The Pin Factory Blog

A fascinating (tax geek alert, this for a certain and not common value of "fascinating") post looking at what rate of flat tax and the associated personal allowance would be needed to replicate the current US income tax yield?

If these really are the economics of large scale wind power systems, why on earth do we have a Government Minister proposing that we build tens of thousands of them? 

Reforming the rights to public protests. Well, what did you think they were going to do? Return freedoms to Parliament Square or reduce freedoms elsewhere in their harmonisations? 

The perils of State funding of political parties, of State control of political parties. Once the money comes from the State then said State gets to decide who is allowed to be a political party (and possibly, thus, who may stand for election).

More political duplicity, otherwise known as do as I say, not as I do. 

And more such : this is why we don't let the government own the printing presses. 

And finally, where does a divorce lawyer advertise if a divorce lawyer isn't allowed to advertise? How about sponsoring the condoms at that hot sheet motel on the edge of town? 

House prices in Ireland fell 4.7 percent last year, or 9 percent when you take inflation into account. Some people see that as a big worry, since house building has been a very large chunk of Ireland's heretofore booming economy. And forecasters say that Ireland's 5.1 percent growth rate last year could fall to just 2.1 percent this year - still positive but things will seem very tight after years of rapid expansion. But house price falls are perhaps just one part of the changes that are needed to make Ireland a more competitive economy. Without its own currency any more (Ireland is part of the Eurozone), there are few ways for Ireland to adjust to a downturn. And anyway, in other sectors such as tourism, manufacturing and services, things are still looking not too bad. Agriculture, too, has benefited from the sharp rise in wheat and dairy product prices.

The government, though, might have a problem, having made tax revenues too dependent on housing. Instead of the old rates system and a short-lived property tax plan, Ireland opted for stamp duty at the point of purchase as its means of taxing house property. With prices falling, so does the revenue. And with growth slowing, other taxes are under pressure too. So the government needs to get more of
a grip on public expenditure and the value for money that it gets from public spending: as usual, when things were booming, nobody had to worry too much about being efficient. They do now. But reality is asserting itself, and a benchmarking report on public service pay recommended only a 0.3 percent rise overall.

On the bright side, unemployment in 2007 was just 4.6 percent compared to 17 percent in 1986 before the Celtic Tiger stirred itself, and the number of people in work has doubled over the past two decades. Ireland this year surpassed Switzerland in GDP per head. Norway might be passed in three to four years if sensible policy is pursued. Reinstating the policies that created the Celtic Tiger would take Ireland on a strong growth path in 2009. A return to the high tax-high borrowing policies of the 1970s and early 1980s would undermine growth as it did in Japan, Germany and France.

Ireland's strong ties with the United States should help too, but the essential recipe for success in a small, open economy is simple: invest in education, cut taxes, pursue value for money in public expenditure, deregulate markets, and support world free trade. It's a recipe that would work for Alex Salmond's Scotland just as it has worked in the past for Ireland.

Dr Sean Barrett is a senior lecturer in the Department of Economics at Trinity College, Dublin.

A young man was having a blazing row with his parents and cried, "I want excitement, adventure, money and beautiful women. I'll never find them here at home, so I'm leaving. Don't try to stop me!" What that he headed for the door.
His father rose and followed close behind.
"Didn't you hear what I said? I don't want you to try and stop me."
"Who's trying to stop you?" replied his father. "If you wait a minute, I'll come too."

10. "We have to keep universal services in health and education, so that the middle classes will demand their improvement."

This is the "theory of imprisoned misery." The supposition behind it is that the middle classes will support nothing unless they stand to gain from it. Its corollary is that as many people as possible should be imprisoned in shoddy and inadequate services in order that the pressure of their protest will improve things.

It underestimates, in the first place, the ability of the middle class to get what they want out of the system. In any universal service, it is not the articulate and self-confident who suffer deprivation; they are quite able to command the scarce resources. The inarticulate and poor lose out in competition with the middle classes. They get worse health and worse education within the state system.

