What would we consider a successful railway system?

Under many measures, the railways have performed remarkably since privatisation. It is not surprising that the British public would nevertheless like to renationalise them, given how ignorant we know they are, but it's at least slightly surprising that large sections of the intelligentsia seem to agree.

Last year I wrote a very short piece on the issue, pointing out the basic facts: the UK has had two eras of private railways, both extremely successful, and a long period of extremely unsuccessful state control. Franchising probably isn't the ideal way of running the rail system privately, but it seems like even a relatively bad private system outperforms the state.

Short history: approximately free market in rail until 1913, built mainly with private capital. Government control/direction during the war. Government decides the railways aren't making enough profit in 1923 and reorganises them into bigger regional monopolies. These aren't very successful (in a very difficult macro environment) so it nationalises them—along with everything else—in the late 1940s.

By the 1960s the government runs railways into the ground to the point it essentially needs to destroy or mothball half the network. Government re-privatises the railways in 1995—at this point passenger journeys have reached half the level they were at in 1913. Within 15 years they've made back the ground lost in the previous eighty.

But maybe it's not privatisation that led to this growth. Let's consider some alternative hypotheses:

Was it a big rise in the cost of driving?

Was it the big rise in GDP over the period that did it?

Was it just something that was happening around the developed world?

Was it purely down to extra cash injections from the state?

Has it come at the expense of safety?

Has it come at the expense of customer satisfaction?

Has it come at the expense of freight?

Is it all driven by London?

Democracy's not all it's cracked up to be you know

As Churchill pointed out democracy does have something going for it, that it's better than all other methods anyone's ever tried. But that doesn't mean that it's perfect, not by a long shot. And interestingly we've that nice Owen Jones making the point for us:

The Aids crisis was building; more than half the population believed homosexuality was “always wrong”, peaking at 64% in 1987 when just 11% opted for “not wrong at all”; and later that decade the homophobic legislation, section 28, was introduced.

Meaning that under the pure rules of democracy that Section 28 legislation was entirely justified. Indeed, it should have been introduced as it was obviously the majority view of the people. All of which is a problem with democracy: for there are quite obviously times when that will of the majority conflicts with the civil liberties of various minorities. Meaning that we have to decide which we are going to regard as more important, those civil liberties or that will of the majority.

Those times that we have to decide coming in a variety of flavours. We could most certainly gain a majority for the idea that we should string the paedos up without much of a trial. There's actually a substantial campaign to insist that legal protections for accused rapists should be weakened, even to the point (not in the UK thankfully, not yet, but in the Antipodes) that the presumption of innocence should be dropped. Here at home we have a campaign to insist that prostitution among consenting adults must be made illegal: quite clearly a violation of that right to ownership of ones' own body and the income therefrom. And there's been campaigns against the rights of property ownership for most of the past century. A subset of which today is the idea that the shareholders in a company may not decide how much they wish to pay the managers in their own employ (in the name of "equaliteeee" of course).

And the campaign against the arbitration part of the Transatlantic Trade and Investment Partnership is exactly a complaint that that treaty would insist that governments must obey the law of the land over and above whatever democracy demands as changes.

Jones has provided us there with a useful example of when those civil liberties are more important than whatever it is that the mob thinks. We should remind him of this point when he next, or his ilk, suggests taking away our economic liberties. Just because the Demos can be whipped into howling for it does not make a policy one we should enact.

Two cheers for Mark Carney

Applauding regulators, and especially the financial variety, is rare but maybe the tide is finally changing.  It was a delight to see Ofgem attacked this month by its previous chiefs for reducing competition and thereby contributing to higher prices, i.e. the opposite of what utility regulators are supposed to do. Likewise it was a delight to read in The Times (“Regulators join bandwagon heading away from Bank”, 18^th August) that the Prudential Regulation Authority (PRA) has lost 160 staff.  That is only 10% of the total and the cynical may believe that they were always lost.  Even so, it is a step in the right direction and the Governor’s “One Bank” plan deserves some of the credit.

The Bank’s present 3,600 staff compares with 2,900 in February 1997, i.e. before Gordon Brown removed banking regulatory and supervisory responsibility.  This compares like with like. In 1974, Bank of England staff numbered 5,500 excluding print workers.  The long term staffing levels are declining but, with the transfer of regulation to Brussels, Mark Carney should still be looking to halve the current number to about 1,800.  For comparison, the Bank of Canada has, according to its latest (2012) Annual Report, 1,239 staff.

