We entirely agree Dame Margaret, we entirely agree
Dame Margaret, Lady Hodge, tells us that government isn't very good at doing things, a position that we entirely agree with:
Furthermore, the public sector is notoriously bad at both writing and managing the contracts it enters into.
This is, of course, writ small the basic larger problem with calls for government intervention into matters. Most certainly, there are times when only government intervention will do - we're entirely happy with the British state's monopoly on the possession of nuclear weapons in these isles for example.
For the standard switch and bait is to insist that here, look, there's a problem that the market isn't solving. This is thus a market failure - although, a with climate change, it is often the absence of something from market prices, that is the absence of a market rather than a failure of one. Do note though that we agree, there are indeed such things as market failures.
The answer to such not being the usual knee jerk reaction, that government must now do this thing. For there is also something called government failure and we need to take that into account as well in designing whatever the solution might be. For example, as we've mentioned around here before about food banks, government just doesn't seem to be very good at the £10 here, £20 there problems. Private, communal if you prefer, charitable action appears to be very much more efficient at dealing with this specific problem.
That is, we've always got to remember that government isn't very good at doing things.
Ireland finally looks ready to abolish its anti-blasphemy law
This week, Irish Taoiseach Leo Varadkar announced plans to hold a series of referendums in the next two years. One of these referendums concerns Ireland’s outdated anti-blasphemy law, which mandates a maximum fine of up to €25,000 for the “publishing or uttering [of] matter that is grossly abusive or insulting in relation to matters sacred by any religion, thereby intentionally causing outrage among a substantial number of adherents of that religion”.
Whilst nobody has ever been prosecuted under the current legislation (passed in 2009), it nonetheless creates a chilling effect on free speech and makes an ass of the law. The only reason it still exists is to satisfy the requirements of the Constitution of Ireland, and indeed Irish lawmakers have admitted that the 2009 act was designed to render the law practically unenforceable. When actor Stephen Fry was investigated by gardaí earlier this year for alleged blasphemy, former minister Dermot Ahern told the Irish Independent:
We diluted it in a way that made it pretty ineffectual...We implemented the crime but made it in a way that it would be virtually impossible to prosecute.
Ireland’s religious community is equally blasé about the 2009 act. As Kevin Hargaden, Social Theology Officer of the Jesuit Centre for Faith and Justice, explained to the Irish Times earlier this year:
This law was passed as a component of the Defamation Act in 2009. It was not the product of a grassroots movement of Irish Christians or a broad coalition of religious leaders. The Irish Council of Churches did not greet it with applause. No photo opportunity followed with the leaders of Dublin’s mosques. Religious adherents in Ireland did not actively lobby for this law.
Despite the widespread (and accurate) impression that Ireland’s blasphemy law has no teeth, its continued existence has proven to be a useful rhetorical tool for opponents of free speech. Following the Charlie Hebdo massacre, Dr Ali Selim of the Islamic Cultural Centre of Ireland threatened to pursue legal action against members of the Irish media who published cartoons of the Prophet Mohammed: referencing Ireland’s blasphemy laws. And the problems created by the 2009 act aren’t limited to Ireland either:
...the Organisation of Islamic Co-operation - which has 57 member states - cites Ireland’s law as best practice and has even proposed the adoption of its precise wording to limit human rights on freedom of conscience.
Thankfully, with a recent poll showing a clear majority in favour of removing the offence of blasphemy from the Constitution, Ireland looks set to adopt a modern, secular approach to free speech.
Simon Woolley must do his sums again - or we'll send him to bed without any supper
Simon Woolley and The Guardian are telling us all how appallingly white Britain's elite is. This is rather a large campaign by them in fact. One part of which gives us our nomination for the most egregious piece of innumeracy to appear in The Guardian:
But right now, the path to power for minorities is strewn with rocks and hurdles. A BBC study last year – accompanying David Harewood’s documentary Will There Ever Be a Black Prime Minister? – highlighted the fact that 50% of the 2014 intake for Oxford and Cambridge University was taken from five private schools.
Surely one of The Guardian's editors was going to catch that? After all, most of them did go to private schools and then onto Oxbridge. They'd thus have personal experience of the relative sizes of the various institutions.
