The Pin Factory Blog

The Welsh assembly on Tuesday voted to allow hospitals to presume individuals have given consent for organ donation, in the absence of an objection from the individual themselves, or evidence from family or friends they would have had an objection. This a step forward. Nudges—non-coercive changes in the presentation of options that result in different decisions—may work. Adults in the UK can expect to wait for over three years for a kidney, and the good transplants do is huge—if we can do anything to cut down on the wait with something as innocuous as a nudge, we should, and let's hope the measure makes it over to the UK as soon as possible.

But it's not enough. Cadavers are not people, and they should not be accorded rights as if they were. A person has the right to guide and direct their life, but once they are dead their body is effectively meat. Given this, no one's wishes, or their families wishes, about what is to be done with their corpse should be taken as gospel. I know this is a controversial position, but really it shouldn't be. Neither of the three main objections I've heard really seems to hold much water at all.

1. But we own our bodies! You are effectively licensing theft of our bodies!

We own our bodies while we are alive. Either we have this right because in general it promotes good consequences, social welfare, human happiness, or we have this right because it protects an important interest of ours, or to protect our choice or will. I deal with the consequences issue below. Neither of the other justifications hold for cadavers. Cadavers don't have any interests in a meaningful sense. They cannot experience suffering, pleasure, pain, or happiness—they can't experience anything. They are things not persons. Nothing can be good or bad for them. And this feeds into what is even more obvious—they can't make any choices so there is nothing for a (transferrable) right to bodily integrity to protect. An objection here might be that the relevant choices are made before they die, but the choice-protecting right would fizz out as soon as they did die, and then we'd lose the reason we had to protect the choice in the first place.

2. The families will find it very difficult to deal with it.

At first glance this objection shouldn't be too compelling; consider that someone's speech causing offence is widely seen as a poor reason to forcibly stop it. But I think we should take these sorts of effects on happiness seriously. Under the Welsh scheme individuals would not dread their organs being used to improve or save lives because they could opt out, similarly families with strong views about retaining a dead body at the expense of real, living people who need the organs could also keep the organs inside the cadaver. But my scheme would appear to ride rougshod over these concerns in a relentless pursuit of keeping innocent people alive (1,000 die each year in the UK alone waiting for a donation).

However, I believe individuals or families should be able to buy the right to not have their body used in this way, if they feel so strongly about it. We know from the Coase theorem, that if transaction costs are low enough, this will be efficient. NICE, or in a utopian future, private medical companies, can decide how much the organs are worth and if individuals feel so deeply they can pay the cost in order to keep the organs from those who need them. If few people want to do this, the price will be low as there will be sufficient organs. The system would actually work pretty much identically if we gave the initial right to the families and let them decide whether to sell the organs.

3. Instituting a norm of bodily integrity is difficult, this will break it down

In general, humans tend to have intuitions that bodily integrity should not be violated except in special situations. It might be that this intuition is coarse-grained—we can either have the intuition for all bodies (dead or alive and human), or for none. Those with the least respect for live humans—the Nazis, Mao, Stalin—tended to bury bodies in mass graves, suggesting they also had little respect for dead bodies. But I don't think this is necessarily the general trend. Respect for the dead has been falling for thousands of years, from when ancestor worship was one of the most prevalent elements of religion, when great superstitions surrounded death and burial, whereas respect for the living is only rising, with the belief we are all basically equal or endowed with the same rights or should all count the same now near-universal. Even if these trends are not linked, it suggests that declaring open season on organs in cadavers does not imply humans will lose all restraint over their actions with real living humans and involuntarily extract their organs. Norms are quite flexible, and we should switch to a more sensible norm, where humans are treated with all the respect they deserve, but where we don't waste life-saving organs due to our reverence of ex-humans.

This morning, I was appalled to see more evidence that free speech in this country is under attack. Emma West, 36, was given a 24-month community order. Her crime? “Racially-aggravated disorderly behaviour likely to cause harassment or distress.” West shouted racial abuse at fellow passengers on a tram between Croydon and Wimbledon. The rant was filmed on Youtube and has over a million views.

I have seen the video, and it’s not pretty. Allow me to clarify that I do not share West’s view that immigration has ruined the UK, and I believe people should not be discriminated against because of their race. Repeatedly swearing in the presence of young children is something else I would always try to avoid doing. 

But West’s rant should not be a crime. (At least, not for the reasons given: a case could be made that she should have been expelled from the tram for causing a public disturbance. But the words she used did not deserve an arrest.) Free speech is one of the most important aspects of life in a free country. The extent to which governments infringe on free speech is an indication of their general attitude to the citizens they are supposed to represent. In the UK, it appears we have a nanny state, which takes any opportunity to relieve of us of our right to independent thought.

