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"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

Schools don't need a new curriculum, they need freedom

Written by Teddy Baker | Tuesday 09 July 2013

Today’s announcement of the reforms to the national curriculum have been met with both praise and displeasure from varying sides of the debate, with Anthony Seldon, head master of Wellington College, heralding the new curriculum as giving essential “building blocks” to allow children to progress with more complex ideas, whilst Brian Lightman, general secretary of the Association of School and College Leaders reacted more critically, suggesting that, “unlike previous versions of the national curriculum, which were drafted with a heavy involvement of teachers and school leaders, these proposals have been driven and closely directed by politicians without that professional input."

However, it is not the allegedly more demanding content of the curriculum which is concerning, nor the way in which many regard it as too heavily under the control of politicians rather than teachers themselves, rather, the continued way in which the government forces what it feels is right upon parents and school children, instead of giving them influence over what their own child learns. Not only does this exemplify the overarching nature of government in the UK, but the emphasis this new curriculum puts on force feeding facts to pupils, under the pretence of providing them with “core knowledge”, besides removing any individuality or element of choice, also is likely to reduce interest in the subjects amongst the pupils, as its less independent nature prevents the students from taking the initiative and developing their study into areas which interest them.

Furthermore, this “one size fits all” approach to the curriculum does not take into account those children with special educational needs, who are approximately 20% of the student body in the UK. This only highlights the problems with the inflexibility of the government and this new curriculum, and shows the need for more choice within schools and for parents to allow them to ensure that all children can receive an education appropriate to them.

Fortunately, this new curriculum is not being enforced on the country’s academies, whose independence allows them to better provide for children individually. However, it must not be forgotten that in fact, although the government has less direct control over academies (e.g. they are not subject to the new curriculum) this may be replaced by the influence of the academy’s main sponsor, rather than parents, so they may not be ideal for providing a more independent education.

Whilst academies are not necessarily the only or ideal solution, currently they appear to be the best available option, due to their relative independence. In addition the way in which they specialise in one area of study allows parents to find a school more closely in line with their children’s strengths and weaknesses. On the other hand they have been criticised as being too selective, meaning that schools choose pupils, rather than the other way round, removing their key justification. Therefore, although they are a step in the right direction, more needs to be done to create both a more flexible curriculum and school system, as while they make up over 50% of English secondary schools, they represent only 13% of the overall maintained sector, which badly needs an injection of freedom.

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Chart of the week: Portuguese bond yields jump as government falls into disarray

Written by Gabriel Stein | Tuesday 09 July 2013

Summary: Spike on Portuguese bond yields show euro crisis not over

What the chart shows: The chart shows the yield on the Portuguese 10-year benchmark government bond; and the difference (‘spread’) between the yield on its German equivalent

Why is the chart important: With the (admittedly significant) exception of the Cypriot crisis earlier this year, the euro area has been relatively calm since ECB President Mario Draghi last summer promised to do ‘whatever it takes’ to save the euro. However, in the first week of July, there was a brief eruption in Portugal, where the Finance Minister resigned due to the country’s failure to reach its fiscal targets; and the Foreign Minister then resigned because he disagreed with the Prime Minister appointing a new Finance Minister who vowed to continue austerity instead of pushing for growth. But Portugal was the ‘troika’s’ star pupil – doing everything asked of it without complaining. Failure to achieve targets raises a question mark over the entire austerity policy pursued in the euro area; and the rise of politicians in a ‘model country’ questioning it means that the days of austerity – already eroded – are likely to be numbered.

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Unintended consequences in everything

Written by Sam Bowman | Monday 08 July 2013

Home insulation promoted by the government may end up killing old people in their homes, apparently (hat-tip to Chris Snowdon):

Prof Chris Goodier, of Loughborough University's department of civil and building engineering, said it was vital that homes in the UK better insulated to help meet carbon emission targets and save on winter fuel bills.

But he said the risk of overheating had been overlooked in the "big rush to insulate and make homes airtight", particularly as more extreme weather events, including heatwaves, are being predicted for the UK by meteorologists.

"Overheating is like the little boy at the back of the class waving his hand. It is forgotten about because the other challenges are so big,"

This is nothing to sniff about. Back in 2003, a staggering 70,000 people died in heat-related deaths during a Europe-wide heatwave, partially caused by elderly people living in homes designed to withstand cold winters instead of extremely hot summers.

