Jacqui Smith and Public Choice Theory

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Public Choice Theory seeks to study individuals in the model of self-seeking utility maximizers. It is an eclectic approach that can incorporate many definitions of self-interest, from the material to the psychological.

Jacqui Smith’s case fits slap bang in the material. She has claimed a plum load of money in very questionable circumstances. Her case reminds me of those benefit fraud cases where the father is supposed to be split from the mother while he is in fact living in the family home. Don’t they often end up in prison?

Of course, politics is riddled with such petty corruption across both Houses; the political process is oriented towards the betterment of its participants: it is an elite private club and we pay the membership fees.

Sadly, short of revolution, we are going to have politicians around for a few more years. As such, it makes a lot of sense to fully open up the Pandora’s box of their sordid behaviour to public scrutiny. We can then shamefully parade them across the inside pages of the tabloid press, before gently pushing them into early retirement and a lifetime of being vaguely remembered by the public as petty crooks on obscure reality TV shows.

Thanks to the iconoclastic efforts of the likes of Guido in the UK and Drudge over the pond, transparency is being forced upon politicians by this unservile new media. A simplification of political perks combined with a clear and present public statement of all external interests is essential in making their task easier. As a child who keeps getting hurt by a hot plate, in time the politicians will learn that they just can’t get away with it and will eventually stop being so naughty.

Destroying football

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So typical of a quasi-politician; attempting to bend the rules to suit their own purblind cause. Michel Platini urged the European Union to allow him to force through a variety of regulations that in all probability would see the J-League or the Hyundai A League become the strongest in the world.

His plan is to institute a cap on the spending and transfer fees for the football clubs of Europe, this would be limited to somewhere between 38%-63% of a club’s income. All done in the hope that fees and wages – like the ones recently seen offered for Kaka of £108m at £275,000 per week – aren’t seen again.  Apparently this kind of offer debases the ‘beautiful’ game and will lead to the implosion of the sport. Platini sees his own plan as enabling football to continue its upward rise in the global sporting stakes. However, if he were to look under his nose and examine the recent developments in English rugby union, he’d discover that a salary cap has caused three English players to move to France. The RFU have successfully found a formulae to destroy rugby from the top down. Platini’s idea would have the same effect.

If the MEPs bend to his will – which they likely will given that most detest wealth and wealth creation – then we can all say goodbye to football being a successful sport across Europe. If we wish to drain the sport of the outside investment it has seen over recent seasons then we’d be going the right way about it. The money will dry up and move elsewhere, along with the successful players. He plainly doesn’t understand basic economics, but then what else would you expect from a French footballer.

Brussels Dispatch: Yesterday’s history is today’s politics

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The Petrograd Strikes, which heralded the start of the 1917 Revolution in Russia commenced on 22 February; find a moment for reflection this Sunday. Even though the Soviet system of Communism lasted for 69 years, its ideology is evidently still very much alive and well: the British government now spends half the nation’s income. Yesterday’s history is today’s politics, to adapt the adage.

This Thursday our very own Nicholas II went to see the Pope. Perhaps he asked the Vicar of Christ to pray for a miracle – huge monetary expansion without hyperinflation – or perhaps he asked for the economy to receive the Last Rites. Ironically, one of the things the Prime Minister did discuss was freeing the world from poverty. He can contribute best to this desirable goal in Great Britain by the near abolishment of the State. Government remains the problem, not the solution, and we can work our way back into prosperity, as opposed to continue to regulate ourselves into impoverishment.

I came across this passage today in Ludwig von Mises’s Human Action which underlines this point (Chapter 21, Part 7):

The outstanding fact about the Industrial Revolution is that it opened an age of mass production for the needs of the masses. The wage earners are no longer people toiling merely for other people’s well being. They themselves are the main consumers of the products the factories turn out…The very principle of capitalist entrepreneurship is to provide for the common man…There is in the market economy no other means of acquiring and preserving wealth than by supplying the masses in the best and cheapest way with all the goods they ask for.

Blinded by their prejudices, many historians and writers have entirely failed to recognise this fundamental fact. As they see it, wage earners toil for the benefit of other people. They never raise the question who these “other” people are.

The free market must be permitted to get on with offering exchanges in which both parties expect to benefit, unhampered by unpredictable behaviour-altering regulation and wealth confiscation. Only the State coerces.

The only question Mr Brown should be asking is which tax (capital gains tax, corporation tax, income tax, ‘inflation tax’, or VAT) he should scrap  first.

