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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 571

Written by Netsmith | Friday 18 April 2008

Ronald Reagan really did have it right about government. The banks here seem to have gone through the whole cycle in only seven years.

An example of the government's expertise at creating value added regulation.

The costs and benefits of climate change: do we really want to go back to1988?

Guido's not to blame: the fake and leaked emails have come from another source and wouldn't it be interesting to know who and why?

Today's statistical games are to do with drinking and breast cancer risks. If all women in the country ceased drinking completely there would be very little reduction in deaths.

More on the effects of immigration: what effect that there is on reducing wages seems to occur to the previous generation or wave of immigrants.

And finally, something of a blunder from the BBC.

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Monetary failures

Written by Richard Jeffrey | Friday 18 April 2008

Despite the obvious monetary-induced stresses that have emerged since mid-2007, few economics commentators have questioned the role that monetary policy has played in causing this situation. In fact, monetary policy has everything to do with where we are today. The low levels of interest rates that were maintained on both sides of the Atlantic between 2002 and 2004 are the main reason why there was a surge in debt-financed activity, undertaken by financial businesses, households and government.

In the UK, inflation targeting has failed to create the conditions necessary for sustainable growth. Indeed, it has more than failed; it has actually been a significant cause of the credit boom. The problem with all static policy targets, whether they are for monetary variables, the currency or inflation, is that they work only so long as they remain consistent with longer-term equilibrium between supply and demand. Inevitably, however, they are framed by politicians and civil servants looking into the rear-view mirror.

Had it been in place earlier, inflation targeting inflation might have prevented some previous acts of economic vandalism. But it is hard to establish a rigid policy framework capable of accommodating future changes in the economic environment. Worse than that: the goal of monetary policy becomes solely to achieve the target; policy makers become blind to other evidence that suggests a change of course might be appropriate. The problem in the UK has been that the inflation target was not designed to accommodate a situation in which there was excess domestic demand at the same time as significant downwards pressure on inflation.

Because the policy framework established by Gordon Brown in 1997 was so narrow, the MPC was encouraged, if not mandated, to ignore obvious signs of overheating in the economy. The result was that the policy signal became stuck on Go.

The MPC should be given a broader remit. This may still have inflation at its heart, but it should also be made clear that policy must be formulated to ensure that the UK is on a sustainable growth path. Sometimes this may mean that inflation deviates from an explicit target – but on the basis that this is consistent with a wider balance being maintained in the economy.

Richard Jeffrey is Head of Securities at Ingenious and is a member of the ASI's regulatory action group.

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Common Error No. 94

Written by Dr Madsen Pirie | Friday 18 April 2008

94. "Business doesn't care about consumer safety, and cuts corners by economizing on safe conditions for its workers."

What private business wants most of all are satisfied customers who will not only come back, but tell their friends. A reputation for unsafe products is the last thing a business needs. A toy company with a reputation for products which injure children is not going to sell many toys. An airline with a bad crash record tends to be avoided by travellers, as does a railway company, state or private, which kills its passengers.

It is often a good thing to have industry-wide safety standards. They help impart general confidence and inform on how safety is best maintained. Best practice can become the norm. The industry itself should be consulted on this, however, because they know better than any outside inspector can. In many cases a voluntary code policed by the industry itself is satisfactory. In others, legislation incorporating their advice may be needed. But the notion that they don't care about product safety is profoundly wrong. And the notion that some bureaucrat sitting in Whitehall or Brussels with no knowledge of the industry is the best person to lay down rules for product safety is equally wrong.

It is also true that a contented, motivated workforce tends to be more productive and less prone to disruption. It is not in the interest of business to have casualties among its workers. Again, it is good to have the industry's input into safety standards, because they know the conditions. As the economy becomes more prosperous, and as technology advances, it becomes possible to achieve and insist upon ever higher safety standards.

State industries in the UK and abroad are not safer for customers or employees than are private businesses. If anything, it is the prosperous private industries which can afford better safety standards, just as it is the rich economies which can do so.

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An overdose of headlines

Written by Dr Eamonn Butler | Friday 18 April 2008

I'm suffering from an overdose of headlines again.

