There is no right time to sell the RBS shares


This is a simple point, but it’s one that some people who should know better seem to keep getting wrong. Share price movements are unpredictable and there is no more reason to think the price of shares will be higher next year than to think that they’ll be lower. Which means that there is no ‘right time’ for the government to sell its RBS shares. If we thought that RBS shares would each be worth 50p more by Christmas then we’d be buying them now and bidding up the price towards 50p now. The price wouldn't quite reach 50p because there's still the chance that we're wrong.

And indeed that is exactly what happens, and why we can only assume that share prices reflect what we expect them to be worth in the future. Because share prices can go down as well as up, we get a return from investing in the stock market above what we get if we invest in safer assets, like government bonds.

You would think this was obvious, but the BBC quotes:

Ian Gordon, a banking analyst at Investec, told the BBC's Today programme: "The taxpayer is being short-changed." The shares could have been sold for a higher price in February, when they were changing hands for more than 400p, he said.

But of course we had no idea in February that they would fall, and we have no idea what will happen to them next. Like the Royal Mail shares they might rise after we sell them off, or they might fall. Or they might not move at all.

BusinessInsider’s Mike Bird makes this point very well, and as well as reminding us that the RBS bailout was always going to be a money-loser, he points the people who think we can just wait and hold on to the shares until they rise back up to their 2008 level to this chart showing RBS's share price since 2007:

rbs bailout

To be fair, quite a lot of RBS has been spun off so it’s a much smaller company than it was in 2008 anyway, but the point still stands that there is no rising trend that we should be riding, as many people seem to think.

The flipside of all this is that Gordon Brown is equally blameless for selling off the government's gold at ‘historically low levels’, except to the extent that we might want the government to own gold for other reasons.

So there is no ‘right time to sell’ except to the extent that we do or do not want the government to own shares in the banks, or to try to make money by taking risks. If we don’t want the government playing the stock market, the ‘right time to sell’ is always now.

Replace the House of Lords with a Lottery


Before the House of Lords Act 1999, foolish legislation from the Commons would often be blocked, delayed or amended by wise men that did not owe anything to anyone and would thus be wise and objective in their decisions. Tony Blair was defeated 38 times in the Commons in his 1st year of government. After 1999 the chamber became nothing more than a useless chamber of former party donors who had been given life peerages often at the request of the Prime Minister. Unsurprisingly they would enter the chamber owing the Prime Minister a favour or two and suddenly a lot of poor legislation is being passed without so much a whimper from that once mighty chamber. While we can all agree the current system is broken, conservatives should recognize the old one is lost, and thus a redesign of the House of Lords should keep the best of the old while discarding some of the more unnecessary inequality of the old system.

My idea is a lottery system, whereby people are, at random, selected to serve as a “Lord” for one Parliamentary session, much like an extended form of Jury service. There would be rules of course- no-one should be forced into it, and those who do accept would have to declare all interests for the purpose of public accountability. To ensure wisdom prevails there should be a minimum age of 45, and anyone who has been closely involved with a political party in the last 5 years should be disqualified. The few hundred who accept will be compensated generously for any time they have missed out of work, and of course because they are all older, this year long task will not take vital time younger people would need in the job market or higher education.

The sheer hassle of such a system will discourage the government from passing excessive legislation to the Lords- and certainly make the legislation understandable for the average laymen who will be serving. The selected group should have the powers the Lords currently have- with the suspensory veto extended from 1 year to 5 years and the formal discarding of the Salisbury Doctrine.

Hopefully this change will result in a conservation of the liberties and property rights Britain still has, and an end to the de facto unicameralism of our current House of Commons.

Theo Cox Dodgson is winner of the Under-18 category of the ASI's 'Young Writer on Liberty' competition. You can follow him on Twitter @theoretical23.                             

