Chris Dillow's Blog, page 117

False democracy

At the gym yesterday morning, I caught site of a TV show discussing "is fracking the future?" Who might usefully discuss this question: geologists? energy economists? Nope. There was the ubiquitous vested interest; Vivienne Westwood, a frock designer; and James Delingpole, whose field of expertise has yet to be discerned.

What's going on here is yet another example of the Robbie Savageization of the media. What matters is not knowledge, intellect or wisdom but the narcisstic assertion of mere opinion. And "good" TV (or radio) consistents not in enlightenment but in the loud and heated exchange of that opinion. We see this in Question Time, radio phone-ins and the speak your branes sections in newspaper websites.

There's a paradox here. This might seem a democratic development; everyone's opinion is equal, regardless of their knowledge. And yet at the same time as the media has become more "democratized" in this sense, the power of elites has strengthened.  

One reason for this, I suspect, is that the downgrading of expert opinion can serve a reactionary function. Since at least the time of Galileo, scientific knowledge has tended to undermine those in power. Historically, this has been true of economics too. David Ricardo was a radical MP; Alfred Marshall, one of the founders of neoclassical economics, had socialist sympathies; the "dismal science" got its name by opposing slavery; and the efficient market hypothesis tells us that millionaire fund managers are mostly thieves and parasites.

However, a world in which experts are ignored, because "it's a matter of opinion, innit" is one which helps silence these challenges. The sidelining of genuine expert knowledge on fiscal policy and immigration has contributed to falling real wages and racism.

You might think this isn't wholly unreasonable, because experts - not just in economics (pdf) are often wrong. But there might be a negative correlation between being right and having influence. As Alan Blinder famously said, "Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least."

There is, though, something else going on. Giving voice to mere opinion does not mean redistributing power. Most workplaces - including in the public sector - are fiercely top-down and anti-democratic even though employees might be local experts with genuinely useful knowledge.

What have then, is not real democracy but the mere appearance of it, in which the opinion of the mob serves to disguise the fact that power is held by a small elite.

Emergence

The Social Mobility and Child Poverty Commission this week reminded us of an old fact - that privately educated people are disproportionately represented among top jobs. Why is this?

It's not solely because prviate schools give people a better chance of going on to get good degrees. This paper shows that, even controlling for university, the privately educated have a slight advantage in their chances of getting top jobs. And this one shows that, controlling for degree, there's an earnings premium for the privately-schooled. This is consistent with anecdotal evidence. Sajid Javid's experience of getting job offers from foreign but not British banks, I suspect, chimes with the experience of many of us from the wrong side of the tracks.

Equally, though, I'm not sure it is solely due to outright overt class discrimination. Call me naive, but I doubt that Alan Rusbridger - to take one example of someone who employs lots of folk from expensive schools - wants to grind the faces of the poor or faints at the thought of proximityto ghastly oiks.

Instead, I suspect that what's going on is an unintentional form of discrimination. The privately educated give off more competence cues; they are more likely to fit in; and because they seem familiar, they are less of a risk to prospective employers.

What we have here, then, is an example of emergence.Discrimination against oiks can occur as the unintended outcome of reasonable behaviour. Social phenomena are not simply individual behaviour writ large. As Alan Kirman said in his important book, Complexity Economics, "Aggregate behaviour does not always have a counterpart in the microeconomic data.  

Although complexity and emergence seem like new ideas they are in fact at least as old as modern economics. When Adam Smith wrote that "it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest" he was expressing the idea of emergence; benign social outcomes can result from nasty motives.

Now, sometimes, emergence is a good thing - as in Smith's invisible hand or in this example of how stupid traders can generate rational markets. But there are other cases where it's not so benign, for example:

 - The idea of rational bubbles shows that intelligent traders can generate irrational markets.

 - Patriarchy is, in part, an emergent process - it arises not just because men are consciously sexist, but because of socio-psychological mechanisms.

 - Markets and institutions can select for idiots and against the competent, resulting in an anti-meritocracy even though few people really intend this to happen.

 - As Marx pointed out, markets might seem like a realm of freedom and equality, but in fact they are places in which the worker is "bringing his own hide to market and has nothing to expect but — a hiding."

Only a silly fanatic would regard emergence as always benign or always nasty. How it works varies from context to context according to quite subtle conditions. My point is simply that combatting inequality might take more than simply changing attitudes.

Herein, though, lies a link with that other big story of the week, the Rotherham child sex exploitation affair. One response to this has been to demand Shaun Wright's resignation as PCC. However, social problems occur not (just) because we have weak or corrupt individuals in positions of power but because of complex social forces. The notion that these can be tamed by the right people represents an unthinking rejection of the notion of emergence.

