The lottery and the Olympics
Some oppose the cost to public funds of the Olympics, and some criticize the inconveniences to which Londoners have been subjected. There can be few, however, who deny credit for the superb performances of our athletes. They have shown a dedication and commitment that has rallied most of the nation behind them in their efforts, and given them generous praise for their achievements.
That so small a nation can do so well is remarkable, and many commentators, including Lords Coe and Moynihan, have praised the role of the National Lottery in this. The Adam Smith Institute is proud of the role it played. In 1990 we invited the orchestra conductor, Denis Vaughan, who had suggested the idea, to write a paper for us setting out the case. Within two years of that publication, the National Lottery bill had cleared Parliament, with credit to Sir John Major and Virginia Bottomley for the role they played.
The lottery is voluntary. No-one has to buy a ticket, and those who do can dream of the chances of winning millions. Funds are raised that taxpayers might not be prepared to give.
The distribution of lottery receipts has been remarkable. Of every £1 spent on tickets, 50p has gone into the prize fund. Of the remaining 50p, 28p is assigned to good causes, 12p in government duty, 5p to retailers as commission, and 4.5p in operating costs to Camelot, and 0.5p as their profit. It returns to good causes a higher proportion of each £1 than any other official lottery. It is reckoned to have increased funding for the arts and sport sevenfold.
Perhaps too much lottery money has gone to support institutions such as the Royal Opera House, where more might have been given to local arts ventures, repertory companies and youth orchestras, but large numbers of people on modest incomes have benefitted from the support it has given to sports activities. Lottery funding has enabled athletes to undertake full-time training in preparation, to attract top-ranking international coaches, and to train in the world-class facilities that it funded.
The pay-off achieved by our athletes at the Beijing Olympics and even more in London is the reward for a bold idea well executed. The arts, medical and other charities have been aided by the National Lottery as well, but the Olympics highlights the difference it has made to sport. And every penny is raises is freely given.
The Olympics and public choice theory
I view the Olympic Games as a prime example of a Public Choice dilemma. It has grown from being a relatively small-scale, privately-funded and organised event into a behemoth supported by a large bureaucracy, state-enforced monopolies (so-called ‘exclusive sponsorship rights’) and vast amounts of state subsidies. Public choice theory coherently explains why countries are so keen to host the Olympics and why such rent-seeking behaviour occurs at the expense of the public good.
Concentrated special-interest groups benefit from the Games both directly and indirectly: the IOC bureaucrats with their junkets, Olympic organisers in the host nation such as LOCOG and the London Legacy Development Corporation, athletes who raise their profiles and win sponsorship deals, corporations and construction firms who benefit from contracts and via advertising opportunities and so on (one might also say that the Olympics represents a classic example of Corporatism, an unholy alliance between Big Government and Big Business).
Politicians also gain from being an Olympic host nation from a Public Choice perspective. On the one hand, they may benefit directly from the lobbying that inevitably takes place from the special interest groups. On the other hand, there is clearly an expressive interest at stake – one might rather aptly call this the ‘bread and circuses’ approach, developed particularly by Geoffrey Brennan and Loren Lomansky. Much of the public support for the Olympics is given on the basis of an expressive interest rather than an instrumental one and politicians of all stripes seek to benefit from the public mood of good cheer and enthusiasm that do – genuinely – seem to surround the Games.
The instrumental arguments for the Olympics are much less convincing. Much emphasis has been placed on the legacy, particularly in terms of the sporting infrastructure and the ‘regeneration’ of run-down parts of northeast London. It is highly doubtful, given the level of success of previous Olympic legacies and the general record of government spending and top-down regeneration how successful this will be. Moreover, there can be no doubt that the transfer of resources via taxation of £9billion (or more?) represents a similar problem to all other government spending in that we cannot know what use the resources would have been put to, had they been left in private hands. What we can tell is there will be a significant deadweight cost, not only because of the usual deadweight costs of collection and reallocation but also because the Games themselves represent a one-off, deadweight cost with no tangible benefits.
