Calling all economists...


The US economics publication Econ Journal Watch has issued a call for papers for a symposium entitled Economic Notes from Underground.

The idea is for economists to write confessional essays about their existence as economists, and to explore preference falsification – the idea that people publicly express views or attitudes that are false to his or her true private views or attitudes – and other forms of moral or intellectual compromise within the profession. Papers may be published anonymously.

Click here for more information.

Blog Review 761


The crisis is, as we know, bringing out everyone and their uncles with their pet plans for sorting out the world. Can we just remind ourselves that there's nothing big and nothing clever about the idea of energy independence? The arguments for trade don't break down just because something is important.

Schumpeter's Wager is the opposite of what he actually thought himself: that these downturns are simply the necessary flipside of the creative desctruction that makes us all so wealthy.

On why we need the Milton Friedman Institute now more than ever.

Netsmith isn't quite sure he believes this headline figure but there is your real economy for you.

Just another reason to dislike politicians.

How the media reports on medical stories and "miracle cures".

And finally, the interesting way to decide the US election.

Guns, drugs and money


Imagine my surprise on finding a cogent, well thought out and sensible article at the Guardian's Comment is Free site. But there it is, they've managed to do it.

It is perhaps tasteless to say so, but we are fortunate that we face a social plague very similar to that of gin – the illegal drug trade. And as in the mid-18th century, we see the failure of abolitionist policies to control the menace. The total value of this trade amounts to between £2bn and £6.5bn a year – all untaxed........The total benefit of such legalisation to the Exchequer is likely to be between £3.5bn and £6.3bn a year, including excise duty, VAT and income tax from the dealers and allowing for additional costs.

Quite, in these straitened times, while all are looking for new sources of tax revenue, why don't we legalise something which we know we cannot beat by prohibition? As we've shown by trying said prohibition for the past few decades?

The tax revenue would not be the only benefit, of course. There is the simple civil liberties aspect: my or your desire to ingest oddities carries no diminution of the rights of others, nor threat to their person or property, so it should not be something which is constricted by the law. Legalisation and the subsequent competition amongst legitimate suppliers would lower prices (even with the high tax rates we'd impose) and thus reduce the crime associated with addicts looking for the money with which to score.

Prisons could be filled with real criminals rather than those only damaging themselves, we'd save many billions in policing costs. The quality of the drugs on offer would rise, thus reducing the physical damage that they do and the associated costs to the NHS.

All in all, we reduce the costs to the Exchequer, increase the revenues and advance freedom and liberty in one fell swoop.

It's something of a pity that we've not done it already really, isn't it?

Perhaps this could be one of those Naomi Klein moments, from her book The Shock Doctrine? Where we neo-liberals use a shock, a crisis, to advance our agenda?

You want more money?


I have a little confession. I've been a member of the Obama campaign for nearly a year. I signed up when the inspiring, energetic junior Senator from Illinois was the long-shot candidate struggling against the Clinton machine and its sense of entitlement. As a member of the campaign I get regular updates, letters from the candidate, and the occasional request for a campaign contribution. But lately I have been stunned by the deluge.

With less than two weeks till the election, almost every day, I receive emails asking me to donate money. Emails from Sen Joe Biden, the would be Vice-President, from Mr Plouffe, the manager of the campaign, from Mrs Obama, the lady who would be first, and from Sen Obama himself. Pleading, cajoling, prodding. Telling me of their desperate need. Urging me to give. I've been scratching my head in bewilderment. Sen Obama has raised more money than any other presidential candidate in history. By recent count he has raised in excess of US$ 600 million (over US$ 150 million in the month of September alone). He has raised more than twice the sum Sen McCain has raised and is out-spending the Arizona senator, several times over, in almost every state and county. How much is enough?

In response to the most severe financial crisis in 70 years, Sen Obama often crows about the economic hardships that hard working, blue collar Americans face. Yet with this gross, bloated, obscene political treasure chest, Sen Obama has the temerity to ask these people who struggle to feed their families, to pay their rent or mortgages, to school their children, for more money. It's simply astonishing. During the Great Depression, men would pull the tongues of their trouser pockets out to show they were penurious. They called them Hoover Flags, as a sock to the then President. I've just reached into the pocket of my neat Saville Row suit and pulled the tongue out. I'm waving it at the Obama campaign. Joe the Plumber, Tito the Builder, and Ed the Dairyman ought to do the same.

Effective third party?


In the latest issue of the Cato Policy Report, William Niskanen calls for a different kind of Libertarian Party in America. He calls for a more effective LP that would trade it’s vote for influence on the candidate who is most closely aligned to the Libertarian Party's ideals, rather than trying to fight elections on its own. This would only work if certain criteria were met in each district: (1) there must be no separate LP candidate; (2) the size of the party must be larger than the expected vote difference between the major party candidates; (3) after the major party candidates are selected the LP must have bargaining power with them; (4) the LP's members must act in concert to support their preferred candidate.

This call is perfectly rational in light of the evidence, whereby around 20 percent of people have libertarian leanings, but then come election time only 1 percent vote for the Libertarian candidate. David Boaz and David Kirby investigated this in depth in the Policy Analysis paper, The Libertarian Vote and found that there are in many districts a key 10-20 percent of voters that can swing an election. William Niskanen’s idea is a way of utilising this and then building influence into it. The Libertarian Party of the US (and indeed of the UK) should look at how this can be developed to become effective in shaping the policy ideas and pronouncements of politicians.

There is of course one drawback, the large amount of risk involved, in that you have to trust a politician. Somewhat easier in the US, with it’s looser party system, distinctly harder here in the UK. But worth a shot nonetheless.

