On holiday in sunny, economically devastated Spain, I spent an evening chatting to an ex-financier who predicts inflationary doom for the Euro. Inflation doom-mongering has been consistently wrong so far. So why would that change? One reason is that inflation may be the wisest policy now. Europe has a lot of debts. (Yes, the US has more and Great Britain more still.) We probably can't pay off those debts. So we can either default hard, or default quietly via inflation. On a naive view the latter is less honest, but for that very reason, it is likely to cause less social conflict. Here are some more people making the argument.
A side note: sometimes people try to reconcile central bank independence with democracy, by arguing that monetary policy is a purely technical field without distributive consequences. If inflation does become a tool of policy, then this will swiftly be seen for the nonsense it always was. Inflation redistributes towards debtors. It's just as political as everything else.
Sunday, 26 August 2012
Monday, 20 August 2012
Sunday, 19 August 2012
Noooo!
http://www.guardian.co.uk/uk/2012/aug/19/britains-railways-another-round-arrivals-departures?newsfeed=true
Having experienced both, I think Virgin are great and FGW are dreadful.
Designing a market for train services is tricky. Leaving each rail operator permanently in charge might lead to stagnation. Reshuffling franchises every few years puts civil servants in charge of the market, and can make the operators short-termist. My instinct is to prefer natural monopolies to artificial competition (have I mentioned the Russian chandelier factory?) but that is just from the gut.
I travelled across Germany on Friday. Every train I used was late, I was delayed by 2 hours in total, and there was a replacement bus service on the last part of the line.
Having experienced both, I think Virgin are great and FGW are dreadful.
Designing a market for train services is tricky. Leaving each rail operator permanently in charge might lead to stagnation. Reshuffling franchises every few years puts civil servants in charge of the market, and can make the operators short-termist. My instinct is to prefer natural monopolies to artificial competition (have I mentioned the Russian chandelier factory?) but that is just from the gut.
I travelled across Germany on Friday. Every train I used was late, I was delayed by 2 hours in total, and there was a replacement bus service on the last part of the line.
Saturday, 4 August 2012
Ljubljana
 |
| "I can't decide who I love more: Hitler or the Wu-tang?"
I should add that Ljubljana has actually really grown on me: a chilled-out small Central European town, with a pretty, baroque centre and lots of cafes serving fresh lemonade and Italian coffee.
|
Linkage
Sam Harris (Letter to a Christian Nation, the best and shortest of the new atheists' books) has a new ebook on lying.
Monday, 30 July 2012
Sunday, 29 July 2012
We have met the enemy and he is us
Political economists divide politics into “special interest” and “general interest”. Special interest politics is about how relatively narrow, sectional interests like the arms industry, nuclear power, or the universities affect political outcomes. It is the analysis of smoke-filled rooms, expensive dinners, consulting jobs for ex-Ministers and so on; at the bottom end, we come to brown envelopes and the local councillor with a swimming pool on his patio after the new shopping centre is approved. Hobbes called these things “worms in the body politic”. (Yes, the seventeenth century had its own Public Choice theory.)
If special interest politics is parasitology, general interest politics is more like plate tectonics. It deals with the clash of great, broad strata: the rich versus the poor, business versus unions in general, and the neverending campaign for the median voter. Think cheering crowds, newspaper headlines, and MPs coming back to Westminster cowed by their angry constituents.
If special interest politics is parasitology, general interest politics is more like plate tectonics. It deals with the clash of great, broad strata: the rich versus the poor, business versus unions in general, and the neverending campaign for the median voter. Think cheering crowds, newspaper headlines, and MPs coming back to Westminster cowed by their angry constituents.
Special interest politics are the big problem for most countries. In these countries, politics is more or less corrupt, and the unorganized majority is held back by the interests of entrenched minorities, in the way Mancur Olson talked about. Special interest politics are a big source of problems in all countries: you cannot eradicate the power of small, well-organized interest groups, any more than you can eradicate all a body’s parasites. So on a global scale special interest politics is what matters.
But I think that the storms on Western countries’ horizons come from general interest politics. Take two examples: social security and global warming.
Nobody likes welfare benefits. They breed scroungers (just ask the Daily Mail) and they cost a lot. Every political party for the past 30 years has wanted to reform welfare, and slowly it is being reformed. The problem for European democracies, though, is not handouts to the feckless poor. It is pensions. Nobody would dare say, or be daft enough to think, that pensioners are feckless. No politician dares cut pensions. They are the third rail even in conservative America. Mess with them and you will make the median voter angry. Unfortunately, the huge black hole – composed of off-balance-sheet dark matter – in European and American budgets is made up of public pensions.
Global warming is the biggest danger to the human race, but as an issue in the Presidential campaign it’s non-existent. You could blame Big Oil. But think about the threat to the ozone layer from CFCs. That problem appeared about the same time as global warming, we solved it rather fast, and Big White Goods couldn’t stop it. Ultimately, the economic power of oil comes down to the fact that it drives a huge chunk our economy, and the political power of the anti-global warming movement comes down to our great capacity for kidding ourselves. Dealing with global warming would mean uncomfortable lifestyle changes for all of us. Of course, that would be impossible, so it must be unnecessary, and global warming must be a fraud.*
Most of the world is still struggling against privileged minorities. In the West we have really solved that problem, as much as it can be solved. A lot can still be got away with, but really egregious abuses result in a public outcry and Something is Done even if it takes a quarter-century to do it. Our biggest danger is the privileged majority, which does not even believe it is privileged, and will be angry if you tell it different. We Have Met The Enemy, and He Is Us.
