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Clearing up some confusion about ‘market failure’

By Tom Papworth
January 27th, 2012 at 1:44 pm | 2 Comments | Posted in Uncategorized

Nick Clegg thinks that the “short-termism and recklessness [that] eventually consumed our banks, taking the whole economy to the edge of a cliff” is an example of “market failure”.

For David Cameron, it is a sign of “a market failure [that] between 1998 and 2010 the average pay of FTSE executives [went] up four times”.

While for Ed Milliband, there is a “the market failure in the finance gap for SMEs that want to expand.”

All three make a common and simple mistake: they believe that market success is defined by a number of uneconomic measures such as social justice, or even (that ultimate weasel-word) fairness, and that it is a sign of market failure if market participants (that is to say, you and I) do not act in a way that the politicians think is appropriate for a market actor.

But that isn’t what market failure means at all. Market failure is a clearly defined economic term, and it has nothing to do with whether we get the outcomes that we want.

I explain this in more detail in my latest article for the Institute of Economic Affairs. Please visit their site to read more and to leave your comments.

Shocking market failure as woman rejects apricots

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Mark Littlewood: Liberal Voice of the Year

By Angela Harbutt
January 15th, 2012 at 5:31 pm | 1 Comment | Posted in Uncategorized

Congratulations to Mark Littlewood, formerly of this parish, for winning LDV’s Liberal Voice of the Year.

As we posted hear a couple of days ago, we thought Mark was a deserving candidate – but even we were somewhat surprised by the decisiveness of the vote.

Mark Littlewood 32%

The Occupy Movement 13%

Ken Clarke 13%

Mohamed Bouazizi 11%

Nick Davies and the Guardian 10%

Ai Weiwei 8%

Hugh Grant and the Hacked Off Campaign 6%

Hilary Rodham Clinton 4%

Barack Obama 3%

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Love Thy Nimby

By Guest
January 13th, 2012 at 1:20 pm | 4 Comments | Posted in Uncategorized

In the past week, the Coalition have backed controversial plans to construct the London to Birmingham section of HS2, a major public works scheme that aims to connect the capital to Scotland by high-speed train over a generation into the future.  However it’s looked at, the logic of this depends upon a highly dubious belief  - that a trainline that won’t open until 2026 and will only reduce the journey time by half an hour at most is the best possible use of £33 billion of public money.

The government are trying to sweeten opposition by floating figures of how many jobs it will create, always rather neatly ending in ’000′. The correct response is to pull a innocently confused expression and enquire, ‘I’m sorry, but isn’t that irrelevant?’ To make job creation on this scale anything but spin we must first know how much these jobs pay, how long they will last, who they will be given to and how they are economically productive.

If job creation were the name of the game, why not just pay one billion of the world’s poorest people £33 to spend a day digging wells. That would give the government an impressive amount of jobs to boast about on polling day and might actually do some good. It’s not about an empirical evidential base either as the case for the project is based upon unfounded assumptions over the direction of future technologies and the habits of businessmen and overlooks the economic harm caused by taking £33 billion out of people’s pockets.

No, this seems to be about ideology, as from the rather telling quote from the Transport Secretary:

If we used financial accounting we would never have any public spending [and] we would build nothing.”

Who needs evidence when you’ve got belief?

But who’s ideology is this? After all, the project was set up by a Keynesian Labour government and is now being supported by a government that rejects Keynesian stimuli. The trouble is, it’s just about everyone’s belief as I recently found out campaigning against my local council’s proposals to build a thousand new homes on the local Green Belt over five years. While local residents overwhelming welcomed my input, my somewhat socialist acquaintances attacked me for nibyism. What came as a surprise was that my libertarian acquaintances attacked me for much the same reason.

Both argued that local residents should let the councils proposals go through, no matter what the social, environmental and economic arguments against them. Development is necessary, they said, signalling my cue to shut down my mental facilities and bow to perceived wisdom. How could ideologists of such opposing first principles support the plans which have provoked thousands of formal objections and united villagers together? My guess is that it’s for the same reason that every post-war government (with the debatable inclusion of Thatcher’s) have supported the ‘post-war consensus’.

