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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

Quote of the day

Written by Wordsmith | Monday 25 February 2008

It is a popular delusion that the government wastes vast amounts of money through inefficiency and sloth. Enormous effort and elaborate planning are required to waste this much money.

– P.J. O'Rourke

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Blog Review 517

Written by Netsmith | Sunday 24 February 2008

An excellent outlining of the problems with ethanol and biofuels. Of course, our Masters took the decision to insist upon them before they found out anything about them. Par for the course.

As, for example, with the proposed rules about ISPs and their policing of file sharing. Not technically possible. 

Looks like the euro (if it doesn't collapse first) could supplant the dollar as the international reserve currency of choice in the next decade. Not that this actually means very much of course....

How to get around the smoking ban.

A look at the British medical blogging scene. 

When picture captioning goes wrong. 

And finally, an Italian confession and humour in typography

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The Ex-Editor

Written by Tim Worstall | Sunday 24 February 2008

John Kampfner has recently been thrown out resigned as the editor of the New Statesman. My assumption is that even the highly partisan readership of that magazine got  bored of being offered inaccuracies of the following sort:

It is strange to remember that a Labour government has presided over
the phenomenal transfer of wealth and assets into the hands of the very
rich.

I could understand if he said a transfer of resources from the productive, private, sector to the less productive State one, for taxation and government spending have indeed risen over the New Labour years. But a transfer of wealth from the poor to the rich? How does that work then?

Leaving aside the sarcastic point that the poor, by definition, don't have any wealth worth taking because, by definition, they're poor?

A requirement for this to be true would be that the poor now have less wealth (and we should distinguish between wealth, a stock, and income, a flow) than they did ten years ago.  There's no evidence that this is in fact true: quite the contrary, every level of society is now wealthier than they were ten years ago. So there has been none of the transfer that he complains about.

What is true is that of the growth in wealth in the past decade more of it has gone to the top of the distribution than was formerly the case. But this is a function of the way in which the benefits of growth are distributed, not a transfer from one group to another. And even there it's hardly phenomenal: in 1999 the top 1% had 34 % of the wealth in 2003 they had, err, 34% (adjusted for housing, and yes, I'm cherry picking).

I've no objection to someone complaining about the distribution of newly created wealth (I might disagree but it's a legitimate concern) but I do have an objection to someone insisting that if some have become richer then others must have become poorer: that simply isn't true, the economy and the wealth it can create are not zero sum games. All can benefit, as they have been, rather than more for some having to mean a transfer to them from others of a set amount. 

Now we've put him straight all we need to work out is why this guff is appearing in The Telegraph rather than tucked away in a magazine no one reads. 

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Common Error No. 44

Written by Dr Madsen Pirie | Sunday 24 February 2008

44. "Business should be forced to be socially responsible."

People in business have moral obligations to others, just as teachers and lift operators and everyone else does. Nothing about the activity excuses them from these, which include behaving in a responsible way to others, and respecting their rights, too.

Business people have the additional burden which trust imposes. They engage in transactions and contracts, and have a moral duty to keep their side of the bargain. Of course they have a legal duty as well, but that is not why they behave honourably.

They already perform services to society by making goods and services available, by creating employment, and by contributing to society's maintenance by paying the taxes and levies it imposes. Some suggest that they have the additional obligation of contributing to charities and the arts, to funding neighbourhood community schemes, and to supporting causes they deem worthwhile.

Some businesses engage in such activity to boost their public relations and their reputation. If being seen to do such things makes them sell more of their product, these are legitimate business actions, calculated to improve the financial position of the company. It can be good business practice to maintain excellent employee and community relationships.

People invest in companies, lending them money in order to generate a yield from it. It is a company's duty to use that money with due diligence for the purposes for which it was lent to them. If they misapply it to themselves, we rightly castigate and even prosecute them. If they apply that money to causes they approve of, perhaps because it makes them feel good, this can be a misuse of funds lent to them in good faith. It was not lent to them to support good causes, however noble. The lenders could have done that themselves. If it aids the business it is a valid use, otherwise it is not.

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The virtues of tax competition

Written by Dr Madsen Pirie | Sunday 24 February 2008

Yes, tax competition does pose problems for politicians who buy votes with other people's money. Tim Worstall points out on the GI site that "if people are able to pay lower tax rates elsewhere then they might just leave and go and do precisely that." Thus the presence of more tax-attractive places restrains the big spenders. More to the point, though, as Tim emphasizes, is that tax competition brings choice and with it the opportunity for people to satisfy different preferences simultaneously.

