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Dr. Eamonn Butler

Dr. Eamonn Butler

Eamonn Butler is Director of the Adam Smith Institute, rated one of the world’s leading policy think-tanks. He has degrees in economics, philosophy and psychology, gaining a PhD from the University of St Andrews in 1978.

Articles by Dr. Eamonn Butler

Merchants’ Day

May 25, 2021

In my diary for today, 25 May, is a mysterious entry: “Merchants’ Day”. I have no idea when or from where this reminder came. But it struck me as a red-letter day worth celebrating. After all, merchants of many kinds have had a pretty tough time of it over the last year. So to find out what Merchants’ Day was all about, I turned, naturally to Mr Google. Or is it Mrs, Ms or Mz Google. Let’s just say Dr Google, which is gender free. Or does that sound too elitist. Anyway, I, er, got on the internet.I thought I’d struck paydirt straight away when I alighted on a page from Chapman University, where my friend and fellow economist Mark Skousen teaches. He’s the author of a book on Smith and Keynes and the Austrians and an enthusiast for the General Output measure of economic benefit. “Third

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Happy Birthday Friedrich Hayek!

May 7, 2021

On 8 May 1899, in Vienna, Friedrich Hayek was born. He would become, in Robert Skidelsky’s words, “the dominant intellectual influence of the last quarter of the twentieth century” and he remains influential among liberals and libertarians today.From the 1940s to the 1970s, Hayek had — almost alone — kept alive the spirit of personal and economic freedom that had been crushed by the chaos of the Second World War and the Keynesian government interventionism that followed it. Such interventionism, he argued, was based on a fatal conceit, the conceit that we knew far more than we in fact did. Governments and their planners simply could not collect and process all the information needed to run an efficient economy, because that information is dispersed, diffuse, incomplete and essentially

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Theorising around The Theory of Moral Sentiments

April 26, 2021

Today we think of Adam Smith as an economist. But it was not his 1776 book The Wealth of Nations that made him famous. It was a work of moral philosophy, published seventeen years earlier.The Theory of Moral Sentiments came out on 26 April 1759. It was a sensation, and made Smith a hot intellectual property. Moralists had been struggling for centuries to work out what makes some actions morally good and others morally bad. To clerics, who held great sway over the public and in intellectual debate too, the answer was plain: it was the word of God. Though of course, human life was complex, so God’s word needed a good deal of interpretation coming from those who understood it — the clerics, naturally. But then, in an age of science, there was a spreading reluctance to take the word of church

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Logic and rhetoric at the heart of Smith’s ideas

April 22, 2021

Today (22 April) is the date when, in 1751, Adam Smith was appointed Professor of Logic and Rhetoric at the University of Glasgow. Though only 28, he was already well known as a gifted scholar. He had given a very successful series of public lectures on philosophy, in Edinburgh. The intelligentsia of Scotland’s capital were impressed.Before the year was out, the young Smith was promoted to the prestigious Chair of Moral Philosophy — a post he held until 1764. In the meantime, he served as Dean of Faculties, Quaestor of the University Library (i.e. in charge of management and accounts — he was a very meticulous person), and Rector.Today, we remember him as a pioneering economist. But he was really more of a philosopher and social psychologist — he saw economics, politics, ethics and

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Happy birthday Carl Menger!

February 23, 2021

Carl Menger, the founding thinker of the Austrian School of Economics and pioneer of the concept of marginal utility, was born on this day, 23 February, in 1840. His revolutionary, individual-focused approach to economics influenced many others, including his compatriots Friedrich von Wieser, Eugen von Böhm-Bawerk, Ludwig von Mises and Friedrich Hayek; and his influence still resonates widely today.Menger studied in Prague and Vienna before becoming a business journalist. In that role, he realized that the teaching of mainstream, ‘classical’ economics did not match the real-life workings of markets. So, in 1867 he began writing a new approach, Principles of Political Economy (1871). By the age of just 33, he had become Chair in Economic Theory at the prestigious University of Vienna.Menger

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Protectionism: Product standards

