Linkage

That's so exogenous!

Beliefs and non-beliefs (2): the Eurozone

Here's the widely-held view. Germany must stop being intransigent, bail out the Southern Europeans (and thereby save the world economy) by standing behind their debt and/or issuing new Eurobonds. The political price for that is some degree of fiscal and political union. (Yesterday's agreement is a step along this path.)

This is nuts.

First, it doesn't solve the problem except in the short-run. Eurozone debt in the aggregate is about 80% of GDP and this is being bandied about as less than the US and therefore somehow manageable. Well, yes it is better than the US, but that does not necessarily make it manageable with low European growth rates. And this number does not include the very large off-balance-sheet liabilities from e.g. public pensions. There is a story from The Big Short about a trader who decided that some of these US mortgage securities were going to blow up. This smart guy therefore planned a massive swap for other, safer mortgage securities, which he had to accumulate in large quantities. Unfortunately he missed the big picture: all the mortgages were crap. He ended up buying a load of junk from the book's autistic Goonie heroes.

For mortgages, read Euro debts. What if they’re all crap? (Le Monde Diplomatique describes a French movement to “re-examine” their public debt.)

The political side of the Grand European Compromise is equally unappealing. What Greece, Spain et al. are being offered is essentially “Germany chooses how much you can spend”. This is not democratic, and there is no way it can be made so. (The European Parliament? Please.) Even if these decisions were made by an elected body at European level, this would still be a massive increase in centralization, with a concomitant massive decrease in human freedom. The famous EU “democratic deficit” has deep causes: no European public sphere, not enough common interest and/or mutual altruism for a true European demos.

In better times, the lack of democracy would just be a worry for earnest political theorists. Most people care about “output legitimacy” i.e. bread and butter. Unfortunately we are going through a very painful crisis and there is no output legitimacy: all politics has to offer European nations at the moment is blood, toil, tears and neoliberal reforms. That offer is far from attractive when made by your own politicians. Even less when it comes from foreign politicians and bureaucrats. In tough times, communal solidarity is not a luxury but a necessity.

Conclusion: we are trying to avoid ten years of economic pain, by setting ourselves up for a century of political disaster.

Why David Cameron is going along with this and demanding that Europeans implement the Grand Compromise, I do not know. The best outcome possible is that Britain ends up with a politically unified Eurozone as its nearest neighbour, thus defeating our central foreign policy objective for the past three hundred years. The more likely outcome is that we end up as neighbours of a continent-sized Argentina. This suits the short-term interest of the banks, not the long-term interest of the nation.

Rainald Grebe translations

A quick translation of some Rainald Grebe lyrics. I chose these ones because they rely more on concepts and wit than on wordplay and rhyme. Corrections welcome.

Prime of life

Dear motorway, I’m going to lick your central reservation

A bath in the day, I think I’ve earned that

Bottom line – which line? – it was a good year, a good year

Tralala

Another company car... Always left, always left!                    [ie overtaking]

And the jacket in its foil

Yeah, Peter, Peter, clock kilometers, Peter.

My God how everything’s shaken up and down in this country

30 year olds, 40 year olds, what they put away, awesome, awesome!

Go on ask the satnav, when are we in Osnabruck

The satnav is broken, ticka ticka ticka ticka tick!

The hedgehog tells the hare: lame rabbit,

I’ll prick you with my little speedo needle!

We start the day with a delicious coffee and a working breakfast

Swallow it! Chop chop! The receipt in the box, you can claim it back, claim it back

I swear, my girlfriend and me, it’s just a working relationship

Come on, give us a kiss, a kiss, kisses you can claim them back, claim them back

You’ve gotta fuck, fuck, the Ministry of Labour said

Go on get fucking, get fucking, plenty fuckee you get a special year-end bonus

I look at old people and think: “They’ve got it behind them”

I look at little kids and think: “Look forward, look forward to what’s coming!”

The hedgehog tells the hare: lame rabbit,      [a ref. to the Grimm fairytale]

I’ll prick you with my little speedo needle!

