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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 499

Written by Netsmith | Wednesday 06 February 2008

Yes, it's true. Fat people and smokers save the government and the health care system money. So can we please go back to doing as we wish, not as we're told? And further, snarl at those who lie to us on this point?

More on 'elf'n'safety. Of course, it's vitally important that the are regulations about workplace safety, fines for breaching them and inspectors to enforce? Yes? Well, such are entirely dwarfed by the effects of the extra wages employers pay to workers for risky activities. The incentives are already there.

If only Bastiat were alive now. No, really: the candlemakers are calling for trade protection. 

Disturbing evidence that there really might be people to dumb to be allowed to vote. 

This compulsory education idea might be worse than previously thought. Much vocational training actually has a negative return. 

Something for our cartophile (?) audience. Another fascinating map site.

And finally, proof that intelligence is not a requirement to be a BBC newsreader. 

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Common Error No. 26

Written by Dr Madsen Pirie | Wednesday 06 February 2008

26. "Government must 'prime the pump' by stimulating demand through increased public spending."

Some urge that when the economy slows, and people are not spending or investing as much, government should step in with projects of its own to boost demand with public spending. In fact when government does this it destroys private sector jobs by taking away the resources which would have sustained them. Taxes are higher than they might otherwise be, leaving less to be invested in private business and to spend on its products.

Moreover, government uses those resources inefficiently. The administrative costs of sustaining each job are higher in the public sector, and the funds themselves are used less effectively. "Priming the pump" often means spending on infrastructure and civil engineering projects, all capital-intensive and less productive of jobs.

Even in labour-intensive areas, such as the public services, most of the extra money it puts in is swallowed up by increases in the public sector rate of inflation. It simply puts in more cash for public employees to bid for. This happened with the huge sums pumped into UK public services in the post-2000 budgets. All of the money was swallowed, but service improvements were not remotely commensurate with the enormous increases in spending. Indeed, some things became worse.

Private money goes where economic factors signal it should, but government cash follows political demands which are not as commercially viable or as sensible.

It takes a lot of money to sustain each public sector job. The private sector employs more people for the money. "Priming the pump" is a now discredited notion from Keynesian days. It creates a temporary and artificially high demand in certain sectors at the expense of others, followed thereafter by massive dislocation and unemployment when that artificial demand ceases. It tempts government to create artificial short-term 'booms' ahead of elections, with the consequences coming after they have been safely re-elected.

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Technical difficulties

Written by Blog Editor | Wednesday 06 February 2008

Apologies for the late start on the blog this morning. Slight technical difficulties...

Hopefully everything should be working now. 

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More misery for London commuters

Written by Tom Clougherty | Wednesday 06 February 2008

underground2.jpg The RMT and TSSA – the underground's biggest trade unions – have threatened to ballot their workers for strike action tomorrow, if Transport for London (TfL) does not meet their demands (which is basically impossible, given the time constraints).

The unions object to ticket office closures and the employment of non-union, agency, security or sub-contractor staff on the tube network. That is not surprising. They know that private-sector workers could do a much better job, at a much lower price. Frankly, they could hardly fail to do so. Unfortunately, the fact that TfL is a public-sector monopoly makes it easy to hold them to ransom and commuters suffer as a result.

Using the tube is a nightmare. According to statistics obtained under the Freedom of Information Act, the average commuter on the Metropolitan Line wasted three days, 10 hours and 25 minutes in 2006 due to delays. I hate to think what the figure would be on my (notoriously unreliable) branch of the district line.

These problems are not insurmountable: the Docklands Light Railway (DLR) provides a good model for the future. First of all, it is computerized and driverless. That blunts the power of the unions but also makes it more reliable, since trains can run a set distance from one another, arriving and departing at set times, without reliance on an antiquated human-signalling system.

Secondly, the DLR is operated and maintained by a private franchise, which means better management and greater efficiency. Our report Underground Revolution advocated a similar structure for the rest of the network, which would be split into four vertically integrated businesses (Metropolitan, District, Circle, Hammersmith & City lines; Jubilee and Bakerloo lines; Piccadilly and Central lines; Northern and Victoria lines). Splitting the tube up would promote competition in ideas on innovation, marketing and efficiency, as well as weakening the hand of the unions. Vertical integration would encourage investment in infrastructure and capacity building.

In short, no other policy would make such a difference to Londoners' quality of life.

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And another thing...

Written by Junksmith | Wednesday 06 February 2008

According to a survey of 3,000 people commissioned by UKTV Gold, a satellite TV channel, Britons are increasingly confusing fact and fiction when it comes to their historical knowledge. While 58 percent believed Sherlock Holmes was a real historical figure, 23 percent believed Sir Winston Churchill was fictional.

On seeing the results of this survey I assumed that I had overslept and woken up on April 1st but, alas, no. It appears to have been a real survey of real people – something which, humour aside, is very worrying indeed.

