The Pin Factory Blog

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ensure their children are properly fed, with less money then available to fix the problems of dilapidated classrooms, out-of-date textbooks and poorly paid teachers.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.

The late Nobel economist Milton Friedman was born on this day in 1912. A great communicator and cheery personality, he revived the idea that inflation is at heart (he would say 'always and everywhere') a monetary phenomenon. In other words, if you discover inflation, you can be pretty sure that it stems, not from the rising price of oil or whatever, but from governments being profligate with our money. He was also a great believer in small government and personal freedom. Here are a few of his bon mots:

"The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself."

"I am favour of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible."

"Inflation is the one form of taxation that can be imposed without legislation."

"Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government."

"The problem of social organization is how to set up an arrangement under which greed will do the least harm: capitalism is that kind of a system."
 

Today marks the 10th anniversary of the introduction of the national minimum wage in the UK – something the government trumpets as one of their proudest achievements. 

Minimum wages are one of those things that sound wonderful in theory, and which politicians are therefore unwilling to publicly oppose. But as with all government attempts to fix prices (in this case, the price of labour), minimum wages tend to have some unfortunate unintended consequences – as this Fraser Forum article succinctly points out.

• A review of 90 studies in fifteen countries carried out by Professor David Neumark of the University of California and Dr. William Wascher, a U.S. Federal Reserve Board economist, found that "the overwhelming majority" of studies consistently showed that minimum wage increases resulted in decreases in employment.
• Research by Professor Morley Gunderson of the University of Toronto found that a 25 percent minimum wage increase (which was being proposed by the Ontario government at the time) would reduce employment by as much as 15 percent – even if phased in slowly.
• Employers often respond to minimum wage rises by reducing on-the-job benefits and training – not good news in an increasingly skills driven economy.
• Raising the minimum wage has also been associated with higher drop-out rates in schools.
• The beneficiaries of minimum wage rises do not tend to be low-income workers and struggling families In fact the only people made better off by minimum wage increases are young people living at home and adults supplementing their family income with part-time work.

Let's hope further minimum wage rises – or, indeed, the abolition of the lower minimum wage for young people – are not on the government's agenda. The costs would almost certainly outweigh the benefits.

If you missed the headlines, World Trade Organization talks failed on Tuesday – disheartening news for free-traders like us.
 
The talks fell apart when the US, China and India could not agree on whether protectionist measures to defend struggling domestic products would be included in the agreement. Surely the goal here was to reduce the barriers to trade, not include new ones?

Allowing India, China and the other G33 countries to keep tariffs on agricultural imports would have been counter-productive, especially with current rising food prices. The tariffs would have encouraged this trend instead of making food and other goods more affordable for all their citizens. On the other hand, perhaps developing countries would have been more willing to bring down tariffs if the US and the EU had actually been prepared to reduce the subsidies they pay their farmers.

It's a real shame that 7 years of negotiations have amounted to nothing. But the most frustrating part is that once again governments were far too short sighted, choosing a path that would lead to popularity in the here and now, and did not consider the net benefits and long-term growth achievable through truly free trade.