Adam Smith Institute

An excellent general and theoretical result undermined by an individual and anecdotal incident. Ain't that always the way?

Those who can, those who teach and those who teach the teachers: now one more recursion, those who administer the teachers. 

And photographic evidence of how at least one of those groups of administrators operates. 

Surfing a 66 foot wave. Eeek!

A good question, why does the Treasury get the fines? Shouldn't it be the consumers who were (allegedly) ripped off?

What happens when a lawyer gets a blog. Not pretty.

And finally, just why is the Antiques Roadshow so popular? 

Lloyds TSB has just announced its results: 

The group, Britain's fifth-biggest bank, has taken a £280m hit on risky sub-prime loans, but that is only a fraction of the figure suffered by rivals such as Barclays, which earlier this week revealed a £1.6bn write-down. Chairman Sir Victor Blank said the bank had benefited from its cautious approach.

But that's how the system works: we've not found any method better than people doing as they wish wth their own money: hiring those stewards for it that they trust. Those who turn out to be worthy of that trust prosper as do the businesses they run and those who invest in them, waxing fat off the judgement of their servants and hirelings.

Those who are careless or foolish in where they invest stand to lose their money: exactly the tonic needed for people to be careful about where they do so. Harsh it may sound, but there's nothing unfair about capitalism in this manner. 

43. "The market cannot protect the environment."

The Stern Report described climate change as "the greatest case of market failure" the world has seen. In fact the market has not failed – there is no market at all. There is no market in war, either, which some think more devastating then climate change. Markets deal with transactions, not with human behaviour in general. Where there are no exchanges, there are no markets.

Markets can prompt and regulate human activity by signals they send about scarcity and prices. They allocate scarce resources in ways that encourage people to consume less of them and produce more of them. When some resources, such as air, water, and ocean fish stocks have no price on them, there are few restraints on their use. Sometimes production causes 'externalities,' such things as pollution and noise disturbance, and the depletion of resources.

The way to have markets protect the environment is to put markets into place. If some activities contribute to climate change, there should be a price to pay for doing them. The habit of environmental campaigners of picking out relatively trivial symbolic targets such as "food miles" or budget air travel obscures the fact that agriculture, industry, and power production are among the greatest emitters of "greenhouse gases."

Markets can be introduced by putting a price on previously unowned resources. Fish quotas can be set and then traded, giving the buyer ownership of the fish and an incentive to conserve them. Tradable emission permits can discourage emission by raising the price of doing it. They raise production costs to those who emit more, and reward efficient, cleaner producers.

Markets can be used to promote the development of clean technologies by giving them a price advantage, encouraging people to produce more cleanly by making it more attractive financially to do so. Markets can protect the environment if they're properly introduced.

The single most exciting thing you encounter in government is competence, because it's so rare.

– Daniel Patrick Moynihan (1976)

The BMA report this morning is getting something of a slating for its, umm, how to put this, ignorance of some of the finer points of economic analysis. More here.

On the subject of bansturbation, the effect of the smoking ban on both Working Men's clubs and the variety circuit. Many more unintended consequences than we were told there would be.

Excellent fun about Jerome Kerviel. Apparently he was over €1 billion up at the turn of the year. Might his bonus have influenced him? 

My, my. Given the choice it looks like people move to States with higher economic freedom and lower tax rates. More here.

Perhaps not all that surprising though: large numbers have been known to try and leave this country. 

A description of how government actually works to spend that tax money: policy first, then evidence. 

And finally, yes, the cause of many late nights.

42. "A truly compassionate society would devote a much larger share of its wealth to the less fortunate."

Individuals show compassion, not societies. If individuals wish to give away a larger share of their wealth to the poor, this might be compassionate. It is not compassionate, however, to force others to do this.