Liberalising Immigration is a Win-Win scenario


Draconian immigration rules represent the largest restriction on liberty in the UK today. They restrict the personal and economic potential of millions of people and achieve little in return. How to roll back these limits on freedom? Think tanks have a difficult dilemma. They want to build a reputation as radical thinkers, but at the same time propose moderate policies. Early drafts of this essay argued that Britain should be more open to this or that group, but the truth is that both hard-headed economics and human decency demand wholesale liberalisation. Immigration restrictions curtail our ability to hire, sell to, befriend and marry the people we want to. People understand this – it's why people view immigration to their local area much more favourably than on the national level. And they have an enormous economic cost.

The ASI's namesake argued that the division of labour is limited by the extent of the market. Everyone accepts the case for free trade, but that leaves markets incomplete, because non-tradable services (like haircuts) can't travel across borders. Freeing people to move where they wish would let people go where their talents would be best used. The productivity of someone with an engineering degree – the amount can achieve with their labour – is many times lower in some areas of the developing world than it is in the UK.

The benefits to migrants are best illustrated by the lengths migrants are willing to go to to cross borders. Smugglers charge thousands for passage from Libya to Europe, and the journey is fraught with risk, but hundreds of thousands make the journey anyway. Migration lets people escape poverty, war and authoritarian regimes.

The Mariel Boatlift is an example of this. In 1980, 125000 Cubans fled Castro's regime, landing in Miami. Their liberation increasing the size of the local labour force by 7% almost overnight. But economists found almost no impact on wages and the labour market.

7% of the UK labour force works out to approximately 2.3m people. The government could auction off permanent residency permits to that many people each year. Such a radical policy would be disruptive. It would have costs, losers as well as winners. But the potential benefits are too colossal to ignore – a Britain where not only workers and jobs but husbands and wives, parents and children, potential pub geezers would not be separated by arbitrary borders.

Theo Clifford is winner of the 18-21 category of the ASI's 'Young Writer on Liberty' competition. You can follow him on @Theo_Clifford, and read his blog at

If you think for profit health care is expensive wait until you see not for profit...


One of the battle cries during the set up of the ACA, aka Obamacare, was that for profit health insurers were way too expensive. Because, you know, profit. It's obvious to all that the profit must make things more expensive, innit? So, a series of cooperatives to provide that health care insurance were set up. There's two problems here. Much as we love cooperatives ourselves the obvious feature of hem is that they've not got any capital. They thus need to grow into a market position rather than just leap into trying to be a large player in a capital hungry industry like insurance. For their capital comes from retained earnings, rather than having some capitalists providing capital: that's rather the point of them. That these coops did try to leap in and become large players in a capital intensive market means they're all going bust.

Nonprofit co-ops, the health care law's public-spirited alternative to mega-insurers, are awash in red ink and many have fallen short of sign-up goals, a government audit has found.

Under President Barack Obama's overhaul, taxpayers provided $2.4 billion in loans to get the co-ops going, but only one out of 23 -- the one in Maine -- made money last year, said the report out Thursday. Another one, the Iowa/Nebraska co-op, was shut down by regulators over financial concerns.

The audit by the Health and Human Services inspector general's office also found that 13 of the 23 lagged far behind their 2014 enrollment projections.

The probe raised concerns about whether federal loans will be repaid, and recommended closer supervision by the administration as well as clear standards for recalling loans if a co-op is no longer viable. Just last week, the Louisiana Health Cooperative announced it would cease offering coverage next year, saying it's "not growing enough to maintain a healthy future." About 16,000 people are covered by that co-op.

Wise observers like Dennis the Peasant were predicting that this would happen. But they're also not cheap:

Separately, the AP used data from the audit to calculate per-enrollee administrative costs for the co-ops in 2014. It ranged from a high of nearly $10,900 per member in Massachusetts to $430 in Kentucky.

Wouldn't everyone prefer a few rapacious capitalists trying to rape the citizenry for profit than admin costs per scheme member of $10,900 a year? Further, can you actually imagine a for profit company allowing bureaucracy to balloon out to such an extent?

Securitising Britain’s Future: A free market solution to university funding


  When the Coalition Government increased tuition fees from £3,300 to £9,000 a year, it had done so to provide a sustainable alternative that would boost university’s incomes and cut government spending. But there are reasons to believe this has failed. The Guardian reported that the new funding system is likely to cost the government not less, but more money than the system it replaced. It is time to reevaluate university funding, and I propose the following alternative: a system under which students would agree to ‘sell’ a percentage of their future income to their university in exchange for an education.

