The kidnapping of Adam Smith

Adam Smith was kidnapped by gypsies at the age of 4, and was rescued by his uncle, who, according to some accounts, led a horseback posse into the woods to achieve this. It might have been the most exciting thing that happened to Smith in his lifetime. He lived most of his life with his mother, never married, and led the life of a scholar in research and writing.

He has, however, been kidnapped many times since his death as assorted scholars and others have sought to explain that he didn’t mean what he wrote, and was really on their side. Every few years some new study comes out to reinterpret Smith’s work, and after the initial reaction, quietly disappears. Even Gordon Brown had a go. Smith has been claimed as a kind of proto-socialist, and even as a precursor of Karl Marx. To be fair, Marx did indeed adopt one of the very few things Smith was wrong about, namely the labour theory of value.

The Adam Smith Institute is usually derided in such reinterpretations for abusing the great man’s name and propagating a cardboard cut-out simplification of his ideas. The straw man is a simplistic, capitalist, laissez-faire apologist for the abuses of big business. This is not what the ASI does. Our emphasis starts with Smith’s “Theory of Moral Sentiments,” the book that first established his reputation. The human “sympathy” (which we would call “empathy”) that we all share leads us to identify with our fellow men and women, and is the source of our morality.

Far from assuming that some “invisible hand” will direct selfishness to achieve social goals, we note that Smith only used the phrase twice, in discussion of income distribution and production. We do, however, highlight his reference to “the uniform, constant, and uninterrupted effort of every man to better his condition,” to point to the importance of incentives. And we also quote his observation that. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest,” to show that a legitimate self-interest can provide goods and services that benefit others.

We share Smith’s skepticism of government, and his observations about the way in which markets generally allocate resources. And we heartily endorse his rejection of mercantilism and protectionism. These would be difficult to explain away, but that doesn’t stop people trying.

The problem is that “Adam Smith” has become like “Freedom,” with such favourable connotations that everyone wants to be on the same side. For some this can only be achieved by redefining the original. Thus we hear of “Real freedom” and “What Adam Smith actually meant.”

At the ASI we tend to take the unremarkable view that he probably meant what
he actually said.

Would you describe yourself as a cynic or a realist?

Our view of this is more than a little dyspeptic. The question is though, should we be describing ourselves as cynics here, or realists? 

The European Union has been accused of using the world's poorest as a “bargaining chip” after threatening to pull funding from British aid organisations in the event of a no-deal Brexit.

Senior officials at the European commission have been inserting disclaimers in aid contracts warning UK development charities that they could be dropped as a partner in programmes should Britain crash out of the EU next year.

The move has brought fierce criticism and warnings it will hurt “the most vulnerable people on the planet”.

As we're all aware that third sector has quite some influence in our domestic political life. To threaten to pull large parts of their funding unless - well, there's going to be a certain amount of activity on that unless, isn't there? 

Large charities losing a chunk of their funding unless there's a deal, that deal quite obviously being something the EU itself gets to determine by agreeing to it or not. It's possible to describe this as having bought the loyalty and activity of a large portion of that influential third sector.

The interesting question is whether that description reveals one to be a cynic or a realist.

One estimate tells us that UK charities receive some £300 million from the EU. That'll buy quite a lot of political pressure.

For example: 

Friends of the Earth, the environmental charity under fire for openly campaigning to keep Britain in the EU, is "urgently" reviewing whether its activities breach new impartiality guidelines.

The charity pledged to look "very carefully" at how detailed advice from the watchdog released on Monday impacts its campaigning as a Tory MP formally complained it was breaching the rules.

In findings that will fuel claims of a conflict of interest, analysis by this newspaper has found that Friends of the Earth groups received almost £10m of EU funding in recent years.

So, are you a cynic or a realist? 

They're at it again, like rabbits again

Prostitution exists and some think it shouldn't. Our own view is that consenting adults get to do as they wish subject only to their not harming the same ability of others to do as they wish. OK - but that's no excuse for people to be lying about it all.

Which is what we are seeing here. A determined effort to manipulate the language - so badly as to be such a lie - so as to sway the body politic. For there's a very large difference between sexual exploitation and sexual exploitation.

The one is the forcing of people into sexual slavery, repeated rape in short. The other is being defined as people voluntarily offering sexual services in exchange for cash, rather than love, fun or a date. We're being told that the first is the reason why the second should and must be banned. 

There is a certain problem with such manipulation:

Ministers will come under intense pressure from a cross-party group of MPs this week to follow the US by banning so-called prostitution websites amid mounting evidence that they are enabling a huge growth in sexual exploitation and the trafficking of women to the UK for profit.

