The Pin Factory Blog

A recent publication by the Vancouver-based Fraser Institute argues for the introduction of flat tax in Canada, convincingly showing that the move would make the tax system both simpler and more lucrative. They call for a 15-per-cent flat tax, which would save a significant amount of time, energy and money, estimating that the current multi-rate progressive federal and provincial tax system costs the country around $30 billion per year.

The report argues that the current system is impeding Canada’s economy, constructing strong disincentives for working hard, saving, investing and engaging in entrepreneurial activities. These findings chime with those of the Adam Smith Institute: we have made similar arguments in both Flat Tax – The British Case by Andrei Grecu and in A Flat Tax for the UK – A Practical Reality by Richard Teather. Of the latter, Allister Health, the editor of The Business, wrote the following:

Rarely has a think-tank publication been this influential so quickly. Its arguments have been dissected by the UK Treasury, are well known among the Shadow Treasury team, have had an influence on some parts of the Liberal Democrats and were even adopted by several minor political parties.

Yet despite the press and political interest the research has engendered, there remain obstacles to its implementation. The much discussed Huckabee FairTax, while superficially attractive, is not the answer and may be distracting from the sounder proposals that could be implemented by governments on both sides of the Atlantic. In the UK, as in many other countries, the research is there and politicians are engaging in debate; the next stage is for them to stick their necks out and argue the case.

Interaction Times, a Brazilian international relations consultancy which organises academic trips around the world, brought a group of 20 students to visit the ASI yesterday. Their tour of Europe is also set to include visits to the World Trade Organisation, World Health Organisation, OECD, NATO and the European Commission, which sounds like rather an interesting way to spend a few weeks. I told them about the Institute, its history and its current activities, about the way we operate and about the role of think tanks in general. Dr Madsen Pirie then told them more about the liberal approach to public policy, noting that while the ideology of the free market is the same the world over, the policy instruments used to promote it do, by necessity, vary from country to country. The key is to come up with solutions that are politically  acceptable, and which work. We took questions afterwards, and it was clear they were a very bright bunch. Many of them seemed to have market-liberal leanings as well, which is always nice to see!

Carbon footprints and now food prints. Hmm, how about a radical system which measures everything, distilling all the information down into just one number?

It is odd how it's turned out. If you'd made these predictions 20 years ago no one would have believed them possible. 

One of those possibilities, ID cards. This is an excellent forensic dissection of why they'll not work as Gordon Brown seems to think they will. 

Yet more on why seemingly good ideas simply cannot get off the ground in the UK. Yes, it's the bureaucracy. 

A poser for a Monday : if we do meet aliens, what will we ever trade with them? 

Back here on planet earth, more amusement as the prognostications of Paul Krugman the political columnist on trade are refuted by the prognostications of Paul Krugman the economist on trade.

And finally, yes, Netsmith too was a victim, sucked into wonk land by airy promises. 

3. "The industrial revolution brought poverty and misery for the masses."

The masses already had quite enough poverty and misery. The mediaeval myth of rosy-cheeked and carefree villagers dancing around the maypole before returning home to dine on roast beef is a later construction of romantic conservatives. The reality was squalor and unremitting toil. People worked the entire day, and lived on a poor, basic diet of which there was often not enough. Death from disease or childbirth was common, as were malnutrition and starvation. A more real impression of what life was like can be gained by looking at agricultural economies in poor countries today.

The industrial revolution created employment opportunities and gave the chance of advancement. True, women and children worked long hours. They had always done so. True, working conditions were poor and often dangerous. They had always been so. The working class housing that characterized Northern and Midlands industrial cities was an improvement on the squalid and primitive hovels which the agricultural poor inhabited.

Industrialization enabled labour to be more efficient, and to add more value to goods, enabling workers to be paid more. With the spread of mechanized production, the wage labourers were gradually able to afford better food, better clothing, better household goods such as china, and luxuries such as tea. It was the industrial revolution that made it possible for people to become richer by creating wealth and to move away from mere subsistence.

The wealth-creating process gradually made society able to afford better public health and social amenities. It enabled society to afford higher standards of safety at work. It was the wealth generated that made families rich enough to educate children instead of needing them to work.

It is only natural that we compare the conditions of early industrialization with our own, and call them "Dickensian." We should really compare them with what prevailed before then. Capitalism was a step up.
 

