Think like a dandilion

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What we can learn from those pesky perennials.

Blog Review 999

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Yet more evidence of Laffer Effects. The income of small business owners (who have more opportunities for changing behaviour of course) is twice as responsive to tax rate changes than the incomes of employees.

Not quite zero tolerance, but if you crack down on silliness when it's still silly then you'll not get the larger problems.

Could someone please create a similar guide to right wing zealous artcle writing? Then we'd all know what to avoid.

Argument Against Democracy No. CCVII.....there are at least 18 people who should not have the vote.

Argument Against Democracy No. CCVIII....look at the naivety of those who actually get elected.

Explaining Dani Rodrik's Capitalism 3.0.

And finally, another face/palm moment.

The Adam Smith Institute on YouTube

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We have just created a YouTube channel. See below for the first part of our Dan Ikenson Seminar. Click here to watch the rest of the Ikenson Seminar and subscribe to our channel. The Deepak Lal event will be up soon.

Mandelson's expensive empire

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Back in Gordon Brown's first reshuffle as prime minister, he turned the Department of Trade & Industry (DTI) into the Department for Business, Enterprise & Regulatory Reform (BERR). He also created a new Department for Innovation, Universities & Skills (DIUS). And according to the Evening Standard's Joe Murphy, this did not come cheap:

The Business, Enterprise and Regulatory, and Innovation, Universities and Skills departments were created in 2007 at a cost of £7million, including £218,063 on rebranding at BERR including emails, a website and headed stationery...

Two years later, and Gordon has been at it again, merging BERR and DIUS to create a new Department for Business, Innovation & Skills (BIS). The estimated cost of this rearrangement is £3million.

Maybe it's a better arrangement than old one. Or maybe it's worse. Or maybe it made more sense when we just had one department for 'trade & industry', one for 'education', and one for 'the environment' (instead of having BIS, DECC, DEFRA, DCSF, and DCLG all tripping over one another). Who knows?

And to be honest, I don't much care. But the waste, inefficiency and duplication that all these rearrangements engender does make me wonder if we wouldn't be better off with the American system, where primary legislation is required to create new departments and delineate their responsibilities. Perhaps then prime ministers would think twice about playing departmental musical chairs (at our expense) every time they got bored.

Save our Pubs and Clubs

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On Tuesday a new campaign is being launched to 'Save our Pubs and Clubs'. It has the inelegant but informative web address AmendTheSmokingBan.com (launches 22nd June) which sort-of tells you what it's about. The fact is that pubs and clubs have seen a disastrous fall in their trade since the smoking ban came in - and the recession has simply compounded the problem. Pubs are closing – several a week. Which is bad for business, bad for localities, and bad for those drinking habits that the government says it wants to improve – at least in pubs, people are drinking under some kind of supervision, while if they just load up at the supermarket and drink in the street, they're not.

The campaign says that if pubs want to have a designated smoking room, with proper air filtration and the like, why shouldn't they be allowed to? People who didn't like a smoky atmosphere wouldn't have to have one, but those people who wanted a beer and a cigarette could have it.

Anyway, the campaign is being launched in Westminster on Tuesday at 11am. As a non-smoker, I won't be lighting up, but I shall be there supporting the rights of those who want to.

A nudge in the wrong direction

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An accident waiting to happen?

Blog Review 998

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On the Iranian election: the secret to cheating is not to do it too well.

Why we need our own Pirate Party in the UK: it's not just for Sweden you know.

The side effects of regulation: the banning of naked short selling simply leads to larger profits for hedge funds.

Once again, evidence that accepting government "help" is more expensive than not having such government help.

Contrary to what we are told, plastic bags do not take 100 years to decompose.

Sometimes, economists would prefer that people did not take their advice.

And finally, why bother with satire when the real world offers such gems?

MP's expenses: A blackout and a whitewash

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Another huge own goal by Britain's parliamentarians. Everybody knew that they were taking a rather generous view on their expenses, and when a request under the Freedom of Information Act threatened to expose it all, the Speaker, the hapless Michael Martin, took it right up to the High Court. The argument was that the expense chits would show where MPs lived, which would be a security threat. Eventually a compromise was reached – that the information would be published, but with the addresses blacked out.

It is only thanks to the Daily Telegraph that we discovered what such censorship would have concealed. MPs 'flipping' their second homes to maximize their allowances, using public money to do up their houses before selling them at a profit, even maintaining a 'second home' that is neither in London nor in their constituency. Because the Telegraph saw the uncensored originals.

