Would a third runway be 'good value' for the taxpayer?

The Department for Transport has stated that without new runways, London’s airports will be at capacity by 2030. This could put Britain at a disadvantage from not being able to deal internationally at its full potential, especially with fast-growing markets in the Far East. Heathrow, as Britain’s only hub airport, is almost at capacity already and there has been pressure on the PM from businesses, media and backbenchers supporting the building of a third runway there. It is important that government does not prevent international businesses from operating in Britain, yet it is equally important that it allows investment decisions and funding to come from private interests and that it does not encroach on the rights it is designated to protect.

The building of a third runway is all very well if BAA Ltd (or a consortium of businesses and airlines) can afford to do so itself, but it is quite another if the £10bn funding required is going to come from the taxpayer. Against the official line of his party, George Osborne said on Sunday on the Andrew Marr show that a third runway at Heathrow is an option for government funding through the Infrastructure (Financial Assistance) Bill. This Bill will come into effect in October and promises £40-50bn of state finance to go to private schemes approved by the government, can start within 12 months and, supposedly, offer good value for the taxpayer (in other words, more government welfare for private companies that offer ‘good value for the taxpayer’).

If it is decided that a third runway is to go ahead, even if it is privately funded by BAA, additional costs may hit the taxpayer. The Free Enterprise Group, made up of Conservative MPs, has supported a move to give up to £40,000 compensation to those who would be affected by noise created by the new runway. This presumably would come out of government pockets rather than being enforced on BAA.

The best solution would be to grant a private company permission to build an airport around existing transport links and infrastructure located in an area where no or minimal noise compensation would be needed. The Mayor of London has stated his support for a new hub built in the Thames Estuary. One such proposal by Foster and Partners is to build a £20bn four runway airport on an artificial island near the Isle of Grain. It would be entirely privately funded, allocating £4bn towards improving existing infrastructure. Arguably, however, demand in the area isn’t high enough and the government would end up diverting much more infrastructural spending to this to increase demand, by creating transport links and provide public services for new workers. For the same reason, building a hub airport in the north when demand is predominantly centred around London may be good politics, but would be a great risk economically. The ‘build it and they will come’ strategy is a risk that should not be taken on something as crucial as international transport links, especially if the public purse is involved.

Another possibility arises from the currently anonymous ‘world-leading infrastructure firm’ made up of a consortium of British businesses, who are currently scouting sites for a new four runway airport that they hope could rival and perhaps even replace Heathrow as Britain’s key link between domestic regions and international airports, especially in the Far East. The firm has been looking at sites to the west and north-west of London and is now in talks with Chinese sovereign wealth funds over raising the necessary capital.

With a self-appointed monopoly on the decision of where something as crucial as an airport can be built, the government has a responsibility to make a decision that will involve minimal public expenditure, follow demand and protect the citizens who elected it from having their property devalued without compensation, whichever option that may be.

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Conspiracy theories: Back and to the Left?

A study claiming that climate sceptics are more likely to (a) support the free market, and (b) believe in conspiracy theories has attracted a good deal of media attention recently, leading to such headlines as “Climate change deniers ‘are either extreme free marketeers or conspiracy theorists’”. (Students of logic might like to consider how that headline diverges from the actual findings.)

This has naturally annoyed the aforementioned sceptics/deniers, who dispute the researchers’ claim that their blogs were invited to take part in the online survey that provided the study’s data. Regardless of whether or not this is true, the methodology used was about as impressive as the phrase “online survey” implies. In 2010, a questionnaire was posted on the various climate change blogs where the two sides thrash the issue out, often in forthright tones. Questions involved belief in the extent of man’s contribution to global warming as well as one’s preferred economic system, the moon landings, Princess Diana’s death, Area 51 and other wacky conspiracy theories. Since it would not be difficult to guess the purpose of the survey, it strikes me that there was a non-trivial incentive for each side to use it to discredit the other by claiming to hold the opposing view on climate science whilst pretending to believe in every tinfoil hat idea on the list.