Just in case it's not hit yet, Oxford seems to admit some 3,200 undergraduates each year, Cambridge 4,300 or so. 50% of that is 3,750 students and we're not even sure that Britain's top 5 schools have that many pupils in total - although we're absolutely 100% certain that their graduating upper sixth doesn't have anything like that in total. We're also absolutely 100% certain that not all people who leave such elite schools manage to get into Oxbridge. The universities are rather more selective than that.
We are given a link to the proof of the contention though, that BBC study:
Four independent schools - Eton, Westminster, St Paul's Boys and St Paul's Girls - and state-funded Hills Road Sixth Form College in Cambridge, together sent 946 pupils to Oxford and Cambridge between 2007 and 2009.
By contrast, 2,000 lower-performing schools combined sent a total of 927 students to the two elite universities, getting less than 6% of available places, the Sutton Trust found.
Hmm. 900 and a bit over a couple of years is 6% of all places granted, therefore 900 and a bit places over a couple of years must be 6% of all places granted. We would therefore say that five schools provide around 6%, not 50%.
Sure, OK, we might call this trivia however delicious it is to point to such innumeracy. But the larger report, as one of us has described elsewhere, suffers from a similarly large failure. Their Colour of Power report compares the BAME population in that governing elite with the BAME population of the nation at large. Yet that governing elite comes from a certain sort of age group - obviously. And the BAME portion of the population varies considerably by age cohort. From some 2% or so in the over 85s to some 21% or so in the under 4s.
No, despite what you might think of Corbyn or McDonnell we do not draw our governing elite from those - and least not exclusively so - crumbling into the grave nor those just learning to open the cookie jar. The general report is as innumerate as this example about Oxbridge entry.
Both we generally and The Guardian in particular should send Simon Woolley back to do his sums again - and no supper for him until he's got them right.
Good grief, can't we at least expect that those who tell us how the country should be run can add up?
Oh well done, Labour decides that those with poor credit should not be allowed to borrow
This is not what they say they want to do of course, they are telling us that this will make credit cheaper for those who find it difficult to get. But the net effect will be to make something currently difficult and expensive into something impossible:
Credit card companies would be forced to write off billions of pounds in long-term customer debts if Labour got into power under a policy to be unveiled at the party's conference.
John McDonnell, the shadow chancellor, will propose capping the amount of money lenders can charge in interest so that no one has to pay back more than double what they borrowed.
He will say the policy will help three million credit card holders who are “trapped by their debt”.
As the Federal Reserve has pointed out over in the US interest rates, just like other prices, are not things we can just randomly assign at our whim. They're actually a bit more important than that:
Even though payday loan fees seem competitive, many reformers have advocated price caps. The Center for Responsible Lending (CRL), a nonprofit created by a credit union and a staunch foe of payday lending, has recommended capping annual rates at 36 percent “to spring the (debt) trap.” The CRL is technically correct, but only because a 36 percent cap eliminates payday loans altogether. If payday lenders earn normal profits when they charge $15 per $100 per two weeks, as the evidence suggests, they must surely lose money at $1.38 per $100 (equivalent to a 36 percent APR.) In fact, Pew Charitable Trusts (p. 20) notes that storefront payday lenders “are not found” in states with a 36 percent cap, and researcherstreat a 36 percent cap as an outright ban. In view of this, “36 percenters” may want to reconsider their position, unless of course their goal is to eliminate payday loans altogether.
We would also point out that if this was applied to debt, rather than simply credit cards, then this would rule out mortgage interest rates rising above 5.5%. No, really, a 30 year repayment mortgage at 5.5 % pays back more than twice the sum borrowed.
Prices, even the price of money, aren't some random digits we can apply as we wish. They're actually the way the world works. Not that we expect John McDonnell to understand this but the rest of us should.
Against rural broadband
Society got very excited about the invention of the car. From the 1950s onwards especially, governments around the world began huge road-building projects, bulldozing swathes of cities for huge multi-lane dual carriageways. This frenzy has subsided, and it's largely clear how this ideological expansion reformed our cities for the worse.
