The law of unintended consequences

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"Be sustainable – do not buy sex", the Lord Mayor of Copenhagen has told guests at the COP 15 climate change summit. The sex workers interest organisation (SIO) has reacted angrily, accusing the Lord Mayor of abusing her office in attempting to prevent prositutes from carrying out their work, which is entirely legal in Denmark. By way of retaliaition, conference delegates have been offered a 'free ride' during summit, so long as they can present a valid COP 15 ID card...

New businesses thrive in recession

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While Britain ("best placed of all major economies to face the financial crisis") remains the only member of G20 still in recession, there is some good news. It is that the services sector continues to expand, as opposed to the more fragile manufacturing and building sectors. The services sector is reckoned to account for nearly three quarters of the country's GDP, so its recovery is important.

The fact that much of this is new business is important, too. That is the one bright spot about recessions. As demand slumps, marginal and over-extended businesses go to the wall, leaving both capital and market space to new business activity. What governments should do in a recession is make life easier for new and growing businesses. What they should not do is prop up the ailing ones, for that simply prolongs the recession and denies the economy the few positive things that it brings.

This recession, already the longest for post-war Britain, has seen record amounts of taxpayers' cash used to bail out ailing businesses in an attempt to stop them going under. We might have been far wiser to let the recessionary axe take more of a toll, and concentrate our efforts on helping the new businesses to build themselves up in their place.

Madsen Pirie's new book "101 Great Philosophers" makes an excellent and affordable Christmas gift. Buy it here.

Climate change: the new Nazism?

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For those against further government meddling in the economy, an eminent scientist voicing his desire for the Copenhagen negotiations to break down may sound encouraging. However, this isn’t the case when that scientist is James Hansen, the original harbinger of global-warming doom.

Despite pledges to cut carbon emission having potentially large impacts on national economies, Hansen believes that any Kyoto style global agreement would be fundamentally flawed – for its lack of radicalism. He likens the tackling of global warming to the struggle against Nazism and Slavery, claiming "on those kind of issues you cannot compromise. You can't say let's reduce slavery, let's find a compromise and reduce it 50% or reduce it 40%."

Many countries plan to reduce CO2 emissions through carbon market schemes and the trading of carbon permits. Assuming the best thing for human development and the planet is to cut carbon emissions now (even though that is not nearly as clear-cut as the climate change fanatics insist), then using a market mechanism is one of the better ways to go about it. Allowing people to trade limited carbon rations should lead to the best allocation of these amongst the competing needs, and ensure that even with reduced carbon emissions the most useful goods are still being produced. The incentives for firms to develop and install green technology could also encourage investment and technological advancements in other areas too.

However, Hansen believes in much more drastic action – the swift abandonment of coal as a source of fuel coupled with an escalating carbon tax across all other fossil fuels in order to force producers to magic up alternate forms of energy.

With no room in Hansen’s arsenal for compromise, there is no room for disagreement or dissent either. For him ‘business as usual’ while we learn to adapt to a lower-pollution economy is not an option. The opportunity costs associated with an extreme attempt to tackle global warming are unimportant. Never mind falls in GDP and average income, reduced development prospects for the poorer nations and stagnation in innovation and healthcare; these are examples of inconsequential collateral damage when defeating the danger of climate change.

It seems that changing international agreements to suit Hansen’s taste would require the bypass of traditional democratic politics; which after all seeks to mediate between many competing interests. Hansen may be right when he likens climate change to Nazism – but only in the sense that once the ideology gains popularity in politics it can lead to totalitarianism, and significant constraints on our personal liberties and behavior.

And in other news...

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Ragnar 'Milkman' Bengtsson, 26, comes up with a novel way of meeting American supermodels...

Letter in today's Times

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Sir, Alistair Darling is too complacent. Strip out his spin and the facts support President Sarkozy’s boast, namely that the City in future will be regulated by Brussels, not London (“We are in charge now, Sarkozy tells the City", Dec 2). Indeed, the commissioner in charge will be French.

The Chancellor confirms that the UK will merely supervise the EU regulations. Undoubtedly, this supervision will itself be subject to EU oversight, and to the European Court of Justice, whenever Brussels is displeased with the way that London does things.

Tim Ambler
Fellow, Adam Smith Institute
London SW1

Reforming the voting system

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It is reported that the Labour Government will pledge to put a referendum early in the next parliament to consider an alternative vote replacement of our first-past-the post-system. Firstly it should be noted that Labour are highly unlikely to be called on to honour such a pledge, since they will probably be in opposition by then. Secondly it should be seen as a bid to attract Liberal Democrat support for Labour in a parliament with no overall majority. The Lib-Dems are unlikely to fall for it, being more or less committed to helping the largest party to rule rather than strike deals of this nature. The timing of this proposal perhaps shows a Labour party resigned to not winning another term.