This is the kind of flaw that all researchers who rely on anonymous internet-based surveys completed by a self-selecting sample group must contend with. One would ordinarily hope that the false positives cancel each other out. However, in this instance, as the authors of the paper note, none of the climate sceptic websites took part, and so it is quite conceivable that ‘debunkers’ pretending to be ‘deniers’ made up a larger proportion of the responses.

That being said, it would come as no great surprise if free marketeers were more likely to be sceptical of climate change than left-wingers since many of the most prominent global warming advocates are on the left and many of the proposed solutions involve encroachments on economic or social liberties. There is, therefore, a greater motivation for them to seek out alternative hypotheses. Conversely, one might conclude that socialists are more likely to embrace the issue than right-wingers, and for the same reason, but since the study did not use a control group, we have no way of knowing if free marketeers are over-represented in the sceptic camp or if the numbers are what you would expect from a random sample of the population.

The (considerably weaker) relationship between climate change scepticism and conspiratorial thinking is more interesting and it made me wonder whether the study also found a link between free market beliefs and conspiracy theories. The researchers do not say—although they must have the data—and I would be surprised if such a link exists. One striking aspect of David Aaronovich’s excellent book Voodoo Histories is how many conspiracy theories are of the left. The two biggest conspiracy theories of the last century—the JFK assassination and the 9/11 ‘inside job’—surely do not correlate with free market beliefs. More likely, they correlate with the politics of Oliver Stone and Michael Moore, both of whom have managed to keep their careers on track despite publicly promoting some quite outrageous drivel.

I dare say that free market views would also not correlate with the belief that the invasion of Iraq was a ‘war for oil’ with Halliburton pulling the strings, or that Hilda Murrell, John Lennon, Martin Luther King, Robert Kennedy and David Kelly were murdered by the government, or that the 2000 US presidential election was rigged, or that the government blew up New Orleans’ levees during Hurricane Katrina, or, for that matter, that anyone who is sceptical about climate change is funded by the fossil fuel industry.

Perhaps I am being unfair. In many cases, conspiracy theories have no clear political undertones and their believers have an incoherent ideology at best. I would find it difficult to place David Icke, for example, anywhere on a traditional left-right axis. Yes, the moon landing ‘hoax’ involved Nixon and the cold war, but I would be surprised if its adherents are overwhelmingly of the left. Similarly, a belief in the ‘assassination’ of Marilyn Monroe does not obviously further any faction’s political agenda. It is possible that the Daily Express’s obsession with the death of Princess Diana has made that particular conspiracy theory more popular on the right in the UK, but it is probably popular with lunatics of all persuasions.

Aaronovich balances his book with two notable right-wing conspiracies: the absurd claims about Bill Clinton’s supposed orgiastic and murderous criminal syndicate, and the ‘birther’ cult surrounding Barack Obama. It seems that anyone who holds the office of US president can expect to become the subject of a conspiracy theory, and I do not seek to downplay the stupidity of these accusations when I say that they are of a different order to the JFK and 9/11 theories. The Clinton allegations were bizarre and became more so the longer he held office, but rumours of Slick Willy’s adultery were not entirely misplaced and the ‘Clinton Body Count’ was started largely as a response to the earlier ‘Bush Body Count’. The Obama birth certificate ‘scam’, while patently baseless and mildly racist, would have required only a petty criminal act and a handful of participants. Neither necessarily required the connivance of government and it is this, I think, that distinguishes a right-wing conspiracy theory from a left-wing conspiracy theory.

The theories of the right portray innocent individuals as criminals while the theories of the left blame the government for acts of evil committed by individuals (notably assassins and terrorists). This difference in outlook means that the left’s theories are on a much grander scale. The 9/11 ‘plot’ would have required years of planning and a cast of thousands all of whom would be forever expected to remain silent. The JFK conspiracy would have required at least a couple of hundred people in various branches of government to be in the know on the day, followed by thousands more in the subsequent ‘cover up’. Both would have required immaculate preparation and execution on the part of multiple government agencies.

Herein lies the big problem with the most grandiose conspiracy theories. They require a degree of government competence which is rarely exhibited in their official activities. They depend on numerous arms of the state working together efficiently and effectively to orchestrate an event with meticulous attention to detail, on time, and without putting a foot wrong. And only a statist could believe in that.

