Climate change models

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Last Friday's papers had blanket coverage of the latest government-sponsored projections of climate change in the UK. Summers, particularly in the South East, are set to get hotter, and winters generally wetter. London will become (even more) unbearable in summer, coasts will erode faster than ever and hundreds of thousands of homes will be at risk of flooding. However, although this is put forward as authoritative research, it is actually just the revised projections of computer models. In the world of climate science, hard evidence is replaced by computer output.

These models, flawed and incomplete as they are, are compromised further by being fed with doubtful input data. In particular, unrealistic assumptions are made about the amount of oil, gas and coal likely to be economically extractable. By some reckoning, even the most conservative of the IPCC's scenarios assumes cumulative fossil fuel use by 2100 of greater than the likely reserves; the more extreme scenarios project their use still to be accelerating at that point! If reserves really are effectively limited, there is simply insufficient oil, gas and coal available to raise average temperatures by more than 2° Celcius, even using the IPCC's assumptions for climate sensitivity. And if so, the projections for the UK's climate are simply nonsense.

For more detail, see the latest Scientific Alliance newsletter.

Is Schwarzenegger back?

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A good friend of mine, a judge at the civil justice court of Hamburg, once surprised me stating he would not socialize with teachers. Although such a statement is of course untenable as a generalization it was a fairly just conclusion given the disastrous role teachers have played in the state of Hamburg and other advanced Western states. This seems to be the lesson Arnold Schwarzenegger has finally absorbed. Indeed, no one has probably paid out more to the teacher unions than the famous body builder, turned actor, turned governor of California. Over the last couple of years, Schwarzenegger's weakness at the hands of the powerful teacher unions of California has wrecked his entire reform agenda. But to most people's surprise, with California’s facing bankruptcy, Schwarzenegger is back in full terminator mode:

California is so broken that we must look at every bold proposal out there, no matter how daring or radical -- including the idea of a flat tax"…Mr. Schwarzenegger has shocked nearly everyone in Sacramento by embracing some seismic policy changes to fix the California budget for the long term. These reforms include a flat-rate income tax, a spending limitation measure with teeth, and deep cuts in wasteful spending.

Schwarzenegger will create a bipartisan tax reform commission which will work on his proposal of a uniform tax for everyone of 6%. Against this only very few deductions will be allowed. Everyone who has spent days with their UK tax return will have to envy Californians. Edmund Burke was right to defend prejudices as the quickest guide for our actions if there is no time to reflect in full depth which way to go.

Ideas on healthcare reform

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At times, rule by the demos leaves me feeling desperately frustrated. Especially when their instincts are entirely wrong. Take healthcare for example. How could any political party – even if they wanted to – stand up for radical reform of healthcare in this country and expect to be elected? The people are some way from voting for this, despite the manifest failures of the NHS.

What rational person could disagree with the following statement?

Unlike government coverage or coverage purchased through employers, private coverage purchased directly by individuals encourages people to choose between health coverage and all other goods. It controls health spending by pricing individual risk, encourages substantial variation in plan design to accommodate differences in individual risk tolerance, and provides incentives for cost minimization.

And yet, there appears to be a pervading collectivist approach to health care that is not accepted in any other facet of human relations in this country.

Murray Rothbard once made a great speech arguing for the power of ideas to change the world. The work of libertarians across the world is driven by this premise; great men and women have devoted their lives to this end and people in this country are as yet not ready to hear the truth.

With top-ups, the strictures of a national health service are slowly being overcome. Yet it will take a sea change in popular feelings towards the institution before radical reform can take place. Given its increasingly visible costs and failures, this is only a matter of time.

Scientific myths

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A new book soon to be published, takes a healthy dose of common sense to otherwise confused scientific debates.

Become a fan of the ASI

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You can now become a fan of the ASI on facebook. Click here to find out more.

The Recession: Causes and Cures

• The recession was neither unforeseeable nor inexplicable. On the contrary, it was the direct and unavoidable result of the credit-fuelled boom that preceded it.
• Governments and their central banks contributed to the boom by: (1) keeping interest rates too low for too long, allowing asset-price bubbles to build; (2) giving implicit guarantees to the banks and other borrowers; (3) failing in their functions of prudential supervision and financial market regulation; and (4) by encouraging borrowing by those least able to afford it.
• These mistakes originated in a misunderstanding by central bankers and Treasury officials on both sides of the Atlantic of the nature of the economic cycle, and in their consequent hubristic belief that they had solved the problem of how to prevent recessions.
• The only way to avoid a recession is to restrain the antecedent boom. However, once a recession is under way, there may be ways to mitigate its worst effects and bring it more quickly to an end. The key is to re-establish a climate of business confidence.
• The best way to do that is to set a long-term course for lower corporate and personal tax rates, and stick to it. In the medium term, higher taxes can only be limited by reducing government expenditure, not by borrowing. Large-scale borrowing does not inspire confidence, because it gives rise to an expectation of future tax rises which discourages investment.
• In contrast, the three principal measures that have been adopted by the US and UK Governments to mitigate the recession are of marginal benefit and may prove harmful. These are: injecting taxpayers' money into the banks, artificially expanding the money supply, and attempting to provide a 'fiscal stimulus'.
• While one can understand why Governments felt the need to bail out certain institutions when they did, attempting to bail out all the banks is unwise. An orderly liquidation of the insolvent banks would have left sound banks in a stronger market position, allowing them to expand their lending to creditworthy borrowers more rapidly. No financial institution should be allowed to believe it is too big to fail.
• Expanding excessively the supply of money is unlikely to have a positive impact. In the long-term, it poses an inflationary threat which may be difficult for central banks to counter.
• The prescription of an across-the-board fiscal stimulus as a remedy is equally misconceived. The present recession is not the result of a deficiency in aggregate demand which was growing steadily until the summer of 2007. Nor is the recession's impact evenly distributed across the economy. There may be a case for targeted assistance to alleviate hardship and ease adjustment, but government must be careful not to support unsuccessful firms at the expense of successful ones.
• A notable feature of the boom was the misalignment of incentives in financial markets, which encouraged excessive risk-taking. This is largely attributable to the persistent failure of institutional shareholders to hold directors and senior managers to account. This may perhaps be the biggest flaw in the operation of Western market economies at the present time, and needs to be addressed by legislation.
• The present crisis has cast into doubt the ability of national governments to control the supply of money and credit. In the short term, new monetary and fiscal policies will have to be formulated. If these don’t work, then in the longer term some form of commodity reserve system for currencies may need to be considered.
   