We’re calling from the prime of life

Calling from the prime of life

I’m normal. I’m normal

Calling from the prime of life

Calling from the prime of life

Teteretetet

OK that’s what it is, right? That’s normal!

The customer is the measure of all things – oh right! –

What we do we do just for him.

Now is the time, if you haven’t yet

Then you never will

Yeah, yeah, you wanted to just look around in life a bit more –

Sure, the sun shines so nice in your back yard –

Are you dumb? No! No!

We are now we’re the ones who, who are standing at the machine

Produce, produce, I want to see your backs in it, backs in it

The 35 year old stutterer makes 35 year old promises –

The 35 year old criminal does 35 year old crimes –

“I’ll do my best tomorrow” is New Year already

“I’ll do my best tomorrow” is New Year already

It was it was it was a good year

Great buffets, and the eggs still recognizable as eggs!                       ["eggs" here also = "balls"]

If you want let’s meet in August for a coffee

“How do you do?” “How do you do?” How do I do what?

Those with work complain they’ve got so much much much much much

Those with none complain they’ve got none none none none none

At Penny and at Plus there’s organic really cheap cheap, oh I need it!

When every tramp can eat healthy, yeah, then I don’t know

Have you got time for kids, have you time for a boyfriend?

No! No! No! You don’t need Powerpoint to get it!

The hedgehog tells the hare: lame rabbit,

I’ma prick you with my little speedo needle!

We’re calling from the prime of life

Calling from the prime of life

Teteretetet

I love Berlin... I love normality!

It's good

I wanted to do so much

Now the day’s already done

So many important things

Not today I’ll stay at home

I wrote three bestsellers

And built four dams

Grated so much cheese

Chewed off so many ears

My jets have jetted all around

From here via Munich to Milan

And I still haven’t saved the world

So another saviour can

It’s good, it’s good, it’ll be over soon.

No fuss, no howling at the moon.

It’s good. I count the sheep

Until I finally sleep.

When will the sandman come to call

To sail my boat along the wall?

And the volcano's extinguished

The chip pans on standby

Even in far-off Baikolo

The rockets have the day off

And hell is yawning sleepily

In the Great White’s mouth

Just an untiring hammer thrower

Still spins himself around

My jets have jetted all around

From here via Munich to Milan

And I still haven’t saved the world

So then let someone else, someone else...

It’s good, it’s good, it’ll be over soon,

No fuss, no howling at the moon.

It’s good. I count the sheep

Until I finally sleep.

When will the sandman come to call

To sail my boat along the wall?

On the flight back from New York

Coming back from ESA. New York was great and the conference was fabulous too. There were several panels on “dishonesty and corruption”. A nice one with Marco Piovesan looked at people who did not buy bus tickets on the Italian public transport system.

Outsiders often think of experimental economics as proving that people are much nicer than Rational Economic Man – altruistic, unfair, averse to inequality and so on. In fact, a lot of recent work goes the other way, exploring spite, dishonesty and hypocrisy. The picture of man that comes out of this is not a Noble Savage, but more a flawed, selfish creature whose vices are partially checked by his fear of social disapproval.

Intergroup emotions in Germany

In the Old National Gallery guest book, Berlin

East door of the Berliner Dom

... and the most moving thing in that grandiose building.

Linkage

Evolution does not always lead to efficiency.
Jonathan Portes explains how the Cameron government has quietly U-turned. I told you it would.
Elinor Ostrom's last writing, very much in the vein of her life's work.
Botticelli's Venus gets Photoshopped up to 21st century fashion industry standards.
Half-arsed attempt to be democratic leads to utterly predictable outcome.

Beliefs and non-beliefs, part 1

I have finished teaching my "Making of Economic Policy" class for the year, and the students have done their exams. Modulo the usual pain for precious research time lost, teaching it was a lot of fun.

Now that I am not going to affect anyone's opinions before the exam, it seems like a good time to describe some of my personal beliefs about the course's topics; and some of my non-beliefs. These are all highly provisional, unscientific and evolving. ("Evolving" is a bit hopeful. Maybe "changing".)

