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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

And another thing...

Written by Junksmith | Monday 21 April 2008

TV Licensing (cont’d). A reader informs me of extreme measures taken by a friend who has never possessed a television licence and has constantly been accused of evasion by TV Licensing as a result. When he recently passed the age of 75, he realised that he was entitled to a free television licence. He therefore applied for one, although he still has no television, just to stop the flow of abusive letters. It is satisfying to think that the state is picking up a bill for its own intrusions.

Charles Moore in The Spectator

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Blog Review 573

Written by Netsmith | Sunday 20 April 2008

A useful point to make about the Reverend Malthus: he was right about all of human history until his own time. Similar remarks could be made about other oeconomical ideas: those of Marx perhaps?

If you're interested in peer reviewed scientific papers which take issue with the tenets of climate change, here's a (non-exhaustive although long) list.

On which subject, a climate scientist takes issue with Nicholas Stern's latest pronouncements on the immediate and catastrophic nature of the problem.

Further evidence that wind power might not be all that much of a solution to any problems.

The Conservative Homies choose their book of the year.

One way to eradicate poverty: if sending them aid doesn't work, why not let them come here?

And finally, the Ban Darling Campaign seems to be getting some results.

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The rising price of farmland

Written by Tim Worstall | Sunday 20 April 2008

A report in The Times on how rural land values are soaring:

Farmers have seen their land values soar by 30 per cent in a year. With markets in turbulence and surging global food prices making agriculture profitable, land is now seen as a safe haven for cash and pension funds.

City institutions, led by Blackrock, UBS and Schroders, are setting up funds to invest in land and agribusiness. Other hedge funds are exploring the market. They are in competition with British farmers and businessmen from Ireland, Denmark and the Netherlands, where land is even more expensive.

Well, yes, but there's something else going on as well, it's not just the usual interaction of supply and demand. There's subsidy as well.

The Common Agricultural Policy (spawn of the very devil that it is) has recently undergone some changes. Instead of subsidy being based upon production, it is now linked simply to the acreage (actually hectarage but forgive this traditionalist his little pleasures) of land held. It's not quite in one leap though: over a period of years it moves from the historical amount based on past production to the flat per acre payment. That change is having its obvious effect: previously you had to actually farm the land, get something out of it. Now you just have to own the land to get the cheque.

That obvious effect being of course that the price of land will rise, as David Ricardo woud have pointed out. The subsidy is now simply an additional rent to the property, one which will simply feed through into increased capital values. It's a little difficult to work out exactly what the subsidy actually is (come on, this is the EU we're talking about) but £100 an acre or so looks like a reasonable estimate. Taking a 5% interest rate (or return upon capital, your choice) we would thus expect the subsidy to increase the value of land by some £2,000 per acre (ignoring the effect that the earlier subsidy system had on such land).

£3,500 Price of an average acre of farmland a year ago
£5,000 Price that an acre is close to fetching today

Ah. So, that's what the CAP does, increases the wealth of those already owning land and making future farmers require more capital to enter the business. Not, perhaps, the desired outcome. Which brings me to my perpetual and oft asked question about the European Union itself.

Can we leave yet?

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Common Error No. 96

Written by Dr Madsen Pirie | Sunday 20 April 2008

96. "Private sector health and education cream off the very best in resources and personnel from the state sector."

When people pay for private health and education, they save the state money because it no longer has to provide facilities for them. Furthermore, the money they spend for themselves means that the total expenditure on health and education is increased. And because the private sector has to be responsive to what consumers seek, it gives the public sector some idea of what it is that people want. It is not true that it drains away state service personnel; only a tiny fraction of those going to work in private healthcare come from the state sector.

Private health and education do not take resources away from the public sector; they give it more to spend per head. They may, by providing more flexible conditions, attract some of the most talented personnel. But they also improve conditions in the state sector by taking away some of its workload; and there may always be those who prefer to work in the state sector. Machines bought for use in private medicine increase the total supply of health equipment and the supply of equipment per head for the population. Their use enables waiting times for NHS equipment to be cut.

The private sector often acts as pacemaker for the public sector, making advances in services and techniques which the public sector can follow. Some of the innovative treatments are available first in the private sector, and spread over into the state sector once their value and efficacy have been established. In both health and education it is not so much the financial rewards which draw people to the private sector; it is the attitudes and conditions they find there. The weight of bureaucratic compliance and the endless form-filling are absent, and personnel have more time to interact with those they are serving. The parallel private services do not undermine the state services; they bring about their improvement.

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Book of the week

Written by Booksmith | Sunday 20 April 2008

My top read this week is Squandered: How New Labour are Wasting Over One Trillion Pounds of Our Money, by David Craig (£7.64 + postage).

The UK government has increased our taxes by around £1000 billion over the last decade (that's an extra £50,000 per household). And what have we got for it? Slick, world-class health and education? A welfare system that really helps people back into work? Or a bigger, fatter, self-serving bureaucracy?

Silly question, really. David Craig's new book shows how the tsunami of extra cash (our extra cash to be precise) has been squandered by department after department. It's a triple whammy of f incompetence, cover-up and cuts. Craig exposes a story of woeful mismanagement that has produced more bureaucracy rather than better service, squandered astonishing amounts of our money, damaged our life and rewarded the person responsible with the keys to Number Ten. Would be comic if it weren't so tragic.

Learn more and buy it here.

