The Pin Factory Blog

The massed ranks of the bien pensant hordes seem to gathering behind the idea that there should be windfall taxes upon the profits of the energy companies. One exemplar much quoted across the newspapers is Tony Woodley:

Tony Woodley, joint leader of the union Unite, said: 'These latest vast profits now put the case for a windfall tax on big oil companies beyond argument.

'The Government should grasp the nettle and do what it did in 1997 by taxing grotesque profits and put the proceeds into helping the millions of people struggling with their fuel bills.'

Let's see if we can disentangle this argument shall we? Firstly, yes, we have high fuel prices: as we know prices change to balance supply and demand and so those prices are simply reflecting that balance point. So, if we would like to lower prices, we would want to reduce demand, increase supply or some mixture of the two.

Increasing supply would require more money to be spent on the problems of discovering and extracting more of those energy sources: reducing demand could be done by reducing the amount that people either do or have available to spend on purchasing such. Perhaps not the way we'd like to do that latter, but it would work.

So Mr. Woodley is suggesting that we should do something rather different. We should reduce the amount being spent to discover and produce more. That's what greater taxation of the profits would mean: both the profits which the current companies would no longer have to finance such and also by dissuading new capital from entering the industry if they think they won't be allowed to earn from what they discover. He further thinks that we should give this money to consumers so that they can continue to buy the products which are in short supply.

Now stupidity isn't something in short supply, but this idea goes right through that. We would like to increase supply and reduce demand so as to bring prices down. This suggestion is that we should reduce supply and increase demand as a method of reducing prices. That's well past stupidity, that's idiocy.

Might I suggest that Mr. Woodley make sure that he wears slip ons from now on? Given the amount of mature intelligence he's displaying here he's clearly at risk of strangling himself if he were to attempt to tie his own shoelaces.

In Westminster, the speculation over Gordon Brown's leadership continues to mount and polls continue to plunge (according to YouGov, only 18 percent think he is an asset and only 15 percent think he is up to the job), the first round of the challenge draws ever closer, and Miliband is waiting in the wings.  Since the humiliating by-elections defeats, with a 17.6 percent vote turn around in Crewe and Nantwich, and a swing of 22.5 percent in Glasgow East, the cracks within the Labour Party have begun to emerge and a showdown now seems inevitable.  Some such as John McDonnell are already demanding to test Brown, and his most likely adversary Miliband refuses to deny a Leadership challenge, has made subtle attacks, cancelled a foreign trip and held what many are calling a 'farewell' party.

This is all very suspicious behaviour from the man who says he 'always supported Gordon's leadership, and from a party that loves to use covertness to bring about change (e.g. Gordon's Stealth Taxes). It is always possible that Miliband's actions are a poorly timed coincidence, but as some of his colleagues have begun to label him as a self-serving egotistical backstabber who is damaging the party, one can only conclude that Brown's leadership is deeply under threat. Only time will tell how Brown's premiership ends, however one doesn't have to be a fortune teller to guess that Brown will be down and out before a second term; either through regicide or in 2010.

Even if Miliband took the helm of Labour, would he be able to steer the party away from catastrophe at the next election? Or, is the death of Labour upon us?

To be continued...

For our anniversary, I decided to take my wife somewhere really expensive. So we went to the petol station.

We're not party political here but our word it is good to see economic rationality from that set of benches. Green taxes have their place, but that's as green taxes, not extra taxes nor for the pursuit of other political ends.

Adam Smith is often called the father of (modern) economics, was he also the father of wine economics (erm, oenoeconomics?)?

Banning things, prohibition, simply doesn't work, for we shaved monkeys are innovative little things. Further, banning things leads to peoples' deaths. Time to stop banning things perhaps?

Yes, there really are large differences between men and women: perhaps not on average, but in variances around that.

A nomination for Most Economically Literate Bureaucracy. No, it's not our own, why do you ask?

The unique role of the shed in British history.

And finally, modern history does seem to have become, well, modern.

One of the most interesting sites to come out of Africa recently is African Liberty  which blows open the traditional Western metropolitan elite consensus about how to help people in the continent.

It's refreshing stuff. My eye was drawn to the piece about the 'ambitious UN centrist plan' to get half the world's children into school (free schools, of course, paid for by governments) by 2015. Part of this is Ghana's programme to feed all schoolchildren at taxpayers' expense – a ploy to increase the enrolment figures. That, say the authors, means higher taxes on parents who would gladly ensure their children are properly fed, with less money then available to fix the problems of dilapidated classrooms, out-of-date textbooks and poorly paid teachers.

And the delightfully-named Rejoice Ngwenya, writing from Harare, gives a sharp taste of what life has become like in Zimbabwe:

My day starts with a fire in the gazebo to warm a bucket of bathing water. Electricity is usually down and with a water system that collapsed six months ago, running water is a thing of the past. Zimbabwe National Water Authority has a repertoire of excuses why the precious liquid deserted my home. I have stopped asking. Water bills do come, but there are no penalties for ignoring them... Forget eggs and a cup of tea. They are not on my menu if the preceding day I had no access to at least six United States dollars. My breakfast is therefore limited to a bowl of corn meal porridge with peanut butter, and boiled sweet potatoes!

Then there are pieces arguing that the Aid industry has become – well, just that, a self-justifying industry – and that its critics, the people who believe in opening up markets rather than sending aid to entrenched governments – are in fact its best friends. Challenging stuff.

Most of the restaurants that I frequent in the USA are cheap places outside Philadelphia, New York, and New Haven, Connecticut - not exactly the kind of cities renowned for their polite people or friendly service at, say, store counters. But it took a summer in London for me to appreciate just how good the wait-staff service is at restaurants near home. It’s not a far stretch to attribute this to the much stronger culture of tipping in the USA, which means that waiters can realistically expect to substantially increase their incomes by delivering exceptional service. 

The government has just announced a new law that would prevent tips from being counted towards the minimum wage in service industries. Now, we here at the ASI aren’t huge fans of minimum wage laws in the first place. But just to clarify, these waiters and waitresses were being paid at least minimum wage - but some of that came from their tips. Effectively, the law now says that the minimum wage for the service industry is minimum wage plus tips. The likely outcomes of such a law are higher prices at restaurants due to more staffing costs and less tipping, since the waiters are already taken care of. Neither of these will be good for the vast majority of consumers.

I will put in one caveat. Perhaps if restaurant owners do not need to use tips to ensure that they meet federally mandated minimum wage, they will be less likely to require that people in the service industry pool their tips and divide them equally. The positive incentives provided by tips are far more effective when the person who earns the tip gets to keep the money. There’s certainly no guarantee that this will be the effect of the law; if it is, however, and people keep tipping despite the increased charges, maybe there’s a silver lining to what is otherwise most definitely a cloud in the way of good service.

I used to get panic attacks whenever I saw small coins, but the doctor said I was just afraid of change.

George Orwell's diaries are to be released in (almost) blog form starting next week here. Here's a celebration of the fact and here's what seems to be an advance extract.

Netsmith hadn't realised this at all: Wikipedia is regularly used as a reference by the US courts.

The government might start guaranteeing mortgages: umm, didn't this at Freddie and Fannie contribute to the US mess? One economics professor sees a flaw as well.

Detailing quite how much of the rising energy bills come from government action. It's not all market action you know.

From the US, Obama seems afflicted with the same problem that many of our own leading leftists have over education for their own children: choice for the few not the many.

Also from the US, a Brit abroad visits a gun show. A sound idea in all he thinks.

And finally, not the most unexpected of scientific research outcomes.