* If you want to know more about global warming, then there are some good websites. Realclimate.org is my favourite. Wattsupwiththat.com and climateaudit.org seem to be the best of the deniers. I don't think climate scientists are saints or geniuses, and I am dubious about their computer modelling; but the skeptics seem much worse. For books, I liked The Hot Topic and Storms of my Grandchildren; I confess to not having read any skeptical books. Go and make up your own mind.
But I think that the storms on Western countries’ horizons come from general interest politics. Take two examples: social security and global warming.
Nobody likes welfare benefits. They breed scroungers (just ask the Daily Mail) and they cost a lot. Every political party for the past 30 years has wanted to reform welfare, and slowly it is being reformed. The problem for European democracies, though, is not handouts to the feckless poor. It is pensions. Nobody would dare say, or be daft enough to think, that pensioners are feckless. No politician dares cut pensions. They are the third rail even in conservative America. Mess with them and you will make the median voter angry. Unfortunately, the huge black hole – composed of off-balance-sheet dark matter – in European and American budgets is made up of public pensions.
Global warming is the biggest danger to the human race, but as an issue in the Presidential campaign it’s non-existent. You could blame Big Oil. But think about the threat to the ozone layer from CFCs. That problem appeared about the same time as global warming, we solved it rather fast, and Big White Goods couldn’t stop it. Ultimately, the economic power of oil comes down to the fact that it drives a huge chunk our economy, and the political power of the anti-global warming movement comes down to our great capacity for kidding ourselves. Dealing with global warming would mean uncomfortable lifestyle changes for all of us. Of course, that would be impossible, so it must be unnecessary, and global warming must be a fraud.*
Most of the world is still struggling against privileged minorities. In the West we have really solved that problem, as much as it can be solved. A lot can still be got away with, but really egregious abuses result in a public outcry and Something is Done even if it takes a quarter-century to do it. Our biggest danger is the privileged majority, which does not even believe it is privileged, and will be angry if you tell it different. We Have Met The Enemy, and He Is Us.
* If you want to know more about global warming, then there are some good websites. Realclimate.org is my favourite. Wattsupwiththat.com and climateaudit.org seem to be the best of the deniers. I don't think climate scientists are saints or geniuses, and I am dubious about their computer modelling; but the skeptics seem much worse. For books, I liked The Hot Topic and Storms of my Grandchildren; I confess to not having read any skeptical books. Go and make up your own mind.
Friday, 27 July 2012
Linkage
A big list of Roman graffiti. My favourite:
We have wet the bed, host. I confess we have done wrong. If you want to know why, there was no chamber pot.Off to Ljubljana for ECPR summer school tomorrow. (The website cunningly hides the details: scroll over "Summer school" to see the hidden dropdown menu.)
Wednesday, 25 July 2012
Linkage
German academia has problems with plagiarism, says German academic.
And Chinese students in the US face prejudice from back home (and loneliness abroad).
Luigi Zingales on orphan ideas. A related incentive problem is that researchers get kudos for finding exciting new ideas, but not for repeating sensible old ones. (I once heard Alberto Alesina describe how he had given up urging Italy to reform its labour markets, and instead decided to write a model explaining why its labour markets were optimal, given Italians' desire to stay near home.... It's a really interesting model, by the way.)
And Chinese students in the US face prejudice from back home (and loneliness abroad).
Luigi Zingales on orphan ideas. A related incentive problem is that researchers get kudos for finding exciting new ideas, but not for repeating sensible old ones. (I once heard Alberto Alesina describe how he had given up urging Italy to reform its labour markets, and instead decided to write a model explaining why its labour markets were optimal, given Italians' desire to stay near home.... It's a really interesting model, by the way.)
Friday, 20 July 2012
Thursday, 19 July 2012
Linkage
Crowdfunding rare disease research.
Matt Yglesias on microfoundations.
Nick Crafts (head of CAGE) on Radio 4, bringing lessons from the 1930s to bear on today.
Most importantly, punt guns.
Matt Yglesias on microfoundations.
Nick Crafts (head of CAGE) on Radio 4, bringing lessons from the 1930s to bear on today.
Most importantly, punt guns.
Monday, 16 July 2012
Linkage
Apologies for lack of posts. I've been ill.
Did xenophobia evolve to protect us from infectious diseases? If so, might there be a genetic basis for it?
Proposal to renationalise the railways, mooted by Maria Eagle. Only someone who does not remember British Rail could say "Bring back British Rail". Well, or ASLEF of course.
Passenger km on the railways since 1987:
Railways were privatised in 1994. (Wikipedia has history.)
Did xenophobia evolve to protect us from infectious diseases? If so, might there be a genetic basis for it?
Proposal to renationalise the railways, mooted by Maria Eagle. Only someone who does not remember British Rail could say "Bring back British Rail". Well, or ASLEF of course.
Passenger km on the railways since 1987:
Railways were privatised in 1994. (Wikipedia has history.)
