Blogroll: Adam Smith Institute
I read blogs, as well as write one. The 'blogroll' on this site reproduces some posts from some of the people I enjoy reading. There are currently 93 posts from the blog 'Adam Smith Institute.'
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We’ve pointed this out before, that it’s not the drink drive limit itself which determines how many people drink drive and thus the accident rate. Human incentives don’t work that way. This is thus not surprising:
Cutting the UK drink drive limit would not reduce the number of accidents on our roads, a new study suggests.
Researchers from the University of Glasgow have found that the lowering of the legal blood alcohol limit for drivers in Scotland in 2014 has had no impact on the number of road traffic accidents in the country.
The research, published in The Lancet, evaluated the impact of the change in Scottish law in December 2014, when the blood alcohol concentration limit for drivers was reduced from 80 mg/dL to 50 mg/dL.
Broadly, the weekly rates have stayed relatively stable, with between 5 and 9 road traffic accidents per 1000 traffic count in Scotland between Jan 1st 2013, and January 31st 2016.
In England and Wales, the number of accidents was proportionately similar over the same period, according to the study in which the University of East Anglia, the NHS and the University of Stirling also collaborated.
What matters, as people like Gary Becker have repeatedly pointed out, is the total package here. Yes, the drink drive limit matters. But so does the punishment for breaching it, so also the likelihood of being caught if over that limit. The expected cost of a crime is, obviously enough, the punishment for being caught times the probability of being caught. A 20 years sentence for burglary combined with a 0.1% chance of being convicted might deter less than 7 days in the cells and a 99% chance of capture. No, we’ve not checked the maths there.
The British system did have - England still does - a limit which is high by international standards. We also have a high probability of being caught. And we have, by those international comparisons, very heavy punishment for the crime. Yes, automatic 12 month licence suspension is, while perhaps entirely righteous, high by the standards of other places.
The end result of all of this is that Britain has a low incidence, again international standards, of the crime itself, drink driving. Unsurprisingly, a low accident caused by booze rate as well.
In fact, that former British system of heavy punishment, high likelihood of being caught, produces what we desire, low incidence of the crime and its corollaries, those accidents. Moving the limit doesn’t seem to change that at all. So, perhaps not moving the limit, given that the system already works, is the right course of action?
Numerous studies have examined poverty and the lot of poor people. Now Rainer Zitelman has studied the psychology of the super rich. His study, based on in depth interviews and questionnaires, looks at wealthy Germans who gained their wealth, not as employees of large corporations, but as entrepreneurs and investors.
It reveals significant factors. For example, the parents of 60 percent of them were self-employed, which is ten times the average for Germany. They were not necessarily rich, but they worked for themselves.
School or education did not play a key role in determining their future status as super rich, but extra-curricular activities did, notably competitive sports or entrepreneurial activity. As youngsters, they tended to be difficult, even rebellious, unwilling to subordinate themselves to authority or established organizations.
They all had sales skills in the broad sense: selling ideas, or selling themselves. They exhibited the ability to explain things clearly. They showed a pronounced optimism, and had early acceptance of high levels of risk. They were reliant on intuitive as well as analytical knowledge, and they showed a readiness to learn from experience and “turn the page” on negative experiences.
Zitelman’s research reveals that they had personality traits that went with success. They scored high in self-discipline and deliberation (advance planning). They tended to be conscientious (thorough, meticulous), as opposed to negligent or careless. They were hardworking as opposed to lazy. They tended to be well-organized, punctual, ambitious and persevering.
The upshot is that although luck, of course, plays some role in determining who will succeed, it mostly comes down to personality traits. They have drive and determination. They succeed because they have the qualities that often lead to success, and in doing so they create the wealth that enriches society as well as themselves.
We are told, endlessly, that we’re in a new economics here. Growth only goes to the rich, the entire structure of what we thought we knew is wrong and thus, well, thus we’ve got to do all the things we previously knew were wrong.
This is, umm, wrong. We do not have a new economics these days, we just have ever more examples of the old:
The jobs market has defied Brexit worries and fears of an economic slowdown to add another 79,000 posts in the three months to October.
