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Professor Jonathan Sacks' 1988 IEA Hayek Memorial Lecture on Morals and Markets was generally regarded as one of the most stimulating contributions to this subject in recent years. The institute therefore commissioned three other distinguished authors to write commentaries on Professor Sacks' paper. The four papers are published in this volume, together with an Afterword by Professor Sacks.

In the 1999 IEA Hayek Memorial Lecture, reprinted in Occasional Paper 111, Otmar Issing, the eminent monetary economist and one of Europe's most influential central bankers, discusses currency competition and European Monetary Union. Professor Issing argues that choosing a '..Hayekian discovery process as a route to monetary union' would have been too risky. However, the introduction of the euro has triggered '..a kind of Hayekian discovery process' which gives more scope for the private sector to 'enhance the quality of the medium-of-exchange and store-of-value functions of money.' This Occasional Paper also includes commentaries by two other distinguished economists - Professors Lawrence H. White and Roland Vaubel - who criticise Professor Issing's views. There is then an Afterword by Issing.

In this monograph, Professor Gissurarson explains the Icelandic model of fisheries management, Individual Transferable Share Quotas (ITQs), implemented in 1979 to reverse the decline in Icelandic fish stocks. Access to Icelandic fisheries was traditionally open to all. In the 1960s and 1970s excessive catches of herring and then cod led to a decline in stocks of these important species in Iceland's waters. In response, Iceland's government imposed restrictions on the number of days trawlers could put to sea to catch certain species. This led to fishing Derbies, where fishermen competed to catch as many fish as possible in the limited time available. Inevitably, catches continued to exceed sustainable levels. Starting in 1979, the Icelandic government gradually introduced a system of individual transferable share quotas (ITQs), which essentially give boat owners the right to catch a specific proportion of the total allowable catch (TAC) of certain species. If a boat owner does not wish to use all his ITQ he can sell part of it to someone else. This encourages more efficient use of the capital invested in boats and equipment.Because ITQs entitle their owners to a specific share of the future stock of fish, they create incentives to ensure that stocks are sustainable. Since the introduction of ITQs, capital invested in Icelandic fisheries (boats and equipment) has been gradually falling and catches have fallen to sustainable levels, whilst the value of catches has risen. Because of the success of the ITQ system and the wealth it has created, there is now political pressure for an imposition of a resource rent tax. But such a tax would be contrary to the interests of effective conservation of fish stocks. A more appropriate next step would be to introduce a cost-recovery charge and, as a quid pro quo, give ITQ owners greater say in the administration and enforcement of the system. Owners of ITQ would have stronger incentives to ensure that catch levels were set at the economically optimal level.

The first edition of this pioneering book produced surprising conclusions from research around the world into the extent of private education. James Tooley challenged the prevailing wisdom that private education fosters social and economic inequality. On the contrary, he found that the private sector, as well as being innovative, often provides creative social responsibility programmes, subsidised places and student loan schemes. He concluded with a proposal about the role of for-profit education enterprises in promoting equitable development. In this second edition, Professor Tooley contributes a new preface which shows how his work has developed and extended into other countries. In particular, he provides a fascinating account of how private education is flourishing in China.

This volume, edited by Dennis O'Keeffe and with a foreword by David Willetts, explores the relationship between virtue, morality and alternative forms of economic organisation. It should be read by anybody who is interested in the relationship between morality and economic order. Despite the obvious success of the market economy in generating wealth, many commentators accept this success only grudgingly, and unthinkingly criticise the moral underpinnings of capitalist societies. "Economy and Virtue" takes such critics on and finds their criticisms wanting. It analyses how a free society both relies on and promotes values. Unless people can choose between good and evil in conditions of freedom, there is no morality in performing an action that helps another person. A market economy promotes cooperation and restrains selfishness because it relies on contracting by consenting parties, and because its legal system protects the property rights of the vulnerable, just as it does the property rights of the powerful.The authors argue that we cannot judge the market economy by observing the obvious process of 'getting and spending', because this process alone tells us nothing about the motives and character of those involved. There is much more to the market economy than material acquisition: the eminent authors in this volume discuss lucidly and convincingly the moral justifications of the market order.