February 7, 2021

Most countries want to keep out products that are potentially unsafe (such as. electrical goods, medicines, recycling waste or GM crops) or unethically sourced (such as products made by slave labour).That seems a perfectly legitimate policy — though if we find that a country imposes stricter product standards on importers than it imposes on its own producers, that is a sure sign of safety masquerading as protectionism. So how do we know what safety and ethics objections are legitimate and not merely an excuse for protectionism? Are the concerns about America’s use of hormones in cattle, chlorination of chicken, or exports of genetically modified cereals legitimate health fears or just an excuse to block US agricultural products? And is America justified in refusing meat products from

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Protectionism: The anti-dumping argument

February 5, 2021

Dumping is the idea that foreign businesses may export products cheaply — or even below cost — into your country, in the hope of squeezing out local producers. Having captured the market, they can then put prices up again.This predatory dumping may be rarer than imagined. In order to capture a country’s market and then raise prices a company would have to see off all other sellers. That is unlikely to happen — so why bother trying>But there are many reasons why exporters might sell their products cheaply or below cost. They might have produced goods that have failed to sell or might have a temporary overstock to clear. So it makes sense to sell them for whatever they can raise. That is a boon for consumers, but it is not likely to cause much harm to producers.The real problem, though, is

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Protectionism: The infant industries argument

February 2, 2021

One of the most common justifications for trade barriers is to enable developing countries to diversify and grow new industries to a size where they can benefit from large-scale production and compete against established competitors abroad. That is important to countries that need to diversify, such as those who are largely dependent on a single mineral or crop. And people fear that, since it is hard for individual governments to regulate multinationals, they can accumulate and use monopoly power to squeeze out competitors.But there are problems with the infant industry argument. For example, which new ‘infant’ industries should be grown? The choice may be made for political purposes more than any real prospect of economic success. And unfortunately, the infant industries never grow up.

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So, we’ve left, now what?

January 1, 2021

It’s morning in the United Kingdom. Strangely, World War III has not broken out. Japanese carmakers are still investing here. House prices have not plummeted; indeed, in recent months they have surged. No punishment budgets are planned. The pound has held up, the stock market has had a bit of a surge. The banks have not left. Freight still seems to be crossing into Calais, and medicines back to Dover. It’s also morning in Europe. And as Boris keeps saying, we are still European. We account for 12% of Europe’s 513m population and 93,000 square miles of its land area. Not to mention 9.6m square miles of fishing grounds.We are the largest military power in Europe by a long, long way, and the only nuclear power other than France. We account for around a quarter of European defence spending. We

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That’s it, we’re out

December 31, 2020

“That’s it, we’re out!” said David Dimbleby in the early hours of Referendum night as the mathematics became inevitable. He was premature: it has taken four years to fend off the petulant determination of the deniers to overturn the result.Now, I hate referendums. Changing the constitution — the rules by which we can be inspected, regulated, taxed, licensed, repressed, judged, censured and punished by our politicians — you should have near-unanimous agreement. And not just a small majority, as the losers keep bleating. Mind you, they didn’t bleat when giving Scotland an entire new government on the basis of a 51.6% to 48.4% vote — not so far off the Brexit majority that Nicola Sturgeon was so anxious to overturn. Wales was even slimmer, 50.3% to 49.7%. But we didn’t have four years of

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Adam Smith’s Anniversary

July 16, 2020

If you had been standing on this spot in the late eighteenth century, you would have seen a plume of smoke rising up from this house here. It was Adam Smith’s executors burning his papers, just as he directed before he died on this day in 1790. Though it seems odd to us—and is a great loss to later generations—that was quite normal among prominent people at the time. They did not want to be judged on their personal letters and their sketches of half-thought-out ideas. And Adam Smith was a prominent person. He had risen to fame in his mid-thirties, having published The Theory of Moral Sentiments, a book that tore up the ethical theories of the time and explained morality in terms of social psychology. It landed him a plum job—personal tutor to the teenage Duke of Buccleuch, with a salary of

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Moths, my jumpers, grand plans, and the UK economy

June 30, 2020

During lockdown I’ve been wearing more pullovers than usual and discovering just how far the months have munched their way through the ones at the bottom of the drawer.So, it’s time to do a bit of darning.And that’s what the economy needs too. Like my jumper, it’s still holding together. We’re still getting food and other essentials—and soon even non-essentials.But even so, the economic fabric is full of holes. Like all those pubs and restaurants that will never open again. Events and travel businesses. Sports venues and theatres.I don’t need to knit myself a new jumper. And we don’t need to build, build, build a new economy. Particularly when it is politicians and officials, not real people, who are doing the building. The waste and delay in public projects is notorious.Where we do need

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Happy Birthday Adam Smith (maybe)!