Highways are a crucial part of a nation's infrastructure. Turnpikes—privately-funded and toll-financed roads—were, alongside the private waterways network, a key part of the earliest stages of England's industrialisation. Their high tolls—the rents earned by those who built them—were incentives for the creation and rapid expansion of the world's first, and for a long time the greatest, railway network. So much for natural monopolies: price competition was so vigorous that Mancunian workers and industrialists (and eventually the city corporation) funded a canal that made the city, 40 miles inland, the world's third biggest port.
But it's all too easy to go from thinking something is beneficial in particular contexts to thinking we should expand it indefinitely, even outside of that context. In post-war Britain, infrastructure investment was not driven by the profit motive—it was driven by a conviction that cars were the future. Birmingham is, of course, an especially prominent UK example of this. But it happened almost everywhere, and London was only just saved. The US midwest provides even more extreme examples. Of course, the more heavily roads and parking were subsidised, the more rapidly transit declined.
An insightful short newsletter, which I saw online like a blog post, applies this insight to broadband.
Our rampant enthusiasm for involving computers in everything reminded me of the last century's most important technological revolution, the automobile, which turned out differently than it began. Like computers today, cars were once so novel and promising that we "did the things that let us use cars" rather than the inverse.
That honeymoon period lasted long enough (and for some it hasn't ended yet) to entirely and permanently remake the infrastructure of cities, the most familiar example being the wave of support that enabled Robert Moses to slice New York apart with expressways. By the time the car's real problems became visible—traffic, pollution, physical danger, and social atomization—it was too late to reverse its complete dominance. Most of the rebuilding was already done.
Right now, we're building a digital infrastructure that rivals the physical one we built for cars, just as fast and with equally uncritical enthusiasm. If freeways prioritized cars at the expense of people, this prioritizes bits similarly, no less because we've all begged for it. Of course, it's still too early to say what the internet version of gridlock and global warming will turn out to be once its saturation of society is complete.
In the eyes of this author, it's Zuckerberg and Jobs we should be worrying about, but I'm not sure. See, like private road, rail, and waterways, Facebook and Apple have automatic feedback mechanisms that help guard against both overexuberance and underexploitation: profit. Yes, private firms make crazy decisions, but when they do they get wound down, automatically. They only stay alive, assuming a decent institutional framework, when they satisfy preferences. Uber's venture capitalist investors can only subsidise riders while they have money in the bank. Historically we can see that government-funded boondoggles have not faced this discipline.
So I'm sceptical about the clarion calls I hear absolutely everywhere that we should spend billions of pounds, or hundreds of billions around the world, building broadband because the internet is the "technology of the future". It probably is, but unless we have incredibly solid evidence that broadband has large net positive externalities, then we should let it roll out privately; when people are willing to pay how much it costs society to build. Real technologies of the future fund themselves.
We most certainly welcome this People's Trust Fund, oh yes we do
We think this is an absolutely wonderful idea, the People's Trust Fund. Not, we hasten to add, that we're saying anything at all about how you should invest. Rather, this is going to be the most wondrous test of what we are really pretty sure we know about markets, finance and investment.
As The Guardian says:
An investment fund that promises to break the mould of City short-termism and aims to make gains of 7% a year is to open for small investors able to put in as little as £500.
As they say in a little more detail themselves:
Nobody can be sure what our investment returns will be, but we believe that over a typical seven-year period, our strategy should be capable of turning £100 into £160 – that’s a total return of 7% a year compound, after costs, and assumes that inflation runs at 2% p.a. over the period.1
In terms of your spending power, this is the equivalent of 5% p.a., giving your £100 a value of around £140 after seven years, after inflation.
A 5% real return after costs? That is a remarkable offer. So, how are they to do this?
Well, firstly the investors own the company - so, it's like Vanguard in that sense, a mutual. Secondly, no cash bonuses for anyone, only shares in the fund itself- be interesting to see how the dilution works there. They'll accept investments as small as £500 or even £25 a month. Those logistical costs of management are going to be quite high.
Further good things:
The People’s Trust will also aim to improve lives directly and immediately, by using a small proportion of the fund to lend to charities and community interest companies that have a direct social impact. This is not charity; we expect a modest return on these loans – but you’ll know this money is being used with the aim of doing good in society.
Deliberately lending at modest returns in order to produce a 5% real return.
The day-to-day money management will be done by five fund management groups, which will each be given a seven-year contract to ensure their performance horizon is the same as the underlying investors.
It's a fund of funds, meaning two sets of fund management costs.