Blog Review 876

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Dealing with the problem of high marginal tax rates by raising marginal tax rates doesn't, at least on the face of it, sound like a very good solution.

The Obama plan to help homeowners doesn't have all that much to recommend it either.

And this idea that we should all dig allotments? Piffle.

We seem to be running four for four so far on the inanity of government plans: this fourth being about drugs.

Why is Chrysler asking for government funds when it's owned by Cerberus who are not short of funds themselves?

In defence of bonuses.

And finally, financial neologisms (and you can add to the list too!)

Gabb on liberty

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Dr Sean Gabb spoke to the Cities of London and Westminster Conservative Future ‘Star Social’ meeting on Monday on the subject of liberty. He caused somewhat of a stir. The talk was based around the advice that he would give to a future incoming Conservative administration, and why it needed to undertake the ideas he suggests. He posited it in the future as he rightly believes that the government that Cameron would form will be more or less a carbon copy of the governments of the past 17 years.

Dr Gabb drew upon Marx and his reasoning as to why the 1871 Paris Commune failed as a way to show why the Establishment needs to be abolished. The key actions he called for a future administration to undertake involved closing the BBC and shutting down around half of the civil service and its associated quangocracy. This would successfully rid any government of the challenges that the entrenched rent seeking opponents could bring to bear by utilizing their positions of comfort. Most importantly though, liberty would be returned to the inhabitants of the United Kingdom, as they would have the heavy weight of bureaucracy lifted from them and the heavy burden of tax removed.

The Conservative party, as is, has meekly become an extension of the establishment, exemplified by the response that Dr Gabb’s speech received. Dr Gabb is correct in his suggestion that a new wave of radicalism is needed to save the freedoms’ of the British people. That this approach is unacceptable to those who seek to become part of the problem should be of no surprise. Proceeding governments of the near future will offer little that will alter the status quo.

Whilst the polls show a massive lead for the Conservatives, they do so only because the Conservatives appear to not be New Labour. The truth of the matter is that both of them accept the Establishment and will do little to undermine their own chances of lining their pockets via the political process. We the people will continue to lose out.

The beginning of the end?

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An article in The Times yesterday highlights the correlation between the business cycle model and the political cycle. As we slip further towards a recession Gordon Brown’s position seems even more precarious. As the article points out, his rise was as false as our credit boom – although it seems the fall of New Labour will not be quite as rapid as the economic downturn.

In anticipation of a Labour loss at the next election, senior members of the party are already sowing their seeds for a leadership contest. It has been rumoured that Harriet Harman planted a story that Brown is already considering a role as ‘Global Financial Regulator’ in an attempt to undermine confidence in him (although she has hastily denied this). Ed Balls made a high profile comment about the state of the economy that was well beyond his departmental remit, and the ever-present Ed Miliband (my personal bet to win the next leadership contest) has appealed to the green-arm of the party by opposing a third Heathrow runway.

It seems it is not just the Labour heavyweights that are finally coming to terms with the fact that the current government is on a downslide. In the past week we have seen the prominent welfare guru David Freud deflecting to the Tories – not for any policy reasons, but because working with the opposition can give him more opportunity to impact public policy. It also seems civil servants and mandarins are trying to distance themselves from the Labour party as they look to the future. We are surely seeing the beginning of the end of New Labour.

Blog Review 875

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Excellent couple of political interviews: once Senator insists that taxes are voluntary, a Congresswoman insists that working for less than minimum wage is just fine, as long as they're working for her.

Even if the stimulus works, it won't work: what'll be the effect of politicians getting their hands on the banking syustem?

It's generally agreed that sports stadium building doesn't provide a stimulus: so why should other infrastructure projects do so?

And this scheme is likelty to be expanded as part of our own stimulus. Whoopee, eh?

Introducing Valtio, the country which might give Patri Friedman a run for his money.

Instead of the spies playing economists and the economists spies, why not utilise that insight of Adam's, the division of labour and its specialisation?

And finally, vomitology.

Deregulate the labour market

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On the 9th of February, Christopher Chope, Conservative MP for Christchurch presented his Ten Minute Rule Bill to the House of Commons, amid no fanfare whatsoever. His Bill went unnoticed by political commentators and was largely ignored by all but a few of his friends, some quietly dozing MPs, and those such as myself, with seemingly nothing else to do but watch BBC Parliament.

