Let us praise. First, let us praise Ken Binmore. Not a household name, yet, but a man to whom all the households in this country owe a debt of gratitude. He is the professor of economics at University College, London, who devised the system for auctioning the rights to use the third-generation mobile phone frequencies. The bidding closed yesterday at £22.5bn, more than four times the Treasury's forecast. It sounds simple, does it not? You publish all the bids and then invite the bidders to bid again until you have squeezed the largest conceivable amount of money out of them. That is high-level theoretical economics for you. But it is not how it was done before, and it is not how other European countries are doing it. Give Professor Binmore a Nobel prize for proving that the "dismal science" can sometimes help design successful public policy.
Second, let us praise Gordon Brown. The Chancellor has resisted the appeals of sentiment from Old Labour to blow the whole lot on higher public spending. That would be to make the same mistake in mirror image as the Conservatives when they used the sale of the family silver to prop up the revenue account. Margaret Thatcher used the tax on North Sea oil and the proceeds of privatisation primarily to cut income tax, but the mistake was essentially the same - of using a one-off windfall to allow the Government to spend more than it raised in taxes, year on year.
Mr Brown should be congratulated on using the money to repay the national debt instead. That is the sustainable and fair way to give the money back to its rightful owners, namely the people of this country, by reducing the interest payments the Government has to find each year.
But why not, the intelligent Old Labourite might ask, keep interest payments the same and increase public spending a little, spreading the £22.5bn prudently over the next 20 years? There are two arguments against that. One is that Mr Brown is already planning to increase spending on education and, to an unprecedented extent, health over the next few years. The other is a matter of fairness between generations. The trouble with government debt is that it represents a tax on future citizens. There is nothing wrong with debt in a country with a young population or with pressing social needs. But Britain, with its ageing population, ought to be trying to reduce the burden on the workers of the future. True, Britain is in a better position than most European countries. Our national debt is less than 40 per cent of national income, and heading towards 30 per cent, and more of our future pensions are covered by present investments. But the argument stands.
Finally, though, let us praise Vincent Cable, another economist-politician. The Lib Dem trade and industry spokesman wrote an excellent article in The Independent on Tuesday in which he advocated using the same auction system to maximise the public benefit from the allocation of another scarce resource, namely landing and take-off slots at airports. And he speculated about other possibilities, pointing out that the public revenue from the sale of television broadcasting licences, for example, does not seem to reflect their true value.
Make Mr Cable a Treasury minister, Mr Brown, and see how many more good economic ideas can be translated into political practice.Reuse content