The receipts published online by Parliament today, however, have all the address information blacked out. So you can see if they've been charging the taxpayer 89p for a bathplug – but not whether they told Parliament that one address was their second home, and Revenue & Customs that it was their main residence (and therefore not liable to capital gains tax).

What makes it an own goal, though, is that the story has shifted: it is no longer about expenses, but about the cover-up. The censorship does far more than protect MPs from security threats. It protects them from embarrassment. One MP put in a grocery bill, but we're not even allowed to see what supermarket it was from, never mind what town it was in. That's above and beyond the call of security.

Thanks to the Telegraph, we know what has been going on. So the censorship now doesn't look like a prudent measure to protect MPs' safety – it looks like a blatant cover-up to save their skins. This will run and run.

Balancing the budget

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Apparently the Tories are going to cut public spending by 10%. But are they really? Assuming a May 2010 election, and a bit of time to get organised, that should mean cutting Darling’s proposed spending for 2011/12 from £717 billion to £645 billion.

Except that they aren’t going to cut education, or health, or overseas aid. And they can’t cut debt interest or payments to the EU. And they are only proposing to cut departmental expenditure, not benefits, pensions or tax credits. So in fact the Tories’ supposed 10% cut is actually barely 3%, from £717 billion to £695 billion.

That leaves the Tories’ spending more than Labour’s record £671 billion this year. Even allowing for inflation, the Tories propose to spend more than Labour ever spent. You call that a cut? Pathetic.

So what can be done to balance the Budget?

The Treasury estimates that taxes will bring in £577 billion in 2011/12, but frankly no-one else does. Lets assume that we’re not going to get any more than 2008/9’s £530 billion. So what would we have to do to balance the Budget at that level, instead of Darling’s insane plan to borrow £111 billion?

Well, four years ago (2005/6), government spending was £523 billion. Take spending back to that level, and we would have a surplus. Remind me, who was the Chancellor who thought that £523 billion was a generous level of public spending just four years ago?

OK, those calculations don’t allow for inflation. So let’s go all the way back to 2002/3 – five years into the Labour government. Then the government’s total spending was £425 billion. Add on inflation, and that would cost about £515 billion by 2011/12, leaving a £15 billion surplus.

So balancing the Budget, without any tax increases, means the government just has to do what it did in 2003. Is that really so difficult?

A response to Digital Britian

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The government has announced "plans to help secure Britain's place at the head of a new media age". We should be cautious whenever we see governments combining future visions with the word "plan".

Not surprisingly, the headline measures involve the use of force to construct a "transformation" - in Gordon Browns words - of the distribution of digital broadband, comparing it with what he calls "essential services such as electricity, gas and water".

This is an upside-down policy approach. Technology, delivery methods and service product innovations are changing rapidly under private initiative, individual traders are juggling for profitable commercial position and the industry is moving on fast. Now leviathan wants in on the act to re-invent a commanding height in the economy that they control. That's mad.

If ever there was the case for getting out of the way, this is it. The dangers of larger players getting into bed with government using new legislation as an excuse are huge. Producers and service providers are bound to follow market incentives and the government appears about to create incentives to cartelise the industry in the name of equality for old ladies and slow-witted shopkeepers who do not have broadband, and an unknown method of curtailing individuals engaging in file-sharing.

We should not forget that it is possible to get your granny on the internet for essentially zero cost if she can cope with a computer, and as the part owner of a specialist jazz download site I happen to know that it is within the scope of even small companies to develop fullproof watermarking of music. These innovations will strengthen through market incentives through time.

The tangle web the government is weaving is made complicated by their interest in what happens in digitalised television, now under threat from broadband internet. But the threat is a chimera, created by the ossified structures of a quasi-nationalised television industry. We are likely to see a carve up of bandwidth use rights decided on by government which guarantees various incumbent players a secure channel to broadcast audiences. But this horsetrading negates what the market actually does; i.e. fine tune audience preferences through the creative innovation which the internet makes happen. It is time that some old things failed so that new things can take their place. For example, why should local news always be delivered on television? Would it not do local internet services some good it it migrated to the internet? Hey, they could even compete with the tax subsidised BBC online service.

Over the next few weeks, we are going to have a feast of purported details about the "plan" to develop "digital Britain". Listen, but keep looking at the wider picture, these are dinosaurs stumbling around in Jurassic Park, digitally focussed mammals have been through the fence and out in the new world for a long time and are creating new ways of doing things that governments haven't even thought about yet.