Over the last twenty years, airports and airlines have been privatised in a number of countries. However, many of the fundamental functions of airports remain outside the market process. In particular, the allocation of take-off and landing slots is largely determined by custom and practice and by regulation. The pricing of such slots does not follow economically rational principles. The current, arbitrary system of allocating airport slots can hinder competition and prevent slots being used by airlines that value them most. The authors suggest how a market in airport slots can be developed to address these problems. They are careful to take account of competition issues and other special features of the industry in developing their proposals. Nevertheless, the authors agree on the need to assign property rights to airport slots and allow slots to be traded. Only then can there be a more rational allocation of scarce airport take-off and landing slots.

This book provides an analysis of the current problems of pension provision in the UK and a radical plan for reform. The authors believe that the system of retirement income provision in the UK is so mired in complexity that nothing less than wholesale change is necessary. The authors believe that state pensions should only be offered on a contributory basis - there should be no automatic right to a 'citizen's pension', as has been proposed by many commentators. Attention should also be paid to the social security system to remove the perverse incentives of means testing. Anomalies and special treatment of favoured groups in the tax system should also be removed. The Way Out of the Pensions Quagmire proposes a holistic approach to pension reform that takes proper account of the interaction between pensions, tax, social security and financial regulation.

This book is a collection of papers from the Beesley Lecture series on regulation held jointly by the IEA and the London Business School in the autumn of 2000. The chapters in this volume are revised versions of the papers given in the series and they are, as usual, followed by comments made by the chairman; the chairman in most cases being the regulator.

Judgments about Britain's economic performance are constantly being made, often based on inadequate evidence. In this paper, Professor Nicholas Crafts, one of Britain's leading economic historians, assembles the evidence, places recent performance in a long run context and makes informed judgements about whether Britain is suffering from absolute or relative decline. His book is a mine of information about economic trends since the 1870s, giving details of the GDP, productivity, investment, educational attainment, taxation and other statistics which are relevant if proper assessments of economic performance are to be made. One of his conclusions is that the economic reforms which began with the Thatcher governments, and which have broadly been continued under New Labour, have made a difference, avoiding some of the 'government failures' of earlier years. How managers respond to the revolution in information and communications technology is now a key factor in determining Britain's future performance.

The world-wide trend towards privatisation, liberalisation and globalisation has produced substantial economic benefits. Nevertheless, liberalisation has had its shortcomings and there are potential threats to further progress, including in particular an anti-liberalisation backlash. Continuing progress depends on the ability to articulate a clear vision of the positive effects of global liberalisation and to establish institutions and policies which can help realise that vision. Reversing globalisation would harm the world's poorest inhabitants. Professor Calomiris, well known for his work on national and international financial markets, examines the successes and failures of recent global liberalisation and derives a 'globalist manifesto' for public policy. His paper is a revised version of the tenth annual Hayek Memorial Lecture given in July 2001.

The teaching of economic history is in decline in our schools and universities. Yet much can be learned from the analysis of historical economic events. In railway.com Robert Miller combines such analysis with an explanation of the technological developments in order to draw parallels between the early British railways and the ICT revolution. Study of the former enables us to understand likely trends in the latter. Furthermore, a number of important policy implications can be drawn from the study of the economic history of both events. Robert Miller shows too how stock market bubbles do not necessarily lead to economic losses. The use of central planning for allocating capital in network development has simply led to technological networks being under-provided. The author also considers the issues of technology 'lock in' and examines how markets, even in apparently unsophisticated economies, can solve complex resource allocation problems.

