Does voting make a difference?

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Voting is a civic duty, but does it really make a difference? For anyone living outside about sixty marginal constituencies, clearly no. You are more likely to be run over outside the polling station than your vote changing the balance in Parliament.

Even if it did, would that make a difference to how the country is run, since the main parties seem to share so many of the same metropolitan, nannying, spin-ridden presumptions? Well, yes: however much all politicians claim they will cut taxes and improve state services, it is plain that some believe in more state control of our economic and social lives, and others in less.

Nevertheless, what we need is something that none of them promise: a complete overhaul of our political system. It has become a presidential system, though Britain does not have a constitution that can contain presidential power. It has become the Prime Minister and a bunch of unelected party apparatchiks who decide policy. Ministers, the civil service, Parliament, even the courts are elbowed out of the way.

The problem is not how to choose our leaders, but how to restrain them. Parliament used to be there for that purpose, but with 120-odd ministers owing their pay and perks to the Executive, it has become a Downing Street poodle.

If I lived in a marginal seat, I would vote for the strongest Parliamentarian, someone who might hold the Executive to account. Since I live in a ‘safe’ seat, what can I do? Well, I might just ‘spoil’ by ballot paper by writing in a message that all of the candidates will see. That I want a Parliament that represents the people and returns power to us – not the present system of elected dictatorships.

The new paternalism

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As usual, Cato Unbound has a fascinating selection of essays. This month they are on the new paternalism. Glen Whitman opens the debate, attacking many of the proposed policies of this latest fashion in behavioural economics. As he states:

The story begins with the seemingly innocuous proposal to enroll all employees in savings plans automatically (with the ability to opt out). Then it progresses to new default rules in contracts, such as a presumption of “for cause” rather than “at will” employment, again with an opt-out. And then? Default rules that can be waived only through a cumbersome legal procedure. Then default rules with some options ruled out entirely — such as maximum hours that cannot be waived for less than time-and-a-half pay. Then cooling-off periods for high-cost purchases. Then sin taxes for fatty or sodium-rich foods. Then outright bans on ingredients like trans fats.

Indeed, as he argues, we are on a slippery slope:

The top of the slope is gentle nudges to save more and eat less. The bottom of the slope is forceful shoves to eat right, drink right, exercise right, sleep right, have sex right, choose our professions right, and pick our lifestyles right.

For Nudge economists and its supporters, government interventions are taken as a given. As Whitman suggests, “the new paternalists have framed the debate as being not whether there should be paternalism, but how much.”.

I think the new paternalists' crucial mistake is to omit to frame their aruguments in the ideological baggage they bring to the table (see here for an interesting podcast on the issue bias in economics). They defend their policies as economists, yet come with an already formed vision of the good life, that they are pushing us to pursue. There is no escaping the fact that Nudge and its equivalents are packed full of plenty of ways and means for the government to take away our freedoms, founded in a belief that they could and should decide better how we live.

Organised crime

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Panic button

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The protection of children is always a sensitive issue and a large responsibility, but the Child Exploitation and Online Protection Centre’s (CEOP) reaction to Facebook’s new safety measures shows to what extent self-righteous bureaucrats feel justified in spreading their remit. On top of a plethora of privacy settings, Facebook have decided to tackle internet predators with a £5m internet safety campaign, a 24 hour police hotline and the option to send information to CEOP when abuse is reported online. Nonetheless, the website has been attacked for refusing to install a ‘panic button’ on every user’s profile, which would give information to the quango directly. Facebook insists their research finds a single panic button would confuse and intimidate people, and be less effective in reporting abuse.

As a private company Facebook should not be coerced into fulfilling the egotistical aspirations of a quango, no matter how well intentioned; how they manage the threat of internet predators should be entirely up to them. The drive to remain popular and public concerns will no doubt mean that Facebook remains up to date when dealing with the ‘darker’ side of social networking such as grooming, bullying and exploitation. How they respond to this pressure should be their own choice. Also, many of my friends have had their birthdays changed, or obscene status updates posted as a result of prank. It seems obvious to me that a ‘this person is a pedophile’ button would be taken advantage of to cause mayhem, likely wasting police time.

Nevertheless, the CEOP have been supplementing their attack on Facebook with the ‘shocking’ fact that the website has never reported an alleged pedophile to the Police directly. This is because Facebook is compelled by US law to report cases to the American authorities, who then pass them on to the CEOP. This doesn’t stop the mighty child protectors targeting worried parents and schools. The issue at stake is not so much about Facebook’s safety controls, but the freedom of private organizations to develop, without being subject to the whims of government bodies.

Public sector efficiency

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Efficiency savings are all the rage now that government spending is coming under increasing pressure. The idea is to reduce spending ‘without damaging the frontline services that we all depend on’, apparently saving money without affecting the delivery of health care, education or whatever the particular area happens to be.

