The Pin Factory Blog

I share Madsen's disappointment with Nick Clegg's refusal to back a referendum on the Lisbon Treaty (or EU Constitution, as honest people call it). Internationalism may be an important part of the Lib Dem creed, but there isn't much in the treaty that I would describe as 'liberal'. And it's strange that while the Lib Dems rightly back devolving more power to local government and individuals, they also support giving Brussels ever greater control over our lives and the policies that affect them.

On the other hand, Nick Clegg also made a very promising announcement on the future of the NHS yesterday, saying he would replace central government targets with 'personal entitlement's to high-quality care. A 'patient contract' would guarantee service and give people the right to private treatment if maximum waiting times are exceeded. As he put it in a Telegraph article, "That's how it works in Denmark – not to undermine the public system, but to guarantee individual care."

Quite so. Public services, in a sense, represent a contract with the public. In return for paying taxes, you are entitled to certain services. The trouble now is that the contract is neither explicit nor enforceable. If you get shoddy service in the public sector, there is not much you can do about it. You are certainly not going to get your money back. An enforceable patient contract, with an escape mechanism to the private sector, changes things. It ensures a high level of service for the individual, and it forces the public sector to raise its game.

Of course, we have been advocating this kind of thing for years (see Blueprint for a Revolution, for example) but it's always nice when politicians realise you are right. David Laws MP, the man in charge of Lib Dem public service reform policy, has promised radical thinking across the board, so let's hope there is more of this to come...

Yet again, the state is trying to assume control over our bodies. Last week it was Gordon Brown’s 'presumed consent' for organ donation, this week it is 'specific consent' over tissue being used for stem cell research.

The Human Fertilisation and Embryology Authority's bill would require specific consent from those whose tissue would be used for stem cell research, regardless of the date of tissue donation. That may sound reasonable, but as a letter to The Times from twenty-nine top stem cell researchers (including three Nobel laureates) put it:

…many existing cell and tissue samples and cell lines were donated, for any research purpose, by patients (now untraceable) with particular diseases, before this sort of research was even imagined. These cells have been well characterised over many years, or have unique properties and may therefore be the best samples to use for the derivation of embryonic stem cells. Such stem cell lines would be of great value in understanding how diseases develop, as well in the search for therapies.

Clearly people donating tissue or their entire bodies are interesting in progressing science and healthcare for the sake of others, but HFEA's proposed legislation will require a new bank of tissue will need to be created, costing hundreds of thousands of pounds, and more importantly – time. The bill also blocks any donations from children, regardless of consent, which means that some scientists whose research has already been approved will not be able to proceed.

Baroness Royall has told the House of Lords that ministers will reconsider the bill, but that they could not accept the amendments put forth by Lord Patel of Dunkeld, the chairman of the UK Stem Cell Network Steering Committee:

We believe the use of their genetic material to create cloned embryos or human admixed [interspecies] embryos is exceptional and requires exceptional consent.

One week consent is presumed, the next it is specifically needed. It seems as though the government can’t make up their minds about anything.

Two restaurant robbers in Melbourne have shot to international fame this week. After mistaking a bag of bread rolls for the day's takings, they made for the wrong get away car before one robber shot the other by mistake. In the buttocks.

Sometimes truth really is stranger than fiction... 

Government is inefficient, that we know. But just be thankful that you're not getting all of the government you're paying for.

On the subject of government, we now seem to have reached the age of the airbrushing of speeches. Can't have politicians making themselves look stupid now, can we?

Sometimes the stupidity cannot be hidden though. The effects of making sex illegal to buy in Sweden and of making it legal to sell in New Zealand. Which has the better outcome? And which is the UK Government proposing?  

Apparently most teachers agree with Tim Worstall of this parish. The educating to educate business is a waste of time. 

This giving software away for free idea: apparently it creates as much value per worker as Goldman Sachs does. 

The new Index on Censorship site: yes, freedom and liberty need to be protected with vigilance. 

And finally, more government. This is the UN's International Year of the Potato. 

Centralisation kills is the message of a new paper (should be here by the time you read this) from the Centre for Economic Performance. Centralisation, in this sense, meaning the setting of standard national pay rates.

What the authors did was look at the quality and productivity of nursing across the country, this being measured by the percentage of those admitted to hospital after a heart attack (AMI) who died in the subsequent 30 days. As we're all told so often of the connection between (relative) poverty and bad health we would expect the rates to be higher in poor areas. Quite the contrary: the richer the area surrounding the hospital the worse the survival rate. The reason for this is that nurses' wages are set centrally, to be the same (with very little geographic variation) right across the country. However, wages in general are not the same across the country: 

Pay for nurses and physicians in NHS hospitals, which provide almost all hospital care in the UK, is set by a central review body that sets pay scales in which there is limited regional variation. The variation that exists does not fully reflect the wages differentials in the external labor markets in which the staff are employed. Regional pay differences are considerable in the UK. For example, female white-collar wages in North East England are about 60 percent lower than in Inner London and these persist after controlling for human capital characteristics and other factors.

It isn't that wages are too high in low wage areas, but that they are too low for nurses in high wage areas. This leads to both a shortage of people willing to do the job itself and hospitals relying upon agency staff who are not constrained by the national pay scale: but agency staff are, by the very nature of their shift by shift employment, unlikely to know the systems and hospitals as well as permanent. The end effect is: 

A 10 percent increase in the outside wage isassociated with a 4 percent to 8 percent increase in AMI death rates.

That is, where hospitals cannot pay the going rate for trained staff because of the national pay setting, people die. All in the name of equality no doubt, for a job's worth the same amount of pay where ever it is to some people. The only solution to this is to abolish such national pay rates and allow local employers to pay what they need to attract the staff they desire.