Thursday, 5 July 2012
Bob's evidence
Obviously, this banking scandal is another reason why honesty and integrity are hot topics for social scientists. Let me focus on a detail, like Adorno analysing fascism via modern car doors (here, aphorism 19).
In his evidence to the committee yesterday, Bob Diamond called all the MPs by their first name. This replacement of "Mr. X" by "Jim" is actually an ongoing trend of our democratic age. I think it is a loss of a small area of respectful distance. It also leads to two comic phenomena:
(1) On the radio, "Dave" tells "Ed", his sworn opponent, that he is politically incompetent, his policies are bad for Britain and borderline treason, etc.
(2) Using your interlocutor's first name as a way to patronise them, as if you were their kindergarten teacher. Which is then reciprocated, leading to a kind of weaponized chumminess.
My students tend to be schizophrenic, either calling me "Professor Hugh-Jones" or "Yo Dave". Personally, I am fine with Dave. When I demand to be called Dr Hugh-Jones, I will definitively have become an Old Fart. Maybe skip the Yo though.
Perhaps Adorno -- Theo -- has the mot juste in aphorism 20: "The matter-of-factness [Sachlichkeit] between human beings which clears away the ideological ornamentation between them, has itself already become an ideology of those who wish to treat human beings as things."
In his evidence to the committee yesterday, Bob Diamond called all the MPs by their first name. This replacement of "Mr. X" by "Jim" is actually an ongoing trend of our democratic age. I think it is a loss of a small area of respectful distance. It also leads to two comic phenomena:
(1) On the radio, "Dave" tells "Ed", his sworn opponent, that he is politically incompetent, his policies are bad for Britain and borderline treason, etc.
(2) Using your interlocutor's first name as a way to patronise them, as if you were their kindergarten teacher. Which is then reciprocated, leading to a kind of weaponized chumminess.
My students tend to be schizophrenic, either calling me "Professor Hugh-Jones" or "Yo Dave". Personally, I am fine with Dave. When I demand to be called Dr Hugh-Jones, I will definitively have become an Old Fart. Maybe skip the Yo though.
Perhaps Adorno -- Theo -- has the mot juste in aphorism 20: "The matter-of-factness [Sachlichkeit] between human beings which clears away the ideological ornamentation between them, has itself already become an ideology of those who wish to treat human beings as things."
Friday, 29 June 2012
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.
Monday, 25 June 2012
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.
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!
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.
Wednesday, 20 June 2012
Monday, 18 June 2012
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.
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".)
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.
Sunday, 17 June 2012
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..."
Friday, 15 June 2012
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.
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.
Thursday, 14 June 2012
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).
Tuesday, 12 June 2012
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.
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.
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.
Sunday, 10 June 2012
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.
Saturday, 9 June 2012
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.)
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.)
Tuesday, 5 June 2012
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
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.
Monday, 4 June 2012
Thursday, 31 May 2012
Economic imperialism
Wednesday, 30 May 2012
Nineteenth-century England, by a visitor
Conversation with an Englishman .... Twenty-five years of age; sneering, decided, incisive face; he has made, for his amusement and instruction, a trip lasting twelve months, and is returning from India and from Australia....
Of all the countries this Englishman has seen, England is the most moral. Still, in his opinion, the national evil is " the absence of morality." In consequence he judges France after the English fashion. "The women are badly brought up there, do not read the Bible, are too fond of balls, occupy themselves wholly with dress. The men frequent cafes and keep mistresses, hence so many unfortunate households...."
Followup linkage
Re alternative ways to present data, see also this. Time Out has more details. Their Twitter feed is here.
Sunday, 27 May 2012
Linkage
Are CEOs with military experience more honest? (via marginalrevolution)
Dan Ariely has a new book on honesty: actually, I ghost-wrote that book for him while I was on leave from the SAS.
Dan Ariely has a new book on honesty: actually, I ghost-wrote that book for him while I was on leave from the SAS.
Friday, 25 May 2012
More linkage
Here is a great, informative rant on the internet and the music industry, from a Camper Van Beethoven member who is also an economist, a geek and an entrepreneur.
My problem with average utilitarianism
Today’s most
influential moral framework is average utilitarianism (AU for short): the idea that whatever increases the average person’s welfare is
good. It’s the default way economists use to make welfare
comparisons. It is also reflected in the use of GDP per person as a
measure of a society’s well-being.
By contrast, total
utilitarianism (TU) says that good is whatever increases the sum of
welfare. This only makes a difference when the number of people under
consideration changes. For example, 1000 people with 2 welfare units
each is better than 100 people with 3 welfare units each according to
TU, but worse according to AU. (Never mind how welfare units are
calculated or compared across people. That’s a problem for both
varieties, and for another blog post.)
Tuesday, 22 May 2012
A spoonful of sugar
A friend at another university tells me that the exams committee are facing pressure from the administration to give out more Firsts and 2.1s. The argument is that employers won’t hire people with 2.2s or below. So, by giving out lower grades, they are harming their students in the job market.
This is an interesting example of what Chugh, Bazerman and Banaji call Bounded Ethicality. Giving out undeservedly high grades (1) is dishonest and (2) corrupts the degree grading system, and I guess a little thought will make that clear to most people. However, the administration makes the case that not doing so will harm the university’s students. The force of this appeal is: “ignore the global harm, focus on the local benefit”.