There is a more general point. The proposed change is designed to make future Conservative governments unlikely, since the other parties have a track record of ganging up on them in tactical voting. Indeed, it would make outright winners less likely than coalitions, European style. It is often said that the present UK system is unfair because it under-represents minor parties in parliament. This may be true, but fairness is only one of its aims. Another is stable government, which an alternative vote system might undermine. There is an even more important attribute of the present system: it enables us to change governments quickly and decisively. On the Continent a swing of 10 percent might result in a few minor changes to junior ministry posts. In the UK it usually heralds a removal van pulling into Downing Street next day. Our system enables us to get rid of governments when we think them past their sell-by date, and that is not an advantage to be tossed aside lightly.

Dr Madsen Pirie's "101 Great Philosophers" makes a great and affordable Christmas gift.

Climate change policy in a democracy

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Recent opinion polls in the UK and elsewhere show that governments have failed to convince the public about the received wisdom on climate change: it's very bad, it's all our fault and we have to rejig the global economy to fight it. In a survey conducted for the Times, just 41% of people agreed that 'it is now an established scientific fact that climate change is largely man-made'. And only 28% believed that it is 'far and away the most serious problem we face as a country and internationally'.

The Science Museum has been running a campaign called PROVE IT!, in which they asked people to sign up to the statement 'I've seen the evidence. And I want the government to prove they're serious about climate change by negotiating a strong, effective, fair deal at Copenhagen'. Visitors to the museum gallery were overwhelmingly in favour: 3,408 counted themselves in, while 626 disagreed. But on the website, after allowing for initial multiple voting (largely from the 'yes' camp), 2,650 were counted in and 7,612 counted out. Hardly a resounding message to send to the negotiating team.

It seems that the public just refuses to get the correct message, and it's likely that 'climategate' and the recent scary TV ads have reinforced scepticism. The problem is that, short of voting UKIP, the electorate has no way of influencing policy at the next election: both Labour and the Conservatives are officially fully signed up to the climate change agenda.

But this may not always been the case. It's fascinating to see that, in Australia, the opposition Liberal party replaced their leader, Malcolm Turnbull, by Tony Abbott, on the basis that he would not support the goverment's Energy Trading Scheme bill (which has now been duly rejected for the second time by the Senate). If, as expected, Kevin Rudd now calls a snap election, it will be equally fascinating to see what the Australian electorate thinks. It must surely only be a matter of time before a major political party in an EU Member State backs away from a hardline policy on emissions: despite appearances, most parties contain significant numbers of doubters. Then we can see whether there is truly a democratic mandate for radical carbon dioxide emissions reduction policies.

Martin Livermore is the director of The Scientific Alliance.

The business of education reform

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Reform’s latest report, Core Business, does an excellent job of pinpointing some of the main problems with education in the UK, but, to my mind, does not go quite far enough on the solutions.

As the report makes clear, low expectations, a lack of intellectual rigor and grade inflation are serious problems in our schools, while the fact that the most disadvantaged children are pushed to follow non-academic qualifications to boost school league table results is nothing less than a disgrace. A powerful and convincing case is also made that government policies of emphasizing differences in educational potential of children is in fact a symptom of the failure of state education.

On the policy side, there are two recommendations. Firstly, it is suggested that, “all students should be required to study a minimum of five academic GCSEs", while vocational qualifications would be done in addition to, not instead of GCSEs. Yet on its own, this change would offer little for the thousands of children let down by state education. The problem isn’t vocational qualifications per se – just consider the Indian examples of NIIT and GNIIT – but rather the fact that the state holds a debilitating monopoly on education funding and delivery. It might well make the skewed league tables more accurate to ignore vocational qualifications, but as competition between schools is nonexistent, this will not return power to parents in any genuine sense. What we need is for parents to become consumers of education – something which Reform, to their credit, have pointed out in numerous other reports.

Secondly, the report recommends ending Ofqual’s and the QCDA’s control of the curriculum. This makes sense, but replacing them with another Quango run by academics is a Band-Aid solution to a much wider problem. It may prevent grade inflation, but will do little for improving the quality of teaching. Once again, I feel the focus should be on more competition, not just ‘better regulation’.

If the Conservative Party does come to power, they will have a mandate for radical reform of the education system. The failure of state education as things stand is beyond doubt. With a voucher system that allows schools to profit, competing curriculums to better meet the demands of parents and a bonfire of the multifarious regulations, Michael Gove MP could succeed where so many before him have failed. A proper market place with competing brands of schools, teaching methods, exam boards and curriculums is the only way to extract ourselves from the hole we have been digging since 1870.

What the government should announce in the PBR

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I’d like to see that immediate action will be taken to reduce the budget deficit... I’m interested in the scope of tax reform... I want Alistair Darling to realise that this isn’t about New Labour. The fact that entrepreneurs are so keen to hear what policies will be announced indicates why we’re still in a recession. The U.S. economy only left the Great Depression once politicians stopped changing the rules of the game and investors got back to business.

Anthony J. Evans, 'Politicians should allow a business-led recovery' Reuters.

What the government will probably announce in the PBR

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There is some talk that it could hike inheritance tax on estates over £1.5m to 50 or even 60 per cent (from 40 per cent today)... hiking capital gains tax could be another way to play the class war card... Alistair Darling could lower the threshold at which the new income tax kicks in to just £100,000.

Allister Heath, 'High earners set to be hit by new taxes' CityAM.