The Pin Factory Blog

What it is like when you've got a serious amount of inflation in the economy.

Yes, many are calling for increased regulation in these difficult times. That doesn't mean that we should in fact have more regulation: for it is extremely rare that the results are those intended. 

Words to live by:

Almost all that any politician says on any topic other than political strategy
should be treated with even less respect than would be accorded a
professional circus-clown's speculations about string theory.

A description of what it is that politicians and bureaucrats actually do and how they work.

From strength to strength. The Ban Darling campaign makes PM's QT. And the story seems to be going international as well.

Rather more sober minded economics now: the way in which recessions spread geographically.

And finally, copyright theft as a Pareto improvement.

The Cato Institute's David Boaz, who seems to have been churning out a lot of good quotes lately (see here and here), had an excellent article in the Lima News earlier this month. His subject was "The Hillarys and the Huckabees", the two groups that threaten individual freedom in the United States.

The Huckabees, named after Republican primary also-ran Mike Huckabee, are the big government conservatives who want government to fill God's shoes, stamping out sin and telling everyone what to do and what not to do. They're the people who reject the social liberation of the 1960s. As Boaz puts it:

[They] want to censor cable television because they don't think you can be trusted to decide what your family should watch. They support bans on drugs, pornography, gambling and violent video games because you just don't know what's good for you...

Meanwhile, the Hillarys (no prizes for guessing who they're named after) reject the economic liberation of the 1980s. They "want to raise taxes because they think they can spend your money more wisely than you can. They don't believe in school choice because you don't know how to choose a school for your children. They think they can handle your retirement savings and health care better than you can." In short, the Hillarys want government to treat citizens as parents treat children – the nanny-state writ large.

Fortunately, as Boaz points out, the US has a natural inclination towards libertarianism and has so far been able to avoid the excesses of both camps. I think it's a pretty good analysis of American political dynamics: a libertarian default position, embattled by two powerful forces for statism.

I'm not sure it can be easily translated to the UK though. For starters, despite our liberal history, we lack a widespread libertarian ethos – sixty years of the welfare state has seen to that. Similarly, much of our 'political class' (not least the present government) are both authoritarian and economically illiberal. Nonetheless, I'm confident that the political wind will change before too long.

74. "Essential services are too important to leave to the private sector, and have to be done by the state."

The assumption here is that state provision somehow guarantees that essential services will be delivered. In reality it is the important things that we should keep out of the public sector. The public sector is characterized by high costs, by inefficiency, by lack of responsiveness to consumers, and by a propensity to interruption.

Because they are financed out of taxation, the public services do not have to attract customers, or to satisfy them. They gain extra funds by putting pressure on government through lobbying or union militancy. Since the public do not usually have viable alternatives to turn to, the state services can put their needs as secondary to those employed in them or in political control over them. They respond to their managers and employees, rather than to the general public.

Private firms cannot behave like this or they lose customers and revenue. Their workers are less ready to strike in case their jobs go to rival firms as a result. Private firms, moreover, have to keep their products and services up-to-date and to incorporate new advances lest their rivals steal a march on them. They have to keep efficient or costs will eat into their margins. None of this applies to state services, which seem everywhere less efficient, less modern and less responsive.

The message is clear; it is that important services should be kept out of state control. We can imagine what might have been done to our supply of food or clothing if we had been dependent upon a nationalized monopoly, with no competitors bidding against each other to improve quality and efficiency, and no alternative to turn to when strikes occurred. Some things are just too important to be left to the public sector, and any important services still there should be taken out of it.

Globalization isn't new, points out Tim Worstall at the Globalisation Institute.  He's had a preview of an upcoming paper by Prof Leslie Hannah which shows that "Most of Europe's (and Britain's) problems of restricted twentieth-century growth derive from the tariff escalations, wars, dictatorships, expropriations, partitions, nationalism and related problems of 1914-1945."  Before the First World War we were quite happily interconnected with the world and enjoying the benefits.

Germany was dominant in the older industries such as coal and steel, while the UK was forging ahead in things like banking and finance.  These are echoes of the present day, with Germany more dependent than we would like to be on the white goods now so capably produced out East, while we lead in financial services.

Then, as now, the gains are to be made in specialization and trade, not in cowering behind protective tariffs, and certainly not in having government decide which areas the country should concentrate on. In the words of HRH Prince Charles, "People do that."