This argument is not seriously convincing, but it appeals to people’s instinctive moral parochialism. By doing so, it provides a cover for self-interest. (So it is also an interesting example of self-serving bias.) Fighting grade inflation would take time and effort, and will make you unpopular with important people (or if you are an important person, it would make your university worse off, and you personally less successful). Nobody wants that. But a naked appeal to these motives would probably not work as well as this version which comes dressed up in moral clothes, because academics like to think of themselves as high-minded guardians of the scientific flame.
Perhaps the new Centre for the Study of Integrity could do some work on self-serving moral arguments.
Friday, 18 May 2012
Shablamidi, shablamida
Listening to my two favourite Donna Summer tunes, I Feel Love and State of Independence. I can see why Brian Eno said what he did. I first heard it in the 90s and it sounded completely up-to-date, and fitted alongside the blissed-out house music I liked. It's all about surrender to the moment.
State of Independence has the same sound but the lyrics are really different, more like a hymn to consciousness, home, commitment and God. (Donna Summer's family values led to a well-known controversial incident.)
Hmmm.
No, the Devil has the best tunes: I Feel Love is better.
Kickstarter
In March, a gaming company called Double Fine sought funding for their next project on Kickstarter.
Kickstarter is a website where you can pledge to fund creative projects. The project sets itself a money target and a deadline. If enough people pledge money to hit the goal, then their credit cards are charged. If the goal is not achieved by the deadline, nobody pays.
Double Fine aimed to raise $400,000 in a month. In fact, they raised $1 million in 24 hours. The rest is history: total donations came in at more than $3 million, and the computer gaming industry went into a Kickstarter frenzy.
Websites like Kickstarter mitigate some of the problems facing projects with big startup costs. Suppose you are creating a computer game or a film or a ballet. You could sell advance tickets, but if you don't get enough, the project will fold before completion. This makes your potential customers nervous about handing over cash. And the nervousness can be self-fulfilling; if an investor thinks other people will be cautious in handing over cash, that makes it less likely that the project will hit its minimum, so s/he gets more cautious too. Kickstarter fixes that by guaranteeing a refund.
These projects are like what economists call club goods. The marginal cost of producing the second copy of a computer game is (much!) lower than the marginal cost of the first copy: software is partly non-rivalrous. Kickstarter and other crowdfunding websites make it easier to produce club goods. A first cousin of the club good is the public good, which is non-rivalrous and also non-excludable. I.e., whereas you can stop non-payers attending an artistic performance or downloading a computer game (well, maybe...), you cannot stop non-payers enjoying a public good. Those are the goods traditionally produced by governments: clean air, national defence and so forth.
Could crowdfunding transform the public sector?
Suppose you want the local park to be tidied up and get some new flower beds. You could pay for someone to do the work. But the benefit you personally get will be much less than the cost, even though the benefit to everyone might greatly exceed the cost. Your other alternative is to lobby the town council, perhaps joining with others, to provide this public good. With enough persistence you might get your way. Of course, governments are overburdened with demands, often inefficient, and perennially underfunded, so you may not have much luck. Well, those are your choices... until now.
Now, you can set up a Kickstarter project and a Facebook group to fix the park. Like-minded citizens can contribute some minimum donation. They know that if the project doesn't hit its goal, their money will be refunded. The biggest donors get their name on a park bench, just as big donors to video games get a personalized character in the game.
Crowdfunding solves some, not all, of the problems of providing public goods. It makes people more sure that their money won't be wasted; and it could provide a credible signal of unmet demand to government. (So in year 2 of your project, the council might realize the park is a big issue for voters and agree to fund further improvements.)
It doesn't solve the problem of non-excludability. Kickstarter can offer game copies only to contributors. You cannot ban non-contributors from the park.* So there will still be a temptation to free-ride on others.
One tweak would be to change the conditions. So, your pledge will be redeemed only if the project meets its goal funding and if everyone in the park's surrounding area pledges some minimum. Now, for those in the area, not contributing will result in the park not being improved. This condition makes every contributor pivotal, and that weakens the temptation to free-ride.
I don't know how much unmet demand for public goods is hidden out there, but I suspect there is a lot. By tapping it, crowdfunding could cause a governance revolution, making the public sector much more open, flexible and decentralized.
* Actually, you could do that. Kew Gardens charges £15 for entry. My inner economist approves, but my inner citizen feels that parks should be public.
Kickstarter is a website where you can pledge to fund creative projects. The project sets itself a money target and a deadline. If enough people pledge money to hit the goal, then their credit cards are charged. If the goal is not achieved by the deadline, nobody pays.
Double Fine aimed to raise $400,000 in a month. In fact, they raised $1 million in 24 hours. The rest is history: total donations came in at more than $3 million, and the computer gaming industry went into a Kickstarter frenzy.
Websites like Kickstarter mitigate some of the problems facing projects with big startup costs. Suppose you are creating a computer game or a film or a ballet. You could sell advance tickets, but if you don't get enough, the project will fold before completion. This makes your potential customers nervous about handing over cash. And the nervousness can be self-fulfilling; if an investor thinks other people will be cautious in handing over cash, that makes it less likely that the project will hit its minimum, so s/he gets more cautious too. Kickstarter fixes that by guaranteeing a refund.