That cross party group. It's an all parliamentary group, meaning whatever selection that have a particular bee in their bonnet. But there are others joining the bandwagon:

France has led the way by taking action on prostitution websites under comprehensive anti-pimping laws and, crucially, tackling the demand underpinning them – by criminalising paying for sex, and decriminalising selling sex. It is time the British government did the same and finally woke up to the sexual abuse scandal playing out in brothels across the country.

It's entirely true that there has just been a successful prosecution for sexual trafficking. But that is as a result of the law already having been changed to blur an essential distinction.

The proper meaning is the movement of people into that sexual slavery and repeated rape. An appalling crime which should indeed be heavily punished. The problem being that a decade back we had a great big look at this. Operation Pentameter found precisely no one to prosecute for it. That was every police force in the country specifically investigating for it. Details here. The meaning being used by these campaigners - and the law currently - is the organisation and movement of people across geography to voluntarily take part in cash based sexual transactions.

This is a different thing.

That thing which we all righteously abhor doesn't, to any appreciable level, exist at all. But the language is being hijacked to outlaw what some 80,000 people - the estimated number of prostitutes in the country - voluntarily do.

In Britain, prostitution advertising websites continue to operate, the UK’s patchy and inadequate laws against commercial sexual exploitation leaving sufficient leeway for them to profiteer openly.

That's actually what they're complaining about and that's what they want to ban. We disagree with them and they've every right to argue their case as they wish. But we do indeed think that using the non-existence of sexual slavery to ban consensual, if paid, sex is a torturing of the evidence and language amounting to a lie.

Venezuela Campaign: Law & Order

Venezuela is the world’s most dangerous country for the second year running. More than 40% of Venezuelans have been victims of robbery or theft, leaving just 17% of Venezuelans feeling safe as they walk home at night. But it is not just property crime: there are 24,000 violent deaths a year, and nearly a quarter of Venezuelans have been assaulted. Venezuela is more dangerous than actual warzones, and the Foreign Office now advises against all but essential travel to Venezuela. Some areas of Venezuela are completely off-limits, as the breakdown of law and order in the country has led to a massive increase in criminal activities, including kidnapping and drug smuggling.

If Venezuelan criminals were not enough to be afraid of, the government is brutally cracking down on political dissent. Over 8,000 people have been killed by security forces since 2015, in addition to the many wounded when riot police are deployed to disperse protests. Additionally, the security services seem to be operating outside the law. The UN has declared the rule of law to be 'virtually absent' from Venezuela, and that extra-judicial killings and disappearances are rife. As a result, less than a quarter of Venezuelans have confidence in their police.

This has been facilitated by President Maduro, who has consolidated his hold on power and removed all remaining checks and balances on his office. The Attorney-General who questioned the security services’ use of force and opened investigations into them has since been removed from office by Maduro. UN inspectors were not allowed into Venezuela and had to assess the situation remotely. Maduro’s refusal to cooperate with the UN is deeply troubling, as it shows that he has something to hide.

Venezuela is a country in which people are at risk from both criminals and their own government. Law and order has broken down to the point that the country is more dangerous than war-torn Afghanistan. This is appalling and there must be change for the sake of the Venezuelan people.

More information on the Venezuela Campaign can be found on their website. 

Rural broadband - if it's not worth it, it's not worth it

A useful guide is that if something's not worth doing then it's not worth doing - whoever is paying for it. This is true of, say, a road. If the benefits of having it are lower than the costs of doing so then don't build it. This is true whether it is privately or publicly funded.

This is also true of rural fibreoptic broadband:

Rural communities risk being left behind if the Government fails to subsidise the rollout of fibre broadband across the country, ministers have been warned. 

The National Infrastructure Commission said that the Government needs to go "further and faster" by subsidising the rollout of fibre broadband in rural areas to replace the ageing copper wiring. 

We're not even certain that this is the right technological solution. There are, after all, vast areas of the world which will never be wired up for landlines - mobile has superceded that requirement. We don't know but we can imagine that the onward development of mobile data will create the same situation.

However, it's still not true that we should be running fibre to every hamlet:

His report, due to be released next month, will recommend that while private businesses are likely to install broadband for urban areas, the Government must intervene to ensure it is also extended to people in remote and rural communities.

Schemes have already been launched by firms to install fibre broadband including CityFibre and Vodafone, Virgin Media and BT, but these programmes less likely to be commercially viable in rural areas, because the cables and too expensive to install and reach fewer people.

The clue is in that too expensive to install. The cost of installation will be more than the value of it. This is something that makes us poorer and therefore should not be done.

Even if we want to move up one level in analytical sophistication - perhaps it is worth it but the installing company cannot capture that value. In which case those who do gain that value will install, won't they, as with those Welsh villagers who've just got out and dug their own trenches. 

Living rurally does indeed mean access to less infrastructure, it's rather the definition in fact. We don't run water, sewage nor electricity to every cottage in the land on those very grounds of cost effectiveness. The same is and should be true of fibre.