The special magic sauce here is that it will be a long term investment fund. Eschewing all short term fads and fancies, along with making sure that everyone pays all their taxes and so on.
That is, an investment strategy that simply hasn't occurred to any of the other half a million people working in The City is, through that fee structure, charitable endeavour and tax insistence, going to deliver a 5% real return to investors.
That would indeed be most welcome - as we know, over the long term managed funds tend to underperform the basic indices precisely because of those management costs. And it would be welcome too, not least for the investors.
But also it would greatly inform the rest of us out here labouring as we do under that efficient markets hypothesis. That known information about prices is already in prices and therefore no one can consistently and long term outperform that market. Or rather, if someone does then they're very definitely a statistical outlier (Warren Buffett doesn't quite count here, his insurance float means that his cost of funds is rather below that of Treasuries, below everyone else's in the market).
This is going to be the most wonderful test of exactly that basic critique of the current investment markets. If it is true that short-termism damages investment returns then this fund has a chance of proving that. Our own supposition is that that's a simple enough idea that someone's had it before and tried it but still, we look forward to the disproof of our contention.
In which we entirely agree with John Harris of The Guardian
Something we entirely agree with:
No one, surely, is going to be able to roll back a social transformation that dates back to the era of Margaret Thatcher.
Excellent, now that we've got the issue of council housing out of the way we can move onto important matters:
Which takes us to the question posed by our presumptive next king-but-one, and the stupid tangle of legal and cultural conventions that get in the way of recognising what is happening, and doing something about it. Just as hardened heroin addicts are often killed by dealers who play fast and loose with their supply, so it is with scores of young ecstasy users. In other words, for as long we allow our young people to ingest chemicals cooked up in bathtubs by career criminals, with no means of checking what on earth they are about to swallow, tragedies will happen.
I am as unsure about the sweeping legalisation of drugs as Prince William appeared to be. God knows how you liberalise the supply of crack; the idea of powerful hallucinogens available from your local off-licence seems problematic to say the least. But the idea of decriminalising at least the possession of most drugs seems increasingly unanswerable – and in time, it is not hard to envisage the liberalisation of cannabis pioneered by a handful of US states extending to Britain, as well as ecstasy being legalised, made subject to official standards, and freely bought and sold.
We are not unsure. As Harris ably describes it is the very uncertainty of what is being ingested which causes the problems with what is being ingested. Even with heroin this is true - certainly, Shipman turned out to be a mass murderer but he was also an entirely functional one and also entirely functional GP for some decades while on good, pure, pharmaceutical grade stuff.
We actively desire that suppliers be held responsible for the purity, consistency, of what they supply, just as in any other area of life. All of which means that it should be legal, so we can sue them, so that there is the incentive to create brands which are indeed consistent.
It really is worth noting that the branding of food took off in the 1850s, largely solving the problems of adulteration rather before legislation upon this matter in the 1870s. Food that doesn't kill people gains market share against that which does. Drugs which don't kill people will equally so.
It may even be that drug taking is immoral, that it's a waste of a life, but whose life it it anyway? To be a liberal is to say that it is the life of the person living it. And we here are utilitarians, simply desiring what works best given that fallible material being worked with, human beings.
We're still not quite convinced that heroin should be sold in sweetie wraps so that 5 year olds can chase the dragon. But the closer that consenting adults get to being able to purchase known drugs, in known purities, with the standard consumer comebacks for failures on either part, then the fewer people will die from taking drugs - and, of course, the more people will be able to follow their desires.
And what else can drug policy be other than management at least damage of something that happens anyway?
How terribly amusing from the European Commission
There's a great deal of shouting from the European Union about the taxation of digital business. An insistence that really, such companies must be paying more tax where value is added. Which is, of course, how the system currently works. Most of he value is created in the US, given that's where all the programmers are, and that's where it gets taxed, under US rules. Really - profits cannot be paid out to shareholders until US profit taxes are paid.
