such an important discovery should surely be big news. However CERN's Director General has attempted to play down the study and it's potential conclusions in order to avoid "the highly political arena of the climate change debate." So, instead of what should be a debate concerning the causes of global warming we are struck by an entirely different debate, the autonomy of scientists who receive government funding. CERN receives millions of euros in funding from it's member states, the top three being Germany, France and UK, a list which is ever growing as more countries clamour to join the well-respected establishment. However such government funding undermines the very credibility that makes CERN the scientific goliath it claims to be. Nigel Calder makes a similar point, arguing that:

"CERN has joined a long line of lesser institutions obliged to remain politically correct about the man-made global warming hypothesis. It’s OK to enter “the highly political arena of the climate change debate” provided your results endorse man-made warming, but not if they support Svensmark’s heresy that the Sun alters the climate by influencing the cosmic ray influx and cloud formation. The once illustrious CERN laboratory ceases to be a truly scientific institute when its Director General forbids its physicists and visiting experimenters to draw the obvious scientific conclusions from their results."

The scientists behind the CLOUD experiment have been in a battle for over a decade to continue and publish the results of the project due to their state-funded position. Jasper Kirby, a CERN scientist, postulated back in 1998 that the cosmic ray theory would "probably be able to account for somewhere between a half and the whole of the increase in the Earth’s temperature that we have seen in the last century." This admittance of a hypothetical alternative to anthropogenic theories was apparently a step too far for global warming activists who pressured the Western governments that control CERN's funding to suspend the project. It is only after a decade of negotiation that the project was allowed to continue, and even now it's results are being stifled by a need to placate political influences. As a result last week's CLOUD paper perhaps reveals more about the distortion of science by government intervention than it highlights any real scientific breakthrough.

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Picks of the week

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1. The Gnome Thought Experiment – Only Austrian capital theory can explain economic slowdown caused by mischievious gnomes. 

2. Friends Don't Let Friends Become Chinese Billionaires – Why do Chinese billionaires have such a high mortality rate?

3. "Not every human problem deserves a law"California's Governor Jerry Brown uses his veto pen. Reason.com has more.

4. Video: 4 Million Microloans Visualized in 4 Minutes – The power of charitable capitalism through Kiva.org microloans.

5. Government to Investigate 'West Lothian Question'– The first step towards an English Parliament, or even greater decentralization of power?

6. Save The Pound – Denationalize It – Currency competition is the key to sound money.

7. A World Without Borders Makes Economic Sense – Ending immigration controls might be the best single policy decision anybody could make.

8. No Way Out – Why Policy Advice is Futile, And What You Should Do Instead – Basically, we're doomed, but here's an interesting explanation of why.

Picks of the week

1. The Gnome Thought Experiment – Only Austrian capital theory can explain economic slowdown caused by mischievious gnomes. 

2. Friends Don't Let Friends Become Chinese Billionaires – Why do Chinese billionaires have such a high mortality rate?

3. "Not every human problem deserves a law"California's Governor Jerry Brown uses his veto pen. Reason.com has more.

4. Video: 4 Million Microloans Visualized in 4 Minutes – The power of charitable capitalism through Kiva.org microloans.

5. Government to Investigate 'West Lothian Question'– The first step towards an English Parliament, or even greater decentralization of power?

6. Save The Pound – Denationalize It – Currency competition is the key to sound money.

7. A World Without Borders Makes Economic Sense – Ending immigration controls might be the best single policy decision anybody could make.

8. No Way Out – Why Policy Advice is Futile, And What You Should Do Instead – Basically, we're doomed, but here's an interesting explanation of why.

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Tax avoiders deserve a medal

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Am I the only person to be outraged that HM Revenue & Customs have an 'Anti-Avoidance Group'? Or that the Group says it aims to 'make tax law robust against avoidance'? Or that it will 'quickly and expertly prevent and close down avoidance by effective legislation'? And be 'proactive in challenging avoidance'?