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Quote of the week

Written by Wordsmith | Sunday 20 April 2008

When a man spends his own money to buy something for himself, he is very careful about how much he spends and how he spends it. When a man spends his own money to buy something for someone else, he is still very careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else's money to buy something for himself, he is very careful about what he buys, but doesn't care at all how much he spends. And when a man spends someone else's money on someone else, he does't care how much he spends or what he spends it on. And that's government for you.

Milton Friedman

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Blog Review 572

Written by Netsmith | Saturday 19 April 2008

Behavioural economists tell us that humans aren't rational and thus that carefully crafted regulation can be better than laissez faire. Possibly so, but then public choice economics tells us that "carefully crafted" ain't what regulation ever is. The idea is thus rather better than the reality.

How addicted do drug users get? Not very according to the latest figures: even with crystal meth only 5% of users actually become addicts.

Ripples of the credit crunch or how you can now buy (certain) airline tickets with PayPal.

On airlines, those limits upon liquids or gels in baggage: are these by volume or weight?

Greenhouse gas efficiency is indeed increasing.

A very efficient (if rare) method of making money.

And finally, how modern political reporting would have covered one of the great political debates of the past.

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Regulating buses

Written by Dr Eamonn Butler | Saturday 19 April 2008

altOur Senior Fellow in Transport, Professor John Hibbs OBE, alerts me to a new extension of regulation in the bus industry. The Certificate of Professional Competence is already a requirement for any business engaged in public road passenger transport, but from September it will be made a requirement for drivers too.

At a cost of £240, new drivers will be required to take a four-hour theory test, even though that will cover the NVQ that many companies already demand of their drivers, and naturally (since this regulation emanates from Brussels) it will cover not just safety but subjects such as 'customer care', 'transport in the economic context' and 'role in the company'. Existing drivers will have to undergo 'periodic training', involving 35 hours attendance to meet the same criteria.

Well, I love the idea that my bus driver should be trained to drive safely, but this seems to be over-egging it. It won't improve on what responsible operators already do. What it will do is load the industry with extra costs, which the large groups will be able to bear but smaller operators will not be. So new competition will be thwarted, and today's legions of perfectly well qualified part-time drivers will find themselves out of work because their hours don't justify all the cost and training. The impact will be most severe for the small firms, usually personal or family businesses, that today provide private hire and contract services of various kinds, who (thanks to current fuel prices and of course taxes, work on tight margins already.

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Common Error No. 95

Written by Dr Madsen Pirie | Saturday 19 April 2008

95. "The economy offers too much choice. It wastes resources and confuses people."

Some commentators say that there are too many varieties of items such as lipstick, colours of toilet paper, and types of milk on offer. They suggest that this leaves shoppers not knowing which to choose, and that it represents a waste of resources.

But these resources are not wasted if people want them. To some people they may seem wasteful, but not to the consumers. Some people prefer full fat milk. Others choose semi-skimmed or 2 pecent fat. Still more opt for goat's or sheep's milk, and some for soy milk. People have their reasons for making these choices. In many cases they express a taste preference by their purchase. Others might consider health or nutritional factors. The supermarket shelves offering their variety of milk might confuse some, but they are simply responding to customer preferences. The same is true with other products

Markets respond to demand. They supply the goods people want in the forms and varieties that are sought. Those who are good at this have resources directed their way. Those who are bad at it find themselves struggling. Henry Ford famously offered his Model-T in "any colour you like, so long as it's black."  He lost market share to rivals who offered the different colours buyers wanted.

In a planned economy one could commit the production of shoes to purple sandals of size ten. In the absence of any other footwear, people would buy them and one could point to the lack of waste in not producing different styles, colours and sizes. But the consumers would not have gained the products that satisfied their preferences.

Those who call product differentiation wasteful are those who would have the economy produce the priorities they thought appropriate and sufficient, rather than the ones which emerged from free choices by the population. Choice is the hallmark of free societies.

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The race for Mayor of London

Written by Tom Clougherty | Saturday 19 April 2008

"Why has the London election, which seemed a few weeks ago to be on the point of capturing the public imagination, degenerated into a dull Punch and Judy show that even London's local papers can scarcely bring themselves to report?"

That's how Anatole Kaletsky began an excellent article in Thursday's Times. It's a good question to ask. Is it down to the cynicism of the media, who are only interested in "the personalities of the candidates and their gaffes?" Well, perhaps. The Newsnight 'debate' was appallingly handled by Jeremy Paxman, who seemed entirely uninterested in getting the candidates to set out their stall, preferring to provoke constant interruptions and arguments. The same criticism can be levelled at much of the coverage.

But there's more to it than that. As Kaletsky points out, the London Mayor's areas of responsibility – transport and congestion; crime and policing; pollution, housing and urban planning – are things voters really care about. So you would expect a lot more interest in the election than there is. Kaletsky diagnoses the cause of this apathy correctly: Britain'se endemic over-centralization.

The London Mayor is really only an agent of central government. His job basically comes down to spending a big budget, and nothing more. It doesn’t matter who wins – they will still be dependent on the national government for any major policy shifts. That's why so many people just don't seem to care.

I'd like to see a radical decentralization of political power. London and the English counties could have the same responsibilities as the Scottish Parliament, and raise all the money they spend themselves. Greater accountability to voters would be one advantage. Competition between local government areas would be another: there would be more experimentation in public policy and the 'exit option' (people could move if they didn't like their area's services or tax rates) would serve to drive standards up and taxes down.

It's a win-win, in my opinion. But it will take a brave national politician to give up that much control.

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