Giving them a larger share of wealth is not necessarily the best way of improving the lot of the poor, because that wealth is not a fixed amount. Poor people might do better if the rich are permitted to get even richer, thereby increasing the total wealth available. It might be that a growing economy is a surer way of giving the poor access to betterment than any attempt to give them a larger share of a smaller pie. This would not please the poverty lobby, who try to define 'poverty' in terms of incomes below 60 percent of the average. This is inequality, not poverty, and can mean describing as 'poor' people who have cars and take holidays.

Many of us do not want to live in a society which tolerates deprivation, or is complacent about those who don't get adequate nutrition, healthcare, or education for their children. But having a sufficiency of such things is not about equality; it is about removing the causes of suffering and trying to redress the circumstances of inadequate provision.

The less fortunate might do better if society provides chances and opportunities for them to improve their lot, rather than turning poverty into pauperism by making them depend permanently on state handouts. A safety net to guarantee a minimum living standard is one thing. To redistribute more wealth from the successful to the less fortunate is another. It might not be the best way of helping them, and it might, in the process of trying, undermine the incentives by which people better themselves and their society.

The Institute of Chartered Accountants in England and Wales publishes a quarterly survey of business confidence, and the current report is the third in a row that makes rather depressing reading. Business confidence is, of course, down. In fact, it's the lowest it's been since the surveys started in early 2004.

The number-crunchers say that business confidence has sunk faster than the overall economy – which may just indicate the effect of a gloomy media, and the complete collapse of confidence in the financial sector. But however well the real economy is holding up, if people are too nervous to make investment decisions now, that can't be a good sign for the future. The accountants are predicting very low economic growth for 2008 – though they think that preparations for the Olympics, interest rate cuts, and consumers dipping in to their savings will spare us a true recession.

Genetically modified (GM) plants are helping to adapt to climate change. This is mostly because of drastically minimizing water use compared to non-GM plants. Worldwide 1.4 billion acres are already cultivated with DNA-modified crop varieties in 22 countries. However the same agency that took the lead in climate change alarmism is now seriously considering a moratorium on all field-testing and commercialisation of GM tress. This comes on top of already extant heavy-handed over-regulation that stifles innovation in biotechnology. According to a new paper from the Hoover Institution the UN may actually be worsening the global environment with its policy:

Irrigation for agriculture accounts for approximately 70 per cent of the world’s fresh water consumption… so the introduction of plants that grow with less water would allow vast amounts to be freed up for other uses. Especially during drought conditions…even a small percentage reduction in the use of water for irrigation could result in huge benefits, both economic and humanitarian.

With speculation about Tony Blair becoming EU President intensifying, it's time to take another look at William Hague MP's wonderful take on the subject. Junksmith is almost beginning to feel sorry for Gordon Brown...

Much is being said about the Granite securitisation and Northern Rock. Here's something actually sensible on the subject. And here's the FT taking that something sensible and expanding upon it.

Something else deeply unsensible: how can you write an entire chapter of a book on inflation without mentioning the two words "money supply"? 

Yet more: moves afoot to harmonise EU taxation: the apparent logic is that having tax competition will, umm, allow people to compete. 

Answering George Monbiot's accusations. If only George understood the subjects he was writing about... 

The Precautionary Principle is often likened to Pascal's Wager: here's why it isn't. 

Ever wondered why the amount ripped from you untimely in taxation only ever goes upwards? Because you're usually paying through the tax system for people who lobby for higher taxation. 

And finally, where all the education tax goes. 

Ferrovial's misfortunes may be London travellers' gain. The Spanish infrastructure group, which controls Heathrow, Gatwick, and Stansted (plus four Scottish airports) through its ADI (Airport Development and Investment) consortium, is under pressure from all sides.

The airport regulator (and recent ASI Power Lunch guest) Harry Bush seems likely to cut the return on the consortium's capital. The Competition Commission is also looking at the London airports monopoly, and may force the consortium to sell Gatwick. The economic slowdown has alarmed aviation executives, since holidays and business travel are some of the first things that people cut down on when times are tough.

All of which means that Ferrovial's shares have halved since last year, and its debts have soared. It needs to restructure fast. But the credit crunch has made that pretty difficult. Some commentators are speculating that Ferrovial will have to sell Gatwick, even if it isn't forced to by the regulator, just in order to make ends meet.

