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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

Quote of the week

Written by Wordsmith | Sunday 16 March 2008

I am hard-pressed to see an instance where the intervention of government has led to much beyond sorrow.

David Mamet explains his Damascene conversion to real liberalism

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Common Error No. 62

Written by Dr Madsen Pirie | Sunday 16 March 2008

62. "A person's economic or political viewpoint is only the unconscious expression of their class interest."

This argument is elevated by the name of "Sociology of Knowledge" and implies that some views can be ignored because they reflect only the self-interest of those who hold them. The bourgeoisie support liberty, for example, only because they get rich when they are free to exploit. In its extreme form it rejects philosophy, art, literature and culture as no more than expressions of the self-interest of those who produce them. Deconstructionism, for example, supposes that any account reflects only ideological bias, and that history is only about power and domination.

The attitude is profoundly anti-intellectual and anti-rational. It suggests that people with an interest have no case to put. It might be that the condemned murderer awaiting execution has good arguments against the death penalty; but on this thesis they need not be listened to at all because they echo only his or her self-interest.

This analysis is a recourse of those who lose arguments. When the logic and the facts show their views to be erroneous, they respond by saying that this is only 'bourgeois' logic, and that there are no facts, just a series of experiences. In reality both the argument and the evidence are on the side of those who point to the creativity which freedom and enterprise unloose, and to the solid achievements gained by such societies in contrast with rival systems.

An interesting feature of this approach is that it is never taken to apply to those who use it. They are never taken to be expressing their own class interest as leftist intellectuals who would end up with power if their views prevailed. On the contrary, they are taken to be the only group whose "correct analysis" has cut them off from expressing any class interest. Just as one might expect.

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The third rail of British politics

Written by Tom Clougherty | Sunday 16 March 2008

The SNP government in Scotland has decided it wants to replace council tax with a local income tax.

The problem is, their local income tax is not a local tax at all. Although its proceeds would be used to pay for local services, it would not be set or collected locally. Basically, three percent on income over the personal allowance would be added to a person’s usual tax bill. Aside from higher income taxes being precisely what nobody needs, this is hardly a recipe for increased local government accountability.

The problem with local government finance is that councils themselves raise less than 30 percent of the money they spend. Being so reliant on central government for funding makes local councils merely the agents of the centre. This means that there is no meaningful link between taxation, representation and spending. There is little incentive for efficiency, little accountability to voters, and little policy choice come election time. The reliance on central government funding has another nasty side effect: if a council needs more money, it has to raise council tax quite substantially to make a real difference to its budget. The SNP’s proposed reform addresses none of these issues.

There is another problem. Based on broad assumptions, the Scottish government says any household with an income of less than £58,000 would be better off. They may be right. But that means households earning more than £58,000 a year will end up paying more. This is the problem the Lib Dems encountered in the 2005 when they campaigned for a local income tax. A middle class couple, say a teacher married to a nurse, could easily end up worse off. That’s always bad politics.

What’s the solution? By happy coincidence, VAT raises almost the same amount of money as central government distributes to councils in grants. Replacing VAT with a local sales tax (set and collected locally) would be the simplest way of making councils self-financing, as Douglas Carswell argued in this ASI paper. Of course, competition in policy is the essence of true localism, so we shouldn’t be too prescriptive. I’d tell local government they had three permissible sources of revenue - property taxes, sales taxes and service charges - and leave the rest up to them. If people started moving out, they would know they’d got something wrong.

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Blog Review 538

Written by Netsmith | Sunday 16 March 2008

Oh dear. It appears that the cryptographic protection on such cards as the Oyster has been cracked. Despite the likely losses to the transport network from the inevitable clones, perhaps something good might come of it? A realisation that there is no truly secure computer system and that thus the ID cards and the National Database will never work as advertised?

Anecdotal evidence that the other security monsterings that we are subject to are really not necessary. 

Do market systems encourage people to act honourably? Well, if Adam Smith was correct (ToMS, not WoN)  then yes, arguably so. 

Apparently at least one of the current Cabinet has read AA Milne.  

If music is to be paid for by a levy on all broadband, why would anyone bother to produce music that customers preferentially want to listen to? 

If we use the tax system to encourage the rich to move away, why aren't we using it to encourage the poor to move away as well? 

And finally, Brighton is an odd sort of place, isn't it? 

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Quote of the day

Written by Wordsmith | Monday 17 March 2008

Giving money and power to government is like giving whiskey and car keys to teenage boys.

P.J. O'Rourke

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Cutting off mercantilist noses

Written by Dr Madsen Pirie | Monday 17 March 2008

There's an interesting side to the EU's latest "green" threat. The suggestion from the EU summit is that nations which fail to conform to the EU's idea of environmentalism will have their goods excluded from the EU market. That is, unless they sign up to Kyoto or son-of-Kyoto or whatever carbon targets are to be achieved by the specific methods endorsed by the EU, there will be trade sanctions against them. This might include nations that don't trash the planet and starve the poor by turning intensively-produced food crops into biofuels.