Under the current system moral hazard occurs since the universities need not worry about its students’ ability to repay their loans. Instead, the government will bear the costs if students default. This is a problem in desperate need of addressing especially considering that an estimated 73% of graduates will not be able to fully repay their loans.

Under the proposed system in which universities own the income rights to students’ future earnings, the incentive structure would be changed as to align the interests of students, universities and society alike. Universities will factor in how much their education will benefit their students in terms of their future earnings. This allows relative prices to convey how much certain professions are, in fact, valued by society. The university would encourage more students to take up careers that are more valued and it could charge less (in terms of percentage points) for the degrees with better prospects than those with worse.

By contrast, universities today charge uniform rates and have an incentive to provide the most appealing courses - which often mean courses that are enjoyable or easy - rather than being actually useful or valuable. The graduates may therefore lack the skills to be productive members of the workforce, despite accumulating large debts. Universities even have an incentive to admit students it knows will not benefit from the course since it will nonetheless receive government funding.

In turn, universities could sell its future income rights through a process of ‘securitisation’, per course or as a diversified portfolio. This free-market solution provides an equitable opportunity to all, since students’ ability to attend university is not depended upon current wealth but future earnings; thus depended upon skill and merit, not money. This system would streamline all stakeholders’ interests and ‘securitise’ Britain’s free and prosperous future.

Tamay is the runner-up in the 18-21 category of the ASI's 'Young Writer on Liberty' competition. 

Devolution and Super-Councils


As Scotland looks set to receive an ‘unprecedented’ collection of powers from Westminster, it is time too for the English regions to benefit from devolution. The lack of what Hayek would call ‘perfect information’ is a weakness intrinsic to a centralised states – surely local councils have a greater understanding of problems that face their local areas than Whitehall? As one of the most centralised states in the world, the UK is ripe for devolution in a variety of policy areas. One such example is taxation. Rather than simply being bankrolled by central government, local authorities should be able to raise their own revenue. This would encourage greater fiscal responsibility from councils, as they would have to justify spending to their electorate, discouraging the waste that has been all too characteristic of local government.

Another possible area of devolution is healthcare: councils should be free to innovate in response to local problems. The savings that this would result in would contribute to the £22 billion of efficiencies in the NHS that Simon Stevens, the Chief Executive of NHS England, has highlighted as necessary by 2020-21. Furthermore, patient satisfaction will improve: the Institute of Economic Affairs has pointed to Switzerland’s decentralised healthcare system, which provides a responsive service with high life expectancy and patient approval ratings.

Having greater powers would also give councils more clout when they bid for major infrastructure projects. London has reaped the fruits of much central government support, with the Greater London Authority securing £4.7 billion from the Department of Transport to fund Crossrail. If all councils had the same bidding powers, government spending would more effectively match the infrastructure needs of the local area – instead of grandiose projects such as HS2, more Crossrails could be built, creating the ‘Northern Powerhouse’ that George Osborne strives for.

How will this devolution create a freer UK? Firstly, councils being forced to raise their own money deters excessive spending, lest councillors be punished by the local electorate who are paying for it. Secondly, healthcare efficiencies mean a smaller burden on the taxpayer to pay for the NHS, while the patient will likely be more satisfied with a service suited for local needs. Finally, this devolution will result in more focussed, efficient infrastructure spending. In short, ‘super-councils’ can reduce the burden on the taxpayer, and create the conditions for a flourishing free market.

Alan Petri is runner-up in the Under-18 category of the ASI's 'Young Writer on Liberty' competition 2015.

Against reform of the House of Lords


This probably won't be all that popular among those who insist that democracy is the be all and end all of a political system. But we think that the current proposals to reform the House of Lords are a bad idea:

Rogue peers should be subject to immediate suspension from the House of Lords when scandals break, a senior Labour peer has said.

