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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 495

Written by Netsmith | Saturday 02 February 2008

So why do so many nations insit upon having an integrated steel works? Could it be the same reason we Brits started using iron?

As so often, Frank Field speaks great good sense. 

Tsk: once again the media is allowing the petticoats, the artifice, to show.

A possible reason why the reading of literature is in decline: the way that students are taught to read literature. 

It would appear that at least one part of the climate change scare story is incorrect, the possible slowing or ceasing of the thermo-haline circulation. Far from doing that, increased temperatures should strengthen it. 

Yes, really, in some places you need an auctioneers' licence to sell things on e-Bay. For the good of the consumer, of course, although there's more than a suspicion that the professional auctioneers have something to do with it. 

And finally, a selection of most excellent advertisements. 

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Tax need not be taxing (with a flat tax)

Written by Philip Salter | Saturday 02 February 2008

adamhartdavis.jpgFollowing the online tax return debacle, Adam Hart-Davis, the face of HM Revenue and Customs, questioned the way tax is collected in this country. As well as apologising for the online website crashing on Thursday, he described the VAT system as absurdly complicated and said it was a mistake for Gordon Brown to have amalgamated the Inland Revenue and Her Majesty's Customs and Excise in 2005. That move was analogised at the time in the Financial Times with trying to cross a Terrier with a Retriever.

It is worth considering how we got to this state of affairs. The idea has been to save money by replacing the monolithic human system with a complex computerised one. However, implementing the new system has proved more prodigal than its predecessor, with the added disadvantage of putting many people’s personal data at risk. With all the mistakes too numerous to recount, the government is rethinking its affection for these grand IT projects. Given that that the cost to tax payer of abandoned IT projects alone since 2000 stands at £2 billion, this is clearly too little, years too late.

Private industry chiefs have been critical of the incompetence of this government. Rob Steggles of NTT Europe Online arguing: "If an organisation’s web presence fails to perform at a critical time, both reputation and revenue suffer." However, unlike the private sector, HMRC will not go out of business and as such the chaos continues.

The solution is surely to simplify the tax system. In the same interview Hart-Davis argues for a simpler tax system. He suggests that a flat tax system would be both easier for the taxpayer and will ultimately bring in more revenue. He is absolutely right. With a flat rate of tax, a tax return could be completed in matter of minutes on the size of postcard, abolishing the need and unbounded expense of either a bloated bureaucracy or complex computer system.

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Common Error No. 23

Written by Dr Madsen Pirie | Saturday 02 February 2008

23. "Many things just cannot be produced by the market system, including such services as defence and law and order."

This may be true, but is not an argument against having the free market produce what it can. Society might decide to guarantee the collective provision of some services, such as defence and the administration of justice. This has little bearing on whether its rail transport or its health should be produced in the public sector.

In any case, market forces can play a surprisingly large role in even the "core" public services. Over half of Britain's police, for example, are private. They work for private security firms which perform police functions. Much military work is contracted to private enterprise, including maintenance of military bases, and the supply and servicing of equipment.

Private justice is used routinely in Alternative Dispute Resolution (ADR), when firms specify in contracts that an agreed arbitrator is to be used in the event of dispute. Privately run prisons are widely used in the USA, and have been successfully introduced in Britain, too. Even the role of central clearing bank, assumed by many to be a core state function, was at one time ably performed by the private Suffolk Bank.

A generation ago in Britain people thought that only the state could deliver mail, connect telephone calls, or collect the garbage, among the dozens of activities it ran. Private businesses do them now.

There is scope for greater use of free market forces in many areas of social provision. The state may wish to guarantee the supply, but it usually finds it more efficient to use private business to actually produce it. Competing private businesses have to attend to consumer preferences and keep up with innovations in both equipment and service. They are not subject to produce capture as state operations are. It makes sense to introduce market forces wherever possible, even in the state's core functions.