Having freedom of speech means having the freedom to offend. Passengers feeling “upset . . . disgusted, shocked and horrified” is not a reason for an arrest to be made. Everyone is different, and might take offence at different things. It’s not hard to imagine that West herself was upset, disgusted, shocked and horrified - at the supposed "invasion" of the UK by immigrants. Why were the non-white passengers not arrested for their "crime" of offending West?

Police, lawyers and judges should never have been involved in this incident at all. The only acceptable limitations to free speech are those against threats, and incitement to violence. If the government is willing, "in the public interest", to censor some minority views, what guarantee is there that it won’t do the same to those which it finds difficult to answer? The Chinese authorities might well be ‘upset’ that some of their citizens do not agree with their policies, but they are not justified in silencing journalists because of it.

Furthermore, I believe that allowing "undesirable" views to be aired is the best way to stop them from becoming dangerously prevalent. Censoring fascists, for example, denies them equal participation in the democratic process. This is more likely to result in violent protest, as peaceful debate is not an option. Instead, fascists and other extremist groups should be allowed to speak their minds. If and when their beliefs are rejected by the vast majority of people, the matter is settled – fairly, through reason, not oppression. As soon as they use violence to further their agenda, the full force of the law can be used against them.

When is it wrong to stop someone else committing a wrong? When the method used to stop them is worse than their wrongdoing. Even in the developed world, we must always be vigilant in ensuring that the government does not go too far in its regulation of our lives.

The Murray Rothbard Institute and Institute for Economic Studies Europe are this summer holding the Rothbard Summer University, a 5-day seminar in (beautiful) Ghent, Belgium.

The seminar features such prominent lecturers such as Tom Palmer (Atlas Network), Tim Evans (Adam Smith Institute), Adam Martin (King's College London), Lawrence Reed (President of Foundation for Economic Education) and Stephen Davies (Institute for Economic Affairs).

The event is held from 17th to 21st September, scholarships are available and free books distribution will also be organized.

More information can be found on www.rothbard.be/rsu, and any remaining questions should be directed to lode@rothbard.be.

Free market supporters of immigration controls often quote Milton Friedman in support of their position:

“There is no doubt that free and open immigration is the right policy in a libertarian state, but in a welfare state it is a different story: the supply of immigrants will become infinite.”

On the face of it, this is a powerful argument for restriction. As I’ve noted in the past, whether we like it or not people are dependent on state institutions like the NHS and it would be a bad thing for those things to crumble without the reforms that make market-based alternatives viable.

But are things as clear as they seem? Elsewhere, Friedman also said:

“Look, for example, at the obvious, immediate, practical example of illegal Mexican immigration. Now, that Mexican immigration, over the border, is a good thing. It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But, it’s only good so long as it’s illegal.”

I think Friedman vastly overstates his case in his final line (it’s only good if it’s illegal?), and empirically he seems to be mistaken (the fiscal contribution of immigrants is usually positive in general, and has been positive in the UK in particular) but still, let’s take his point as given. Does that make immigration controls the best option?

No. There are ‘keyhole solutions’ we can implement instead – that is, solutions that are specifically designed to address the supposed problems that go with open borders.

We could require that immigrants post bonds priced according to the average cost to the state of someone of their age. We could require immigrants to provide for their own health insurance, unemployment insurance, education, etc. We could restrict the use of the NHS and other state services to immigrants who are working. And so on. The point is that most of the problems associated with immigration are not best solved by restrictions on immigration. Don't use a sledgehammer to crack a nut.

Well, OK, but we are where we are. Those solutions are nice in a think tank fantasy-land, but they’re never going to happen, you might say. (Well, not with that attitude, they're not!) For the sake of argument, what if these keyhole solutions were irrelevant and Friedman was empirically correct?

In that case, his point about illegal immigration being the best kind of immigration – and indeed, a net positive overall – might really be worth thinking about. As Will Wilkinson has argued, people who follow Friedman on immigration should then argue not for restrictive immigration controls, but restrictive immigration laws paired with a toothless Border Agency, or one simply told in practice to ignore these laws. (Much as most decent police officers ignored anti-sodomy laws for some time before those laws were repealed.)

So maybe that’s a Friedmanite ‘keyhole solution’ for people concerned about immigrants sucking the welfare state dry: keep immigration laws the way they are, but shut down the UK Border Agency and treat the laws as the silly anachronisms they are.

