The Pin Factory Blog

Something that all too many forget. Drugs were once legal in the UK and no, it really didn't seem to cause many problems.

Other numbers to be kept in perspective: this coming crash. We don't even know if GDP growth will go negative yet in the US, let alone decline significantly.

This might not have been the very bestest documentary ever, at least judging by this review.

Clever people the French, you know, Cartesian logic and all that. Not all display that admirable quality though.

That Tragedy of the Commons stuff: keeps popping up everywhere.

A fascinating experiment: what did Robert Johnson really sound like?

And finally, yes, this could have been better designed.

London's Mayoral election is getting plenty of coverage but the local elections taking place in 155 council areas across England and Wales the same day have generated far less interest. As yesterday's Daily Telegraph noted:

Council elections never attract much interest. Average turnout in local polls since 1996 has been 35.4 per cent. And those who do vote tend to treat the election as a miniature referendum on the national parties, a megaphone through which to shout at Westminster.

The reason is straightforward. People don't think that the composition of their local council is going to make very much difference. Indeed, it's hard to think of any developed country in which local government is weaker than here in Britain. As the Telegraph continued:

Schools and hospitals are largely run from Whitehall. The decree on fortnightly recycling came, in effect, from the EU's Landfill Directive. Three-quarters of council budgets come from central government, the highest proportion in Europe.

This is a shame. Local government could be a useful bulwark against excessive central government. When power is diffused it is limited. Localism creates an 'exit-option' similar to the one that exists in the market – if people don't like the policies of their local authority, they can move to another one and take their taxes with them. That creates competitive pressures to keep charges down and improve standards.

Localism also allows for greater experimentation. Councils can learn from each other and move towards better delivering better services. When power is centralized none of this can happen. There is no 'exit-option' short of leaving the country and only one reform can be tried at a time.

Counties should exercise the same powers as the Scottish Parliament.* People often say that local councils are not competent to exercise such powers, and that if they did it would result in a 'postcode lottery'. But I'd say that these powers are precisely the ones that should be left to local government. They couldn't do worse than Whitehall. And besides, centralization has itself given us a 'postcode lottery'. If local authorities were free to tailor polices to local needs, there would probably be less divergence in outcomes than under the one-size-fits-all approach.

* Healthcare and social services, education, housing and planning, transport and local environmental issues, among several others.

The unintended cosequences of climate change alarmism are growing clearer by the day. Prices for wheat are 60 percent higher than a year ago – resulting in soaring bread prices of around 36 percent per year. This is primarily due to agricultural land being used for biofuel production (which now takes up 30 percent of American agricultural capacity). Bread riots, a red light for every regime since time imemorial, toppled the government in Haiti a few days ago and are spreading across the world. Similar developments have triggered protests and riots in countries ranging from Africa, India, Indonesia and Afghanistan.

Alarmed by this, Ukraine, Russia, Kazakhstan, India, Inonesia, Vietnam and Argentina have restricted food exports in order to feed their own populaces. Even in the US, probably not much longer the bread basket of the world, rationing of food has begun over the last 6 weeks. Bloggers in New York are relating amazing stories:

I've heard that rice, flour, beans, and cooking oil are the main items being rationed at places like Pathmark, ShopRite, and Costco. One friend who lives in Flushing mentioned that she was not allowed to purchase more than one 25lb sack of rice in a local grocery. As far as I know, the main neighborhoods being rationed so far are all in the outer Boroughs (Queens, Bronx, Jersey City, parts of Brooklyn, and Harlem).

In silicon valley you could not buy more than one big sack of rice last week. With the growing media coverage of food shortages and related unrest abroad, the already protectionist mood among Americans has lead to calls for a moratorium on wheat exports. American bakery owners marched on Congress last month demanding to curtail wheat exports to give them some relief. Thanks to the collapse of the American dollar it's becoming cheaper for foreigners to buy out US supplies. Bread and butter issues are increasingly likely to become an issue in this November presidential election.

When I began writing about "Common Errors" in early January, I had little idea how many there would be!  It seems that there are more erroneous views in everyday currency than I had supposed possible. However, a series became a book. I decided to stop at 101, for in Room 101 of Orwell's "1984" is the thing that everyone fears most. In this case it is the plausible assumptions that are completely mistaken.  By coincidence the starter courses in US universities and colleges are often designated 101 courses. The series which became a book is now "Freedom 101" and you can read about it here.

Players at Harrowgate Cricket Club, North Yorkshire, have been banned from hitting sixes – on health and safety grounds. Harrowgate Borough Council made the ruling out of concern for local residents.

More here on the Daily Telegraph website.

Are you annoyed by your council trying to fine you for litter? For a bin over-filled in a minor manner? Why not insist that they the council should also obey the law? Here's a how to guide. Sauces, geese and ganders, no?

That new Libertarian Party. Extremely annoying, don't you think? Taking the ideas straight out of your brain?

We only need for TV watching habits to change slightly at the margin ffor there to be a huge amount of participation in hte various social networks and projects like Wikipedia:

The Internet-connected population watches roughly a trillion hours of TV a year. That's about five times the size of the annual U.S. consumption. One per cent of that  is 10,000 Wikipedia projects per year worth of participation.

Thank goodness we created and maintained the NHS, eh? Britain is top of the world!

So what is causing those food riots? Yes, it's bad government policy.

It's not as if there's a shortage of bad policy, bad regulation, around at the moment now, is it?

And finally, do we actually want Boris to win if this is the alternative?