Many members of public will recognise a worrisome implication in this notion; if the same service can be delivered with less expenditure, where was the money going beforehand?

This gets right to the heart of a difficulty with valuing public services. Because no market forces are involved (in most cases they are free at the point of use) it is extremely difficult to measure efficiency. When measuring the efficiency of a private firm, you can look at the inputs (money invested) and compare it with the outputs as valued by the market.

But this methodology becomes a lot more difficult when public services are involved. The inputs can be defined well enough, but who knows how to value the output? What do you define as a useful output for a school? I can’t see a way of measuring the amount of education a school produces in order to compare this to the input.

This problem, I think, leads to the extremely difficult philosophical problem of attaching a value to lives saved by the NHS in order to prioritise spending. Quality Adjusted Life Years, or QALYs, are currently used as a metric for comparing the payoffs of medical procedures in some areas of the NHS, but this method is far from perfect.

It is difficult to see how budgets can be systematically prioritised when one understands the issue there is with defining outputs provided by public services. Looking at the issue of public sector output in this way helps to explain why public services have at times been underfunded for the purpose at hand, and at other times seem to have money to waste on endless consultants and all manner of shiny billboards.

Nevertheless, efficiency savings are only pledged in certain areas. One could interpret this as a sign that government expenditure is working at capacity in other areas. But judging from the expensive cut of many civil servants’ suits I see when out for my lunchtime walk, I’d say there’s some squeezing to be done yet.

A question for followers of Mises

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Once again, I need a little help from my Austrian friends. You see, I can't quite make that leap of faith that would turn me into a gold bug.

After the recent financial crisis, I've tried hard enough, to be sure. I've read my Mises, so fully accept that it was the inevitable implosion of a fake boom that resulted from 25 years of incontinence by the monetary authorities. Indeed, our cash today is worth about a fiftieth of what it was a century ago. Markets, as I keep saying, depend on trust: they can't survive when the currency itself is untrustworthy.

The answer is to have a currency that keeps its value. Friedman suggested a monetary rule, by which the money supply is expanded only as fast as the economy, keeping prices stable. Alan Walters pointed out that because of the 'seignorage' in the system – as we grow wealthier, we keep more cash in our wallets – it actually has to expand slightly faster. Keynes thought that, because nobody willingly takes a pay cut, a little inflation might be a convenient way of adjusting wages without strikes. The trouble with all these ideas is knowing where to stop.

Hence the notion that we should return to a commodity currency, linked, say, to the value of some basket of goods. The snag there, as Mises pointed out, that the choice of the basket becomes a political decision; and politicians will always find reasons (the 1985 Savings and Loan crash, the 1987 crash, the Russian debt default, 9.11...) for making 'exceptional' expansions that are somehow never reversed.

A money tied to gold, then? (You certainly don't want to use the stuff itself – it's heavy, and it wears down. Better to use notes that are completely exchangeable for bits of it.) But there are snags. Since there is a lot more paper cash around than there is gold, so the price would skyrocket: nice for those rich folk with lots of jewellery, but not for the rest of us. Indeed, whole countries with small currencies and large gold reserves would become instantly rich, while those with big currencies who've sold off their gold reserves (thanks, Gordon), would be made poor. Doesn't seem fair, or even practicable. And the supply of gold fluctuates too, so prices will still change. Moreover, the Russians have far too much of the stuff, so they could use it as a political weapon, as they do oil.

Mises himself thought that such political realities would rule out a return to gold any time soon. His second-best was to have firm limits on the monetary authorities. Sadly, that hasn't worked so far. The question, then, is how in practical terms, could the world ever make the transition?

Wealth inequality and the Hills Report

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Over in the think pieces section of the website, ASI fellow and pre-eminent blogger Tim Worstall has an article examining the National Equality Panel's 'Hills Report', with particular emphasis on its treatment of wealth inequality and the gender pay gap.

Tim argues that not only did the report's authors directly ignore Office of National Statistics guidelines on how to measure the gender pay gap, but that they also hugely overstated wealth inequality in the UK by failing to take account of the effects of the welfare state.

He makes a good point: politicians use wealth inequality as a justification for all kinds of redistributive policy interventions, but then fail to take account of the effect these policies have.

Why, for example, do we count private pensions as ‘wealth’ but ignore the guarantee of a state pension? As Tim argues, this is a piece of ‘wealth’ with a calculable net present value. The same is true of access to the NHS. And when these two aspects of the welfare state are factored into our measurement of wealth inequality, the wealth gap between the 10th and 90th percentile is not 1:100, as the Hills Report suggests, but is actually more like 1:5.

