Rupert Murdoch, after initially declining Parliament's request to attend the Commons Select Committee on Culture, Media and sport, has accepted the invitation.
Next Tuesday (when the Murdochs and Rebekah Brooks are scheduled to give evidence) is an opportunity for Parliament to showcase themselves as an effective body that aims to throw light on this hacking scandal - not to show off. Amidst huge public outrage and anger, it would be easy enough for MPs on the select committee to grandstand and look to ridicule the Murdochs. Instead, they must show voters that Parliament works - by asking questions designed to further the investigation - and not merely humiliate the Murdochs as an end in itself.
Indeed, it is a chance for Parliament to vindicate itself: when the chief executive of Kraft refused to attend a Parliamentary select committee, she argued that she would be met with "ill-founded allegations and insults." On Tuesday, Parliament can show these claims were wrong.
Friday, 15 July 2011
Wednesday, 13 July 2011
If you have nothing to hide, you have nothing to fear
British people are said to be the most watched people in the world. There are nearly 3 million CCTV cameras monitoring the UK.
Many human rights groups oppose what seems like an all-seeing State on the grounds of privacy. They claim that individuals have a fundamental right to a private life.
Needless to say, this is true. But, it is also true that they have the right to be safe when they make that journey home every night from work. Rights can be seen as relative, as opposed to absolute. Thus, when they conflict (as is evident with CCTVs), we must weigh them up. I for one would rather be watched every step of the way on my journey home than be mugged.
Perhaps some would claim that this argument is redundant - CCTVs do not necessarily reduce crime. Well, of course, CCTV cameras do not eradicate crime - but it does undeniably act as a deterrant for many would-be criminals. The prospect of having your face pop up crystal clear on a police officer's computer is, I am sure, not one a criminal relishes.
In a perfect world, yes, the right to privacy would always be preserved. But, unfortunately, we do not live in a perfect world. There are criminals who want to steal our wallets, rob our homes and terrorise our country. Our right to safety does mean that our privacy must be curtailed to some extent for the greater good.
Many human rights groups oppose what seems like an all-seeing State on the grounds of privacy. They claim that individuals have a fundamental right to a private life.
Needless to say, this is true. But, it is also true that they have the right to be safe when they make that journey home every night from work. Rights can be seen as relative, as opposed to absolute. Thus, when they conflict (as is evident with CCTVs), we must weigh them up. I for one would rather be watched every step of the way on my journey home than be mugged.
Perhaps some would claim that this argument is redundant - CCTVs do not necessarily reduce crime. Well, of course, CCTV cameras do not eradicate crime - but it does undeniably act as a deterrant for many would-be criminals. The prospect of having your face pop up crystal clear on a police officer's computer is, I am sure, not one a criminal relishes.
In a perfect world, yes, the right to privacy would always be preserved. But, unfortunately, we do not live in a perfect world. There are criminals who want to steal our wallets, rob our homes and terrorise our country. Our right to safety does mean that our privacy must be curtailed to some extent for the greater good.
Tuesday, 12 July 2011
The third great crisis of trust
First, it was the banks. Then it was our MPs. Now, it is the turn of the media.
Recent phone-hacking revelations, which has led to the closure of the News of the World, are very unsettling. It would probably be wrong to see the actions of the individuals concerned as acting in a vacuum. The scandal perhaps exposes the culture that led to it. In an attempt by journalists to find the most exclusive stories, amidst the fierce competition in the media, they have overstepped the mark - and broken the law.
The media plays an integral role in our democracy. Its role in scrutiny is certainly welcome. They criticise government actions and expose our elected representatives when they behave illegitimately. Unfortunately, for some, they have confused "scrutiny" with invading privacy for no reasonable justification and frankly, breaking the law.
Recent phone-hacking revelations, which has led to the closure of the News of the World, are very unsettling. It would probably be wrong to see the actions of the individuals concerned as acting in a vacuum. The scandal perhaps exposes the culture that led to it. In an attempt by journalists to find the most exclusive stories, amidst the fierce competition in the media, they have overstepped the mark - and broken the law.
The media plays an integral role in our democracy. Its role in scrutiny is certainly welcome. They criticise government actions and expose our elected representatives when they behave illegitimately. Unfortunately, for some, they have confused "scrutiny" with invading privacy for no reasonable justification and frankly, breaking the law.
Tuesday, 19 April 2011
Peaches and Lemons
Akerlof, Stiglitz and Spence jointly won a Nobel Prize in 2001 for their insights on asymmetric information. They used the market for second-hand cars to illustrate the problem of when a buyer knows more than a seller: quality uncertainty.
There are two types of second-hand cars; the good, functioning cars (peaches) and the bad, defect-ridden cars (lemons). However, the market for peaches and lemons are not separate. Consumers cannot distinguish between the two for many reasons - they cannot access all the hidden mechanical parts, they are not car experts or they do not know the history of the vehicle. Thus, they will only find out whether it is a peach or lemon after the purchase - which of course, is too late.