• I do not believe that a more open immigration policy to the EU and the UK is an obviously good thing which is held back only by voters' irrational xenophobia. 

Linkage: how to measure the universe

via kottke.org.

Measuring the Universe from Royal Observatory Greenwich on Vimeo.

Medieval polisci

For Sunday, here's François Villon's version of a famous theory.

Au temps que Alexandre regna,

Ung hom, nommé Diomedès,

Devant luy on luy amena,

Engrillonné poulces et detz

Comme ung larron; car il fut des

Escumeurs que voyons courir.

Si fut mys devant le cadès,

Pour estre jugé à mourir.

L'empereur si l'arraisonna:

«Pourquoy es-tu larron de mer?»

L'autre, responce luy donna:

«Pourquoy larron me faiz nommer?

«Pour ce qu'on me voit escumer

«En une petiote fuste?

«Se comme toy me peusse armer,

«Comme toy empereur je fusse.

In the time of Alexander's reign

A man, by name Diomedes,

Was dragged before him

Thumbs and fingers in irons

As a robber; for he was

One of those pirates that we see.

He was brought before the judge

To be sentenced to death.

The emperor questioned him:

"Why are you a robber on the sea?"

The other replied to him:

"Why are you calling me a thief?

Because you see my piracy

In a tiny little boat?

If I could have your armaments

I would be emperor like you..."

Ariely on dishonesty

I got the new Ariely book about dishonesty the moment it landed. Now that is an interesting topic, probably one of the most interesting topics in social science. Why? Well, take any game, i.e. any economic or social situation. Almost all of game theory, i.e. of the study of conflict of interest, becomes irrelevant if the players can sign contracts, because they can just agree on one of the possible efficient solutions. So why then is game theory still widely studied and important? Because in lots of important situations -- war, crime, non-contractible outputs -- legal contracts can't be made.

Except that if people are honest, then they will do what they say; and so promises become contracts. Robert Solow makes this point in his review of Titmuss' book on blood donation. Thomas Hobbes understood it earlier, and put it as rule number two of the Law of Nature: "That men perform their covenants made."

So, dishonesty makes game theory interesting, and social outcomes much worse for everyone.

Professor Ariely's book has a really simple, interesting thesis. Most dishonesty, he says, is not bad people cheating; it's good people cheating a little bit. The most powerful example is when he computes the money he's lost by being actually swindled, compared to the amounts he's lost because of insurers, advertisers etc. marginally overcharging, marginally exaggerating the benefits of their product, and so on. Anyway, he pursues that thesis in many clever and interesting experiments, all written up in his witty prose. Top-notch popular science.

Ironically for a book on dishonesty, many of the experiments involve deception of (as well as by!) the experimental subjects. For example, sometimes the researchers hire an actor to pretend to be dishonest, so as to see if others copy him. In the world of social science experiments, this is a controversial topic. Sometimes deceipt can be unfair to be participants. A much bigger problem, in my view, is that deceipt is going to make future subjects suspicious. Suppose this book is as successful as it deserves -- and students love this behavioural stuff right now. Suddenly, all our potential experimental subjects are going to be in our labs going "where's the trick? Who's the actor?"

Of course, once that happens, we lose control and have no way of knowing how subjects see their situation. (Here is the classic example: when a subject in a psychological experiment had an epileptic fit, 3 of 5 other subjects thought this was part of the experiment!)

For this reason, many experimental economists believe, as I do, in making experiments honest wherever possible. Then at least our experiments will have a good reputation. In future, we may even have to announce "In our experiments, unlike the psychology department's experiments, you will not be deceived"! That's harsh, but if psychologists like Dan Ariely keep writing these brilliantly popular books about experiments where they deceive people, it may be necessary.

Linkage - warning, adult themes and emotional content

Oh, this is very serious: after 115 years together, two tortoises in Klagenfurt zoo have ended their relationship. (Link in German).