The odd thing about The Times report is its sepulchral gloom.  We should be rejoicing that personnel are leaving the PRA and that they are joining trading banks to direct their compliance.  Surely less interference from bureaucrats and more self discipline by banks is just what we want?

Why only two cheers for the Governor?  Things seem to be going in the right direction at last but they have a long way to go.

There's no reforming the EU without understanding it

Once again the Daily Telegraph (“Brussels plots fresh City of London power grab”, 8^th August) and like-minded media have become irrationally frenzied by EU moves that are wrong but nevertheless entirely rational.  London has been reminded that the three UK financial regulators will have to give up their regulatory powers to Brussels and become merely supervisors. As this Institute pointed out in our letter to The Times in June 2009, the UK governmentagreed that the previous March.  It was President Sarkozy’s price for attending the London G10 Summit in April.   The necessary legal framework was agreed by Parliament before that summer’s recess. The government and the City were silent at the time and in the five years since.  It is no use yelping now.  Brussels is only implementing what we agreed.

The worry now is that the City and the government ignorance of Brussels and its processes make EU reform all the less likely.  One needs to understand and then work the system to succeed.  The UK negotiators’ failure is demonstrated by the 55 occasions on which we have sought to block some new Brussels initiative or other and been over-ruled each time.  The French and the Germans know how to garner support for what they want done; the British government clearly hasn’t a clue.

If the past five years, during which the EU financial regulation issue has been ignored by City and government, show anything, it is that the Foreign and Commonwealth Office and HM Treasury have been asleep at the wheel.  The FCO lacks backbone and is notoriously pro-EU. We need a new team.

Obviously some of the existing team do have some understanding of the EU.  Perhaps we need an exam, supervised by Michael Gove, to sift out the good ones and then complete the new team with our finest negotiators first to understand what has to be done and then to prepare the way.  It will make little difference to the UK’s position in the EU if our involvement, for the few years preparation will take, is little more than keeping bums on seats.

The Coalition has at least done some of the preparation in asking and thinking about what reforms Britain would like but that is no more than a Santa Claus wish list without a plan to achieve any reform.

A final thought along these lines is to put the new team under John Major’s charge.  He is the last British Prime Minister successfully to have negotiated any substantial matter with the EU.

The reason we're all such fat lardbuckets

A number of reasons are put forward as to why the nation has, in its entirety, become a population of fat lardbuckets. Big Food pushes ever more unhealthy comestibles upon us, advertising to children is for some reasons still allowed, there's no tax on sugar, or fat, we've even got those who insist that inequality causes obesity. Of course, all these reasons come with their own solutions: we should ban advertising to children, or of "unhealthy" food, or reduce inequality or something. As Chris Snowden shows in his latest little report (The Fat Lie)all of those reasoned proffered are simply wrong:

If we look at the average body mass of English adults since 1993, we see a steady increase from 72.4 kg to 77.4 kg (Figure 7). This seven per cent increase contrasts sharply with the data from DEFRA which shows a decline in domestic calorie consumption of nine per cent in the same period (Figure 8). If we confine ourselves to the period 2002-12, for which we have solid data for food consumed inside and outside the home, we see the same ‘paradox’: an increase in average body weight of two kilograms coinciding with a decline in calorie consumption of 4.1 per cent and a decline in sugar consumption of 7.4 per cent.

Britons are eating fewer calories than we all used to. What is causing the increase in weight is that we're all also doing less physical labour than we used to. The imbalance between calories consumption and expenditure is growing but not the total amount of calorie consumption. We've thus got under-expenditure of calories, not over-consumption of them.

Note that if we are all consuming fewer calories this does then mean that if Big Food has been trying to get us to eat more they've failed and failed dismally.

It's also worth noting one more thing, that inequality argument. This should really be turned on its head: it is greater equality that is to blame here. There's always been a certain calorie richness, calorie density, to the British working class diet as compared to its middle class (or even upper) equivalent. This made perfect sense back in the days of heavy manual labour. We now have much greater equality in the workplace, there's very few of us making a living from the exercise of our muscles rather than what's between our ears. And that greater equality has had a larger effect on those still eating that culturally calorie dense diet than it has on those whose diet adapted to less physical labour earlier.