Conspiracy theories: Back and to the Left?

study claiming that climate sceptics are more likely to (a) support the free market, and (b) believe in conspiracy theories has attracted a good deal of media attention recently, leading to such headlines as “Climate change deniers ‘are either extreme free marketeers or conspiracy theorists’”. (Students of logic might like to consider how that headline diverges from the actual findings.)

This has naturally annoyed the aforementioned sceptics/deniers, who dispute the researchers’ claim that their blogs were invited to take part in the online survey that provided the study’s data. Regardless of whether or not this is true, the methodology used was about as impressive as the phrase “online survey” implies. In 2010, a questionnaire was posted on the various climate change blogs where the two sides thrash the issue out, often in forthright tones. Questions involved belief in the extent of man’s contribution to global warming as well as one’s preferred economic system, the moon landings, Princess Diana’s death, Area 51 and other wacky conspiracy theories. Since it would not be difficult to guess the purpose of the survey, it strikes me that there was a non-trivial incentive for each side to use it to discredit the other by claiming to hold the opposing view on climate science whilst pretending to believe in every tinfoil hat idea on the list.

Continue reading.

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On central planning

My two favourite political economists, Daron Acemoglu and James Robinson, have started (and ended with) a series of blogs on the topic of central planning. Their angle is that central planning in practice doesn’t originate from Marxist ideology, but from the inherent desire of an extractive state to exert full control over its people.

They were motivated to engage into the subject in order to disprove the idea that ideology is what causes economic inefficiency (they spend a lot of time in their book tackling this subject – the book is reviewed here). 

This is similar to another argument they aim to disprove, which claims that poor countries are poor because their leaders are ignorant and chose inefficient systems since they either don’t know better, or are blinded by ideology. And while a lack of knowledge and/or ideology is an attractive way of explaining some of the persistently bad equilibria in certain dictatorships, it is more realistic to believe that dictators choose bad policies because they want to preserve the rent-extracting system under their command. They are smart enough to know that preserving the status quo, no matter how poor the country is, allows them to keep hold of their power (just think of North Korea).

That’s where central planning kicks in:

“Essentially central planning is not about the efficient allocation of economic resources, it is about control.

Central planning maximizes the extent of control that the state, and the people running the state, exercise. The desire to control others is a constant in history and is part and parcel of the construction of states. If the state can grab all the land and resources and control who and on what terms people get access to them, then this maximizes control, even if it sacrifices economic efficiency.

This sort of economic and political control — not Marxist ideology — is what central planning is all about. This is not to deny that Marxist ideology supported and legitimized central planning in several 20th-century societies. But it is to emphasize that the emergence and persistence of central planning is often a solution to the central economic and political problem of many elites: to control and extract resources from society.”

This was the concluding point they made after examining historical cases of central planning which have originated as far as ancient Greece or even among the Incas. The Soviet example, certainly the most popular case, used ideological motives to overshadow the true reasons behind having a command economy.

Keep in mind that central planning of the Soviet economy didn’t take place until after Stalin took over (the authors remind us of that), whose ideological views were fully subordinated to his lust for power and self-preservation.

The conventional explanation of using ideology to preserve one’s power (or the whole system) is wrong if one thinks of what methods most dictators use to silence their political opponents thereby eliminating any possible threat to power. When things escalate out of control even more brutal methods are used (as in the case of Syria). In that perspective Stalin’s central planning does come as a good example of a dictator’s choice to what is more important – having an efficient and productive economy (to a certain extent), or having the power to control and extract everything the economy creates, even if it’s well below full efficiency. This dilemma certainly isn’t limited to Stalin alone.

Achieving absolute control and preservation of power is a strong incentive to maintain an inefficient system, especially if such conditions are supported by ideology and submissive, subliminal brainwashing of the population.

Realizing this argument, a logical inference emerges in which the only way to achieving a prosperous society can come from attaining individual freedom.

Sure, experts should do their expert things

Apologies for this extensive quote from The Guardian. It might shock the eyes of those who generally avoid that particular paper:

One more thing is required of academia: to play its role right at the heart of democracy. Being adequately informed is a democratic duty, just as the vote is a democratic right. A misinformed electorate, voting without knowledge, is not a true democracy. Society needs the expertise of academics in the most important issues: climate science above all. A democracy then needs the press to disseminate academia's knowledge and to do so with integrity. But the media's ambition to be entertaining and provocative too often overrules its respect for intellectual rigour.