These projects are like what economists call club goods. The marginal cost of producing the second copy of a computer game is (much!) lower than the marginal cost of the first copy: software is partly non-rivalrous. Kickstarter and other crowdfunding websites make it easier to produce club goods. A first cousin of the club good is the public good, which is non-rivalrous and also non-excludable. I.e., whereas you can stop non-payers attending an artistic performance or downloading a computer game (well, maybe...), you cannot stop non-payers enjoying a public good. Those are the goods traditionally produced by governments: clean air, national defence and so forth.
Could crowdfunding transform the public sector?
Suppose you want the local park to be tidied up and get some new flower beds. You could pay for someone to do the work. But the benefit you personally get will be much less than the cost, even though the benefit to everyone might greatly exceed the cost. Your other alternative is to lobby the town council, perhaps joining with others, to provide this public good. With enough persistence you might get your way. Of course, governments are overburdened with demands, often inefficient, and perennially underfunded, so you may not have much luck. Well, those are your choices... until now.
Now, you can set up a Kickstarter project and a Facebook group to fix the park. Like-minded citizens can contribute some minimum donation. They know that if the project doesn't hit its goal, their money will be refunded. The biggest donors get their name on a park bench, just as big donors to video games get a personalized character in the game.
Crowdfunding solves some, not all, of the problems of providing public goods. It makes people more sure that their money won't be wasted; and it could provide a credible signal of unmet demand to government. (So in year 2 of your project, the council might realize the park is a big issue for voters and agree to fund further improvements.)
It doesn't solve the problem of non-excludability. Kickstarter can offer game copies only to contributors. You cannot ban non-contributors from the park.* So there will still be a temptation to free-ride on others.
One tweak would be to change the conditions. So, your pledge will be redeemed only if the project meets its goal funding and if everyone in the park's surrounding area pledges some minimum. Now, for those in the area, not contributing will result in the park not being improved. This condition makes every contributor pivotal, and that weakens the temptation to free-ride.
I don't know how much unmet demand for public goods is hidden out there, but I suspect there is a lot. By tapping it, crowdfunding could cause a governance revolution, making the public sector much more open, flexible and decentralized.
* Actually, you could do that. Kew Gardens charges £15 for entry. My inner economist approves, but my inner citizen feels that parks should be public.
Sunday, 13 May 2012
Strand Magazine data presentations from 1906
The size of the people in each picture is proportional to some relevant statistic, usually their number in the population. Someone needs to create the R package for this.
Sports
Most popular authors in Britain, based on library borrowings.
From left to right: Thomas Hardy, Miss Braddon, Marie Corelli, Hall Caine, Rudyard Kipling, Mrs Humphry Ward, J. M. Barrie, Sir Arthur Conan Doyle, Stanley Weyman, R. L. Stevenson, W. M. Thackeray, Scott, Dickens, Henry James, Charotte Bronte, George Meredith, Trollope, Charles Kingsley, Bulwer Lyttton, I. Zangwill, Charles Reade and E. F. Benson.
World religions by number of adherents: Brahminism (=Hinduism) 223m, Protestantism 210m, Ancestor worship 283m, Buddhism 107m, Catholicism 353m, Taoism 40m, Islam 222m, Judaism 9m, Parseeism 150,000, Shintoism 18m, Polytheism 130m
Female occupations in the United Kingdom:
Dressmakers 903,646; Mill-hands 867,259; Shop-girls 325,000; Domestic Servants 1,641,154. In the foreground are laundresses, charwomen, teachers, sick nurses, shopkeepers and landladies. On the table: actresses, musicians and authors (1,327).
Thursday, 10 May 2012
A bit more on democracy
The
last decade has seen three serious blows to democracy’s
credibility.
The
first is the accumulation of public and private debt beyond what is
prudent. (I include private debt because people or banks may avoid their debts
by transferring them to the state, demanding their cancellation by political means, or by voting for
parties that inflate the debt away.) This accumulation of debt made
it much harder for European nations to respond to the financial
crisis by Keynesian spending. You are supposed to save in the good
times so that you can spend in the bad times. We spent all the time
and when we really needed to spend, we stretched our credit with the
markets. Now most European democracies have to perform a very unpleasant balancing act.
The
second and much more serious is the violation of human
rights by the Western democracies. We were not supposed to torture
people, abduct people to be tortured by others, or imprison (“detain”)
people for 3 months without trial. George W. Bush authorized torture and
was reelected. Since then, nobody has been prosecuted for the torture that took place. The word for this in third-world dictatorships is "impunity". It is hard not to suspect that these events happened because very many Americans do not mind, or actively support,
torturing America’s enemies. (Similar things have happened in Britain.) So, the democratic process failed to protect
unpopular minorities. This is tyranny of the majority. When
democracy eats away at liberalism, it is destroying its own moral
basis.
Last,
and potentially the most serious, there is the failure to deal
with global warming. This issue dwarfs all others in its possible consequences. Again, one factor behind the world’s inability to
come up with a solution is surely that in many democratic countries, large parts of the public do not understand the science of climate change, or are actively deluded climate deniers. It is as if human
survival depended on the theory of evolution, in a world of
creationists.