June 16, 2020

Possibly. We know when his birth was registered, and normally that would be a couple of days after the event itself. The registration was in early June 1723, but since the calendar changed in 1750, you have to add a few days, so 16 June seems close enough.His childhood in Kirkcaldy, a small working port on Scotland’s east coast, was largely uneventful, except for briefly being kidnapped by vagrants. But the local school did give him a good education—a school system which he later praised. It was good enough for him to win a scholarship to Balliol College, Oxford—which he later definitely did not praise. Indeed, he found that the professors there had “given up even the pretence of teaching” because they got paid whether they taught or not. On his return—the journey took a month each way, on

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Money alone won’t get us far with sorting out social care

June 11, 2020

Most contributions on the social care debate in Britain focus on how the sector needs more money. That is not wrong. The care of elderly people, and younger people with physical disabilities or mental health and learning difficulties, has long been regarded as the poor relation to the National Health Service. But in our new report, Fixing Social Care, we argue that money alone won’t get us far, because the whole social care delivery system is broken. Spending more money is like pouring more fuel into an engine that has already seized up.There are 400,000 people in residential homes—more than twice the number in hospital—and thousands more who get care services delivered to their own doors. Most homes are independent, though some of their clients are funded by the local authorities, who

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Social care comes with a cost we should care about

May 31, 2020

Everyone agrees that social care has always been the poor relation to hospital care—starved of funds despite a huge surge in the elderly population. And it’s seen as unfair—hospital care is free to all, but families with savings must pay for social care themselves.So, many people argue that social care should become part of the National Health Service and be provided free to everyone.But this idea is utterly impractical.Though much social care is already financed through taxation, most is delivered privately. That’s quarter of a million places in care homes 190,000 in nursing homes—plus all the care delivered to people’s doors. If the NHS took that over, it would be the biggest nationalisation since the 1940s. The compensation bill for care homes alone would be over £30 billion, the

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Privatisation can teach us a lot about preparedness

May 17, 2020

In 1989, England’s government-run water utility was split into regional companies and privatised.The timing was unfortunate. A year later, England was gripped by a two-year drought, the worst in 100 years. The new water companies were reduced to rationing water, banning all but essential uses, putting standpipes in the streets and running water tankers to the most affected towns and villages. Complaints abounded, and naturally, privatisation was blamed.Shortly after, I met the Chief Executive of one of the new companies. As is the way of these things, running a water utility is a specialist job, and like many of his colleagues, he had worked in the old government-run service. I asked him about the crisis.He looked rather wistful. “When we were in state ownership,” he said, “we were geared

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The furlough scheme has a cost and must come to an end eventually

May 16, 2020

Like other countries, the UK is subsidising jobs during the virus crisis. Now, the Treasury is finding that it’s much easier to give money away than to stop giving it away. But that needs to happen, and fast. One reason is cost. The government’s interventions may end up costing a third of the national income. That means higher taxes—which will choke off job-creation and recovery—or cuts in public service spending, or a massive rise in public debt.Another is that the scheme promotes inactivity. We have fruit and vegetables waiting to be picked but seasonal workers can’t get here to pick them. Yet we have 10m domestic workers being paid to do nothing.The scheme also prevents businesses adapting to the crisis situation. Sure, we’ve seen restaurants turning into takeaways, and taxi drivers

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Paying for the COVID-19 lockdown

May 15, 2020

Imagine if you were handed a bill amounting to a quarter or even a third of your annual income. You’d think: ‘How on earth can I pay that?’Well, that’s the bill the government faces for the cost of its crisis measures, such as the Job Protection Scheme. And they are asking the same question.The first possibility is to raise taxes. That’s popular with the Left , who imagine that ‘the rich’ will pay most. But tax is paid by ordinary people when they earn or spend. ‘The rich’ simply aren’t numerous enough to make much difference. Meanwhile, the higher taxes will discourage people from creating the new jobs we will need after this is all over.The second possibility is public spending cuts. Well, I’d love to see bureaucracies and prestige projects being cut back. But again, the biggest spending