This doesn't satisfy European politicians of course as they want to be able to spend that revenue. Thus the shouting. However, in the course of their reasoning they let slip something terribly fun, an agreement, an admission perhaps, that we shouldn't be taxing corporations at all:
In the field of taxation, policy makers are struggling to find solutions which would ensure fair and effective taxation as the digital transformation of the economy accelerates. There are weaknesses in the international tax rules as they were originally designed for "brick and mortar" businesses and have now become outdated. The current tax rules no longer fit the modern context where businesses rely heavily on hard-to-value intangible assets, data and automation, which facilitate online trading across borders with no physical presence. These issues are not confined to the digital economy and potentially impact all businesses. As a result, some businesses are present in some countries where they offer services to consumers and conclude contracts with them, taking full advantage of the infrastructure and rule of law institutions available while they are not considered present for tax purposes. This free rider position tilts the playing field in their favour compared to established businesses.
Not paying corporation tax is an advantage to those who don't pay it as against those who do. Which is what we've been saying about corporate and capital taxation all along. If you tax corporations then there will be less investment in them in your economy. This makes everyone poorer - the deadweight costs are high. This is indeed exactly the same reasoning which leads us to insisting, as a result of optimal tax theory, that we shouldn't be taxing the corporations at all.
Which is interesting, even amusing, don't you think? The EU's justification for why they just must tax companies is the very reason basic theory says we shouldn't be taxing corporations at all.
We're struggling to see what the problem is quite frankly
We're aware that we might not be quite in tune with the zeitgeist here but we do find it difficult to understand what is the problem here:
The ranks of Queen’s Counsel are the elite of the legal profession’s advocates. To take silk — so-called after the silk robes worn by the 10 per cent or so who attain the initials “QC” — is a passport to status and higher earnings. So who gets it, and how, matters.
Yet despite fundamental reform in 2005 to end the system’s reliance on judges’ comments and the lord chancellor’s decisions, women still do not put themselves forward in anything like the same numbers as men.
As it happens women seem to achieve this exalted rank in about the same proportion as they put themselves forward. The portion of newly appointed QCs that are female also seems to be about the same as the the portion of those lawyers of the appropriate seniority who are female.
We'd thus start with the idea that the appointment of QCs isn't a problem. As the analysis goes on, what is actually happening is that rather more of the women - than the men - who qualify to be lawyers don't progress in their careers to the point where they might be considered as QCs. Yes, obviously, family life and children.
That is, those who take the career breaks - or, as is mentioned, restrict their travel or activities for the same reason - to raise their children tend not to reach the upper reaches of the profession. We are really quite certain that the same would be true of men who took such breaks, restricted their activities in such a manner.
Which is why we can't see what the problem is. Those who strive for the brass ring seem to have, whatever their gender (and the same seems to be true of ethnicity), the same opportunity to grasp it. Which is about what we would hope society did and does. People should indeed have the liberty, even the right, to organise their lives as they wish, to pursue their own goals. That's rather what being a liberal means and we're most definitely that, liberal.
That those who don't work nose to the grindstone for 20 years don't become QCs does not worry us. For the same reason that those who do not qualify as lawyers don't become QCs does not worry us. People make choices in life, they get to enjoy living as they wish. But, as ever, making one choice does rather preclude some other outcomes - opportunity costs do always exist of course.
The ASI at Tory Conference: cannabis, vaping, clubbing and winning over Millennials
Let's face it, Conservative Party Conference can get a bit stuffy. But that's definitely not the case when it comes to the ASI's conference fringe line-up. We're discussing issues that really matter on topics that are often neglected, but vitally important if you care about a free society.
We're hosting three events inside the secure zone (that means to attend you'll need a conference pass) over the Monday and Tuesday covering e-cigarettes, cannabis legalisation and winning over young voters with free market policies.
On the Monday we've got two panels. The first (at 1pm-2pm in the Stanley Suite at the Midland Hotel) will cover how innovation (and not nanny state regulation) has been the driving force behind millions quitting smoking, and what we can do to ensure that more people can benefit from innovations like e-cigarettes. Regulations from Brussels are threatening the harm reduction revolution, imposing silly rules on vape canister sizes and preventing vendors from fully informing customers that e-cigs are (at the very least) 95% than tobacco.
