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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

It's a funny old game

Written by Philip Salter | Thursday 31 January 2008

nashat_akram.jpgThe arbitrariness of the Home Office work permit system is exposed by the decision to deny the footballer Nashat Akram the chance to play for Manchester City. The rejection came because Nashat is Iraqi, and Iraq is rated 72nd in the world rankings. Permits are only given to players from international teams in the top 70. This decision was made despite Nashat's remarkable performances in Iraq's surprise triumph in the Asia Cup, all the more remarkable given the disorder in his home country.

It is also not the first time the Home Office has been in the news over footballer's work permits. Jason Scotland (Trinidad and Tobago) and Mark González (Chile) were both denied permits, with latter being a deal worth £2.35 million. Perhaps the government is best left out of such decisions; at least until the mandarins at the Home Office can meet the fan's demand by scoring goals like Akram (see here and here).

As it would happen, Philippe Legrain, author of "Immigrants: Your Country Needs Them" will be arguing along these lines tonight at the Adam Smith Institute. If you would like to come, please contact Steve at steve@adamsmith.org or us call on 020 7222 4995.

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Common Error No. 22

Written by Dr Madsen Pirie | Thursday 31 January 2008

22. "The free market is unfair because we do not all have equal votes as we do in a democracy."

ballot_paper.jpgThe argument is that people with more resources unfairly have more market power than others, whereas in a democracy everyone counts equally. We would think it absurd if everyone voted on what kind of MP3 player people should have, and everyone received the one which gained the majority vote; yet this is how democracies work.

In a market we can all choose what type of MP3 player we want, and receive the one we choose, even if it is not the one preferred by a majority. This makes the market a source of greater freedom than a democracy. In a democracy we have to settle for the majority choice on a large package of issue taken together. In a market we can pick and choose to satisfy our preferences on individual items. We can take Apple for some products and Sony for others. We cannot in our government choose different parties for different policy areas.

People do not have the same buying power. Some people can offer goods and services worth more than those of other people. Older people might have more savings or command higher salaries than younger people. Those with more education and skills might become wealthier than others as a result, and the same applies to those with special talents, such as footballers, musicians, or entrepreneurs.

It means that some people can afford more or better goods and services in their market choices. This is because they offer more valuable service to others, and it is what spurs others to try and do likewise. If the rewards were allocated by equal votes, a majority could vote themselves a large share of the total, and make entrepreneurial activity no longer worthwhile. The economy would stagnate and no-one would benefit. This is not the kind of "fairness" that is worth having.

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A very stupid idea

Written by Tom Clougherty | Thursday 31 January 2008

sky_news.gifI was interviewed on Sky News yesterday morning, giving my take on the European Parliament's plan to prohibit the sale patio heaters. Unlike the other guest, Friends of the Earth's Tony Juniper, I thought this was a ridiculous idea.

First of all, the only reason so many people are using patio heaters is the smoking ban. Attempting to outlaw patio heaters is a classic example of one ill-conceived and illiberal piece of legislation having to follow another, with little thought for the unintended consequences. In this case, the pub industry thinks it could lose as much as £250 million pounds a year in lost trade if outdoor heaters were banned.

My second point was that no one actually believes banning patio heaters would make the slightest bit of difference to the global climate anyway. Yes, these heaters are inefficient, but their emissions are miniscule in the grand scheme of things. Tony Juniper said we should lead the world by example, but it didn't think our banning patio heaters would really make much difference to the Chinese. They're going to build a coal-fired power station every week for the next ten years anyway.

Patio heaters are just the latest symbolic thing for environmentalists to get worked up about, like food miles or budget airlines. It's not about being practical, or actually improving the environment, it is just another way to tell people that they should stop being so wicked and 'live more simply'.

I suggested that instead of banning outdoor heaters, the EU should focus on reforming its emissions trading scheme so that it actually works, encouraging the development of clean technologies. And since agriculture contributes 17 percent of global emissions, they might like to abolish the common agricultural policy too. The developing world would certainly thank them for it.

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Quote of the day

Written by Wordsmith | Thursday 31 January 2008

It has been said that politics is the second oldest profession. I have learned that it bears a striking resemblance to the first.

– Ronald Reagan

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Blog Review 492

Written by Netsmith | Wednesday 30 January 2008

Given the tendency of us wonks here to have great faces for radio we're happy to outsource these videos on the Laffer Curve to the George Clooney of the free market movement (self-described we note). We give you Dan Mitchell.

Yes, Netsmith knows that these people are lefties, but more joy in heaven over one sinner that repenteth etc. Finally, a Nanny State regulation not even they like.

Not good news at all: productivity in the NHS continues to fall. Proof once again that it's not how much money you spend, it's how you spend it that's important. 

Long and detailed but useful for those who want to try and understand part of the American mortgage market and its current turmoils. The final paragraph simply emphasises that Heinlein was right: TANSTAAFL.

