On freeloaders in the benefits system, and reducing the offence they cause

One complaint that appears in the popular press from time to time is that the welfare state is too generous to undeserving people, while not being generous enough to hard-working citizens.

It's an unfortunate reality that no matter how careful you are in designing your welfare state, you're guaranteed one of three outcomes:

1. Some people freeload and get away with it, because there's nothing in the system to stop them.
2. Some deserving people don't get the help they need, because the system says no.
3. The system costs a huge amount to administer, and is much more expensive overall than a system that permits freeloading - you can easily end up spending hundreds of pounds on administration for each pound of freeloading prevented.

I hope that people would agree with me that the third option is absolutely insane - there comes a point where pragmatism says that you shouldn't spend hundreds of pounds just to guarantee that a few pennies don't get given to people who don't need them. This leaves us with just two choices; I would personally prefer that deserving people don't miss out, which means that I have to tolerate freeloaders.

Given this state of affairs, what can be done to ensure that freeloaders don't upset people? First, we need an understanding of why freeloaders upset people; I believe that, in large part, people get upset because they work hard "for what they have", while freeloaders appear to get more by not working at all. We therefore need to ensure that freeloading isn't going to leave you better off than working.

Of course, I have an idea to solve this; simply put, we have plenty of benefits that could easily be paid to everyone, regardless of need, with those who don't need them paying them back in taxes. For example, the highest rate of Jobseeker's Allowance is £65.45 per week per person (around £3,500 per year). The basic rate of income tax is currently 20%, but by removing the personal allowance completely (replacing it with what used to be JSA), you claim back £1,500 from basic rate tax payers; you could then increase the basic rate to claim back the remaining £2,000, or accept that by pushing more people into the higher rate tax band, you're getting more income tax. Further, because people continue to get the same rate of benefits whether they work or not, you encourage people who don't work because they're scared of losing their benefits, or who can't stick out a job for more than a few months at a time to work, and thus pay taxes.

As a second upside, you reduce the amount of administration needed; if you look at all means-tested benefits, and remove those that can fairly be paid to everyone and reclaimed via tax, you reduce the number of people you need to administer the benefits system. There will still be exceptional cases (disability benefits for one), but they're fewer and further between.

There are, of course, downsides. For one, you need to be good at catching out tax dodgers; if people hide from the tax system in the black market, the maths stops working out. You still have a social problem; while you're now always better off working for a living, people will still resent carrying people who don't work, even though they should. I do, however, believe that this system will lead to less resentment, and even, possibly, more employment overall (it becomes possible to work for a couple of hours a week, without losing out on your "bennies").

Market abuse; or, extending control from one market to another

As a geek with an interest in broadcasting, I see an awful lot of people justifying market abuse by Apple, Microsoft and Sky, amongst others. I thought I would jot down my personal views on what is and is not market abuse, and why I don't consider it acceptable.

So, what is market abuse? Market abuse is where you use your power in one market to unreasonably influence another market. In this circumstance, unreasonable means that a competitor who's only playing in the market you're trying to influence cannot possibly match your influence, without first having power in the market you're using.

It's easier to explain by examples of abuse, and not abuse:

Abuse

Tying your web browser in with your OS, and forbidding resellers of your OS from removing your browser or adding another browser.

Not abuse

Giving your web browser away for free, and permitting unlimited distribution of copies without a fee.

Abuse

Tying reception of your TV channels with your TV receiver box.

Not abuse

Tying reception of your TV channels with your encryption card.

Abuse

Tying your mobile phone to a specific provider, and requiring people who want your phone to take out service from your chosen provider.

Not abuse

Permitting mobile providers to subsidise your phone and apply a subsidy lock.

There's a thread running through all of these; when you are engaging in market abuse, there are two separate products being sold. One is worth buying (or getting for free) on its merits, the other is not, so you tie the two together, forcing me to take the poor quality product if I want the good product. But note that there's a slight twist; it's not market abuse if I can get equivalent products elsewhere in the market without the tie.

So, offering me your MP3 player tied to your music player software isn't abuse; I can buy other MP3 players, not tied to your music player easily enough. If I can't get an equivalent to your phone elsewhere in the market (e.g. because your application store means that network effects compel me to have your phone or lose out), it's abuse.

Why do I consider market abuse bad? Simply put, it's because I'm compelled to accept a worse overall experience. Either I accept the poor quality product with the good product, or I lose out on both; it gets really bad when network effects mean that I must accept one of the two products and lose out.

How do companies avoid market abuse? By not tying two products together unreasonably; sell them both separately, and let your immediate customers make decisions for themselves. If you're moving into a new market, don't get tempted to do anything that couldn't be done by a competitor in the new market with enough money. In particular, don't tie your existing product together with your new product, unless a competitor could tie your existing product together with their existing product.