The Pin Factory Blog

More on how your tax money gets spent. "Not effectively" would be too mild a description.

This might be part of the explanation of how the money gets wasted in such fashion. 

You might think that some of it also comes from the difference between these two questions. All too often people are asking the wrong one. 

And of course, the existence of tax havens is one of the things that limits governments' ability to ratchet taxes ever higher to pay for such things. 

A little macroeconomic reminder. Central banks influence, not control, interest rates and the longer term the rate, the less influence they have. 

Inspired blogging of the primary results from The Economist. 

And finally, why you should eat whale meat: it saves the planet. 

Freedom Week director, Jean-Paul Floru, was guest of honour at the ASI's launch of Madsen Pirie new book, "Freedom 101."  The book is a refutation of 101 "common errors," many in daily currency.  In his opening speech Jean-Paul praised the scholarship and commitment which had made the ASI so influential over the years.

Madsen then explained how the book and its title had come about.  He said that not only was 101 the designation for US university introduction courses, but was also the number of the room in Orwell's "1984" where people encountered whatever they feared most.  In this case it was what left-wingers feared most – the truth.  The reason why each error was refuted in 300 words, Madsen explained, was that this length occupied a computer screen without scrolling.  He told how a predecessor called "The Book" had similarly been designed to fit neatly into the back pocket of jeans.  Ideas were important, but so was marketing.

The hope was, said Madsen, that people would use "Freedom 101" to reinforce their own views and to undermine those of others.  He concluded by welcoming suggestions for further common errors for a possible "Freedom 202."  

The book will be available from this weekend on Amazon at £5.95, and will at some stage be available to download from the ASI site.

53. "Competition means companies selling shoddy goods to keep prices down and make more profit."

Companies which responded to competition like this would soon find themselves on the skids. Customers have a choice, and are unlikely to prefer shoddy goods to quality ones. The firm which has a consistent reputation for quality is more likely to survive, to prosper, and to show profits than the one which offers its customers inferior products.

Of course competition keeps prices down. For equal quality customers will prefer lower prices if they can find them. This means firms have to continually look out for ways keeping costs down by more efficient production methods, such as making better use of labour and machinery. But if they cut quality, they cannot expect their reputation to bring in new customers, or to encourage the old ones to come back for more.

In most markets there is a demand for different variations of products sold at different prices. Some prefer the top-of-the-range item, even if it costs more. Others choose to make do with the less classy variant that comes in at a lower price. Different firms will exploit different market niches, choosing to concentrate on a particular sector of the market. But any who try to trick customers into buying shoddy and inadequate goods will find their market share plunging.

Far from encouraging shoddy goods, competition constantly spurs firms to improve their quality as well as their efficiency, to show customers that they represent good value. The market works in an evolutionary way. Firms with an advantage prosper, whereas defective or inadequate ones are counted out. An examination of durable and consistently profitable firms shows that these are not the ones that tried to make quick profits on shoddy goods, but ones which maintained a long-term reputation for quality and value.

I was just trying to book some last-minute event tickets the other day. It's astonishing just how quickly many big events get sold out, mostly because of the policies of the promoters. Concerts and sports fixtures underprice their tickets in the belief that this makes them more accessible for the 'real fans' or because promoters earn more from sell-outs. So if you don't get in immediately the phone lines open, you've no chance.

A lot of policymakers would like to keep it that way because they simply don't like the idea of 'touts' selling tickets and making a profit out of Wimbledon and the like. The image is of the shifty, ill-shaven character flogging high-priced tickets outside the ground. But the reality is that there is now a thriving secondary market in event tickets, thanks to the internet and other highly respectable agencies such as Seatwave.

So folk like me can get the tickets they want, even if they have to pay a bit extra.
So I'm glad that the House of Commons committee on Culture, Media and Sport, in its recent report on the subject, rejected the case for heavy restrictions on the resale of tickets. The promoters want regulation so that they can continue to control prices. But you can't buck the market. An open and secure secondary market has got to be good for fans. Seatwave, for instance, offers a guarantee that the tickets it sells are genuine, 150% refund if they do not arrive on time, and a full refund if the event is cancelled (which is more than you get from many promoters).

But politicians are born meddlers, and the Committee also suggested that there should be a levy on tickets resold online. The idea is that any premium on the price can be channelled back to players and performers. In fact it would be just a tax on fans. And such is the way of these schemes that most of the cash would go back to the biggest stars, who are already not short of a bob or two. The market – free of daft political schemes like this – is unquestionably the best way to ensure that tickets end up in the hands of those who most want them.

According to The Guardian we actually have a real live sighting of Laffer Curve effects in the UK taxation system. Any bets on when they start to realise it can occur with every part of the tax system?

An argument against liberal paternalism. If we're too stupid to know the right thing to do on our own, how can we be clever enough to choose those to make said choices for us? 

Certainly, those running to rule us don't seem too bright at times. 

Interesting number. 90% of the world's oil is owned by national governments. Predictably, the amazing efficiency and transparency of this ownership method is leading to problems.

A macro-economic oddity: short term real interest rates in the US are now negative. Is this where we get Keynes' pushing on a piece of string?

More on that *secret* report on MEPs' expenses claims. *Secret*, because as we've been told, it's not really secret, just so confidential that no one is to be allowed to read and report on it.

And finally, to change the subject entirely, a new online journal of light verse.  

