"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
The traditional statement is that half of your advertising budget is wasted. If only it were that efficient!
There's more information coming out about those derivatives trading losses at Soc Gen. According to one whisper they were actually in profit by €1.6 billion at one point.
An altogether more amusing rumour. Apparently M. Kerviel was driven into his behaviour by something terribly un-French: reading Adam Smith's "The Wealth of Nations"
On which subject, here's PJ O'Rourke talking about his book on Adam Smith.
Even the ECB now agrees: there's a trade off between redistribution now and wealth in years to come. Higher government spending reduces GDP growth.
How odd, a politician arguing that transparency is essential for football clubs but not for politicians.
And finally, film of how lefties do when they actually try to run something. Extra-ordinarily amusing, if it were not for the fact that many of these people are now trying to run larger and more important things. Like, say, the BBC documentaries division.
According the Heritage Foundation and Wall Street Journal's annual Index of Economic Freedom, Britain now ranks as a "mostly free" economy, rather than a "free" one. That's because the UK's scores have worsened in four of the ten economic freedoms measured by the index: trade freedom, monetary freedom, fiscal freedom, and freedom from government. By far the worst scores are in fiscal freedom (where we get 61.2 percent) and in freedom from government (where we score just 40.1 percent). Basically, that means our taxes and public spending have gone up, and we are less economically free as a result.
People will dismiss the Index as being just another pointless list, but these things do matter. Higher taxes blunt incentives to work and produce, and discourage businesses from investing in the UK. That stunts economic growth, making us all poorer. Public spending increases achieve the same end by taking money away from the private sector, where it is productive, and spending it in the public sector, where it is not. The private sector is crowded out, and less wealth is created.
As Fraser Nelson pointed out on the Spectator blog, public spending has grown faster in Britain since 2000 than in any other OECD country (except for Korea). Government spending as a proportion of GDP has risen from 37.1 percent to 44.8 percent, without any real improvement in public services. Given that, it amazes me that so many people still believe that more public spending is, de facto, a good thing. Even the more adventurous Tories are only suggesting that public spending growth be slower than the government plans.
On a political level, that position is understandable. But intellectually, why should public spending rise any further at all? Isn't £600bn a year enough? At the very least, spending should rise only in line with inflation. Better than that though, would be to freeze actual spending, and starve the big government beast. That way, the government would be forced to prioritize, cut waste, and become far leaner and more efficient.
20. "It is wrong that so few people should own so much of the nation's wealth."
The wealth in no sense belongs to the nation, since we are talking about wealth which belongs to individuals. The statement comes down to saying that it is wrong for some people to own vastly more than others. This is not self-evidently true, and there are many advantages to people in society if concentrations of wealth are possible.
Firstly, estimates of the distribution of wealth in society are often wrong. They conveniently count shares and landed property, while often neglecting the entitlements which constitute the main source of wealth for ordinary people. Pension rights are often treated as if they did not exist or had no value to them, while other estimates deliberately omit wealth vested in housing, which is most people's main item of value.
That said, there is nothing wrong with an uneven ownership of wealth. Some people are more prudent, some more successful than others. Some show enterprise and initiative, and the accumulation of wealth represents the reward for their activities. In a free society, even if people started with an equal amount of wealth, there would soon be wide variation.
Possible accumulation of wealth not only stimulates entrepreneurs into socially useful activity; it often provides the means. Wealth can be put to work by investment in creative enterprises. It can create employment, and can lead to the creation of more wealth. Pools of capital are necessary to most economic enterprises; they are a vital tool by which societies become richer.
Of course we want decent living standards for those who cannot make it on their own, but we also want opportunities for those who wish to advance themselves and who can benefit society in doing so. Inequalities of wealth are not important; what counts are the opportunities for people to create the wealth that enables society to improve its services.
Bill Gates is good at making money and supporting charitable work, but weak on his understanding of how capitalism works. He called at Davos for a kinder, gentler, "creative" capitalism. As our own Tim Worstall points out on the Globalisation Institute site, that's what capitalism already is. It harnesses desire for self improvement into social good. All right then, how much good does capitalism's creative side do socially? Tim quotes William Nordhaus calculating how much of the benefit of technological change between 1948 and 2001 went to its producers.
The actual number he came to is that only 2.2 percent of the total value created by innovation remained with those who did the innovating. The other 97.8 percent went to the society at large: they got new, or cheaper, or more, gew gaws like edible food, clean water or even mobile phones as a result of the entrepreneurs' attempts to enrich themselves.
That's the point. It already benefits others. Bill Gates seems to have taken on board some comic book BBC view of a greedy, reckless capitalism which tramples the poor. Phooey. It's the best thing in history that has ever happened to the poor.
Since it came to power, the Labour government has introduced 2,685 pieces of legislation every year. And each has been either ill-conceived, draconian, bonkers, bitter, dangerous, counter-productive, childish, wrong, thoughtless, selfish, or designed primarily to make life a bit more miserable for everyone except six people in the BBC, 14 on The Guardian and Al Gore.
– Jeremy Clarkson tells it like it is in The Sunday Times.
The stupidity of mercantilism was known before Ricardo, before Adam Smith. Why is it that some politicians still don't get it?
Unfortunately, there are all too many who think this way.