Dictatorship hardly has a better record in any of these cases.
The Chinese also share the blame for Kyoto's failure, plenty of
dictators have piled up debt and run down the country, and as for
human rights, enough said. But if the failures above become
more and more apparent, nobody will be calling for a home-grown Idi
Amin. Instead more and more power will be handed over to unelected
bureaucrats, with academics and others thinking up specious reasons
why this is “really compatible with the principles of democracy”
– just not with actual voting, you understand.
For
these reasons, despite the inspiring example of the Arab spring, I am not sanguine about democracy's future in its heartlands.
Sunday, 6 May 2012
Invertebrates and discount rates
Grandpa, when you were
young, did you see the Houses of Parliament?
Of course. I walked
past them all the time.
There’s a school trip
there next week. We’re going to sail the boat over the top of Big
Ben. That was where all the decisions were made before the Emergency
Committee ran things, wasn’t it?
That’s right.
Grandpa... why didn’t
people then do anything about global warming? Didn’t they realise
what was going to happen? Did they get the science all wrong?
No, lots of people
realised and we had a pretty good idea about the science. We knew
just what we were doing. In fact, we worked it all out using advanced
economics. We calculated exactly how much effort we should make to
move to a low-carbon economy.
So why did London get
submerged, and we have to build dykes in play hour? You must have
made some big mistakes in your sums!
No, we got our sums
right. You see, we used a formula where your happiness now was as
valuable as half of our happiness back then. So, for
example, one person getting Ebolaic Footrot then was as bad as two people getting Footrot now.*
You counted us as
half as valuable as you?
That’s
right. Don’t upset the worm bucket or we won’t have any dinner.
It’s perfectly simple. We used a time discount rate of 1.5 per cent per
year. So over 50 years, a unit of your future welfare worked out to
about 0.985 to the power of 50 = about 0.46. A 50% discount.
But
why shouldn’t I count just the same as you?
Well
some people suggested that we use a 0% discount so that the future
would count just as much as the past. But other people said* that
because people didn’t care much about the future, it
would be wrong for politicians to care about the future either.
So how did you come up with a 1.5% discount rate?
We
worked that out from the capital market.
The capital market?????!!!!!
Yes.
To calculate the discount rate people used, we looked at capital market
returns, because that’s where people’s rational behaviour reveals
their true long-term preferences.
Wow.
And when did you work all this out?
About
at the time of the Great Financial Crisis.
(Pause.)
Well,
let’s get back to Mother for dinner.
Grandpa,
one day can we use the worms to catch fish?
Nonsense!
Worm soup is good for you.**
* Ungated version here.
Saturday, 5 May 2012
Why Nations Fail thoughts, part 5
A&R
argue that economic growth under extractive institutions is unlikely
to be permanent. This is also what North, Wallis and Weingast think,
and it leads all these authors to be skeptical of China’s present
growth spurt. A&R use the analogy of the Soviet Union, which also
grew fast up until the 1970s before crashing. There may well be a
slowdown, or even a political crisis, in China, but I don’t believe in
the USSR analogy, for the following not-very-scientific reason.
Visitors to Soviet bloc countries in the 1960s found them drab and
depressing places: think shortages, rationing and queues, bad
service, no consumer choice, crappy cars, unhelpful and corrupt
officials.... Visitors to China in 2011 come back with very different
impressions – not uniformly positive, but far from stagnation –
fast trains, massive growth, a booming middle class. Even the
problems, like the arrogance of the newly wealthy, arise from rapid
change.
My instincts are that the statistics are not the whole story;
and that if politics fights economics in China, economics will win
and the new bourgeoisie will replace the Communists with a more
pliant executive committee, or even perhaps a system of teams which
compete for office. In short, economic growth can throw up new
assertive classes and generate its own political pressure.
There are
certainly places which do fit the idea of unsustainable growth
(Pakistan, Venezuela) and here growth tends to be based on commodity
prices or foreign aid rather than innovation. (By
the way, innovation does not have to mean “being the next Apple”.
There is also what Dani Rodrik calls “within-the-frontier
innovation”, ie within the technological frontier, ie being the
first firm in your province to sell bottled lemonade or littlepackets of shampoo.) China just looks different to these
cases.
[That's enough of my incoherent thoughts on this very interesting book. Go and read it!]
Friday, 4 May 2012
Depressing graph of the day
Patent applications of UK residents, 2002-2011:
(Of course there are alternative interpretations. Maybe UK firms are patenting in the US more. Or maybe the UK was just very active around the dot-com period.)
Data from World Bank
Thursday, 3 May 2012
Why Nations Fail thoughts, part 4
[Don't worry, this series ends soon!]
What creates good political institutions? A&R answer: “critical
junctures” in which “small differences become important”. Game
theorists would call this transitions between different equilibria.
In a sense this is not a very useful answer, because “small
differences” is likely to mean “differences too small to detect a
priori”. But it might be a true answer.
However there are some unconsidered candidates. For example, Gibbon
thought that the Roman empire’s break-up was important because it
created a set of competing states in Europe. In turn, competition
between states limited their ability to extract rents and gave them
incentives to innovate. (Historically, a lot of innovation has been
driven by war.) This argument suggests a corrective to A&R’s
praise of centralization as a necessary condition for the development
of inclusive institutions.
