We don't understand why Oxfam is so concerned about US University debt

It’s the time of the year again when Oxfam sends out a reminder that the poorest in the world are actually doing better than ever before, but spun in such a way that suggests the world is in crisis. Head of Research, Matthew Lesh, has gone through the report and calls out its failings:

“Oxfam’s report is complete hogwash. It’s simply not true that the poor are worse off just because the rich have gotten richer, everyone can get richer at the same time. Oxfam doesn’t care about the poor, they just hate the rich. Oxfam should stop playing the politics of envy and start talking about how free markets, free trade and liberal institutions are the most effective poverty alleviation tool known to humankind. 

“Just because some people have gotten richer does not mean that the poor have gotten poorer. In fact, over last thirty years more than a billion people have pulled themselves out of poverty thanks to the adoption of freer markets and freer trade.

“Oxfam’s inequality claims are built on a methodology that would fail a first year statistics course. There is no crisis of inequality. In fact, particularly because of the rise of China and the developing world, global inequality is already declining for the first time since the Industrial Revolution. 

“According Oxfam’s methodology, which focuses on wealth and not income, a recent Harvard law graduate, with US$130,000 debt, has net negative wealth and is, therefore, poorer than a farmer in a developing country. The problem with American student loans is well known, but it’s not clear that it’s an issue that should worry Oxfam.”

For further comment, or to arrange an interview, please contact Matt Kilcoyne (via email: matt@adamsmith.org; or phone 07584778207 or 02072224995).

Size does not matter

Micro-homes central to inner-London living says Adam Smith Institute

• Micro-homes could help new, younger Londoners move into flats in the city centre close to places of work and leisure

• Design and liveability requirements should be kept, while floor space requirements scrapped, to green light a new wave of innovative development

• Average house price is 5 times higher than 50 years ago

• In the past 20 years London’s population has grown by 25%, but the number of homes by only 15%

• By 2025, 3.5m Londoners will be living in rented housing, with 79% of adults moving to London in the last year renting

• On average 1/3rd of income is spent on housing, up from 1/5th just 15 years ago

• The upcoming GLA ‘London Plan’ should remove minimum space requirements for co-living units and micro-homes, while retaining the demand that they are “appropriately sized to be comfortable and functional for a tenant’s needs”

It’s not size that matters in housing, it’s how you use it.

Restricted supply of new housing has meant sharp rises in house prices and rents in central London in recent decades, with young Londoners priced out of the market. Micro-homes are purpose designed flats with floor space below 37sqm that make innovative use of space to expand choice available to many Londoners open to living in smaller, but more personal and private apartments.

Micro-housing is not the same as cramped sub-division of existing units, they are smart, modern, custom designed units that make good use of space which have won prestigious architectural awards. Micro-housing is often accompanied by communal amenities such as games rooms and open living spaces that help address loneliness.

Report author and urban policy researcher Vera Kichanova stresses that while micro-housing is not a panacea or a replacement for planning reform, it could be a partial solution for those in cities like London that want to live close to where they work, as well as close to bars and restaurants.

In London this means living in what the Greater London Authority calls the Central Activities Zone. Stretching from King’s Cross in the Northeast of the city to Battersea in the southwest, this area alone is home to 1⁄3 of all jobs in the capital and generates 10% of the UK’s GDP.

With 79% of adults moving to London in the past year in rented accommodation, being younger and with less disposable income than older generations, and with rents taking up an average of a third of their income, micro-homes in could be the only chance to stay within the Central Activities Zone.

Without micro-homes many Londoners are forced to pack into crammed peak hour commuter trains, are forced to share living space with complete strangers, or leave the city altogether.

Ms. Kichanova lays the blame for all of these squarely at the feet of government—specifically the Town and Country Planning Act 1947. By requiring local or central government permission for building projects, the Act detached house prices from just the cost of construction and tied it heavily to a price for land that was heavily rationed.

A previous report by the campaign group London YIMBY for the Adam Smith Institute had found London rents have been inflated by over 300% due to planning restrictions with over 75% of the cost of development coming from planning red tape.

A green light to innovative development could help London become a denser, more liveable city for its increasingly younger and dynamic residents by providing a choice that fits their individual requirements in the world’s most diverse city.

The Adam Smith Institute’s Head of Research Matthew Lesh said:

“Small, but perfectly formed micro-homes would expand choice for young Londoners. There are many who would rather live close to the city centre, in a building full of amenities such as game rooms and co-working spaces, rather than spending hours commuting every day.