UK vs US living standards

Fraser Nelson's claim that the UK is poorer than any US state other than Mississippi has met with some scepticism on Twitter. However, I reckon he might be right.

Put it this way. Last year, UK GDP was £1612bn in current prices. With a population of 64.1m this gives us GDP per head of £25161. With the exchange rate averaging $1.57 last year, we have GDP per head in dollars of $39503. US GDP (pdf) was $16768.1bn spread over 316.3m, giving GDP per head of $53013. These are close to Fraser's numbers.

One reason for this difference is simply that Americans work more; the OECD estimates that the British work an average of 1669 hours per year whilst  Americans put in 1788.

If we look only at wages, though, things look very similar in the UK and US. The ONS estimates that the median full-time male wage was £556 per week in 2012, whereas the BLS estimates that the median full-time male worker in the US got $860. At an exchange rate of $1.57, these are very close. This is quite consistent with US GDP being higher, though, to the extent that non-wage incomes such as profits and the self-employed are greater, and to the extent that US earnings are higher because of higher wages at the very top.

But what about the cost of living? In many respects, this is lower in the US, which means that whilst the typical wage-earner brings in roughly the same in the UK as in the US, his money goes further in the States.

Housing costs for sure are lower. The median house in the US costs $222,900 or £134277 at today's exchange rate, whereas Lloyds Banking estimates the average UK house to cost £186322 (pdf) (yes, there's a difference between average and median, but I doubt this explains all the gap).To be more precise, you could get a four-bed house with five acres in Little Rock, Arkansas for the price of a one-bed flat in Hackney.

Many consumer prices are lower in the US than UK. If we compare table P4 of the BLS's CPI release (pdf) to table 62 of the ONS's CPI report, we find:

 - 12 eggs cost £3.09 in the UK but $1.95 (£1.17) in the US.

 - A gallon of milk costs £3.68 in the UK but £2.34 in the US

 - 1kg of beef mince costs £7.96 in the UK but £5.15 in the US.

 - 100g of coffee costs £2.78 in the UK but 67p in the US.

A comparison of prices at Amazon.com and Amazon.co.uk reveals a similar pattern. For example, a 160GB iPod costs $259 in the US (£156) but £175 in the UK. And a quick glance suggests car prices are also lower in the US. The US isn't the home of the free, but it is the home of the cheap.

Not all comparisons are so favourable for the US - there's the not inconsiderable matter of health insurance, for one thing, and Harvard's a darned sight more expensive than Oxford.

And of course, the cost of living is only part of what makes a place desirable to live in: some of us think it a good thing that the UK's police forces don't model themselves on the Islamic State, for example.

Nevethless, the point is that Fraser's claim isn't outrageous, as it is consistent with other data.

Constraints, real & imagined

Simon's post reminds me of Sidney Webb's reaction to Britain leaving the gold standard in 1931: "nobody told us we could do that."

The 1929-31 Labour government tore itself apart because it thought the gold standard was a binding constraint which demanded fiscal austerity. But in fact, the constraint was imaginary. Abandoning the gold standard had no great ill-effects.

European social democrats are in the same position Webb was. They are seeing binding constraints when in fact there are only illusory ones. In the euro area, a relaxation of the stability and growth pact to permit fiscal expansion would probably have the same benign consequences as Britain's leaving the gold standard. And in the UK, Ed Miliband's claim that "we won’t have the money" after the next election is illiterate drivel; he's imagining a constraint where none really exists.

This question broadens way beyond fiscal policy. Hopi says that "the constraints on the next government will be so tight". But which of these are genuine, and which imaginary?

To some extent, it's a matter of degree. For example, a living wage of £50 an hour is obviously infeasible, but one of (say) £8 isn't. And a top tax rate of 100% is infeasible, but one of (say) 50% might not be. (Note: feasible isn't the same as desirable.)

In another respect, the issue here is the old one of the role of MPs. If you think politicians should enact voter preferences, then you'll regard their demands for (say) immigration controls as a binding constraint. But if you take the Burkean view that politicians should serve interests rather than preferences, you won't.

It's a cliche on the left that we need a debate about something. But here the cliche is true. We should ask which of the many alleged constraints on a future social democratic government are real and which imaginary. Richard Murphy complains that politicians "choose to shackle themselves to the interests of the corporation and so voluntarily curtail their capacity to act." To what extent is he right?