A record 32.5m people are now in work, a rise of 396,000 on the year.
Pay growth also accelerated to a new 10-year high, with regular pay up 3.3pc, its strongest rate since the end of 2008.
Bonuses, which are volatile, rose by 4.2pc year-on-year. Once those are included, the average worker’s earnings came in at £528 per week.
This means wages are outstripping inflation, as prices increased by 2.4pc over the same period.
Wages rise when unemployment is low, wages don’t rise when unemployment is high. This is such old economics that even Karl Marx managed to get it right with his comments about the reserve army of the unemployed.
It’s entirely true that we don’t know economics well enough to know everything but we do indeed know some things. The old verities apply simply because they are verities.
If the EU will not modify the proposed Brexit agreement to allow the UK to end a backstop when it chooses to do so, it seems unlikely that it could command a Parliamentary majority to implement it. In which case the UK would leave on March 29th under WTO rules.
David Singh Grewal, a professor of law at Yale University, and Richard Tuck a professor of government at Harvard University, have written an intriguing piece in the Irish Times suggesting a possible course of action the UK might then undertake, much to its advantage, and providing a solution to the apparent impasse.
They point out that WTO rules allow for a “national security exception.” It is in article 21 of the general agreement on tariffs and trade (Gatt). “Nothing in this agreement shall be construed . . . to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests . . . taken in time of war or other emergency in international relations.”
These are somewhat uncharted waters, and it isn’t as clear as one might like what would constitute an “essential security interest” or an “emergency in international relations,” but the UK could argue that free access of goods across the Irish border was indeed vital for our security interest, which is true, or would prevent an emergency in international relations, which is also true.
It would not be completely unprecedented, however, because President Trump has claimed that the preferential tariffs imposed on some foreign goods are need to protect the security interest of the US.
If this reasoning were sustained it means that the UK could, under WTO rules, allow goods from the Irish Republic free access across the border into Northern Ireland, without allowing goods from the rest of the EU similar free access until a free trade deal had been completed. There would thus be an open border that honoured the Good Friday Agreement.
How the Republic of Ireland and the EU chose to respond to such a unilateral initiative remains to be seen, but it would be to the advantage of both to accept it. They would not be able to prevent the UK from doing this, even should they perversely wish to do so. The UK could use this approach to prevent a backstop from inhibiting its future freedom, or from requiring the consent of the EU to end it.
This would seem to be a valid and attractive alternative if no deal can be agreed that can pass through Parliament.
From The Guardian, an example of quite gloriously missing the point:
As the characters and plot of Care show, quality care and support costs huge sums, and local authorities have never been under such a relentless onslaught, with budgets ravaged and social care suffering horrifically. As a result family members are forced to care for older relatives full time, putting on hold their own children, jobs and lives.
More and more people are forced to remortgage or sell their homes to fund care, at a time when parental homes are expected to provide both a pension for the home owners and a foot on the housing ladder for their children: eventually, the money runs out.
That people pay for their own lives out of their own resources doesn’t sound all that objectionable to us. Nor does the idea that families care for families - we always though that was rather the point of that most basic of human institutions.
But then this:
Here, we have a jobs crisis and a care crisis: why not push for a Grey New Deal? It could be a charter of rights each citizen should expect, a formalisation of respect across institutions and socially, and a long-term budgeted cash injection to create the skilled jobs and develop the technology needed to make sure we can care properly for older people. The people delivering that care should receive a decent wage for decent work, and expect job security and job satisfaction.
We’ve already agreed that we cannot afford what we’ve already promised ourselves - that embracing welfare state - within what we’re all prepared to cough up to pay for it. Thus promising ourselves more isn’t one of those things that’s going to work, is it?
The logic being presented to us is that of the restaurant diner who agrees that they can’t afford the mackerel, or the sardines, so why not order the lobster? An entirely wondrous starting point for a phantastical short story perhaps but not quite the way to interact with reality.
