Power Lunch with Peter Hill

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Old and New Media met across sushi and sandwiches at the Adam Smith Institute today. Our principal guest was Peter Hill, Editor of the Daily Express, but with bloggers there like Guido Fawkes, Tim Worstall and Mike Smithson of politicalbetting.com, there was a predictably lively discussion on his theme that the internet was killing newspapers – and not replacing some of the public service they deliver us. Newspapers are giving away their content for nothing online, said Hill, but this can hardly be a good business model. Local papers are suffering particularly – much of their traditional classified advertising has moved to online providers, and advertising generally is down. But local papers play an important role in holding local councils, police and officials to account, so when they go, it's a loss to democracy. Then there is the BBC, which has a vast, free website completely funded by the taxpayer. Who can compete with that? But its effect must be to take business away from commercial newspapers. The bloggers were united in their disapproval of the BBC's taxpayer-subsidized webworks, but weren't likely to shed a tear for the print media. But perhaps there is something different about newspapers. Would the MPs' expenses scandal have made so much impact if the details had simply come out online? As Smeargate showed, bloggers can bring down politicos. But perhaps newspapers can bring down governments...

Printing money: who benefits?

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There are some who would benefit from hyper-inflation.

Blog Review 966

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It's true, this is one of the things that is desperately needed in British politics. That the left will actually start looking at the evidence of what works rather than what they desire might work.

For example, regulation almost always simply benefits the largest incumbents.

And yes, high tax rates really do make some people flee the jurisdiction.

This might not be the most surprising number ever.

Why do politicians prefer cap and trade over a carbon tax? Because cap and trade offers greater opportunities for politicians to meddle.

More dystopian writing from The Guardian.

And finally, the first line here shows why economists are different.

BAA: Over two decades of indecision

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Today’s announcement by BAA that it is appealing to the Competition Appeal Tribunal (CAT) over the Competition Commission’s (CC)  report prolongs the ongoing indecision on UK airports policy.

Ignoring the natural justice element of the appeal – as to whether one of the CC’s members had a conflict of interest - by far the more important ground is whether it is unreasonable to expect BAA to sell three of its airports within two years in current depressed markets.

Since its privatisation in 1986, BAA had been adamant that one dominant airports owner was best for UK plc, despite the fact that much of its investment went into new retail outlets.

This mantra endured for almost 20 years until BAA was taken over by a highly geared private equity consortium led by the Spanish-based Ferrovial. Arguably, this risky financial deal should have been blocked. 

In fact, the worm began to turn before the recession kicked in, when various shambolic incidents at Heathrow - for which British Airways shares some blame – drove the competition agenda. 
 
Following the recent CC report, a rapid U turn was executed. Although BAA was to retain Heathrow, Gatwick had to be sold off; despite today’s appeal to the CAT, this disposal seems set to continue. Further sales of Stansted and either Glasgow or Edinburgh are also required by the CC.

With bids for Gatwick coming in at c15% below the near £1.6 billion Regulatory Asset Value of Gatwick, the Ferrovial consortium will be sitting on a heavy loss. Neither will this valuation help other regulated businesses. 

Such massive policy shifts over a short period are not the best way to run an industry dependent on long-term investment, a factor that is crucial to Stansted’s future - whether based on BAA’s projected investment costs or those promoted by the far more parsimonious Ryanair.   
 

The good news about MPs' expenses

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There are two silver linings to the cloud about the bogus and outrageous expenses claimed by Members of Parliament. The first is that we now find it easier to convince people that "they're all in it for themselves." Recent disclosures have made this so patently obvious that heads nod without dissent. This is especially true when we put a gloss on this selfishness by calling it "Public Choice" theory.

The second good aspect is that it undermines the moral authority previously claimed by law-makers. Sheltering under the cloak of the public interest, they passed their absurd and restrictive laws to confine our lives, while claiming to be the custodians of public virtue. A few weeks ago we saw self-righteous MPs castigating bankers for their 'greed,' but we now know that their own hands were assiduously pilfering the public purse at the time.

If we want to stop the tide of petty legislation that interferes in our lives, it helps if the would-be legislators are devalued currency. Law-makers have claimed moral authority to impose choices on us that we can and should make for ourselves. Now this is stripped away, and if people have no respect for the law-makers, they might have no respect for their claim to direct our own lives better than we can direct them ourselves. It sits ill to see people passing laws which claim to improve our behaviour when we know that they themselves looted taxpayer funds to support non-existent mortgages.