Journalists cannot hold degrees in every subject they report on, but their job is not to claim they know the science better than the experts, or to practise that consummate deception of pretending there is controversy when the consensus is overwhelming. But a controversy is more fun, and the media – skedaddling towards infotainment – is losing sight of the core purpose of its activity: to be a truthful messenger, in this case between the world of academia and the public. I would propose a system of certification for media articles in which there is a clear issue of social responsibility – a kitemark of quality assurance. It would be awarded by teams of academics, and be given to the article, not the journalist, recognising the facts, not the sometimes spurious credibility of being a "personality".

It would be awarded when the article is accurate, using reliable sources and peer reviewed studies. There already exists the Climate Science Rapid Response Team, which answers journalists' questions to help them achieve accuracy. The formality of certification is necessary, though, for the reader to know whether to trust an article. Accuracy must not only be achieved, but be seen to have been achieved.

Now note that this is voluntary. We're in favour of voluntary cooperative action around here so let us applaud this idea.

However, let us also insist that this be carried over into the realm of what we do about climate change assuming it exists. For there are experts there just as there are in whether it exists. And we call those experts "economists". Those who study how human beings respond to the incentives in their lives. These are the correct experts to be using of course, for assuming that climate change does exist, is a problem we want to do something about and is amenable to human action (as you all know, generally my own view), then it is indeed changing what humans do that will be the solution. Which, in turn, means changing the incentives humans face.

So, entirely happy to support the idea of a "kitemark" scheme, an entirely voluntary one, for articles on the science of whether climate change is happening and how. But that same scheme also needs to extend to cover those articles which discuss what we should do about it. Something which, I assure you, will be much more entertaining.

For absolutely nothing from nef, Greenpeace, Friends of the Earth, Action Aid, CAFOD, Oxfam or any of the other NGOs will manage to pass such a test. Certainly nothing put forward by Jonathan Porritt, George Monbiot, Bill McKibben would achieve the badge of sensible and factually based policy. Most of the output of the various scientific institutes, even of our own government's Chief Scientific Officer would go unlaurelled. In fact, it's a reasonable certainty that articles by the Ministers involved, laying out their policies would fail, as would Green and White papers as proposals for legislation.

For the truth is that economists are in general of one mind about what we should do about climate change, assuming that it is happening, is amenable and so on. We should either have a carbon tax or a cap and trade system. And that's all we need. Set the incentives, get the prices right, and let that only calculating engine that we have capable of solving for a solution, the market, get on with its job.

The disagreements are more trivial. Should we tax now and hard now (Stern) or lightly now and more heavily in the future (Nordhaus)? Should the actions attempt to prevent a 2oC rise or not (Tol often enough)? Should it be a tax or would cap and trade allowing the idiot politicians to meddle more be even worse (erm, me, who is not an economist)?

I would certainly su[port a scheme which asked for an verified scientific accuracy in articles about climate change. For I know very well that almost all articles suggesting what we should do about it will fail such a test. Which would be, don't you think, just so hugely, hugely, entertaining? As well as educational.

Why we don't want government providing things

One of the things that seriously annoys me about the political and economic discussion in the UK is the way in which a huge logical leap is made at times. I think we'd all be getting along a great deal better if people stopped making what I regard as this error.

There are indeed many problems in this world. There is a subset (smaller than some seem to think but still extant) of such problems that are amenable to government action. Without too much cynicism there's even a subset that can be alleviated rather than worsened with such state action.

However, the error is that because this is true therefore the state must actually carry out the action. This is not necessarily true: the state might be better to regulate, legislate, finance, rather than actually provide directly whatever it is.

Think of food for the poor for example. We can think of a number of different ways that this problem, of the destiitute starving in the streets, could be solved. We could legislate that every household must feed the hungry- that shops must give away some portion of their stock- that there should be special ration shops with special stocks- or we could do what we actually do which is give poor people money to buy the food they need from the usual infrastructure that the rest of us use.

