Pay For Rail Improvements In London By Facilitating Electronic Money

I live in London. And, when I travel on the London transport rail network I use something called an Oyster card. This card, allows me to check-in at the station where I join the network. And then, I check out using my Oyster card when I leave the network. The system charges of my Oyster card the cost of the journey. I don't have to wait in line to buy tickets. Neither do I have to make sure I have enough change or cash.

Now, supposing London transport extended the ability to charge money to an Oyster card by allowing newspaper vendors at stations to charge an Oyster card. Pretty soon, other vendors will also start accepting these cards for small payments. Not long after that shops and businesses in London, realising that just about everybody has an Oyster card will begin to accept them as a way of making school cash payments.

Pretty soon, even people who never travel on London transport will start carrying an Oyster card. And then shortly after that shops and businesses outside of London will also accept Oyster cards. After all, many people who work in London commute from outside.

After a while, London transport will be able to sell the whole Oyster card business to a bank for a significant sum of money. This can be used to pay for improvements to the rail network.

Free Mobile Internet

so, I live in the UK. And we are just in the process of rolling out 4 G mobile Internet. This technology promises extremely high speeds for its users. No doubt this speed will come at a price. But I'm not talking about paying for mobile Internet access. I'm talking about free mobile access.

It occurs to me that our government has missed a trick here. I guess, that they have auctioned off the spectrum to the highest bidders. This is what any normal economist would tell them to do. However, they are a government, and that they should not always act like a profit maximising organisation.

Supposing, the UK government had incorporated a public service requirement into their conditions for rewarding access to spectrum. Such a public service requirement might simply require any operator to provide free access to their network. Albeit, at a very low speeds. the speed would have to be sufficiently low that the service could not be used to carry VoIP phone calls. Such a proposal would open up the mobile Internet to a large number of people who would not pay for it without cannibalising the customers of the network provider.

Costs could be controlled by allowing the network providers to agree amongst themselves which of them would provide the public service Internet access for a given area.

Such a move would have wide benefits for society as a whole. And, might well benefit the operators as they may well find that once people experience the joys of the mobile Internet at low speeds, they then decide to upgrade to a faster speed.

Corporate Responsibility for Libertarians

There's been a lot of comment about corporate pay and other anti-social corporate behaviour in the press over the last few years.

There has been precious little comment as to what to do about it. Here's an idea based on the following unashamedly libertarian principles.

1. Companies should be run in the interests of their shareholders.

If I buy an interest in a company with my money then it only seems fair that that company should work for me. It is no different to saying that if I buy a new phone then I should be able to use the phone as I please or that if I buy a house then I should be able to live in it.

I also think that companies should have due regard for the interests of their other stakeholders. Companies that ignore the interests of their customers, suppliers and employees aren't going to be very successful. But, and this leads on to point 2, that is what I happen to think.


2. It is not the business of government to tell shareholders what their interests are. 

Only shareholders know what their interests are. And this is the crucial bit. The interests of shareholders are not the same as the interests of the companies that they invest in. In fact, given that the beneficial owners of most of the big companies are normal people who are investing in pensions and ISA's and the like, the interests of the many companies' shareholders are aligned with the interests of society as a whole.

So why do companies seem to act primarily in their own interests and not in the interests of society as a whole?

My best guess is that, by law, they have to. In law companies have a duty to their shareholders which amounts to 'make as much money as you can while staying within the law and acting in accordance with some non-statutory codes of conduct'.

So the problems arise from government telling companies what their shareholders interests should be rather than getting companies to actually listen to their shareholders. Fortunately we are now in a position in which getting companies to listen is practical it works like this.

Change the law so that

a. Any company that wants to carry out investment business in the UK must allow each of its customers to register a proxy voter who can use the voting power associated with their portion of the investment fund to influence the companies in which their fund manager is invested.

b. Politicians and Political Parties (and anyone else for that matter) can put themselves forward as a proxy voter.

c. Customers can choose to have a 'super proxy' instead. A super-proxy is a proxy who can nominate another proxy.

Imagine a country in which ordinary investors could use their voting power to give, for example, the Labour party the power to appoint the Directors of large corporations. What would that do to excessive corporate pay, or other corporate anti-social behaviour.

It's time to get companies to act in their shareholders' interests and time to give shareholders their voice.

Defining Standards in the NHS

but haven't we had too much of government standards and targets and all that?

To be honest I'm not entirely sure. But this post is not about that kind of standard. This post is about standards for 'interoperability'.

So, what do I mean any why is this important.