Education reform, anyone?

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Written by Blog Administrator | Wednesday 06 February 2008

In January we had more than a quarter of a million visits, over a million pageviews, and nearly three million hits.

Thanks for reading... 

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Blog Review 498

Written by Netsmith | Tuesday 05 February 2008

A quite remarkable economic finding: the slave trade quite possibly being responsible for the shorter life spans of African Americans. 

A note to environmentalists. Here's the list of things that you can usefully worry about and try to change. Rather than the ones you are worrying about.

A nice laying out of the point of economics. It's not trying to tell us how the world should be: rather, trying to tell us how it is. 

And what can sadly happen when an economist moves from describing how the world is to how he thinks it ought to be. 

Guido points out that the investigative committee into MPs' expenses isn't really all that investigative.

A reminder that not everything in the newspapers is quite what it seems. Some quoted there represent no one but themselves. 

And finally, some money on offer if you can teach economics better than a high priced call girl. 

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Nick Clegg's problem

Written by Dr Madsen Pirie | Tuesday 05 February 2008

clegg2.jpgLiberal Democrat leader Nick Clegg has a real problem. Last week one of his MPs tabled a bill in Parliament to force pubs and bars to sell wine in small measures only, while one of his party's MEPs called for a ban on patio heaters.

Greg Mulholland, Lib-Dem health spokesman, wants to make it illegal for bars and pubs to sell wine in anything other than the little 125ml size popular over a decade ago. These were the tiny little glass bowls that didn't allow the wine's aromas to develop in the glass. His excuse is that "people don't realize how much they're drinking."

Meanwhile Fiona Hall, Liberal Democrat MEP for the North East, called for the EU Parliament to urge the Commission to ban patio heaters on the grounds that they contribute to global warming. Of course they have a negligible impact; it's just one of those gesture politics tricks to create whipping boys. The surge in the sale of them is probably down to the government's ill-conceived smoking ban anyway.

The result is that poor Nick Clegg has seen his party made to look stupid yet again. He needs to take a lesson from Peter Mandelson, who introduced tight controls over what initiatives individual Labour politicians might launch or pontificate about. It made him unpopular, but it made his party able to control its image. Nick Clegg will have to do something similar or risk seeing idiots and charlatans make his party a laughing stock week after week.

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Reforming general practice

Written by Tom Clougherty | Tuesday 05 February 2008

gp_surgery.jpgAlan Johnson, the Health Secretary, has written to every GP surgery in England urging them to open in the evenings and at weekends. He wants surgeries to be open for an extra three hours a week. The British Medical Association (BMA) is only prepared to offer two extra hours. They say opening for longer would compromise patient care, unless they were given extra resources. The government's proposal would, apparently, only cover a single GP working late at the surgery, without a nurse.

The whole argument is ludicrous. Why do GPs have central contracts with the government at all? Why on earth is the secretary of state sending letters to GP surgeries? This sovietized system is so backward, so obviously inadequate, that it’s a wonder it has lasted so long. In such a system the fight is always between producers and governments, with patients hardly entering the equation.

This could all change very simply. Make GP surgeries independent and self-governing. Then have them agree NHS treatment tariffs with their primary care trusts (the local bodies that commission healthcare services). Let them advertise for patients, or group together into chains of GP surgeries to reduce administrative costs. The revenue these surgeries, or chains of surgeries, brought in would depend on how many patients they treated, and on whether those patients were satisfied with the service and became repeat customers.

In such a system you would quickly find that where there was a demand for such services, GP surgeries would stay open later in the evening or at weekends. All their incentives would be aligned towards providing the best possible service. Of course, the left will scream "privatization" and say this amounts to the abolition of the NHS. Yet services would still be free at the point of use and paid for out of taxation.

It's high time British healthcare put patients ahead of political ideology.

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It s government intervention, stupid!

Written by Dr Fred Hansen | Tuesday 05 February 2008

President Bush’s plans to bail out subprime loans by freezing interest payments for adjustable mortgages is ill conceived enough. But did you know that it was another government intervention that goaded these people into making those mistakes in the first place? That is exactly what George Mason University Economist Walter E. Williams is saying in an interesting commentary for the Washington Post:

As with most economic problems, we find the hand of government. The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton administration, is a federal law that mandates lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining. In other words, the Community Reinvestment Act encourages banks and thrifts to make loans to riskier customers.

However, 96 per cent of mortgages are being paid in time. It is only 2 or 3 percent of homeowners who have to face foreclosures. The Bush bailout will help only few people at a huge cost for the rest of the economy. Above all it is a gross violation of contract rights in a free market (and could even be a Fifth Amendment violation) as Williams rightly states:

If a contractual agreement is willingly entered into and agreed upon by a borrower and lender, it is binding and if broken by one party or the other, harsh penalties should ensue.

Since it was government intervention that got us into the mess more of the same does not make sense at all.


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