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"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

Liberty, safety, and political viability

Written by Jason Jones | Sunday 15 June 2008

“Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety."

- Benjamin Franklin

Without undermining the importance of national security or the danger of radical jihadists, politicians in the United States and Europe need to keep a sound perspective on the costs and benefits of exchanging our liberties for a little temporary safety. At the moment, many of our anti-terror laws are so vague that they give law enforcement agencies the ability to intrude on or detain individuals with no ill intentions.

The Magna Carta, the U.S. Constitution, and several British laws guarantee Habeas Corpus. The 42-days law, which passed this week, and the Patriot Act, suspend this "essential liberty" for supposed "temporary safety." The solution is not difficult: if you are going to arrest them, do so with enough evidence to charge the suspect.

It remains to be seen whether or not the law passed yesterday is the result of horse-trading. But, as Lord Goldsmith said,

My fear is that this particular issue over the period of detention without charge has become a symbol of political virility.

This is precisely the problem with the issue of terrorism. It is not a matter of public safety or national interest. It is an issue that politicians use to bolster their own popularity. With Gordon Brown fighting to keep his head above water, it seems he is trying to prove he still matters.

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A distorted market

Written by Dr Fred Hansen | Sunday 15 June 2008

Among the major perverse incentives that distort the US health care market are the tax breaks for immobile employers rather than mobile employees, and for non-profit hospitals instead of patients. Both tax subsidies are partly to blame for spiralling health care expenditures, making non-profit hospitals richer than their for-profit counterparts in the process.

The majority (60%) of the 3,400 US hospitals are not for profit. The 50 largest of them have increased their net income eight-fold between 2001 and 2006 to $4.27 billion, and the 25 richest earn more than $250 million per year. Originally set up to serve the poor, today poor or uninsured patients are billed the highest charges because they don’t benefit from discounts granted to privately insured and Medicaid or Medicare patients. One non-profit hospital group, Ascension Health, has piled up reserves of $7.4 billion, more than many large publicly traded companies. These tax breaks are ‘drawing fire’.

Nonprofits …are faring even better than their for-profit counterparts: 77 percent of the 2,033 US non-profit hospitals are in the black, while just 61 percent of for-profit hospitals are profitable, according to the American Hospital Directory data. The growing gap between many non-profit hospitals wealth and what they give back to their communities is raising questions about the billions of dollars in tax exemptions they receive.

The exact number for 2006 is estimated by the Congressional Budget Office $12.6 billion in tax exemptions plus subsidies from different government levels worth $35 billion for the whole hospital industry. These numbers show better than anything else what damage is caused when third parties instead of consumers run health care. It also shows a high degree of noble cause corruption: 'non-profits serving the poor'.

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Quote of the week

Written by Wordsmith | Sunday 15 June 2008

To be governed… is to be watched, inspected, directed, indoctrinated, numbered, estimated, regulated, commanded, controlled, law-driven, preached at, spied upon, censured, checked, valued, enrolled – by creatures who have neither the right, nor the wisdom, nor the virtue to do so.

Pierre-Joseph Proudhon

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Blog Review 628

Written by Netsmith | Saturday 14 June 2008

A slight bop on the nose for Paul Krugman. If you're going to claim that the gutting of the food inspection bureaucracy has led to rampant food poisoning, it would help if, following said gutting, food poisoning had actually risen.

Playing with numbers: true, there are only 3 million registered Irish voters: but their voice is perhaps louder than those of Europe's 9,225 legislators? Or perhaps should be?

The Charity Commission believes that blogs are not educational. (More here.) From that we might conclude that the Charities Commission in incapable of recognising what is in fact educational....which raises the question of why they are ruling on the tax breaks that educational charities should or should not get?

How to have very low administrative costs like Medicare: don't do any administrating.

There are indeed always unintended consequences. Just another example of why planning an economy or its manpower doesn't work.

As is said, if this lot are against it (whatever it is) there's almost certainly something to be said for it.

And finally, perhaps not the best product design of all time and bringing home the full horror of the housing crash.

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It's intensely annoying...

Written by Tim Worstall | Saturday 14 June 2008

To have to keep making the same obvious point and find it being continually ignored. Still gird the loins and keep stating the truth I tell myself.

Europe's biodiesel producers will today urge the European commission to levy punitive duties on US rivals after Brussels launched formal anti-subsidy and anti-dumping investigations into imports from America.

I've said it often enough before: if someone is willing to gouge their own taxpayers in order to provide us with cheaper goods then the correct response is to say thank you. Followed by an invitation for them to do the same tomorrow as well. To do otherwise is to be protectionist: protectionist of the interests of business above those of the consumers and that really isn't the way we're supposed to be playing the game. But in this report we see it even more nakedly:

Garofalo said that "splash and dash" accounted for only 10-15% of the biodiesel imported into the EU. "The real problem remains US biodiesel producers," he said. "Changing the rules to stop splash and dash doesn't change a lot as export subsidies will be maintained for US producers and that's precisely what we want to stop."