Other places don't make quite the same devisions:

Ram Kishen, 52, half-blind and half- starved, holds in his gnarled hands the reason for his hunger: a tattered card entitling him to subsidized rations that now serves as a symbol of India’s biggest food heist. Kishen has had nothing from the village shop for 15 months. Yet 20 minutes’ drive from Satnapur, past bone-dry fields and tiny hamlets where children with distended bellies play, a government storage facility five football fields long bulges with wheat and rice.

By law, those 57,000 tons of food are meant for Kishen and the 105 other households in Satnapur with ration books. They’re meant for some of the 350 million families living below India’s poverty line of 50 cents a day. Instead, as much as $14.5 billion in food was looted by corrupt politicians and their criminal syndicates over the past decade in Kishen’s home state of Uttar Pradesh alone, according to data compiled by Bloomberg.

The theft blunted the country’s only weapon against widespread starvation -- a five-decade-old public distribution system that has failed to deliver record harvests to the plates of India’s hungriest.

Direct government provision of a good or service might not be either as efficient or equitable as simple government financing of access to such a good or service. Those doing the providing on the government dime might turn the system supposedly making provision to the public into a system providing for the providers.

Actual government provision of goods and services might not be the best way to provide things. Even something as vital and humane as food for the starving might best be provided through tax financing aiding, working with, normal market processes.

So remind me, what is the argument that the British State should and must provide health care, education, housing, rather than just aiding with the financing for those that need such aid? Why should teachers and nurses be employed by a Minister, why does everyone shout about building more council or "socially owned" housing rather than concentrating on more cheap ones?

If anyone proposed the Indian method of feeding the poor for the UK we'd shoot them. The proposers that is, not the poor, however much it would alleviate their future suffering. So how have we ended up making the same logical error in all these other areas?

Nobody would (willingly) invest in a government-run bank

I am in City AM this morning, debating with Keynes's biographer Lord Skidelsky about whether we should have a government-run investment bank, as Nick Clegg has proposed. Skidelsky says yes:

Showing the government is willing to invest in the right project would lift business expectations, and the contracts from large projects would flow down to small and medium-sized enterprise.

I'm not convinced. If a project is so risky that the private sector won't invest in it without some kind of taxpayer guarantee, it is far too risky to spend taxpayer money on. And government has different priorities to private investors, whose main aim is to make a return — bailing out 'national' industries is a political priority, which a state investment bank would only :

Four out of five start-ups end in failure – if the private sector can’t get it right, how will the government? Inevitably, a state-run bank would be used to bail out politically sensitive projects, as was Leyland Motors in the 1970s, at a cost of £12bn to the taxpayer (inflation adjusted).

Read the whole debate. For me, the bottom line is that a project that's too risky to attract voluntary investment is the last thing that taxpayers' money should be spent on. Governments aren't very good at what they do as it is — I shudder to imagine how badly they'd do at playing the market with other people's money.

The lazy logic of banning sports supplements

Most of us are used to prohibitionists banning things that are thought of as being unhealthy. But the fact that the Medicines and Healthcare Products Regulatory Agency (MHRA) has decided to ban DMAA, an ingredient used in popular sports supplements, is a little more surprising. DMAA is used in pre-workout products, intended to give athletes greater focus and energy. Even the most ardent paternalists tend to be supporters of greater public fitness.

The most popular product containing this ingredient is Jack3d, a product aimed at weight training enthusiasts. Fears have risen about the active ingredient as it has been linked to increased blood pressure and heart rate. However, the quantity of DMAA in the recommended dose has been shown to elevate these by the same levels as 2-3 cups of coffee.

One death has been associated with DMAA, where in New Zealand a man took a dosage of some 30-60 times greater than the recommend dose given for formulated sports products. This was combined with an unknown quantity of alcohol. DMAA has been used in fitness products for years, with millions of doses taken by gym-goers. Meanwhile paracetamol was responsible for 507 accidental deaths from 1993-7 in England and Wales alone, and remains legal.

This is just the latest in a legal war on the fitness industry, but also a by-product of the impact that competitive sports has on the regulatory process. The supplement in question has been banned by the World Anti-Doping Agency (WADA) for some time. WADA’s Director of Legal has stated that WADA “continues to work closely with the MHRA.” This closeness puts non-professional users at risk.

