The latest argument for paid kidney donation

Apparently people receiving kidney transplants sometimes have to put up with pretty much any old dog end:

Almost 300 patients have been given kidneys previously turned down by other hospitals, with the majority not having been informed.

One in 11 kidneys transplanted from dead donors recently were used after at least three other units rejected them, official figures showed.

Doctors said a shortage of donors meant there was a need to use lower-quality “second-hand organs”. Critically ill patients are being forced to choose whether to hold out for a better organ that might never come.

Recipients were, however, not told that the organs had been turned down elsewhere. Patient leaders are calling for improvements to be made to enable patients to make informed choices. Patients are told what is wrong with the organs, but surgeons said it was irrelevant how many others had rejected them.

Kidneys have been offered on a “fast track” scheme after they had been rejected by five hospitals if the donor was brain dead, or three if the donor died after cardiac arrest since 2012.

This is not, to put it mildly, optimal. However, it is a useful illustration of the basic point about kidney transplantation. Which is that, very simply, not enough people die healthy enough to provide the kidneys needed for those who will die without a transplant. This is true whether we use an opt in system, an opt out one, even if we nationalised the cadavers of everyone in the country. We have to supplement that cadaveric supply with live donations.

At which point we'll make our now ritual point. There's only one country in the world with no shortage of kidneys for transplant. There's also only one country that allows direct compensation of live donors (under quite strict government and ethical control, of course). Iran is the only place that manages both. given that this does in fact work, does save lives, it's really something we ought to be doing ourselves. And, given that a transplant is vastly cheaper over time than continued dialysis it would save the NHS substantial sums if we did just bung a live donor £25k or so.

There really are some things that are just too important not to have markets in them.

Dollarisation in Ecuador

Over at the free banking blog, Larry White has a very interesting post on dollarization in Ecuador. He outlines the history of the dollar in Ecuador and rehearses some of the key arguments in favour of free banking, and against its critics.

The dollarization of Ecuador was not chosen by policy-makers. It was chosen by the people. It grew from free choices people made between dollars and sucres. The people preferred a relatively sound money to a clearly unsound money. By their actions to dollarize themselves, they dislodged the rapidly depreciating sucre and spontaneously established a de facto US dollar standard.

Finally, in January 2000, Ecuador’s government stopped fighting their choice. Until that point the state tried to use legal penalties or subsidies to slow currency switching. Today the state threatens an attempt to reverse the people’s choice through legal compulsion.

He points out that the dollar was consistent with rapid economic growth and general success: between 2000 and 2013 the Ecuadorean economy grew a cumulative 75%, or an average of 4.4% annually, compared to just 36% in the previous 13 years (equivalent to 2.4% annually). And dollarisation has not just been good for output and living standards, but also the stability of banks:

Dollarization has also brought improvement to Ecuador’s banking system, according to two analysts at the Federal Reserve Bank of Atlanta. Mynam Quispe-Agnoli and Elena Whisler, in a 2006 article, noted correctly that dollarization, by ruling out an official lender of last resort able to create dollar bank reserves with the push of a button, eliminates an important source of moral hazard.

In this way dollarization has the potential to reduce risky bank behavior, and thus so “make banks runs less likely because consumers and businesses may have greater confidence in the domestic banking system.” Lacking the expectation that “the monetary authority would come to the rescue of troubled banks” whether solvent or insolvent, banks in a dollarized system “have to manage their own solvency and liquidity risks better, taking the respective precautionary measures.”

He ends by giving strong warning that a return to state compulsion in the use of currency will worsen the country's prospects. The state seems, White suggests, to be trying to bring back state currency control on the sly, through unifying all mobile payments under one system, something he argues is completely unnecessary.

In sum, there is no plausibly efficient or honorable reason for the Ecuadoran government to go into the business of providing an exclusive medium for mobile payments. Consequently it is hard to make any sense of the project other than as fiscal maneuver that paves the way toward official de-dollarization. I gather that President Correa does not like the way that dollarization limits his government’s power to manage the economy. He has compared the limitation to “boxing with one arm.” But as I have already emphasized, retiring the government from boxing against the economy by means of money-printing is precisely dollarization’s great virtue.