It is still possible to point out that it's the poorer among us who are the lardbuckets. But this isn't the result of ineq1uality at all, it's the result of greater equality in the workplace, in all of us now expending fewer calories in pursuit of our daily bread.

Actually, people aren't willing to pay more tax for the NHS

There's a report out announcing that loads of people would be entirely happy to pay more tax if that extra cash was allocated to the NHS. Two important things #to say about this. The first being that it's untrue and the second being that if it is then that's just great:

Almost half of voters say they would be happy to pay more income tax as long as the money went directly to the NHS, which is facing a £30bn gap in its finances by 2020.

Polling firm ComRes found that 49% of people would be prepared to pay more tax to help fund the health service, one in three (33%) people said they would not be ready to do so, and 18% did not know either way.

However, if only the views of those who expressed an opinion are considered, as many as 60% of people are willing to pay more tax to help the NHS providing its wide range of services; 40% are not.

The reason it's not true is our old friend revealed preferences. We should never try to divine what people really want from what they say: we should instead look at what they do. And we do have a method of being able to pay extra tax: simply send the cheque to "The Accountant, 2 Horse Guards Road, London SW1" and they're absolutely delighted to apply it to whatever area of public spending you wish to inform them you favour. Admittedly it's a few years since I looked into this but in that year an entire 5 people had actually done so and four of them were dead, leaving bequests.

So revealed preferences tells us that exactly one live person was actually willing to pay higher taxes for any reason at all, not just for the NHS.

But let's assume for a moment that this is in fact true. That the reason, perhaps, that more people don't pay is because they don't know where Mr. Accountant resides? All we have to do is tell everyone where he does and that's the problem solved, isn't it? A few people to open the flood of envelopes that will no doubt overwhelm the office and we're done. Everyone who wants to pay more tax for the NHS may do so and no one who does not needs to.

If only all public policy questions were as simple to solve as this one.

An infrastructure push does not lead to a boost to GDP

We've heard much these past few years about how now id just the time to have an infrastructure surge. It's said often enough that a recession is just when we should be building all those roads, railways, council houses and the rest. Obama even tried to find those $800 billion worth of shovel ready projects just raring to do. With no great success it should be said. Sadly, this just doesn't seem to work. From the IMF:

This paper has examined whether major public investment drives in the past have served to promote or accelerate national economic growth. It is not about whether in theory public investment drives could accelerate growth, but rather whether in practice, with real governments deciding how to spend the funds and implementing investments, they have in fact accelerated growth.

The answer appears to be “probably very little”. This conclusion pertains to the drives – the big increases in public capital spending – not necessarily to routine levels of public investment. And furthermore the evidence here is not about whether public capital can promote growth by averting the emergence of bottlenecks. Major public investment campaigns continue to be advocated in several countries as a major trigger for economic growth, and on this issue, whether they have in fact triggered growth, the evidence for a positive effect of public capital on GDP or GDP growth is weak. … It is difficult to find a clear-cut example that fits the oft-repeated narrative of a public investment boom followed by acceleration in GDP growth. If anything the cases of clear-cut booms illustrate the opposite – major drives in the past have been followed by slumps rather than booms.

In theory it should work, in practice it doesn't, which is a bit of a conundrum. The practical answer to which puzzle is that government is probably even worse at doing things than we generally think. Thus we'd probably be better off limiting it to that very small set of things that both must be done and that only government can do. Something which is a very small overlap indeed.

A new ASI report finds a foreign player crackdown would do nothing to help England's football team

A new report released today by the Adam Smith Institute blasts the FA's proposals to crack down on foreign players, finding:

• No link between native play time in the Premier League and performance of English national team
• No link between amount of minutes played by Englishmen ten years ago and performance today
• A strong link between foreign players and Premier League quality

The FA's plan to crack down on foreign players in the Premier League would damage the league's quality and success in European club competitions, without any benefit to the English national team's performance, according to a new study from the Adam Smith Institute, an economic think tank.

In the first research of its kind, there was no link found between the time English players get on the pitch and the performance of the national team.

The report, "Sweet FA - Why foreign player crackdowns hurt English football", found this to be true for performance measured in FIFA points, world ranking, or placing at major championships—i.e. the World Cup and European Championship. This also goes for the other major leagues in Europe—Spain's La Liga, Germany's Bundesliga, and Italy's Serie A.