My personal suspicion is that Labour is not constrained much by the fiscal position, nor by the power of the media, but it is tightly constrained in its ability to raise long-term growth. I suspect that some shadow cabinet members believe the exact opposite.

Herein, though, lies a problem and two paradoxes.

The problem - and first paradox - is that a debate about constraints is unlikely because of a constraint imposed by the Overton window and the traditions of politcal discourse. In recent years, politicians have tried - often successfully - to close off debate. Be it Thatcher's claim that "there is no alternative" or Blair's appeals to modernity, some of the most successful political rhetoric of our time has been the pretence that constraints rule out all policy options bar one. To debate whether constraints are real or imaginary requires a break with this managerialist mindset.

Which brings me to the second paradox. We Marxists are somtimes accused of believing in historical determinism. And yet on this point the opposite is the case. It is a Marxist who is inviting you to believe that politicians might have room to manoeuvre whilst it is rightist social democrats who seem to be the determinists who deny that freedom. 

Public vs private racism

Which is better - to be a racist in words but not actions, or in actions but not words?* This is one question posed by the Malky Mackay affair.

To see my point, let's juxtapose him (and football generally) with the film and TV business. Many black actors have felt the need to leave the UK to pursue their careers for want of good jobs here. But this is not the case for black footballers. I suspect that 20-something black men get a better deal relative to their white peers in football than they do in other walks of life** (though this might be a low bar), and - so far - there is no suggestion that Mackay's team selections or other actions were racist.

Which brings me to the paradox. Whereas Mackay is being kept out of work because of his racist words even though no black person is claiming that he victimized them, no individual in the arts is being accused of racism even though many black actors feel that they are victims of racism.

There are two things going on here.

One is that intentions are mediated by institutions. In football there is cut-throat competition and as Gary Becker famously said this compels managers to act non-racist regardless of their private beliefs***. Exhibit A here is Ron Atkinson. By contrast, the British film and TV industry is less competitive, and this provides room for nepotism, tradition or subtle forms of racism to exclude blacks. Racism or non-racism can be an emergent process; both can exist, independently of the motives of individuals. As Bernard Mandeville pointed out in 1732 in a different context, private vices can coexist with public benefits and vice versa. 

The other is that a nice guy image can be used to deflect attention away from misdeeds. As Machiavelli said,"it is unnecessary for a prince to have all the good qualities I have enumerated, but it is very necessary to appear to have them." Just as Jimmy Savile used his charity work as a front for serial sex abuse, and Bernie Madoff presented a trustworthy image to disguise his fraud, so images of liberalism and non-racism can hide racist actions; endless anti-racism statements and initiatives, for example, have not eliminated racism in the police. And not just racism, of course. We all know men who pretend to be feminists and yet treat women abominably.

Herein lies my concern about the Mackay affair. Punishing men for sexist and racist words, in the absence of any actions, might amount to hurting not the most racist and sexist men but rather those with the least self-control and who get on the wrong side of vindictive billionaires. And it might wrongly exonerate those who succeed in hiding their racism and sexism behind a front of hypocrisy.

* It should go without saying that it's better still to be neither, but this option isn't always available.

** There are no black managers in the league, but that's a story about club owners not about Mackay. And of course we should not suggest that billionaires are guilty of wrong-doing.  

*** I'm not saying here that competition completely precludes injustice; there might still be space for some racist and homophobic actions.

Olivier Giroud & social change

Watching The Arsenal last night reminded me of a saying by Niels Bohr and Jon Elster - that the opposite of a great truth is sometimes another great truth.

What I mean is that some Gooners have long been critical of Olivier Giroud and have called for the signing of a big-name striker. But what sort of things could a top-class striker do? Pull back a two-goal deficit against a top team away from home, that's what...which is exactly what Giroud did. Had a new £50m signing turned the game as he did, everyone would be saying today what a fantastic signing he was.

To some degree, Giroud is a victim of the phenomenon described in those old sayings, familiarity breeds contempt and the grass is greener. Sometimes, we undervalue what is known and familiar to us, and overvalue what we don't have. As Joni Mitchell said, you don't what you've got till it's gone.

Gooners are of course not unusual in this regard. Last Christmas, when West Ham were in the relegation zone, some Irons wanted Sam Allardyce sacked. But then it was pointed out that the sort of manager West Ham needed was just the sort that Mr Allardyce was. He stayed, and the Hammers have since improved.