The dreadful incidence of fuel poverty in Britain is taken as evidence of how uncaring, unequal, generally undesirable, we are. The truth is the opposite, it’s proof of how much richer we are these days:
Can we please have a focus on the dire state of our housing stock? This will mean investment by the government in energy efficiency, with money from the Treasury. There are millions of fuel-poor homes – each requiring tens of thousands of pounds spent on them if the occupants are to be warm despite their low incomes. We should be spending billions of pounds to reduce fuel poverty.
There’s a certain bitter sweetness to the idea that standard policy is to drive up the cost of energy to beat climate change while also insisting that everyone be able to have cheap energy to heat their housing.
However, fuel poverty is defined as being able to heat a certain amount of the dwelling, to a certain level, on less than 10% of income. The areas to be heated, the temperature they’re to be heated to, being far above those normal in a middle class household of only one generation back.
Actually, very much higher than was normal anywhere before the widespread adoption of central heating in the 1970s and 80s. Which is indeed proof of how much richer we are, isn’t it?
Adam Smith and the linen shirt. A society which goes from yhe lack of one not marking you as poor to doing so has become richer by those very proliferating linen shirts. A society that used to live in cold houses and now regards doing so as poverty is a richer one.
The standards by which we measure fuel poverty are proof that we’ve become richer this past generation.
We have been pointing this out for some time now, that proper and rigorous testing of illegal drugs saves lives. For the basic cause of most overdoses is that people don’t know what they’re taking, at what purity level. If those little packets of fun - and yes, they are fun, why the heck do you think people take them - are tested to see what’s in them then here will be fewer such mistakes over dosage and fewer deaths.
Thus the answer is to make drugs legal:
An alarming rise in drug-related deaths at music festivals can be countered by testing illicit substances onsite, according to the first academic study of its kind, which has triggered calls for similar services to be rolled out at all major events.
Testers found that one in five substances sold at the Secret Garden Party, a four-day festival in Cambridgeshire in July 2016, were not as described by dealers.
Samples contained ketamine instead of cocaine, while a drug sold as MDMA turned out to be n-ethylpentylone, a long-lasting cathinone that can cause anxiety, paranoia, insomnia and psychosis.
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Others contained pharmaceuticals and cutting agents such as anti-malaria medication, as well as less harmful ingredients such as brown sugar and plaster of paris.
Chemists from the non-profit social enterprise The Loop analysed 247 drug samples brought in anonymously by festivalgoers. Two-thirds of people who discovered they had had substances missold to them subsequently handed over further substances to the police, according to the study.
Knowledge saves lives so let’s have more knowledge.
About as far as most liberal opinion is prepared to go is that such street pharmaceuticals should be decriminalised. We, being proper liberals, insist that proper legalisation is the route. For only when producers can in fact advertise - yes, advertise - their brand will they have that skin in the game. They’ll have something valuable which they don’t wish to destroy, a reputation for not killing their customers. Thus they won’t, we’ll get drugs which actually are what they say on the packet.
The analogy here is to the early days of food brands. 1830, 1840, saw that England had been rapidly urbanised and the old methods of food provision didn’t really work. No one did buy repeatedly from the bloke next door in the village any more. Adulteration was rife. Brands arose competing upon the quality and purity of their ingredients and proliferated in the 1850s. The first serious laws about food adulteration came in the 1870s, by which time the problem was largely over.
The same, but in inverse, came with the slightly later technology of canning. A hit and miss affair to start with, those brands that are still with us and still valuable - as examples, Heinz and Campbell’s - distinguished themselves by getting canning right and killing fewer to no consumers. They became valuable as a result, a value the owners have preserved.
Once there’s a value to having a drug brand then people will produce clean and dose controlled highs. They can and only will gain such value when it’s legal to have a drug brand.
Thus we wish to have legal drugs. Assuming, that is, that we wish to reduce the danger of drugs rather than just insist that other people shouldn’t be doing what we think they shouldn’t.
In Chavista Venezuela it is not just running water that is no longer available, but electricity too. Inadequate investment and a lack of maintenance has collapsed the electricity grid, plunging much of the country into darkness for prolonged periods of time.