London’s housing crisis is not just an economic problem, hurting growth because people cannot live where they would be most productive, it is also having very real and serious political ramifications. The lack of housing affordability is leading many to lose faith in the entire free market system.

Housing policy reform is an urgent priority, and while micro-housing is no substitute for fundamental planning reform, it is an important first step.

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, at matt@adamsmith.org | 07584 778207.

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Low tax good, anti-migration bad

Responding to Boris Johnson's latest Brexit intervention, Daniel Pryor says warm words on free markets are not enough. While we welcome the idea of simplfying tax and defense of competitive markets, it will mean little if his promises on migration will harm investment, business and the lives of those who seek to make a home here Daniel Pryor, Head of Programmes at the Adam Smith Institute, said:

“High levels of income tax damages investment, economic growth and innovation—so it’s good to see a competitive tax system being defended. Simplifying our needlessly complex property taxes into one straightforward levy on land values will encourage investment and help end the housing crisis.”

“Cracking down on immigration won’t solve Britain’s productivity woes—it will make matters worse. The Migration Advisory Committee recently found that immigration increases productivity by contributing new skills and ideas, doesn’t lead to less training for native workers, and has little to no impact on wages.

“Boris is right that Britons deserve a pay rise. But that won't come from locking foreigners out of the economy. When women entered the office that didn’t destroy the world of work for men. Newly arrived citizens buy things we make here, live here, eat here, and contribute their skills to our economy. They encourage existing workers to upskill. If politicians want to increase the value of workers’ pay packets, they’d stop pickpocketing them with the highest tax burden in half a century.”

To arrange an interview or further comment please contact Matt Kilcoyne (07904099599 / 02072224995 / matt@adamsmith.org).

Patents, not boondoggles, really reward innovators

Britain’s history of patents helped the country become the powerhouse over the 19th century and the market based system helps maintain economic growth and innovation to the present day.

New research out today by free-market think tank the Adam Smith Institute shows that by being both a market mechanism and rewarding outcomes rather than intentions, patents beat the efforts of grants, tax credits and prizes in both effectiveness and value for money — all while keeping open and actually helping innovation by offering incentives in direct proportion to level that the invention or innovation services consumers' demands.

The paper stands as a challenge to both traditional libertarian thought that argue against the principle of intellectual property on grounds of principle, and state interventionist economists that call for more grant based funds and credits to researchers (often to their own benefit), by showing the system works in both principle and practice. 

Author Ben Southwood helps to back up the suggestion of the Tabarrok Curve, which shows patent protection boosting innovation by awarding firms economic rents for delivery of new products/services more than closest substitutes—but with effectiveness of this impacted by length of the patents.

Long patents, the paper suggests, only slightly increase incentive to invest but drastically slow flows of ideas into the public domain. The most costly in both the United States and the United Kingdom have been in the areas of medicines, especially the flow of specialist medicines to generics. This was seen in 2016 when Actavis UK 'evergreened' their hydrocortisone tablets with new slightly modified patents, and hiked the price over a decade from 70p a pack to over £88 a pack. 

Uncertain IP regimes, and uncertainty between IP regimes, have hindered collaboration and consumer benefit. This is especially relevant as the UK's ability to join the EU's patents union remains in question post Brexit this year.

With the UK having patents in one form or another since the 15th century they have played an important role in providing the property rights that enabled economic growth in this country to outstrip much of the world's remainder. In reform of the system, and as we leave the EU, we must be careful not to throw the baby out with the bathwater. 

For further comments or to arrange an interview, contact Matt Kilcoyne, via matt@adamsmith.org| +44 (0) 7584 778 207

Fat Cat Cod Stats Won't Help Workers

The High Pay Centre and Chartered Institute of Personnel and Development (CIPD) have declared today to be “Fat Cat Friday”.

Matthew Lesh, Head of Research at the Adam Smith Institute, commented:

“Another year, another set of cod statistics on executive pay. If these activist organisations actually cared about workers — and not just the politics of envy against our best and brightest — they would talk about ways to actually increase worker pay.”

“The only way to increase wages is by boosting productivity through innovation, cutting red tape, and making it easier for people to move for jobs.”

“In a global market for CEOs, British firms must be able to compete for top CEOs who provide immense value to companies. Decisions made by Britain’s makers and doers now have global impacts and their value to firms reflects this.”

“Limits on executive pay would drive top British talent and companies offshore, ultimately leading to fewer jobs and lower pay for workers.”

If you would like further comment, or to arrange an interview with a member of the Institute, please contact Matt Kilcoyne via phone (07584778207, 02072224995) or email (matt@adamsmith.org).