Therefore, the buyer’s best guess is the average quality. The owner is only willing to pay what the average known quality of the car is. This leads to a market failure - an information asymmetry has led to adverse selection. The peaches, as a reaction to the lower price, will be unwilling or forced to leave the market. Once the peaches start to withdraw, the proportion of lemons increase. Thus, the likelihood of a consumer buying a lemon increases - yes, adverse selection in all its glory.
The problem here is that sellers, especially lemons, have a financial incentive to pass of their cars as “good”. This introduces an element of risk for the consumer who risks overpaying at an unfair price for a lemon. To coin the economic principle of Gresham’s Law, the bad cars drive the good cars out of the market - literally.
To overcome this problem, the information gap needs to be reduced. To compensate for the lack of expertise, on the consumer’s behalf, an independent third party can be introduced to reveal the quality of the car. Peaches can be given rubberstamp to indicate that they have been inspected and are road-worthy.
It may be impractical for every car dealer to attain this certified status in terms of the efficiency of the market. In this case, both parties can agree a warranty - an assurance by the car dealer to the consumer that the car is functioning. If this proves to be untrue, the consumer may seek compensation.
In the age of technology, the wonders of the internet can be harnessed. Consumers can review their second-hand cars and car dealers to inform potential future consumers. Thus, car dealers have an incentive to maintain their reputation - something which lemons cannot rely on. This will solve the problem of adverse selection. Nevertheless, this is practically tricky. The nature of dodgy car dealers, the lemons, are that they are small dealers and elusive. They only sell a few cars and keep moving location. As a result of this and the fact that they are unofficial renders this internet based solution largely ineffective against this particular type of car dealer.
There are two types of second-hand cars; the good, functioning cars (peaches) and the bad, defect-ridden cars (lemons). However, the market for peaches and lemons are not separate. Consumers cannot distinguish between the two for many reasons - they cannot access all the hidden mechanical parts, they are not car experts or they do not know the history of the vehicle. Thus, they will only find out whether it is a peach or lemon after the purchase - which of course, is too late.
Therefore, the buyer’s best guess is the average quality. The owner is only willing to pay what the average known quality of the car is. This leads to a market failure - an information asymmetry has led to adverse selection. The peaches, as a reaction to the lower price, will be unwilling or forced to leave the market. Once the peaches start to withdraw, the proportion of lemons increase. Thus, the likelihood of a consumer buying a lemon increases - yes, adverse selection in all its glory.
The problem here is that sellers, especially lemons, have a financial incentive to pass of their cars as “good”. This introduces an element of risk for the consumer who risks overpaying at an unfair price for a lemon. To coin the economic principle of Gresham’s Law, the bad cars drive the good cars out of the market - literally.
To overcome this problem, the information gap needs to be reduced. To compensate for the lack of expertise, on the consumer’s behalf, an independent third party can be introduced to reveal the quality of the car. Peaches can be given rubberstamp to indicate that they have been inspected and are road-worthy.
It may be impractical for every car dealer to attain this certified status in terms of the efficiency of the market. In this case, both parties can agree a warranty - an assurance by the car dealer to the consumer that the car is functioning. If this proves to be untrue, the consumer may seek compensation.
In the age of technology, the wonders of the internet can be harnessed. Consumers can review their second-hand cars and car dealers to inform potential future consumers. Thus, car dealers have an incentive to maintain their reputation - something which lemons cannot rely on. This will solve the problem of adverse selection. Nevertheless, this is practically tricky. The nature of dodgy car dealers, the lemons, are that they are small dealers and elusive. They only sell a few cars and keep moving location. As a result of this and the fact that they are unofficial renders this internet based solution largely ineffective against this particular type of car dealer.
Wednesday, 23 March 2011
Democracy is right - invasion is wrong
Democracy is right but invasion to install democracy in authoritarian regimes are wrong.
Invasions are idealistic. In a hypothetical situation, the plan would be to send a military force to country X to firstly, topple the regime and then secondly, oversee the introduction of free and fair elections. Both these hurdles are insurmountable. The first aim is difficult: regimes under Gaddafi and Mugabe are well-planted. After possibly decades in power, the regime often command the loyalty of the army and are able to put a bloody resistance. Even if the leader is removed, no doubt his cronies will replace him.
The second aim is even more difficult (if you manage to even get to that stage): removing an authoritarian regime by force creates a power vacuum. If the authoritarian regime has been in power for decades (as is often the case), the country has no experience of democracy. Political parties are non-existent and there are few established leaders. The result? Civil war. Competing factions emerge giving rise to insurgency, and guess what, more bloodshed. This is a lose-lose situation; democracy is not effectively installed and lives are lost. Even if democracy were installed, is it really worth the cost of thousands of lost lives?