All of which rather puts into perspective the current wrangles over national bargaining for police pay, other public sector workers, even the negotiations with civil servants and doctors. We shouldn't be having such national problems because we shouldn't be having such national negotiations in the first place. For centralisation of pay bargaining kills people.

Two engineering students were walking across campus when one said, "Where did you get such a great bike?" The second engineer replied, "Well, I was walking along yesterday minding my own business when a beautiful woman rode up on this bike. She threw the bike to the ground, took off all her clothes and said, "Take what you want". The second engineer nodded approvingly, "Good choice; her clothes probably wouldn't have fit you, anyway."

Ed - with this, his 1000th joke, Jokesmith is retiring from the ASI blog to pursue a career in stand-up. Apparently he was inspired by the late, great Bob Monkhouse, who famously quipped: "When I said I was going to be a comedian, they all laughed. Well, they're not laughing now..."

15. "The top rate of tax should be raised so that the rich pay more."

Higher tax rates do not necessarily mean that people pay more, or that more revenue is raised. It depends on other factors, including the total amount of money being taxed. It's all very well for politicians to talk of how they'd spend the extra money derived from raising the top tax rate to 50 percent, but the chances are that less money would be raised, and that they'd have to cut back on spending instead.

Higher tax rates have two important effects, among others. They make it worthwhile for people to avoid them by employing accountants to minimize their tax exposure via tax shelters, or to evade them by simply not declaring income and dealing in cash where they can. The former is legal, the latter criminal, but both mean a smaller tax base to levy the new rate upon. Both are encouraged by higher rates, and made less worthwhile at low rates.

The second effect is that earners have less incentive to work more. If they keep only half of any extra they earn, this is less of an incentive than if they can keep 60 percent. Extra effort and risk become less worthwhile, and people do less of them. Leisure, which costs you the money you could have earned by working instead, becomes cheaper and people take more of it. Some high achievers move abroad to escape the higher rates, and all of this makes the tax base smaller.

In fact well-judged tax cuts result in more revenue, and in the rich paying a larger share of the total. They pay at a lower rate, but pay it on more money. This happened in both the US and the UK with the 1980s tax cuts. The top earners ended up paying a higher proportion of the total tax take, and more revenue was raised.

The temptation of politicians to twist public policies for short-term gains in order to win votes is well known. Policy on cholesterol (pictured) is one such example. It turns out, according to accumulating evidence, to be a rather simplistic public scare. Reducing 'bad cholesterol' has been the mantra for decades and statins, which are just doing that, have earned $27.8 billion in sales in 2006. Little wonder since 13 million Americans and 12 more millions worldwide are using them to prevent heart attacks.

Because it attracts large numbers of voters, politicians keep shifting health resources to disease prevention – and thus draining away vital resources from the chronically ill, who are always a small minority. Yet new research shows that only one in 100 people, or according to some research even one in 250, who take statins over five years have any benefit whatsoever.

One reason is that healthy people have a different metabolism than chronically ill patients. Another is that bad cholesterol levels may no longer a reliable risk indicator for heart disease. For instance, Australian Aborigines have low cholesterol but high rates of heart disease. Spaniards have as much bad cholesterol as Americans but only half as much heart disease and the Swiss have even higher cholesterol but lower rates of heart disease. And now a different enzyme, called Rho-kinase, has been found that predicts heart disease much better.

This is just one example that exposes how government healthcare policies lag hopelessly behind science and are prone to blunder public health issues. And it will probably take much longer for government health programs to change course than the market would need to correct obviously biased research.

Installing metal detectors in schools: according to one teacher they'll manage to get the pupils in at about the moment when it is time to break for lunch.

Another rejection of the idea: on principle, not simple empirics. 

Comparative advantage , cooking and satirical argument. Is it really the business of society to iron out the unfair advantages of endowment? 

Comparative macro-economics. Germany has a budget surplus: not a bad thing to have at the beginning of a world-wide (possibly) economic turndown.  Something of a pity that the UK's economy wasn't managed similarly.

It would appear that physicists, when publishing papers, understand markets better than economists do when publishing papers: 

In addition, physics has a laissez-faire attitude about publication,
believing that it is better to err on the side of letting as many new
ideas in as possible, and to let the market eventually decide what is
good and what is bad through a Darwinian process that selects what is
useful and forgets what is not.

Hugo Chavez seems (again) to be picking every bad economic idea from around the globe to impose upon Venezuelans. We've known that this would all end in tears but it seems to be accelerating. 

And finally, the great econblogging debate of our times: did Adam Smith actually visit a pin factory or not? 

I'd not heard of Teach First until Andrew Leigh referred to it. Put simply, the idea is to take bright graduates, give them a few weeks of training to polish their educational skills and then stick them into bad schools. The schools that they find it very difficult to get fully trained teachers to go to.

On the face of it this seems absurd: for as we're constantly and consistently told, teaching is a profession, one which requires either a full degree in the subject or at minimum a one year post-graduate course after a non-education major degree. How could merely clever people pick it up in weeks?

Quite how well can they? Results from the American equivalent show: 

...research on Teach for America that suggests these teachers outperform other starting teachers, and even the more sanguine evidence (eg. work by Jonah Rockoff and coauthors) has Teach for America teachers being no worse.

So we seem to have a situation where an absence of specific training in education produces better educators: or at the very least, ones that are no worse. 

An excellent result I think all can agree: the policy implication is therefore clear, make teacher training a 5 or 6 week course, close the vast majority of the educating to educate system, save a great deal of money and possibly improve the education system, or at least leave it no worse.

And remember, we're doing it for the children.