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Fingerprints please

Written by Steve Bettison | Saturday 02 February 2008

fingerprint.jpgTravelling to America has, in recent times, become arduous. Increased security due to the threat of terrorism now means the weary traveller is faced with long lines, impersonal questioning, scanning of index fingers and a snapshot of your face. The duty to protect is a core part of national government, but it always seems that the 99 percent of us that travel to the States with lawful and legal intentions are being treated as though we are all criminals. This has turned many away from travelling to the United States, and things don't look set to improve.

We will now be faced with a new challenge: a 10 finger scanner that the Department of Homeland Security is aiming to have at all points of entry in the US by the end of 2008. These scanners are linked directly to the FBI’s criminal database and automatically scan to see if you are wanted or are on any of their lists, be it terrorist or otherwise. (There have already been wrongful arrests relating to this; I expect there to be more over the coming months). We can marvel at the innovation, but surely we must also ask if it is really needed and should so many innocent travellers have to endure it?

Yes, the state must protect its citizens. But the state is also increasingly showing that they have no processes in place that do not tarnish us all with some degree of guilt. The rise in usage of scanners and ID cards is really a government admission that they do not really know how to protect us. It is time for us to ask for protection from someone with better ideas, and an approach that does not invade our privacy, but only invades the lives of those that wish us harm.

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And another thing...

Written by Junksmith | Saturday 02 February 2008

Given the jitters across financial markets it is nice to see that an entrepreneurial German airline is offering a nudist flight from Erfurt to the Baltic island of Usedom. A gap in the market if ever there was one. It reminds me of Seneca’s observation that "the good things which belong to prosperity are to be wished, but the good things that belong to adversity are to be admired" (but from a distance, of course). 

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Blog Review 494

Written by Netsmith | Friday 01 February 2008

Yes, the Revenue's online tax filing system fell over on the last day of the year you could file your tax returns. Try here if you'd like to know why.

Contrary to the statements and assumptions of many, more money does indeed make you happier.

Some very odd statistics from the police. Most odd indeed. 

One possible solution to the problem of unruly classrooms: set them up as an internal capitalist economy. Whether we'd be able to find enough teachers in the UK capable of running a non-inflationary central bank is another matter...the evidence of the macro economy isn't encouraging.

Very long and very geeky: the Director of the CBO sets out what are, and more importantly are not, the problems with US health care. For example, obesity has not been one of the problems. 

A list of what ought to be at the forefront of everbody's minds when designing a tax system: followed by what is at the forefront of politicians' minds when they do so. There's a slight difference of emphasis.

And finally, wisdom from a wife. 

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People are rational

Written by Tim Worstall | Friday 01 February 2008

logic_of_life.jpg
Tim Harford's new book, The Logic of Life is hitting the bookshelves just about now. His essential point is that we are in fact rational beings and that we do act rationally. But this isn't the "hard" version of such a statement. Not all human beings in all situations do so. There are times when we are in the grip of irrational emotions, others when we don't in fact know enough to make a rational decision.

Depending how you look at it this can be used to either attack or defend the Nanny State: if people are rational most of the time then we don't need that much nannying, but if people are ever irrational some would argue that all should be prevented from making such irrational decisions. All prevented all the time by law, that is.

But Harford takes us further: there have been many pieces of experimental economics showing irrational behaviour, something which supports the Statists. But as John List has pointed out, this is precisely because we are putting ordinary people in extraordinary situations:


...by contrast, when you ask an ordinary person to make the kind of decisions he or she makes every day, you will tend to see rational behaviour. 

When we don't have enough information, when we're not au fait with what's going on we can and do make basic errors. Thus there might be good arguments for having reasonably strict regulation (as we do) on, say, pension funds, something we're likely to set up only once in a lifetime. However:


...most shopping is done by experienced shoppers.

That is, by people who do have enough information, who are au fait with what is going on and are thus making rational choices. Which means that we don't in fact need regulation of the salt content, the sugar, in foods, we don't need imposed traffic light signals on every box, we can work perfectly well with a simple listing of ingredients.