We've got a great panel for it. Media GP, Spectator Columnist and author Dr Roger Henderson will be speaking about the public health divide on harm reduction. Roger probably knows more about giving up smoking than anyone else, indeed he's been the face of NHS stop smoking campaigns. He'll be joined by Christopher Snowdon, who's work as Head of Lifestyle Economics should be known to every reader of the ASI blog. Chris is a fierce opponent of the nanny state and a strong critic of the EU's Tobacco Products Directive. He vapes. Representing the ASI will be Sam Bowman, our Executive Director. He's a big advocate of Sinnovation, the idea that innovations in vice products like heat-not-burn cigarettes could have massive benefits for public health and reach people who'll never sign on to a public health campaign. Also from the ASI will be our Director, Eamonn Butler who'll be chairing the panel. Given the sheer number of people who suffer from smoking-related illnesses and the massive prospects for e-cigs to dent that, this could be the most important discussion you will see at Tory conference. For more info, click here.
Sticking with the harm reduction theme, we've partnered once again with Volteface, Britain's best drug reform think tank on an event (4pm to 5pm - Central 3) entitled 'how to stamp out street cannabis'. We'll be talking about how cannabis legalisation can address the drug problems that Conservative voters really care about. Just as alcohol prohibition led to stronger booze, no ID checks and violent crime, so to does the legal fudge on cannabis. States in the US that have legalised cannabis have been able to regulate purity and strength, force sellers to check IDs, and tax it to pay for drug treatment.
We've got a great panel to discuss what we can learn from the US and Canadian experience. Crispin Blunt MP (a former criminal justice minister) will be speaking. He's always worth listening to, especially since last year he declared his support for full drug legalisation at an ASI party conference event. His experience on the foreign affairs select committee gives him a unique perspective on the harms of cannabis prohibition. Joining Crispin will be Steve Moore who's the Director of Volteface. Steve's, one of the few drug reformers who really gets the need to win over and address the concerns of Conservatives as well as liberals. He's a true expert on drug policy. Rounding out the panel will be Sam Bowman, who's been leading the ASI's drug reform push. For more info, click here.
Cannabis and vaping lead in nicely to our third secure zone panel on Tuesday, 'The Millennial Manifesto: how to win over young voters' (4pm - 5pm - Central 3, ICC). Young voters opted for Corbyn's socialist agenda at an overwhelming rate. If the Tories are ever going to win another majority they'll need to have a message that appeals to young people. We've already chipped in to the debate with Dr Madsen Pirie's Millennial Manifesto grabbing headlines with policies that cut taxes, build houses and prioritise mental health.
Our panel will tackle the issues that young voters care about and make the case that the Conservatives change to win over the young. Dr Madsen Pirie, President of the ASI will make the case for his Millennial policy agenda. Alongside Madsen, will be the ASI's former head of comms and current IEA News Editor, Kate Andrews. Our Head of Research Ben Southwood will be joining the fray making the case that bribes won't work and that the only real way to win over young people is to start building more houses. Grant Tucker, Diary Reporter for The Times will be chairing the panel. For more info, click here.
As well as our secure zone panels, we're doing an invite-only one outside the secure zone at a nearby music venue on Tuesday at 6pm (email samd@adamsmith.org if you want a place) on a new approach to 'preventing club drug deaths'. Clubbing may not be the first thing you think of when you hear the words Conservative Party Conference, but with the Conference returning to Manchester, a city that can claim ownership of clubbing culture like no other in the UK, it is a perfect fit for a debate on the opportunities and the threats to the industry.
We'll be discussing how to prevent club drug deaths and how innovative harm reduction solutions like The Loop's Multi Agency Safety Testing are having a real impact. Working with Volteface and The Night Time Industries' Association we've assembled an incredibly cool panel.
We've got Paul Staines (aka Guido Fawkes) chairing the panel, who before becoming the most feared voice in Westminster stood up against anti-rave regulations with the Freedom to Party campaign. We've got Volteface's Policy Director, Henry Fisher, who's heavily involved in The Loop's drug testing. Alan Miller, Director of the Night Time Industries Association will be making the case against excessive regulation of venues, and Sacha Lord Marchionne, founder of Parklife and The Warehouse Project (Manchester's superclub) will be talking about how venues can be a force for good by working with the police and groups like The Loop. If that wasn't enough, we've also got The Loop's Director Prof Fiona Measham joining us via videolink from New York.
It's sure to be a cracking couple of days. If you'd like more info or to request a place at our club drugs event, then send an email to samd@adamsmith.org