There are at least three requirements for an economy to maintain stable prices. Policy markers and opinion formers must understand that inflation brings no medium or long-term economic benefit; the causes of inflation -- monetary growth -must be also be understood; and there needs to be a stable and credible institutional structure that will deliver a sound monetary policy. This book brings together two classic IEA papers by Nobel Prize winner Milton Friedman with a new work by Charles Goodhart who is a Bank of England Advisor and former member of the Monetary Policy Committee. In doing so, 'Money, Inflation and the Constitutional Position of the Central Bank' provides a thorough yet accessible text appropriate for anybody who wants to understand inflation and how it should be controlled. Friedman's paper, 'Unemployment Versus Inflation?' is a lucid explanation of why higher inflation does not lead to lower unemployment, and his 'The Counter-Revolution in Monetary Theory', the first Wincott lecture, explains why excess monetary growth is the only cause of sustained inflation. Goodhart's paper 'The Constitutional Position of the Central Bank' was the 32nd Wincott Memorial Lecture.It explains how the Institutional arrangements for central banks should be developed to deliver stable prices and, importantly, to influence inflation expectations. Professor Geoffrey Wood sets the historical perspective in his introduction and also links the work of Goodhart and Friedman to the current thinking of the new Governor of the Bank of England, Mervyn King.

This book is a collection of papers from the Beesley Lecture series on regulation held jointly by The IEA and the London Business School in the autumn of 2001. The chapters in this volume are revised versions of the papers given in the series and they are, as usual, followed by comments made by the chairman; the chairman in most cases being the regulator. Since the early days of the Lectures on Regulation in the early 1990s, a great deal of experience has accumulated of how and how not to design and operate regulatory systems. This growing experience is reflected in the increasing detail and sophistication of the papers given in this series.

The energy challenges of resource depletion, security of supply and pollution have been effectively addressed by market entrepreneurship, technology, and measured regulation. The remaining sustainability issue for carbon-based energy reliance is anthropogenic or man-made climate change. "Climate Alarmism Reconsidered" demonstrates how the balance of evidence supports a benign enhanced greenhouse effect, and how the case for mandatory greenhouse gas reductions depends on unrealistic assumptions. Government intervention in the name of energy sustainability is the major threat to real energy sustainability and the provision of affordable, reliable energy to growing economies worldwide.Free-market structures and the wealth generated by markets help communities to best adapt to climate change. This multi-disciplinary study concludes that climate alarmism and its corollary, policy activism, are unwarranted and counterproductive for the developed world and particularly for the world's energy poor.Every few decades the intellectual community becomes obsessed with some energy 'problem' to which it can see no solution and calls for intervention by governments and international bodies to save the world. In the 1970s, the perceived problem was an imminent energy shortage; today the issue is climate change.

Corporate governance has come to prominence in recent years because of the perceived political importance of issues such as executive pay and apparent accounting scandals. As might be expected in this frenzied climate, politicians have reacted. US politicians reacted with particular speed through the passing of the Sarbanes-Oxley Act. Dr Elaine Sternberg brings some sobriety and clear thinking to the debate in this new and fully revised edition of "Corporate Governance: Accountability in the Marketplace", lucidly defining the purposes of corporate governance and analysing different models of corporate regulation. The Anglo-American model allows corporations to fulfil their corporate purposes more effectively than the stakeholder or the German/Japanese models. Given that problems of executive pay, accounting scandals and so on result in corporations not achieving their proper purposes, Sternberg finds that a change in the regulatory model cannot be the answer. Instead, she proposes that we should look at the ways in which regulation prevents the Anglo-American model from working in practice as effectively as it should in theory.Sternberg shows how a genuine 'market' in corporate governance could be created so that firms had to compete for funds, with their mode of governance being one of the attractions to potential shareholders.