That there needs to be regulation in the economy at times is accepted: the argument is about how much of it there should be. This result shows us that such regulation should be extraordinary, at least as far as people's choices are concerned, for it's only required when we are acting potentially irrationally which is, as shown, only in extraordinary times.  

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The tangled web of the welfare state

Written by Steve Bettison | Friday 01 February 2008

crackbaby.jpgAt the beginning of the week the Family, Drug and Alcohol Court opened. It is a £1.3 million pilot scheme being run jointly by three London Boroughs, Westminster, Camden and Islington (part-funded by both the Ministry of Justice and Department for Children, School and Families) that has been set up to attempt to ensure that children remain with their parents despite any addictions the parent might have.

Yet to accomplish anything judicially it has, however, allowed another true cost of the welfare state to be exposed. There are obvious costs to the taxpayer, such as the set up costs shared unevenly between central and local government, but this court has revealed some unwelcome negative externalities created by the welfare state.

Specialist court judge Nick Crichton said, "We are routinely taking into care the fourth, fifth or sixth child from the same birth family" (this in relation to the removal of 14 children into care from one mother). It is not hard to see the perverse logic that the welfare state has created in the minds of these drug users. Despite the drug use, they have recognized a secure income stream that can feed their habit: children. The blame for this culture lies squarely at the doors of government (both shades) for the implementation of child benefit to its current high levels.

The welfare state as the abuser is no surprise. It has distorted incentives since its inception and will continue to do so via its warped perception of 'caring'. The socialist state has turned children into nothing more than inanimate objects, their value being no more than a hit to a drug addict.

If only the politicians were forced to live with the unintended consequences of their actions, they might rethink some of their most damaging policies.

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The world's first electric car network

Written by Dr Fred Hansen | Friday 01 February 2008

The Project Better Place is a joint venture by Israeli-American entrepreneur Shai Agassi and the Israeli government. With the aim to reduce significantly Israels dependence on foreign oil from undemocratic regimes, a nationwide network of electric cars will be available by 2011 if everything runs on schedule. Nissan and Renault will build the cars and the government will offer tax incentives to purchasers.

The innovative model, developed by Agassi, would provide consumers with inexpensive cars, and they would pay a monthly fee for expected mileage, like minutes on a cellphone plan. Project Better Place will provide infrastructure including parking meter-like plugs on city streets or service stations along highways at which batteries can be replaced.

This annoucement coincides with a rebirth of electric vehicles, thanks to a breakthourgh in energy storage based on nanotechnology. New Lithium batteries are developed from a family of different chemical combinations and have enabled new features such as charging cycles in excess of 20,000 while still retaining 85 percent of their capacity. The time required for recharing has been cut down to only 10 minutes, instead of many hours previously. Most importantly, the new batteries can store four times more electric energy than conventional ones and operate safely from -50° C to 75° C. With 3,000 charging cycles a battery would provide enough energy for a car to do 150,000 miles at 80 percent capacity.

Two years ago a Japanese team built a car called Eliica, short for Electric Lithium-Ion battery Car. This eight-wheeled, 600kW rocket served as proof that electric cars can be fast and fun. It boasts a neck-snapping 0-100kmh time of just four seconds and a 0-160kmh time of seven seconds - faster than a Porsche 911 Turbo. And for our American readers, the attractive new Teslasports car, built in Northern California, is now being marketed for $100k.

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Keep going Shell

Written by Dr Madsen Pirie | Friday 01 February 2008

shell.jpg I was on BBC radio on Thursday, commenting on the record profits announced by Shell. I said it was very good news because it meant the thousands of jobs which Shell sustains in Britain are safe. It's also good to see a world class British company doing so well. I pointed out that Shell is devoting huge resources to the development of cleaner technologies and alternative fuels, which it can afford to do thanks to its healthy profits. I said we should all be celebrating the good news. 

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