That heatwave was widely attributed to global warming, which the 'Green Deal' home insulation is meant to stop. But this sort of unintended consequence shows the danger of imposing any one 'solution' to problems in complex systems. If the 'solution' causes problems of its own, those problems will be compounded across a much wider area than if different 'solutions' had been allowed to emerge from the bottom up.

Where there are collective action problems like global warming, the simple solutions that adjust incentives and let the market try lots of little things out (like carbon taxes) beat the grand plans of Very Clever People who cannot possibly know the full consequences of their actions. Of course, even things like carbon taxes may have their own unintended consequences too.

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The NHS is going to have a £30 billion a year funding gap apparently

Written by Tim Worstall | Monday 08 July 2013

Woes, woes unto us, eh?

The long-term crisis in NHS finances will be laid bare next week when the health service reveals it is facing a £30bn hole in its budget – as a prominent Lib Dem peer suggests charging people to see their GPs. Tim Kelsey, NHS England's information director and a former Cabinet Office adviser on data, said the health service faced a £30bn funding gap by 2020. In an interview with Health Service Journal he said: "We are about to run out of cash in a very serious fashion." He said that next week NHS England would be "publishing a call to action". The document – entitled The NHS Belongs to Us All – is expected to make the case for significant changes to the way hospitals operate. "The financial context is, and our analysis will disclose, that by 2020 there will be a £30bn funding gap in the healthcare system." NHS England's predictions appear to be based on work by the Institute for Fiscal Studies. Last year it calculated that if NHS spending was left to continue to soak up resources at its long-term rate and other on-health public spending is kept at 1% a year, then the funding gap would be about £30bn. When contacted NHS England confirmed that it would be publishing a report next week. "We are not in a position to say more at this stage," it said.

I'm not sure that I can take this. It will mean more Polly Toynbee columns about how the NHS is The Wonder Of The World, so fabulous that absolutely no one has ever tried to copy it.

Now unpack what they've actually said there. NHS inflation has been and is higher than the general inflation rate. This is partly because it's a protected State organism and partly because of Baumol's Cost Disease: services become more expensive relative to manufactures over time.

The solution to both of these problems is to introduce markets. Sure, they can be markets where the financing is still done by the State. But you need a variety of suppliers competing with each other for access to that cash stream in order to increase that productivity. This is obviously true of any organisation suffering from bureaucratitis: but it's also implicit in Baumol's writing on innovation. Yes, it's more difficult to increase productivity (and thus lower the inflation rate) in services but this is why services need to be subjected, even more than manufacturing, to the incentives of market competition.

That the NHS is going to suffer, as a result of its higher than general inflation rate, a £30 billion funding shortfall is why the NHS needs to be subjected to market competition. But do note that given that it is being subjected to market competition its higher inflation rate is going to be moderated: thus there won't be the £30 billion shortfall.

If you prefer, that identified shortfall is exactly why the current reforms must go through: because they're designed to beat that shortfall.

Now, if only we could get Polly to grasp this concept....

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When the khat is away, the mice will play

Written by George Kirby | Monday 08 July 2013

The government still hasn’t got the message. On Wednesday I saw that Theresa May has decided to ban khat, a herbal stimulant popular among Somali, Yemeni and Ethiopian communities. This goes against advice from the government’s own Advisory Council on the Misuse of Drugs (ACMD), which claimed there was “insufficient evidence” that khat caused health problems.

I agree with the ACMD that khat should remain legal, but for different reasons. The legal status of recreational drugs should not be decided by their healthiness. They should all be legal. Individuals should be free to harm their own bodies if they wish to do so. The government should be limited to providing information about the risks, providing customer protection through licensing and quality control, and helping those who struggle with addiction.

With this new ban, khat will go the way of other recreational drugs. Where there is demand, there will be a supply, regardless of the government’s ban. People who want to buy khat will now have to go through the black market. They will become involved with drug dealers who they would otherwise have no business with. These dealers will be unregulated, of course, so there will be none of the customer protection found in a legal market.

The BBC report says: "Somali groups in the UK had told the ACMD that use of khat was a 'significant social problem' and said it caused medical issues and family breakdowns."