Let me explain: tax avoidance is perfectly legal. It means using the tax regime to your own advantage – organising your affairs so that, under the rules, you reduce the amount of tax you have to pay. What is illegal is tax evasion – deliberately misrepresenting your affairs, concealing your taxable income, smuggling, taking payment in cash and not paying VAT on it and so on. So Revenue & Customs make no bones about it: they will challenge, prevent, and make laws against and close down things that are perfectly legal. You might think that only Parliament can 'make laws', but if so, you are out of date. Officials now have so much discretionary power that they are effectively making our tax laws, not the elected politicians.

I would have no – well, less – problem if Revenue & Customs had an 'Anti-Avoidance Advisory Group' whose function was to spot the tax loopholes that people were exploiting and give advice to politicians about how those loopholes could be closed and how the tax law could be made more sensible. But not a bit of it. The present Group's purpose is to prevent people from benefiting, quite legally, by spotting where the law is an ass. Rather than harass such people, we should give them a medal for public service, in pointing out just how stupid our tax laws are.

What generates these loopholes is the absurd complexity of the tax law. Tolley's Guide, the accountants' summary of tax laws, has reached another record this year, at 14,500 pages. Nobody in their right mind, even with a trained accountant's experience, can know what is legal and what is not. For every person or company who actively exploits the loopholes, there are another nine who don't understand it and are simply petrified of getting it wrong and being prosecuted. HMRC should be doing something to help those nine, not harass the one – because in simplifying the law, making tax intelligible, and simplifying things such that it is obvious what everyone should pay and there are no loopholes to exploit, they would actually be getting to grips with the one as well.

But no, it's a constant, downward spiral. Tax rates are too high, so lobbyists demand exemptions and breaks here and there. With those folk now paying less tax, the rate has to rise for everyone else. So the lobbying spreads further, and the rules and exemptions become even more complicated. Then HMRC sees that it is losing money because people are taking advantage of the rules, and dream up all kinds of extra complications to stop it. Which increases the costs of taxpayers, who lobby for more reliefs and exemptions…which – well, you get the idea. It is a downward spiral of complexity.

It's time to make tax simple and certain. And to ensure that our tax officials are public servants, not public inquisitors.

Tax avoiders deserve a medal

Am I the only person to be outraged that HM Revenue & Customs have an 'Anti-Avoidance Group'? Or that the Group says it aims to 'make tax law robust against avoidance'? Or that it will 'quickly and expertly prevent and close down avoidance by effective legislation'? And be 'proactive in challenging avoidance'?

Let me explain: tax avoidance is perfectly legal. It means using the tax regime to your own advantage – organising your affairs so that, under the rules, you reduce the amount of tax you have to pay. What is illegal is tax evasion – deliberately misrepresenting your affairs, concealing your taxable income, smuggling, taking payment in cash and not paying VAT on it and so on. So Revenue & Customs make no bones about it: they will challenge, prevent, and make laws against and close down things that are perfectly legal. You might think that only Parliament can 'make laws', but if so, you are out of date. Officials now have so much discretionary power that they are effectively making our tax laws, not the elected politicians.

I would have no – well, less – problem if Revenue & Customs had an 'Anti-Avoidance Advisory Group' whose function was to spot the tax loopholes that people were exploiting and give advice to politicians about how those loopholes could be closed and how the tax law could be made more sensible. But not a bit of it. The present Group's purpose is to prevent people from benefiting, quite legally, by spotting where the law is an ass. Rather than harass such people, we should give them a medal for public service, in pointing out just how stupid our tax laws are.