This time, the scare is vitamin tablets. A Copenhagen University among 230,000 people, we're told, says that taking vitamin pills might not do you any good and might actually do you positive harm. Really?

Well, I'm no biochemist, and not even in the pay of any pill producers. But the headline sounded pretty daft to me. And I've never really trusted Danish science after the way they beat up Bjorn Lomborg so mercilessly instead of getting to grips with his arguments. Yet the story was so well-spun by its promoters that I had to read quite a long way down the coverage before I could get a balanced picture.

It took a lot of reading to discover that even the spinners of this story aren't saying that a daily multivitamin pill will do you any harm. They're talking about people taking really big doses of a single supplement - Vitamin A, E, C, Beta-Carotene and Selenium. I discovered that the researchers had started by reviewing 815 (some reports say just 467) clinical trials. But a lot of these were studies on very sick people, whose experience is probably not very relevant to the rest of us. Then, it seems, the reviewers eliminated all but 68 because they showed no deaths. Yes, well that would skew things a bit, wouldn't it? By the time they had eliminated the Selenium studies (which showed a reduction in deaths), they were down to less than half a dozen studies, on which the scary headlines are based.

Well, scary headlines sell newspapers and a balanced appraisal of complicated science doesn't. Ask Bjorn Lomborg.

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Bloggers' bash 2008

Written by Tom Bowman | Friday 18 April 2008


It was a full house last night for our 2008 bloggers party. The theme was "curbing the crap artists" and we drafted in three top bloggers to speak on the topic. Tim Worstall went first, curbing the crap journalists. Invoking Hayek, he said that the collective information of the bloggers will always be superior to that of a journalist, so bloggers should pick them up on their mistakes and to not let them get away with poor research or lazy assumptions. If you're not blogging already, he said, join the club!

Guido Fawkes went next, telling us about curbing crap politicians. Politicians are basically glorified social workers, he said, [over]paid to administer the welfare state. And they're mostly crap. The key to curbing them is giving them much less stuff to do. Quite right too.

Perry de Havilland of Samizdata filled the final slot, on curbing crap businesses. He cited three examples. Dell were forced to improve their service when the blog "Dell Hell" made it onto to first page of Google. An overpriced chocolate brand was found out when a blogger revealed that it was just crap chocolate in a really expensive box. And finally, switching things around, Johnson & Johnson actually managed to win a public relations war against the Red Cross (!) by getting senior executives blogging on their website.

Afterwards we adjourned for alcohol and sandwiches. I've never seen so much real ale disappear so quickly. Clearly bloggers are a thirsty bunch. Telegraph blogger Alex Singleton was there taking pictures: you can see them here.


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Blog Review 570

Written by Netsmith | Thursday 17 April 2008

As simple an explanation of the work life balance as you're likely to find: the important point being that it is different for different people (although those nervous of strong language might want to skip the last paragraph).

Another one of these happiness things. Marriage raises happiness: children decrease it. But you'd have to have 19 children to reduce happiness to the single childless state. Although, to be fair here, if your wife likes you enough to bear you 19 children, even that might not be true.

How odd. The bank that the Government owns isn't passing on the fall in base rates to borrowers either.

Now this is science, even climate science. Following the results and publishing them, even if they contradict your own previously held opinions.

And this isn't science. A list of things that might make you an "altie" (technically defined as one well on the way to "woo woo" status).

Businesses are starting to leave the country due to the tax and regulatory burden. No, not good news.

And finally, it's amazing the things you can win in magazine competitions. Even a divorce.

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The problem with the Olympics

Written by Eben Wilson | Thursday 17 April 2008

While the proximate cause for the rising distaste for the Beijing Olympics is the way that China treats Tibet, I think there’s something else. My local market stallholder expressed it the other day as "all those Chinese in rows and ranks of uniforms – makes me shiver".

What he pictured was an old cliché of Maoist uniformity. I rather liked the “rows and ranks" which I think was expressed tautologically, but actually captured the sinister uniformity and hierarchical inequality of communist China rather well. Today, the cultural mores of post Mao capitalistic China are quite different, with the creative chaos of Western clothes and accessories prevalent. But he did bring back to me the scene when London’s 2012 Olympics were announced. The British delegation leapt in delight and hugged and wept, but what struck me then was the contrast of their individual abandon with their corporate uniformity. If my memory serves me right they were all uniformly dressed in formal business suits in a rather drab beige.

