The Pin Factory Blog

It does not really matter what colour of government reforms our schools, but it must surely be the number two priority after putting the economy to rights. It begins to look as if it might be the blue party that does it. Having embraced the Swedish model, they seem to have quietly dropped the idea of excluding for-profit schools in the mix.

Now comes an announcement from Michael Gove, shadow Schools Secretary, that groups of teachers will also be allowed (and he suggested 'encouraged') to start their own schools. He has been looking at the successful US experience of the Knowledge Is Power Programme (KIPP), which has seen several new schools started by teachers.

We meet quite a few teachers in the Adam Smith Institute through the ASI's programme of school visits, 6th form ISOS seminars, and even our Power Lunches. There is practically a unanimity that talented teachers have their time wasted and their enthusiasm blunted by the acres of paperwork which flow across their desks, and by the need to comply in detail with minutiae set by civil servants who have not entered a classroom since they were children themselves.

It is reported that the recently-formed New Schools Network has already been contacted by significant numbers of teachers keen to take advantage of the new opportunities.

Education will be the key, and new schools are an essential part of its ability to open new doors of opportunity and quality education, especially for students in deprived areas. Some of the current failing schools might well reform and improve once parents can exercise choice of schools, and direct state funds to those they have chosen. Many, though, will fail and pass unmourned into oblivion. Their place will be taken by high quality new schools. Some will be started by entrepreneurs, some by parents, and now, we are told, some by teachers. They bring a knowledge and a commitment that are needed.

This is a very welcome move, and one that suggests that the Conservatives finally have the right policy on schools, and might just have the nous to implement it.

Madsen Pirie's new book "101 Great Philosophers" is now available.

Will Nudge author Richard Thaler cut regulation or build a new Tory Nanny State?

University of Chicago economist Richard Thaler has reportedly joined the Conservative party as an adviser on regulatory issues. This may be good news for the cleanliness of British urinals, but not much else.

Professor Thaler is the doyen of the school of ‘behavioural economics’, which is based on such non-astonishing insights as the fact that human beings are not wealth-maximizing automata; they procrastinate, lack self-control and occasionally act like headless chickens. He recently wrote an article in The New York Times in which he compared the average punter to Homer Simpson! Behavioural economics thus represents yet another attack on the straw man notion that the validity of free markets depends on rational humans and perfect markets. Adam Smith certainly never made any such claims. He noted that it was all about higgling, bargaining and propensities to ‘truck, barter, and exchange’. Behavioural economics is yet another excuse for intervention, as if the return of Keynesianism wasn’t bad enough!

The Bible of the ‘new’ economics is Professor Thaler’s Nudge: Improving Decisions about Health, Wealth, and Happiness, which he co-authored with Cass Sunstein, President Obama’s regulatory czar. The book is aimed at promoting an oxymoronic ‘paternal libertarianism,’ a ‘real Third Way’. Thaler and co-author Sunstein make the claim – much beloved of Communist rhetoricians – that there is no ‘real’ freedom. Since all choices are made within particular ‘contexts’, policymakers are obliged to become ‘choice architects’, subtly rigging our environment to stop us making the ‘wrong’ decisions. For support, the authors quote – with an example whose bizarre triviality you could not make up if you were deliberately trying to discredit them -- how Dutch airport authorities reduced urinal spillage by 80% by etching target flies into the porcelain!

It seems that people can’t even piss straight without someone in authority telling them how.

Shadow Home Secretary Chris Grayling wants to tax alcopops and curb pub hours. Neither will stop binge drinking.

When problems like binge drinking crop up, lots of people from 24-hour news channels thrust microphones under the noses of politicians and ask what they are going to do about it. Naturally, they say they're going to take 'tough' action, right away. But often their 'tough' action is only tough on the symptoms, not the disease. And quite often, the politicians' actions have exactly the opposite effect of the one intended.

Here's an example. As Fraser Nelson reported a year ago, when the Rudd government in Australia jacked up the price of pre-mixed drinks by 70%, consumption fell by 30% but spirit sales jumped by 46% as the kids mixed their own. And of course the kids poured themselves bigger measures than you got in the average alcopop. The result was a 10% rise in alcohol consumption.

