The Pin Factory Blog

There are a number of people who aren't all that keen on what Hillary Clinton has said about trade. Daniel at the Times, Willem Buiter in the FT, Clive Crook in the FT, but here's why she actually said what she said.

On the subject of what politicians say in public, Guido on Peter Hain's latest little statements. 

On trade, why don't people get this? We impose sanctions to punish countries: so tarrifs, which are sanctions upon us, well, why are we punishing ourselves?

Could this actually be true? More storms are being named, which pushes up the "hurricane count": but more storms are being named because lower wind speeds now qualify a storm as one that should be named? 

The equation you need if you want to improve your profits as a dope dealer. 

Technology can build businesses up and it can also destroy entire industries, as the history of porn online seems to be showing.

And finally, Hugo Chavez has accepted the results of the referendum. Does this make him more of a democrat than the EU?

The Economist carries an interesting article about road pricing this week, based on the RAC foundation's latest forecast of traffic growth. By 2041, their report says, demand for road space will have increased by 37 percent due to economic and population growth. Given the steady decline in road-building over the last twenty years, and the UK's already clogged-up infrastructure, the future sounds like it is going to be very congested indeed.

This need not be the case. Standstill Britain could easily be averted by a sensible transport policy, which would make addressing both the supply of and the demand for roads a priority. Increasing the supply of roads is simple - it means building more of them. And the best method of regulating demand and allocating road capacity is well established too - road pricing.

The trouble is, both of these policies have encountered noisy opposition. The environmentalists get worked up about new roads (never mind the fact that less congestion equals lower emissions) preferring to force us onto inadequate and crowded public transport. Motorists do not seem to like the idea of paying for road space either - a petition against road-pricing on the Downing Street website attracted 1.8 million signatures.

The explanation may lie in the woefully unimpressive way the government made the case for road-pricing. They failed to point out that pricing would replace other road taxes, rather than add to them, or that many people (rural or off-peak drivers) would actually end up paying less under the new system. Then again, perhaps no one would have believed them anyway, given the current Prime Minister’s affinity to stealth taxes.

The RAC's report recommends a very sensible (and potentially popular) scheme. Fuel duty would be scrapped, and replaced with a 14 pence/l 'carbon charge'. Then motorists would pay per kilometre according to how busy the road was. I would add something to this: the money collected should fund improvement and expansion of the road network. If you are going to make motorists pay, it's only fair to give them something in return.

I was road-testing my new Ferrari when a cop pulled me over.

"Sorry, officer," I said. "Was I driving too fast?"

"No, sir," he replied. "It's just that you were flying too low."

As in the last campaign for a Clinton presidency, which Hillary nearly derailed with ill-advised health reform proposals, she has once again missed the point in her insults on private medicine.

On the campaign trail in New Hampshire she accused the US health insurance industry of spending $50 billion to avoid paying claims of their clients. But she has got the numbers wrong. Currently private health insurers are paying claims worth about $600 billion a year and spending $30 billion to adjudicate those claims, actually only denying claims worth $3 billion – not $50 billion. The cost of scrutinizing claims represents good value for money, because it keeps the premiums at bay by rejecting fraudulent and frivolous claims.

However, the ideological thrust of Clintons argument is targeting at gradual replacement of private with public insurance – in other words to expand Medicare for all Americans, with alleged administrative cost of only 3-6 percent. Her followers claim falsely that the administrative costs of private insurance (11-14 percent of premiums) alone would be enough to fund coverage for all presently uninsured Americans.

Fortunately, a meticulous actuary enquiry by the Manhattan Institute has recently dismantled this myth. Administrative costs for public insurance such as Medicare do not reflect the hidden cost of tax collection and other government functions for the administration. Under the "lowest plausible assumption about the excess burden engendered by the federal tax system" the total Medicare administrative costs would account to a minimum of 24-25 percent of all outlays. However:

A more realistic assumption raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or about four to five times the net cost of private health.

In Stockholm, where I have been doing events at Timbro, the excellent local liberal think-tank, lunch with a selection of professors and politicians – including current MPs and former party leaders – was interesting.

In particular, everyone was very interested in the UK experience of privatization. The government here are trying to sell a few companies, but it's proving hard work. I think they are trying to sell the idea on the grounds of efficiency - but that's not something the pubic really relates to. And it's hard to measure even if you're successful: UK companies changed so much after privatization that you're really comparing chalk with cheese when you try to measure their performance. They become just different kinds of company.

Also, the government has a list of companies it wants to privatize. I see the merit of having a programme well thought out, but again, I'm not sure of the wisdom of this. It enables doubters – who invariably include the management an workforce of all the companies on your list – to combine together into a big opposition movement. Better to take on difficult challenges like privatizaiton one at a time.

But in reality there's no need for governments to make such mistakes in privatization, and I left Timbro with lots of links to our website where we have discussed these issues over many years.

A debate in Australia over whether the State should be running schools at all. First point , would we invent public schools if we didn't already have them and secondly, don't public schools indoctrinate pupils?

The first answer is that yes, but what's wrong with a little indoctrination when it's the State doing it ? Netsmith can't help feeling that this needs a touch more logical rigour applied to it.