Individuals are best placed to judge these risks for themselves. Relegating those things that regulators consider as bad for us to the black market restricts information on safe use, and could genuinely endanger users.

A system which has state officials tell us products are either ‘safe’ or ‘unsafe’ reduces personal responsibility, and encourages complacency. Every decision carries risk, and consumers would be better protected by us being open about that than by treating them as infants.

For now, many users on message boards across the internet are discussing how to ensure they can pile up a “stash” of these products. It looks unlikely that rendering their supply illegal will stop people looking for an edge in fitness. Casting them into the domain of the black market will only help those who are willing and able to sell them illicitly.

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Monte dei Paschi di Siena - we've been here before

In June, the Italian Parliament approved Italy’s struggling third-largest lender, Banca Monte dei Paschi di Siena (MPS), for another round of state aid.  This week, Reuters reports the Italian state may have to take a stake in the bank after it posted larger than expected first-half losses of €1.6 billion. MPS’ ongoing difficulties stem from imprudent lending and acquisitions during both the Europe-wide credit expansion and the “consolidation frenzy” which swept the Italian banking sector in the late 2000s, leaving it with low reserves compounded during the downturn by the bank’s €25 billion exposure to Italian government bonds – described as “proportionally higher than that of its domestic peers”.

One other interesting piece of information: founded in 1472, the Sienese institution also happens to be the world’s oldest surviving bank.

I say “surviving”, of course, because the city of Florence had a history of much older banks, many of which went bankrupt over a hundred years before MPS was even founded.  Their story, recalled briefly in Jesús Huerta de Soto’s Money, Bank Credit and Economic Cycles, is worth revisiting here because it reveals a similar set of preceding circumstances:

“Around the end of the twelfth and beginning of the thirteenth centuries, Florence was the site of an incipient banking industry which gained great importance in the fourteenth century.  The following families owned many of the most important banks: the Acciaiuolis, the Bonaccorsis, the Cocchis, the Antellesis, the Corsinis, the Uzzanos, the Perendolis, the Peruzzis, and the Bardis.  Evidence shows that from the beginning of the fourteenth century bankers gradually began to make fraudulent use of a portion of the money on demand deposit [ie. non-saving deposits], creating out of nowhere a significant amount of expansionary credit. ... [A]n increase in the money supply (in the form of credit expansion) caused an artificial economic boom followed by a profound, inevitable recession.  This recession was triggered not only by Neapolitan princes’ massive withdrawal of funds, but also by England’s inability to repay its loans and the drastic fall in the price of Florentine government bonds.  In Florence, public debt had been financed by speculative new loans created out of nowhere by Florentine banks.  A general crisis of confidence occurred, causing all of the above banks to fail between 1341 and 1346.” (pp. 70-71)

A familiar pattern emerges from de Soto’s work: banks drawn into excessive lending on ever-diminishing reserves, triggering in turn credit expansion, recession, and financial vulnerability compounded ultimately by over-exposure to questionable government debt.

It is a pattern which demonstrates a weakness in our current economic system that is older even than the oldest of its contemporary institutions.  More properly, it is a cautionary tale against state collusion in the active encouragement of excessive lending and credit expansion.  In the fourteenth century, this was achieved through the privileges granted to banks by their avid state-borrowers, allowing them ignore the earlier legal principle of maintaining full reserves on non-saving deposits.  In the twenty-first century, however, the pattern of depletion was significantly amplified by the availability of easy lines of credit through the European System of Central Banks.

De Soto would argue, as he does in his conclusions, that the way to avoid the kind of insolvency crisis which struck medieval Florence and threatens modern Italy is a system of free banking (ie. without central bank interference), accompanied by full-reserve requirements on non-saving deposits.  The efforts of the Italian government to boost MPS’ reserves aim to address an important weakness, but as long as the European Central Bank retains the capacity to expand credit artificially in the name of “stimulus”, the risk of state-induced asset bubbles and sovereign-debt crises still exists.

Although today we use the euro instead of the florin, those two issues are still very much two sides of the same coin.