Garofalo is the head of the European Biodiesel Board, the trade organisation for producers. It is exactly as Adam Smith said all those years ago:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

There it is, plain as day. Garofalo wants you to be barred from purchasing the best offer so that his members might make more profit. That US taxpayers are subsidising that best offer is an irrelevance to your and my interests. The correct response to someone offering us subsidy in this manner is thank you, please call again.

Whatever the interests of Garofalo, the EBB and the producers.


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The benefits of failure

Written by Dr Eamonn Butler | Saturday 14 June 2008

Capitalism is based on failure. But that's no problem, since life is based on failure. That's the view of Professor Paul Ormerod, who outlined the idea at an Economic Research Council meeting I attended in London.

Ormerod points out that over 99.99% of all known species are dead. And roughly 10% of all US companies disappear each year too. Even when things are booming, you get extiction: in 1469, Venice boasted twelve firms engaged in the dotcom boom of its day – printing. By 1474, nine of them had failed. Sound familiar? Some 995 of the 2000 US firms making cars in 1900 disappeared. Of the world's 100 top companies in 1912, just over half survive, but only 19 are still in the top 100 – and most of those have changed beyond recognition.

Yet it's amazing how many people hark back to Marx, complaining that capitalism produces more and more concentration. John Kenneth Galbraith played the same tune in his book The New Industrial State. But by then, big-company America was at its zenith: from there on, it has been a story of the proliferation of new, small companies.

And it's that proliferation – that constant innovation coming from new, small firms – that makes free-market systems so vibrant, productive, and beneficial to humanity. Just as the small mammals proliferated when the dinosaurs declined, so so new small businesses spring up and become larger businesses. America's commitment to (relatively) low taxation and (relatively) light regulation and its (relatively) strong commitment to personal freedom is, I think, the main reason why it consistently outperforms statist backwaters like Europe. The biosphere and the economic sphere change constantly. You have to adapt and innovate. And decentralized, market systems are a lot better at adapting and innovating than socialist ones.

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The good news about oil prices

Written by Jason Jones | Saturday 14 June 2008

An excellent article in Business Week explains why bubble markets aren’t all bad.

"The stuff built during infrastructure bubbles—housing and telegraph wires, fiber-optic cable and railroads—doesn't get plowed under when its owners go bankrupt," writes Daniel Gross in Pop! Why Bubbles Are Great for the Economy. "It gets reused—and quickly—by entrepreneurs with new business plans, lower cost bases, and better capital structures. And when new services and businesses are rolled out over the new infrastructure, entrepreneurs can tap into the legions of users who were coaxed into the market during the bubble."

For example, this happened during the late 1990s. Speculators predicted that the growth of the Internet would necessitate huge increases in fibre-optic cable. The predictions were incorrect and much more cable was laid than necessary for the intended purposes, but after, business used the cable in an even more beneficial way (see The World is Flat, the steroids part of the ten flatteners section for more on that). The high oil prices hit us where it hurts the most—our wallets. But this too shall pass, and when it does, we will all be better off because of it:

As the "hot money" is flowing in, the investment is building ever tighter and stronger economic ties between the developed and developing economies, creating wealth at an unprecedented rate, building bridges that will strengthen in coming decades. And it's the growing economic vigor of a vastly healthier global economy that is pushing up the price of commodities. These higher prices are encouraging enormous increases in investment in alternative energy and increased agricultural production.

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And another thing...

Written by Junksmith | Saturday 14 June 2008

Good news for Canadians: their Tax Freedom Day comes four days earlier this year

Bad news for Canadians: Tax Freedom Day is today, June 14, which means they've spent the last 165 days working for the state.

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Thank you, Ireland!

Written by Blog Administrator | Friday 13 June 2008


PIcture from Guido Fawkes

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Blog Review 627

Written by Netsmith | Friday 13 June 2008

Further (as if it were needed) evidence that The Guardian really doesn't understand this liberal capitalism thing as yet. Well, yes, big surprise, eh?

Yes, this is the US rather than the 42 days here, but the Supreme Court makes the point that habeas corpus idea really is about what the State may not do to the citizenry. Security from terrorists isn't the point: it's security from those who would rule us. (How 42 days was reached here.)

More on that disconnect between the Westminster Village (as the saying goes, there's an awful lot of villages across the country that have lost their own idiots) and the general population.

No, this really isn't all that much of a surprise. What, you thought bureaucracies were there to aid you rather than control?

This bureaucracy seems a little less malevolent but the basic structure is similar.

Netsmith is going out a little on a limb here but it is at least arguable that there have only ever been three major inventions. Agriculture, the scientific method and the limited liability corporation.

And finally, yes, Wellesley really is different than Vassar for as the man said, if all the students at Vassar were laid end to end no one would be at all surprised.

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