Lord Soley, a former chairman of the Parliamentary Labour Party, made the call in a letter to Lord Speaker Baroness D'Souza in the wake of the allegations against Lord Sewel.

Well, no. we don't kick an MP out of the House of Commons because a scandal has broken. They do have to leave if they are found guilty of a criminal offence and are then sentenced to more than a minimum amount of jail time. And then there's this:

Peers should be forced to retire when they reach old age to ensure the House of Lords remains "fit for purpose", the Lord Speaker has suggested as she ordered a review into the code of conduct. Writing in The Daily Telegraph, Baroness D'Souza warns reform is “vitally necessary” if the body wants to retain public support in the wake of the Lord Sewel scandal.

Again, no, we are not persuaded.

It's entirely possible to have a very different conversation about whether there should be a House of Lords at all, we should have a unicameral system, one with an elected second house, one selected by sortition, any number of variables. But the real point of a second house at all is to have one that acts as a limit upon the enthusiasms of the mob that directly elected politicians are subject to. And for that limiting to be effective there must be no way to remove those not convicted of some criminal offence of some specific level of gravity. For, given how many things are illegal these days there's absolutely no one who cannot be accused of breaking some law or another. And wouldn't it be remarkable if it were those who were being particularly bloody minded about opposing the executive of the day who were so accused?

After all, at least part of this outrage about Sewel was that he was doing something entirely legal: consorting with ladies of negotiable affection. Something that really is entirely legal in this land, however much it might not be to your or our taste.

Being able to throw peers out because they were a bit doddery, or because a newspaper disapproved of their activities, would greatly weaken the House's ability to be independent of the whims of the passing society. And given that that's what they're there for, to limit the impact of passing fads, we oppose such a change.

Young Writer on Liberty 2015 Winners


We're delighted to announce the winners of our 2015 Young Writer on Liberty competition, and will be showcasing some of their work in the coming days. The theme of this year's competition was 'The road not yet travelled: Three paths the next government should take for a freer United Kingdom'. Entrants wrote three, 400-word articles on this theme, each outlining a policy proposal to make the United Kingdom richer, freer and more prosperous.

We received dozens of entries and competition was fierce with incredibly high standards. This year for the first time, entries were spilt into 'Under-18' and '18-21' categories, with a winner and a runner-up in each.

The runner-up of the Under-18 category is Alan Petri, and the winner of the Under-18s is Theo Cox Dodgson. The runner-up of the 18-21 category is Tamay Besiroglu, and the category winner Theo Clifford.

Runners-up will have one of their entries showcased on the ASI blog tomorrow, and category winners will have all three of their pieces posted over the week.

Category winners will also receive £150 prize money, whilst both winners and runners-up will receive boxes filled with liberty-related books.

Check-in next week to read the entries!


What a pity Professor Krugman doesn't explore this logic completely


We have long been making the point that there's two aspects to Paul Krugman. The outstanding economist and excellent essay writer, then there's the New York Times columnist rather in the tank for one specific political view of the world. that second world being where government tells people how to live their lives better. But there's still flashes of the underlying economist around:

Politicians who preside over economic booms often develop delusions of competence. You can see this domestically: Jeb Bush imagines that he knows the secrets of economic growth because he happened to be governor when Florida was experiencing a giant housing bubble, and he had the good luck to leave office just before it burst. We’ve seen it in many countries: I still remember the omniscience and omnipotence ascribed to Japanese bureaucrats in the 1980s, before the long stagnation set in.

We see this in the development economics of Ha Joon Chang and others too. S Korea grew so therefore the policies that we like that they followed must be implemented elsewhere so they can have growth. Our point is that the reality is rather different:

This is the context in which you need to understand the strange goings-on in China’s stock market. In and of itself, the price of Chinese equities shouldn’t matter all that much. But the authorities have chosen to put their credibility on the line by trying to control that market — and are in the process of demonstrating that, China’s remarkable success over the past 25 years notwithstanding, the nation’s rulers have no idea what they’re doing.

