Labour

Anyone (other than the specialists who get paid to produce them, or pressure groups and politicians who use them to justify intervention in favour of their special interests) who has looked with a critical eye at the Cost-Benefit Analyses, Regulatory Impact Assessments, Environmental Impact Assessments, etc. that accompany voluminously any piece of consultation, legislation or regulation nowadays will know that they are incomprehensible, pseudo-scientific claptrap claiming to predict the unpredictable and usually in practice justifying the unjustifiable.

But surely, the counter-argument goes, it would be irresponsible of the government to proceed without trying its best to assess what might be the results of the policy it is considering. However inaccurate such assessments might be, they are better than no assessment.

I am currently reading The Foundations of Morality by Henry Hazlitt, author of the seminal Economics in One Lesson and, though not widely acknowledged by academia, one of the great thinkers of the twentieth century. I, like Hazlitt and his great mentor Ludwig von Mises, subscribe to the rule-utilitarian approach to moral philosophy. Whilst reading Hazlitt's book, it is becoming more apparent to me what a close connection exists between the alternative moral philosophies and the alternative methods (such as the above bureaucratic approach) by which legislation can be shaped and justified. In Jeremy Bentham's words (that strongly influenced Hazlitt's book), "Legislation is a circle with the same center as moral philosophy, but its circumference is smaller."

For those who believe in a god or gods, the question of morality is an easy one - right and wrong is simply what is specified in the texts. But with the weakening of the moral authority of the church that accompanied the Enlightenment, there was a need for an alternative basis for morality - a method for determining what is right and wrong without dependence on the word of a higher being. The solution developed by a series of great philosophers (most famously David Hume, Jeremy Bentham, and John Stuart Mill) became known by Mill's term: Utilitarianism. In the words of Bentham (with whom the concept is most closely associated): "Morality is the art of maximizing happiness: it gives the code of laws by which that conduct is suggested whose result will, the whole of human existence being taken into account, leave the greatest quantity of felicity."

The above quote, from the posthumous compilation Deontology, expresses a view that is characterised nowadays as rule-utilitarianism. In his earlier works, Bentham had appeared to promote an alternative form, known as act-utilitarianism: "that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness of the party whose interest is in question....I say of every action whatsoever; and therefore not only of every action of a private individual, but of every measure of government" (from his An Introduction to the Principles of Morals and Legislation). The difference is that act-utilitarianism attempts to judge the impact on total happiness of every action, whereas rule-utilitarianism specifies that the morality of actions should be judged by their conformance with general rules, whose merits have been calculated to promote the maximum happiness if followed by everyone.

Our politicians and civil servants certainly seem, in recent years, to have taken seriously Bentham's instructions to consider, for "every measure of government" the utility of the measures under consideration to "the party whose interest is in question", i.e. "if that party be the community in general, then the happiness of the community". And very worthy it sounds too. But there are problems with this approach, sufficiently intractable that few people would now promote pure act-utilitarianism as a sensible basis for action.

1. What is the measure of the happiness of the community? Happiness is experienced only by individuals, so the happiness of the community must be the sum of happiness of the members of the community. To calculate that sum requires an effective method of hedonistic (or felicific) calculus, which has escaped Bentham and his successors. If an action makes me happier and you less happy, how are we to decide whether the total change in happiness is positive or negative? We cannot even say that the change is positive if it increases the happiness of more people than it decreases. Murray Rothbard (emphatically not a utilitarian) gives the example of 99% of the population deciding to enslave the other 1%. This is the illusion underlying the King of Bhutan's Gross National Happiness index, and David Cameron's replacement of GDP with GWB (General Well-Being) as the guide to public policy. It tends towards governance in the interests of the majority, which can be a very dangerous thing.

2. Even if it were possible to calculate the impact of each action on the combined happiness of all those affected, one cannot live life this way. I should not decide whether to stop at a red light by trying to weigh the time-saving benefit of proceeding against the possible impacts of doing so. We have neither the time nor the ability to weigh all the impacts on all the people who may be affected by all the decisions we take. In most cases, we have to act according to general rules that, if followed, should lead to a good outcome in most instances. In other words, we are all rule-utilitarians, if only by force of necessity.

We know the importance of general rules for our own actions. But modern government, full of the arrogance of power, believes itself not to be subject to these limitations. No longer do we draw up legislation according to the good judgment of intelligent people, following general rules that can be shown to maximise the welfare of society.

Modern government forgets about general principles and instead tries to weigh the consequences of every piece of legislation and regulation for every party affected by the measure under consideration. That is what CBAs, RIAs and EIAs (not to mention focus groups and polls) are for. It is an impossible task. But while they continue to try, our legislation becomes ever more complex, contradictory, unprincipled and counterproductive.

