Once a week Dr Pirie takes to the camera to explain a concept to our social media channels. This week it's innovation and Madsen is explaining why we at the ASI have put it at the heart of our policies for the year.
There's a good reason why all the economists looking at climate change insist that there should not be detailed plans for this and that to do with the subject. Assuming that something must be done stick the one crowbar into the price system and allow those markets, that calculating machine of the economy, to do the detailed work.
Do not, just do not, try to make those little plans for each nook and cranny. Like, for example, do not try to have industry or sector specific carbon allowances:
A radical way to cut emissions – ration everyone’s flights
No, really, just no.
Instead we should look to carbon trading schemes for inspiration. In schemes running in the EU and some areas of the US, international organisations or governments sign up to a total limit on carbon emissions. They then issue companies with permits that allow them to emit a certain amount of carbon. It’s then up to the companies to trade the permits. Companies that want to emit more can buy permits from those that manage to reduce their carbon emissions.
We could develop a similar system for flights. Everyone could be given an air mile allowance – say enough for one long-haul return flight a year, or three short-haul flights, so people with families on the other side of the world could see them once a year. If you don’t want to use your allowance, you could sell it off in a government-regulated online marketplace. If you’re keen to do a holiday a month, you’ll have to buy your allowance from someone else.
The reason being that there's nothing specific about emissions from airplanes - or any other source. They're all the same gas, it all has the same effect - whatever that is. Thus we want to be as rich as we can within whatever the limit we allow ourselves.
Which means using that that economists' favourite, substitution. We don't want to limit emissions from farming, from aviation, from land transport, shipping, per se. Whatever the limitation is we want to limit all such - meaning that we're not just happy but overjoyed if emissions in one sector go up as those in another go down. Say, just imagine, that a fully loaded car has fewer emissions on a journey than a train - true for small cars properly full of people. Our desired output is that people get there with the fewest emissions - we'd thus be happy with rising car emissions and falling train ones to get that task done.
Or to adapt Adam Smith, the transport emissions from taking Bourdeaux to Scotland are lower than the local emissions of trying to grow the wine north of the Tay. We would be happy with such substitution as we'd still gain the booze and also lower emissions.
Thus we don't want industry or sector specific schemes - we want substitution across sectors as well as within them.
Whatever views on climate change itself it's still important that we stamp on delusions like this one proffered. We're looking for the greatest human utility within whatever the limits are. That means we cannot impose strictures just on the one activity, whatever it is that is done must allow for substitution across sectors and activities.
Many commentators think it inevitable that the House of Lords will be reformed. The present mix–part hereditary and elected by their peers, and part appointed and chosen by the government–is difficult to justify in principle, and has failings that are all too evident in practice.
Some of the activities and powers of the Lords have been restrained by convention rather than by law. The famous Salisbury Convention, by which the Lords will not impede laws that were in the manifesto on which the government was elected, is not legally binding; it is only a convention. Recent years have shown that convention is a poor restraint on political expediency.
Convention decreed that the Parliament Act that could shorten the delaying power of the Upper House to one year rather than three, was limited to matters of vital national security. That was what was promised in the chamber when it was enacted. Yet it was used by the Blair government to push through the ban on fox-hunting–hardly the most vital of national security issues.
The unelected Lords have voted for measures designed to thwart Brexit or to render it meaningless, despite the clear majority it enjoyed in the largest vote ever seen in the UK, and the government’s manifesto promise to deliver it.
Opinions differ over the type of reform needed. Many oppose an elected Second Chamber because it would divide along party lines. It would have an electoral mandate to challenge the Lower House, and would make it nigh on impossible for talented achievers in different fields to sit there, depriving the country of the vital role they play in scrutinizing forthcoming legislation.
Instead of the total overhaul that such a step would demand, it might be preferable to tweak the present arrangement to reduce or remove its failings. Some have proposed either a compulsory retirement age, or a limit to the number of years for which a member might sit.
It would make sense to separate the legislative power from the honour bestowed, by separating life peers into those who sat to legislate, and those who received the title as a personal honour for achievement but did not sit in the chamber.