Banning khat will likely exacerbate this problem. People whose khat habit is causing a problem will be less likely to seek help, for fear of being branded a criminal and punished by the state. The real problem is pushing the drug business underground. Dealers are risking years in jail for responding to a legitimate demand, so the incentive to obey other aspects of the law is limited and some have no qualms about cutting the drugs with more harmful substances, or assaulting their customers to keep them obedient.

These dealers would not exist if drugs were legal. I realise that while cigarettes are still legal, there is a significant black market in them. This is mostly due to the huge taxes the government hits them with: 82% of the price of a packet of fags is tax. But when recreational drug users can only get their highs illegally, the black market is much bigger. As ever, the example of alcohol prohibition 1920s USA is illustrative.

Finally, legalising recreational drugs would help the government’s finances as well: the tax revenues would be huge. In 2011/12, the government received £2.8m through taxing khat. That was £13.8m worth of khat - the overall drugs market is estimated at between £2.15bn and £6.54bn. But instead, the government ignores advice it has requested, as it did in the case of ACMD chairman David Nutt in 2009. Nutt himself uses a clever analogy to refute the khat ban. But it seems that the state’s illogical control freak attitude will stubbornly persist.

The government should legalise not only khat, but all other recreational drugs. This would correct the current infringement on liberty, make it easier for addicts to get help, bring in tax revenue, and destroy the black market and related crime.

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Making it easier to fire workers really does lower the unemployment rate

Written by Tim Worstall | Sunday 07 July 2013

We're all used to the idea that making the labour market more flexible, which is a code for making it easier to fire workers, lowers the unemployment rate. I think we've all also seen the counter-argument that this is tosh. It's never quite laid out why it is but it must be so there. Fortunately we've now got some more empirical evidence to bolster our case about flexibility increasing employment:

Using 1981–2009 data for the 50 states, this article examines the relationship between economic freedom and the unemployment rate, the labor force participation rate, and the employment-population ratio. After controlling for a variety of state-level characteristics, the results from most specifications indicate that economic freedom is associated with lower unemployment and with higher labor force participation and employment-population ratios.

The advantage of American data is that the various states are rather closer together in their overall culture than are the (fewer) countries of Europe. It's thus easier to see the effects of variations in economic freedom without having too much confounding data. But there we have it, greater economy freedom, including those hiring and firing laws, leads to lower unemployment. We should thus be deconstructing some of our own wasteful regulations and laws around this point in order to lower our own unemployment rate.

I'd also make a rather more speculative point. Why is it that people don't want to believe this finding? As above, we've known it for a long time but there's a great reluctance to believe it. And I think it's because people really don't understand the job churn in the economy.

If you think that a rise in unemployment of 100,000 means that 100,000 people have been fired then you might well think that making it harder to fire people will lead to a reduction in the number of people in unemployment. But the truth is that this isn't what causes a rise in unemployment at all. There are always 100,000 people getting fired. More than that actually: some 3 million jobs, or 10% of the total, are destroyed in the UK economy each year. That's that destruction part of capitalism. This rate doesn't, particularly, rise in recessions nor fall in booms either. That's a reasonably constant rate at which the economy destroys the things that people do for a living.

What does change in a recession is how many new jobs are being created: thus the balance, between those fired and those hired, changes. The actual unemployment numbers that we see are the end result of this complex process. If unemployment rises by 100,000 in one month it's not the result of 100,000 more people being fired. It's the result of 100,000 of that (roughly) 250,000 who get fired every month not finding a new job. Unemployment isn't best thought of as a result of people being fired therefore: it's a result of people not getting hired.

At which point the economic freedom argument begins to make intuitive sense. The more economic freedom, the less regulation stopping you from doing things, the more things will get tried and done.The less the cost of firing an undesired worker the more of them will be hired: demand curves do indeed work that way. So far so true: my speculation is that those who don't get this point are those who don't really understand why unemployment occurs. It simply isn't because people get fired because people get fired all the time. It's that they don't get rehired at times which is what causes unemployment.

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Why an opt out system for kidneys still won't work

Written by Tim Worstall | Saturday 06 July 2013

Ben had an interesting idea yesterday: let's make organs the property of the State for them to allocate, as the State wishes, after our deaths. Even to the point that those who wanted the corpses of their loved ones buried intact would have to pay the State the value of those organs that would go unused. "Interesting" here includes the meaning of "how do I get a rise out of my readers" and by that measure it was indeed most interesting. However, by another, it's not so much. For the problem with the proposal it that it just won't solve the perceived problem. Not enough people die healthy enough for us to have enough organs to transplant.

