The Myth of Science as a Public Good

The society yesterday hosted Terence Kealey, Vice Chancellor of the University of Buckingham, to discuss his fascinating and controversial arguments against government funding of science. Dr Kealey rejects the conventional economic analysis which declares science to be a public good, that is, one that is non-rivalrous and non-excludable, and therefore necessitating government subsidy. The orthodoxy amongst economists being that science is a public good means that the available research into correlations between science funding and economic growth is limited, but what exists plainly contradicts the theoretical justification for intervention. Front and centre of Kealey's case is a 2003 OECD report which finds "a marked positive effect of business-sector R&D, while the analysis could find no clear-cut relationship between public R&D activities and growth, at least in the short term." It can only be hoped that Kealey's argument is to government funding of science what Coase's was to government taxation of externalities - a thorough empirical refutation of dogmatic assumptions.

The talk and discussion afterwards was extremely stimulating and eclectic, including CERN, the Wright Brothers, public schools, 'Pure' science, the role of philanthropy, tuition fees, patents and pharmaceutical regulation:

Kealey's thesis is expanded on and defending most entertainingly in his recent book, 'Sex, Science & Profits,' wherein he develops an alternative economic explanation of scientific progress through a wide-reaching historical study of the interaction between the government, science and the market.

Defending Pay Inequality

On Tuesday evening, the society hosted Professor Len Shackleton, Dean of the Business School at the University of East London. His topic was pay inequality, and he made the case against popular concerns regarding bankers' bonuses, the 'exploitation' of the poorest and the pay gap between men and women. The video is now available, and supplies an excellent antidote to the hysteria about city fat-cats and the worrying extension of state power at the heart of the new Equality bill:

Professor Shackleton's recent monograph on the causes of the pay gap, 'Should We Mind the Gap?' is now available online from the Institute of Economic Affairs, where he also contributes to the blog. We are extremely grateful for the complimentary copies of the book that the Institute provided for the event.

Happy Birthday, Hayek!

As reported on the Volokh Conspiracy (where it was announced a little prematurely), today marks the 110th birthday of the seminal Austrian economist and - in his own words - political philosopher in the 'Old Whig' tradition. The photo to the right shows Hayek meeting the society's founders in the mid-1980s, shortly after they established the Hayek Society, which is now the Libertarian Society.

There's a fascinating article celebrating the anniversary by David Gordon at mises.org, in which he discusses Hayek's teaching style whilst a visiting professor at UCLA:

"Hayek delivered his lectures seated at a desk. He never used notes, but his lectures could easily be printed verbatim. When a student asked a question, Hayek would pause and then deliver an answer in language as equally exact as his lectures. He would sometimes twist his head in order to hear the question better. He said that he found it an interesting historical coincidence that he was deaf in the left ear, and Karl Marx had been deaf in the right ear."

Also, via Cafe Hayek, see this excellent interview from 1985. Well into his 80s, Hayek still comes across as a careful and lucid expositor of the ideas of freedom and free markets:

Both barrels

Via the Spectator's Coffee House blog, Dan Hannan MEP delivers an excellent rebuttal to the government's exculpatory propaganda barrage concerning its handling of the financial downturn:


The absurdity of insisting on maintaining free-trade to an institution whose trade barriers and export subsidies for agriculture alone forms almost half of its budget is farcical. If - as Hannan points out - Gordon Brown genuinely believed in the internationalist sentiment behind his appeals, there could be no excuse, save political expediency, for belonging to a group that arbitrarily excludes the most efficient producers based solely on their geographical location. For a more consistent advocacy of free trade, see this petition (unfortunately not modelled on the candlemakers') from the Atlas Global Initiative.

Douglas Carswell MP, Hannan's coauthor on 'The Plan: Twelve Months to Renew Britain', discussed other aspects of the deterioration of Britain under New Labour and his preferred strategy to return to limited government, in his talk to the society at the end of Hilary Term. The video is now available, here.

Regulating for Fun

News comes via Samizdata of a recently concluded investigation by Ofcom, the UK body that regulates broadcast media, into the illegal activities of a local radio station:

[The] UK regulator has issued a "yellow card" warning to GWR FM for failing to play music the kids want to hear, accusing the Bristol-based station of aiming for an older audience. UK radio stations are licensed on the premise of appealing to a particular crowd, and providing a particular kind of content. For GWR that means locals aged under 44 and a combination of "contemporary and chart" music, which Ofcom interprets as anything recorded in the last two years...

Ofcom spent three days listening to GWR, and concluded that while classics are permitted to add "spice" to the mix they shouldn't make up the majority of content. But even discounting a daily feature of the station, the "Time Tunnel" broadcast daily between 9 and 10am, Ofcom found that 53 per cent of the tracks played were more than two years old - and thus outside the station remit and the stated boundaries of the "contemporary".

From Ofcom's press release, this paragraph was the most galling (not least for its use of the word 'spice'):

In this respect, Ofcom’s expectation of a “contemporary and chart station” such as GWR FM is that the main musical diet should be current music, reflecting the UK singles charts of today and recent months. Older, classic tracks are not necessarily out of place in this type of format, but only acting as complementary ‘spice’ to the main offering.

[emphasis added]

It is one thing for there to exist an organisation whose stated objective is to protect some vaguely defined notion of 'consumers' interest' or 'fairness.' It is quite another for it to reject completely the daily vindication of the station's popularity, proven by the decisions of hundreds of thousands of listeners to tune in to the current programming schedule, in pursuit of its own priorities.

Which better determines what listeners want: the discipline of the marketplace and popular support, or the arbitrary, indefensible criteria of politically appointed apparatchiks?

Localism and Libertarianism

The society was delighted to host Douglas Carswell, Conservative MP for Harwich & Clacton, last night to speak about his new coauthored libertarian/localist manifesto, 'The Plan: Twelve Months to Renew Britain.' The speech was extremely stimulating, and points to an intriguing way for libertarians to return responsibility for the functions of the state down to the lowest level possible - the local community, and in most cases, the individual. One of the subtle points that suggests localism should be forefront amongst the agenda of libertarians is that it provides a counterweight to the politically powerful tool of big government - the client state. By empowering individuals to choose their children's school or be in charge of what healthcare they receive, and how much they pay for it, a new orthodoxy can be established in which rational individuals refuse to surrender their newfound rights to the central government. In this respect, localism has a self-replicating mechanism which, by competition between councils, encourages best practice to be emulated, and, by giving individuals a wider range of choices, irrevocably breaks the monopoly of the central government.

The video is below:

(It starts ~30 seconds in to the talk - hence the discontinuity at the beginning)

Deja vu, all over again

" In any event, the practice of intervening for the benefit of banks, rendered insolvent by the crisis, and of the customers of these banks, has resulted in suspending the market forces which could serve to prevent a return of the expansion, in the form of a new boom, and the crisis which inevitably follows. If the banks emerge from the crisis unscathed, or only slightly weakened, what remains to restrain them from embarking once more on an attempt to reduce artificially the interest rate on loans and expand circulation credit? If the crisis were ruthlessly permitted to run its course, bringing about the destruction of enterprises which were unable to meet their obligations, then all entrepreneurs — not only banks but also other businessmen — would exhibit more caution in granting and using credit in the future. Instead, public opinion approves of giving assistance in the crisis. Then, no sooner is the worst over, than the banks are spurred on to a new expansion of circulation credit."

Ludwig von Mises, 1928 (!) - quoted in a excellent profile of Mises by Richard Ebeling, celebrating the 60th anniversary of the publication of Human Action. HT: The Austrian Economists blog.