Electricity used to be partially privately-owned, part state-owned, but in 2007 former President Hugo Chavez expropriated the assets of the largest private power producer, Electricidad de Caracas. Chavez merged all electric companies into one big state monopoly, the Corporación Eléctrica Nacional (CORPOELEC).
Power cuts due to underinvestment and poor management began in 2009 and have increased in both frequency and severity over time. In 2016 public sector employees were put on a three day week in order to preserve power.
While $50 billion was supposedly invested in the sector in recent years, there is little to show for it aside from 130 houses worth €72 million in Spain recently confiscated by Spanish police from Venezuela’s Deputy Minister of Energy and Mines. Such corruption, also in the form of power stations paid for but never built, clearly contributed to the failure of the system. Of Venezuela’s installed electricity capacity, 50% of the system does not work and 75% of the infrastructure is obsolete. The electricity grid is hopelessly inadequate and completely unable to meet demand.
Key turbines have been allowed to deteriorate and some power installations have actually exploded due to lack of maintenance. The maintenance crisis is exacerbated by the resignation of many qualified engineers and technicians who have fled the country. The Chavista regime’s decision to keep electricity prices substantially below cost has prevented CORPOELEC from earning enough money to maintain its systems. Instead of benefiting regular citizens, the absurdly low electricity prices have spurred a wave of Bitcoin mining.
Electricity shortages have had a dire effect on the Venezuelan economy. During power cuts the Caracas metro no longer operates, and people must walk to work. In Maracaibo, Venezuela’s second largest city, and the surrounding state of Zulia power cuts last days at a time. In Zulia a lack of maintenance means that the power plants are running at 20 percent of capacity, according to Angel Navas, the President of the National Federation of Electrical Workers.
Zulia used to produce 70% of Venezuela’s milk and meat but in the absence of electricity to milk cows and keep meat from spoiling, the state’s production has fallen almost by half, according to Venezuela’s National Federation of Ranchers. Businesses cannot sell their goods, especially because they require electric card readers to process payments now that hyperinflation has made cash too bulky to be practical.
However, the situation is much worse in hospitals, where lives depend on a stable electricity supply. Hania Salazar, the president of the Zulia state nursing association, said that hospitals in Venezuela are becoming large-scale morgues. He questioned "how, as a human, as a health professional, can you treat a patient when you don’t have anything to offer them when you don’t know when the electricity will cut off".
The regime’s failure to provide its citizens with basic utilities is a damning indictment of its ability to provide stable governance. Having assumed the burden of caring for its citizens through expropriations, it has comprehensively failed them on all fronts. Venezuelans deserve a government that can provide them with the basic human necessities.
More information on the Venezuela Campaign can be found on their website.
An example of one of the great truths of taxation. Many to most are in favour of other people being taxed in order to pay or me, rather fewer go for taxing me to pay for thee. Nice to see you again old truth.
The young aren’t so interested in being dinged to pay for the social care of the old, the old are intensely interested in someone, anyone other than them, being taxed to pay for said care:
Younger adults are far less keen than older people on raising taxes to fund public services and want volunteers to help ease the growing crisis in social care, a survey shows.
It reveals a stark generational divide over whether to increase taxation, with under-45s much less supportive than those aged over 45.
The results suggest that public support for tax rises to fund the NHS, and the health service receiving a growing share of public spending, may be eroded in the coming years.
While overall 41% of the public believe taxes should go up to fund public services such as the NHS, just 33% of 18 to 24-year-olds and even fewer – 30% – of those aged between 25 and 44 agreed.
In contrast, backing is strongest among those aged 45-54 (42%), 55-64 (46%) and over 65 (54%).
It’s all rather Who, Whom? isn’t it? Who gets taxed for the benefit of whom?
Our own insistence is that getting someone else to pay for you through the political process is rather cheap. Cheap morally but also cheap in the sense that you’re not having to pay the cost of what you’re getting. This doesn’t accord with any true measure of value, which is that you really do think the thing is worth what you’ve got to give up to get it. On the obvious grounds that you’re insisting that someone else give up so you get. That’s why it’s only market systems which do deliver what’s worthwhile - precisely because people will only pay from their own resources for those things that they themselves think it worthwhile to get.