Summary: EA inflation remains subdued and below target

What the chart shows: The chart shows euro area (EA) inflation, headline, core (excluding food and energy) and trimmed mean (excludes the fastest and slowest changing items) as twelve-month changes.

Why is the chart important: Ultra-low interest rates and loose central bank policies – including ‘money printing’ in a number of countries – have raised concerns that inflation could take off in the near future. While there almost always is an upward pressure on inflation in modern societies, recent inflation developments and broad money trends (which is a key indicator of future inflation) show that there is little or no risk of a near-term surge in inflation. In the year to June, EA inflation remained below the ECB’s target of ‘below but close to 2%’ for a fifth consecutive month. Moreover, excluding the impact of food and energy, inflation has been below target for five years. As long as EA domestic demand remains weak and even for some time after it has picked up (given the slack in the EA economy), inflation will also remain quiescent.

A report in the Independent based on alleged leaks by Department for Education civil servants suggests that Michael Gove is preparing plans to allow academies and free schools to be run as profit-making institutions, bringing cash into education from hedge funds and venture capitalists. Although many on the left are hostile to the idea of profit-making schools, as they are to profit-making in general, the evidence suggests that Gove is right, and that this could result in the rapid expansion of free schools delivering a high quality education.

It is obviously a good thing when parents, teachers and local businesses work together to establish a free school, and there have already been several examples that point to an extension of educational opportunity as a result. But they only have the motive to do this once and in their own area. Any lessons they learn stay relatively local, and the numbers of such schools set up depends on the availability of capital. The advantage of for-profit schools is that they bring investment. The cash needed to set up a new school is a major hurdle to be climbed, and outside investments helps it to be climbed. Secondly, the lessons learned can be applied to other schools set up in other areas by the same investors. Once there are chains of schools, the successes achieved by each can be extended to the others and built upon. When for-profit investment is allowed, the numbers of new schools will increase dramatically. 

In Sweden, which pioneered free schools and permitted for-profit ones to be established, the free schools are now one in five of the total, and 65% of the independent ones are for-profit schools. Since the mid-90s free school numbers have gone from 122 to 1,091, and parental satisfaction with the for-profit schools there is far higher than it is for the government schools.

The argument that for-profit schools "divert money out of the classroom," as opposition spokesman Stephen Twigg has alleged, is absurd. This is akin to saying that for-profit food stores divert money from the table. In fact our food is supplied both plentifully and cheaply and of high quality by suppliers doing it for profit. That is why it has attracted the investment to make it widely available. We do not need to imagine what food would be like if it were provided at state outlets on a non-profit basis. We do not need to imagine it because we saw the example in the Soviet Union: low quality, short supplies and interminable queues. If the leaks are correct, Gove should be applauded for doing the one thing that will give millions of children an alternative to the low quality education that still pervades parts of the state system.

John Butler has a great piece in yesterday's City A.M. making the case against central bank interest rate interference. He uses the devastating insights of Ludwig von Mises and Friedrich Hayek to show why central planning cannot work rationally for basic epistemic reasons. His example is of the Soviet shoe industry, constantly providing surfeits of boots in summer and sandals during winter.

Absent a pricing mechanism to match supply and demand, there was invariably either a glut or a shortage. And even when there was a glut, there were plenty of summer shoes, but a shortage of winter boots. By contrast, the largely capitalist West, responding to real price signals in real markets, did a pretty good job at producing, in sufficient quantities, a range of shoes that customers wanted, that fit, that they could afford.

Butler argues that in the significantly more important financial markets, which coordinate plans about saving and investment, together determining the future's capital structure, the same rules apply. We need real prices to convey information and organise society into a rational economic order. He claims the monetary policies of many countries—cutting headline interest rates and buying hundreds of millions of bonds—distort market interest rates (the most important prices in the economy) and thereby drive capital to be used in suboptimal ways.

I think there's a problem with his approach. Going with the title of this post—isn't it possible that the free market interest rate is below zero? German bund yields have fallen below zero several times during the Euro crisis, despite no central bank engaging in any major programme to buy them up. In times with few good investment opportunities, lots of funds (saving rates have boomed during the bust), and lots of worrying risky areas, it makes sense that some safe assets would see crashing rates. Bond yields can fall below zero even in a zero inflation or deflationary environment, but that's not true for many of the myriad interest rates in a modern economy. There is a zero lower bound on most rates, that is, no one would accept a nominal rate less than zero, as they could usually change the money into cash and put it under their mattress. But quantitative easing raises inflation expectations (and inflation), allowing real rates to go below zero, potentially clearing some otherwise stuck markets.