Perhaps the most sensible reform would be to change the legislative powers into advisory ones, so that instead of passing amendments to bills, the Lords would pass recommendations for the Lower House to consider. The expertise of its talented achievers would not thus be lost, while the problem of unelected authority which could overrule elected authority would be resolved.
By their recent actions the Lords have brought forward the need to redress some of the anomalies that presently characterize it. The aim of the reforms should be to preserve the good presently done by the Upper House, while removing some of the abuses it currently allows.
In the 6th Century BC the Greek poet Theognis of Megara, writing of the myth of Pandora’s box, detailed how awful mankind had become, how far we had fallen:
"Trust, a mighty god has gone, Restraint has gone from men,
and the Graces, my friend, have abandoned the earth.
Men's judicial oaths are no longer to be trusted, nor does anyone
revere the immortal gods; the race of pious men has perished and
men no longer recognize the rules of conduct or acts of piety."
It’s a tale as old as time, that we’re on a recent fall from grace, but it somehow still draws in supporters. And the same arguments made in the 6th Century against the failings of mankind are made today of the press by its detractors. They argue while the press was once a true and noble force it now can’t be trusted, that it has overstepped the mark with our precious celebrities, that it no longer recognises the old noble ways and must now be reigned in.
No; No; and No again.
The Leveson Inquiry looks to have been a pandora’s box for the fight for press freedom. After the initial multi million pound inquiry (estimated to have cost taxpayers £5.4m and the industry £43.7m), leftover sections of the Crime and Courts Act 2013 continue to threaten our free press.
Mrs Thatcher was onto something when she said “you may have to fight a battle more than once to win it.” And perhaps we should all expect sly politicians to use a wholly separate bill on data protection to sneak in the old proposal for papers to bear the cost of all legal cases brought against them (even when they win, and no matter how spurious the allegation).
The other option open to papers, under the amendment that sees implementation of Section 40 of the Crime and Courts Act, would mean papers forced to sign up to a state-recognised regulator of the press. One of the regulators licensed by the state is Impress, set up and bankrolled by the backers of the legislation and anti-press campaigner Max Mosley.
The press has been free of licensing by the crown since 1695, free of a secretary of state issuing warrant against authors or papers they accuse of libel and free of duties payable since 1870. That this is being brought up as an idea again now is both sad and worrying.
Those in the Commons and Lords should know the public are well aware of the benefits of a free press and also know the stifling effects this law could have on it. A public consultation on the issue in 2016 saw 174,730 responses, with 79% wanting Section 40 to be repealed in full and just 7% wanting it implemented. The most common reason given to repeal it was the worry of the ‘chilling effect’ it would have on the freedom of the press.
We’ve argued before of the value of a free press that prints with neither fear nor favour, that keeps the powerful honest and all of us in the loop. None of that has changed, its importance to us grows as more and more consume media in more and more varied forms.
While we can never put the evils of the world back in Pandora’s Box, this is not true of MP’s actions on the press. They can begin by shooting down Tom Watson and Ed Miliband’s amendments today, and then by repealing Section 40 of the Crime and Courts Act 2013. If politicians fail to act this will keep being snuck in by those that hold vendettas against the press. They only need to win once to snuff out our free press.
Update: MPs narrowly defeated Ed Miliband's amendment and, after the SNP said they would abstain, Watsons withdrew his. This is a temporary win though, until Section 40 is repealed the press remains under threat.
Adult social care, with one sixth of the NHS budget, is the poor relation in terms of government oversight. The Department of Health and Social Care (DHSC) has 19 quangos to help it run the NHS and none for adult social care – not that quango deprivation is a bad thing. Nor does it manage the funding; the department for Local Communities does that.
It has had no shortage of advice: a Royal Commission in 1999, an influential King’s Fund report in 2005, and the Dilnot Commission in 2011. An untrailed and untried proposal for funding adult care introduced during the last general election campaign nearly cost the Prime Minister her job. A green paper is expected in 2018 but no date has been announced and there are few clues when it might be due. The section concerned is apparently too short of staff to clarify the time-line.