The grass is greener/familiarity breeds contempt effects help explain why fans often want their manager sacked (though of course sometimes the calls are rational), and why we get so excited on transfer deadline day - because the players we are about to sign are more thrilling than the ones we actually have. They also explain why men cheat on their wives, somtimes with unhappy effects (as Olivier himself knows).

So far, so obvious. But here's where Bohr and Elster's saying comes in. The opposite phenomenon also exists. Sometimes, we overvalue things simply by virtue of owning them; the endowment effect has been established in laboratory experiments (pdf). This helps explain a range of behaviour such as why housing transactions tend to slump when prices fall (because homeowners overvalue their houses and so set too high a reservation price) or why people tolerate inequality - it's (partly) because they over-rate the merits of existing inequality.

What we have here, then, is something that is quite common in the social sciences. We have two opposing mechanisms, which poses the question: in what circumstances will one mechanism be more powerful than its opposite?

Often, this question can only be answered in hindsight: as Elster stressed, prediction and explanation are two different things.  

There is, though, (at least) one circumstance relevant to our case - aspirations. Demands for social change tend to be greatest not so much when people are abjectly poor and oppressed, but rather when their aspirations are higher than their objective conditions. It is then that the grass is greener effect outweighs the endowment effect. This helps explain discontent with Giroud. It those Gooners who expect Arsenal to win the league who are most unhappy with him, whilst those with lower expectations see his merits.

I've said it before, and I'll keep saying it: football can illuminate important issues in the social sciences.

Politicians' biases

All professions - yes, even economists - tend to have a biased perspective on the world; the French call this deformation professionnelle. Reading Theresa May's proposals to combat Muslim "radicalization" reminded me that politicians are prone to such biases too.

I say this because they are selected to have certain dispositions. It costs time and money to enter politics, and success does not necessarily go to the most meritorious. This means that politicians, even more than others, will tend to be over-optimistic. Also, you tend to enter politics if you think policy can make a difference. This tends (there are exceptions) to select against those with an Oakeshottian conservative disposition, who believe that bounded rationality plus the innate imperfections of human nature mean that some social evils cannot be eradicated.

There's a third selection effect. Politicians are selected for their emphasis upon rhetoric and persuasion. Many would-be pols were active in the Oxford Union. But if you emphasize some things, you naturally de-emphasize others. And one of these other things might be the dull grunt work of day-to-day policy implementation; the soaring rhetoric of Winston Churchill excites more admiration among politicians than the quiet administrative ability of Stafford Cripps or Norman Fowler.

This is where Ms May comes in. These raise some obvious questions: do we really want to keep potential terrorists in the UK where they can cause trouble here rather than let them kill themselves in Syria? If the security services devote resources to people plotting terrorism overseas mightn't they be distracted from those plotting terrorism here? Might a clampdown on "radicalism" reinforce some Muslims' perceptions that the west is at war with Islam and so encourage some hotheads into terrorism? Wouldn't such actions suggest to some that the "western value" of free speech is mere hypocrisy, thus further antagonizing some Muslims? (Nelson Jones has likened May's proposals to the Six Acts).

Now, like pretty much everyone else who bloviates upon these issues, I don't know how strong these objections are. But I do know that revenge effects are common in the social sciences. And I fear that politicians might be underweighting them because of their deformation professionnelle.

I stress that I'm not making a partisan point here. One thing for which this goverment deserves more credit than it gets is a lack of the legislative hyper-activism of the New Labour years. And Npower's claim that it hasn't cut gas prices for fear of a price freeze under a Labour government is - if true - an example of how Labour has under-estimated the power of revenge effects.

However, it's not just politicians who should be blamed here. So too should be voters (and the media). The tendency to regard politics in the spirit of partisans cheering for one side or another distracts us from some fundamental questions, such as: what can politicions actually achieve?

Women MPs & the nature of politics

Whilst I was away, I got a reminder of how I am out of step with modern politics.

Austin Mitchell complained about the feminization of parliament. This, he says, will lead to politics becoming "more preoccupied with the local rather than the international...and small problems rather than big ideas and issues." The reaction to this, gathered by Ben Cobley, has been hostile.

There is some important and interesting evidence on this point. It's this paper by Dinuk Jayasuriya and Paul Burke. They show that:

Over recent decades, higher representation of females in parliament has led to faster economic growth.

Now, "led to" does not mean "cause." It could be that this correlation exists because of an omitted variable; perhaps gender equality generally promotes growth - for example by encouraging women's education (pdf) - and more female MPs are merely a symptom of this equality.

However, this might not be the whole story. Perhaps preoccupations with local issues help promote economic growth - say, by ensuring better childcare (pdf) - in a way that bloviating about big ideas does not.   