That would be good for travellers. When the Adam Smith Institute proposed the privatization of Britain's airports in the Airports for Sale back in the 1980s, we did not even contemplate the idea of the London and Scottish airports being packaged as a single unit. We were sure that a competitive structue with different owners would serve customers better. Now, more than two decades later, the regulators seem to be coming to the conclusion that we were right. It's a conclusion that air passengers - especially those who have to face the hell of Heathrow - came to a long time ago.

Fidel Castro’s retirement seems to offer a “once in a dictator’s lifetime” opportunity for Cuba to escape the injustices of Communism. However, with reports that brother Raul is of equal mind to Fidel, freedom could be as far away as ever. With the internal strangleholds over internal revolution, this may be a good time for the US government to change their policy towards Cuba, undermining the new leadership through trade and engagement.

If life is to improve for the people of Cuba, the US should consider ending its long-term trade embargo. It could be the necessary catalyst to move the country from the dead-end limitations of Venezuelan oil money to the limitless wonders of free and varied trade. However, President Bush (like those before him) is in a tight corner. The Cuban-American lobby puts strong pressure on the US to continue its embargo, a valid position in view of the many freedoms taken for granted in the US but routinely trampled upon by the Cuban government.

However, efforts like the Condozeela Rice led United States Commission for Assistance to a Free Cuba (CAFC) have failed. The best way to put pressure on the inadequacies of the Cuban system is to trade with them. Such a position was argued convincingly in the Financial Times last month. Cuba’s future may not come from the withered seeds of its home grown kleptocracy, the passing of power from dictator to dictator. Instead it could come with the inauguration of a new President and a change of US policy: from the energised democracy, ninety miles across the Straights of Florida.

41. "Privatization has given to a few hands industries and services which should belong to all of us."

The term 'public ownership' is a misnomer. The state sector may have the name of the public filled in on the dotted line, but the public do not own it in any meaningful sense of the word. All of the attributes of ownership, such as control, the right to determine what use is made of it and under what conditions, is determined by the bureaucracy in command of it. Far from being owned by the public, it is owned in effect by the people who administer it. The public actually has more influence, via its choices and purchasing decisions, on private sector businesses than it can ever have over state industries and services. In those cases its influence is diffuse and diluted through the political process.

Because the public has no choice over whether to pay for state services, or to choose what quality of service is appropriate for them, they have no power over them. In their absence it is the managers and workforce who increasingly direct the services to meet their needs and convenience instead of those of the public. The phenomenon, called 'producer capture' by economists, results in services which score low in customer satisfaction, and in the output achieved for the funds they receive.

When parts of the state sector are privatized, they are moved into that part of the economy over which people do have some control, and influence. It is the public sector which is in the hands of the few, and the private economy which is subject to the will of the many. And where state industries are privatized by widespread share issue, large numbers of the public do achieve some genuine measure of ownership, as opposed to the total myth which is what public ownership has always been.

UK Chancellor Alistair Darling, announcing the nationalization of failed bank Northern Rock:

"This is a temporary measure. The long-term ownership of this bank must lie in the private sector."

US economist Milton Friedman, reflecting on politicians' plans:

"Nothing is so permanent as a temporary government programme."

Castro resigns and Brad Delong has to man the barricades against the mouth breathers. This is both most droll and quite possibly true on the end of the embargo.

Greg Mankiw, Larry Summers and William Polley all agree: you should read Capitalism and Freedom.

An entirely wondrous and excellent find at The Guardian. Still there as Netsmith goes to press... 

The last bank nationalised for borrowing short and lending long was Continental Illinois. We might not like the results at Northern Rock to judge by that experience. But it is just like Bargain Hunt, isn't it?

Sausages and laws: you might actually prefer the tour of the abbatoir to this description of the legislature. 

A possible step on the way to a hydrogen economy. 

And finally, waiters everywhere are cheering wildly.