This book charts the development of the new rural economy and considers whether government policy has similarly developed. In the rural economy, tourism now employs more people that agriculture, and the agricultural sector itself has become much more diverse. But the government bodies charged with delivering countryside policy very often seem wedded to a view of the rural economy and the traditional agricultural sector as synonymous. In "The New Rural Economy", Professor Berkeley Hill of Imperial College London analyzes the appropriate roles of the public and private sectors in the developing rural economy and questions whether evidence of 'market failure' necessarily justifies government intervention, if 'government failure' imposes greater costs than the problems intervention was intended to remedy.This book is an essential reading for those concerned with the development of the countryside and the proper role of government in creating a sustainable, long-term future for those living and working in rural Britain.

It is now a widely held view that a new era has dawned in which businesses must adopt a new conception of their mission, purpose and conduct, by endorsing and implementing corporate social responsibility. In The Role of Business in the Modern World, Professor David Henderson argues if we ask businesses to achieve broader social goals, we risk undermining the very system in which business activity leads to opportunity and prosperity. Professor Henderson describes the unprecedented material progress that has occurred in the last century as a result of the wide-ranging entrepreneurial opportunities and competitive pressures that exist within a market economy. The material prosperity created by the activities of business is threatened by the 'global salvationist consensus' that has arisen in recent years and which seeks to change the role of business via the doctrine of corporate social responsibility. Professor Henderson shows that this consensus is based upon a set of fallacious beliefs about the nature of capitalism, profiteering and business enterprise.

The existing system of land use planning in the UK dates back to the 1947 Town and Country Planning Act and is therefore now well over half a century old. However, there have been indications that government is beginning to take seriously the case for radical reform. This Hobart Paper examines some of the government's proposals against economic evaluation criteria. The principal deficiencies are found to be that the proposals do not properly address important topics such as the internalisation of environmental externalities or land betterment taxation. The author discusses various options for change to the land use planning system primarily designed to introduce voluntary trading and the privatisation of development decisions. He argues that these options, and also market-based instruments such as tradable development rights, have the capacity to achieve a greater degree of allocative efficiency and to take some of the political heat out of the land use planning process.

This collection of essays provides important insights into a number of aspects of financial regulation which will be of lasting value. The authors are leading figures from regulatory bodies, financial markets and academia. There are several issues on which all the authors are broadly agreed: market discipline is important, regulators should not attempt to eliminate risk, and there are great benefits from financial liberalization and globalisation. The essays offer different perspectives, however, on the correct regulatory response to financial crises, how the EU should manage regulation, and other issues of importance to the future of international financial markets. It is increasingly common for books and papers on regulation to focus on detail and to be highly specific and technical. While "The Regulation of Financial Markets" does not ignore the detail, it also considers fundamental and practical issues in regulation and provides a valuable broader perspective.

This selection of E G West's papers contains a wealth of economic and philosophical analysis which can guide policymakers in the field of Education. They also show how state monopoly provision of education has led to a particular model of schooling which does not work for many of those who use the education system -- parents and children. Perhaps the most valuable contribution of these papers, though, is their historical analysis. The extent to which education systems developed in the UK and the USA before either compulsory schooling or dominant state finance emerged is remarkable. E.G. West also analyses the debate between those who believe that the state should control education in order to shape the thinking of the younger generation, and those who believe in a purist system. He demonstrates how universal state provision of education is the model that is least likely to benefit the poor, although they could benefit substantially from programmes to help them fund their education.In an era when there is increasing dissatisfaction with state education provision, but in which the state has ever greater control of the curriculum -- including the teaching of 'citizenship' -- and management of schools, the papers in Occasional Paper 130 have never been more relevant.

In this paper, Richard A Epstein, Professor of Law at the University of Chicago, explains how there are substantial gains to be made from countries getting 'easy' policy decisions correct. Societies collapse and become impoverished when they do not accept the basic principles of freedom to contract and competition. Even in the developed world these principles have not been accepted in key areas such as agricultural and labour markets. Significant welfare gains could be achieved from liberalisation in both areas. Epstein explains how liberal economists, politicians and civil servants often spend much time discussing 'difficult' cases. While these issues may be important to particular groups in society, the implications of getting 'difficult' cases wrong is not serious. Thus policy-makers and their advisers, Epstein says, would do well to concentrate on the 'easy' cases. In his study, Professor Epstein uses evidence and analysis derived from the disciplines of both law and economics. Professor Geoffrey E Wood provides a commentary that elucidates Epstein's argument and shows how it can be further applied to policy issues relevant to the UK.

