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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

Blog Review 611

Written by Netsmith | Wednesday 28 May 2008

If you read the latest proposal from the House of Representatives about attacking OPEC. well, you can change it one way, or you can read it as insisting that the House of Representatives should now sue the House of Representatives.

Further oddities: a self-described liberal newspaper is now attacking the very concept of free speech and the freedom of the press.

Netsmith does wonder whether this is an economic indicator that will make it into the standard macroecoonomic toolkit.

Analysing the latest intellectual high speed reverse from someone worried about losing their job.

Politics is really a very messy trade, isn't it?

Things you don't often see. An alternative title might be no, the rest of it doesn't make up for that voice.

And finally, yes, Netsmith knows they scrape the barrel to find contestants for this TV show but really, couldn't they at least find someone who understood the basic concept?


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Regulation on the horizon?

Written by Dr Eamonn Butler | Wednesday 28 May 2008

I feel a regulation coming on. The Times last week carried a headline on the China earthquake: "Human cost of cut-price concrete is revealed in the rubble." I didn't have to read the story: you know what it means. Shoddy materials contributed to the death toll as substandard buildings collapsed.

Normally following such disasters, the Chinese government rounds up 'cowboy builders' and various 'racketeering' architects, town planning officials and the like. They're shot, and the families are sent a bill for the bullet. (Though the cost of sending the bill and collecting the cash must far exceed the few yuan-worth of lead.) It's designed to encourage the others – though the others are probably just as innocent.

People use cheap building materials because – well, they're cheap. It's a waste of resources – time, money, energy, materials – to use stuff that's costlier than you need. Save money and you can use the change on something that you really want a lot more. Sure, at the back of your mind, if you live in an earthquake zone, is the fact that every few hundred years your particular town might get hit by a tremor and some people will be killed. But that's a risk you have to calculate. Save money now and that saving can be put to good use and grow your economy, making you rich enough to deal rather better with natural disasters.

I make the same calculation every time I fly or drive somewhere. These activities are risky: there is a finite chance I'll be killed in a crash. And make no mistake, being killed is a pretty big deal as far as I'm concerned. I still do it, because the potential benefits to me far outweigh that small risk.

This time, China might spare us the shootings. They're beginning to realise that it's better to have the sympathy of the world than its disgust. But The Times headline makes me dread that they will introduce all sorts of new building standards. Why's that bad? Because it will make houses, apartments, shops and offices that much less affordable. Less will be built, and people will continue to live in insanitary squalor (at the risk to their health and indeed lives, of course) and economic growth will be that much slower. The rational calculations of individuals will be outlawed by the political necessity of the authorities.

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A sensible welfare proposal

Written by Jason Jones | Wednesday 28 May 2008

The Conservative Party plans to harden the line for welfare recipients if it wins the next election by requiring any able-bodied person on welfare who is under 21 and unemployed for three months to attend an intense work-training program. It is hoped that the proposed course would improve their work discipline and teach the skills necessary to obtain work.

Even better, they plan to "ask private sector companies and voluntary organisations to run the… centres." But what if they still don’t find a job? After a year of unemployment, they’ll be required to work full-time in community programme.

This proposal should increase productivity and decrease government spending on a deadweight program. By using private companies and charities, the worker-incentive program has a much better chance of being both effective and efficient.

As the party’s welfare spokesman Chris Grayling said, "Staying at home doing nothing will be a thing of the past."

It all fits in nicely with our line on welfare reform, which you can read more about in our 2007 report, Working Welfare.

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Written by Dr Eamonn Butler | Wednesday 28 May 2008

All the time I'm being told how much wasteful packaging we use these days. Well, that's garbage.

The average US household generates about a third less trash each year than the average household in Mexico. The average US trash can is full of packaging, while the average Mexican one – like the average British one or forty years ago – is full of animal and vegetable food waste.

Intensive packaging actually produces less waste. Buy a fresh whole chicken and you end up with about a kilogram of stuff you can't use. Buy processed chicken in about fifteen grams of packaging and there's no waste at all – almost all of the chicken that you don't want to eat is processed into pet food and other products. The same is true of fruit and vegetables.

And why be ashamed of carrying out your processed chicken in a plastic bag? Plastic bags use 40% less energy and generate 80% less solid waste than paper ones. Plastic bags are a quarter of the thickness they were when we started using them in the mid-1970s. They use hardly any oil, and recycling a kilo of plastic takes just 10% of the energy used to recycle a kilo of paper. Paper bags produce 50 times more water pollution. Recycling paper uses bleaches and other nasty industrial chemicals, remember.

And yet the humble, useful plastic bag is on the way out because politicians, for the best of intentions but the worst of reasons, are intimidating supermarkets into scrapping them. Now: which is the real rubbish?

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Quote of the day

Written by Wordsmith | Wednesday 28 May 2008

Any prime minister in office today would feel the voters' anger as they see their cherished plans to spend their own money as they see fit destroyed by rising prices combined with the insatiable greed of the state in all its manifestations to take the people's money for its own, often incompetent and counter-productive ends.