From a Public Choice perspective, however, it is clear that the concentrated interests of particular groups who might benefit from the spending - certain people in Newham, sportsmen and women, the bureaucrats responsible for administering the legacy and so forth – have benefitted instrumentally from the Games at the expense of the broader public (especially Londoners) who have suffered a loss. That this loss is small per capita is precisely the reason why opposition to the games has not proven more substantial. Moreover, as opponents to the bid and then the spending had no real means of expressing their opposition, even in the unlikely event that they were willing to do so, given the small per capita cost involved. This is, however, exactly how the Public Choice process works and we must not construe such tacit consent as legitimising such spending relative to the Olympics or any other areas of public policy.
Get the Olympic rulebook out of our private lives and legalize steroids
We’ve seen quite a few sporting upsets at the London 2012 games so far. But what remains predictable are disqualifications for drug use, with an Albanian weightlifter and Uzbekistani gymnast being banned and some Chinese swimmers facing allegations of doping.
The reasons for cheating are clear. Performance enhancing drugs (PEDs) offer improved performance and detection is far from certain. A constant arms race between drug developers and those who test for them has led to a situation where even the World Anti-Doping Agency Director-General himself has confessed that they are catching “the dopey dopers, but not the sophisticated ones.”
Only users who poorly time their intake get caught, while those on more intelligent cycles can avoid detection at the games themselves. Simultaneously, the rules on what is allowed constantly change to account for new substances. At different times caffeine and Vitamin D have been prohibited. Bizarrely, blood doping is now banned while training at high altitude to achieve the same effects is permitted.
Many have responded by asking for greater international cooperation in cracking down on the drugs trade. There are alternatives, however. The Chairman of the IOC takes the view that a more stringent out-of-competition testing system, with a greater use of the “whereabouts” policy, would improve detection.
Further restrictions on PED markets will not just affect performance athletes, though. The vast majority of users do so recreationally for aesthetic reasons. Growth in users has been dramatic in the past few years, particularly in poorer areas such as the Welsh valleys, where 60% of recycled hypodermic needles are from steroid use, not heroin use.
These users do not have the professional team that Olympians do, procuring drugs and ensuring their quality. As with mood-altering drugs, steroids are often cut with other substances, such as baby oil. The legal status of these drugs also means that users are often restricted to purchasing products developed for bulking up cows or the treatment of injured horses. Legalising supply would ensure that fitness enthusiasts could rely on brand strength for the quality of their drugs as they can do with legally available supplements now.
Many of the health complications that arise as a result of use can be put down to a poor circulation of information. Many learn how to use steroids by word of mouth or from internet forums. Moves to legalise the use of drugs would help to open the world of PEDs, so that those who do choose to use them can educate themselves to do so as safely as possible.
Steroid use is swelling, and whatever happens in the world of professional athletes, the rules of their games should not affect the lives of those outside them. We should ignore calls for tighter controls (especially when those who decide what is permissible change their definitions so often) as these clearly have not stopped the use of steroids skyrocketing in recent years. Rather, we should push for legalisation of all performance enhancing drugs so that those who are more vulnerable can be safer in pursuing their fitness goals.
New at AdamSmith.org: These Olympic Games are nothing to be proud of
The London 2012 Olympic Games have been a triumph of wastefulness, nannying government, corporatism, deceit and incompetence. Our writer Lawsmith asks, how could our political class have gotten it so wrong?
The first and only time I've met Boris Johnson was when we were on our bicycles at the traffic light at the bottom of King William Street in the City. I stammered: "Uh, good morning, Mr. Mayor." Play it cool. After a brief (and awkward) exchange, he pushed off, away from my sight and into eternity.
Months later, as the tangible effects of the Olympic Movement's month-long occupation of central London started to make themselves felt, my thoughts once again turned to my cycling buddy. After reminding yourself for a moment that Boris once gave some constructive criticism to the city of Portsmouth by saying it was "too full of drugs, obesity, underachievement and Labour MPs," and that barely two months ago he referred to the BBC – which, like that brainchild of the Blairite Labour Party, the 2012 Olympics, is state-run – as “corporatist, defeatist, anti-business, Europhile and… overwhelmingly biased to the Left”, I take the view that BoJo -- currently the Games' biggest cheerleader -- would be doing one thing, and one thing only if he were in opposition (if he were so inclined).