With respect to the French protests we have this from one of the country’s more vocal tax campaigners.
The Guardian discusses protests in France this morning, 8nckuding this comment and quote:
Isabelle, 41, a single mother, had never taken part in a protest movement before. She works at a sandwich stand at Toulouse airport for the minimum wage – less than €1,200 a month – and her daily shifts begin at 3am. She was among many who had deliberately spoiled her ballot paper in last year’s presidential election final round, unwilling to choose between Macron or the far-right Marine Le Pen.
“This is now about so much more than fuel tax,” she said. “We seem to live in a world gone mad where the rich pay next to nothing and the poor are constantly taxed. We’ve had enough of the elite.”
It is fifteen years since tax justice campaigning began. But the attitude of the wealthiest has not changed. They still think tax ‘is for little people’. They are wrong. We said so. Now very large numbers of people are agreeing.
We have for a decade or so been suggesting a solution to this. Raise the personal allowance so that those on low incomes - oooh, say, those earning around the full year, full time minimum wage - are not in the income tax system at all. We’ve even been successful in that the personal allowance is rising to £12,500 a year.
We’d also like to see national insurance payments only start at that level but then no campaign achieves all its objectives immediately.
The most vociferous shouting against this idea has been coming from these very same tax justice campaigners. Making sure that taxation doesn’t fall on the little people opposed by those who will, when it’s foreigners, change their rhetoric.
There’s a line somewhere about how without double standards certain people would have no standards at all. That might be a little harsh but logical consistency certainly isn’t a strong suit now, is it?
Or as we should put it, it’s us classical liberals proposing and carrying to fruition the policies that benefit the poor, the progressive liberals doing something quite different.
Paul Mason has written a challenging piece in ExecReview. He does so from a Left-wing activist background as a Corbyn supporter who says that Labour “should welcome Momentum,” and as a one-time Channel 4 News Economics Editor. He quotes Goldsmiths University academic, Will Davies, who describes “the disenchantment of politics by economics”. Mason writes that:
“Another way of phrasing Davies’s definition, then, could be the evisceration of politics by economics, or more simply the surgical removal of emotional reasoning from political decision-making.”
It was neoliberalism that did this, of course. He is right in the sense that neoliberalism did change politics, but wrong in supposing that it used economics to remove emotional reasoning from it. Inspired by David Hume, neoliberals know that while reason can direct people how to act, it is emotion that makes them want to act in the first place. People might want to give as much of humanity as possible the extra wealth that bring additional opportunities and choices in its wake, and they might want to lift the poor of this world into a decent standard of living, but these wishes do not tell them how to do it.
What neoliberals did was to require that political decisions should take account of the real world, the practical world of experience. It is not enough to approach them with emotions, praiseworthy though many of them might be. Neoliberals brought the empiricism of practical observation to bear on policy proposals. The question was not, “does this express people’s emotions about identity and class?” but “does this achieve the sought-for results in practice?” Neoliberals looked at what had worked in the past and sought to build on it. They looked at what had worked in other countries, and sought to adapt and apply its lessons elsewhere.
No less importantly, they looked at what had not worked in the past, and not worked elsewhere, and rejected it. It was discarded on practical grounds, incorporating the lessons of experience. The aim is to change and improve the real world, not to feel good by having worthwhile emotions about what it might be in some imagined future. We might even paraphrase Marx. “Some thinkers have interpreted the world through an emotional lens. The point is to change it.”
Today’s lesson in the basic fact about our universe that there are costs and benefits to everything. Those free lunches simply do not exist.
If we’re to send some vast number of young people off to university then there are going to be vast numbers of young people at university. Quite why this should surprise people is unknown but there we are:
Down with 'studentification': how cities fought for their right not to party
From Bristol to Nottingham, university towns across the country are facing up to the negative impacts of large student populations
If we’re to send 50% of the age cohort off away from their parents for 3 years then we’re going to have 50% of the age cohort off away from their parents for three years. It’s not necessary to be a particularly assiduous student of human nature to catch that this is going to mean loud parties, lots of drinking, staying up late and all the rest of that.
