Blog Review 919

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Oh my, what confusion! Even Nobel Prize winners are finding it difficult to keep their thoughts straight in these times.

Find out which MP took the most of your money last year.

Still, a silver lining....that money they took this year wasn´t worth as much as the money of yesteryear before those MPs got elected to run things for us.

A most important point about economics. It´s essential to differentiate between theory and the underlying reality that theory is attempting to describe.

Sometimes theory is pretty good at that of course: barriers to entry do raise the prices consumers pay.

Good news: "Economic globalization has been going on for far too long for even the crash of 2008 to derail."

And finally, just when should an MP declare an interest?

Just rearranging the deckchairs

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Yesterday saw the latest in a long line of local government re-organizations. 44 councils were shut down, and replaced by 9 bigger ones. The old councils followed the traditional two-tier model, with district councils looking after housing, leisure facilities, planning and waste collection, and county councils responsible for education, social services, transport and libraries. The new councils are 'unitaries', which means one layer of government performs all those tasks. The idea is that accountability will be clearer, and costs will be minimized.

Well, maybe. But the problem with these reforms – as with most changes to local government – is that they are not underpinned by any coherent idea of what local government is for. And different ideas about local government tend to suggest very different arrangements.

If the role of local government is simply to deliver services, then you probably want very small unitary authorities (much smaller than the existing ones), which would contract out service provision and be financed by some sort of per-capita fee or property-based tax.

On the other hand, you might think that local government should be about devolving political power away from the centre, to allow more experimentation and innovation in policy, to make different areas compete to have the lowest taxes / best services, and to create a 'market' in governments where people always have an easy exit option. That view suggests somewhat larger council areas, perhaps based on the traditional counties, with broader and more extensive fundraising powers.

However, the latest changes reflect neither of these views, nor anything well thought-out in between. On the contrary, what they tend to indicate are power struggles in existing councils, and the Department of Communities and Local Government trying to make work for itself. And until we decide what the point of local government is, such reorganizations will continue to be completely pointless.

An unhelpful system

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Earlier this week I caught the end of a BBC programme about the planning system. Admittedly, they do seem to be scraping the barrel a bit when it comes to reality TV. But while it wasn't exactly scintillating viewing, it was interesting to see just how it all works in practice.

In my view, the planning system is deeply illiberal and economically damaging. It contributes to the unaffordability of British housing, by making supply unable to react effectively to demand. It prevents people from living in the sort of houses they want. It drives up retail prices, and it has even been shown to increase the volatility of housing booms and busts. And that's just for starters...

I found that the BBC's programme confirmed my prejudices. Three different cases were being followed. One – a disruptive developer in North London – struck me as a clear case of private nuisance. Rather than employing an army of bureaucrats to deal with the problem, it could have been handled privately though the courts. The second – where one family wanted to build an extension that would have blocked their neighbour's light – also struck me as more properly handled without government interference. Some sort of privately negotiated compensation arrangement would certainly have been preferable to the winner-takes-all saga of public inquiries, appeals and counter-appeals.

But it was the third case that really annoyed me. Some inspector was driving around farms in Essex to make sure that they weren't acting as car parks for Stansted airport. But if people need to park their cars, and other people have space for them to do it, why should the government be involved? The farmers concerned were clearly causing no harm to anyone else – on the contrary, they were providing a useful service at a good price. And isn't that much better than subsidizing them with taxpayers' money, at the expense of poor farmers in the developing world?

Patri Friedman

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This was a talk when new ASI wine burst old bottles. Let's set sail with Patri Friedman. The basic idea of sea-steadings is that only on the high seas can we escape the institutional inefficiencies and perverse incentives of national governments.

I'll reduce Patri's entertaining self-titled "rant on government" to three points. Firslty, government everywhere is the meta-problem: it's the largest industry - 36% of GDP in the USA - but technologically the most backward; and the barriers to entry are "insane: you need to win a war an election or a revolution". Secondly, even when good policies are put forward within government, they are not adopted because political institutions are designed to reward horse-trading and political favours. Finally, there is the guarantee of inefficiency - customer lock-in: far worse than a two-year cell-phone contract. In order to escape from your bad home government you face the hassles of another country's tortuous immigration laws and changing jobs and house. Rant over: get to sea.

Patri stated "All humans have monkey brains". but only one in six people are libertarians, pioneers ready to explore new frontiers - check Frederick Jackson Turner's "The significance of the Frontier in American History (1893). To "Go West, young man!" after you reach California there is only the ocean. However, even when they have the best ideas, libertarians will never be the majority who win elections. Their best option is this crazily sensible vision of communities of the like-minded based on floating cities outside territorial waters that can exercise - and perhaps in time claim - their own sovereignty. They can be near or far from a coastal state, on a cruise ship or on floating platforms with an open ocean breakwater (with mathematical economies of scale - double the radius and halve the cost per square foot). Think of the Empire State building on its side, height turned to length but with the same population. The big difference? When no longer perched on Manhattan you are free from New York (city and state) and more than two centuries of federal interference.