Blog Review 760


Sadly policy about prostitution seems to have been informed (if not hijacked) by those with something of an ideological axe to grind. To the benefit of nobody, certainly not prostitutes.

On the same subject, a little hopeful trying to stop politicians (insert favourite euphemism here) people isn't it?

As we keep telling everyone, incentives matter

“Blair’s Treasury Secretary, Gordon Brown, does not necessarily have his interests aligned with his boss, in the way that Bob Rubin does. So Brown had less incentive to stop Blair from saying something foolish."

Would people shout so loudly for minimum wages if they realised that they actually lower wages?

Why is everyone decrying greedy bankers? Giving money to someone who won't repay it is generous surely?

The smaller the political unit the longer the lifespans it appears. Well, that's the European Union dealt with then.

And finally, look who is hoping that we do ban high interest no collateral loans.


Reasons not to reform the financial infrastructure


I've said before that I'm entirely happy to listen to arguments that we need more, less, different or even no regulation of the financial markets in order to make the current events less likely in future. This particular justification though is one we can reject out of hand.

Most importantly, the international financial system has failed to meet two obvious requirements: of preventing instability and crises, and of transferring resources from richer to poorer economies.

I'm not sure we do want to prevent instability or crises: I was absolutely delighted when the Soviet Union fell over in a rather large crisis and with a great deal of accompanying instability. But I'm absolutely certain that we can reject that second idea out of hand. For we don't actually want to transfer resources in that manner at all, from rich to poor.

(Allow me a caveat here, yes, of course we want to transfer food aid, vaccines and so on and the money to pay for them but that's not what is being talked about here.)

There is indeed gross, shaming and disgusting poverty in the world and yes, we'd certainly like to do something about it even if only out of empathy with our fellow men and women. But crating up the wealth we enjoy and shipping it off (even if that were possible) isn't the way that we're going to alleviate that poverty. For the problem isn't the way that such wealth (the resources being talked about) is distributed, it's that some parts of the world currently create it and some others don't. Why this is so is really rather the heart of the study of economics: not "why poverty?" but "why and how wealth?".

An early and correct, so far as it goes, answer to that why and how wealth question was offered by a Scot we've just unveiled a statue to: "peace, easy taxes and a tolerable administration of justice are all that are required to lift a country from barbarism to opulence" seems to ring a bell. We might now want to go further, I for one am absolutely delighted that my taxes in part pay for vaccination campaigns abroad just as I am that they do at home.

But when we talk about what we might or might not do with hte international finance system we need to be absolutely clear. The aim is to allow the financing of trade, the movement of capital, the sending of remittances, certainly, but not the transfer of resources or wealth themselves.

Instead of the transfering of resources what we're trying to do is facilitate the creation of more resources. After all, it's not that complex a thought, that we'll cure poverty by creating more wealth, is it?

ISOS 2008


On Wednesday the Adam Smith Institute held its biannual Independent Seminar on the Open Society. Attended by around 200 sixth form pupils we had a highly impressive line-up of speakers.

Opening the seminar was the Institute’s Dr Eamonn Butler who spoke on whether or not our rulers have too much power. Needless to say, he concluded that they do, the challenge for him and the Institute is in finding ways to get it back. Next up was Councillor JP Floru. Having recently been selected to represent the Conservative Party at the 2009 European election, he discussed with verve the threat European politicians pose on the ability for the people of Europe to thrive. Interesting stuff.

The economist Paul Ormerod was next to speak, tackling the key factors shaping the economic realities for future politicians. With cutting accuracy, he showed that despite the growth in size of the state, the problems that it sets out to combat have not been solved but often exacerbated. The Institute’s president Dr Madsen Pirie spoke next, addressing the question of whether a libertarian can be a conservative. Much of the talk centred upon the highly regarded book Nudge, drawing the key practical and moral issues that come from Cameron’s Conservative Party being so taken with ideas contained within it.

After lunch, Dr Steve Davies spoke on the potential for the private supply of public goods. With refreshing iconoclasm, he showed that the state could be superfluous in providing everything (yes, including the police and the military). Journalist and author Ross Clark followed this with an exposition of the surveillance society, detailing the remarkable proliferation and failure of the ubiquitous surveillance camera.

Our penultimate speaker was Vincent Cable MP, Shadow Chancellor of the Exchequer for the Liberal Democrats. Interesting as always, he spoke with his usual clarity on the fundamentals of the credit crunch. Last up was Dr Helen Evans of Nurse for Reform. Addressing the question of whether political factors thwart a rational healthcare system. The answer was unequivocally ‘yes’, once again an argument true to the spirit of Popper’s Open Society.

We plan to run another sixth form conference next March, if you would like your name or school to be put down for an early invitation please send us an email:

Quote of the week


The politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.

George Reisman, The Myth that Laissez Faire Is Responsible for Our Present Crisis Ludwig von Mises Institute

Blog Review 759


Another index that we should be looking at to check the real economy: The Baltic Dry Index. Measuring the price of shipping and thus an insight into the levels of trade.

It's always nice when people go to the trouble of correcting the more inane interpretations of what Adam Smith actually said.

Special checkouts at the supermarket for those buying alcohol. One way to undermine this and as one wag pointed out, this'll just be an express checkout line, won't it?

Going back to Keynes and Hayek to look at why the boom happened (without which of course there wouldn't be a crash).

Summer time, double summer time (and remember to change the clocks tonight!)...they're about saving energy aren't they? Pity they seem to increase energy consumption then.

Venezuela looks to be in serious economic trouble. Social spending is all very well but you've got to keep up the investment that finances it too.

And finally, demand in the gag-gift market.