However you interpret their finding, it suggests that, at worst, a feminization of parliament would not have adverse material effects and at best it would benefit everyone (except for a few would-be male MPs).

However, as far as I can tell, nobody has cited the Burke and Jayasuriya paper. In one sense, I find this depressing. This omission corroborates my fear that politics has become a post-serious wrestling match in which scientific evidence is ignored in favour of narcissistic cheering and booing.

In another sense, though, I wonder whether it might be me that's wrong. In hoping for a dispassionate scientific debate, mightn't I be guilty of the mistake of which I accused Richard Dawkins - namely, assuming that emotion-free politics is both possible and desireable?

I'm not sure which it is. Either way, I'm out of touch.

Optimum deaths

What is the optimum number of migrant deaths? The answer is not zero.

Think of this from the point of view of UK voters. They want tougher immigration controls. But these impose the risk of death upon migrants. If people can't enter the UK legally and safely, some will try to do so illegally - and this will sometimes entail taking risks by travelling in containers or unseaworthy boats.

I suppose it might be technically possible to have fully secure borders which do not impose a risk of death upon migrants - say, if all lorries and boats entering the UK are searched before they set off - but doing this would be prohibitively expensive. Feasible border controls invite some migrants to risk death by using dangerous routes.  

It might well be rational for some migrants to incur this risk. They must weigh the costs of trying to enter the UK - which include payments to traffickers as well as the risk of dying in transit - against the benefits. If the latter are high enough - as measured by expected wage differentials or the risk of death or imprisonment if they stay in their home country - then it might be rational to incur a risk of death in transit.

Just as the criminalization of drugs generates risky behaviour among drug users who take drugs of unknown purity and composition, so the criminalization of immigration generates risky behaviour among migrants.

But let's be clear. Such risks arise inevitably from preferences and technology: the preferences of voters to restrict immigration and of immigrants to come here; and the imperfect technology of border controls which leaves open some dangerous routes into the UK.

There's an analogy here with the economics of crime. Just as there is a (positive) optimal amount of crime because the costs of completely eradicating it are prohibitively high, so there is also an optimal number of migrant deaths.

From this perspective, it makes no more sense to mourn the death of a migrant than it does to mourn the arrival of a restaurant bill. Both are the inevitable result of our choices. Such mourning would be sanctimonious hypocrisy - and voters and politicians would never be guity of this, would they?

Heritability & inequality

I have pointed out before that rightists are prone to a rhetorical trick which I've called "small truths, big errors" - a tendency to use a small factual claim to obfuscate a bigger issue. Tim Worstall gives us an example of this today. In replying to Will Hutton's call for efforts to get more poor kids into top universities, he points out that intelligence is heritable, and so we'd expect some inequality in unversity admissions.

I'll concede this. But this misses two big points.

First, heritability of pure academic ability probably doesn't explain all of the inequality of which Will complains. Rich parents can increase their chances of getting their kids into top universities not just by giving them the right genes, but by buying houses in the best school catchment areas or by providing more cultural capital.

One big fact suggests that such non-genetic bequests matter. It's that greater inequality of income is associated with greater inequality of opportunity. As a World Bank report says (pdf):

The data reveal a positive correlation between inequality of opportunities and income inequality. Countries with a higher degree of income inequality are also characterized by greater inequality of opportunity.

This is consistent with Will's main point, that increasing equality of access to university requires "mobilising against inequality in all its manifestations."

Secondly, even if Tim were wholly correct to imply that heritability of ability explains all the inequality of access to university, it would not follow that such a situation was fair. In fact, from the point of view of luck egalitarianism it is not. This theory says that inequalities are unacceptable insofar as they arise from factors beyond an individual's control. And, obviously, a person's genes are beyond their control.

Of course, luck egalitarians would not argue that people should be accepted into universities regardless of ability. But they would argue that they shouldn't suffer (much) because of their inherited lack of ability. Herein lies one argument for a redistributive tax and benefit system; it helps to equals out the effects of the genetic lottery.

Indeed, luck egalitarianism predicts that redistribution should have increased since the 1970s, because since then the penalty for inability has increased. A mix of globalization, deindustrialization and technical change has reduced demand for unskilled labour, with the result that their relative pay and chances of getting a job have worsened. But this has not happened.

My point here is not merely to criticize Tim. It's broader than that. What I'm saying is that you cannot point to the heritability of ability (howsoever defined) to defend inequality. To do that, you must also argue against luck egalitarianism.