The report also rejected as baseless the claim that a reduced amount of playing time for English players five or ten years prior affected English international performance.

But the report did find evidence of a strong link between a league's UEFA coefficient and the prevalence of foreign players—leagues with more non-natives are stronger, and stronger leagues have more non-natives.

This suggests that Greg Dyke's scheme to tighten up work permit rules for foreign (or just non-EU) players would harm the English Premier League—the world's most popular and successful league—without any concomitant benefit to the English national team.

Paper author Ben Southwood, Head of Policy at the Adam Smith Institute, said:

"It is widely believed that England's perceived underperformance at recent international competitions owes something to the reduced fraction of minutes English players are playing in the Premier League—but up until now no one's really studied the question with any kind of rigour.

"My numbers are not final but they suggest there is no real link between the amount of football English players play in the Premier League (or across the top four European Leagues) and English international performance.

"If the reduced quantity of experience is a problem, then it is being balanced out by the massively improved quality—or something else".

For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@old.adamsmith.org / 07584 778207.

The Adam Smith Institute is an independent libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

We'll take good policy from anyone who wants to offer it

As we regularly point out here, at the ASI we're not party political. But we do propose policies that we think would be good to political parties. As such it's nice when someone, anyone (we're not proud!) decides that implementing a policy we've been recommending would be a good idea. So it is with the announcement that the LibDems are going to have a £12,500 a year personal tax allowance in their manifesto:

The Liberal Democrats have pledged to raise the income tax personal allowance to at least £12,500, in manifesto plans announced on Thursday.

The party has also signalled it would seek to increase the amount people can earn before paying National Insurance.

Danny Alexander, the chief secretary to the Treasury, said the allowance would rise by the end of the next parliament. The move would cut income tax for 30 million workers and save the typical basic rate taxpayer £400 a year, the party claimed. It would also benefit more than six million pensioners.

The ASI has for years argued that the personal allowance should be much higher. But we started to point out, a few years ago when the Living Wage movement first started out, that it's simply ridiculous that people earning the minimum wage face income tax. The entire point of the minimum wage is that this is a minimum politically or socially acceptable amount that people should earn (whether you believe there should be a minimum wage is another matter). That at the margin government then nicks 40% of it in various taxes is just not on. so we've been saying that, even if people don't like our flat tax plan (£15k personal allowance and a flat rate income tax above that) can we all at least agree that the personal tax allowance should be that full time, full year, minimum wage?

The reason that Danny Alexander is saying £12,500 a year as the allowance is because that's what that minimum wage was a couple of years ago when he was first asked about the suggestion.

We would go further though (we always go further) and insist that it should rise to the current minimum wage, whatever that is in any year. And also that the NI contribution limits (yes, for both employers' and employees') need to rise to that same level. For we do still have that simple problem. If the minimum wage is the irreducible minimum that it is just and righteous that someone receives for their labour then it's just not on that government dip its sticky fingers into it.

And it's also worth pointing out that doing this will immediately make the minimum wage above the Living Wage. For we don't actually have a low wage problem in the UK: we have tax poverty.

Explaining the success of the Finnish education system

It's a standard enough trope: the Finnish education system does very well so our education system should be just like the Finnish one. Meaning comprehensives for all and put the private education system to death. That is, of course, attractive to those who have been arguing for decades that we should put the private sector education system to death and have comprehensives for all. There's an interesting new paper arguing that it really might not be all that simple:

Finland has been noted to perform consistently very well in the international PISA assessments for many years, but it also has a relatively low per capita number of Nobel Prize winners. We draw upon a large body of proxy data and direct evidence, including the first ever use of RTs to calculate the Finnish IQ and the first ever use of the WAIS IV and PISA scores in the same capacity. Based on these data, we hypothesize that Finns perform so consistently well in PISA because they have a higher IQ overall than other European countries and exhibit a specialized slow life history strategy characterized by high Agreeableness and Conscientiousness, and low Psychoticism and Extraversion. Most of these traits predict educational success but all would suppress genius and creativity amongst this population.

If Finnish children are both brighter than those in other countries and also the culture itself supports conscientious hard work then yes, we might well think that that has an impact upon the success of the education system.