For those who don’t know, the post-war consensus was the belief that the outwardly impressive centralised, bureaucratic planning that had seen us through the war could herald a golden age for Britain. What started with socialist MPs and William Beveridge was later supported by Churchill’s government and has been the stalwart of state plans for economic development ever since. It’s gifted us such ineptly managed projects as the Channel Tunnel, the Millennium Dome and all those lovely sink estates.

Now Labour’s 1947 planning system (which instructs bureaucrats to ignore the opposition of local residents and gives the power for local authorities to forcibly appropriate your property should it be in the way of ‘progress’) is gifting us HS2 and a thousand protested homes on Gravesham’s Green Belt. The government says HS2 will create hundreds of thousands of jobs; Gravesham Council say each house built creates one job. The government claim against reason they have compelling evidence that HS2 will be popular in 2026; Gravesham Council say much the same about homes must be built now for the market of 2031. Neither have a credible mathematical ground to back up their omniscient vision and both can only guess what changes they are likely to inflict upon the local communities, environments and economies.

While libertarian think tanks are siding with the nimbys against HS2, I find it odd that libertarians should find it so unfathomable that local campaigners like myself are not a threat to the free market. Liberalism is about believing that individuals are better at shaping their lives than the state and when thousands of locals are contributing arguments against a development, that can only be a good thing. It’s about protecting those individuals from vested interests and many local councils are being far from transparent about the wealthy developers who lobby them. Economic liberals should support critical scrutiny against the instinct that development is always to be preferred.

Our philosophically bankrupt government have now embraced the statist planning system to which nimbys are often the last line of defence. The Coalition fails to the see the irony that at a time when Scottish independence is being widely discussed, the UK is about to make the same bankrupting mistake which led Scotland to sell its freedom in the first place – speculating in a state-funded transport development which private investors wouldn’t so much as toss as a cable at. If we free-marketeers truly wish resources to be channelled where they are most productive, it’s time we suspended mistrust of the warnings of nimbys and respected the local knowledge they possess.

David M Gibson is a classical liberal, member of the Liberal Democrats and active campaigner. A collection of his writings can be found at davethedystopian.blogspot.com, as well as on the Freedom Association website.  David recently  posted “the stupid 100%” and “Sympathy for Occupy LSX” here on LV.

Government priorities gone bananas

By Angela Harbutt
January 13th, 2012 at 10:54 am | No Comments | Posted in Government

I was reading Professor Philip Booth’s excellent blog post yesterday on David Cameron’s red tape challenge to ministers. Here is an extract that caught my eye.. (emphasis is mine) .

Of course, this is just what we need – more employment regulation. It comes in a long line of announcements and enactments over the last two weeks about executive pay, council house tenancies, the disastrous implementation of the moratorium on employment regulation for small firms, alcohol regulation, the extension of employment rights to temporary workers and the regulation of the scrap metal industry. I am wondering if I have misunderstood the government’s red tape challenge – is the challenge to ministers to produce as much red tape as possible?

And I found myself cheering his point that..

“If somebody is not very clever but good at building networks, why should they be looked down upon more than somebody who is clever but not good at building networks? The hard work that one puts into networking is not obviously less virtuous than the hard work that one puts into developing one’s intelligence. The good luck that comes from being born with a good brain is no more virtuous (indeed it is not virtuous at all) than the good luck that comes from being born with a set of well-networked parents.”

But that is perhaps because I was not a particularly brilliant scholar but had “the gift of the gab” (though sadly no “connections”). Goodness only knows what job I would have ended up with if my application had gone in “blind” rather than me tracking potential bosses down to seedy pubs to pester them into giving me an interview.

Professor Booth’s point is not that dissimilar to a point I made recently. Why is it that Government seems happy to go after highly paid bankers and CEOs on such issues as bonus’/ pay differentials etc whilst ignoring the vast sums earned by Premier League Footballers, pop stars and the like?  After all the pay differential between the average Manchester United fan and their top players is vast – and the penalty for failure? they get transferred to another team quite often for even more money. Why is it, I wonder, that it’s OK to earn fortunes because you are good at kicking a ball about – but not if you happen to be masterful at running a company? (Note this is NOT a demand that the Government starts meddling in sports pay as well.)