We tend to think that no government ever knows what it is doing. This is partly Hayek, pointing out that it can never have enough information to plan things, partly our own observations of how governance actually works in detail. We know lots of the people who do actually run the government. Some of them are even very nice people but we'd not describe any of them as the Wise Solons who know the answer to every, or even any, of the nation's problems.

So what have we just learned? China’s incredible growth wasn’t a mirage, and its economy remains a productive powerhouse. The problems of transition to lower growth are obviously major, but we’ve known that for a while. The big news here isn’t about the Chinese economy; it’s about China’s leaders. Forget everything you’ve heard about their brilliance and foresightedness. Judging by their current flailing, they have no clue what they’re doing.

China's stunning growth since 1978 is not an illusion. The country has gone from being roughly as rich as England in 1600 (as measured by per capita GDP) to about the UK in 1953, 1955 or so. That's pretty good for simply stopping the adherence to Marxist and Maoist idiocies. But that's what it was: the rulers stopped following idiot policies.

And thus why we are minarchists. There are indeed some things that both must be done and must be done by government. But given the paucity of knowledge, of competence, among those who would govern that's all that government should attempt to do. The only further ambition they should have is to not do stupid things. Which, given those who become the governors, means nothing over what must and can only be done by government.

Yes, we really do need to start paying kidney donors


We have long been pointing out that the solution to the shortage of kidneys available for transplant is to offer to pay those donors who might be willing to donate one. Adter all, it's not exactly a new insight that increasing prices brings forth more supply. And the sort of levels of payment necessary are in fact cheaper than the cost to the NHS of dialysis. The New York Times has a nice piece on how this works elsewhere:

Iran’s system has many deficiencies — not least that the very idea clashes with ethical norms observed in many other countries — and the program varies greatly from region to region. But its chief advantage is this: People who need kidneys get them rapidly, rather than die on the waiting list.

In the vast majority of cases, donors know in advance what they will be paid and receive appropriate screening and good medical care before and during the operation. And by getting patients new kidneys instead of keeping them on dialysis, the society saves a lot of money and avoids much misery.

Whatever anyone's doubts about whether people ought to be paid for organ donation there's no doubt that it does actually work.

“We should ask ourselves why some people find accepting money to donate a kidney and save a life repugnant, but accepting money for being a policeman or miner or soldier — all of which are statistically riskier than donating a kidney — is O.K.,” said Mohammad Akbarpour, a research fellow in the Becker-Friedman Institute of the University of Chicago. “Is there a fundamental difference?”

It could be that people simply don't understand how low that relative risk is.

Commercializing kidneys calls up images of a filthy, makeshift clinic, a rich traveler with a wad of cash, a desperately poor donor tricked into selling an organ, and a broker who keeps 90 percent of the money. India, Pakistan, the Philippines, South Africa and Indonesia, among other countries, are known for this type of trafficking in organs, and wealthy Americans, Israelis and Europeans are known for buying them.

But in Iran, the legal market pre-empts these abuses. To prevent kidney tourism, recipients in Iran have to share the nationality of their donors, and Iran recently banned kidneys for all foreigners except refugees in Iran from Afghanistan. “The rate of people who die in surgery is much, much lower in Iran than in other developing countries — all the transplants are under supervision,” said Farshad Fatemi, an assistant professor of economics at Sharif University of Technology in Tehran, who studies the kidney market. “If this regulated market weren’t in place, we might have organ trafficking here. We might be more like India or China and have illegal clinics, a black market where nobody looks after patients and donors.”

And there we have something that we have again been saying repeatedly. Markets are going to exist where human desire is great enough. It happens with sex, it happens with drugs, it is happening with organ transplants. In all three we argue that said market will be safer, will work better, if the activity itself is legal so that regulation, if that's necessary, is possible. Insisting that these things are illegal is part of what makes them so dangerous.

So, given that we've got the example of the one and only place in the world where people do not die waiting for a transplant, when are we going to institute our own paid market in them? For it really is true that people die, in great pain, each and every year simply because of some squeamishness about introducing filthy lucre into the proceedings.

As ever, there really are some thing so important that we must have markets in them.