He would tear the government, the media, and anyone even remotely associated with bringing the Olympics here to shreds.
In his absence, others have tried. Most have failed to make a dent. Dominic Lawson, writing for the Independent, fired the opening salvo of reason against Olympics fever last month — writing a fairly broad-brush piece which covered most of the general criticisms of this circus (cost, inconvenience, armed police), he scored his best points at the ‘leftist’ BBC's expense: "[news coverage of the Games] really does make one feel as if this is North Korea,” he wrote, “rather than a country supposedly characterised by individualism and nonconformity."
Olympic arrogance
For some weeks transport within London has been dislocated and delayed by road closures as Olympic venues are prepared. Soon now whole lanes will be closed off to ordinary drivers so that these 'Games Lanes' can whisk Olympic officials around in their limousines without hindrance from other motorists. Any cyclist entering one of these lanes faces a fixed £130 penalty, and motorists have been advised to avoid London altogether during the Olympics.
My use of the word 'Olympic' risks an enforcement lawsuit from the committee 'protecting' the trademark. Also banned are words and phrases made up of terms that might refer to the Games, including London, 2012, games, medals, gold, silver and many more. Bullion dealers should be careful when they talk about their work.
The Spectator tells of a butcher in Weymouth banned for arranging a display of sausages like the 5 Olympic rings, and of a florist in Stoke-on-Trent ordered to remove similarly arranged paper tissues in her window. Only Macdonald's chips will allowed at the Olympic stadium; others are banned.
There is a no fly zone around London, and some homeowners have to put up with anti-aircraft missile batteries installed at the top of their apartment blocks. Residential areas will have to put up with the noise of commercial garbage being collected nearby between 1.0 and 4.0 am during the games.
There are queues of several hours sometimes for air passengers arriving at Heathrow, even before the games have begun. The cost of all this long exceeded its planned budget, and is now reckoned to top £12bn, though if the cost of public transport upgrades is included, even that figure doubles.
And for what? So that the "international sporting community" can have a good time at the expense of the locals? So that Olympic officials can congratulate themselves on the way the locals were whipped into line to minimize any inconvenience they faced?
Welcome to the true spirit of the Olympics. Its rings stand for corporatism, cronyism, extravagance, bullying and arrogance. The sensible course is to be as far from it as I can be until it's all over.
New at AdamSmith.org: In Praise of Consumerism
We generally hear the term ‘Consumerism’ used as a term of abuse, usually by religious movements, pro-state economists, environmentalists and so on. I would argue that, properly constituted, a ‘consumerist’ society is exactly the type of society that we should be striving for.
However, part of the pejorative use of the term comes from a particular meaning attached to it. As the brief but surprisingly illuminating Wikipedia article observes, there are at least four possible meanings of the term:
i) The common use of the term giving an "emphasis on or preoccupation with the acquisition of consumer goods" (Oxford English Dictionary) – which is exactly the meaning which attracts much opprobrium
ii) The original coinage (1915) which referred to the "advocacy of the rights and interests of consumers" (Oxford English Dictionary)
iii) The economic use of the term referring to “economic policies placing emphasis on consumption”
iv) And finally “In an abstract sense, it is the belief that the free choice of consumers should dictate the economic structure of a society”.
Clearly, as Classical Liberals or Libertarians, we will see that (iv) is exactly the kind of economic order that we would like to prevail. This is the argument of von Mises in Liberalism that:
The social order created by the philosophy of the Enlightenment assigned supremacy to the common man. In his capacity as a consumer, the “regular fellow” was called upon to determine ultimately what should be produced, in what quantity and of what quality, by whom, how, and where... The much decried “mechanism” of the free market leaves only one way open to the acquisition of wealth, viz., to succeed in serving the consumers in the best possible and cheapest way.