Labour MP Denis MacShane, writing in yesterday's Telegraph

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Blog Review 610

Written by Netsmith | Tuesday 27 May 2008

How extraordinarily alarming: American high school students show greater economic understanding than that usually on display from the entire Guardian editorial department (substitute "Labour Party" to taste).

Not the most surprising finding ever: demand curves slope downwards.

It isn't just here in Blighty that civil liberties are under attack: habeas corpus isn't looking too healthy across the Pond either.

Here in Blighty: we seem to longer to have the freedom to read.

So, err, why are we taking seriously the comments of a biologist upon the effects of climate change on ice shelves?

The usual source for the latest bright idea.

And finally, a solicitor writes a play and is there life before death?


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Equal and opposite

Written by Jason Jones | Tuesday 27 May 2008

The United Kingdom and the United States are both affected by and concerned about the war in Iraq, the credit crises, the housing market, oil prices, globalisation, immigration, and a host of other challenging situations.

Notice some similarities in recent events:

US: A Democrat won one of the safest Republican seats in the House of Representatives last week.

UK: Last week, the Conservatives thumped Labour in the Crewe and Nantwich by-election.

US: “The Republicans [are] busy dying. The brightest of them see no immediate light. They're frozen, not like a deer in the headlights but a deer in the darkness, his ears stiff at the sound. Crunch. Twig. Hunting party." - Peggy Noonan, former Reagan speechwriter, Wall Street Journal columnist, and influential Republican

UK: “The lesson tonight for the Labour Party is that it is change or bust." - John McDonell

US: “[I’ll]… build a coalition for change that stretches through red states and blue states because that's how we'll win in November, and that's how we'll finally meet the challenges that we face as a nation." - Barack Obama

UK: “I want to go on building this broad coalition for change so we can bring our country better government." - David Cameron

I guess it's the political cycle at work!

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Against hypothecation

Written by Tim Worstall | Tuesday 27 May 2008

There's been a recent revival of the discussions about the hypothecation of tax revenues and as I never tire of telling people, it's a bad idea. For there is no logical connection between how much you can raise from taxing an item or activity and how much you might want to spend on that or any other problem, whether related or not. Another reason it's a bad idea pops up here:

One-sixth of all the national lottery money earmarked for good causes is being spent on bureaucracy, including one quango that has more staff than the Treasury.

New figures reveal that more than £200m a year is being swallowed up in administration and staffing costs at lottery distributors – up to six times the proportion spent on overheads by some leading charities.

The connection is that these groups (like the Big Lottery Fund) have in effect hypothecated funds. They get a set proportion of the money raised but do not have any pressure on them from outside to increase their efficiency. Given that their finds come from that tax on stupidity (if you prefer, ignorance of odds) that is the lottery, they don't have to compete for the cash. Given their entire insulation from the market there is also no pressure from elsewhere. Now that is so far true of all bureaucracies, but with hypothecated funds it is worse. For at least if the money is being doled out of the Treasury's one big bucket then there is a certain amount of pressure from the same Treasury for accountability and economy in the administration. Not much, I agree, but at least some, even if it is only from the covetous glances of others hoping to be fed from the big bucket.

With hypothecation there is a complette absence of this pressure and thus anything funded in this manner, accountable to no one and competing with no one, is bound to become increasingly inefficient.

My history knowledge is woefully incomplete but I do dimly recall that we fought a fairly bloody internal war a few centuries ago and that one of the triggers was Parliament's insistence that the Monarch had to be dependent upon said Solons for money and to account to them for how it was spent. And that if it were ill spent that no more would be forthcoming. As with the Monarch, why not so with a bureaucracy?

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The Future of Oil

Written by Jason Jones | Tuesday 27 May 2008

Over the last month, several newspapers have highlighted individuals who are moving away from gas-guzzling cars to more energy efficient alternatives. Some farmers are using donkeys and camels rather than tractors, others are buying smaller cars or even bicycles rather than SUVs, and others are choosing mass-transit. Ford is even changing its line-up in favour of cars with better gas mileage to better suit the market.

Oil prices have risen and fallen over the years, but due to rapid industrialisation in many developing countries, this surge will likely be permanent. Which leaves the question: are these high prices best for the long-term success of the oil companies?

Richard Fletcher doesn’t think so. Many people are making long-term lifestyle changes that are much more energy efficient. New homes have better insulation, windows block heat more effectively, and light bulbs run on less energy. Smaller vehicles are quickly becoming the norm in the United States, just as they have been for years in Europe.

Perhaps most importantly, there has never been a greater incentive than now to develop practical alternative sources of energy. In fact, £500bn will be invested in renewable energy over the next twenty years. May the force (but please, not subsidies) be with anyone who can develop cheap and clean energy.

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Quote of the Week

Written by Wordsmith | Tuesday 27 May 2008

"Every revolutionary idea seems to evoke three stages of reaction. They may be summed up by the phrases: (1) It's completely impossible. (2) It's possible, but it's not worth doing. (3) I said it was a good idea all along."

Arthur C Clarke

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