On the subject of schooling, it appears that in Scotland the lesson plans are actually a secret. It is not possible for a parent to find out what their own children are being taught . 

A pointer to how ludicrously large the US economy actually is . 

Amusingly, even the Committee on Standards in Public Life (such standards would, to paraphrase Gandhi, be a nice idea) is against the idea of State funding of political parties .

Iain Dale has the details of what looks like an excellent idea to spread a little Christmas cheer . 

And finally , don't anger the train spotters, you won't like them when they're angry. 

According to Saturday's Times, the government's new 'five-year plan' for the future of NHS cancer services (due to be released today) admits for the first time that the UK has poor survival rates compared with Western Europe, the US and Canada. Long waiting lists for radiotherapy and chemotherapy, as well as rationing which means too few sessions of treatment are given, are at the heart of the problem.

Money isn't the issue here. Since 2000 the government has tripled spending on cancer, and the UK no longer lags behind Europe or North America on this front. The problem is structural. As Karol Sikova, the former head of the cancer programme at the World Health Organisation, told The Times, most of the extra money lavished on the health service has gone towards the salaries of people who don’t work with patients:

We have funded mangers to deal with targets while in France, Germany and Italy that bureaucracy just does not exist.

Unfortunately, the government’s approach to improving cancer services does not appear to have taken this on board - doctors are simply being ordered to increase radiotherapy doses and, no doubt, there will be new targets for waiting times, and more mangers to make sure the targets are met.

The government's addiction to targets is understandable, and, I think, based in a genuine desire to improve customer service. In the absence of competition and market forces to drive up standards, targets and regulation are the obvious option. Trouble is, they just don't work and have significant unintended consequences.

The only way to really improve the National Health Service (assuming its continued existence) is to create the freest and most extensive internal market possible. That probably means breaking the NHS up into smaller, more localized commissioning units which would fund patients (at a set treatment price) to go to the doctor or hospital of their choice (whether state or private), as well as the introduction of a capped co-payments scheme for treatment (like those that exist elsewhere in Europe).

Sadly, the government is not still not prepared to think that radically.

Why was the cannibal was expelled from school?

He was buttering up his teacher.

I'd like to propose a little test that we can use to judge the merit of any proposal for the spending of taxes, something I'm calling "The Lifeboat Test". As we all know there are some things that have to be done both collectively and with the powers of compulsion (at least in paying for them) that the State has available. There's also another set of things which do indeed need to be done collectively, but there is no real reason why we need the compulsion of taxation to pay for them. For as PJ O'Rourke pointed out, taxation is in the end extracted by the business end of a gun (don't pay it and they send you to jail: escape and they'll try to shoot you).

I'm using lifeboats as my test for they are indeed something that must be collectively provided but as is also apparent (this might puzzle some non-Brits: The Royal National Lifeboat Institution runs all lifeboats in the UK and it is entirely a private charitable institution. Other than the usual charitable tax concessions it receives no subsidy from taxes at all) that they can be provided both excellently and voluntarily. What I propose is that if something is more important than the lifeboats, we can consider whether tax money (that extracted by the gun, remember) might be used to pay for it. If it's less important then we can reject the idea of funding from taxation out of hand.

Gordon Brown is apparently considering the funding of political parties from taxation (that which is extracted at the barrel of that gun, remember):  

Mr Brown also sent a clear signal that he was prepared to consider a big increase in state funding for political parties.

So let us now apply our new test. The suggestion is that, by force, money should be removed from our pockets to pay for politicians to apply for their own jobs. Is paying for politicians to posture and preen in front of us more important than the lifeboats? No? I think not as well.

Good, State funding of political parties fails the lifeboat test and can therefore safely be rejected out of hand.

To enliven a Monday morning, what State spending (paid for by the taxes the government already forcibly removes from us at gunpoint) also fails the lifeboat test? 

I'm in Sweden giving a couple of talks at Timbro, the free-market think-tank here. It's the sort of place I visit very enviously. They have a couple of dozen staff, housed in modern, well-kept offices right in central Stockholm. When I arrived they were cleaning up from a book launch – two massive refrigerators groan with drink, and there's a full kitchen for coffee-making, lunch preparation and so on. Plus a big library, sitting around areas, you name it.

A number of related organizations have rooms on the same floor, like Neo, a political/literary magazine like a sound version of Prospect or a glossy version of The Spectator. And there's a group of former lefties who seem to be running a very robust campaign to remind people what communism was really like behind the iron curtain (and is like now in other parts of the world). And Timbro takes in students on an annual seminar programme, so the place has a young feel to it.

My evening seminar was a talk on Adam Smith to students, so Timbro was handing out copies of my monograph Adam Smith - A Primer. ('Monograph' makes it sound boring, but in fact it's a right rivetting read: all you need to know about Adam Smith in 60 pages.) Timbro has also just translated P J O'Rourke's new book On The Wealth of Nations into Swedish, which is another thing they have to be congratulated on. I don't know how they translated the jokes, and I see they sensibly left some of the puns in English, but I'm glad to see this excellent book made available to Swedish speakers.