The Beautiful Tree

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There are plentiful reasons to recommend The Beautiful Tree, a book that challenges and inspires in equal measure. It is the remarkable story of Professor Tooley's discovery of how the poorest of poor are setting about improving the education of their children without the state and the often patronizing efforts of many in the development community. The implications this has for thinking about the history and future of education of children in developing and developed world are potentially profound.

The first thing to hit the reader is the immense task that Professor Tooley and his researchers have undertaken. The work behind the statistics that forms the background to engaging narrative is evident on every page. Beyond the geographical and administrative complexities, the willingness to set himself at odds with his peers in his quest for the truth is a commendable achievement that many in the claustrophobic and stultifying world of academia shy away from. With each step, Professor Tooley pulls away from the establishment as he moves closer to the colourful array of entrepreneurs who are already providing the education that the people want in most challenging parts of the world.

Many new insights are garnered from this work. A fascinating revaluation of the impact of British imperialism upon the Indian private education system is given in the penultimate chapter, while the last chapter answers the hanging question of what the rest of the world can learn from his findings in India, Nigeria, Ghana, China and Kenya. It is an upbeat message that could put private education beyond the moral and regulatory power of our politicians. Find out more here.

On reducing inequality

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Let us imagine that you are concerned about the amount of inequality there is in UK society. You wish to reduce said inequality. I might not (in fact don't) share that concern but even as the interested amateur that I am as an economist (ie, not an economist, simply an interested amateur) I might be able to offer some guidance as to how you might do this.

The first observation would be that some countries have indeed lowered inequality (and relative poverty) so to reach your ambition (which, remember, I don't particularly share) we could go and look at what they have done. The poster children here are of course the Nordic countries. And the most important thing we can say about their taxation systems is that they are very differrent indeed from what is usually proposed here:

....the countries that have been the most successful in reducing inequality don't have particularly progressive tax structures. The real gains in reducing inequality are achieved by means of well-designed transfers.

Indeed, the Nordic tax structures are not particularly more progressive than the one we currently have in the UK. Yes, they have high marginal income tax rates but they also tend to have lower capital taxation, lower corporate taxation and higher VAT than we do. That is, they have concentrated on growing the goose, taxing consumption more than we do, so as to provide the revenues to make the transfers.

Which leads us to the ritual calls here for the rich to be paying more tax, for companies to pay "their fair share" and so on, that our tax system must be made more progressive. But why, if we know that the way to reduce inequality is not through the tax system at all, should we do that?

Shouldn't we be copying the systems which really do reduce inequality?

As I say, I'm not an advocate of this inequality reduction in the first place. But for those who are there's something very odd indeed about their insistence not to do what has worked elsewhere: cut corporation tax, cut capital taxation and raise VAT. Why is that?

British Fusionism

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'Fusionism' is the name generally given to the ideological alliance between conservatives and libertarians, particularly within the US Republican Party. It is widely seen as a major feature of the Reagan Administration, though as a political movement it goes back much further than that. Meanwhile, many commentators argue that the decline of ‘fusionism’ during the Bush years (when social conservatives came to dominate the party) is a significant part of the Republicans’ current woes.

It is probably fair to say that ‘fusionism’ is less easily applied to the British Conservative Party, which has generally been far more statist than its US counterpart. The Thatcher years are, of course, an obvious exception to that rule. But I’m not sure we’ll be saying the same thing about the ‘Cameron administration’ in a few years time. Often you hear David Cameron and George Osborne making disparaging asides about libertarianism during their speeches, probably in a childish and unnecessary attempt to ‘triangulate’.

So it is interesting to see the results of a new poll on ConservativeHome, which is very popular with grassroots Tory activists. Readers were asked to “identify the extent to which they identified with various strands of conservatism" by giving nine different descriptions of conservatism a mark out of ten. The most popular was fiscal conservatism – a belief in lower spending and balanced budgets – followed by ‘supply side’ conservatism – a commitment to lower taxes and less regulation. In third place was libertarian conservatism, the conviction that we needed less of the state in every walk of life.

In descending order of popularity, the next six tags were compassionate conservatism (defined as support for school reform, welfare reform and the family), euroscepticism, social conservatism, law and order conservatism, unionism (i.e. keeping Britain together) and, lastly, ‘hawkish conservatism’ (those who favour an interventionist foreign policy).