Australia also used to have the ‘five o’clock swill’ as pub customers drank as much as they could before the official 5pm closing time. I remember the same happening in Scotland, where pubs were open a few hours at lunchtime, then from just 5pm-10pm in the evening. They didn't even open at all on Sundays. After Scotland deregulated in 1978, allowing 24-hour opening, everything improved – there was less drunkenness, less violence, an easier job for the police, and a fall in alcohol-related illnesses. Pubs were no longer just male drinking holes, but started selling food and becoming much more welcoming to families.

Politicians who want to seem ‘tough’ on binge drinking would be better focusing on the real, cultural cause. Alcohol is far cheaper in France and they drink at all hours, but they don’t have anything like our problems. Instead of an instant reaction for the microphones, our politicians would be better to understand why it is that young people go out binge drinking. Maybe it's because we have regulated our pubs so much that young people can't afford to drink in them. So they are no longer drinking under adult supervision, but go and get smashed on supermarket lager instead. Maybe the decline in the nuclear family, thanks to perverse welfare rules, also means that kids never learn to handle the joys and the dangers of alcohol as they do in France. Maybe it's bad state education or a nanny state that just picks up the mess with no come-back for kids or parents. Whatever the cause, slapping on new taxes and bringing in regulation isn't going to stop the effect.

Dr Butler's book The Rotten State of Britain is now in paperback.

Cameron's 'thoughtful revolution' in elderly care needs more thought about principle.

The latest fusillade in the Conservatives' 'thoughtful revolution', which Philip Salter reported on here, looks – well, completely devoid of any thought at all.

In fact, this latest vote-winning wheeze shows how devoid of principle or imagination the Conservatives have become. (Not that this is much of a criticism, since all parts of the political class are naturally more interested in votes than in either of those.) Indeed, it looks like a quick-fix plan to match Gordon Brown's costly promises on the same subject

The plan is that if people pay the £8,000 at retirement, then the government will give them free long-term care when they need it. It is absolutely extraordinary. It means that the Conservatives – the Conservatives – are proposing a new form of national insurance. An extension of the Welfare State. It means that a Conservative – a Conservative – government would crowd out private insurers who might just be able to do that sort of a job better and cheaper than Whitehall bureaucrats. (Admit it, that has been known.)

If anyone in the Eton-Islington Axis was actually moved by principle rather than PR, they'd have consulted two decades' worth of think-tank reports pointing out that things like long-term care – and healthcare in general – are best provided through a partnership between individuals, insurance, and the state. The deal should be that if you fund or insure yourself for a reasonable period (say two years) of long-term care, then yes, the state will pick up the tab for the rest – since it's those unpredictably long stays that give insurers the collywobbles. It certainly shouldn't be that the state insures everything.

As an insurance company, the state sucks. It should focus on its proper role – welfare needs and the provision of things people can't save or insure for – not advancing into new areas that never occurred to Aneurin Bevan. Now that would be a thoughtful revolution.

Dr Butler's book The Rotten State of Britain is now in paperback.

Richard Thaler, co-author of the book Nudge will be joining Camp Cameron as an adviser on regulation. Should the Conservatives form the next government, he will sit in a regulatory “star chamber" designed to analyse the impact and effect of proposed regulation.

Thaler is an American behavioural economist whose work has long been popular with the Conservatives. He argues that the concept of humans as fully rational and logical is wrong; instead, we often react instinctively, affected by emotion or acting in ignorance. In essence, Thaler doesn’t believe that we are entirely capable of making our own decisions. Instead he suggests that the government should create social nudges that encourage and influence us to make the ‘best’, socially useful decision. Examples include presumed consent for organ donation, and the proposed Tory policy of comparing a household’s energy expenditure with their neighbours on the bottom of gas and electricity bills.