This must be contrasted to an economic order in which producers are able to dictate to consumers what quantity of quality and of goods they should receive and at what prices, rather than having that determined by, in the long-run, the subjective desires of consumers. In a free market*, producers will be unable to dictate to consumers except in a very few cases, as Hayek and von Mises pointed out. However, armed with the power of governmental intervention, producers will be able to create cartels and monopolies and exploit consumers. This is what Deirdre McCloskey recently pointed out as have many others.
The EU's cookie monster
This May marked the end of an amnesty by the Information Commission Office (ICO) on enforcement of the EU Cookie Directive. It requires all website owners to update their content to request the viewer’s permission to use cookies. While ‘essential’ cookies are exempt, this doesn’t include cookies that track usage or allow targeted advertising, which are critical to improving the user’s experience (through methods such as A/B Testing). This compromises the ability of firms to provide services that people want, and to do so free of charge.
What this law won’t catch is those who actually mean to do harm. The online community already counters those who would genuinely seek to misuse cookies more quickly than a government agency could shut down a server. The usefulness of cookies to do harm is also limited, and by telling people it is cookies they should be concerned about shifts very real concerns about using the internet safely away from genuine threats.
Meanwhile well-meaning service providers break the law without even realising it. The ICO’s own video to publicise the change has less than 10,000 views, while over 175,000 new .uk sites were registered in May alone. Providers simply aren’t aware that the technology they put in place to improve their products is making them criminals.
In practice, the law means only that users will be faced with constant interruption. Once the user has been asked for permission for a specific cookie for a specific site a hundred times, it seems unlikely that they would continue to read about what each cookie does. Eventually only the illusion of security is provided, breeding complacency.
Cookies have been around almost as long as the internet has been commercially available, and for those that are concerned about them, there are already a plethora of techniques to avoid them such as browsers and scripts. These are one-button fixes as opposed to a heavy-handed law, which requires updates on upwards of half a billion web pages.
While this will have little impact on large businesses, which can move their servers out of the EU and avoid the process entirely, this will be a blight on smaller providers of web content. It is these small providers that have made the internet so interesting. Traditional publishing has long been dominated by a much smaller group of voices, and the internet has gone a long way to increasing pluralism. The EU Cookie Directive puts that at risk, while only providing a façade of security.
On not giving a stuff about privacy online
I’m in today’s City AM debating about whether we can trust social networking sites with our data. My basic point is that, if we want it, they will provide it:
If people want privacy, the profit motive will give social networks a good incentive to offer it to them … Social networks have to constantly innovate and compete with each other to stay alive. If ever there was a good reason for other sites to improve security, losing users – valued for Facebook at $121 each – is it.
Against me is Big Brother Watch’s Nick Pickles, who I like very much and who has spoken at ASI events in the past. I won’t try to paraphrase his argument, but I strongly recommend reading his side too.
What I didn’t have space to discuss is my suspicion that most social networking users just don’t care about their privacy. Many might say they’re concerned about keeping their activity secret, but talk is cheap. When you look at actual user behaviour, the evidence that people really care about privacy is fairly thin.
Facebook is notorious for its difficult-to-understand privacy controls, yet it’s the most popular social network by a country mile. I couldn’t find any data about this online, but most active Twitter accounts seem to be public instead of private. When Google+ launched, it sold itself as a privacy-friendly alternative to Facebook, but has not succeeded despite massive backing and cross-product integration from Google. (As a Google fanboy, I’m a little disappointed by that!)
Diaspora, a community-built alternative to Facebook which has placed privacy protection at the centre of its mission has not attracted many users. True, the network strength of a Facebook or a Twitter mean that switching sites can be costly for users – a social network is only as valuable as its user base – but that didn’t save MySpace, Orkut or Bebo in countries where they were popular, and I strongly doubt it will save Facebook or Twitter when a genuinely superior service emerges.
Even security – not having your account hacked into – may not be very important to a lot of users. Many people still use awful passwords like, er, “password”, “123456”, “qwerty”, and so on. It’s possible that they’re just ignorant of the dangers, but given the media coverage for any large website security breach, this seems less to me than the idea that they just don’t really care if their LinkedIn account is hacked into.