Critics point to their fear of a two-tier system, with an adequate service for the middle classes and a rotten one for the poor. They fail to see that universal state services themselves create a two-tier system.

They also underestimate the readiness of the middle classes to support causes from which they derive no personal benefit. They are the backbone of most charities and the mainstay of most church organizations. The middle classes have campaigned in the past to improve the lot of the poor, and are no different now. They don't need to be imprisoned in a poor service to work for its improvement. On the contrary, if they are imprisoned within it, they might devote their energies to securing an adequate service for themselves first. If people are free to seek alternatives, new standards might be pioneered which others can benefit from.

The real reason for keeping the middle classes in a universal service might be to promote an egalitarian society by preventing them from choosing alternatives. But lack of competition militates against improvement in the services concerned.

One of the most heartening things about the Northern Rock bank fiasco is how determined the UK's government is not to nationalize it.

In past decades, a Labour administration would have thought nothing of nationalizing a bank, and maybe a few of its customers and suppliers to boot, because the Labour Party believed in public ownership. Indeed, its constitution aspired to seek control of the 'means of production, distribution and exchange'. Clement Atlee's Labour government of 1945 nationalized the Bank of England, the railways, coal, gas, electricity and steel in speedy order.

Some Labour supporters still hanker for those days. But not Labour ministers. Certainly not after the last move to renationalize something that Mrs Thatcher had privatized – Trade Secretary Stephen Byers's replacement of the Railtrack infrastructure company with a new body, Network Rail. It's proved unaccountable and hugely expensive.

The minister who had to try to make this costly train crash work was of course Allister Darling, who is now taking all the Northern Rock flack. Having loaned the bank £35bn to prevent worried savers forming queues outside its door, he is now staring at another £15bn, perhaps, to take it over and try to turn it into a saleable proposition. That's a bill of around £1800 per taxpayer.

But absolutely nobody in government is suggesting that the government should continue to run the Northern Rock indefinitely. So as I say, that's heartening. Now if only we could convince them that governments controlling things is just as bad as them owning things...

The evidence continues to come in. If we want a better health care service than the NHS we're going to have to pay attention to patients' incentives. Thus, to introduce co-payments for treatment. Free at the point of use isn't efficient and is thus inequitable.

We've said it before and no doubt we'll have to again. We really don't as yet have the best copyright system possible.  

So if politicians don't actually do very much, why do we have politicians? 

Tsk, silly Netsmith. So that they don't have to be subject to the same laws as the rest of us, of course. 

A truly stunning calculation, quite horrific.

Well, yes, of course the BBC is biased: just not perhaps in quite the way that you expect. 

And finally, Trevor Phillips would like to have a law that doesn't involve lawyers. Good luck there Trev. 

At last, Britain's Conservative Party is getting in touch with its masculine side. And doing very well as a result.

David Cameron spent a year turning his rather unpromising colleagues into something that more resembles a team, that seems engaged with the issues that affect ordinary people's lives, and that in part is almost human - or at least gives a convincing impression that it might be. Along the way he mightily irritated a number of Conservative supporters who picked up the message that health and education just needed more cash, louts should be loved, and tax cuts were right off the agenda.

None of it stopped the Conservative Party's drift eastward (or even east-southeast) in the opinion polls, but what a difference an election makes - even one which UK Prime Minister Gordon Brown bottled out of. Suddenly some real policies had to be produced. Particularly one or two that would induce Conservative supporters to get out and vote, rather than just stay home in disgust. Shadow Chancellor, George Osborne, picked a fairly innocuous one - that only millionaires should pay inheritance tax. And whoosh! Suddenly the opinion polls were going north-northeast.
It's happened again. The Conservatives are now seven points in front of the Labour government, thanks in great part to their latest policy promise - getting the scroungers off welfare.