Who pays for this, the resident or the general taxpayer, doesn't change that base calculation.

Menstrual leave - well, it's a great way to increase the gender pay gap

As we're continually told one of the great afflictions of our civilisation is the manner in which men and women - in general and on average - earn different amounts. Our continued insistence that this is about the manner in which - in general and on average - men and women seem to make different choices about how to earn money seems to cut little mustard.

This though would be a great way of increasing the problem being complained about:

Perhaps legalised time off is a solution. Legislation offering menstrual leave exists already. Women in Japan, Korea and a few other countries are allowed to request days off work, something that one academic called “an unusual institutionalised practice”. It sounds like a good idea. When Italy tried to bring in similar legislation last year, it didn’t pass, and critics came up with the usual objections: Italian women are already stigmatised for their biology, with some employers forcing them to sign undated resignation letters in case they become pregnant. Other objections: menstrual leave sends the message that menstruation is a disease or an affliction. It is sexism, or stigmatisation. It may lead to the women who seek menstrual leave being paid less...

There's no may about it.

Now it is true that most of us around here are men and of an age kindly called rich in maturity. Which means we have seen some of that world out there. It's not so much the menses as the pre- at issue here. So, let us be kindly and suggest two days as this menstrual leave.

So, what is the effect upon annual wages of an extra 26 days (no, lunar months here) off, or at least potentially so, each year? Note that's rather more than 10% of the usual quota of working days in a year. Pay of those gaining such time will be higher or lower than that of those who don't on that annual basis? 

Quite, if you actually wanted to increase the gender pay gap you'd find it hard to come up with a better plan, wouldn't you? 

No, school choice doesn't cause gang violence

On Tuesday, my colleague Daniel Pryor appeared as a witness on BBC Radio 4’s The Moral Maze to discuss the causes of gang violence. He made a persuasive case that ending the prohibition of recreational drugs such as cannabis would reduce gang violence just as the end of the prohibition of alcohol reduced gang violence in the US.

After Daniel deftly dealt with Melanie Phillips objections, another questioner Matthew Taylor, a former Head of the Number 10 Policy Unit under Tony Blair, suggested that it was competition between schools that caused gang violence. He said that schools were excluding difficult pupils and they were ending up in the hands of gangs as a result.

Putting aside whether this is a case of correlation and not causation, after all the same pupils might have been excluded in the first place because they were violent, the evidence simply doesn’t show school choice leads to more crime. In fact, it’s the opposite.

One study by Corey DeAngelis and Patrick Wolf looked at the Milwaukee School Voucher program. They matched 1,089 Milwaukee students who used the vouchers to attend private school with 1,089 similar public school students on the basis of grade, race, gender, English language learner status, baseline math and reading test scores and neighbourhood.

They then checked the Milwaukee criminal record database for the students names when they were between 22 and 25 years old. The results were impressive. They found “attending a private school through participation in the Milwaukee voucher program was associated with a 79 percent reduction in the likelihood that a given student would commit any felonies and a 66 percent reduction in the likelihood that a student would commit any misdemeanours.”

There’s evidence too that when voucher programs are tried that state-run schools tend to get better as well in response to the competition. According to a review by Dennis Epple, Richard E. Romano, and Miguel Urquiola “evidence on both small-scale and large-scale programs suggests that competition induced by vouchers leads public schools to improve”.

Another study looking at Charter Schools (the American equivalent of Free Schools) by Roland Fryer and Will Dobbie found that winning a lottery to attend a charter school in Harlem had massive crime-reduction benefits, reducing the risk that a male student would be incarcerated by 4.4 percentage points.

A further study by David Deming also looked at lottery winners who got to choose the school they wanted (this time in North Carolina). He too found that letting parents pick the school their children go to lead to significant falls in criminal activity.

It’s likely that gang violence has many causes, but forcing schools to compete by giving parents choice over where they study simply isn’t one.

Excellent, health care - even the NHS - works by the normal eonomic rules

As we know the National Heath Service is the national religion. As such we're continually told that it's different. That the rules which apply are in some manner orthogonal to the rest of reality. This being a usual feature of religions.

This appears not to be so:

GPs are doling out fewer antibiotics after being paid bonuses for cutting prescribing levels, research shows.

Under the schemes, groups of doctors can receive an extra £5 for every patient on their list if they meet targets to cut antibiotic prescribing.

A study by Imperial College London and Public Health England found that the financial rewards helped to reduce antibiotic prescriptions for common respiratory tract infections by three per cent.

The first thing to know about standard economics being that incentives matter. Here we have a simple response to a simple incentive. We are not off in some alternate reality, we're in this world with the normal rules.

Markets increase efficiency and productivity. Indeed, so far as we know, competition is the only manner in which productivity continually increases over time. For economic systems without it don't.

Similarly, prices do indeed impact demand.