It would appear that it is not only our own, home grown, media which is at times innumerate. 

On South Africa's energy problems: it seems that, apart from coal, the entire mining industry is shut down. 

And finally, technological changes have uncertain effects. Who knew that mobile phones and wristwatches were substitutes? 

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Common Error No. 21

Written by Dr Madsen Pirie | Wednesday 30 January 2008

21. We are using up resources for the future; we should all learn to live more simply.

oil_well.jpgAlthough it might seem obvious that the supply of resources is limited, and that they grow more scarce as we use them up, this is not in fact true. It costs money to locate reserves of scarce resources, so we tend to search for more as the price rises. In other words, as they grow scarce, we can often establish more supplies.

Furthermore, as materials grow scarce, the price rises and it becomes more economic to mine marginal reserves. Not only that, it becomes cheaper in some cases to use or develop substitutes. As supplies appear to dwindle, so does the rate of use. Instead of the world suddenly waking up one morning to find the last ounce of aluminium gone, it turns gradually to glass filaments and to carbon fibre as substitutes. New methods of extraction and reclamation become economically viable. The question is whether our development of new sources and substitutes is faster than our use of resources.

There is one reliable indicator. No one knows what new sources will be developed, or how fast our use will be. We do know, however, that price is a guide to the ability of supply to meet demand. Over many years the real price of most commodities (excluding oil) has been going down. This means that they have been becoming progressively more available, and that our relative supply has been increasing rather than diminishing.

We do not have to live more simply. On the contrary, we have to keep on developing new technology to make better use of our resources and to extract from more difficult locations. In this way our relative supply of them will continue to increase. If we start to "live more simply" we may lose the ability to economize on them and replace them.

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The Future of Immigration

Written by Tom Clougherty | Wednesday 30 January 2008

We have an interesting event coming up tomorrow, an evening seminar on 'The Future of Immigration'. Our guest speakers will be Philippe Legrain, the UK's leading advocate of open immigration and author of Immigrants: Your Country Needs Them, and Damian Green MP, the Conservative Immigration spokesman.

Immigration is a difficult subject – one I sometimes feel conflicted about myself. The free-marketeer in me thinks we should encourage the free movement of labour, just as we strongly advocate the free movement of goods, services and capital. If someone wants to come to this country to work and contribute, then surely we should welcome them. The economic benefits of immigration are pretty clear and there is no doubt that immigrants usefully fill many gaps in the UK labour market. Where would the tourist industry, for instance, be without foreign workers? In the global context, there is another important benefit to immigration: remittances. The amount of money sent back to developing countries by people working the rich world now dwarfs government aid – and unlike aid it goes straight into the hands of individuals, where it can make a real difference.

Of course, there are serious arguments in the other direction as well, and they are hard to ignore. There is little doubt, for example, that mass immigration has heightened racial tensions in some parts of the UK, and contributed to the ghetto-ization of many big towns and cities. Furthermore, in a country where public services are government-controlled and incapable of reacting to demand, large numbers of immigrants can put them under immense strain. There are other legitimate concerns too.

These are the kinds of issues that will be discussed on Thursday, and I have no doubt the debate will be lively. The seminar, which is being held in our offices at 23 Great Smith Street, Westminster, kicks off at 6.30pm (doors open at 6), with drinks to be served at 7.30pm. If any of you would like to come, please email Steve at steve@adamsmith.org or call 020 7222 4995.

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Power Lunch with Digby Jones

Written by Tom Clougherty | Wednesday 30 January 2008

digby_jones.jpgDigby, Lord Jones – formerly director-general of the CBI and now Minister of State for Trade and Investment – was our Power Lunch guest this week. He spoke very candidly and engagingly about his role as a GOAT (government of all the talents) and sparked some fascinating discussion around the table. What really shone through was the clarity of his ministerial remit (to promote the British brand overseas), and his enthusiasm for and expertise in getting the job done. That always seems to be a rare quality in politicians, but then, I suppose, Digby Jones is not really a politician anyway. He may have taken the government whip, but he has not joined the Labour Party.

It made me wonder whether there might be some mileage in appointing more government ministers – or even secretaries of state – who are not MPs. US cabinet members are typically far more qualified for their positions than their British counterparts. The US Treasury Secretary, for instance, usually comes from a financial rather than political background – and this is surely a good thing. Thinking really radically, couldn't we directly elect Prime Ministers, have them appoint top quality cabinets, and turn Parliament into a US-style legislature, with its own agenda and powerful committees to grill government ministers? Well, perhaps not, but there may be something in the idea. I'm probably just getting carried away with US election fever...

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Britain today?

Written by Junksmith | Wednesday 30 January 2008

britain_today.jpg

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Blog Review 491

Written by Netsmith | Tuesday 29 January 2008

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. 

 

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