Socialists have never been shy of sketching out their dreams of a better world, but that better world has never materialised in socialist countries. Indeed, socialism has frequently achieved the precise opposite of what was intended by its architects. The first part of Towards a Liberal Utopia? outlines the dreams of liberal economists and political scientists. These are not the dreams of people who wish to achieve their plans through central direction and who believe they know the precise outcome of the process called liberalisation. Rather our liberal thinkers sketch out frameworks for policy, which, in increasing the domain for individual action, will give rise to beneficial results that cannot be foreseen in detail. This will not lead to utopia, but the authors are confident that greater freedom will lead to better and more prosperous society. The second part of the book shows how an earlier generation of liberal economists turned ideas into action. Led by Ralph Harris and Arthur Seldon, the authors writing for the Institute of Economic Affairs helped to turn back the tide of collectivism by undermining its intellectual foundations.They were so successful that no serious political party now proposes a platform of central planning. As the authors featured in the first part of the book make clear, however, that does not mean that there are no new dragons of collectivism to slay. Some battles may have been won, but the war of ideas continues. Towards a Liberal Utopia? is essential reading for all those who are curious to know how the liberal economic agenda will develop over the coming generation. I trust you get some satisfaction from how far the influence of the IEA has spread, directly and indirectly. Milton Friedman, 6th October 2004.

Eighteen years ago, Professor Sir Alan Peacock made radical proposals in a report commissioned by the then Government on the future funding of the BBC. These proposals involved making subscription to the BBC voluntary but providing a fund that would finance public service broadcasting on a competitive basis. The report was widely acclaimed, as its proposals would help ensure quality programming within the context of a competitive broadcasting market. It is widely recognized that the technology is now available to make Peacock's vision a reality. In the context of the Government's review of the BBC's charter and the broadcasting regulator's review of public service broadcasting, this timely contribution once again puts the existing model of broadcasting to the test. Peacock shows how his radical ideas can now be implemented in practice. He also proposes a new corporate model for the BBC that will make it independent of the state but not fully commercial.

The debate on rail privatisation often seems to focus on very narrow issues. Those on both sides of the argument seem to be able to employ a mass of statistics to prove their point. Proponents of privatisation suggest, with some credibility, that all was reasonably well with the privatised railways until the Hatfield disaster. Opponents point to spiralling costs since privatisation. The authors of this monograph examine privatisation in the context of the long history of continual government intervention. The government imposed upon the industry a particular structure - separation of track and wheel. It also wrapped it up in increasing amounts of regulation. After examining the history of government intervention in the railways and the privatisation process, the authors of this monograph then examine the future of railway policy. Should the industry be allowed to evolve its own structure - remerging the ownership of track and wheel if it wishes? What aspects of a railway should be regulated? Who should own the various parts of the infrastructure? This monograph is essential reading for all with an interest in railway policy and the process of privatisation.

Governments, Competition and Utility Regulation continues the series of annual books, published in association with the IEA and the London Business School, which critically reviews the state of utility regulation and competition policy. The book contains incisive chapters on competition policy and trade, antitrust and consumer welfare, merger control and efficiency, regulating the labour market, Ofcom and convergence, energy regulation and competition, regulating the London Underground, the future of water regulation and European merger control. Chapters on each topic are followed by comments from regulators, competition authority chairmen and other experts in the relevant fields. The book provides analysis of and commentaries on the most significant developments in regulation and competition policy, drawing on experiences in Britain, United States and the European Union, as well as in international trade negotiations, It will be of value to practitioners, policymakers and academics who are concerned with regulation, deregulation and policies to promote competition.