Rated R for Repression

On Monday, a new law governing the type of pornography that can be produced in the UK came into force. From hereon in, online, video-on-demand content made or sold in the UK must conform to the same guidelines binding DVDs sold in sex shops, with content more 'extreme' than the British Board of Film Censor (BBFC)'s R18 classification will permit prohibited.

Such services already had to adhere to the Crown Prosecution Service’s guidance on the Obscene Publications Act, which lists a number of activities it is illegal to broadcast. However, the BBFC’s R18 classification is far more restrictive and outlaws the portrayal of a far greater number of sexual acts. There's a very educational list of what's prohibited on obscenity lawyer Myles Jackman's blog should you wish to be exactly sure, but it includes anything other than ‘gentle’ spanking, whipping and caning, activities that can be classified as ‘life endangering’, such as strangulation, the portrayal of non-consensual sex and female ejaculation. The R18 rating also dictates what objects can be inserted into a consensual adult’s body and how, whilst outlawing instances of verbal and physical abuse, even if consensual.

The UK now has some of the most draconian laws on the production of porn in Europe. Mary Whitehouse might smile approvingly from beyond the grave, but for today's warm-blooded Brits this is a real kick in the nuts.

First of all, it’s bad for the UK porn business and its customers. In the grand scheme of things the impact on the fetish porn purveyor may not be huge, because UK citizens can still access content produced from around the world online. A number of UK performers and businesses will be affected, though, and forced to close shop or start lengthy proceedings to attempt to exempt themselves from the purview of the regulations.

These regulations apply to all video-on-demand services, which are regulated by the quango ATVOD (Authority for Television on Demand). ATVOD's authority stems from EU regulations surrounding 'TV-like' services. However, ATVOD takes a very liberal interpretation of what these 'TV-like’ services are, with both the BBC and the Sun newspaper appealing to Ofcom to have themselves removed from such classification. This large regulatory scope means that adult, video-on-demand websites in the UK are considered 'Tv-like’ and regulated as such, whereas in most other European jurisdictions the majority of sites are not.

However, these changes aren’t just bad for the UK’s comparative advantage in pornography - they’re a chilling act of censorship. The EU Directive empowering ATVOD states that content which ‘might seriously impair minors’ should be restricted to protect those under-18. However, completely prohibiting the production and sale of pornography beyond R18 classification is not ‘protecting children’ so much as seeking to prevent all adult’s access to it.

The law change was pushed by DCMS, who argued that the laws surrounding DVDs and online video were inconsistent. Maybe so, but to expand the remit of a censorship board which decides what is acceptable pornography and what is unclassifiably taboo is regressive and a significant restriction on freedom of expression. As Jerry Barnett, founder of the Sex and Censorship campaign claims, the R18 rating is "a set of weird and arbitrary censorship rules", for which "there appear[s] to be no rational explanation…they are simply a set of moral judgements designed by people who have struggled endlessly to stop the British people from watching pornography".

As has been noted, many of the acts prohibited for distribution under the new laws are those which offer an alternative to the mainstream porn offerings, are often performed and enjoyed by women, and considered empowering by those who engage in them. None of the acts are illegal to perform or enjoy, and some are simply bodily functions. We should be expanding the scope of the R18 classification to encompass all legal adult behaviour engaged in for pleasure, not busy censoring. To suggest that adults should be shielded by law from legal, but apparently 'unacceptable' acts of enjoyment is to return to the mentality towards homosexuality in 1967, when it was considered a 'shameful disability' and tolerated only 'behind locked doors and windows and with no other person present on the premises'.

Given that the new law only applies to UK porn producers and will not significantly reduce the amount or type of porn available in the UK, this seems a particularly ill-thought out piece of moralism.  However, one possible concern is that this will be followed by calls for foreign adult sites to register with ATVOD and be censored, or for ISPs to block the sites. And, as Myles Jackman warns, "pornography is the canary in the coal mine of free speech: it is the first freedom to die. If this assault on liberty is allowed to go unchallenged, other freedoms will fall as a consequence". Now that really is obscene.

