The Pin Factory Blog

How the UK is missing the literacy targets: while still spending a fortune trying to do so.

There is a suspicion that this sort of behaviour might have something to do with it.

Much the same thing seems to be happening with the National Health Service as well.

Naomi Klein's ideas take another battering. Yes, yes, quelle surprise.

One reason for that oil shortage: the number of places where you're not allowed to drill for it includes a lot of places where we know there's a lot of oil.

If the cash is running short have you thought about applying for a grant or two?

And finally, a scene from a petrol station.

One reason why the UK joined the European Community in the early 1970s is because we thought that our sick economy would be lifted by its association with more successful continental ones. Iceland, where I was last week, now thinks the same. It's already part of the European Economic Area and some people think it would be but a short step to full membership. Except that the European Union which many people there want to join is now very different from the 'common market' of the early 1970s. Icelanders should ask themselves:

1. Do you really want to be part of an organization whose accountants annually refuse to sign off their accounts? Where millions is lost to fraud and corruption? Whose politicians regularly fiddle their expenses?

2. Do you really want to be part of a club that raises tariff barriers against the rest of the world – protecting its own producers, but at the expense of consumers at home and producers (often impoverished ones) abroad?

3. Can you really live with 16,000 pages of regulation, with more being added every year? Can your small businesses survive the economic cost of regulation?

4. Do you know how things are decided in the EU? Not on principle, that's for sure, but on horse-trading of national interests.

5. Do you really want large parts of your policy – foreign affairs, security, justice and more – put into the hands of a bunch of distant countries with quite different interest to your own? Do you think your voice would count?

6. Can you really defend an agricultural policy that prevents some of the world's poorest farmers from selling their produce inside the European Union, driving them to starvation?

7. Are you sure you want the common currency, leaving you unable to adjust when things go wrong? An interest rate that may be good for the big countries, but cannot possibly be right for everyone in the Union?
 

So that’s it, the government has spoken. One high speed rail (HSR) is all we are to be allowed. Rail companies can’t promise their customers future developments to improve capacity and journey times. This is due to the increased energy consumption by high speed trains. It looks like we will only have the rail link from St. Pancras to the Channel Tunnel for some time. As the rest of Europe embraces HSR we are being left behind by a short-sighted and economically illiterate administration.

In a letter obtained by The Times, Tom Harris, the Rail Minister, said: “The argument that high-speed rail travel is a ‘green option’ does not necessarily stand up to close inspection. Increasing the maximum speed of a train from 125mph  – the current maximum speed of domestic trains – to 220mph leads to a 90 per cent increase in energy consumption.”

The Rail Minister is unaware of the fact that with trains travelling at higher speeds they in fact increase capacity on the line, so energy consumption per passenger is only slightly higher than at lower speeds. Moreover, without increasing speeds or capacity the UK rail network will reach capacity sometime around 2015, at that point more people will switch to travel by air or roads, thus increasing carbon outputs and energy consumption via these two higher polluting forms of transport.

We find ourselves in the unfortunate state where the government of the day can dictate what is done to the infrastructure of the rail network, as well as the companies that use it. All they can really promise us are delays every weekend from now until 2014. Imagine where we’d be now had the railways never been nationalised. Perhaps not at the level of quality that the Japanese do, but I suspect we’d be able to travel to Scotland in just over 2 hours...

The Commons vote on 42-day detention will without doubt make the headlines this week - but it is tactically overshadowing another bill that will have a far greater impact on both our liberty and bank balances. The UK Climate Change Bill is going through its second reading in the Commons and will see government propose 80 per cent cuts in Britain’s greenhouse gas emissions.

Over at CCNet, Julian Morris of the International Policy Network, has put together a concise analysis of the Climate Change Bill. His conclusion?

The Climate Change Bill as it currently stands presumes that knowledge concerning the most cost effective means of reducing carbon emissions can be acquired and utilised effectively by planners in central government. This is the same fatal conceit that underpinned the fantasy of socialist central planning. The consequences cannot be but ill for the people of the UK and of the world.

Indeed, from the goal of avoiding global mean temperatures rising more than 2C above pre-industrial levels, to the choice of the year 2050 and 80 per cent reduction - these targets are all completely arbitrary. Once again, the government has decided that it knows best - without having even looked at the economics of different carbon reduction strategies.

The full analysis is here.

America's criminally undersized 16oz pint glasses (in contrast to Britain's government-regulated 19.2oz glasses) are being shrunk by many establishments to 14-ouncers. Known as “falsies" because of their trick-of-the-eye design, barmen are also being instructed to leave an ever-expanding gap at the top of the glass for froth. When confronted, landlords will grumble defensively about the rising cost of hops and barley. Amazingly, this Great Beer Swindle has attracted remarkably little media attention. How very different America and Britain can sometimes be.