We always knew they had double standards and were entirely hypocritical in their claim to moral authority over us. Now everyone knows it. Yes, it has undermined the authority of Parliament, and yes, this is a very good thing.

Money talks

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In this case money tells us a little about Robert Mugabe and a lot about centrally planned economies. The hundred trillion dollar note is literally not worth the paper it's printed on, and the city authorities in Harare had to put up notices in the loos forbidding people to use banknotes in the toilets (since they are cheaper than tissue, albeit still, by comparison, 'hard' currency). The quantitative easing practised by the Mugabe regime made money worthless, except to collectors such as myself. They have now abandoned the currency entirely, with the result that a market in foodstuffs and other goods has begin to re-emerge, provided you pay in anything other than barrowloads of the local money. Gresham's Law famously says that bad money drives out good, meaning that people pay in the devalued coin and hoard the good stuff. But this only applies where 'legal tender' applies. If you cannot be forced to take the bad stuff, Gresham's Law is reversed, and good money drives out bad (because no-one will take it unless they are forced to). In Zimbabwe, the moment they allowed people to trade in other currencies, the local money was abandoned. Perversely, it gained in value as a collector's item and a reminder of the follies into which socialism can lead… Afterthought:  A friend, hearing about the note, asked if it were from Zimbabwe or England in 2012.  Funny, but scary…

IPN: 2009 Bastiat prize for journalism

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International Policy Network (IPN) is now accepting submissions for the 2009 Bastiat Prize for Journalism. The Prize is open to writers anywhere in the world whose published articles eloquently and wittily explain, promote and defend the principles and institutions of the free society. Submissions must be received on or before 30 June, 2009.

This year, IPN will award two prizes. In addition to the Bastiat Prize for Journalism (First - $10,000; Second - $4,000; Third - $1,000), they will award a Bastiat Prize for Online Journalism (one winner only, $3,000).

Click here to find out more.

Labour on the fall

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It is looking increasingly bleak for the government.

Blog Review 965

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Who would have thought it? The technology used depends upon the relative price of inputs?

If you think we've got some meddlesome health bureaucrats over here, check out this guy from New York City.

Sadly, people swtill misunderstand what happened to unemployment in the Great Depression.

Although by the end of the Dperession Hoover was pretty clear about the dangers of the supposed cures.

Strange though is seems, the Bush Administration did at times try to do the right thing. Things now being reversed by the new Administration, of course.

No, we really do not want to just depend upon machines in our judicial system.

And finally, Gordon Brown explains his expenses claims.

Where next for Labour?

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If and when Labour loses the May 2010 election, they will be in even greater turmoil. The Old Labour dream died with Thatcher. The New Labour vision has been ailing for a while, but this time its death was self inflicted. What comes next?

Clearly, the leader will change. Who might win is a matter of mere speculation, since there seems to be a shortage of good candidates. Whoever it is could well find that Old Labour will rebound internally, shifting the party to the left, and back to its old ways. In opposition (perhaps still the largest party) they will focus their efforts on attacking those Conservative measures which cut spending, reduce debt, and try to rebuild.

This approach might bring short-term rewards, and perhaps the difficulties the Conservatives must face will keep Labour alive. Such an approach is inadequate, however, as a long-term strategy.  After the mess in which they left the nation, they must redefine their brand, as the Conservatives did. Like them, they cannot just rely on their core support. They must become Newer New Labour. They must break the confining chains of socialism, and recognize that free markets are the best way to advance the interests of ordinary people.

In practical terms, Labour could never become a true party of the free market; it would tear them apart. What  they could do, however, is to take a more Scandinavian approach, treading down the road of social democracy. It would reduce their chances of obliteration; it would give them room to differentiate; and it would allow them to espouse a positive vision. Moving towards the free market need not be taxing because in practice it spreads benefits to far more than the ‘evil’ entrepreneurs – those who generate the wealth and enlarge the economic cake for the benefit of all. Radical policies such as flat taxes, school vouchers, and restoring civil liberties, all bring benefits and choices to lower income groups, and there is a rich mine of votes to be tapped by the party that embraces such ideas.

Frankly, Labour has dissipated all their goodwill, and done little of late to merit sympathy. Now the choice before them is stark, and will be even starker if the electorate react as expected. It is that they must change or die. They had that choice late last century and they chose to change. Can they do it again?