Thaler calls such ideas examples of “libertarian paternalism"; they are deemed libertarian because they do not force anyone to change their habits, yet they are paternalistic because they assume that the governments’ desired outcome is the most correct. A major problem is that this work is based upon an individual’s unconscious and psychological reactions to the situations before them. ‘Nudging’ people to act in a certain way requires the manipulation of these reactions, such as our ‘herd instinct’, encouraging people to 'make the right choice'. As Lib Dem MP Danny Alexander claims: “There's something worryingly illiberal about all this Nudge stuff. If governments wanting to change our behaviour don't need to explain what they're trying to do, how they're trying to do it, or what outcome they're after, then they are ignoring what voters want."

The influence of economists like Thaler add to the creation of our Nannying State, where citizens are perceived as too ignorant and base to rely on their own desires and morals. It is difficult to see how principled views such as a reluctance to donate organs can be ob ‘wrong’, even if we do make rash and impulsive decisions in day-to-day life.

One hopes that we have enough awareness not to be nudged. However, if we are as susceptible as Thaler claims it is a serious cause for concern. Perhaps it is better to be shoved than nudged; at least then you can retaliate in self-defence.

George Osborne’s announcement that he will “stop Labour’s tax on working people” is broadly speaking a welcome one. He is referring, of course, to the government’s plans to put an extra 1% on employees’ national insurance contributions (with the basic rate rising to 12% and the higher rate to 2%) and employers national insurance contributions (which will rise to 13.8%). These tax rises are due to come into force in April 2011.

However, it is worth noting that Osborne’s plan does not involve any change to those rates, which will still rise under a Conservative government. What he actually said he would do is:

“We will take his [Gordon Brown’s] national insurance tax plans and we will raise the primary threshold for employees by £24 a week and the upper earnings limit by £29 a week. We will raise the secondary threshold at which employers start paying national insurance by £21 a week.”

By way of explanation, the primary threshold is the point at which you start paying employee national insurance contributions, the upper earnings limit is the point at which you start paying the higher rate. The government has already said it will raise the primary threshold to the level of the income tax personal allowance plus £570, and the Conservatives proposals are in addition to that. The government currently has no plans to raise the secondary threshold or the upper earnings limit.

Essentially then, Osborne has proposed to make the national insurance system more progressive – lower contributions from those with low income are compensated by higher contributions from those with larger ones.

Therefore the following statements can be made about George Osborne’s national insurance plans compared with those of the government:

• Anyone earning between £7,100 and £45,400 will be better off with the Tories than with Labour. For others, it won’t make a difference which party is in charge.
• Employers will pay less in employers’ national insurance contributions per employee under the Tories than they would under Labour.

However, one can also make the following statements about George Osborne’s national insurance plans compared with the existing system:

• If you earn more than £38,350, you will pay more national insurance than you do at the moment.
• If you earn less than £38,350, you will pay less national insurance than you do at the moment.
• If you earn more than £23,325, your employer will be paying more employers’ national insurance than they are now.
• If you earn less than £23,325, your employer will be paying less employers’ national insurance than they are now.

Overall then, this conclusion can be made: the Conservative plans are definitely better than the Labour ones, but are a mixed blessing compared with the status quo.

Tory regulation policies show they don't understand the burdens on business nor how to lift them

Regulation in the Post-Bureaucratic Age is the third Conservative policy paper on the subject in three years. Each bears little relation to the one before and no doubt another will be along before the general election.

The title is fantasy. Apparently, by next June, bureaucracies will no longer exist. For example, the Audit Commission will no longer audit local government; that will be done by a Whitehall department. At least the Audit Commission has some level of independence and accounting skills. Replacing it with a government department doing the same job hardly cuts bureaucracy.

Most of the proposals are so old hat they already are in place. The proposals for enforcing regulations are near identical with the Hampton proposals now being implemented. The “Star Chamber" to challenge new regulations is exactly what Downing Street had under Blair. Gordon Brown announced the regulatory budgets idea, but withdrew it in March 2009 when shown it could not work. The idea of getting the public to identify poor regulations is equally old hat. The Better Regulation Executive has been imploring us to do that for the last five years.

The paper doesn’t even consider how to deal with EU regulation which is the source of most of the burden.