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In our latest publication, The Recession: Causes and Cures, economist David Simpson examines the current recession and the government's responses to it. I'd highly recommend reading the whole thing if you have time (PDF available here) – the analysis of the financial crisis is one of the best I've read – but for now you can click read more for the executive summary.

EU make me sick

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A flabbergasted European Union has for the past 12 months been telling Ireland that the "No" they returned in the referendum of 2008 was not "their final answer". Today the EU announced that concessions had been granted to the Irish in areas covering military neutrality, taxes and abortion. Or in political terms: the voters of Ireland have been offered a bribe to vote 'yes' so that the planned federalization of Europe can continue unabated. As for the rest of the European nations who have already ratified the treaty, there are no special favours or opt-out areas on offer.

If a single 'no' to a EU treaty can grant you negotiable policy areas imagine what the UK could have achieved had we been able to express ourselves freely and openly on how we felt towards the EU and the Lisbon Treaty. But this quite clearly shows that there are areas of public policy that have once again been handed over meekly by parliament to the control of Brussels/Strasbourg. If the Irish felt those areas were of national importance and are enough to swing the vote to a 'yes' what are we going to regret losing control over?

Rather than continuing the charade of European elections every 5 years, with an ever-decreasing turnout, we should finally hold the referendum that has been continually promised us. We are now 36 years into a partnership with our neighbours which has hardly ever been beneficial. Thirty-four years have passed since we last held this contract to account, it is time for a re-assessment especially in light of what Ireland have protected and what we no longer have control over. In the meantime we shall have to hope that the Irish see past the bribery and realize that there is no benefit to further integration. Should they vote 'no' it could finally open the door to a referendum in this country.

Lessons from Alderney

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Last week I was in Alderney, the most northerly of the Channel Islands and a wonderfully free place. It is controlled by an elected legislature with ten members and a President, acting as head of the government. Without the interference of party politics and career politicians they seem to have maintained a sense of sanity that has been lost in Westminster.

As part of the Channel Islands Alderney maintains a low tax status:

• No Value Added Tax.
• No tax on capital.
• No tax on inheritance.
• No tax on exempt companies carrying on business outside the islands-see section Trusts/ Company Law.
• No tax on trusts whose beneficiaries live outside the island.
• Low tax (only 20%) on profits of companies which carry on business in the island.
• Low tax (20%) and generous personal allowances on income of persons who live in the island.
• Preferential arrangements made for captive insurance companies based on the island.

This all means that smaller local businesses don’t have to struggle in order to pay their tax bills, which obviously is beneficial to all on the island. The absence of tax on capital attracts wealth from abroad, creating flows of income into the island that act as an investment for the community.

The island is not only competititve in its tax policy. The legislature also does not infer in people's social freedoms as in mainland UK. There are relaxed driving laws with no traffic lights or MOT tests. If you go into the pubs on the island people are free to smoke indoors at the bar – a far cry from the infringement on our freedoms that we have suffered here.

There was a really good quality of life on the island, this is shown by a high number of people retiring there after living and working in Britain and France. The government has not sought to meddle in every aspect of life and the community is better off for it – now why did I come back to Westminster again?

Voluntarism and coercion

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The "private sector" of the economy is, in fact, the voluntary sector; and...the "public sector" is, in fact, the coercive sector.

Henry Hazlitt

A certain sadness, yes, but really we should celebrate

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Ian Jack's got a nicely done piece over at The Guardian about the decline of the British milk producing industry. Yes, of course, there's a sadness at the idea that the very embodiment of Stout British Yeomanry, the independent farmer, is being driven out of business. I'm also a little surprised that mention isn't made of the way that the milk quota regime imposed by the EU is deliberately skewed against said Stout British Yeoman.

But there's one little line in there which is the reason we should really be celebrating.

Years of genetic engineering and dietary supplements mean increased milk yields and fewer cows;

Fewer cows of course means fewer farmers needed to tend to them. This is really the story of increasing efficiency, increasing productivity, in farming. Something that we really should be celebrating, for it's the key to this whole civilisation thing. A society where everyone has to work full time in the fields in order to keep that society fed is really not much of a society. In order to develop anything other than just that peasant farming, you know, things like libraries, the NHS, symphonies, jet travel, absolutely anything other than a pure subsistence lifestyle, it is necessary that farming become more productive. That one person working upon the land can produce the food for 2 people, or 49 (as it is in our own, with some 2% working upon the land) or even 1.001 people's food.

It is only if there is this sort of surplus production over and above the necessary food for those doing the labouring that we can develop and build a society of any real sort.

So while we might indeed be sentimental about the disappearance of part of Ye Olde Englande, we really ought to be celebrating the process which has been going on for some10,000 years now, the ever increasing producivity of farming. For it's to that that we owe the rest of this wonderful world we see around us.