Is this a fiddle in the Autumn Statement?

As we all know, knowledge is local and dispersed. A corollary of this is that you, the readers collectively, will always know more on any specific subject than one single writer on this side of the software. At which point to ask you a question. We've got the BBC telling us that public spending is going to fall to levels not seen since the 1930s. This does seem unlikely: although if we could get government back to the sort of levels of interference in our lives of the 1930s that would be both nice and an achievement.

The Office for Budget Responsibility (OBR) says spending on public services is heading for an 80-year low.

In its report accompanying the Autumn Statement, it projected that spending by central government on public services was going to fall from 21.2% of gross domestic product (GDP) in 2009-10 to 12.6% in 2019-20.

As a proportion of GDP, that would probably take spending on public services to its lowest since the 1930s.

That report is here.

Note that this isn't public spending as a whole: this is nothing to do with pensions or the welfare state or other transfer payments. This is solely what is spent upon public services, not money shuffled from one citizen to another.

And the question is, how important is that word "central" in that calculation?

For example, just imagine we moved NHS funding from its current system to the Swedish or Danish one? There it is, respectively, the counties and the communes that raise and spend the taxation that pays for the health care systems. That money simply doesn't flow through the national treasury nor the central government (which is why Denmark's standard national income tax rate is 3.76% and the top one 15%). We can all think of reasons why this might be better (local accountability, greater efficiency) and possibly some that it might be worse (postcode lottery!). But it's not obvious that there's either less or more government spending on public services in either system: but there's obviously a huge difference (as much as 10% of GDP) in central government spending.

So, of this reduction in central government spending on public services how much is a reduction in government spending on public services and how much is just the movement from central to some other level of government spending?

We could argue that the Scottish and Welsh NHSs, for example, are covered by the Parliament and the Assembly, therefore aren't any longer central government. There's a change coming in the allocation of business rates. As was these were all collected centrally and then apportioned. The new system will see some being retained locally and spent locally: if that a reduction in central spending but not in public spending? As things become devolved do they fall out of central spending but still remain public spending?

In other words, how much of this reduction is not really a reduction, just changes in the budgets that the spending is coming from?

Over to you: and let there be more light than heat.

It’s time the government let adults - even the smokers - grow up

While the under-12s and orchestras hit the jackpot in yesterday's Autumn Statement, tobacco companies were subtly thrown under the bus, as the Chancellor quietly committed to a consultation to determine how much more money tobacco companies should be contributing to public services; a pledge Labour has already signed on to as well. Specifically, the consultation will look at the “introduction of a levy on tobacco manufactures and importers,” which could raise taxes on tobacco companies by millions of pounds a year.

From the Independent:

The tobacco industry should pay for the costs it imposes on British society, the Chancellor has said, signalling that the Government will back a levy on tobacco manufacturers and importers.

In a low-key Autumn Statement announcement, George Osborne committed the Government to a consultation on how tobacco companies could make bigger contributions to the public purse.

Specifically he said:

Smoking imposes costs on society, and the Government believes it is therefore fair to ask the tobacco industry to make a greater contribution.

The Government will shortly launch a consultation on introducing a levy on tobacco manufacturers and importers.

My colleague Ben has just recently addressed these ‘costs on society’ the Chancellor references, and debunked a fair few of them. He also pointed out the known, positive effects of nicotine, and reminded us that, despite all the lies perpetuated around smoking and NHS spending, smokers, on average, take up less health expenditure over their lifetime than non-smokers do.

My two-cents goes something like this: What cost on society? Sure, there’s a cost on the smoker, who will deal with the consequences that come from inhaling all sorts of questionable stuff – but adults get to make those personal decisions and take those risks. All choices have a cost, but in the case of cigarettes, the individual bears the brunt of the consequences; not the public at large.

But more powerful than the adults trying to make decisions about their personal lifestyles is the government, which is treating cigarettes the same way children tend to treat stuffed animals – labelling them with human-characteristics; acting as if objects are inherently bound to be good or bad.

And when it comes to cigarettes, the government has deemed them inherently evil. And it’s the tobacco companies, of course, that are proliferating them (remember, public demand matters very little to paternalists), so naturally, they must be taxed to the death.