Libdem MP Phil Willis was our guest at a Power Lunch this week. As Chair of the Innovations, Universities and Skills Select Committee, he chose to raise the question whether labour (small L that is) was a global commodity or a national asset.

Many politicians think about skills in terms of producing the future skills that Britain will need. But Willis takes the view that we should be producing the skills that the world will need. I think that's a fair point. We live in what my colleague Madsen Pirie in an ASI report called a 'people economy' where your best productive asset is people and their brains and skills - and people are much more mobile than land or factories or machines. So we should think globally about them. Every knows that 600,000 people have migrated to the UK, mostly from Eastern Europe, and joined the workforce in the last year or so. But then there are more than four million Brits working abroad. We get around – and that's quite right.

We don't need to be self-sufficient in skills any more than we need to be self-sufficient in bananas. We can buy skills from the world, and they can buy ours. We're talking about building four new nuclear power plants – but the expertise to build them won't come from the UK alone, they will come from Japan and lots of other places which have the right people with the right skills.

I guess the policy conclusions are first, that we need to develop skills for the global marketplace, not just the skills that we think we need here and now. And second, if we are going to get all these skilled people to come to the UK and undertake the work that we can't do ourselves, we have to make the UK an attractive place to live. That means a relaxed, open, tolerant society, with good public services and low taxation. Unfortunately (as any non-dom will tell you) the present government seems to lack the skills to produce that happy prospect. Back to school for them.

54. "The arms trade is immoral."

It is the misuse of arms which can be immoral, not the people who make and deal in them. Every country has the right to protect itself and to have defence forces capable of ensuring its security. Without protection against armed aggression and conquest, all of the rights its people enjoy are empty and risk being overthrown.

The industry and the trade which meet that legitimate need are not immoral. On the contrary, they are helping countries to protect the rights that their citizens enjoy. The tanks, planes and ships which that industry supplies enable countries to protect themselves from armed aggression, and pose a significant deterrent to hostile acts being committed against them.

Further to this, the arms industry in Britain supports hundreds of thousands of jobs. These are in such areas as the manufacture of missiles and warplanes, making tanks and trucks, shipbuilding, and all of the support industries which go with these. The technological advances made in armaments often spill over into improved civilian products which go to help exports, and to give domestic consumers access to better products. Much night vision technology, for example, originally developed for military purposes, is now used by wildlife photographers. GPS systems, once used to locate troop movements, now steer cars and buses too.

There are problems where the arms sold for defensive purposes are used to commit acts of aggression, to wage civil war, or to repress a country's own citizens. The UK policy has been to deal with this by being selective about which governments it will sell arms to, and about what arms are appropriate. It means in practice that countries bent on the immoral or illegal use of arms have to obtain them from other, less scrupulous countries. Control of arms sales through export licences helps to keep the UK at least clear of the moral consequences of unacceptable uses.

The Government finally took heed of the Adam Smith Institute’s advice and put the former state owned turf accountant – the Tote – up for auction. The Tote enjoys a valuable statutory monopoly of pool betting along with an empire of 450 betting shops across the country.

Originally, the Government was committed to selling the Tote at a knock down price to its own management ‘for the good of racing’, although this curious term was never defined by ministers. In reality, racing has been doing very nicely of late. Indeed, there never been so many racing events held in this country. Meanwhile, many prominent racehorse owners remain as tax exiles, huddled in offshore centres or clustered in the Gulf states. They hardly need a hand-out from the British taxpayer.

Auctioning the Tote offers the first real opportunity to identify precisely how much the business is worth. The sale of the Tote ranks as Gordon Brown’s first privatisation measure. There is likely to be interest shown from various bookies, including Gala Coral, BetFred and Paddy Power.

Neil Goulden, Gala Coral's chief executive, is busy writing a letter to the government confirming its interest. Meanwhile, a clutch of private equity firms are likely to show an interest in the Tote. Currently, one of their main problems is to find a rewarding home for their stockpiles of money – a message underlined at last week’s Super Returns conference held in Munich. Significantly, Gala Coral is itself owned by a consortium of private equity houses comprising Candover Investments, Cinven and Permira. All of them have deep pockets

Gerry Sutcliffe, the minister responsible for the sale, told MPs yesterday that the government would begin taking indicative offers straightaway. So, if you fancy a flutter, give him a call. The guide price is £400 million.

Keith Boyfield is the author of At Odds With Taxpayers: Why a Cosy Deal on the Tote is Bad for Punters and the Public. In 2004 the Adam Smith Institute submitted a formal objection to the European Commission concerning the Government’s proposal to sell the Tote to a Racing Trust for a figure well below its market value. The Commission agreed with our complaint and ruled that the Government’s plan constituted an illegal use of state aid.

Another example of the lunacies to which the War on Drugs leads us. The banning of small plastic bags.

On the rise of the minimum wage. It's not actually going to change the income of those on it very much: although it will cost businesses a great deal. 

Wat Tyler attends Parliament. So, just what are they going to do with all those 16-18 year olds who will be subjected to educational conscription? Umm, they haven't worked that out yet. 

As Milton Friedman said, there's nothing so permanent as a temporary government program. 

Government in Romania might be glaringly and obviously rent seeking, but it's only a matter of degree: this happens to some extent everywhere. 

Well, yes, although rent-avoiding rather than seeking might be the phrase here. 

And finally, could this be the reason for the low birth rate in Finland?