But returning to David Cameron’s challenge – maybe it is time for him to reconsider giving a wider challenge to ministers and put it in really simple terms – since they do seem to be having trouble grasping the point.

“If it doesn’t cut costs, improve effeciency or help business get the economy going, then JUST DON’T DO IT – unless there is a bloody good reason why you have to – Dave”

I know ministers like their headlines, feel the need to be seen to be doing something, but really! Most of us are sitting in our homes wondering what the hell this government is up to? What we want are jobs, an economy that gets going, the clearing of our debts. What on earth has alcohol regulation or executive pay got to do with any of those things?

Mark Littlewood has been asked by the Government to help them on red tape. Perhaps the Government needs a similar expert to help them sort out Government priorities – ( I say “expert” all we need is a person with an ounce of common sense and a large red pen). Here is one example concerning my current hobby horse. Why is Andrew Lansley devoting vast amounts of time, money and resource undertaking a consultation on tobacco plain packaging, when we can sit back for six months and wait for the REAL evidence to come from Australia (where plain packaging is about to be introduced). With the time and resource released he could devote that to sorting out the current crisis in the NHS now- and return to plain packs if/when the evidence from down under suggests that it warrants it. It’s just about priorities. Surely?

Enjoy Professor Booth’s musings – definitely worth a read.

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Liberal Vision votes in LDV’s “Liberal Voice of the Year poll”

By Editor

 

Much has been said on the subject of  LDV’s “Liberal Voice of Year Poll”. Having read a good number of thoughts, on a range of blogs and posts, about who people think should (or shouldn’t) get the vote… we thought we might lob our two-penneth in.

It probably won’t surprise you to discover that we think it should be Mark Littlewood, founder of and former contributor to this very blog.

Why? Curiously NOT because he has easily been the most effective “free market freedom fighter” of the past year. That should perhaps count… but we think there are other reasons…

First off, as many of you know (and some may have forgotten) Mark is a true liberal. Not only has he done his turn working for Liberty, Mark co-founded, and was chief spokesman for, NO2ID for quite a stint. It is easy to forget that without the simply brilliant and relentless work of NO2ID (hats off here to Phil Booth and Guy Herbert as well) we would almost certainly have seen ID cards being rolled out by now. That alone should earn him some form of recognition.

And whilst on the subject of noble causes let us not forget his stint as chief spin doctor for the party. Not many people will know the extent to which he totally modernised the Lib Dem press office – recruiting and promoting some of the brightest and the best in the business (several of whom are still doing their bit for the party in government today), changing structures and practices that made party’s press operation one the best in the business.

But perhaps the real reason why we here at Liberal Vision think that he deserves to win is that he has, almost single-handedly, championed the cause of personal freedom. He has taken on ministers over regressive plans to introduce minimum pricing on alcohol; tackled lobbyists over the crippling smoking ban; called for the legalisation of drugs. He has demanded time and time again that adults should be treated as adults and not patronised; not spoken down to; not dismissed by those in power. He has been THE VOICE for all those people out there who believe that Government meddling, nannying or nudging is insane, frequently counter-productive and too often unfair – but have no opportunity to say so. He speaks for millions.

Of course we should not overlook his credentials as the “free market freedom fighter” – a term that truly reflects both the passion he has for the subject and the sheer amount of work he does (when is he NOT on the media somewhere or other?). He was without any shadow of any doubt THE free market Voice of 2011. We understand that not everyone shares his views. But what people can not deny is his willingness to engage in the intellectual argument surrounding economic liberalism.

Whilst here at LV, Mark was always insistent that whenever we ran into people who disagreed with our views, the only way to tackle it was to engage and discuss. Those of you that follow him on twitter today will know that he pursues that philosophy to this day. Liberal Democrats have always valued discussion and debate more than any other party. It is one of the things that distinguishes us from the other parties. And Mark must be one of the exemplary figures in doing just that. Yet another damn fine reason why he deserves the title of Liberal Voice of the Year.

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