But you know who’s really going to suffer when push comes to shove and levies are imposed? Low earners – who probably will, but can't afford to, see cigarette prices rise when the levy comes into play. Because, at the end of the day, these levies aren't coming in to save public health; they're there to save vulnerable public budgets. It's time the government came clean on that—childish, indeed.

Things really are getting better

What are we to make of the UK Autumn Statement? The recovery is stronger than predicted, unemployment has fallen faster than anyone can remember, inflation is lower, interest rates are falling... the government is going into an election with the best economic figures in memory. All of that, the strong pound, growth in the 2-3% range, earnings up, inflation down - all of that should help the Conservatives, come the general election on May 8th.

The deficit is still a problem...bigger than forecast. But interest rates have been kept low, so borrowing has not been a strain: the bond markets have not been spooked.

As for the next election – and the Autumn Statement is very much a political thing – it looks like a large number of MPS, maybe 80 or more,, will be neither Conservative nor Labour, a big change on previous governments. The worst prospect is for a government with several coalition partners. One coalition partner is manageable – two or three, not so.

An unstable coalition partnership of several parties would be a disaster. The markets would just go into a tailspin. Ho hum. Right now, the government is benefiting from ultra-low interest rates. Again, if that does not last - and how can it - things might look much messier. The Conservatives want to cut public spending to more like 35% of GDP, the lowest it has been in decades. But if there is a complicated coalition arrangement, that is a no-hoper.

The eurozone remains the biggest trhreat to the UK. It is flatlining, going nowhere. That is one reason why the Office for Budget Responsibility has downgraded its growth forecast.

The bad news is that those on low income have seen almost no rise in their earnings since the financial crash. Those on top incomes have seen wages rise 20%. This is not a very even recovery.

Meanwhile, people have been lured off benefits and into jobs, thanks to the rise in tax thresholds that the Adam Smith Institute was promoting long before the Liberal Democrats thought about it – isn't it crazy that folk on the minimum wage should pay tax at all?

Ho hum, indeed. It's the economy, stupid. The Tories should have done a lot more to balance the books. But they may have done enough to convince us that things really are getting better.

When Sam Bowman and George Monbiot agree then we know the End Times are near

Rains of blood will obviously follow, cats will lie down with dogs:

Sam Bowman, deputy director of the Adam Smith Institute, said: ‘The housing shortage does not exist because the private sector doesn’t want to build new homes. The problem is that developable land is so scarce because the planning system makes it so.’

This is clearly and obviously so, as we have demonstrated in these pages many a time. But Sam's not the only person to have got the right end of the stick here. Much to everyone's surprise, George Monbiot has managed it too:

The Scottish government might address the speculative chaos that mangles the countryside while failing to build the houses people need. It might challenge a system in which terrible homes are built at great expense, partly because the price of land has risen from 2% of the cost of a house in the 1930s to 70% today.

Except that it's not quite the price of land which has risen. That's some £10,000 a hectare for reasonable agricultural land these days and that's suitable for 14 dwellings (according to the density rules that the planning system insists upon). That just ain't 70% of the cost of a house. It's land that has the planning permission attached to it that allows you to build 14 houses on it that costs the vast amount: it's the cost of the chitty, not the cost of the land.

But with that slight correction, yes, we are all on the same page here. Housing is expensive and it's the planning system than makes it so. Thus, if we desire cheaper housing then we need to reform ("reform" here being a synonym for "blow up with extreme vehemence") the planning system.

And given that the End Times must indeed be approaching given this convergence of views perhaps we can also hope for a murrain that strikes NIMBYS*, BANANAS** and politicians***?

* Not in my back yard people

** Build absolutely noting anywhere near anywhere people

*** A third and virulent plague upon our society.

Osborne scraps the worst tax in Britain – the ASI's reaction to the Autumn Statement

Here are our comments on today's Autumn Statement: Stamp duty:

Head of Research at the Adam Smith Institute, Ben Southwood, said:

The old stamp duty slab system was one of the worst taxes Britain had, and we welcome the Chancellor's radicalism in abolishing it, rather than simply tinkering around the edges.