Monday, 30 April 2012
Why Nations Fail thoughts, part 3
A&R's story has two dimensions: economic and political institutions. The
economic institutions story is basically Adam Smith’s: “peace,
easy taxes and a tolerable administration of justice” lead to economic growth. For most of the past two
centuries, with some unfortunate exceptions, this has been the
conventional wisdom. The question is how you get good economic
institutions. Here they argue that good political institutions, which
allow people to control their rulers, are important. This is the nub.
A&R
don’t list any particular institutions as always inclusive. Is
democracy inclusive? (This blog post of theirs offers some relevant thoughts.) It certainly allows people to control their
rulers and a change to democracy is likely to generate large one-off
gains as policies are altered to benefit the people, not the elite.
However, the potential for extraction (transfer of money from the
many to the few) persists, for two reasons.
First,
many political systems have very limited competition. For example,
first past the post systems are basically duopolies, because once two
parties are ahead in the polls, it makes no sense to vote for a third
party. On subjects where competing parties share interests they will
soon agree not to offer the voters a choice.
Second,
voters are rationally ignorant of policy, and therefore easily swayed
by intellectual fads and media manipulation. (I think A&R's blog post claim, "[t]he available evidence doesn’t indicate that the uneducated masses are ignorant and irrational" is quite wrong, if by "uneducated masses" you mean voters, and by "ignorant and irrational" you mean ignorant and rational. There is a ton of evidence for rational ignorance.) This allows for a lot of
extraction behind their backs.
Another
dimension is long-run prudence. A monarch who will tax his people
ruthlessly may also take care of their long-term well-being, because
he will benefit from it. A democratic ruler may provide short-run
benefits to people for fear of losing office. But because he may lose
office, and expects only to be in power half the time or less in
future, he may also have few incentives to do the right thing in the
long run. This means that democracies may under-insure themselves
against rare risks, and may accumulate long-term weaknesses and
vulnerabilities.
Why Nations Fail thoughts, part 2
Here
is an alternative explanation of the fall of the Roman empire:
“No doubt the
imperial State created by the Julii and the Claudii
was an admirable
machine, incomparably superior as a mere structure to the old
republican State of the patrician families. But, by a curious
coincidence, hardly had it reached full development when the social
body began to decay.
Already in the times of the Antonines (IInd Century), the State
overbears society with its anti-vital supremacy. Society begins to
be enslaved, to be unable to live except in the service of the
State. The whole of life is bureaucratised. What results? The bureaucratisation of life brings about its absolute decay in all
orders. Wealth diminishes, births are few.... After the time of the
Severi, the army has to be recruited from foreigners. Is the paradoxical, tragic process of Statism now realised? Society,
that it may live better, creates the State as an instrument. Then
the State gets the upper hand and society has to begin to live for
the
State. But for all that the State is still composed of the
members of that society. But soon these do not suffice to support it, and it
has to call in foreigners: first Dalmatians, then Germans. These
foreigners take possession of the State, and the rest of society,
the former populace, has to live as their slaves- slaves of people
with whom they have nothing in common. This is what State
intervention
leads to: the people are converted into fuel to feed
the mere
machine which is the State. The skeleton eats up the flesh
around
it. The scaffolding becomes the owner and tenant of the
house.
”
This story is superficially close to A&R’s. But the author
blames the Roman state itself, not the way that state was used, for
the decay of the Empire. An important point is that the centralized
state which is the focus of A&R’s story is not actually a
historical constant. For much of history, the state has simply lacked
the capacity to impose its will directly, and has instead ruled
through intermediaries, such as aristocracies. A&R tend to treat
these forms under the rubric of “inadequate centralization”. That
is not revealing: the feudal system is really not like modern
Somalia.
Just before this bit, our author explains how states can decay:
“But the mass-man does in fact believe that he is the State, and
he
will tend more and more to set its machinery working on
whatsoever
pretext, to crush beneath it any creative minority which
disturbs
it- disturbs it in any order of things: in politics, in
ideas, in
industry.
The result of this tendency will be fatal. Spontaneous social action
will be broken up over and over again by State intervention; no new
seed will be able to fructify. Society will have to live for the
State, man for the governmental machine.
... Such was the lamentable
fate of ancient civilisation.
”
Again this is close to A&R: extractive political institutions
foreclose innovation. But here the problem is the existence of the
state machinery itself, not its control by a greedy minority at the
top.
The author of the above is Ortega y Gasset and the book is The Revolt of theMasses, mentioned in a recent post on the Why Nations Fail blog.
My curiosity was piqued and I got hold of a copy. It’s an excellent
book – highly tendentious, sometimes very prescient, sometimes way
wrong. It provides a nice complement to the A&R book. (Off-topic: don't only read new books! Otherwise you will be historically provincial. Old books are mind-expanding.)
Why Nations Fail, random thoughts, part 1
This is a brilliant book. Daron Acemoglu & James Robinson (henceforward A&R) set out to answer the question “why are some nations poor and others not?” As social science questions go, that is the Big One. And their answer is appealing and plausible: poverty is the fault of elites who set up economic and political institutions to extract money from the rest of us. The next few posts contain some of my not very well-organized thoughts.