Excellent, we can get on with discussing health care - yea even the NHS - using the normal rules we have about reality and human reactions to it. That is a relief, isn't it? 

Tariffs and Trade Wars

In this week's Madsen Moment, Dr Pirie takes aim at those that play with fire when they propose tariffs and trade wars. 

Judging productivity measures in the NHS

As the demands upon the NHS increase, it needs to harness technology and drive out waste to be more productive.  More targeted and effective drugs and keyhole surgery have done that and in some maternity wards, expectant mothers barely have time to warm the bed sheets before, babes in arms, they are in their taxis going home. 

Yet in all the debate about funding, there has been little if any discussion of productivity, how should it be measured or how it should be enhanced.  The health lobby has politicked its way to more funding without any commitment to the better use of that funding.  Both nationally and for secondary care (hospitals) productivity should be the key metric: how much is spent matters less than the money being spent as well as it could be.

Measuring healthcare productivity, i.e. dividing the multivariate outputs by the inputs, is not easy. The Office for National Statistics takes the outputs to be:

• Hospital and Community Health Services (HCHS) – includes hospital inpatient, outpatient and day case episodes
• Family Health Services (FHS) – includes General Practitioner (GP) and practice nurse consultations, publicly-funded dental treatment and sight tests
• GP prescribing – includes all drugs prescribed by General Practitioners
• Non-NHS provision – including services funded by the government but provided by the private or third sector

And then they adjust the output quantities for quality:

• The extent to which the service succeeds in delivering its intended outcomes: for HCHS services, this is measured using short-term survival rates2, health gain following treatment in hospital and changes in waiting times; and for primary care, this is measured with a selection of measures from the GP Quality and Outcomes Framework, including measures for the percentage of certain groups of patients meeting target ranges for blood pressure"
• The extent to which the service is responsive to users’ needs: National Patient Survey.” 

The ONS compounds the input figures from:

• Labour inputs, ideally measured in hours worked, are differentiated by type of labour, for example, we distinguish between doctors, nurses and other staff
• Goods and services used up in production, such as heating and lighting costs, textbooks, bandages and dressings 
• The cost to the government of the activities performed by private sector providers of healthcare, such as independent treatment centres or hospitals made available under the private finance initiative
• An estimate of the annual use of fixed capital assets, such as the school and hospital buildings and the IT equipment”

All that complexity makes the results hard to believe when the productivity metrics swing wildly year to year for no obvious reason.  From the turn of the millennium to 2003 productivity changes fluctuated wildly between of -.3%, +2.8%, -2.2% and +1.3%. These outcomes show no correlation with outputs or inputs.  

Given the stable total workforce and steady march of government funding the figures should be more consistent but they are not. We can be sure about one thing about the NHS: it is very big and like most other big things, seen as a whole, it changes slowly and so should credible measures of productivity.  

The second two of the three inputs are what the government spends on healthcare apart from labour. The only difference, therefore, between the ONS definition of the total input and the cost of healthcare is using the time the workforce uses, and the cost of that time. It would be more realistic simply to use total healthcare cost – possibly adjusted by inflation – as the denominator. It would both be more honest and more stable.

The government made a serious mistake this month by promising large increases in funding without gaining specific undertakings on productivity.

Perhaps the increased funding was a political necessity – but putting in more money without achieving more outputs, simply reduces productivity.

Bed blocking is a prime example.

According to the Government Statistical Service, nearly 2 million NHS England beds were occupied a day more than they need have been. With NHS England having just over 130K beds, blocking occupies about 4% of hospital beds throughout the year. As hospitals take two thirds of the NHS budget, that alone wastes about 2.7% of the NHS budget (or £3bn if you prefer straight number costs), according to Lord Darzi.  

Social services usually get the blame for bed blocking but 58 per cent in 2016/17 were due to the NHS' own inefficiencies and the clock only starts when all the medics have signed off and the admin has been completed – often another two days. I am far from alone in insisting, twice recently, on discharging myself when I was ready to go home. For those who do require ongoing care, the costs are about £50 per person/day compared with £400 in hospital. Saving a over 87% of the cost is not to be sniffed at.   

Advocates for reform have highlighted many other areas of waste in the NHS whose elimination would enhance productivity, reduce waiting times and enthuse patients and staff once they had gotten over their resistance to any change.

Let's not forget of course that reform has been offered. Simon Stevens promised of £22bn. efficiency savings but none were delivered. We don't need an NHS that over promises and under delivers. 

No. What we need now is clear commitment to specific NHS efficiency savings. They need to be simple, credible, and easily understood.

Yes, some budgest may have to rise. Social care will need money. Maybe up to £3bn from existing NHS budgets to get them to sort out bed blocking. And we estimate nearly another £1bn is available from unnecessary DHSC quangos. But right now we need to clarify how we're going to measure successes, else we could be pouring good money after bad and not even know it.