According to the best economic research, raising £1 through stamp duty imposes £2-£5 of cost on the economy. Though it will still, as a transactions tax, cost the economy heavily, the reform will reduce the economic cost substantially. This is a tax cut for the squeezed middle that will make a big difference to a lot of people's lives. Politically, it could be a game-changer.

Business rates:

Deputy Director of the Adam Smith Institute, Sam Bowman, said:

A cap on business rate rises is welcome but the rates system itself needs more fundamental reform. The longer rates take to be revalued, the more distortionary the system is, penalising firms located in areas that have done badly since the last valuation. The longer the gap between rates revaluations, the greater the penalty for businesses in poorer areas and the effective subsidy for businesses in richer ones. Ideally the government should move towards a system of constantly rolling rates revaluations. If Zoopla can judge land values accurately on a rolling basis, so can HM Treasury.

Road infrastructure:

Head of Research at the Adam Smith Institute, Ben Southwood, said:

Infrastructure investment, especially into congested roads, is bound to pass a cost-benefit analysis. The problem is that we had to wait this long. If private firms could build roads, funded by tolls, then we'd likely have all of these roads already. As well as providing funds for investment, and making sure the investment goes to the most in-demand areas, pricing roads also means they get used more efficiently.

Pensions: 55% tax, tax-free inherited ISA

Director of the Adam Smith Institute, Dr Eamonn Butler, said:

The Chancellor is right to kill off the iniquitous 55% tax on inherited pensions, as well as the tax on inherited ISAs. If people have saved for their retirement but die before exhausting their nest-egg, it should go straight to their dependents, not to the Chancellor.

NHS Spending:

Communications Manager at the Adam Smith Institute, Kate Andrews, said:

The Conservatives, along with the opposition parties, are playing politics with the NHS budget. Everyone is vying to be seen as the 'party of the NHS' but no one is willing to have a serious conversation about the reforms that could make the NHS financially viable for the next ten years, let alone for future generations; like charging small fees for non-emergency visits.

It's been estimated that the NHS could fall into a budget crisis as early as 2015, which could result in cuts to core staff, longer patient waiting lists, and a deterioration in the quality of health care. While the extra £2 billion per year proposed by Osborne today will offsets short-term worries, it merely kicks the can down the road for a little while longer. Serious proposals to address the spending and demand that comes with free care ‘at the point of use’ could not come soon enough.

Personal Allowance rise:

Deputy Director of the Adam Smith Institute, Sam Bowman, said:

The Adam Smith Institute has called for the personal allowance to be raised to the full-time minimum wage rate for over a decade and it is welcome to see the government move in this direction. But the National Insurance Contributions threshold has been left untouched, which costs full-time minimum wage workers £667.68 a year. To really help low-income workers the Chancellor should make raising the National Insurance threshold one of his top priorities.

Capital gains tax on property for foreigners:

Head of Research at the Adam Smith Institute, Ben Southwood, said:

Capital gains taxes are some of the worst ones on the statute book, making society poorer by reducing the efficiency of investment and its total amount, but if we have to have them then everyone should pay them.

This is not just because of fairness, but because it causes massive distortions when different groups face different tax rates. In this case it's likely to both lead to excessive foreign ownership of property—both by favouring foreigners over natives in property taxes and by favouring property over other assets for foreigners.

Masters degree loans:

Director of The Entrepreneurs Network, Philip Salter, said:

By extending Entrepreneurs’ Relief and R&D tax credits George Osborne is backing Britain’s entrepreneurs. However, the government’s intervention in the postgraduate student loan market risks crowding out private sector solutions. Banks already provide Professional and Career Development Loans, and entrepreneurial companies like Future Finance, StudentFunder and Prodigy Finance are responding to the demand for loans for postgraduate studies. We are on the verge of the equivalent of the funding revolution we are seeing in SME finance but this intervention risks stymieing it.