Now this isn't necessarily telling on Butler's argument. It might be that sometimes rates need to fall below zero, potentially justifying inflation above zero, but the QE needed to achieve this inflation distorts markets in general more than it benefits in these cases. Other things being equal, the extra demand from bond purchases means higher prices and lower yields on those bonds, and this would be expected to hit all substitute assets. This seems to hold even if the other effects of extra QE (higher inflation and demand growth (NGDP growth) expectations) work in the other direction, or even exactly balance out the demand effect of QE. Compared to the hypothetical situation where the central bank boosts growth expectations without buying up bonds, assets will be more expensive, or yield less.

Funds will look cheaper to firms than they "actually are" in the sense of their social cost as approximated by the information that would have been contained in the relevant market interest rates. Firms will tie up slightly more productive capital in improving capacity when society as a whole would seem to prefer slightly more devoted to consumption. This mispricing of loanable funds seems like it would have distortionary effects, with the size of the efficiency loss depending on the responsiveness of the supply of deposits and the demand for investment to their prices.

Before this starts to sounds one-sided against QE, there is one (big) consideration to take into account—the extra inflation and demand growth expectations that asset purchases create don't just help some interest rates adjust, but also create the space for a vast number of relative price moves. Labour markets tend not to clear after demand shocks because wages take a long time to adjust downwards. The price of avoiding any interference could be deep, ongoing recessions. So a prudent central banker may need to risk some misallocation of resources into investment if they wish to avoid the probably worse cost of punishing unemployment and slashed living standards.

In a video out this morning, City A.M. editor Allister Heath calls on Mark Carney to bring the Bank of England into the twentieth century by reforming regulation to emphasise greater interaction with the financial sector, opening up its culture to something less dictatorial, and monetary policy to something more like Nominal GDP Targeting or a Productivity Norm.

During lunchtime last week, I was queuing for a popular street-stall which sells kebabs to the hungry workers of Westminster. I thought the queue had managed to double back on itself enough to avoid blocking too much of the busy street. Apparently, I was wrong. A middle-aged woman (let’s call her “Mary”), who seemed to be otherwise uninterested in the kebab-stall, decided the queue needed to change shape so that it was more compact. We, in the queue, grumbled but obeyed her directions and shuffled around into the new formation. Whether this had any effect on the flow of pedestrians was unclear, but Mary seemed happy and wandered off, leaving us to discuss her sanity and lust for power.

This got me thinking: to what extent are we private citizens justified in ordering each other about? Mary had no authority over us: she wasn’t a government official, company boss or even an employee of the kebab-stall. We were equals in every respect. For deciding how to act, I was glad to see everyone more or less obey the golden rule of liberty: no interference is justified except to prevent harm.

How does that apply to this situation? Mary’s belief that the queue was blocking the street (and thus causing “harm”) provided justification for her intervention. Furthermore, I believe everyone has the right to freedom of speech, so whatever the circumstances, Mary would have had the right to open her mouth. But what if we, the people in the queue, had ignored her directions? Could Mary have been justified in gently tugging sleeves to form a less disruptive queue? While this would hardly be assault, it would go beyond the right to free speech. It could be argued that people who spend their time trying to help society run more smoothly, as Mary did, should be hailed as heroes of “the Big Society”. I certainly think that, in general, people are too passive about minor intrusions in their lives (for example, those selfish individuals who feel it necessary to share their music tastes with the rest of the bus).

But this is what happens in the ideal society: the citizens sorting themselves out, willing to listen to the advice of a stranger without feeling their autonomy is being violated. More important, in my opinion, are the laws that we need for society to operate to a basic level of satisfaction. In this case, Mary’s right to exercise free speech, but not go beyond that into physical involvement. After all, the actions taken to correct an error should be in proportion to the error itself. Physical coercion seems fine when used against criminals, but over-the-top for rearranging a kebab queue. (This isn’t totally accurate: the police may have the authority to physically control crowds at public events, for example.)

Still, the main point is that Mary had the right to suggest that we re-form the queue, but nothing more. If we had ignored her (and assuming that the queue shape was indeed causing a problem) that would have left a small imperfection affecting the flow of the street. This can be applied in a wider sense to government in general. A control-freak large state might iron out inefficiencies in some areas, like Mary reducing the blockage of the street by physically rearranging the kebab queue. But it is not worth giving up individual rights (and the long-term benefits of a limited state) for these small savings.