Whilst private sector pension schemes have been closing down rapidly in the last few years, public sector employees continue to enjoy 'gold plated' benefits. In addition, rates of ill health retirement in public sector pension schemes are extremely high. Proposed reforms to public sector schemes will make little difference to the benefits available to new employees and no difference at all to benefits of existing employees. Private sector taxpayers have to meet the cost of public sector pensions, so how has this divide between the standard of private and public sector pensions arisen? Part of the answer lies in the fact that the costs of public sector schemes are not properly accounted for.In this monograph, Neil Record estimates that public sector pension liabilities are about GBP1trillion - but the government publishes estimates of the liabilities of only half this level. The author argues that nothing can be done to deal with the liability accrued so far, but that action can be taken to make costs transparent in the future. If costs are made transparent we can start to change the nature of public sector schemes, to the benefit of workers and taxpayers alike.Further reform proposals are discussed by commentators Philip Booth and Nick Silver.

David Smith shows the damage that is caused to economic welfare by high taxation. He also shows how unequal the distribution of public spending is across the regions of the United Kingdom. Future developments in public spending are examined, together with a programme for reducing the size of government to a manageable level.

In a new study, Patricia Morgan shows how tax and benefits policy has undermined family life in Britain and encouraged fraud and dishonesty. The study shows how the tax and benefits systems are particularly harsh on single-earner couples who have to earn over GBP50,000 before there is no loss from declaring their relationship to the authorities. This situation encourages couples not to marry and, if they are living together, to lie to the authorities about their family situation. In 2004/05, the government paid credits and benefits to 200,000 more lone parents than actually live in the UK -- fraud is widespread. The tax and benefits system encourages such fraud. In the most extreme case, a couple can gain nearly GBP10,000 a year by not declaring their relationship. Family life has been discouraged over 25 years by both Conservative and Labour governments. In the Thatcher years, the Conservative government gave lone parents special financial benefits and priority entitlement to council housing. In the Labour years, the state increasingly became the child-care provider.As Patricia Morgan comments, "Under Thatcher, the state became the bread-winner for lone parents; under Brown the state became the child carer. The consequences are obvious -- couples are strongly encouraged not to commit to each other because, by doing so, they will lose out financially. Both Conservative and Labour governments also removed any offsetting compensation in the tax system that had previously helped two-parent families." Government policy penalising two-parent families has had a disastrous economic and social effect. Couples who describe themselves as "closely involved" are twelve times more likely than married couples to split up in the first three years of a childs life. There are also higher levels of worklessness and benefit dependency -- lone parent families receiving an average of 66% of their income in benefits and tax credits. Morgan shows how it is clear from international evidence, examining trends over time and by looking at the behaviour of individuals on different levels of income, that the tax and benefits system has caused the increase in lone parent families.Where there are no incentives for lone parenthood, couples tend to stay together, marry and ensure that they can support their children independently of the state. Individuals and couples respond rationally to the incentives they face -- currently the government is giving families perverse incentives, encouraging them not to form stable family units. Major changes in the tax and benefit system are necessary. Benefits to lone parents could be reduced. Also, the perverse incentives in the benefits system that discourage couples from committing together should be offset by a tax system that recognises families. In particular, families should be allowed to allocate the income of the main earner to non-earners in the family for tax purposes. Reforms to the tax and benefits system should be bolstered by reforms to the "no fault" divorce laws that currently allow a guilty party to walk away from their marriage contract whilst imposing financial penalties on the injured party.

This is the latest book in the annual series published by the IEA and the London Business School, which critically reviews the state of utility regulation and competition policy. The strength of the series is that each chapter is followed by a comment by the relevant regulator or a prominent expert in the field. This new volume contains chapters on a number of prominent concerns, including changes in the British system of utility regulation, the spectrum allocation question, liberalisation of EU energy markets, security of supply issues, reform in the European postal sector, the future of rail regulation, the cost of capital and Ofcoms strategic approach to regulation.