New but daft is the idea that we can replace regulations by “nudging". This comes from Professor Richard Thaler, a US behavioural economist (that is the dismal nonscience invented to cover the gap between what classical economics predicts we will do and what we actually do). Thaler has coined the idea that people are more likely to change habits if they are "nudged" than told what to do. So Professor Thaler – with no knowledge of EU or UK regulation or governance, will be parachuted in as adviser to the “Star Chamber".

But take heart: it is not all bad. The section on regulators, such as Ofwat, is encouraging. The paper suggests taking them back to the original plan, namely that they concentrate on economics and phase themselves out in favour of competition and consumer choice. Sunset clauses would mean that any regulator would have to justify its continued existence at least every seven years.

Regulation is a key topic for what remains of British business. Let’s hope the Tories can do better on it before they come to power.

There's a new kid on the block. It's a glossy magazine called Total Politics, aimed in part at political junkies. It's first issue is a really good read (declaration of interest: there's a piece by me debating with Polly Toynbee the merits of the smoking ban one year on). They start off with quite a coup: an exclusive interview with the Prime Minister. There's another with Lynton Crosby about the successful campaign which saw Boris Johnson elected as Mayor of London. There are lighter articles on the cars politicians drive, and on how Tory men should dress to impress!

Its launch party at Millbank Tower on Monday was a very impressive affair, with a level of interest by media bigwigs which bodes well for the new magazine's visibility and effectiveness. It's a welcome addition to the political scene, and we wish it well.

On Sunday (1st February) I took part in the annual ‘Tough Guy’ challenge in Perton. This is an annual event to separate the men from the boys in terms of mental and physical fitness.

The event consists of a timed assault course covering 21 major obstacles with plenty in between. The obstacles range from crawling through drain pipes (some of which have dead ends), climbing over huge towers, jumping pits of fire, swimming through tunnels (in muddy ice cold water) and crawling under barbed wire through mud and gravel. The event was great fun, but was no mean feat – I couldn’t feel my legs or hands for about half an hour, and couldn’t hold a cup of coffee with spilling the entire contents due to my shivering.

I am amazed that the infamous Health and Safety officials, that purge this country of any fun and excitement we have in our spare time, have not managed to dig their claws into Tough Guy. The reason for this is that every competitor has to sign their own ‘Death Warrant’, declaring that if they are injured (there were a few broken limbs and many more cases of hypothermia this year) or are killed (as happened some years ago) they or their families cannot hold the organisers at all responsible.

This system works superbly, it puts the emphasis of responsibility entirely on the individual, and in return they ensure that they are physically fit to compete. This does not mean that the organisers neglected competitor safety. There was an army of literally hundreds of ambulances, paramedics and fire crews ready to help any injured competitor.

Tough Guy is a perfect example of how people have more fun and act just as safely if the responsibility of their welfare is given directly to the individual. Without Health and Safety rules breathing down our necks, and without organisers being scarred senseless by the threat of lawsuits, we can all have great fun, and raise money for charity in the meantime.

We are continually being told that the causes of crime are both complex, built into the very structures of our society, and simple: it's all inequality, innit? Poverty, deprivation, righteous anger at the greed of the rich: fill in your own quotations from Polly Toynbee here.

However, there's another theory entirey: that much crime, if not most of it, is opportunistic. It takes place because those who would have more and are willing to get more through either violence or other illegality meet up with those who have the more and cannot defend it. Our problem is of course that we very rarely get the sort of natural experiment that we need in order to test which of these two is correct: or, if we are to be fair, or both could have some relevance, which explains the greater part of it. Rarely, but not never:

The Baltimore example is that over the period of the recent blizzards – when most potential victims were stationary, and not accessible to the police, the crime rate dropped.

For example, murders – of which there were 18 in the first 37 days of the year – dropped to 0 in 9 days.

Now it certainly isn't possibly true that inequality, poverty, deprivation or righteous anger dropped in those days of the snowstorms. It's also most certainly not true that policing had anything to do with it as they were as trapped as everyone else. No, we're rather left with our second explanation: the root cause of crime appears to be the opportunity to commit a crime. When that opportunity isn't there, nor is the crime.