Invasions are idealistic. In a hypothetical situation, the plan would be to send a military force to country X to firstly, topple the regime and then secondly, oversee the introduction of free and fair elections. Both these hurdles are insurmountable. The first aim is difficult: regimes under Gaddafi and Mugabe are well-planted. After possibly decades in power, the regime often command the loyalty of the army and are able to put a bloody resistance. Even if the leader is removed, no doubt his cronies will replace him.
The second aim is even more difficult (if you manage to even get to that stage): removing an authoritarian regime by force creates a power vacuum. If the authoritarian regime has been in power for decades (as is often the case), the country has no experience of democracy. Political parties are non-existent and there are few established leaders. The result? Civil war. Competing factions emerge giving rise to insurgency, and guess what, more bloodshed. This is a lose-lose situation; democracy is not effectively installed and lives are lost. Even if democracy were installed, is it really worth the cost of thousands of lost lives?
Friday, 4 March 2011
Reforming the license fee
The BBC license fee is the closest thing we have to a regressive poll tax – used to line the pockets of Graham Norton, Dara O Briain and Anne Robinson.
The BBC criminalises the low-paid – by taking those who do not pay the license fee to court. The opportunity cost for a single mother, earning the minimum wage, to pay the licence fee is to spend less on buying her children books to read, or food to put on the table. It is clear to see where her priorities lie (and rightly so.) Thus, it is immoral for the BBC to then proceed to prosecute such a person.
My second problem with the license fee is that it puts this state-run monopoly in a uniquely privileged position. They are able to retain the stars of entertainment world and keep them away from the likes of ITV and Channel 4, who rely on advertising revenues. In the recession that has just gone by (I hope!) revenues from advertising fell. As a result, those channels that rely on this market-based approach were harmed, but not the BBC. This is unfairly privileged position to be in. Other channels are unable to compete and attract the talent they want.
However, perhaps the state does have a role to play in broadcasting. If the BBC are to ‘inform, educate and inform’ (as promised in its Charter), then it requires a constant revenue flow to fund The Graham Norton Show and Planet Earth – the programmes we love to watch. Therefore, its privileged position can be seen as an unavoidable, unintended consequence of achieving this aim – it is a necessary evil if the public want high-quality programmes. However, funding the BBC through the general taxation system may be a better solution. It would be progressive (well, that’s only if you agree that our current taxation system actually is progressive) and hence, fairer. Those on incomes less than 16k per annum (approximately the threshold for the Working Tax Credit) should not pay.
In the name of quality, the BBC license can be justifiably raised – we all benefit from a broadcasting service free of cheap, copycat programmes. However, this rise should not be at the expense of those on low-incomes – the funding system itself needs to be reformed.
Friday, 25 February 2011
"Bad driving the good out of the market"
Akerlof, Stiglitz and Spence jointly won a Nobel Prize in 2001 for their insights on asymmetric information. They used the market for second-hand cars to illustrate the problem of when a buyer knows more than a seller: quality uncertainty.
There are two types of second-hand cars; the good, functioning cars (peaches) and the bad, defect-ridden cars (lemons). However, the market for peaches and lemons are not separate. Consumers cannot distinguish between the two for many reasons - they cannot access all the hidden mechanical parts, they are not car experts or they do not know the history of the vehicle. Thus, they will only find out whether it is a peach or lemon after the purchase - which of course, is too late.
Therefore, the buyer's best guess is the average quality. The owner is only willing to pay what the average known quality of the car is. This leads to a market failure - an information asymmetry has led to adverse selection. The peaches, as a reaction to the lower price, will be unwilling or forced to leave the market. Once the peaches start to withdraw, the proportion of lemons increase. Thus, the likelihood of a consumer buying a lemon increases - yes, adverse selection in all its glory.
The problem here is that sellers, especially lemons, have a financial incentive to pass of their cars as "good". This introduces an element of risk for the consumer who risks overpaying at an unfair price for a lemon. To coin the economic principle of Gresham's Law, the bad cars drive the good cars out of the market - literally.
To overcome this problem, the information gap needs to be reduced. To compensate for the lack of expertise, on the consumer's behalf, an independent third party can be introduced to reveal the quality of the car. Peaches can be given rubberstamp to indicate that they have been inspected and are road-worthy.
It may be impractical for every car dealer to attain this certified status in terms of the efficiency of the market. In this case, both parties can agree a warranty - an assurance by the car dealer to the consumer that the car is functioning. If this proves to be untrue, the consumer may seek compensation.
In the age of technology, the wonders of the internet can be harnessed. Consumers can review their second-hand cars and car dealers to inform potential future consumers. Thus, car dealers have an incentive to maintain their reputation - something which lemons cannot rely on. This will solve the problem of adverse selection. Nevertheless, this is practically tricky. The nature of dodgy car dealers, the lemons, are that they are small dealers and elusive. They only sell a few cars and keep moving location. As a result of this and the fact that they are unofficial renders this internet based solution largely ineffective against this particular type of car dealer.
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