Our basic problem is that people die as a result of our being able to perform organ transplants but there aren't enough organs available to perform such transplants. Not enough people carry organ donor cards and some of those that do their families demur when asked at that crucial moment. Thus it seems logical enough that we should move to a different policy in order to save those lives. We should have opt out systems: only those who feel strongly enough about rotting with their kidneys and have indicated that desire should be able to do so. Or even, as Ben intimates, that those who want to rot complete should pay the loss to the person whoi doesn't get the transplant as a result of said desire.

And yes, it's all ghoulish and yes there are considerable civil liberties implications: but we should indeed float such ideas to see where they go. The problem is that even if we did this we still wouldn't have enough organs for transplant. For you've got to die pretty healthy for it to be possible to use said organs: no one with any form of cancer can be used for example. No one with a variety of infectious diseases. By the time anyone's got dementia there's little point in trying to use parts of them and heart disease has its own problems: the process of dying this way can damage the organs that are desired.

Effectively we're left with that small group of people who die in accidents. There are certainly enough people who do to cover the simple number of organs desired even if some parts will be a little too squished (that being the cause of death) to be useful. But once you count in the necessity for blood type matching (and it's a lot more complicated than just O, A or AB etc) and tissue matching that's just not enough people to go around. Even if all organs of the deceased were indeed State property to be allocated: there still aren't enough.

So Ben's solution fails at the first hurdle: whatever the moral implications, it still doesn't work. Cadaveric transplant just isn't enough.

Which leaves us with two options. One would be to increase the number of cadavers. Perhaps abolishing the motorcycle helmet and car seatbelt laws. That would probably help, might even solve the problem. Plus we've the obvious benefit that this is an increase in freedom and liberty.

The other is that we should move to a paid market in live organ transplants. I've pointed this out a number of times before.

In terms of what we can transplant corneas we're fine with under the current system. Kidneys, lungs and livers can all come from live donors (no, really, you take a bit of the lung and a bit of the liver). And I've no problem with it being a very tightly controlled market, State controlled, but in order to get them to come forward we're going to have to offer cash rewards. About the only one we can't deal with at present in this manner is hearts. But then compulsory donation unless a fine is paid wouldn't solve this one either. And once we've solved as best we can this problem, through our paid market, then there's no need to go around thinking about making all corpses State property, is there?

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Happy 65th birthday NHS, maybe it's time to retire?

Written by Pete Spence | Friday 05 July 2013

65 years after the creation of the National Health Service, its fans say it's the envy of the world. But does it deserve that reputation, and could there be better alternatives?

We shouldn't just pay attention to the headline grabbing stories. You could point to the thousands of possibly needless deaths revealed by the Francis Report or the high costs of our NHS. The error of those who think we can deliver healthcare by committee is more fundamental. It's absurd that we trust politicians to know how to deliver something as important as our hospitals.

Imagine if the state supplied our food. Without prices, officials can't know when items run scarce. In the marketplace, a supermarket that runs out of food can raise the price for it. This prevents queues, and importantly alerts suppliers that they should divert resources to where there is scarcity.

Whenever governments have tried to control food production, this lack of co-ordination has seen people die in their millions. See the Great Chinese Famine. Governments can't tell if they're producing too much food or too little.

When it comes to the NHS, we're similarly ignorant about how well it's performing. Are we diverting too many resources into cosmetic surgery, too few into cancer drugs? There's no way of knowing, when patients have limited ways of indicating their preference, and we can't price the alternative uses of the NHS' resources.

There are good arguments to be made that we should be concerned by the high health costs that many incur due to conditions beyond their control, but this is an argument for systems that seek to reduce those costs.

Markets are a system that achieve just that. Health entrepreneurs can launch their ideas into the marketplace, and see if they work. Their success is easily gauged, will customers pay for them?

Letting us test health innovations against each other allows us to reveal the best ways to treat patients. Prices co-ordinate all of this information about what patients want, and without it NHS managers are flying blind, trying to make poorly informed guesses. After 65 years, the NHS experiment has been a failure, and we should put that system to rest.

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Should the government subsidise silly walks?

Written by Sam Bowman | Friday 05 July 2013

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Opt-out is a step forward, but it doesn't go far enough

Written by Ben Southwood | Friday 05 July 2013

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.

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