However, the relevant two Commons’ Select Committees have decided to press ahead with their own initiative. Good for them. They have set up a 45–50 person focus group, rather grandly called a “Citizens’ Assembly”, to devote two weekends to listening to alternative proposals for funding adult social care, and then making their recommendations. Citizens’ Assemblies have been used in Canada, The Netherlands, Ireland and Poland but this is the first time the UK government has adopted the idea.
The idea is one that the left proposed and saw its heyday in 2015 when the Greens, Labour, and the Liberal Democrats were all pushing for a 'citizen-led constitutional convention' on the future of the UK constitution. There's perhaps a reason why the left is so keen. After all, 45 people are easier to steer over a weekend than a whole electorate. But whatever the conclusions may be, what comes out of the consultation must be a valuable stimulus – whether government action follows or not.
Unfortunately, it could have been better planned. The weaknesses are fourfold:
It is widely agreed that adult care services should, in future, be better coordinated with the NHS. We're still not at the point where we know what the funding arrangement between NHS and social care will be. Citizens' Assembly members should be considering how to fund adult care as it will be, not as it is.
The research and analysis has been delegated to Involve which is “a public participation charity that aims to put people at the heart of decision-making”. A more fatuous claim to fame is hard to imagine: in this pre-AI age, who else can be “at heart of decision-making”? Involve is actually a sub-quango, i.e. part of, and funded by, the National Institute for Health Research, one of the half dozen quangos within the DHSC umbrella which sponsor research activities. This project is not in their usual line of work and an independent professional market research firm would have been better placed to conduct it. Cost may have played a part in that decision: this arrangement uses DHSC funds, along with two outside charities, to finance the work. Perhaps a false economy.
A 45 - 50 person sample is too small to produce reliable results for the analyses envisioned: “The members are being recruited with the help of ICM to be representative of the English population in terms of age, gender, ethnicity, socio-economic group, place of residence, and attitudes towards a small/large state. They will include people with direct experience of social care for both working age adults and older people.” Contrast that with a much less fundamental (in terms of the numbers and costs involved) research project into why ethnic/faith groups are reluctant to donate organs for transplantation: “A total of 22 focus groups were held in six multiethnic areas of London with 228 participants from six ethnic/faith groups (who identified as West African Christian, black Caribbean Christian, Indian Sikh, Indian Hindu, Pakistani Islamic and Bangladeshi Islamic). There were separate focus groups for older people (> 40 years) and younger (18–40 years), and for men and women among older South Asian people.”
We are not told if this work was put out to public tender. Quangos all too rarely encounter competition and so all too often quality is found lacking. There is little here to suggest Involve will break this rule. And there is a worry that a quango, which is not a professional market research firm, would not be so strictly impartial.
In short, the Select Committees should be congratulated on putting their shoulders to this slow moving wheel. It is just a pity the research is not being more professionally conducted.
The House of Commons is in the middle of one of its fits of inconsistent moralising.
They are creating a panic about data protection; worried that our private information is being sold and must be protected. Facebook can somehow tell what we might be persuaded to buy based on which cat videos we like; more amazingly, people believe that Cambridge Analytica used the same information to change how we voted (Cambridge boffins joining with Russia to subvert Western democracy?! It’s like being back in the ‘70s).
The House of Commons is in full “something must be done” mode, trying to force Mark Zuckerberg to appear before its committee to answer questions. More strongly, later this month the GDPR (General Data Protection Regulation) comes into force; a new expensive, bureaucratic and complex system to protect our data and ensure that it is not used without our permission.
The principle behind all of this is that our personal information should remain private, used only for authorised purposes, and this is apparently so important that it must be protected by law.
Yet the same month that this is happening, the same House of Commons voted to force the UK-linked Overseas Territories (such as the Cayman Islands, British Virgin Islands and Gibraltar) to publish their registers of the beneficial owners of shares in all companies registered there.
This is said to be necessary to combat tax evasion, but that is simply not true; the shareholder registers already exist, and are available for inspection by tax authorities around the world. All this will do is force the same information to be made available to the public.
Rather than helping stop tax evasion, public registers will make the tax authorities’ job more difficult. People will be less willing to have their personal information made public, and so will either hide their ownership or shift their investments to jurisdictions where such information is not available to anyone. The wide ranging and accurate information currently available privately to tax authorities will be reduced by this reform.