Of course, I know that the readership of ConservativeHome is not necessarily representative of the Conservative Party as a whole. But this poll does suggest to me that David Cameron, if elected, will not be allowed to get away with being Ted Heath Mk. II. And thank goodness for that!

The police: predator or victim?

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Denis O’Connor, Chief Inspector of Her Majesty’s Inspectorate of Constabulary used the release of his department’s inquiry into the police forces’ handling of public demonstrations to speak on the overall state of the Police. He worries that they have drifted from the true principles of policing, and as a result are losing the respect and confidence of the public.

The police force is not a gang of senseless thugs and gibbering, inept morons, but the laws, regulations and targets that bind their actions can make them appear to be. New Labour’s creation of nearly one new crime every day since 1997 has certainly helped in creating a culture where we feel restricted and watched over by the police. However, O’Connor explains that the force have more issues to contend with. Police performance and accountability is dealt with by regulators such as his own body, government offices and local partnerships. This can make things very confusing. New reports, instructions and initiatives are frequently directed at the police from bodies with differing interests and priorities. Unfortunately, this is counterproductive. The more orders and criticisms are directed at police officers, the less scope they have to use their discretion and judgment.

Independent thinking can lead to criticism and accusations of irresponsibility, so it makes much more sense for a bobby to blindly follow any instruction or precaution that could possibly be applicable in a situation. Inevitably, situations arise like the kettling of non-violent protestors for hours on end, or the death of a young boy because a PCSO had not received the training to save him from drowning in a pond. Another major problem is the imposition of centrally imposed targets, which distort incentives. The overload of instructions, advice and new laws can lead policemen to lose confidence even in their own abilities and role, or develop a distorted perception of their personal power.

In 1829 Sir Robert Peel remarked that “the police are the public and the public are the police". Britain’s first model of the police set out an “approachable, impartial, accountable style of policing based on minimal force and anchored in public consent". O’Connor is calling for a return to these values, and recommends the creation of universal principles to guide the police on the use of force and appropriate behavior in all areas of policing. It is sad that we cannot trust our police to figure this out for themselves. More can be done to help the force to regain focus and regain public respect. The different bodies involved in regulating and advising the police should be scaled down and simplified, and central targets should be scrapped.

Parsing that Compass report

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Compass had a report out last week which you can read here. All the usual arguments we've come to expect: don't cut "public services" and do ramp up taxation upon the rich and everything will be just hunky dory. However, as usual again, the arguments don't in fact stack up: and no, this is nothing to do with whether what they desire to do is a good or a bad idea (that I think it a bad one is not relevant here). It's simply and purely that they're arguing two entirely contradictory things in the same paper.

Their argument against cuts is that it's cheaper to have someone being employed by the Government than it is to have them on benefits. No, don't even worry about their arithmetic here, just take that point as it is. So if we cut "public services" by firing half a million bureaucrats that means that we'll make the public finances worse, not better. Implicit in this argument of course is that everyone so fired will go on benefits. That not one single one of those currently employed by the State will be able to get a job outside the molly coddling of the public sector.

No, don't even worry about what this says of their views on the competence of those currently in public employment (that they are, quite literally, unemployable elsewhere). Let us move on to their second argument, about raising taxes on the top 10%, the top decile, of households.

These tax rises are really very impressive indeed: marginal tax rates would move to 75% and in small bands to possibly over 100%. Average tax rates (the percentage of total income paid in taxes) would rise by 60% or so from 34% to 55%. We would expect some sort of change in behaviour from such tax rises but as Chris Dillow points out, exactly what they will be is difficult to predict. Will people offer more market labour in order to maintain their post tax income? Or will they trade income for leisure in the face of the high marginal tax rates? Again, let us not be too empirical here (facts are such nasty things) and let us look just at the logic being used. After a lot of badgering, Richard Murphy (for yes, of course he is the author of this report) tells us what assumptions he has made about which effect will predominate.