Quite what the WTO would make of such flagrant violation of its rules would be interesting to observe. But Tim Worstall makes another point over at the Globalisation Institute. It is that the proposed protectionist measures would actually hurt EU citizens more than those they were aimed at. He says:

... As we know it is the imports which make us rich, exports being only the dreary drudgery we do to pay for them. So what the Commission is actually proposing is that if those foreigners do not do what the Commission tells them to, then the Commission will make all Europeans poorer by restricting access to or increasing the price of those imports.

He is correct. Mercantilism is as wrong and stupid now as it was when Adam Smith first denounced it.

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Alexander Herzen

Written by Tim Worstall | Monday 17 March 2008

It may seem odd to quote a 19th century Russian philosopher here, we tend to deal more with the thinkers of the Enlightenment. But Tom Stoppard, commenting on the events of the 1968 student "revolution" makes a point I hadn't seen before (clearly, my knowledge of 19th century Russian philosophers needs to be brought up to speed).

...Alexander Herzen’s own words about the English in the 19th century: “They don’t give asylum out of respect for the asylum seekers, but out of respect for themselves. They invented personal liberty without having any theories about it. They value liberty because it’s liberty.”

Well, quite, and could we have a few more of our servants in government paying attention please? We don't value liberty because it makes us more equal in outcome, nor do we set aside liberty when it does not. We don't value liberty for the security it offers us, nor do we set it aside when said liberty is vaguely threatened by adolescent males with home made bombs. And most certainly we don't value liberty because it allows The State to monitor us all so that we are safe, or so that we can "prove our identities". 

We might indeed agree to certain measures, for example, the prancing and preening that is party politics, for long experience has shown us that this is a means to an end, the furtherance and protection of that liberty.

But as to the end result, the aim, that is indeed that liberty, and to ask what that liberty is for is to ask a nonsensical question. We value liberty simply because it is liberty.

Not just liberty from and most certainly not simply liberty to: but freedom, the right to cleave our own path through life, the liberty to choose our own path to perdition, as long as we are not interfering with the very same rights of our fellows.

There's not much of 19th century England that I would want to bring back but this is indeed one part. What terribly confuses me about the modern world is that not everyone agrees with me. 

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Common Error No. 63

Written by Dr Madsen Pirie | Monday 17 March 2008

63. "We need ID cards to help fight terrorism."

idcard.jpg Terrorists constitute the one group which seems to have no difficulty in gaining access to forged and false identification. If ID cards were introduced in Britain, no competently equipped terrorist would be without one. Terrorists do not usually write the word "terrorist" as their occupation; they try to hide their purposes, and only surface as terrorists at the moment of their crime.

It is all very well to talk of higher technology to combat ID card forgery, but the technology of the forgers advances, too, and many terrorist groups have the resources to use it.

What ID cards are actually about is control. They enable authorities to know our movements, along with a great deal of other information. We have always been reluctant to grant gratuitous information to those in authority because we have so often seen it misused. Just as sophisticated phone-tap technology is now used by local authorities to search for people involved in fly-tipping, so we can expect the information on ID cards to make its way rapidly down the scale of offences and be used against individuals suspected of trivial misdemeanors.

We have learned to our cost that every level of government is careless with the information it stores on us. Even if authorities did not misuse the information themselves, it is quite likely that their slipshod controls would make it easy for those with criminal intent to do so. There have been incidents of highly sensitive information lost on mislaid disks, or stolen while inadequately protected. The very collection of so much information together would create risks of it falling into the wrong hands.

Government talks of combating terrorism, but the real purpose of ID cards is probably to control employment of illegal immigrants or to fight benefit frauds. There are better and less expensive ways of doing this than subjecting the whole citizenry to an ID card regime.

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Blog Review 539

Written by Netsmith | Monday 17 March 2008

Clearly today's big news is Bear Sterns. So why $2 a share? And what what different over there as opposed to what happened here with Northern Rock? And where might such things happen next? And if you really want to be scared out of your Calvin Kleins, read this.

A possible solution to the whole thing. 

On to lighter things. Did Adam Smith have Tourettes? 

The House of Lords now has a blog.

Does having Bianca Jagger doing a book blurb make you more or less likely to purchase a book on economics? 

Tastes like chicken, yes, but which type of chicken? 

And finally, yes, we would all like greater efficiency in the provision of public services, but perhaps not Prussian efficiency.

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Quote of the day

Written by Wordsmith | Tuesday 18 March 2008

The beneficial effect of State intervention, especially in the form of legislation, is direct, immediate, and, so to speak, visible, whilst its evil effects are gradual and indirect, and lie out of sight... Hence the majority of mankind must almost of necessity look with undue favour upon government intervention. This natural bias can be counteracted only by the existence... of a presumption or prejudice in favour of individual liberty – that is, of laissez faire.

A.V. Dicey, English constitutional theorist

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