There are two rules for success: 

1) Don't tell all you know...

David Cameron has been getting some flak for suggesting that those who are on benefits and who refuse to take jobs or training when offered might lose some of their benefits. That, disaster, there might be time limits on how long they can continue to claim even. What puzzles me is not the idea, but the flak, the horror that the idea has engendered in some quarters.

For what he's actually done is exactly what everyone claims they want to happen, he's embraced bipartisanship. A few years back (in 2000 to be precise) Richard Layard and others presented a report* with a foreword by Tony Blair, who fully endorsed it. Here's one of their two crucial recommendations:

It should not be possible for a person to continue in unemployment year after year, living on benefit. Instead there should be a system of mutual obligation. The state should have the duty to secure offers of work or training for everybody within one year of becoming unemployed. And in return the individual should have the obligation to take advantage of these offers.

They also go on to add that "But it is also vital that people who receive offers and repeatedly reject them should lose some or all of their benefits,..." 

So, that's sorted then, this isn't some nasty right wing idea to bash the proles, it's the considered opinion of one who is both a Labour Peer and one of the leading labour market economists in the country.

Oh, and the second major recommendation?

The other key requirement is greater flexibility of wages, especially as between regions. (...) So there have to be mechanisms which allow wages to grow less fast in the high unemployment regions. In most cases the mechanism will involve a greater decentralisation of wage-setting.

That is, that we should end the current system of having national wage scales for the police, nurses, teachers, civil servants and all the rest. Go on David, I dare ya! You could always wheel out Lord Layard in support.

* To be boringly accurate, they were talking about the EU as a whole but there's nothing in their analysis which excludes the same conclusions from being applied to the UK. 

Quite a few claims about popularity of various sites are being bandied about. This isn't what the Adam Smith Institute site is about. It is neither a wholly economic one nor a political one, and we choose not to do many of the things which earn sites higher positions in the various ratings. However, because some readers have expressed an interest, here are some figures to be interpreted as people wish. In December, not a busy month because of the Christmas and New Year holidays, the Webalizer figures say our site had just over 1 million page views and just over a quarter of a million visits during the month.

Every American child has the chance to become President, so the saying goes. Not if their parents have anything to do with it though: let my child become anything, a janitor or a used car salesman, rather than a politician.

A stunning statistic: only 300 titles a year are translated into Arabic. Fortunately, there'll soon be another 100, including Milton Friedman's "Capitalism and Freedom". That might shake a few things up. 

If you're going to run a campaign calling for "fair pay" for everyone, shouldn't you actually pay those running the campaign for you? 

More news of dirty goings on in the US mortgage market but this time on the sales to investor side, not the lending.

That Vioxx settlement: did the plaintiff's lawyers actually have a decent case or was it a shakedown? 

The UN has passed a resolution calling for the respect for the value systems of all religions. The voting list either side is interesting. 

And finally, in entirely unrelated news governments are not handing over enough money to the UN so they are asking that (giggle) private companies might like to fund the UN.

2. "When the state gives us rights, we have responsibilities to it in return."

The state doesn't give us any rights; we give the state some powers. The rights we enjoy are not political ones given to us by some gracious authority; they are ones we owe to each other as human beings. Each right has its corresponding duty. One person's right to life corresponds to the obligation upon others not to take that life. One's right to property translates into another's duty not to steal.

We choose governments for our convenience, although some less fortunate people have them imposed by violence. They derive from our rights rather than constituting the source of them. In a free society, for our convenience we might choose to delegate our right to justice to an impartial authority of our peers. We might choose to band together for our joint defence against hostile intrusion. This is how the powers which government wields come about.

We owe responsibilities to each other. Most importantly we owe to others the obligation to respect their rights. But we do not owe responsibilities to the state; it owes to us the responsibility to carry out fairly and properly the tasks we have assigned to it. Government is not our master, to keep us in line and occasionally give us some rights for ourselves. It is our servant, employed by us to perform as instructed.

The English common law tradition recognizes that people can do whatever the law does not specifically forbid, but in the continental Napoleonic Code tradition, people can only do what the law specifically allows. This leads people falsely to suppose that the state is giving them these rights, when it would be more accurate to say that the state is recognizing those rights. Our responsibility to behave fairly and decently is something we owe to other people, not to government.

 Those that forget the pasta are doomed to reheat it.