The term “studentification” – coined by the academic Darren Smith in 2002 – refers to the impact student bodies have on the cities around them. For all the vibrancy a large influx brings to a local culture and economy, the indirect consequences can be profound: family homes make way for buy-to-let HMOs (houses of multiple occupancy), bars and fast-food outlets replace primary schools, and “street blight” takes hold as properties lie unkempt and deserted outside of term-time.
There is a useful solution of course. Start charging the students - perhaps financed by loans - the costs of their education and perhaps we’ll have fewer of them doing economically non-useful courses in grievance studies. If people are doing economically useful things then obviously, we’re happy enough to put up with the costs.
Our definition of economically useful being, as always, that the benefits are greater than the costs. Again, as ever, we’re trying to find the optimal balance between student education and studentification. Which, again again as ever, is something we find out from the interplay of market forces.
Many of the errors they perpetrate have already been tried and tested and found wanting. Some of them have been found disastrous, as has been seen in Venezuela. Yet they persist as if in some hypothetical world that bears no relation to what goes on in the world around us.
6. State ownership is efficient because it does not need profits
This has been shown countless times to be untrue. It is the pursuit of profits that leads private corporations to seek to be lean and efficient. They try to cut costs and to keep prices competitive to attract customers. The state has no such incentives to drive it to be efficient. In practice, state industries are subject to producer capture, and are usually directed to serve political rather than economic ends. They tend to be over-manned and costly, compared to their private equivalents.
7. Capital Gains Tax is paid from windfall gains
This is not always untrue, but usually is. Capital gains can be made on property when the price people are prepared for it rises. This can be caused because government will not issue sufficient planning permissions to meet rising demand. Or government's central bank might keep interest rates too low for too long to "steer" the economy, making conventional returns low, and leading people to invest speculatively in property. More commonly, capital gains accrue because investments rise in value, especially in a growing economy. To call them a "windfall" is to suggest they are unearned, simply the result of luck, when they often result from shrewd calculation. Profits are taxed when this is successful, but losses are not refunded when it is not.
8. Rent controls make houses affordable
This is a subset of price caps, with rents as the price of accommodation. When rents are capped, existing tenants might benefit for a time, but not future ones because the availability of rental property will diminish. Maintenance will fall, too, with not enough income coming in from property to justify high standards of care for it. Landlords tend to sell under rent controls, reducing existing rentals as well as deterring new ones. The economist Assar Lindbeck compared rent controls to bombing in their ability to destroy cities.
9. Inheritance Tax hits only the rich who can afford it
Thanks to rising property prices, Inheritance Tax hits many middle class homeowners. People are motivated to work and save to provide for their children after they die. A death tax makes that less worthwhile. It also acts to break up the capital pools that could be funding new businesses for middle-aged people when their parents bequeath them their estate. Those new businesses could create future wealth and jobs, so it indirectly hits less wealthy people. Its fairness is questionable because it nearly always taxes funds that were already taxed as they were acquired.
10. Top salaries and bonuses are best limited by law
If they are limited by law, then top talent will drain away to places where it is more adequately rewarded. Top CEOs make a huge impact on the value of their companies, and constitute a pool, like highly talented footballers, that people will pay for in order to secure the value they bring. In a global economy, talent is mobile and will move if the gap between what they can earn at home or abroad becomes too large.
Well, yes, of course everything needs to be regulated, areweright? The idea that the market unadorned could just be left to its own devices is just so absurd that no one could possibly hold it. Except people like us who just will insist on pointing out that the result of regulation is that people die.
For example, we’d all rather like there to be lots of new drugs to treat the cancers that eat away at all too many of us. We’ve a wondrous pan-continental regulation system to make sure they’re safe, the result of which is that we get very few new anti-cancer drugs:
Cancer patients are missing out on innovative new drugs, with red tape covering clinical trials and licensing among the factors to blame, according to a report by the UK’s Institute of Cancer Research.
Children’s cancers have received little in the way of new treatments, a finding the authors put down to drug companies failing to invest in these rare conditions and using regulatory loopholes to avoid conducting the necessary clinical trials.