Elinor Ostrom is dead

Boo. I think of her as a proper social scientist -- interested in big, deep questions, and pursuing them tenaciously with all the tools at her disposal.

Linkage

The future of the world? Bleak results from a simulation.

Biodiversity and trade

So, this Nature paper has been a weekend hit. It links threatened species to trade routes and shows that trade is a cause of loss of biodiversity. Or so it argues.

I am not sure the paper supports that claim, though. Suppose monkey production threatens a species of coffee -- hmm, too early in the morning. Try again. Suppose coffee production threatens a species of monkey, and suppose that 90% of coffee is exported. The paper then argues that 90% of the expected biodiversity loss is also being exported.

We seem to be missing a counterfactual. What would happen if the trade weren't there (e.g. if it were banned)? Presumably economic activity would not stop but would be diverted to alternatives. Some of those would be more ecological, some would not. Subsistence agriculture, plus overpopulation, can be pretty devastating to habitats, right?

It is surely true that rich countries have exported environmental destruction to poor countries which have lower protections for public goods. (Although those countries may also put a higher priority on economic growth.) And biodiversity certification a la the Rainforest Alliance logo might be a solution. It's just that I'm a bit unclear what the paper is actually estimating.

Linkage

Interesting (but at the end slightly scary) Chinese blog post on parenthood in China.

Linkage

Nature paper on tipping points in the earth's climate. (I don't know if there is an ungated version.) Here is an interesting paragraph:

Recent theoretical work suggests that state shifts due to fold bifurcations are probably preceded by general phenomena that can be characterized mathematically: a deceleration in recovery from perturbations (‘critical slowing down’), an increase in variance in the pattern of within-state fluctuations, an increase in autocorrelation between fluctuations, an increase in asymmetry of fluctuations and rapid back-and-forth shifts (‘flickering’) between states. These phenomena can theoretically be assessed within any temporally and spatially bounded system. Although such assessment is not yet straightforward, critical transitions and in some cases their warning signs have become evident in diverse biological investigations, for example in assessing the dynamics of disease outbreaks, populations and lake ecosystems. Impending state shifts can also sometimes be determined by parameterizing relatively simple models.

I had no idea there was a science of predicting state shifts... how cool. I wonder if you could apply it to social revolutions.

Interesting post on the jubilee and the Republic protesters

... at Boingboing.

I went down to the river, it was fun. I couldn't see a thing, the crowds were so tightly packed. Eventually on the South Bank I found a very narrow wobbly bit of fencing which people were standing on, and watched the boats go by for half an hour. It was quite fun and I saw a very small figure in white who was the Queen. (I think.) Then there were various small boats from the commonwealth, Dunkirk, etc. etc. Everybody was in a good mood, Union Jacks were everywhere and it only rained at the end.

This week I was chatting to a top academic who said, with a cheerful grin, "I was hoping for the Duke of Edinburgh to keel over. That would have been a result." There you have the republicans' image problem. Lots of them are nice people who bear no malice to anyone and simply want to change an institution; but some of them sound as if they bear a personal grudge against Ma'am herself, and this is not attractive.

I am ambivalent. The monarchy seems to embody some of the best things about Britain, and also some of the worst.

(By the way, that link will teach you the glorious fact that the President of Turkmenistan is called Gurbanguly Berdymukhammedov. If we have a president, let's have him.)

On soft power

Ideas are more powerful than guns. We would not let our enemies have guns, why should we let them have ideas?

-- Stalin 

US asks Confucius Institutes to apply for accreditation.

Steven Pearlstein on Britain

Here (via MR).

Other than Labor Party politicians, nobody seriously doubts the wisdom of cutting back on the number of public employees or the size of their pensions, or capping welfare payments to any household at the median income, or bringing more efficiency to public education or the public health service through greater competition. The idea that these will be done once the economy returns to normal growth is a political fantasy.

I wonder why Mr Pearlstein thinks this.

RA Summer Exhibition

Linkage

The people at Crooked Timber explain -- in a new way -- why socialism wouldn't work.