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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

Common Error No. 74

Written by Dr Madsen Pirie | Friday 28 March 2008

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.

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Nothing new

Written by Dr Madsen Pirie | Friday 28 March 2008

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."

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And another thing...

Written by Junksmith | Friday 28 March 2008

I'm a little upset. You know, Hillary Clinton was supposed to be our first guest tonight, but she got pinned down by sniper fire and was not able to come in.

Jay Leno

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Blog Review 549

Written by Netsmith | Thursday 27 March 2008

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. 

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Ban the chancellor

Written by Tom Clougherty | Thursday 27 March 2008

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.

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Common Error No. 73

Written by Dr Madsen Pirie | Thursday 27 March 2008

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.

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Written by Tom Bowman | Thursday 27 March 2008

It has been wonderful to watch Hillary Clinton getting into trouble over her 'inaccurate' claims that she had to dodge sniper fire while on a visit to Bosnia as First Lady. Next we'll be finding out that she didn't bring peace to Northern Ireland or re-open the Macedonian border either.

Hillary claims she 'misspoke' and puts the mistake down to fatigue. Watch the CBS video above and see what you think.

In any case, it does beg the question: does the world really want Hillary Clinton answering that all-important 3am phone call? What if she's tired? Who knows what she might say? 

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Freedom 101

Written by Wordsmith | Thursday 27 March 2008

freedom101.jpgFreedom 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.


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Blog Review 548

Written by Netsmith | Wednesday 26 March 2008

It would appear that Hillary Clinton is not the only person with slightly misty recollections of the past.

More Hillary: is this the scariest thing you've heard this electoral season or what? 

The Interior Designers Guild is comparing itself to the AMA: well, yes, they are indeed doing exactly what Milton Friedman's Doctoral thesis suggested the AMA were doing. 

Interested in a bit of British maritime history? Why not try this?

Can't find a copper on the streets? No wonder, they're all in Alberta.

 The BBC is now reporting that Alistair Darling is being banned from pubs. Further updates here. How far will this campaign go?

And finally, perhaps four leafed clover isn't in fact all that lucky? 

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Common Error No. 72

Written by Dr Madsen Pirie | Wednesday 26 March 2008

72. "Scarce resources should be allocated on the basis of need, instead of going to the highest bidder."

If scarce resources are allocated on the basis of need, they stay scarce. When allocation is other than by price for goods in short supply, nothing is done to relieve the scarcity. When allocation is by price, it does act on the shortfall.

In a market situation, goods in short supply command high prices. This means that producers and dealers make good profits, and others are attracted to do the same. The high prices bring new sources of supply to the market, and the price falls gradually as the scarcity is relieved.

When allocation is on the basis of need, there are no high prices and profits to attract new supplies, so the shortage goes on. Consider the case of a new product such as computers or DVDs. At first they are for the very rich, but the profits attract competitors, and the increased supply brings prices within reach of ordinary people.

Consider, more revealingly, the case of two villages in a famine. Village Bigthorpe allocates the scarce food on the basis of need, and all starve together. Village Littlethorpe lets food prices rise. The high prices attract produce from all around and far away. People have to sell their rings and go into debt, and lots of merchants get very rich. But Littlethorpe survives.

Poorer people can be helped not by rationing, but by being given the resources to buy their necessities. Ultimately they are better served by a wealth-generating society in which supply can be brought to meet demand, and in which the market responds to changing circumstances. Such a society will improve their living standard and their command of resources faster than any which tries to allocate according to perceived needs, and which prevents prices from sending their signals and eliciting a response.

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