What generates these loopholes is the absurd complexity of the tax law. Tolley's Guide, the accountants' summary of tax laws, has reached another record this year, at 14,500 pages. Nobody in their right mind, even with a trained accountant's experience, can know what is legal and what is not. For every person or company who actively exploits the loopholes, there are another nine who don't understand it and are simply petrified of getting it wrong and being prosecuted. HMRC should be doing something to help those nine, not harass the one – because in simplifying the law, making tax intelligible, and simplifying things such that it is obvious what everyone should pay and there are no loopholes to exploit, they would actually be getting to grips with the one as well.

But no, it's a constant, downward spiral. Tax rates are too high, so lobbyists demand exemptions and breaks here and there. With those folk now paying less tax, the rate has to rise for everyone else. So the lobbying spreads further, and the rules and exemptions become even more complicated. Then HMRC sees that it is losing money because people are taking advantage of the rules, and dream up all kinds of extra complications to stop it. Which increases the costs of taxpayers, who lobby for more reliefs and exemptions…which – well, you get the idea. It is a downward spiral of complexity.

It's time to make tax simple and certain. And to ensure that our tax officials are public servants, not public inquisitors.

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The NHS is failing us

Most in Britain dislike American healthcare. And rightly so, since the US insurance system is a cartel protected by government legislation. However, that shouldn’t make us want to defend Britain’s Soviet-style healthcare either. Both systems are bad.

You can check out the OECD statistics here. Britain's relatively poor cancer survival rates are of particular concern. The UK ranks 12th (and well below the OECD average) for bowel and breast cancer survival, despite a tripling the NHS budget for these services over 12 years. The ASI produced a good report on this earlier this year.

The problem isn’t finance (per-capita NHS spending is considerably above the OECD average), but the politically charged nature of the NHS, and therefore the inability to remove planners and reform provision. Figures for 2007-2011 show that the NHS spent more on “media professionals” (i.e. spin-doctors) than on cancer specialists. Yet pointing this out – as Daniel Hannan did – puts you beyond the pale of dialogue. The NHS’ failures on cancer included a shortage of oncologists, a lack of MRI scanners and an inability to provide cancer drugs. The basic functions of business (recruitment, procurement and provision) are poorly performed by the state.

This also explains the postcode lottery, where some hospitals (apparently) can provide Kremlin clinic standards, whilst many other hospitals resemble MRSA infested cesspits of pebble-dashed, post-war brutalist architecture. The NHS’s futuristic IT project is a categorical failure, having wasted more than £2.7 billion of taxpayers’ money. Moreover, the NHS’s rebuilding projects (using PFI money) may become obsolete through overcapacity, as recently revealed.

From 1999 to 2004, the government doubled GPs' pay . The Sunday Times reported that after a three-year contract (2004 - 2007) increasing pay by 25%, GPs worked 15% less and 33% worked part-time.

These oft’ repeated arguments don’t include the massive oversupplies of Tamiflu (based on public hysteria rather than medical evidence), or the inability to clean hospitals (as shown by MRSA outbreaks), or declining standards in nursing and elderly care, or even the extent to which unnecessary procedures are funded by the taxpayer...

It’s pretty clear that the NHS is failing. It’s funded by a damaging taxes on work and operated according to centrally determined targets. There’s no reason why the UK can’t have privately run hospitals funded by a truly competitive insurance market. It would almost certainly deliver a more efficient and comprehensive health system, and it needn’t challenge the universal access that so many people value. It's the ends that matter, not the means.

The NHS is failing us

nhsMost in Britain dislike American healthcare. And rightly so, since the US insurance system is a cartel protected by government legislation. However, that shouldn’t make us want to defend Britain’s Soviet-style healthcare either. Both systems are bad.

You can check out the OECD statistics here. Britain's relatively poor cancer survival rates are of particular concern. The UK ranks 12th (and well below the OECD average) for bowel and breast cancer survival, despite a tripling the NHS budget for these services over 12 years. The ASI produced a good report on this earlier this year.

