Play games and die?


In a move that'll shock no one, but will further antogonise Britain's successful and profitable game industry. The Advertising Standards Authority has rejected objections to the "play video games and die early" advert.

The MCV reports that the ASA responded with this terse statement:

Whilst the ASA Council understood the concerns of Tiga and those complainants who worked in the video games industry, it noted that the ad did not claim that playing computer or console games alone would lead to illness or premature death.

Funny that anyone seeing the advertisement in the article might come to a rather different conclusion. If you want to see the ASA make excuses for its decision the article has their complete response.

Blog Review 907


If you were to look around the world and pick a country whose agricultural system you'd like to emulate: well, it wouldn't be Cuba's system, would it?

You know how so many say that if only the banks had been  mutuals, credit unions, then the disaster would not have happened? Ooops!

And Oops! again as those credit unions that did not go bust have to bail out those who did.

Blogs doing what newspapers no longer do. Long investigative pieces. Here on the NSPCC.

Some argue that the growth of the past few years was phantasmal. We recorded as GDP growth what never actually existed. Well, yes, but doesn't that mean that we're not in a recession now:  writing off GDP that was never there isn't a fall in GDP?

The utter cluelessness of the regulators in the lead up to the storm. Plus Alistair Darling is being blamed for Lehman's falling now.

And finally, spare a thought for the poor bureaucrats in their time of need.

The Governor's Eyebrow


Apologies for stealing the headline to this interesting Matthew Parris piece. He's pondering upon the difference between rules based regulation and judgement based. For example, was the earlier system when the governor of the Bank of England could simply raise an eyebrow and an activity would stop better than the current FSA system of rules....leading to box ticking rather than a consideration of the underlying reality of said activity.

In this instance I find myself agreeing that the eyebrow system works better. Yet Parris goes on to another example: wouldn't a tax system that depended upon HMCR simply saying "Oi! That's not on!" be better than a rules based, box ticking one. And I find myself disagreeing.

Which leads to something of a conundrum. If judgement, the eyebrow, is better sometimes than the strict interpretation of the written down rules and yet at other times the reverse is true, is there any sort of sorting mechanism that we can have to work out when for which? Erm, a rule as to when to use judgement or a judgement as to when to use rules as it were?

I don't claim that this is the final word and would welcome comments which would help sharpen this up. But I would say that judgement is correct when we're talking about a voluntary activity and rules when we're talking about the power of the State over us.

Being in the City, being able to rely upon the Bank of England as the lender of last resort, as an example, is a choice made by your business model. I see no problem with that meaning that you've also accepted the judgement based control of your activities as a quid pro quo. To use a sporting analogy, by agreeing to play the game of rugby you've accepted that the referee has the last word and can indeed send you off for anything he likes and no arguing.

However, how we are taxed is not voluntary. This is something imposed upon us by the State and at this point we want to know exactly what the rules are, in detail, in advance. Thus we need to have a rules based system,. the legislation which we can all read and understand (well, if tax law was in fact comprehensible by ordinary mortals).

To use another analogy, that of the criminal law. I want to know what is legal and what is not in advance. I don't want myself (or anyone else) to be dragged off the street and incarcerated just because someone has judged that I am a bad 'un. I've done what that is illegal? And how have you proven this and have you ticked all those boxes of evidence, trial, jury, of justice?

As I say I'd appreciate some help fleshing this out but I'd say judgement is appropriate when we voluntarily submit and rules when we are forced to.

How much would a minimal state cost?


Most libertarians would say that the core duties of government are few in number: defence and diplomacy, policing, the courts, and so on. Essentially, government is there to protect individual liberty, and not a lot else.

I don't expect we'll ever see such a state – as Bastiat noted, the state, like any living organism, tends naturally to grow – but I thought it might nonetheless be interesting to work out how much it would cost.

Using, I worked out that the annual budget for 'defence' and 'protection', the categories which more or less correspond to those 'core duties' of government mentioned above, is about £70bn. Interestingly, that's about how much VAT set at the minimum rate of 15 percent should raise. Wouldn't it be nice if that was the only tax you paid?

OK, so maybe that's not realistic. But here's a still-radical proposal with a little more relevance to the real world: first, go ahead and restrict the Westminster Parliament to those core functions, and that limited tax base.

Then replace the welfare state with the kind of compulsory savings system that they have in Singapore and Chile, and which the ASI advocated in our reports on the 'Fortune Account'. Essentially, national insurance contributions, rather than going to the government, would go into personal, privately-owned accounts, consisting of health savings, health insurance, unemployment insurance, and a retirement fund.

Then leave the provision of any other services to local government, each unit of which would be responsible for raising its own revenue. They would have to compete with one another to attract residents and businesses, so they would have an incentive to provide the best possible services for the lowest possible cost. It would be a bit like having a free market in governments.

Well done, Prime Minister


In 2000 Gordon Brown stood at the Labour Party Conference and said the following:

In 1997 we said that the future depended upon first building strong and long term foundations for economic stability. We all remember the early 90s. It was Britain's hard working families – the one million who lost jobs in manufacturing, the one million businesses that went under, the million homeowners with negative equity. It was hard working families who paid the price and bore the brunt of economic failure. And by 1997 with the deficit nearly 30 billion, the national debt doubled, debt payments bigger than the schools budget, inflation rising, and the economy on the way back to the old familiar cycle of boom and bust, we resolved to, and under Tony Blair had the strength to, take difficult long-term decisions. Bank of England independence. Tough controls on public spending. The difficult decision to raise fuel taxes. The decision to pay back debt and cut the costs of debt.

We can now quantify those long-term decisions: they were all lies.

