Thursday, March 02, 2006

Going for Gold

Sir Menzies Campbell wins the Liberal Democrat leadership election. Do I win for worst olympic headline?

I never did get round to deciding who I though would be the best leader. I suspect Sir Ming is the most respected by the general electorate so this is probably the best result from the point of view of votes. And he made the right noises in his acceptance speech which is a good start.

One definite benefit of the leadership contest has been the emergence of Chris Huhne. When he put his name forward, I , like most people, said "Chris Wuwho"? Having seen more of him, he looks like a pretty decent, eminently competant politician. Just the sort of person the Lib Dems need, in fact. All in all, I'd have to say it's been a remarkable recovery.

I've probably mentioned this before but I really believe that Britain needs a credible third party is politics is ever to change for the better. I can explain it in terms of economics. One for the free marketeers who support first past the post to ponder.

The two party system is non-competitive. It is comparable to a captive, demand constant, oligopoly market in which consumers have a choice between only two approximately equally sized suppliers. In order to sell their product, a company need only sell it as slightly better, or not as bad, as that of their competitor. Neither supplier has an incentive to invest heavily in radical improvements as they know that their competitor would be forced to follow suit if the improvement is a success. Both companies would then incur significant costs to no appreciable benefit. If the investment fails, of course, the competitor will have gained an advantage by not investing.

Both suppliers will therefore tend to resist offering costly product improvements. They will become risk averse, opting to compete for market share at the margins rather than making potentially risky changes.

That encapsulates the market of British politics under the two party system. Labour and the Tories are the oligopoly suppliers. They sell us, the capitive market, their two versions of government. That these two pitches are becoming ever closer is an entirely predictible effect of the stagnant market in which they operate. There is no particular incentive to make costly concessions to better governance or to offer radical changes to the product. All the big two need to do to win market share, and therefore power, is persuade those people in the margins that their competitors product is worse than their own.

Needless to say, the product does not tend to be great in a market like that. And, clearly, it isn't in British politics. That's why I believe the country needs a strong third party. The political system need more competition in order to provide incentives to improve the product. That's why I believe the country needs the Liberal Democrats.

It is also why I believe that FPTP should be abolished. It is a recipe for stagnation and for the delivery of a poor product. If you don't believe me, I'd humbly suggest that you've not been paying much attention to British politics for the last 20 years.

More choice leads to better products. Much as we lefties dislike admitting it, it's often true.

As an aside, I'm one of those people who is worried about competition in the NHS. I think there was a discussion about this at the Sharpener a wee while back. In short, demand here isn't fixed in the way that it is in the market described above (there are a set number of votes, market share, to be competed for). Health demand can be influenced by many factors. If you provide competitive incentives to the NHS you might suddenly find that the demand for health services increases too. You create a market in which suppliers have an incentive to persuade consumers that they are ill and in need of treatment in order to maximise profit. That is, I think the crux of the problem with regard to the NHS. Competition could create incentives to "sell" illness to healthy people.

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