The first step in improving the quality of our legislation (not to mention saving money on the legions of consultants who prepare these useless pieces of paper) must be to scrap the CBAs and go back to governing and legislating according to principle. This will not only improve the legislation, but also restore the battle of ideas to the centre of political discussion. The debates can return to the question of which principles are best to maximise the welfare of society, not who can best micro-manage the economy. That cannot but help alleviate the public disengagement with the political process.

Everyone in the energy industry knew that last year's Energy Review was a fix. Now a judge has recognised it too, and told the Government to consult properly on the nuclear issue. Labour have such contempt for the public that they couldn't even pretend to be listening.

What is really revealing is Tony Blair's response to the decision. "This won't affect the policy at all", he says. So what exactly is the point of consultation, if the Prime Minister rules out the possibility that any submissions will present any argument or evidence that might affect his thinking?

Most examples of picking losers are normally quite subtle. Very often, the offending policy is well-meaning, and the harm unintentional. But the abuse by the Labour Party of their control of the levers of power to steer funding towards Labour constituencies and away from Conservative and LibDem constituencies is blatant, intentional and vicious.

Gordon Brown has pledged to "cut red tape" for at least the third time this year, according to the Telegraph. This might seem a strange thing to criticise on pickinglosers, but we do so, not because it would be a bad idea, but because we don't believe he even knows what that means.

When you look at the detail of the story, what he has actually done is to ask the FSA to cut red tape by 25%:

1. How does one quantify "red tape cuts"? In what units is this measured? It's a popular concept, borrowed from Australia I believe, but utterly meaningless. "88.2% of statistics...."
2. Why only the financial services sector? Does the rest of business (or life in general) not count? The Telegraph reports that "the Chancellor will also say he wants the Department of Trade and Industry to focus on the global promotion of the financial services sector, and in particular the City of London." Can you get a much clearer case of government preferential treatment? And do we believe foreigners are going to use the City because the DTI goes around promoting them, or because they gain a competitive advantage from doing so? How many foreign businessmen in whom the City would be interested do we think are not aware of the City and its services already? Enough to justify regular trips abroad for DTI ministers and civil servants, apparently.

Apparently Ed Balls likes to be called the "City Minister". I didn't know they were allowed to make up their own titles and roles. And how disturbing is it that the man responsible for the detail of economic policy that affects all of us, designs it with particular consideration of how it affects the City. Is it inconceivable that there may be circumstances where the interests of the City and of the broader economy (or industry) are not aligned? If so, who is going to be the winner when hard choices have to be made? Still, Ed should be alright with a nice juicy City job or multiple non-execs once his political career is over. As both Ed and the country will be better off when that day arrives, perhaps we could agree that it is brought forward. Next election, perhaps?

Yet another effort by the Government to "go commercial" is failing. £10m was spent on an internet accommodation service which produced just over 400 hotel bookings this summer, reports the Telegraph. What a surprise. When I book a holiday, the first place I think of looking is the website of the national government.

Government should provide for its citizens only those things that they need (not want) and that are not provided by the market. I hadn't noticed a shortage of travel websites, had you?

Back in the 70s, government picked a real winner: nuclear power. It was going to produce, they promised, power "too cheap to meter".

We know how that turned out. Rather than being too cheap to meter, nuclear turned out to be first too risky to privatise, and subsequently too expensive to run. Post-liberalisation, British Energy had to be baled out when it was revealed that they couldn't even cover their running costs, let alone their vast capital, risk, waste disposal and decommissioning costs at the prices delivered in a competitive market.

Age discrimination is self-defeating. Companies that employ less suitable people simply on the basis of their age will do worse than companies that employ the most suitable candidates regardless of age.

But that is not the same thing as saying that age and experience are not often relevant to someone's suitability for the job. Legislation trying to prevent companies from discovering the age of job applicants is not only bound to fail, but also ought to fail (Daily Telegraph, 26 Sept 2006, p. B7).

David Miliband wants Westerners to buy the Amazon rainforest (Sunday Telegraph, 1 Oct 2006, News, p.2). We need to ensure that there is a balance between urban and industrial development to provide the goods that people demand, agricultural development to provide the food that they demand, and undeveloped areas to provide the ecological services (such as carbon dioxide absorption) that we need and the habitat to support the biological diversity that may yield untold benefits in the future. Property rights are an important way of encouraging protection of assets. In that sense, a proposal to introduce property rights in rainforests should be welcomed.

Gordon Brown has come out in favour of devolving power. But his idea of devolution is a little different to ours. Ideally, power should be devolved to the individual. (Actually, ideally the individual, not the government, should have the power in the first place, but we have to start from where we are.) Markets are devolution of power to the individual, who can use his "dollar votes".