It's a policy almost as feeble as the inheritance tax one: the idea is that only after two years would people be faced with the choice of doing community work or losing part of their social benefits. Under the plans we put forward in Working Welfare, benefit claimants would face immediate work requirements – and if they did nothing, they would get nothing. Nonetheless, Conservative supporters (and quite a few others) are just fed up working hard and paying taxes when they see other perfectly able folk sitting around doing nothing on their money, so the Tory proposals have gone down well.

Some pundits say the Conservatives have to go back to being soft and cuddly so that they might woo over LibDem supporters. But the new approach seems to be working perfectly well, thank you very much.

The pilot of an aerobatic biplane landed in the recently mown field of a Scottish farmer to make a few adjustments to his engine. While he was tinkering with his machine, he noticed the Scotsman and his wife watching with a great deal of curiosity. The Scotsman asked the pilot how much he would charge to give both he and his wife a ride.

'Well', said the pilot, 'Normally I charge $50 dollars each, but if you are both completely quiet throughout the flight, the ride will be free of charge. If I hear the least amount of noise, you will owe the full fare.'

The couple quickly climbed aboard, and the pilot taxied and took off. Immediately, he proceeded to put his plane through all of its paces: barrel rolls, stalls, spins, split S maneuvers, you name it and he did it. The couple in back were completely silent throughout the thirty minute flight.

Upon landing, the pilot said, 'I really have to hand it to you for keeping quiet through all that!'

'Aye', said the Scotsman, 'but I'll admit, ye almost heard me when the wife fell out.'

9. "It is wrong to allow bright children to go to special schools. This deprives the ordinary schools of their beneficial influence." 

If you regard children as the property of the state, existing to serve it, then it is explicable why the bright ones should be regarded as a scarce commodity, and rationed accordingly. The idea of allocating their "beneficial influence" equally through society follows from the same twisted logic. It is a pity that this is only applied to intelligence. Why should not the good-looking children be shared out equally, so their peer group has equal access to the pleasant sight of them? Perhaps the kind ones should be spread so that all may benefit equally from their sweet disposition?

The vicious notion is that children, whether bright or not, should be regarded as the instruments of the ends of others, instead of ends in themselves. Children do not exist to serve the purposes of the state, it is the other way round. The concern should be with what is of benefit to the individuals concerned, rather than with how they can be made to serve some ideological view of society.

Behind the idea often lurks the doctrine of egalitarianism, and the feeling that children really ought not to be brighter than each other. With this comes the determination that nothing should be done to encourage it. And this involves the rejection of special schools where the bright children can feel the competitive challenge of their peers, and be pushed even further.

Not only is the view a malicious one to the children concerned, it is adverse to the betterment of society. It is very often the bright children who go on to become the achievers, and develop the new products and processes, and the new ideas that benefit the rest of society. By holding them back when they are young, we may prevent the development of that ability.

What is good politics has, as we know, very little to do with what is good economics (or even sensible such). For example, on the US campaign trail we find the following:

The prospect of many years of big government spending and major tax
cuts in the US appears to be set in stone, after both Hillary Clinton
and Barack Obama suggested plunging up to $70bn-plus of public cash
into the struggling American economy.

They seem slightly to have missed the point (and those arguing over the relative merits of either plan are like bald men fighting over a comb) that neither of the two will be in a position to actually do anything (if either of them ever are) until January 20th 2009: and it'll take them some months at least to get anything done then. Whatever problems the US economy faces now by then it will be different ones. Similarly, the day before we had this as the lead story in the NY Times:

As leaders in Washington turn their attention to efforts to avert a
looming downturn, many economists suggest that it may already be too
late to change the course of the economy over the first half of the
year, if not longer.

Well, yes, interest rate changes take 18 months to work through, both tax and spending changes take at least 6 months to put into place (never mind the time taken to make a difference) so to call this "news" seems a little presumptuous.

Of course, what could be done instead is to look at what actually does help to avert, shorten or mitigate recessions. The unfortunate thing there is that such good economics requires that politicians do nothing (a blessed state of affairs all too rare) but said sensible such is unfortunately bad politics.

For if things will get better without politicians doing anything, why, people might start to wonder why we have politicians at all and that would never do now, would it?