For reasons we have given - and which I have explained here - we think there will be behavioural changes - which may result in more, not less effort

I think there may be a greater demand for work - for example from the second partner in a high earning household that will - in accordance with all observed social behaviour - including the wish to ‘keep up with the Jones’ or to simply pay the mortgage - which is widely ignored in the blackboard economics you favour developed, rather oddly, by economists who have never worked in a market in their lives

That pressure to earn more to cover fixed obligations will, I (we) think counterbalance any tendency to reduce work.

We'll even leave aside the well known point from "blackboard economics" that married womens' (this is of course what "second partner" means in general and in practice) decisions to enter the paid labour market are more sensitive to marginal tax rates than mens'....for of course, empiricism is so passe these days, is it not? Concentrate again just on the logic.

We must not cut spending because there are no jobs to go to, meaning that the public finances will be worse off. But we can raise taxes because any of those ladies who currently lunch can simply waltz into a job and the public finances will benefit.

I can see that you can believe either one of these but to assert both in the same paper is really rather Red Queen behaviour. So, this is Alice in Wonderland economics. Unless, of course, you really do want to assert that the current public sector workforce is unemployable except on the public shilling and yet that the wives of the upper middle classes are a labour resource of such value that all will get jobs at the drop of a Hermes scarf.

An assertion which I suppose you can indeed maintain if you were some extreme form of Social Darwinist but it's a very odd argument indeed coming from an organisation like Compass...even if not all that odd from Richard Murphy.

Generations of benefits

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In the Centre for Market and Public Organisation's Research in Public Policy Winter 2009 edition there is an article concerning research that was conducted which examined the link between fathers and sons and worklessness. Lindsey Macmillan analysed the rates from two data sets, one from 1958 and the other from 1970 (the former being the National Child Development Study and the latter was the British Cohort Study) and found the probability of a son being out of work for a year or more between leaving full time education and the age of 30.

For the first data set the probability of the son being unemployed for a year or more was 20% if their father had been out of work during the latter part of their sons childhood years. For the second set the rate increased to 25%. The results compare to a probability of only 14% for sons whose father was in work for the duration of their childhood. This increase could be used as an indicator as to who may need the most assistance in the future. Ms Macmillan also looked at data from the recession of the 1980s, and hard hit industries and found that unless the period of joblessness was long then the effect on the child was lessened.

The conclusion is that there is a 'correlation between workless experiences between fathers and sons in the UK.' How then do policy makers break this bond? Perhaps one way would be to make benefits generational within a family: if your parents were in receipt of benefits then you can't claim, you must work and you must purchase employment insurance while also paying back your parents debt via national insurance. Or benefits could actually be made to last only for a limited period. Our current system of benefits does little more than addict people to the political teat which of course is what politicians want: a supplicant mass that votes solely based on who awards them the most benefits. This bond is one that needs to be broken.

Thanksgiving

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As an American, I was obliged to celebrate one of our most time-honored holidays, Thanksgiving. As part of the tradition, many families across America take time before Thanksgiving dinner to express what they are thankful for in their lives. In the spirit of Thanksgiving I would like to talk a bit about a couple of the things I am thankful for.

As an American, I am thankful for the Constitution and the Bill of Rights. In today’s world it is easy for government to enter into a slippery slope were rights can be reasoned away. This has never been more apparent than in Britain where we see government stepping into homes and telling more than adequate parents how to raise their children. Invasion of privacy is now perceived as something only criminals should fear, and anyone speaking out against big government is branded as ‘ignorant’ or ‘obtuse’. While things are far from perfect in America, it is comforting to know there is a document that draws a line somewhere; that we at least have a platform to stand on when arguing for personal liberties.

I am also thankful to be living in a socially and economically free country. While we still live in a free Britain, there are many politicians with good intentions that would seek to take that away. Limiting individual and business income with massively high marginal tax rates is what many government leaders believe to be the moral thing to do. Government intervention in the economy has cost thousands of individuals their jobs, and yet they still preach that the solution to the problem is more intrusive action. We are losing the ability to be economically independent of government.

In reality, there is a lot to be thankful for even if you sincerely believe that government is slowly changing that fact. But while we still have a chance we need to stop this wave of government expansion. It is imperative that we stop the massive amounts of public spending and curb the intrusion of government into our personal lives. We need to make the world a place where future generations will still have freedom to be thankful for.