Well, one person’s loophole is another’s escape from red tape and expense:
She added that EU regulations say that if a disease does not occur in children, drug companies can opt out of testing the drug on them, even though it might help with other cancers. That, she said, needed to change.
So, if all drugs need to be tested upon children then there will be even more expense, even more red tape, even fewer new drugs:
The team also found new drugs are taking longer to make it through the clinical trial stage of development. Between 2009 and 2016, it took more than nine years for a drug to progress from the first stage of clinical trials to being authorised for a particular use by the EMA, compared with 7.8 years between 2000 and 2008.
“I don’t think this is about being over-cautious because of safety; I think this is regulatory red tape,” said Workman.
Isn’t that regulation a wonderful thing?
There is a theory that every civilisation is eventually strangled by the entrails of its own bureaucracy. We appear to be well along the road to testing that one out again. Perhaps we might want to change path before it truly mestastasizes?
It can be depressing to have to revisit arguments won long ago, but some politicians continue to cling to errors that have been exposed, simply because they wish the world were other than it is.
1. Taxes do not change behaviour
In the real world taxes usually change behaviour. Tax increases put up prices, and people usually respond by buying less of something. Increased taxes on cigarettes might lead people to smoke less, but they also lead people to obtain cigarettes from lower tax jurisdictions, or from bootleggers. The result is that less tax is raised than was anticipated. The same is true for taxes on income. They make work and effort less attractive, and they encourage people to use legal means to shelter income from tax. People talk of increasing income tax "to raise more money," but it will hardly ever raise what they anticipate, and will sometimes even reduce the revenue.
2. Price caps make things cost less
In fact they reduce the price, not the cost, of producing things. If people cannot produce goods profitably at a price others will pay, the goods will not be produced. Price caps usually result in shortages. They might lower the price of current goods, but they will reduce the future supply. Price caps on energy will leave producers less to invest in securing and developing future supplies, and to cease producing energy from sources unprofitable at the capped price.
3. Minimum wages help the low paid
They might help those currently working at low wages, but they will reduce the number of jobs available to those looking for work now or in the future. Some firms have responded to minimum wage increases by reducing the number of hours employees work, some by installing machines such as self-checkout tills to reduce labour, and some have gone out of business because their costs became too high.
4. Corporations pay taxes
The source of taxation is somebody's wallet or purse. Corporations are not people, and they do not have wallets and purses. Their shareholders do, their employees do, and their customers do. This means that Corporation taxes fall upon some or all of those three groups. Studies show that about 60% of its incidence falls upon employees, reducing the wages they would have been paid without it. Of the remainder, some falls on customers as firms raise prices to meet the tax burden, and some falls on shareholders, making investment less rewarding, and less likely to be done, thereby cutting future jobs.
5. Improvements for the poor must be paid for by the rich
This is a version of the Zero Sum Game fallacy, of supposing wealth is fixed, and that gains to one group must come at the expense of another. In fact, wealth is created by trade and specialization and groups can become wealthier through growth, rather than by redistribution. Historically it has been the former, rather than the latter, that has improved the lot of the poor. This is also true internationally. Poor countries have become richer through trade, not through redistribution from richer countries. The UK created its wealth in the Industrial Revolution, and the world's wealth then was a tiny fraction of what it is today.
Chesterton’s Fence is a favourite of ours. The lesson being that you cannot decide that something’s no longer necessary unless you understand why it was instituted in the first place. This being a hurdle that Mike Ashley seems not to have cleared:
Retail tycoon Mike Ashley wants to see a 20pc tax levied on online sales and prison sentences for executives who consistently "fiddle" their way out of paying the levy, as part of his plan to save the country's "dying" high streets.
He said any companies with more than 20pc of their sales generated online should have to pay the tax, which would "level the playing field" in the retail sector and give local councils more money to help encourage people to shop close to home, such as offering free parking.
Yes of course this is drivel. No one should be paying extra taxes because they economise on expensive inputs like High Street retail space.
However, the bit that really interests, because we do so love Chesterton’s Fence, is that idea about free parking.