For me, this is the lurking cultural mistake behind the Olympics. Sports people suffer from some of the blind intensity of totalitarians. Sure, they celebrate excellence, but it is not a spontaneous excellence, rather a planned excellence that is generated by a rigorous collective effort. This deliberate construction of performance has strong echoes to the way it is achieved through the controlled statist methods of the communist regime. As such, it becomes culturally unreal, a freak show that ordinary mortals see through.

All over Britain teenagers – most between 15 and 20 - are being recruited into our Olympic effort for 2012. These half-formed athletes will be sponsored and trained up to excel on our behalf in the Stratford wasteland. What a contrast with the ideal of individual self-discovered excellence – spontaneous achievement by those who take part because they have found that they can excel. [Click read more to continue]

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Common Error No. 93

Written by Dr Madsen Pirie | Thursday 17 April 2008

93. "Some businesses deliberately build obsolescence into their products to force people to buy more when they wear out."

Some might economize on longevity where there's a demand for a cheaper product. If people want durability, they pay for it. If you recognize that fashions change and technology advances, you might opt for a cheaper product with a shorter life span. The pace of innovation is accelerating, and most customers seem to want the latest product. It depends on what you're buying.

There are products, such as houses, which people expect to last. Builders do not deliberately build houses which will fall down after a few years to force people to buy new ones. Instead they recognize that the market there is for durability.

For mobile phones and iPods, on the other hand, most customers would not want a product to last for decades. They prefer not to pay the extra costs of achieving this quality, and settle for one which will last them until they are ready to move on to a more up-to-date version.

There's a sort of urban myth that companies spend millions designing products that will fall apart or otherwise cease to function just three days after their warranty expires. This would cost extra, be difficult to achieve, and would probably result in customers buying a rival's product next time because the first one turned out to be no good.

More commonly there's a trade-off between durability and price; you can pay more for a product that will last longer, but you might not want to. Attics and garages are full of junk that people don't use any more. Waist high fax machines and desk top calculators are museum pieces now. Businesses don't deliberately equip their products with termination dates or auto-destruct mechanisms. They want them to last about as long as people expect them to. And for some of today's products, this is not very long.

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As Pope declares his Catholicism...

Written by Philip Salter | Thursday 17 April 2008

Michel Barnier, the French Agricultural Minister, has called upon Europe to increase protectionism in the face of rising food prices. On French radio he stated "We cannot and we must not leave food for people to the mercy of the rule of the market alone and to international speculation." Framed as a humanitarian gesture, it is nothing of the sort. The position is an attempt to upload France’s national policy to the European level, protecting their own uncompetitive farming industry in the face of increasing pressure as the biggest receiver of EU subsidies.

Concerns from many about the price of staple foods have long been on the agenda for a while. However, the argument used to be that the price of food was too low, and that this was having a negative impact upon farmers. Now it is being acknowledged that rising food prices are impacting upon the wider population in developing countries, with serious effects.

Barnier's solution is the wrong way out of the situation. In fact, it is a thinly veiled cover for what he perceives as France’s self-interest. He is wrong even about France’s own self-interest. The appalling impacts of protectionism (on consumers at home as well as on producers abroad) have been clearly acknowledged by any self-respecting economist.

Rising food prices are a real problem. However, looking towards the Europe Union for reasonable solutions is like consulting Robert Mugabe on improving the economy. The ludicrous goal of having 10 percent of transportation fuel made from biofuels by 2020 is still sadly in effect. This Brussels backed initiative is exacerbating the high food prices. The International Food Policy Research Institute in Washington suggests that biofuel production accounts for a quarter to a third of the recent increase in global commodity prices. It is about time the plug was pulled on this harmful policy.

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And another thing...

Written by Junksmith | Thursday 17 April 2008

Hillary Clinton attacked Barack Obama, called him 'elitist,' and said he was out of touch with poor people. Later, Bill Clinton gave a speech on the subject, and charged a million bucks for it.

Jay Leno

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