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Diverse systems work better than centralised ones

May 5, 2020

Back in 1948, Lou Weitzman, a young reporter in Arizona, witnessed a house fire. It was in a rural area, which had no fire department to help. So he bought a fire engine and went door to door asking people to subscribe to a new fire service. His company, Rural Metro, is still fighting fires today.Indeed, Weitzeman provided a better and cheaper service than the city did. While city firefighters mostly sat in the fire station playing cards, he used people with regular jobs, who could be called out instantly to assist. And instead of having a few large trucks located in the busy centre of town, he used lots of smaller, nimbler ones, that could be parked around the whole area and provide that vital first response much quicker.One lesson for pandemic planning is that, it’s pointless to preserve

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Central planning failed but liberalism succeeded during this pandemic

April 28, 2020

Liberal democracies have many virtues. They are tolerant, relatively equal, and very good at producing prosperity.But, say many, they cannot deal with crises, like wars or natural disasters. For that, you need communal effort, a single plan, and strong central leadership. When the virus began to hit, ministers boasted that the UK would fare better than most because of our national healthcare system, which could plan a total response, guided by experts.They were wrong. While the National Health Service had modelled a pandemic four years ago, they had done little to prepare for it. NHS purchasers didn’t have enough PPE for their staff. Public Health England dismally failed to create enough tests. Three quarters of a million people volunteered to help, but weeks later, many still complained

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Why the police got it so wrong on enforcing COVID19 social distancing rules

April 27, 2020

Too late now, but I think I understand why ministers and the police got into such trouble about social distancing.Police, as you recall, hassled people sunbathing in the park, rebuked a man for sitting in his own front garden, and lectured us not to buy ‘non-essential’ items — whatever that means.Meanwhile the Health Secretary, to say exactly how long people could drive in order to take exercise, bizarrely suggested an arbitrary ‘five minutes’.What’s happened is that over the last 40 years, the British legal system has been overlaid with Continental law. Here, the test of an action was whether or not it was ‘reasonable’. The law accepted that life was complex, and left judges to decide each specific case. The Continental tradition, by contrast, specifies precise rules that apply in all

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Ministers are accountable but advisers are not

April 26, 2020

The Chief Medical Officer, Professor Chris Whitty and his deputy Dr Jenny Harries have both appeared at Downing Street press briefings, saying that we should expect to be shut up for another 12 or 18 months.That’s potentially very damaging. It must surely convince any business, struggling to survive its loss of customers and income, that they might as well give up now. That might well convince their suppliers to do the same. The result is more people out of work, with all the uncertainty and misery that causes. The medical experts are advisers. It is not their job to make policy announcements at a Downing Street press conference. But that is what the 12-18-month prediction amounts to. Advisers advise, but ministers decide—and they should decide this sort of issue on the basis of advice

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On this day was written a book

April 26, 2020

Adam Smith (1723-1790) is best known for his pioneering work of economics, The Wealth Of Nations (1776). But the book that actually propelled him to fame was The Theory Of Moral Sentiments, published on this day in 1759.It was a sensation—and made Smith into a hot intellectual property. Thtat’s because moralists had been struggling for centuries to work out the principles that made some actions morally good and others morally bad. To Clerics, the answer was obvious: the word of God. And believers relied on the Clerics’ moral authority to guide them. Skeptics, on the other hand speculated about whether we had a sixth sense, a ‘moral sense’ that would guide us towards good. And so it went on.Smith’s breakthrough was to place our moral judgements as a matter of our deep psychology as social

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The tricky business of valuing lives

April 25, 2020

Many people wonder whether the aim of flattening the Covid curve is worth the cost of the lockdown.But they daren’t say that because all they get is abuse from people so say that lives are more important than money and you can’t put a price on human lives.In fact, we do that all the time. An expensive new by-pass may reduce accidents in a busy town. But how much should we spend on it in the hope of saving one life? Remember, every pound spent on that project could be spent on other things we value, such as teachers and nurses.Or again, a speed limit of zero would save 1800 deaths each year. But we also value mobility and the other benefits of transportation. We have to balance these values when we set the limits.Even our National Health Service balances the cost of a treatment against the