The deficit:

Deputy Director of the Adam Smith Institute, Sam Bowman, said:

The deficit is still enormous and much higher than anybody expected at the beginning of this Parliament. We are borrowing £100bn this year, both because planned cuts to the welfare budget have not taken place and because the growth we have had has not translated into much extra tax revenue. But as high as this is, the Chancellor’s plans to reduce the deficit still seem credible – financial markets are lending to the country at unprecedentedly cheap levels and once productivity eventually does start to recover, things should begin to look considerably better.

Notes to editors:

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.

Gabriel Zucman's latest very interesting paper

There's much huffing and puffing about the information in that above chart. The capitalist bastards are taking an ever growing share of the economy and something must be done! And then along comes Gabriel Zucman (he's the third of the Parisian economic trio, along with Emmanuel Saez and Thomas Piketty) to try and tell us that this really is a problem and something must be done! Except the evidence that he shows us tells us that it's not the problem that it is usually identified as. Here's his latest paper:

Measuring the costs of tax havens to foreign governments is fraught with difficulties. However, balance of payments data and corporate filings show that US companies are shifting profits to Bermuda, Luxembourg, and similar countries on a large and growing scale. About 20 percent of all US corporate profits are now booked in such havens, a tenfold increase since the 1980s. This profit-shifting is typically done within the letter of the law and thus would be best described as tax avoidance rather than fraud.

There's certainly profit shifting going on but it's not profits being shifted out of the US and into those tax havens, not to any great degree at least. The IRS isn't dumb enough to allow that at any great scale. What is happening is that US based corporations are making larger profits from their foreign activities and then parking them in those tax havens.

Yes, really: the way that US profits as a share of GDP is calculated is that all profits made by US domiciled firms are counted as part of US GDP. So, Glaxo's profits in the US (and the associated underlying economic activity that generates them) are part of US GDP. Apple's profits in the US, and the associated underlying economic activity in the US, are part of US GDP. But, crucially, Apple's profits in Europe, but not the underlying associated economic activity in Europe that generates them, are also part of US GDP. So, if Apple's European profits rise then US GDP rises by the amount of those profits and the capital share, or the associated profit share, of US GDP also rises by the same amount. But, of course, that means that the profit share of US GDP rises: but that's purely an effect of the way that we calculate the numbers. Nothing has flowed from labour to capital in the US economy. The workers aren't getting any less of the portion of their labours.

Simply, foreign profits of US corporations have risen. This means absolutely nothing at all to the US domestic economy in the sense that while, because of the way we measure it, the capital (or profit) shares are rising, there's simply no effect at all on the division of spoils inside the American economy.

Zucman is also showing that this is a significant effect. At least two whole percentage points of GDP.

Of course, Zucman is also telling us that this is terrible and that something must be done! On examination however it seems to be largely of no import at all. So, Apple is increasing its European profits. This is bad because?

A solution to the reclining airplane seat dilemma

Anybody who has to fly home for Christmas will know the reclining seat dilemma. It's kind of annoying if the person in front of you reclines their seat and usually forces you to do the same. (Which puts the person behind you into a tight spot and forces them to recline too, and so on.) Josh Barro, invoking the great economist Ronald Coase, suggests paying the person in front not to recline, but Virginia Postrel disagrees:

This solution, however, is highly unrealistic. It waves away the central theme running throughout Coase’s work: the problem of transaction costs. Making and enforcing contracts, Coase emphasized, isn’t free. And when it comes to airline seats, it’s a lot more costly than Barro admits.

In theory, I could have offered the guy in front of me money to sit up, but even assuming that my fractured Italian had been up to conducting the negotiations and that he wouldn’t have gotten nasty in response to my overtures, how would I have enforced the deal? It’s not a simple problem, and certainly not a cost-free one. Suggesting that as long as property rights are well-defined, you can simply make a deal misunderstands what Coase was all about. He was obsessed with transaction costs. They explain why we have institutions (including firms), not just individual bargains.

It's also kind of embarrassing to do this, because some eccentrics think 'commodifying' parts of everyday life is a bad thing. Postrel's solution is a little more elegant. Divide the plane down the middle, with seats on the left able to recline and seats on the right fixed in position. If it turns out that people prefer one side to the other, charge more for that and less for the other. It's so simple it might just work.