The only people who are pushing for this information to be made public are tax campaigners. But from what we have seen of previous data leaks (the Panama Papers and so on), there will be little careful analysis of the information, to see who might be engaged in tax evasion, but lots of searching for famous names to smear people who are in the public eye.
The last round of media investigation into “offshore” companies attacked David Cameron over his father’s investment company, despite the fact that Cameron had paid his tax in full. It also outed actress Emma Watson for using an offshore structure to hide her London address from obsessive fans (due to the government’s tough laws against offshore investment in the housing market her scheme would probably have increased her tax bill, not reduced it).
But the media’s gleeful publicity is only part of the problem. Once public, this data can be abused. Of course it has been before.
Scammers already use publicly available information about shareholders to target people who may be tricked into investing in fraudulent schemes; increase the data available and you make their life easier, increasing the risk of people losing their savings.
But worse, there are many places in the world where public registers risk much more than a ‘phone call from a dodgy investment scammer'. Countries where being known to have money makes you, and your family, a target for thieves, kidnappers and extortionists. There is a good reason why a lot of South American money, for example, is kept in the Caribbean; it is simply not safe to keep it at home.
The House of Commons is being very parochial, viewing the rest of the world by British standards and forgetting that many of our Overseas Territories have a much more internationalist approach than our MPs do. Public registers will mean that people from dangerous countries will be pushed out of the British overseas territories. Their need for confidentiality, for personal safety, will mean that they will instead have to put their assets into less regulated jurisdictions where it will be more difficult, not easier, for tax authorities to get the information they need.
Do our politicians never think through their demands in a joined-up manner? They say that data protection is important. But which is more important: that our financial details are confidential (open to tax inspectors, yes, they have been for years, but not made public for anyone to see), or hiding our social media likes?
We've mentioned before that we've a vision for what the government and taxpayer support for British farming should be post-Brexit. Nothing. To go the full New Zealand option and thereby lower the cost of land and thus the costs of doing or going into farming.
Not to anyone's surprise the National Farmers' Union doesn't agree:
The NFU has released its vision for a sustainable, profitable and progressive future for farm businesses in response to Defra’s consultation on a domestic agriculture policy which closes today.
What follows there is a page of the usual corporate blatherspeak. What they're actually suggesting is:
For a consultation on the potential reforms that closes on Tuesday, the National Farmers’ Union (NFU) is submitting proposals that suggest the NHS, schools, the government and other publicly run services that use government buying standards should be “wherever possible, sourcing British assured ingredients”, except for products not grown in the UK.
If followed through, this would ensure a market of tens of billions of pounds a year to British farming and food production and secure millions of jobs.
Instead of picking out pockets directly with subsidies they will do so indirectly through higher prices paid by the taxpayer. No, we still prefer our solution.
Get the farmers off the public teat as we first did in 1846 and watch as, as they did then, the costs of food fall to the benefit of us all.
On this day in 1899, in Vienna, Friedrich Hayek was born. He would go on to write about economics, philosophy, politics, psychology, and the history of ideas, and win the Nobel Prize in Economics. His 1944 wartime book The Road To Serfdom, which showed how easily social democracy could morph into totalitarianism, brought him fame.
The young Hayek was hired as an economist by Ludwig von Mises, and in 1927 the pair set up an institute to explore boom-bust cycles. They concluded that these cycles were caused by central banks setting interest rates too low—encouraging excessive borrowing, investment and spending. But low rates also discouraged saving, and when funds dried up, investments had to be abandoned and people were thrown out of work.
In the 1930s, Hayek came to Britain, where he fought a long intellectual duel with John Maynard Keynes (1883-1946). But Keynes’s ideas prevailed, and Hayek turned more to social and political philosophy. His key insight here was the concept of spontaneous order. Human and animal societies, he observed, show obvious regularities. Yet nobody planned the society of bees or the operations of markets. They came about naturally, and grew and persisted simply because they were useful. Spontaneous orders (e.g. language) emerged when we followed certain regularities of action (e.g. grammar). We might not be able to articulate these ‘rules', but they contained the ‘wisdom’ that allowed us to thrive.