It's generally assumed that increased trade with countries which have lowly paid workforces must necessarily increase income inequality here: for the low skilled workers in our own economy will be competing with those lowly paid and lowly skilled workers elsewhere, while more highly paid workers in the domestic economy face no such pressures.

And this is true of course, to some extent. The question is, to what extent, and further, are there any mechanisms which offset this increase in inequality?

As a number of people have noted there's an interesting new paper looking at this very point.

Using household data on non-durable consumption between 1994 and 2005 we document that much of the rise of income inequality has been offset by a relative decline in the price index of the poor. By relaxing the standard assumptions underlying the representative agent framework we find that inflation for households in the lowest tenth percentile of income has been 6 percentage points smaller than inflation for the upper tenth percentile over this period.

They actually find that some two thirds of the rise in income inequality in market incomes is offset when you look at consumption inequality instead.The reason for this is that goods preferentially consumed by the higher income groups (mainly services) have had a higher inflation rate than those preferentially consumed by lower income groups (largely physical products). We can see this anecdotally in the UK as the varous papers try to calculate "middle class inflation rates" and the like, they all being much higher than the headline rate. It's also closely tied in with Baumol's Cost Disease, in that we always expect productivity in manufacturing to rise faster than that in services and thus the latter to become more expensive in relation to the former. Globalisation just exaggerates, rather than causes, this.

These figures are for the USA but there's one thing that makes me think that the rise in consumption inequality would be even lower in the UK. That is that, to a much greater extent than the US, health care and education in the UK are free at the point of use: it's roughly the top 10% of the income distribution which pay for these things privately, everyone else using the NHS or the State school system. That 10% will have seen the higher services inflation rate while the 90% will not have (except of course for the taxation to pay for it, but that is skewed towards the higher earners as well).

There may well have been a rise in income inequality as a result of increased international trade, but when we measure it by what actually matters, consumption inequality, there doesn't seem to actually be very much of it.

Last week lots of teachers went on strike because they thought the 2.4 percent pay rise they were being offered by the government was not enough (the NUT wanted 10 percent). Even though only one in four of the teachers' unions called the strike, with only a quarter of the NUT voting in favour and only one in ten teachers supporting it, 5000 schools were closed and 4,500 had their classes disrupted. And this with exams fast approaching.

I liked Alice Thompson's take on this in Friday's Telegraph:

Here's a really good lesson, one I am sure you will all want your children to learn. If you don't like having to eat salad or you don't feel like discussing frogspawn in biology, if you hate swimming or think it is unfair to have Double Maths on a Monday morning, then go on strike. It's easy: just sit on your desk and refuse to move, or don't come in at all - go shopping or play football instead. If the teachers complain, you can explain that it is the only way you can get your point across, that nothing ever happens through negotiation, and confrontation is the best way forward.

If the head teacher tells you that these are the rules and that the majority of pupils abide by them, stick two fingers up. Why shouldn't you disrupt everyone else's lives? If you don't look after yourself, no one else will. The more attention you draw to yourself, the better. Get the camera crews in, parade up and down the high street. It doesn't matter if most of the other pupils want to negotiate a deal to have chips instead of salad one day a week, or change Double Maths to a Tuesday. That would be a pathetic compromise

To be honest, some teachers definitely do deserve more money. They do a tough and vitally important job. But on the other hand, some teachers don't even deserve the money they're getting at the moment. In a sensible system, teachers' pay would be decided by each individual school, who would factor local living expenses, the teacher's qualifications and perhaps their performance into the salary.  Yet because education is nationalized, so is pay-bargaining, meaning everyone has to get the same pay rise. And so we get national strikes when that rise isn't high enough.

It's yet another reason why we need a localised education voucher system like the one in Sweden. Our recent report, Open Access for UK Schools, tells you everthing you need to know.    

On the news that train fares are to be simplified, I think Damian Hockney (possibly the leader of the One London Party, though I can't be sure) made a good point in a letter to Friday's Metro:

YES, let's all cheer that rail travel will become even more expensive. Let's all leap around and bang the drums to celebrate that all the "confusion" invloved in booking really cheap, early tickets will be scrapped and that we will have less choice. Next, let's stop all that "confusion" in other things like telecoms competition, and then we can go back to the good old days when you had to wait nine months to get a phone installed.

Essentially, the Association of Train Operating Companies has decided that the current ticket pricing structure, under which some companies offer as many as 12 different types of ticket, will be scrapped in favour of a system with just three options: advance, off-peak and anytime. Now, that may simply be good business practice - i.e. what consumers want - in which case, fine. But I suspect that this simplification will just be used as an excuse to raise ticket prices accross the board. Imagine if the supermarkets got together and decided that they would all only offer three particular kinds of, say, milk at three different prices. That would probably be regarded as an anti-competitive practice - sellers clubbing together to offer buyers less choice, and therefore get away with charging more for the product.

On the other hand, it's really no wonder that train operators are desperate to squeeze as much money out of passengers as possible. 40 percent of tickets sold have their prices capped by the government, which is to say that 40 percent of a train operator's business may take place at below market prices. They need to make up for that somehow. The reality is that some tickets - those on busy routes at peak times - should become more expensive, while others should probably be much cheaper. It's supply and demand. Such a pricing structure would also act to encourage people to travel at quieter moments, rather than all pile onto the train at 8.30am with everyone else. It is ridiculous that more than a decade after the privatization of the railways, the government is still preventing this from happening.