The problem isn’t finance (per-capita NHS spending is considerably above the OECD average), but the politically charged nature of the NHS, and therefore the inability to remove planners and reform provision. Figures for 2007-2011 show that the NHS spent more on “media professionals” (i.e. spin-doctors) than on cancer specialists. Yet pointing this out – as Daniel Hannan did – puts you beyond the pale of dialogue. The NHS’ failures on cancer included a shortage of oncologists, a lack of MRI scanners and an inability to provide cancer drugs. The basic functions of business (recruitment, procurement and provision) are poorly performed by the state.

This also explains the postcode lottery, where some hospitals (apparently) can provide Kremlin clinic standards, whilst many other hospitals resemble MRSA infested cesspits of pebble-dashed, post-war brutalist architecture. The NHS’s futuristic IT project is a categorical failure, having wasted more than £2.7 billion of taxpayers’ money. Moreover, the NHS’s rebuilding projects (using PFI money) may become obsolete through overcapacity, as recently revealed.

From 1999 to 2004, the government doubled GPs' pay . The Sunday Times reported that after a three-year contract (2004 - 2007) increasing pay by 25%, GPs worked 15% less and 33% worked part-time.

These oft’ repeated arguments don’t include the massive oversupplies of Tamiflu (based on public hysteria rather than medical evidence), or the inability to clean hospitals (as shown by MRSA outbreaks), or declining standards in nursing and elderly care, or even the extent to which unnecessary procedures are funded by the taxpayer...

It’s pretty clear that the NHS is failing. It’s funded by a damaging taxes on work and operated according to centrally determined targets. There’s no reason why the UK can’t have privately run hospitals funded by a truly competitive insurance market. It would almost certainly deliver a more efficient and comprehensive health system, and it needn’t challenge the universal access that so many people value. It's the ends that matter, not the means.

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Young Writer on Liberty 2011

After an exceptionally high number of entries this year, I'm pleased to announce the winners of the Young Writer on Liberty Award, 2011:

First: Henry Hill

Second: Adam Memon

Third: Karishma Puri

The standard of entries was extremely high and I'd like to thank everybody who entered on behalf of the Adam Smith Institute. The amount of clear and thoughtful writing in defence of individual liberty made even the most pessimistic of us wonder if the world might not be completely doomed after all. 

Even if you were unlucky this time, don't be discouraged! Be sure to re-enter next year, and do come along to one of our excellent student events in the meantime. We'll publish a selection of the winning entries on the blog over the next few days.

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Is home ownership past its peak?

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houseBack in 2001, over 72% of Britons owned their own home. In the subsequent decade, this figure has fallen back to 67% and, by 2021, is expected by the National Housing Federation (NHF) to decline further to below 64%. The NHF also expects that, by next year, more Londoners will be renting homes rather than actually owning them. Does this trend matter – and why is it taking place?

Part of the explanation for the latter lies in the increased level of renting, due mainly to financial reasons but also due to more enlightened rental legislation. However, it is the far lower level of new house-build that is of major importance to the housing market. Compared with the previous Labour government’s ambitious target of 250,000 new houses per year, just 105,000 new houses were built in England during the last financial year; this was the lowest figure since the 1920s when ‘the land fit for heroes’ pledge proved to be illusory.

Britain’s leading house-builders are still struggling, most noticeably the highly indebted Barratt Developments and Wimpey. But for them and others, including market leader Persimmon, it is the challenge facing potential buyers to secure mortgages that is pivotal. Having lived though the era of high Loan-to-Value mortgages – epitomised by Northern Rock’s 125% much-maligned Together promotion – banks are understandably implementing far more cautious lending policies especially as property prices – outside London - are not expected to rise appreciably.

In all probability, it will take many years for the property market to recover fully although the NHF’s figures suggest a long-term decline in property ownership despite the popularity of the 1980s ‘right-to-buy policy’. Given the undoubted freedom that property ownership - within sensible financial limits - confers, this would be a retrograde development in furthering the concept of the property owning democracy – a policy that MPs from across the political spectrum have endorsed for decades.