The privatization of space

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I was in Russia and Kazakhstan last week to witness close up the launch of Soyuz TMA-14 taking three cosmonauts to the International Space Station.  Interestingly, one of them is a private citizen paying his own way.  It is Charles Simonyi's second such trip, but as a billionaire from his Microsoft days, he can afford the $30m price tag.

The trips are organized by Space Adventures (with whom I long ago booked a sub-orbital flight).  Their private space voyagers are no longer called 'tourists,' but 'mission participants,' since they undergo the same training as other cosmonauts, and perform a series of experiments while in orbit.

Burt Rutan won the X-Prize for sending the first private manned rocket flight into space, funded by Paul Allen, also ex-Microsoft, rather than by any government.  Paul Allen was also there to see Soyuz 14 blast off.  There are several private space vehicles under development, the most publicized one being the Virgin Galactic successor to Rutan's SpaceShipOne, and including SpaceX's Falcon series and Bigelow Aerospace's expandable module.

There is now widespread recognition and acceptance that the next big wave of space activity will be private.  Space tourism is reckoned to have huge growth potential, as do customized launches tailored for private customers.  It will bring non-taxpayer money into space exploration and development, as well as unleashing new creative thinking.  The era is drawing to a close when only government-backed projects and those selected by governments could undertake space voyages.  Replacing it will be the era when space is for everyone.  Of course it will be high-priced at first, but it will rapidly make its way down into accessible price ranges as new technologies and techniques are developed.

The students of Cambridge University Spaceflight are on course to put a rocket into space this September on a student budget.  They have spent over a year perfecting their balloon techniques to take payloads to the edge of space (30km), and have been developing a rocket to be launched from it to cover the additional 70km to reach 100km, the international definition of where outer space begins.  Once again, their effort is entirely private.  They are raising the sponsorship to fund their project.

Space exploration seemed to go into a lull after the excitement of the moon landings and the end of the space race.  Now, it is starting to move again, and it is private projects that are generating the excitement.

Blog Review 918

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Oh my, American politicians really do seem to have problems paying the taxes they impose on others, don´t they?

No, really, a subsidy to replace clunkers with new cars really isn´t sensible.

Nor is this method of splurging taxpayers´ money a clever one.

If we refuse their products we´re just going to get the people themselves flooding in. Trade sounds better, doesn´t it?

Interesting: indie musician shows that he understands the scalping problem perfectly.

Which is more economics than the World Wildlife Fund seems to grasp.

And finally, a new word game to play.

Financial crisis coincidences

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The UK's financial crisis was, by common consent, partly caused by poor regulation. Some of us would contend that it was far more a question of lack of implementation than the regulations themselves. In other words, poor regulators, rather than a shortage of regulation. 

Who better then to make a dispassionate and independent report on the financial crisis than the chief regulator himself: Adair Turner? The report weighs in at 122 pages. The FSA was able to respond to this report the very same day with 215 pages. If this were not coincidence enough, the FSA was able to agree fully with the Turner Report, with Turner being Chairman of the FSA yet another coincidence.

The main finding, which coincides with Gordon Brown's view, is that little if any of this can be blamed on the UK: the international community is at fault. In short, no one should be criticised, it is just a string of coincidences.

The age of stupid or the age of gullible?

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With most people's attention understandably on the economic situation and the G20 summit, let's not forget what environmentalists are doing. Among the various protest groups having their say in London this week, there is a general understanding that the future world they want to live in will be green and fair as well as being devoid of greedy capitalists. We have also had the "people's premiere" of "The Age of Stupid", a film brought to you by the makers of McLibel.

Whereas Al Gore's invaluable contributions to the debate have at least dealt with factual evidence (cherry-picked to tell a particular story, but still largely factual), the new film is a dramatic look back from a post-Apocalypse future at what went wrong. Not surprisingly, there are clear-cut heroes and villains, with the overall message that it's all been our fault. This message has been reinforced over the last week by Rowan Williams' lecture on responsibility in York Minster. In this, he summed up the belief of many (whether Christian or not) that the environment has been changed "appallingly for the worse". This, I suggest, goes against the experience of most people lucky enough to live in the industrialised world.

Rather than living currently in the Age of Stupid, when mankind wantonly destroys the planet, it seems more likely that we are actually in the Age of Gullible, when the majority of opinion formers, the media and intellectuals are willing to place unquestioning belief in the dire predictions of environmentalists.

Martin Livermore is the Director of The Scientific Alliance

How to defend freedom

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Despite the current downturn, the world's income must be about $60,000,000m. If you added up the budgets of all the free-market policy think-tanks in the world, I don't think you'd make it close to $600m, absolute tops. So I figure the world spends 0.00001% of its income defending the source of that income. Thanks, guys, but you could do better. Why not give online or mail a cheque to the Adam Smith Institute today?