We use standards for interoperability all the time. If you buy a DVD it will play on a DVD player because someone, somewhere has defined a standard for how DVD players read DVD discs. Provided both the disc and the player meet the standard then the disc will play in the DVD player. Or consider the keyboard on which this is being typed. It's a standard qwerty keyboard on my laptop. All keyboards work pretty much the same way so I can pick up any computer and type into it with the same degree of accuracy (or, in my case error) without having to learn a new keyboard layout.

Ok, so this is all very interesting but what has it got to do with the NHS?

Well, the answer goes something like this.

Suppose, for a minute that the government defined a standard for the electronic recording of entries on a patient's medical records. The standard could be very simple. Let's say that every entry on a patient's records had to contain a date and time of entry. The NHS number of the patient. The name of the patient. A code identifying what was done or was test was carried out (e.g XRays would have a code, prescriptions would have a code) and then some kind of document or image or text that describes the entry in more detail. For example, for an X-Ray we might just have an image of the X-Ray picture.

Now suppose that the health minister decreed that, from a certain date, all equipment purchased by the NHS had to comply with the standard. So, for X-Ray machines that would mean that if you went to get an X-ray done the machine would have to send a message to the central hospital computer saying "hey, we did an X-ray for this patient, here's their NHS number and name and here's an image of the X-Ray". The hospital computer would then say "right thanks for that I'll update the patient's medical records OR maybe I'll pass this information on to the place that stores the patient's medical records".

Suddenly, lots of stuff starts to become possible that wasn't possible before. Let's say you need to go to the hospital to get an X-ray done. The hospital updates your records saying that an X-ray is needed and what sort of X-ray it is. They might offer you an appointment but you might want to get the X-ray done somewhere else that is more convenient, may be a private clinic. So, you go to the private clinic, you give the clinic access to your medical records. They can see what kind of X-ray you need. They do your X-ray and then they send the "hey we've done an X-ray" message. Your medical records are updated. The doctor who wants to see the X-ray can be told that the X-ray that was requested is now done and the doctor can see the image of the X-ray. The doctor can take appropriate action based on what they see.

Guarantee the borders of Third World countries.

So this idea looks a bit mad. What we do, is we use British troops to guarantee the borders of certain selected Third World countries. This policy, will save us money.

First off, we need to make sure that we select countries that do not have any serious border disputes. Then, we say to this country, "we will guarantee your borders and in return we expect you to spend very little on your Armed Forces". Instead those countries can spend money on health, education, infrastructure and all the other things that governments should be spending their money on. The country concerned, would continue to have Armed Forces. These would be professionally trained, well-equipped, and deployed throughout the world on UN peacekeeping missions. They would take the place of British troops engaged in such missions.

We get to save lots of money on our international aid budget. This is because the value we create by guaranteeing the borders of the country is so large that it dwarfs any amount that we could generate by spending our own money on aid to that country.

But it gets better than that. If other countries join in and guarantee the borders of other Third World countries. then we can dramatically reduce the amount of money spent on arms in the Third World and redeploy that money to helping those countries and the people who live in them.

Taxing Status - there is such a thing as a free lunch

Well, very nearly free.

This is a post about a revolutionary and quite brilliant way for government to raise large amounts of money with little or no real cost to taxpayers. I should say, at the outset, that I didn't come up with it. My understanding is that the idea was proposed originally by Keynes in the 1930's. But, I'm no historian.

Before we get to the exciting stuff we have to introduce a fairly simple concept in economics. The concept is called 'positional goods'. A positional good is a thing that confers status on its owner. The value that the owner gets from owning the good comes primarily from the fact that it is better than someone else's (ie gives them a higher 'position'). Many goods are like this.

Take cars for example. People buy BMW's, not because they make great cars but because they make better cars than Ford or Volkswagen. Or more precisely, because people think they make better cards than Ford or Volkswagen. Owning a new BMW confers a status that you don't get from driving a 2 year old VW Polo (like I do).

So, what would happen if we put a tax on expensive cars (like BMW's)?

Well, we would raise some tax revenue for the government.That;s a good thing.

We would make BMW's more expensive and that's a bad thing ..... but wait a minute no, in fact we wouldn't. A £50,000 BMW would still cost £50,000. Remember the price of a BMW is based on what the buyers can afford.

Ah but the BMW wouldn't have quite as many features and that is a bad thing. Well, not really. This is where this whole 'positional goods' thing comes in. The buyer doesn't really care about the lost features.The buyer only cares that someone else can't afford a car with as many features as this one.

So, in this scenario the government gets lots of extra money (good thing). The BMW owner loses some features in their car (but no one really cares that much).

I propose that this is implemented in the UK in the form of an annual tax based on the list price of a car. In the UK this is called Road Tax (or vehicle excise duty).