Explaining the distribution of the gains from trade. Further, the fall in the dollar should mitigate the impetus to more trade restrictions.

How some people manage to entirely misunderstand economics (fun for those with a technical bent). More here.

Possibly the least surprising economic conclusion possible: people respond to incentives.

Why national longevity statistics aren't all that good a guide to health policies: there's a lot of genetics in there as well.

It's not just governments that can crowd people out of markets: the BBC seems to be doing a pretty good job as well.

What can happen when goverments play favourites with special interest groups and the ownership of assets.

And finally, censorship in consultation exercises.

I've been in Iceland, promoting my new book on markets (The Best Book on the Market) – Icelanders are huge book-buyers – and giving talks to the RSE think-tank and the Iceland Chamber of Commerce. As Adam Smith said, there is a deal of ruin in a nation – even a tiny nation of just 300,000 people. But after years of boom based on sound policies, Iceland seems to be falling into a slump caused by unsound ones. Worse, it's contemplating even more.

The upturn began in 1991 with tax cuts and economic liberalization. Iceland now boasts a corporation tax of 15%, and just 10% on capital gains. It also liberalized government-run and government-regulated businesses – notably the banks, which promptly boomed, making Iceland a leading European financial centre (with more banks in Iceland than the rest of Scandinavia put together). And those banks financed the expansion of Icelandic business all over Europe.

Like Ireland, tax cuts and liberalization made Iceland an attractive home for enterprise and investment, and the place boomed. But the monetary authorities over-egged the liquidity that booming business required, unleashing inflation of a whopping 12%, No democratic country's economy can survive that. Rapid general price rises disguise real price movements, leading to malinvestment. Workers put in huge wage claims to make up not just what they have lost last year but what they expect to lose next – further stoking the inflationary pressure. Hayek was right: inflation must be stopped dead.

Iceland can do this. The trouble is that many people think it's somehow too small to run its own monetary policy. Quite a number – including, predictably, many businesses who see only the economic issues  – want to fall into the embrace of the Euro and sign up as full members of the EU. Like mediaeval sufferers of scrofula, they imagine that their illness can be cured merely by touching.

To make matters worse, Althing (the world's oldest parliament, founded 830), has decided that the power sector (Iceland has unlimited geothermal supplies) will never, ever be privatized. Plain daft. If you face economic problems, as both Iceland and many other countries do right now, the first thing you need is sound money and the second is to ensure that you use your capital more efficiently. That means privatization, liberalization, and competition.

Clever politicians like Margaret Thatcher and Vaclav Klaus sensed it early on, comparing the mitigation schemes to halt global warming with state socialism of old. The unfolding US Senate debate on 'cap and trade' legislation proves them right, for it reveals what’s really all about: the largest income redistribution since the introduction of the income tax.

The two bills for carbon regulation currently under discussion will generate windfall revenue of $6.7 trillion by 2050, which is half the present US economy's output. Half of that, $3.32 trillion, will come from auctioning carbon allowances to polluters. The other half will be handed out free to favoured supplicants such as Indian tribes or 'green' states such as California, which coincidently is represented by Senator Barbara Boxer who also happens to be a sponsor of the more radical bill. As an editorial in the Wall Street Journal put it:

In the Boxer plan, revenues are allocated down to the last dime over the next half-century. Thus $802 billion would go for ‘relief’ for low-income taxpayers, to offset the higher cost of lighting homes or driving cars. Ms. Boxer will judge if you earn too much to qualify.

Another $190 billion is earmarked for 'green collar-jobs', and on it goes with pork barrelling all over the place. What one now gathers is this: the failure of 'cap and trade' to achieve its stated objectives appears to be well anticipated, with 'social justice' as the fall back position. By the time the greenhouse gas bubble bursts, the gigantic redistribution of wealth will be irreversible – or so the stratagem goes – and government will be permanently bigger.

Perhaps that explains the hurry politicians are in to 'do something' about climate change.

An attack of the funnies over at the BBC with them claiming that this year’s Euro 2008 could be the last one watched on “free-to-air" TV. Now call me obtuse but I’m shelling out £139.50 per year so I can watch everything but the BBC. To me that’s not free TV. I suppose there are pockets of the population that watch TV for free, something I will not begrudge the elderly, but for the BBC to claim that they are “free-to-air" really does take the biscuit.

I sincerely hope that UEFA does indeed win its petition to the EU Commission and are then able to sell the rights to future Euro Championships. They already sell the rights to the European Champions League and these are shared between ITV and Sky Sports in the UK.

It is time to end the listing of protected sports events and  force the BBC to face up to the fact they do not have a monopoly over these sporting events; and nor do they belong, “to the people". They are the property of the organizing body and should be respected as such. If the BBC wishes to air them they should be made to compete for them in the open market, paying a fair price.

But then would that be a fair use of the licence fee tax we are all forced to pay?