For why was the parking meter first invented? In order to increase retail footfall.
Yes, really. It was noted that the provision of free parking spaces meant that people would turn up, bag a space and then go to work or the like. Do something all day at least. By limiting the time a space could be used - the right way, by price - that meant that more people would use it over the day. Increasing the number of people in the area thereby and so that retail footfall.
Yes, certainly, charging “too high” a price can mean a diminution again. But it seems to be as with booze consumption. None, or no price, is as harmful as a lot, the it inbetween being beneficial compared to either. So with car parking pricing. Free doesn’t work.
Sure, new policy ideas are welcome but it does help if people understand why we’ve got the ones we do first.
We’d recommend checking out this great animated video in which Daniel Hannan MEP describes the wonders of the free market and the pricing mechanism using a story about…a chicken sandwich.
One of the great reverse ferrets in the newspaper industry is how the change from Dacre to Grieg has led to the Daily Mail becoming anti-Brexit rather than the previous rather vociferous pro-. Which does seem to be causing a little misunderstanding on certain of the reporting desks.
Here we’ve a complaint that Netflix is selling some vast amount in the UK, reporting little revenue, less profit and near no profits tax. Well, yes, it is, but why?
Netflix Services UK Limited – the company’s British subsidiary - employed only 14 people at its London office by the end of December, according to its most recent accounts.
Its British arm declared revenues of £23.9m (26.9 million euros) and pre-tax profits of £1.12million (1.27 million euros).
Netflix’s standard package for British users offers unlimited streaming for £7.99 a month. If the company’s 9 million subscribers pay around this much per month, Netflix makes £71.9million from its British subscribers each month. This works out to be around £863m each year.
HMRC could be looking into the transfer pricing deal between the British arm and its Dutch parent, which determines the amount of revenues that Netflix reports in the UK. Netflix did not explain why HMRC was examining its tax arrangements.
It’s not actually necessary for there to be any transfers, let alone abuse of transfer pricing rules, for this situation to happen or to be legal. All we need is the European Union’s own Single Market.
Any EU company, registered, domiciled and sitting in any EU country, may sell in any other EU country. And be taxed where it is registered, domiciled, sitting. Which is what is being done. Not allowing this would mean leaving the Single Market.
So, how’s the Mail’s opposition to Leave working now?
Ten years on from the Great Financial Crisis, Dr Pirie looks at the causes and asks if we’ve learned any lessons.
This sounds like a sensible enough proposal at first glance but then we find that it perhaps doesn’t go far enough. For we’ve an analysis that a transactions tax is killing market liquidity. This is something we would expect of course. So, therefore, lift that tax for some - but why not lift the tax for all?
Pensioners in large homes should be let off stamp duty fees to encourage them to move to smaller properties, a leading thinktank will recommend on Monday.
The study to be published by the Policy Exchange also suggests purpose built homes for “ageing baby boomers” would encourage more people to move and “free up more family homes for younger generations“.
That a transactions tax reduces liquidity is rather the purpose of them at times. That’s the point of the ludicrous financial transactions tax for example. Thus the idea that a transactions tax like stamp duty reduces liquidity in the housing market isn’t a tough one to follow. Reducing the tax in order to promote liquidity, that process of people buying and selling houses, seems logical enough. Reduce that slice spirited off into the bureaucracy from each sale and purchase and there will be more such sales and purchases, people will indeed be able to move to the “correct” size of dwelling for their life circumstances. Correct here meaning the outcome of their individual decisions unadulterated by that tax wedge.
However, there’s nothing in this at all which suggests that only pensioners should be so favoured. The tax wedge, if it reduces transactions in one part of the market, will similarly be doing to in other parts of the same market. So, we face the same problem. A reduction in market liquidity through over-taxation of transactions.
At which point the solution becomes obvious enough. We’ve a problem from over-taxation, the solution is to reduce that taxation. And to reduce it for all so as to free up that market from the tax-induced constipation.
Lower stamp duty won’t build more houses, but it will enable people to move to larger or smaller as desires indicate, meaning that it will increase the supply of housing.