Back in March 2001, "unemployment dipped below the 1m mark this morning, for the first time in more than 25 years." 8 years later, this is the situation, "The number of unemployed people increased by 165,000 over the quarter and by 421,000 over the year, to reach 2.03 million. The unemployment level and rate have not been higher since 1997."

And we are all aware of the housing crisis, which is now set to get worse: "The FSA has today issued a statement suggesting that more than 2 million UK homes will be in negative equity within the next 12 months."

The current deficit stands at £77.72bn for the current fiscal year and net national debt stands (using the government's version) at, "a record 49 percent of GDP, or £717.3 billion pounds, in February". And it could rise to £1.5 trillion or just over 100%. And as for debt interest repayments, they will be around £35 billion this year.

So congratulations, Mr Brown. You've managed to make boom and bust twice as bad as it was.

Blog Review 906


A short guide to the defense of liberty.

Regulators are like generals, always ready to fight the last war.

Are fat tails in a financial market a new discovery? Well, no, they aren't.

Mild mannered economist driven to paroxysms of rage by the AIG outrage.

Not mild mannered economist similarly enraged.

Another explanation of where all the money goes.

And finally, poster design competition.


Law making by outrage of the day


Hard cases make bad law, act in haste, repent at leisure....there are any number of aphorisms that suggest that we might at least try and think before we act. Especially where the act of law making is to be committed.

In a frenzy of foaming rage over the retention bonuses being paid to people at AIG Financial Products the House of Representatives has passed a law stating that the tax rate on bonuses over $250,000 a year at firms that have been bailed out by the US Government will be 90%. As Henry Blodgett points out, this is absurd for a number of reasons. It's household income for a start and the effect will be to raise salaries while curbing bonuses: because the tax only applies to bonuses, not salaries.

However, there's one further level of stupidity that no one seems to have noted as yet. US tax laws apply to those who work in the US, of course. They also, uniquely amongst countries, apply to US citizens who work in other countries. But they most assuredly do not apply to non US citizens working outside the United States...even if they do work for US companies which have been bailed out by the Feds.

So, let us take the purely imaginary example of a London based subsidiary of a large US insurance company. This subsidiary bankrupted the parent company by being silly fools in the derivatives market. Difficult to imagine, I know, but suspend disbelief for a little bit more. The staff of this subsidiary were a mixed lot, as is common in finance. Some Americans and some from other countries. The result of this law is that those American employees, working for this US company which has been bailed out, will face 90% tax on their bonuses. The non-US employees will face the standard 40% UK tax rates. The end effect would be, I assume, that Americans would no longer work for the overseas offices of American companies, their jobs going to non-Americans who are in no danger of being touched by this law.

D'ye think that anyone at all in Congress thought about this when they were slavering to pass this law? No, me neither.

But of course this is entirely hypothetical. I have no idea whether there are any non US citizens that work for AIG Financial Products, the London derivatives subsidiary of a large US insurance compay and the company whose bonus plans sparked off the legislative frenzy and the bailout itself.

Straight As no longer enough


This week Cambridge University confirmed that from next year, three A-Grades at A-Level (the exams British school children take at 18) would no longer be enough for a student to be admitted. In future, students will need at least one A* and two As to be considered for a place.

There have been predictable complaints about this, with some arguing that such an admissions procedure will discriminate against students from state schools. But what did the government expect when they introduced the A* grade? If universities weren't meant to use it to distinguish between students, then what was the point?

Moreover, it's not exactly the university's fault if demanding a top grade means only people educated in the private sector can get in (though that is clearly an overstatement). On the contrary, it's the state schools, and by extension the politicians who believe they can run them, that deserve to be the targets of criticism.

It is also politicians who have debased the exam system and made the introduction of an A* necessary. As the Telegraph says, "Last summer, more than a quarter of A-level exams sat in England, Wales and Northern Ireland were awarded an A grade and the rate has more than doubled in 20 years." Grade inflation is not that different from monetary inflation – by increasing supply for political reasons, government agencies have decreased value. It seems they just can't help themselves.

The other thing that irritates me about this story is the implication that lies behind it, that requiring excellence (if that's what an A* means) is some kind of unjust discrimination. It isn't. Rewarding achievement and success is the way the world works, and rightly so. That's all Cambridge are doing.

Nowhere to hide


According to ZD-Net the UK government has plans to monitor all social media traffic including the likes of Facebook, Twitter, MySpace & Bebo.

"Social-networking sites such as MySpace or Bebo are not covered by the directive," said Coaker, speaking at a meeting of the House of Commons Fourth Delegated Legislation Committee. "That is one reason why the government (is) looking at what we should do about the Intercept(ion) Modernisation Programme, because there are certain aspects of communications which are not covered by the directive."

The U.K. government has previously said communications interception is "vital" and has hinted that social-networking sites may be put under surveillance. And responding to a question from Liberal Democrat Parliament member Tom Brake, Coaker said all traffic data on social-networking sites and through instant-messaging services may be harvested and stored.

Web inventor Sir Tim Berners-Lee is not terribly keen on this idea and thinks that people should not be snooped on. This is yet another worrying turn of Labour's survelliance government and one that we should probably not be terribly surprised to read about.

Blog Review 905


Yes, there are arguments for subsidising the production of public goods. But remember, education isn't a public good, even if it is publicly provided.

Most shocking: Ken Livingstone is actually correct on a matter more important than whether newts are cute.

The BBC definitely seems to be holding the law in contempt.

Why new regulation when the market itself just isn't going to make that mistake again?

As a little changes, some reasons for optimism.

Bankers aren't the only people getting rewards for failure you know....

And finally, meet Obama's teleprompter.