A&R make their arguments by historical narrative, although underlying these, there are often academic papers that use the toolkit of modern econometrics. This is a great approach – a credible historical narrative is much more convincing than a bunch of cross-country regressions. And, looking far back into history is surely the correct thing to do. For to answer the question above, you must think both about contemporary variation (why are some nations poor now and others rich now) and about historical variation – why were all nations poor for most of recorded history, before the take-off into growth of Britain, then Europe, then the world in the past 3 centuries.
These guys are not professional historians by training. This creates a bit of a trust problem. When I read their (very interesting) stories about Ethiopia, the French Revolution, Indonesia, etc. I wonder to myself how many specialist historians of the time and place would agree. Their narratives are plausible, but I can often imagine alternative stories.
One
episode where I do know a little is the decline of the Roman empire.
Here A&R’s story seems pretty unusual. They blame the end of
the Roman republic for the decline of the empire, which collapsed four
centuries later in the West and fourteen centuries later in the East.
In fact much of the empire’s expansion happened under the emperors. They have no persuasive causal link between political
institutions and the overtaxation which may have caused the decline
of the Roman countryside in the third century. (Here’s a modern
book which gives lots of detail, without losing track of the big
picture.)
Sunday, 15 April 2012
A poem from long ago
Here's a poem by Enoch Powell from between the wars:
In far Australia to sleep
You snuggle down; I here
Fancy that in your arms you keep
The world’s wide sphere –
This whole great multi-coloured All,
No larger than a playing-ball.
But if I move my lips to speak
Or try to touch your hand,
The coloured tissues with a shriek
To monstrous form expand,
And I apart from you am hurled
Across the endless, dreary world.
In far Australia to sleep
You snuggle down; I here
Fancy that in your arms you keep
The world’s wide sphere –
This whole great multi-coloured All,
No larger than a playing-ball.
But if I move my lips to speak
Or try to touch your hand,
The coloured tissues with a shriek
To monstrous form expand,
And I apart from you am hurled
Across the endless, dreary world.
(I haven't been able to find the copyright holder -- Falcon Press, which originally published this, doesn't seem to exist. Get in touch if you are the copyright holder and wish to object.)
Bernanke speech
Ben Bernanke's thoughts about the subprime crisis.
"... Contemporaneous data indicated that the total quantity of subprime mortgages outstanding in 2007 was well less than $1 trillion; some more-recent accounts place the figure somewhat higher. In absolute terms, of course, the potential for losses on these loans was large--on the order of hundreds of billions of dollars. However, judged in relation to the size of global financial markets, aggregate exposures to subprime mortgages were quite modest. By way of comparison, it is not especially uncommon for one day's paper losses in global stock markets to exceed the losses on subprime mortgages suffered during the entire crisis, without obvious ill effect on market functioning or on the economy...."
"... Contemporaneous data indicated that the total quantity of subprime mortgages outstanding in 2007 was well less than $1 trillion; some more-recent accounts place the figure somewhat higher. In absolute terms, of course, the potential for losses on these loans was large--on the order of hundreds of billions of dollars. However, judged in relation to the size of global financial markets, aggregate exposures to subprime mortgages were quite modest. By way of comparison, it is not especially uncommon for one day's paper losses in global stock markets to exceed the losses on subprime mortgages suffered during the entire crisis, without obvious ill effect on market functioning or on the economy...."
Thursday, 5 April 2012
I don't really like 38 degrees, but...
They kind of annoy me -- all those chummy emails from "Marie, Becky, Hannah, David, James, Cian..." seem more like astroturf than a real decentralized group. Plus, I think they are a bunch of knee-jerk Lefties. Nevertheless, they are where the petition is, so I can't really complain when they push an issue I care about.
Therefore, I urge you all to go and sign up to:
https://secure.38degrees.org.uk/stop-the-snooping-plan
Therefore, I urge you all to go and sign up to:
https://secure.38degrees.org.uk/stop-the-snooping-plan
Monday, 2 April 2012
Immigration politics with cape and mask
http://www.arabtimesonline.com/NewsDetails/tabid/96/smid/414/ArticleID/181499/reftab/73/t/Lucha-libre-pushing-immigrant-storyline/Default.aspx
"Then he points to the message painted on the backside of his red trunks: “SB1070” - a reference to Arizona's controversial immigration law. The crowd, some wearing masks of their favorite Mexican wrestlers, shrieks even louder...."
"Then he points to the message painted on the backside of his red trunks: “SB1070” - a reference to Arizona's controversial immigration law. The crowd, some wearing masks of their favorite Mexican wrestlers, shrieks even louder...."
Sunday, 18 March 2012
Monday, 6 February 2012
Thursday, 26 January 2012
Great essay on Republicanism, 2011.
Fave quote: "Some call this the closing of the conservative mind. Alas, the conservative mind has proved itself only too open, these past years, to all manner of intellectual pollen. "
Fave quote: "Some call this the closing of the conservative mind. Alas, the conservative mind has proved itself only too open, these past years, to all manner of intellectual pollen. "
Tuesday, 10 January 2012
Went to see We Need To Talk About Kevin last night
1. Tilda Swinton is ridiculously good.
2. Lynne Ramsay: still the master.
3. ...And people say there is a dearth of great right-wing art.
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