Fundamentally, I see the relationship between users and social networking sites as being far more benign and positive than Nick and others who are concerned about privacy. Like when I give the bank my money for a trivial interest rate, I am effectively giving up my data in exchange for “free” services – ATM use from banks, and reasonably decent communication tools from Facebook and Twitter.
As I say in City AM, the great thing about these websites is that they’re utterly disposable. Nobody needs Twitter to lead a good life. Those social network users who want better privacy can go to the sites offering them. But, since most people don’t use social networks at all, maybe we have that divide already.
Some books to look forward to
I'm looking forward to the release of a couple of interesting books.
One is The Golden Guinea by Michael Nevin, who runs a blog with the same name.
It is a sort of Greek Tragedy in three acts, describing the roots and (inevitable) resolution of the current euro-turmoil. First, in traditional Greek Tragedy style, comes hubris. Over-optimism and cheap credit fuelled a giant bubble, drove up asset prices, and made us all feel rich. But then, of course, comes nemesis, the fall, as the boom turns into an inevitable crash. The Golden Guinea records how the consequent collapse of asset prices red to a sharp rise in bad debts, driving banks into insolvency. Nevin congratulates world leaders for acting quickly to avert complete meltdown, but accepts that quantitative easing, even lower interest rates and all those keynesian make-work measures simply poured more cash into an insolvent system. As the euro leaders are doing right now.
The third act, catharsis, could turn out tragic – but maybe not. Nevin is reluctant to leave markets to sort things out unaided, but argues for the conditions to make markets work better – sound monetary policy, more sensible banking regulation, and common sense in the international monetary system. He's like to see a new currency – the Guinea – convertible into gold, so it could not be inflated into oblivion like the paper currencies of the US, the UK and the eurozone. It's an interesting idea.
The second book, coming out mid-August, is called Shadowbosses. If I tell you the subtitle is How Government Unions Control America and Rob Taxpayers Blind, I think you might get the sense of what it's about. The authors are US businessman, professor and political activist Mallory Factor and his lawyer wife Elizabeth. I liked the review by Fox News correspondent Michelle Malkin: "Coercion, Corruption. Violence. Secrecy. Special Waivers. Backroom deals. Featherbedding. And nationwide classroom indoctrination. Welcome to America's taxpayer-funded government-employee unions."
The authors have come up with some interesting statistics that are otherwise hidden in the public accounts, like just how much US taxpayers stump up for government-sector union officials to take paid time off on union business. It's an eye-watering sum. Not only are US government-sector unions a multi-billion dollar industry, but they are also protected by a wide range of state and federal laws that give them special privileges, that force workers to join or pay for union activity whether they want to or not, and give power to the union bosses that should rightly belong with individual workers. And then there is all the political activity of these rotten boroughs...
Shadowbosses is available for pre-order on Amazon.
New at AdamSmith.org: The Case for Single-Issue Activism
In recent years, believers in a small state have largely failed to convert good intellectual arguments against interventionism into concrete political achievements. Whig argues for a change of gears by liberals, away from politics and towards a focus on single-issue group campaigning.
Classical liberals, libertarians or indeed anyone arguing for a smaller state (I’m going to use ‘Liberals’ as shorthand) have a serious problem. We don’t seem to be very successful at converting the corpus of intellectual work and powerful arguments against interventionism into concrete political success. Whilst the Archbishop of Canterbury, Polly Toynbee or Michael Sandel, to name a few, seem to think we are living in an era of unbridled free markets, any sensible observer can see that this is not the case; state capitalism or corporatism is the status quo. In reality, the trend of the last twenty years has been a move away from free markets with growing taxation and more regulation. What can be done to reverse this trend or at least to revive the momentum of support for limited government?
While there are some elements of the Conservatives and perhaps Liberal Democrats with (some) Liberal ideals – and one or two Labour politicians have sensible ideas on particular issues – there are no elements of mainstream political life we can call home. Fortunately, one might say the same for out-and-out socialists but I would argue that, given the size and reach of government and the state of public discourse, they are rather more at home in contemporary politics.