If you were a cynic, you might say that it rather suits big government politicians to be able to advocate wealth redistribution on the basis of inequality, safe in the knowledge that this redistribution won’t actually affect their chosen measure of inequality and deprive them of a case for further interventions. And so leviathan keeps on growing.

Anyway, if you want to know more check out Tim’s article. If you want to debate the issues he raises, you can do so in the comments below.

A broken window theory of the deficit

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New York has changed astonishingly in recent years. New Yorkers used to go round in despair about the crime, the grafitti, the vandalism, the run-down building, the gum on the filthy streets. People on those streets looked stressed, workers in shops and service industries were surly. All that has changed. The place is far cleaner. Even the subway trains, once totally covered in graffiti, now have next to none. The streets don't have gum and litter on them like London's. The car drivers don't seem so determined to run you down any more. Sure, New Yorkers are still New Yorkers, but they now seem more polite, they shout less, and use far fewer profanities than the folk you see on Britain's city streetst. They're even quite cheery, and the fear of crime is far, far less.

Much of change is attributed to Police Commissioner Bill Bratton, and his 'broken window' approach. He believed that it was no good just despairing about crime and vandalism. You had to start, where you could, right away. Fix the broken windows and clean up the grafitti, so the place doesn't look so run-down, and people might start to care for it a bit better. Introduce neighbourhood policing so that citizens know who's supposed to be protecting them, instead of regarding the police as distant, donut-chomping layabouts who flash past in noisy squad cars.

It's a policy I would recommend for Britain's public finances too. Don't get overwhelmed by the (seemingly overwhelming) size of the deficit and the debt. Fix the broken windows of inefficient, top-down- control public services. Clean up the sticky mess of quangocracy and regulation that gets under the feet of enterprise. Introduce neighbourhood policing of public spending and politicians by posting all government expenditure and all proposed legislation online for the public to scrutinise. Return control of public service to local communities – and better, to the people themselves. Do that, and not only will we get Britain out of its debt malaise more effectively. We might even end up with a better society, too.

Freedom Week 2010 - Apply Now!

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If any of our younger readers are interested in learning about liberty, why not apply for a place at Freedom Week?. I can personally recommend it, having attended the first Freedom Week back in 2006 and enjoyed it immensely. Basically it is a week-long residential seminar course in Cambridge for students who want to learn more about free market and libertarian ideas. Every day you hear talks from top classical liberal thinkers (last year, speakers included Professor Stephen Davies, Dr Mark Pennington, Professor Chandran Kukathas, and our own Dr Madsen Pirie), and get to discuss fascinating, challenging ideas with like-minded people. There are plenty of fun activities to get involved with too – like dinners, barbeques, punting, and nights out in Cambridge – and best of all, it's all free. What's not to like?

Watch Freedom Week in Educational  |  View More Free Videos Online at Veoh.com

FREEDOM WEEK 2010 will take place from 12 to 16 July 2010, at Sidney Sussex College, Cambrige. The deadline for applications is 15 May, but the earlier you apply, the more chance you have of being accepted.

To apply, please email jp@jpfloru.com, putting "Application [your name]" in the subject box.

• your CV (2 pages maximum);
• a statement as to why you would like to participate in the seminar (150 words or less)
• a statement (150 words or less) about your career interests;
• other supporting evidence as to why you would be suitable to be included in the programme (must be concise!)

For more information, visit the Freedom Week website at www.freedomweek.org.uk.

The China fund

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Lasy week saw completion of the intense sales campaign by Fidelity of its China Special Situations fund. In the event, it raised “only” £460 million against a target of £650 million, although that still makes it the biggest launch of a UK investment trust in 16 years.

You couldn’t have missed this high-profile fund raising jamboree. For many weeks, Fidelity was splashing big ads in all the personal finance sections of the various newspapers, offering small investors the opportunity to get into what has been the exciting China growth story.

Yet that very effort to lure in small investors was a red flag. When the little guy starts to invest, the big guys are quietly tip-toeing away from a story that has run its course. And, indeed, retail investors (the little guys) outnumbered institutions (the big guys) by 2-to-1 against Fidelity’s expectations of a 50-50 split.

So what’s not to like about China? It sure has looked like a greedy capitalist’s dream – businesses are encouraged to be as profitable as possible with minimal protection for labour or minimal regard for externalities like pollution.

However, this seemingly raw-in-the-tooth model of free enterprise is not to be confused with an efficient free market. Rather, it masks the reality of a paranoid government with an unshakeable belief in the righteousness of its cause intent on absolute control - a Gordon Brown writ large. If you think Britain’s Labour government has played fast with its financial accounting and loose with its regulatory duties, just wait for Chinese skeletons to come tumbling out of far more and much larger closets.