Privatize the sea

Could there be a better example of the incompetence of government management than the current state of the world’s fisheries? A combination of subsidies, quotas and the tragedy of the commons all play their part in the depletion of what should be one of the worlds most easily renewable resources namely the billions of fish that swim in our oceans.

We have seen the ludicrous, sad prospect of North Atlantic cod becoming extinct. Of course it has been claimed that the depletion of fish stocks is not due to the failure of government but the rapid increase in technology, which allow fisherman to increase their catch. This was the verdict of Scientific American in 1995. However, what the scientists should remember is that technology and innovation is not limited to our ability to harvest, but also to our ability to conserve. There is no zero sum game here.

Many governments' solution to the tragedy of the commons has been some market reform such individual fishing quotas where the total catch is decided usually by the government. Fishermen and other private companies then manage and trade their part of the quota. This is the situation that currently prevails in New Zealand and has proved to be fairly successful in conserving fish stocks.

However, a much more radical and effective approach can be taken. By introducing full scale property rights to bodies of water and large schools of fish, we can move from our current primitive hunter-gatherer method of fishing to fish husbandry and homesteading of the oceans. This is not as unrealistic as it may sound. Technologies such as Integrated Undersea Surveillance Systems and Advanced Very High Resolution Radiometry allow for close to virtual fencing of bodies of water and surveillance of fish movements, which can be harnessed to prevent poaching.

The use of Autonomous Underwater Vehicles can manage fisheries and pollution, as well as allowing the herding schools of fish toward optimal feeding grounds. A Japanese company is experimenting in fertilizing phytoplankton to increase fish stocks, and, on the increases observed, has estimated that a mere 100,000 square miles of ocean could produce the equivalent of what the entire world now produces in terms of tonnage of fish.

The potential for large-scale aquaculture is huge. Between the years 1984-1995, even with government restrictions, aquaculture (fish farms, etc) grew in production from 6.5 million tons to 21 million tons. Success has been seen not just in quantity, but also in quality. Through dietary control, aquaculturists can produce fish with higher or lower fat contents and adjust strength of flavour.

Property rights in oceans provide a huge opportunity for large scale sustainable aquaculture. Not only this, but ownership of the ocean floor would significantly encourage private investment into resource exploration and set clear lines in terms of the responsibility of those who mine oceans, should accidents and large scale pollution occur. The evolution of private property on land ended the tragedy of the commons, helping to move humanity from cyclical starvation to prosperity and growth. Ending the tragedy of the ocean commons in the world’s oceans may yet prove an equally revolutionary force in providing wealth, prosperity and alleviating the suffering of mankind.

Freedom Forum 2012

It's that time of year again. After the roaring success of last year's inaugural conference, the Liberty League Freedom Forum 2012 is only a month away.

For just £30 per ticket, they've booked out the entire Albatross Hostel in Newcastle, so will be providing your accommodation, meals, drink and books, as well as giving you the chance to meet other young pro-liberty activists from all over the UK.

You'll have the chance to meet and debate some of the liberty movement's best speakers, and take part in seminars and lectures with topics such as whether the state should ever intervene in parenting, banking and currency reform, the Ancient Greek and Renaissance conceptions of freedom, the evolution of libertarian thoughts, whether humanitarian military intervention is ever justified, the morality of food, free market environmentalism, and a whole lot more too.

This will be alongside activism and training sessions exploring and improving skills in journalism, public relations, debating, and how to set up and run pro-liberty student societies on campus.

With even more speakers to be announced over the next few days, the list already includes Madsen Pirie, President of the Adam Smith Institute, along with Mark Littlewood, Claire Fox, Angus Kennedy, Max Wind-Cowie, Nick Pickles, Josie Appleton, Dan Hamilton, Kevin Dowd, Mark Pennington, Chris Snowdon, Patrick Hayes, Rob Lyons, Alex Singleton, and Jamie Whyte.

Date: 30th March - 1st April

Venue: Newcastle University, and Albatross Hostel, Newcastle.