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Private benefit is a public good

April 21, 2020

I’m often asked how bad the impending recession is going to be. The answer is that nobody has the faintest idea. If they say they do, then they’re either lying or mistaken. We’ve had a whole range of figures from the forecaster. From a 5% decline to a 35% decline this year. With things changing so fast, it’s impossible even to guess. We might be able to get a clue from the Spanish flu of 1918-9 which was actually far more lethal than Covid-19. US industrial production then  fell by 25% but it had mostly recovered within a year. I don’t expect a quick bounce back this time. In previous recessions, business has at least kept going. This time we have closed it down. And our economy is much more integrated than it used to be. Rupture any bit of it and you dislocate the whole. Government can

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SAGE advice from some economists might help

April 20, 2020

As the government has said, its strategy on COVID-19 has been driven by the science. Specifically, it has been informed by SAGE, the Scientific Advisory Group for Emergencies.SAGE comprises a number of very distinguished epidemiologists and physicians. And the same is true of the three other committees that feed them.These experts supported the economic lockdown—and its extension—as a way of flattening the infection curve, preventing an unmanageable surge in critical cases and deaths. And most of us have gone along with that.But we are starting to realise that locking down an economy for three weeks is very damaging. Locking it down for six weeks is disastrous. Each business that closes spreads trouble to many more. And they in turn to many more others. So, the failures and unemployment

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Calls for price controls are economically illiterate

April 11, 2020

Recently there have been calls for the government to impose maximum prices on everyday goods. These are motivated by the belief that, during this crisis, shops and producers have been exploiting customers by raising the prices of essential items.Figures from the Office of National Statistics show that this is plain wrong. From the middle to the end of March, prices of dried pasta, kitchen rolls, tinned soup and long-life milk actually fell 1%. Baby food and antibacterial wipes fell nearly three times that.Yes, there were tiny increases in the price of handwash, toilet roles and cleaning products. And cough medicine is certainly up in price. But the general picture is that most retailers have not actually sought to exploit anyone.But then, if they want to have any customers left after the

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British business is adapting to crisis

April 9, 2020

Their response to this crisis shows just how innovative British businesses are.For example, pubs and restaurants are now doing takeaway meals, which taxi drivers, who now have few other customers, are delivering.Yesterday I got a box of fresh produce, delivered by a local restaurant. It’s the same produce they’ve always got from their suppliers, but instead of cooking it they are repacking it and delivering it to your door. Local shops are delivering too. Within days of the panic buying, supermarkets reserved special times for older people and gave all-day priority to health workers.They countered hoarding with buying limits. But then stepped up their supplies so quickly that the shelves were re-filled and the limits lifted. They marked safe distances on the floor, gave their checkout

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The potential effect of our current stasis on jobs is particularly worrying

April 9, 2020

I know someone who is an administrator in a large international company with offices round the world. That person has just been furloughed. So, until June, the firm will pay only 20% of their salary, and British taxpayers will pick up the other 80%. The only condition is that the employee does no work at all.It wasn’t the government’s aim to pay people not to work. Nor that poorly paid local taxpayers should support well-paid international professionals.Nor that the scheme should be so cynically exploited. In this case, it is only the firm’s UK workers that are being furloughed. That’s because our government’s scheme is so much more generous than those of other countries. This allows multinationals to shift their costs between countries — and get the locals to pay 80% of the bills.The

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The economy is more like a fragile ecosystem than a robust machine you can put into stasis

April 8, 2020

Sadly, our Treasury officials—and all those politicians, with their Oxford PPE degrees—have read too much economics.Standard economics textbooks explain the economy as a vast machine. They imply that you can switch it off, then switch it back on again, and it will spring back into life.In reality, the economy is more like an ecosystem. Remember when Chairman Mao mobilized China’s citizens to kill all the sparrows because they were eating the grain?A plague of insects that ate the crops instead, with no birdlife around to keep down their numbers. And people starved.Here, we shut down cafes, bars and restaurants. That hit wholesale suppliers, who had to scramble round to find new, domestic, customers. The closures led to lower footfall in towns, and within days the other shops threw in the

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