Mr. Chope proclaimed that it was time to "liberalise and deregulate the employment market", to allow workers to negotiate wages themselves, without restriction and interference, as free and consenting adults. At a time of crisis, Labour's assurance that the Minimum Wage is fair for workers is in fact proved false. Far from any definition of fairness, it is now resulting in millions of people across the country being made redundant.

Instead of being able to reduce wages below the state-regulated minimum in order to adjust to falling profits, businesses are now forced to make those employees redundant. Instead of being able to offer to work for less in order to gain a job in an increasingly hostile labour market, hopeful job applicants are being blocked by government regulation alone from achieving an income other than the dole.

Some are driven to extremes: according to Mr Chope MP, up to a million workers are already earning below the minimum wage - this significant proportion of the workforce is being criminalised unnecessarily for exercising their fundamental right to work.

More urgently than ever before, the minimum wage must be abolished, at least temporarily. As well as penalising employment through Employers' National Insurance Contributions and various PAYE schemes, the government has placed barriers to people keeping their jobs when they most depend on them, and has restricted the capability of businesses to hold onto those workers. These restrictions mar the label of fairness - they must be removed or reduced immediately if we are to stem the rise of unemployment, now rapidly approaching 2 million.

Anton Howes is leader of the Social Liberalist Party.

Public art is public waste

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Having wasted £1.4m on the complete failure that is B of the Bang, Manchester City Council has decided that no more public money will be spent on the project. It is a little late for that. Whenever the words ‘public’ and ‘art’ are heard falling from the lips of those in charge of spending our cash, you know disaster is just around the corner. B of the Bang is just one of many. Of late we have seen much brass been burnt at the altar of art.

Firstsite is supposed to be Colchester’s first ‘Visual Arts Facility' – every town should have one. Originally it was going to be built for a paltry £16.5 million and open in 2007. Instead, following mammoth delays, it will end up costing in excess of £25 million, with Essex County Council needing to strip its taxpayers of a further £2 million just to keep it going. It is however free to enter, unless of course you're a taxpayer in Essex, in which case you have already paid for it (and some).

The Wigan Pier Quarter Interpretation Project is a £36,000 plan to erect four life-size statues at Wigan Pier. Guess who is putting in a wheelbarrow or two of cash for this? Wigan taxpayers along with the good taxpayers of Europe through the European Regional Development Fund. What about the poor people of the small Welsh town of Cardigan? They certainly don’t want the Big Art Project on their shores. I doubt Welsh taxpayers want to plough in £50,000 either, and i'm quite sure the rest of us don’t want the state subsidized Channel 4 to spend money making them angry.

Even Antony Gormley, who has received taxpayers money, does not like the way the success of his Angel of the North has been as a precedent to encourage people and local authorities looking for European funding or investment.

It need not be this way. The Giant White Horse in the south of England will be built by private money. Whether or not you think it's a good idea to build a giant white horse in a field, at least you won't be footing the bill for it.

The city of brotherly crunch

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Michael Nutter, the current mayor of Philadelphia, recently faced public scrutiny as a result of him making a number of cuts in city programs to deal with major fiscal problems. Philly is known for its public libraries, so when Nutter announced the closure of eleven, he heard outcries from disheartened city residents at a following town hall meeting. In addition to the library cuts, Nutter may also have to shut down several public swimming pools and fire departments.

Although the value of a public library is priceless to a seeker of knowledge, the price of this piece of infrastructure is quite high for a city. Aa such, when a library is severely underused, it seems logical to cut it. Many of the public libraries that Nutter decided to close were empty most of the week, and even after the eleven librarys are shut Philadelphia will still have more libraries per capita than any other American city. Nutter is considering the best interests of the city, as the cuts will save $8 million per year. 

Philadelphia surely had its problems in the past, and it is still severely ailing in the areas of health care and education. But since Michael Nutter’s inauguration a year ago the city has seen major improvements in crime, which has been the city’s most pressing issue in recent times. After hiring 200 additional police officers last year, the city’s murder rate decreased 15%, the sharpest decline in a decade. 

Nutter’s major plans for the city are to reduce the cost of health care and decrease the crime rate further (Philadelphia has had a long reputation for being one of the most dangerous cities in America) so when it comes down to it, some of the money the government is saving in cutting a few libraries will be put towards increasing the city’s well being.

When a city is facing hard times, making a citizen ride the bus an extra few minutes to get to the nearest library should not be the biggest concern for government leaders.