Check out full details all of the sessions and speakers, and book your ticket right away by clicking here: http://uklibertyleague.org/2012/02/08/sessionssofar/

Government should butt out of marriage and churches

UK Equalities Minister Lynne Featherstone want to legalise gay marriage. Fine by me: I don't see why gay couples should not be able to sign up for the same obligations, rights and benefits that heterosexual couples observe and enjoy.

She also wants gay couples to be allowed to marry in church, like heterosexual ones. Again, I have no problem with that, if the church is willing to do it.

The Church of England, typically, is divided on the issue. As the Established Church, they do pretty well out of their cosy relationship with the state, not the least of which is that two dozen of their senior executives, the bishops, sit by right in the House of Lords. So when ministers tell them to do cartwheels the Church of England normally swallow their principles, hitch up their cassocks and cartwheel.

The trouble is that some time ago, the state muscled in on marriage. Churches had been doing their own thing for millennia, but when the state started taxing rich folks and paying benefits to poor ones, it had to find some way of defining families so that it could establish the tax base and the appropriate unit to which benefits should be paid (two can live as cheaply as one, and all that). So they nationalised the whole business, and shoehorned everyone into a single set of regulations, as governments do.

But should we be so shoehorned? Maybe one of the reasons why the one-size-fits-all state-produced marriage contract has declined so much is that people today are more individual, and want to fashion their own ways of living, rather than have a standard, off-the-peg package of obligations forced on them. And so they should. People should be able to draw up their own lifetime contracts, accepting some bits of the present marriage contract, rejecting others and adding different ones of their own if they choose. Certainly, the state might insist on some minimum elements if people want to be taxed, and draw benefits, as a family. But apart from that, it should keep its nose out.

Likewise, Ms Featherstone should keep her nose out of what the churches choose to do. They too may have their own minimum standards for marriage, which couples have to sign up to before they can expect to be married on the premises. Fine. Churches are private clubs, let them get on with it. Personally, I would be campaigning for them to accept gay couples, but I wouldn't force church officials to betray their consciences. These are deeply held ethical positions. Churches have been thinking about the morality of lifetime partnerships a good deal longer than Ms Featherstone has.

I do wish politicians would buzz off and leave us all to our private sphere, allowing us to wallow in our own eccentric diversity rather than forcing us into tidy moulds. At this, rate, they will be demanding that the churches should not discriminate on the grounds of religion, and should accept other faiths into membership. I don't know what Cardinal O'Brien is going to make of it when he has to hand out wine and wafers to his first Satanist.

Correction: An earlier version of this post claimed that the government planned to force churches to perform gay wedding ceremonies. This is untrue. The post has been corrected.

Why the 50p tax rate has to go

Eamonn had a very good piece in the Mail on Sunday yesterday, explaining why the 50p tax is bad news:

And although the Treasury has yet to release its formal study on the impact of a 50 per cent tax rate on growth, the early indicators are  worrying; latest tax receipts from self-assessment forms – those used by the country’s richest – are down by half a billion pounds.

The total revenue from income tax payments came to £10.35 billion –  £509 million lower than the previous year. Senior Treasury figures  quietly let it be known that there had been ‘manoeuvring’ by well-off taxpayers to avoid the 50p top rate of income tax.

It is an example of what economists call the Laffer Curve, after the American economist Arthur Laffer, who discovered this simple truth: high tax rates actually bring in less money for the Treasury than lower ones, because they result in greater tax avoidance.

Read the whole thing.

Economics is fun, part 12: Banking

He's back, and you might notice one big improvement — from this video onwards, the sound should be a lot better. In this video, Madsen talks about banking. Banking isn't about money stored in vaults, he says, but people acting as middlemen between savers and borrowers. In lubricating the lines of savings and credit, bankers are indispensible to a well-functioning economy. But there's a dark side, too: politically-driven bailouts for banks that go wrong.

You can watch the rest of this series here, and buy Madsen's book, which these videos are based on, here.