Define a baseline level of car price at which you can buy a safe, reliable car. Say £10,000. Apply a fixed annual tax of £100 per year for all cars with a value up to £10,000.

Charge an additional 1% of value for the next £10,000.

An additional 2% for the next £30,000.

Ad additional 3% for the remaining amount.

The tax would have to allow for depreciation (a one year old car is worth more than a 2 year old one).

This would mean that the owner of new car with a list price of £100,000. would pay £2,300 in tax in the first year. In the second year we might say that the car is now worth only £80,000. Accordingly the year 2 tax would be only £1,7000.

I have nothing against the designers and manufacturers of high status cars. But I fail to see why we should pay them large sums of money to help us convey our status to our fellow man when we can use the money for something useful instead without diluting the status message.

Comments please.

Freemium in the Education System - Admissions

There is considerable scope for the application of Freemium principles to education. As with healthcare, the principle is well established in small ways. For example, parents can opt to pay for music lessons that take place during the school day.

I propose that this principle is applied to school admissions. Such a proposal would have to based on the following principles which I consider to be reasonable and fair (even if they are a bit disturbing).

1. All children should be offered a place at a state funded school that is within a reasonable distance of where they live. This school place must be free (subject of course to the normal caveat about parents paying through their taxes).

2. No child should be granted privileged access to the state education system based upon where they live. Privileged access, for the purposes of this post, is defined as 'granting a child's choices of school a higher priority than that of another child'.

This means that if you live next door to the best school in the country you should have no more right to attend that school than if you live 3 miles away. This principle must be subservient to principle 1. So if you live next to the best school in the country but your next nearest school is 25 miles away then natural justice suggests that you should not be forced to travel long distances to get to school, so you are granted a place at the school next door.

This is all well and good but if a school receives 500 applications for 180 places then how do you decide who gets a place.

This is where Freemium comes in. All children get a free state education but if you want a 'premium' experience (ie you want to get your child into your preferred school) then you pay a premium.

From this comes principle 3.

3. Parents who wish to have privileged access to the state education system for their children should compensate the children whom they are disadvantaging. This compensation would take the form of a payment to the school the 'disadvantaged' child ends up attending.

The amount paid would be determined by auctioning places at preferred schools to the highest bidder(s).

Such an approach will raise furious objections from those affected among those objections will most likely be .....

A. It is unfair as the rich get access to the best schools. This is true. The problem with this objection is that it is also true today with the current system. The rich buy houses in the catchment area of the good schools and pay a premium for the house. They then get the all the benefits of access to superior education and then they can sell the house later and get most of their premium back.

The system remains in place indefinitely. Nothing changes. The poor and disadvantaged lose out.

In contrast, this proposal contains the seeds of its own destruction. Suppose a portion of the payment (say half) is placed in a trust fund which pays a regular income. Over time, the income of the less preferred school will rise. Eventually the difference in funding will be enough to ensure that the schools are equally preferred.

B. Why should parents have to pay to get their child into a good school? Good question. There are two responses to this

i) Parents don't have to pay to get their child into a state school (see principle 1)

ii) Parents already pay today but the costs are hidden.

Parents pay money to estate agents and solicitors and removal firms and mortgage companies and the government (don't forget stamp duty!) to secure a house close to a 'good school'.

They go through the stress and aggravation associated with a home move. It is widely reported that this is one of the most stressful things you can do. They also incur the opportunity costs associated with the fact that if they didn't have to worry about catchment areas then they would be living somewhere else that was more suitable.

I like solicitors and estate agents as much as the next man (honestly I do) but I fail to see why they should be paid considerable sums of money to facilitate the distribution of school places.

C. By funnelling money to 'failing' schools this proposal rewards failure. This is a good objection. It represents a real problem with the proposal.

It can, however, be mitigated as follows.

a. Ensure that a proportion of the funds are held in trust. That way, if a school really does have poor leadership then they will not be able to spend all the funds in a bad way.

b. Ensure that the trust is independent of the head teacher and the local education authority (LEA). The LEA will like having the extra money available but they won't like the fact that an alternative power base is being created in their backyard.

Finally, and most importantly, it will create a HUGE constituency in favour of sorting out failing schools. If you are a parent the reason for wanting change is obvious. But, even if you are not, the value of your house still depends upon the quality of the schools in the area. But instead of it depending on the quality of the best schools it now depends on the quality of the worst schools. You only get to sell your house at a premium if all the school in the area are good.

If I'm honest, I don't really like the proposal much. I would much rather live in a world where everyone lived near a pretty good school that gave them a good start in life. But I don't and that makes me sad. If this proposal is adopted then one day, maybe, I'll be a bit less sad and bit more happy.