We did not design this system, but simply stumbled upon it. When people first started bartering and swapping goods, they did not know it would grow into a worldwide system of cooperation through trade and commerce. But when they did barter and exchange, prices began to emerge: and prices contain all the information needed for the system to work. High prices induce customers to economise and suppliers to look for new ways to satisfy them; low prices tell suppliers they should train their effort in some more useful direction.
Freedom was critical to the working of these spontaneous economic and social orders. They needed new ideas in order to evolve and adapt—which is why free societies advance more rapidly.
Hayek saw justice as the framework that enabled social life to work. We do not invent the rules of justice: we discover them through trial and error. But while justice facilitates an evolving social order, what people call ‘social justice’ instead aims to deliver a preconceived social outcome. It required us to treat individuals differently; and once we began to do that, we were on the road to serfdom, with no obvious end point. A liberal government would merely create the conditions needed for the social order to function. Socialism—trying to design a social order—was a dangerous mistake. No socialist planner could ever match the creative genius of a free people.
One of our regular complaints around here is that people tend not to have a useful sense of proportion. Despite Douglas Adams' injunction that this is something a human cannot have in the face of the size of the universe we're insistent that, at least when designing public policy, it's essential.
Take this from The Guardian:
Food and farming is one of the biggest economic sectors in the world. We are no longer in the 14th century, when as much as 76% of the population worked in agriculture – but farming still employs more than 26% of all workers globally. And that does not include the people who work along the meat supply chain: the slaughterers, packagers, retailers and chefs.
In 2016, the world’s meat production was estimated at 317m metric tons, and that is expected to continue to grow. Figures for the value of the global meat industry vary wildly from $90bn to as much as $741bn.
Although the number of people directly employed by farming is currently less than 2% in the UK, the food chain now includes the agribusiness companies, the retailers, and the entertainment sector. According to the UK Department for Environment, Food and Rural Affairs, in 2014 the food and drink manufacturing sector contributed £27bn to the economy, and employed 3.8 million people.
We agree that food and drink production is important of course. Without the first we'd be dead and without some forms of the second we'd be unable to be merry. However, we still need to examine that biggest economic sector claim.
Global GDP is of the order of $80 trillion (nominal). Global meat production is therefore under 1% of the economy even at that largest valuation. And 0.1% or so at that lower. The UK's GDP is of the order of £1.8 trillion, meaning that the food and drink manufacturing sector is some 1.3% of our own economic activity.
Again, we insist that these are important things but they're not a large economic sector, certainly not one of the largest, in this modern world. Thus any changes to them at the margin are of marginal importance to that economy as a whole, aren't they?
Expect to see a great deal more of this nonsense in the coming months. The Greek economy is recovering and so that makes all that happened worth it. It's ghastly rubbish and needs to be called out as such, repeatedly:
Yet now Tsipras is preparing to exit the bailout programmes completely, the country’s economic prospects apparently utterly transformed.
The gushing praise in the quote came from Angel Gurria, head of the OECD, last week – the leader of a pro-capitalist group, cheering the work of the leader of Greece’s radical leftists. “I would like to congratulate you, your administration and the whole of Greece for an impressive stabilisation effort and one of the most ambitious reform packages we have seen at the OECD in recent times,” said Gurria. “This is starting to bear fruit.”
Everyone knows, or at least should know, that an economy will, eventually, recover entirely on its own. Even some 30 years of Maoist Madness didn't leave China unable to grow once it ended.
Thus the arrival of growth again is not a vindication of what happened in Greece. The fact that it is only just returning is instead a condemnation of what was done to that poor benighted populace.
Given the situation at the time Greece could do one of two things. It could leave the euro and thus devalue just the one price, that of the currency. That also meaning defaulting on all that debt. Or it could stay in and have to go through an internal devaluation, all prices being forced down individually. Given the sacrosanct nature of the euro the second was forced upon them.
This was and is a disaster, the effect has been as bad as the Great Depression upon the United States and it's lasted for longer too. The correct answer was default and devaluation, the correct answer to what they should have done is still default and devaluation.
Don't let them convince us all that now growth is returning that the correct decision was made back then. It wasn't and we shouldn't forget that.