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The coming qualifications revolution

A new generation of qualifications has recently emerged in the global IT sector, which operate very differently from our traditional GCSE’s and A Levels.  For example, Microsoft Learning is now a global leader in IT qualifications and they offer a wide range of Microsoft Certifications which provide individuals with technical expertise and prove their ability to design and build innovative solutions across multiple technologies.  Due to the rapid rate of change in this sector, new Microsoft qualifications are continuously being introduced and existing qualifications revised.  Some certifications are retired when Microsoft ends its support for the related technology and others must be updated every three years by taking a refresh exam.  This generates additional income for the company, enables students to keep up to date on the latest developments in the field and ensures that potential employers have confidence that someone who holds a Microsoft Certification is current and engaged with Microsoft technologies.  In short the value and the relevance of the qualification are maintained over time.

The branding of these new qualifications is also significant because the quality and reputation of the qualification is now inextricably linked with the quality and reputation of the parent company.  Therefore any criticism of the Microsoft Certification will have a negative impact on the corporate image of Microsoft itself, which places pressure on the company to continuously maintain and improve the quality of its qualifications by investing in research and development and experimenting with new and better ways of delivery.  Further pressure comes from existing and any future competitors from around the world which may introduce a superior alternative at any time.  Again, all of these pressures help to maintain the value and the relevance of the qualification.

Because the government uses examination results as a key measure of a schools performance, schools respond by teaching to the test and by choosing the exam board which has the highest pass rate, i.e the easiest exams.  You therefore end up with a race to the bottom with each private exam company competing to provide the easiest exams. Children continue to get better exam results, schools continue to climb the league table and the government can boast of helping to improve standards across the board.  And when people begin to highlight the blatantly obvious, that despite increasing grades, children appear to be less educated than half a century ago, the private companies which provide the curriculum and the exams can simply hide behind the cover of the government and its generic GCSE qualification, which now attract most of the criticism.  As a result the branding of the company remains intact, while the value of the GCSE continues to decline, until it becomes worthless.

Thankfully, a new generation of specialist qualifications may soon begin to appear in more traditional subjects across the curriculum, as a variety of world class companies and organisations begin to offer their own branded certificates, in the subject areas in which they specialise.   For example, Pfizer could provide qualifications in the sciences, Khan Academy on maths, Pearson on English, Adobe on web design, Virgin on entrepreneurship, Google on utilising the internet, National Geographic on geography, the British Museum on history, the Economist on economics, Fitness First on sport, Jamie Oliver on home economics, Office Angels on how to get a job, Marks and Spencer on customer service and Greenpeace on the environment.  The list is endless.

This unbundling of the school into different subject areas helps to redefine the school as a mechanism that provides students with an assortment of services instead of delivering an indivisible package of education.  We can then start to disentangle the components of that package and customise them to fit specific student needs and abilities.  Choice, variety and specialisation will therefore begin to increase within each school, and each school will now be in a position to offer their students a variety of different courses and qualifications.  With the use of online technology this increasing variety and customisation of children’s education is now much more affordable and this will also encourage a new blended style of learning that combines the classroom with an online experience.

This unbundling of the school will certainly appeal to those parents who live in areas where there is a lack of alternative schools to choose from or who may not want to disrupt their children’s education by transferring them to a different school.  Instead, if they are not satisfied with their child’s progress in a particular subject then they will now have the opportunity to choose between a variety of different educational programmes and qualifications within the same school.  Therefore the goal for customised, unbundled school reform is not to develop a new model of what a good school should look like but to create a flexible system that enables schools and a variety of specialist content providers to meet a variety of needs in increasingly effective and targeted ways.

The end result is that children would not simply graduate after 11 years of schooling with a single certificate which lists the subjects studied and the corresponding A-F grade.  Instead they would graduate with a portfolio of branded qualifications which have real meaning in the outside world and which provide useful information concerning the knowledge and skills acquired by each student.   However, unlike traditional qualifications these branded qualifications will not hold their value for ever but will expire after a certain period of time unless a refresh exam is taken.  This is the only way to guarantee that the qualification holds its value and remains relevant over time, thereby protecting the brand image of both the qualification and the parent company. 

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