Is Britain good for business?

Is Britain good for business?

On Thursday I debated in the Cambridge Union alongside Damian Reece and Willie Walsh.  The motion was that "This house believes Britain is no longer a capital for business."  I asked for four facts to be entered in evidence.

The first was the 50 percent top rate of income tax which, according to the IFS, the ASI and the Treasury, raises no money and may even cost public funds.  It is there simply to punish high earners and high achievers.  Secondly I cited the 28 percent rate of Capital Gains Tax, pointing out that it motivates people to leave capital tied into yesterday's industries instead of freeing it up to invest in tomorrow's wealth and job-creating enterprises.

Thirdly I listed the current 25 percent rate of Corporation Tax, highlighting the fact that it is double the 12.5 percent levied in the Irish Republic.  This, I said, is why Google and other firms chose Ireland rather than Britain for their European HQs.

Fourthly I identified the retroactive legislation announced to take a further £500m from Barclay's.  For that relatively small sum we had sacrificed centuries of the rule of law and sent a clear message to foreign firms that even if they behaved within the law, the Treasury might change it afterwards to take more money from them.  

In addition to those four facts, there was, I suggested, something else.  It is a widely prevalent anti-business, anti-achievement culture, partly fanned by the media, in which success is disparaged.  Business, which alone creates the wealth whose division is argued about, is derided every day in the media and in popular discourse, leaving politicians afraid to defend it.

For these reasons, I claimed, the Cambridge Union should regretfully and reluctantly conclude that Britain was no longer good for businesses.  By a narrow 4-vote margin they agreed with me and did so.  

The sovereign CDS market is broken

Or so some will tell you these days. The reason given is that ISDA (the committee that decides such things) has just decided that Greece has not in fact defaulted on its bonds and therefore the CDS protection that was bought on those bonds does not need to pay out.

Cue consternation among those who don't quite understand what is going on. Look, we can see that Greece is defaulting, CDS was intended to pay out on default, no payout, that's the end of the CDS market, right? Well, umm, no, as two very different people have independently pointed out.

It is true that we expect Greece to default any time now. Indeed, it's entirely possible to argue that Greece is planning to default. That that swap of bonds, where the ECB gets to have new bonds, everyone else has to take a 70% haircut on their old bonds, that this is a default because of the subordination and the different treatment of two holders of the same bonds.

But, here's the thing. This all hasn't happened yet. The prices of a CDS on Greek soverign debt has been closely tracking the value of the bonds, tracking that price all the way down in fact. So that part of the market has been working just fine. But what about that final trigger, the declaration of default so that not just collateral moves but that money gets signed, not just handed, over?

Well, yes, we all think that Greece is about to default, yes, we all think that the deal announced and about to get underway meets the definition of a default. But that's the point: it's all just about to get underway. This is all still in the future. So the default hasn't happened yet meaning that the CDS does not pay out yet. When the default does happen then they almost certainly will. And the Greek events won't be the end of the sovereign CDS market, they'll be a vindication of it. Those who bought the insurance will get paid out. Those who didn't won't.

Likely to encourage a few more people to buy the insurance, isn't it?

In memoriam: John Marks

Everyone at the Adam Smith Institute is saddened to learn of the death of John Marks, the veteran campaigner for transparency and higher standards in the state school system.

Today it is hard to remember – well, perhaps not so hard – that in the 1960s and 1970s state school teachers consistently refused to make their examination results public. They argued that examination results were only a part of what makes a well-rounded citizen, that parents would not understand what the results meant, and that 'league tables' of school examination performance would stigmatise those performing most poorly.

Whatever small grain of truth there might have been in these claims, the net result was that taxpayers were pouring millions into a school system, with no way of finding out what if anything their money was buying. And parents had absolutely no information on which to judge the quality of their school. When John Marks and colleagues initiated a private survey to gather school examination results, many schools – and indeed entire education authorities – refused to send him any results.