Some prefer the greater State services (however incompetently delivered) that higher taxation brings, there are even those who prefer greater regulation. Excellent, let those who desire such things have them. And thus the point and value of having competition in such tax and regulatory jurisdictions: people get to choose which they prefer.

Of course tax competition does tend to make one choice more difficult: that of living where there are high levels of state services, but where someone else pays the taxes to sustain them.

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Quote of the day

Written by Wordsmith | Sunday 24 February 2008

The great non sequitur committed by defenders of the State, is to leap from the necessity of society to the necessity of the State.

– Murray N. Rothbard (1926-1995),

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Blog Review 516

Written by Netsmith | Saturday 23 February 2008

An excellent general and theoretical result undermined by an individual and anecdotal incident. Ain't that always the way?

Those who can, those who teach and those who teach the teachers: now one more recursion, those who administer the teachers. 

And photographic evidence of how at least one of those groups of administrators operates. 

Surfing a 66 foot wave. Eeek!

A good question, why does the Treasury get the fines? Shouldn't it be the consumers who were (allegedly) ripped off?

What happens when a lawyer gets a blog. Not pretty.

And finally, just why is the Antiques Roadshow so popular? 

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This is the point dangnammit!

Written by Tim Worstall | Saturday 23 February 2008

Lloyds TSB has just announced its results


The group, Britain's fifth-biggest bank, has taken a £280m hit on risky sub-prime loans, but that is only a fraction of the figure suffered by rivals such as Barclays, which earlier this week revealed a £1.6bn write-down.
Chairman Sir Victor Blank said the bank had benefited from its cautious approach.

Leave aside the Chairmanspeak guff that follows about high-quality sustainable results and long-lasting relationships. Knights, let alone chairmen of major banks, are not supposed to do the happy dance, sneer at their competitors and scream "Who's your Daddy!" however much they would like to. For the simple truth is that Sir Victor and his team have done exactly what the shareholders are paying them for, investing their capital so that it fructifies in a satisfactory manner while the team at Barclays were perhaps less successful and at Northern Rock, well, not successful at all.

But that's how the system works: we've not found any method better than people doing as they wish wth their own money: hiring those stewards for it that they trust. Those who turn out to be worthy of that trust prosper as do the businesses they run and those who invest in them, waxing fat off the judgement of their servants and hirelings.

Those who are careless or foolish in where they invest stand to lose their money: exactly the tonic needed for people to be careful about where they do so. Harsh it may sound, but there's nothing unfair about capitalism in this manner. 

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Common Error No. 43

Written by Dr Madsen Pirie | Saturday 23 February 2008

43. "The market cannot protect the environment."

The Stern Report described climate change as "the greatest case of market failure" the world has seen. In fact the market has not failed – there is no market at all. There is no market in war, either, which some think more devastating then climate change. Markets deal with transactions, not with human behaviour in general. Where there are no exchanges, there are no markets.

Markets can prompt and regulate human activity by signals they send about scarcity and prices. They allocate scarce resources in ways that encourage people to consume less of them and produce more of them. When some resources, such as air, water, and ocean fish stocks have no price on them, there are few restraints on their use. Sometimes production causes 'externalities,' such things as pollution and noise disturbance, and the depletion of resources.

The way to have markets protect the environment is to put markets into place. If some activities contribute to climate change, there should be a price to pay for doing them. The habit of environmental campaigners of picking out relatively trivial symbolic targets such as "food miles" or budget air travel obscures the fact that agriculture, industry, and power production are among the greatest emitters of "greenhouse gases."

Markets can be introduced by putting a price on previously unowned resources. Fish quotas can be set and then traded, giving the buyer ownership of the fish and an incentive to conserve them. Tradable emission permits can discourage emission by raising the price of doing it. They raise production costs to those who emit more, and reward efficient, cleaner producers.

Markets can be used to promote the development of clean technologies by giving them a price advantage, encouraging people to produce more cleanly by making it more attractive financially to do so. Markets can protect the environment if they're properly introduced.

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Quote of the day

Written by Wordsmith | Saturday 23 February 2008

The single most exciting thing you encounter in government is competence, because it's so rare.

– Daniel Patrick Moynihan (1976)

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