The Great Ban Darling Campaign is gathering momentum. The Telegraph, The Morning Advertiser (for those unaware, this is the publican's paper, so important in such a campaign), Guido, Guido again...please add further sightings in the comments.

Spending taxpayers' money on lawyers so that taxpayers can't find out how taxpayers' money is being spent. Perhaps not the wisest of decisions, Mr. Speaker? Possibly even a reason to resign?

Of rather more importance perhaps is the revival of the Abolition of Parliament Bill. This is getting like the EU, the same measures brought back under a different cover. SpyBlog with the details, Dale and Guido with reactions (and it's hard to find a British political blog today not outraged by this). 

Two from the US: more idiocy from the War on Drugs and an explanation of why it all happens. 

Sadly, things are no better than this in England. 

Can we get out Tax Freedom Day moved forwards to this date please? 

And finally, Mrs. Sarko arrives in Britain. 

There is a campaign afoot to ban Alistair Darling, the Chancellor of the Exchequer, from every pub in Britain. Its organizers are annoyed that he increased the duty on Alcohol in his budget, and not without reason.

The 2008 budget added 4p to the price of a pint of beer, 14p to a bottle of wine, 55p to a bottle of spirits and 3p to a litre of cider. It also introduced an alcohol tax escalator, which means the duty will go up by 2 percent above the rate of inflation in each of the next four years. That means a pint of beer (already more expensive than a line of cocaine, according to some estimates) will cost £6.47 by the time the 2012 Olympics come around.

None of that is good news for the pub trade, or for people who enjoy going out for a drink. The impact of the smoking ban (which I recently heard described as "one of Labour's finest achievements" by a former government adviser) has already meant that 1,409 pubs closed down in 2007, compared with just 102 in 2005. 

Ostensibly, the reason for the tax rises is to curb binge drinking, but everyone knows the taxes won't make the slightest bit of difference – the real motivation for the tax is the same as always: raising revenue. A group of kids sharing a bottle of vodka are hardly going to be deterred by having to split an extra 55p between them. And if binge drinking really were determined by price, wouldn't you expect to find more of it on the Continent, where prices tend to be considerably lower? In reality, it's a cultural thing.

So – in order to have a bit more money to waste, the government is punishing an innocent majority for the sins of the unpleasant few (who aren't going to pay any attention anyway). If I were a pub landlord, I think I'd bar Alistair Darling too.

58. "If people don't like the policies of their trade union, student union or local council, they have only their own apathy to blame. They should become more active and change things."

Why should they?  Why should people be punished for the pursuit of their lawful interests?  Why should they have a system inflicted on them which takes away their rights unless they become active in organizations which do not interest them?

Most people eligible to participate in trade unions or student unions, and most local residents, probably have spare time activities. There are innumerable hobbies and pursuits to engage an active mind or an energetic body. Students, for example, are often interested in sports, in entertainment, in socializing, and even, occasionally, in studying. These are normal pursuits. Those who feel impelled to engage in full-time politicking are the unusual ones. The rest of the group should not be penalized for being normal, and should not have things done in their name that they object to.

The same applies to trade union members or local government electors. They should not be required to engage in unpleasant and time-consuming pursuits in order to prevent things being done to them or in their name which they do not support. It is not apathy which keeps them away from this type or activity, it is normality, and they should neither be blamed for it, nor made to suffer because of it. Those who have tried to operate "within the system" know how tiresome, time-consuming and corrupt it can be, with political extremists relying on late-night meetings and turgid procedural points to drive away normal people.

There should be freedom of association, and no compulsory membership of organizations claiming representative powers, no forcing people into trade or student unions. Those who wish to join and participate can do so, and the others should not lose rights by declining to participate. Non-participation should not be blamed as 'apathy,' but respected as a free decision.

Freedom 101, the recently published compilation of all 101 of Dr Madsen Pirie's Common Errors, is now available on Amazon for the bargain price of £4.79.

The book refutes many of the common errors of economic, political and social debate. Many of them are in daily circulation as if they were truisms. We are
told that, 'the world is running out of scarce resources' or that, 'we
should protect the poor by fixing the price of essential goods'. But as Madsen shows, some of these are based on errors of fact, some on false arguments, and many of them on a misunderstanding of how economics works. The book is designed to help readers clarify their own thoughts and equip them to bring that same clarity to aid the understanding of others in discussion and debate.

Click here for the Amazon page.