Eventually Margaret Thatcher's administration accepted the need for transparency in school performance measures, and published the 'league tables' – exposing the so-called 'hidden garden' of education and leading to a huge focus on standards, in particular the exposure of bad schools and bad teachers who were ruining the prospects of generations of young people.

A physics teacher at North London Polytechnic, he also exposed the political corruption of the higher education sector, where independent-minded teachers were being sidelined and worn down for standing up to the perversion of the curriculum, and the widespread denial of free speech and debate, that was occurring as a result of the domination of Marxist students, teachers and administrators.

A Suggestion in The Guardian I Agree With: A Fair Tax Commission

Yes, even The Guardian sometimes has sensible reader's letters to publish. And I wholeheartedly support this suggestion:

Surely it's time for Labour and others on the left to set up a Fair Tax Commission to examine the legitimacy of a more progressive tax system which shifts the burden to taxation of wealth, land and the grossly overinflated incomes which have become the hallmark of 21st-century capitalism;

I can't quite see why it is to be a thing of the left: Fair Taxes are the concern of us all. But given that we are all so concerned let us try to sketch out the various constraints within which such a Commission would be operating.

The first and most obvious is that it is obviously immoral that those working part time on minimum wage are paying income tax. Quite apart from the stupidity of taxing them then handing back tax credits there's the moral point. If this minimum wage is the minimum that it is legitimate to pay people for their labour then why is the bureaucracy getting a slice of it? We here at the ASI have been recommending for years that the personal allowance should rise to £12,000 a year. I would go further: if we are to have a minimum wage, something which we probably shouldn't but it's a political reality that we will, then the personal allowance for both income tax and national insurance should be that minimum wage for a full year full time job. If one moves then so does the other, link the two expressly and by law.

Secondly we almost certainly want to merge the income and NI systems anyway. The last benefit that relies upon NI is the state pension and that link is to be removed in upcoming legislation. There is no point in having this hidden income tax anymore: merge them.

We need to take note of this Laffer Curve thing. As Diamond and Saetz point out, given the existence of allowances (and yes, the ability of a UK citizen to leave the UK and thus not pay UK tax is just such an allowance) the peak of the Curve for all taxes on income is 54%. Yes, this includes even employers' national insurance (yes, I know, we've just abolished it up above) so that is the absolute top total tax rate we can have on incomes.

We also need to note the deadweight costs of taxation. Different taxes have different effects on future growth for the same revenue raised. We obviously want to have the least effects on future growth for whatever level of revenue. This means heavy on land and consumption taxes, light on income ones and probably best to do away with corporate and capital taxation altogether.

Now, if we're to set up a Commission to look at Fair Taxes then obviously, these are the sort of constraints that such a Commission should look at. Indeed, if there is to be such a Commission I'd happily take part so that it did look at these very points.

But the real importance of such a Commission would be that it would be an opportunity to force those on the left to understand a very basic point about progressive taxes and government. You cannot pay for Big Government with a highly progressive tax system. There just aren't enough rich people and they don't, collectively, have enough money to pay for everything. It's worth noting that the countries that do have substantially larger government than we do, the Nordics, have tax systems which are more regressive than our own one. That's the only way you can have both a Big State and also any hope of continued growth.

I, personally, am not averse to a system of governance that is paid for entirely by the rich. Quite happy for there to be a progressive taxation system: delighted in fact. For such a government would have to be considerably smaller than the one we have now.

And that would be the great value of a real Fair Tax Commission: bringing this indisputable point out into the open. Progressive taxation, the rich paying for it all, or and do note that it's or, Big Government. You can only have one of those two. So let's have the Commission and bring the point out into the open shall we?

Or if that all sounds like too much hard work and effort we could just get people to read the Mirrlees Review.

The Technology Strategy Board: dirigisme in action

Ever heard of the Technology Strategy Board (TSB)? The TSB is an NDPB sponsored by the BIS! Or, to put that in real terms and not public sector-speak, it is one of those arm’s length, alphabet soup agencies that spends huge amounts of taxpayer’s money in order to ‘stimulate’ economic growth. The TSB should be better known, however, as it serves to demonstrate so many of the problems of government intervention that one hardly knows where to begin.