Explaining how the "stimulus bill" is being crafted in the American political system. Bismark and sausages comes to mind.
And how such bills are passed after crafting. Sausages probably get more scrutiny.
Where your tax money goes after such lackadaisical scrutiny.
Surely stupidity, no, evil, like this will wake people up to the insane nature of the war on drugs? No?
And finally, a fabulous time waster. The awful thing is that Netsmith is convinced that he's seen far worse, certainly listened to far worse.
One of the statements that engenders general bewilderment is the insistence that there is no crisis in manufacturing in the UK. It's certainly true that manufacturing employment has fallen a lot, but (with a few years of flatlining just recently) manufacturing output has continued to rise. This is a result of increasing productivity and is generally a good thing: we make the things we can drop on our feet using less labour, meaning that we can both break feet and have other things produced by that newly freed labour. It's also true that the workshop of the world (copyright, 19th century Britain) now has an economy which is only some 16 percent (or so) manufacturing, but this is a result of the service side of it growing more swiftly in recent decades.
Even the car industry is doing well:
Britain exported a record number of cars last year, marking a renaissance in the motor industry, according to the Society of Motor Manufacturers and Traders.
However, I have this horrible feeling that exactly the wrong lesson is being taken from this renaissance:
(SMMT CEO) Everitt said there was a renaissance in the car making industry that should lead to a re-evaluation of the role of manufacturing in the UK economy. "Looking at areas [of the economy] where there is now concern, these are the areas we have been told were the future. We were told that this future was with service industries and we did not need to worry about manufacturing. I think it's time we looked once again at the value of manufacturing."
No, I don't think this is the time to look at the value of manufacturing at all. These good figures have come after a couple of decades where we, as a society, didn't investigate, promote, worry about nor subsidise manufacturing in any manner. We seem to have empirical proof that leaving the business of business to those who actually do business works just fine: the last thing we want to do now, when we've got it running on all cylinders is to open up the bonnet and start fooling around with things again.
If "we" start to look at the role of manufacturing again that'll only encourage the politicians to take an interest: as British Leyland should remind us, that's a great way to destroy an industry.
19. "Big business does not really produce what people want. It uses coercive advertising to make people buy what it wants to produce."
The Ford Edsell was produced by Ford of America and backed by a massive advertising campaign. It flopped utterly. The adverts for Strand cigarettes in Britain won many awards and were very popular. Alas, nobody bought the product, which is why Strand cigarettes have disappeared.
The notion of coercive advertising is pure theory. In fact most advertising is used to break into markets, or to open up new ones. Advertising informs the public of new products and processes, and can thus attack established products. Furthermore, it is very competitive. Skilled creative power pits product against product, company against company. It is self-regulated, too, refusing to allow ads which try to sell products by making people feel inadequate or exposed to ridicule without them.
Far from deciding what is convenient to produce and then trying to make the public want it, companies spend millions on market research trying to anticipate the tastes and needs of the public, and into designing and producing products to satisfy them. Despite this, they often get it wrong. Fortunately the market system directs resources to those who are good at this type of activity. Investors are more likely to back them, and stores are more likely to stock their goods.
Any business which did produce for its own convenience and then tried to make the public accept its goods would soon find its market taken from it by competitors who produced what the public really wanted. In practice, the only firms who can hope to get away with this sort of activity are state-controlled ones protected by monopoly. In these cases the public has no alternative but to accept what is produced, because no competitor is allowed to offer them the things they really want.
I was a guest on BBC 1 West's Politics Show yesterday, discussing post office closures and housing development - both emotive issues in the West Country, I imagine.
Post office closures were first up. I argued that we needed to put aside emotional attachments to the post office and put things in context. Firstly, 95 percent of people will still be within one mile of a post office after the closures. Secondly, the only reason the post offices are being closed is because not enough people use them - despite taxpayer subsidies to the tune of £150m a year, the post office network still loses more than £100m per annum. If people want to save their post office they should spend more money there, not expect the taxpayer to keep an uneconomic business going. In any case, the services provided by post office counters can easily be offered in more cost-effective ways. The mail functions could provided by other shops - just as you can buy a lottery ticket anywhere, why shouldn't you be able to pay for postage? Bills can be paid over the phone or online, and pensions and benefits can almost always be paid directly into people's bank accounts. Where they cannot, it would be much cheaper to send 'mobile post offices' out to rural areas on a regular basis, rather than keep the post offices open.
In the second half of the show we talked about the planning system. I was asked whether I agreed with the government's new target for house building. My reply was that the very fact the government has a housing target is the problem. Development should be led by demand, and not government dictat. Certainly, areas of outstanding natural beauty can be protected, but that still leaves plenty of space for development in the UK. More than 90 percent of the population currently lives on just 8 percent of the land. The only reason it feels cramped is that the government artificially restricts the supply of land, and then imposes density requirements on the land that is available. This also explains much of the objection to new development - government regulations often prevent developers from building houses in a way that 'fits in' (precisely the opposite of what the planning system was meant to achieve). The truth is that government cannot plan land-use any better than it can plan the rest of the economy, and the sooner it gives up trying the better. That wouldn't mean a free-for-all, as most people assume: Bath and Edinburgh were both privately planned cities, and they are much more attractive than anything the government has ever managed.
You can watch the show here via the BBC website.