Ostensibly, the TSB’s role is ‘to accelerate economic growth by stimulating and supporting business-led innovation.’ I don’t think that here it is necessary to get into the fallacies of Keynesian stimulus policies, of which this is one. The TSB has an annual budget of around £200million. It boasts that it has spent £1billion since its establishment in 2004 and has been allocated another £1billion to spend during the course of the present Parliament. Austerity indeed.

To my mind, those who advocate such stimulus will never be convinced of the case against them, no matter how much evidence is presented, because they are fundamentally pursuing non-economic agendas, albeit disguised as economic ones. These policies are dictated by ‘conscience’ as Paul Krugman revealingly tells us. The agendas may be ‘noble’ – equity – or ‘ignoble’ – self-advancement and political gains – but they are not fundamentally related to maximising economic growth and wealth-creation. It should be pointed out, however, that the TSB was created in 2004, at the height of an economic boom. Why, one wonders, does an economy which was clearly overheating need a Keynesian stimulus?

Leaving macroeconomics aside, therefore, let’s examine the TSB as an example of how dirigisme fails in reality. As Lew Rockwell argues (as have many before him), organisations like these are part of the ‘regulatory-industrial complex’. This complex is ostensibly erected by the state in order to provide benefit to the public. In the case of regulatory agencies this is ‘consumer protection’ whereas in the case of the TSB this is to stimulate innovation and create economic growth. As Rockwell points out, the strongest lobbyists for such agencies are actually existing large market occupants seeking to errect barriers to entry, in the form of compliance costs, to their more nimble competitors or to benefit from subsidies. We then end up with oligopolistic industries where, in the absence of competition, they can extract higher profits from consumers. This usually prompts further intervention in the form of ‘competition authorities’ which worsen the problem.

As reported in Private Eye No. 1308 information on the TSB’s grants had to be extracted under FoI requests (some of which is available on the website). ‘Iain Gray, the board’s £199,000 a-year chief executive, was previously general manager of Airbus UK. Funnily enough, the biggest single strategy board grant, of £9.8m, went to... Airbus UK’. Private Eye goes on to list some of the various large organisations that benefit from taxpayer largesse:  Nissan, Rolls Royce, BAE, BMW, Ford and we can also add GSK and GE. Unsurprisingly, large organisations are adept at obtaining such grants, which are ostensibly intended for SMEs, because they are able to devote resources and lobbying beyond the reach of small enterprises. Effectively, the TSB is subsidising large market occupants with research funding which is not accessible to small firms and new entrants. This is public choice in action and it is destructive of public benefit.

Cheerleaders of such programmes will argue to the effect that SMEs and innovation are still being aided by the allocation of government (i.e. taypayer’s) cash. Here we have the age-old doctrine of ‘picking winners’. Even if the TSB were an entirely objective observer – which it evidently is not – how is it to know that such innovation is better than that it does not fund? Here we have the Hayekian knowledge problem in action. The only way to establish the viability of a particular good and a particular firm is to expose it to a free market. Further, as capital is being withdrawn from other areas of the economy via taxation and allocated to these purposes, how is the government to know that the capital would not have been employed more efficiently elsewhere. If you’re not convinced by Hayek, just look at the history of government investment schemes to see an evidence-based approach!

Here we have a clear case of what Adam Smith would call a ‘conspiracy against the public’. Unfortunately, such dirigisme is becoming increasingly likely as a policy choice as there is pressure to find additional sources of funding for small businesses. Such an approach is not only likely to fail but be counter-productive. So, here’s a policy solution; throw the TSB on the ‘bonfire of the quangos’ which will not only free up the hefty officials’ salaries but also £1billion of promised spending which is currently going into the pockets of large firms anyway. If we must ‘stimulate’ the economy, rather than reduce the deficit, use the £1billion to fund some tax cuts.