Chris Dillow's Blog, page 42

Labour: the party of business

���Fuck business���. These words of Boris Johnson should be as great a propaganda coup for Labour as Liam Byrne���s equally stupid ���I���m afraid there���s no money��� note was for the Tories.

This is because it is the final nail in the coffin of the idea that the Tories are the party of business. Which poses the question: how might Labour exploit this?

Of course, politicians should not be in hock to cronyist big monopolies. But the overwhelming majority of businesspeople are not grasping plutocrats but rather people who are struggling to get by, much like ordinary workers. Of the 5.7 million businesses (pdf) in the UK, 4.3 million have no employees and only 41,000 have more than 50.

And the interests of these small businesses are often opposed to those of bigger ones. Smaller firms face high rents (and often upward-only rent reviews) from landlords; banks that deny them finance and sometimes actively try to destroy them; rip-off and unreliable utility providers; the huge buying power of oligopsonistic supermarkets; competition from big firms that can hold costs down by dodging tax; and massive losses if one of their big clients (such as Carillion) goes belly-up. If you want to hear anti-capitalist attitudes, forget Momentum and just ask a small business owner what he thinks of bankers. 

It would be very easy for Labour to position itself as the party of business by championing smaller firms��� interests. For example, more infrastructure spending, not least on broadband. The IoD���s call for more and better infrastructure spending could pretty much be cut and pasted into a Labour manifesto. Also, a national investment bank (pdf) would provide the finance for small firms that banks sometimes deny them, and have the extra virtue of relaxing the grasp of banks over their clients simply by providing competition. And a switch from business rates to a genuine land value tax might help shift the balance of power between firms and landlords; if empty properties were taxed as much as occupied ones, landlords would be incentivized to cut rents.

You might object here that John McDonnell���s talk of the need for ���new forms of ownership��� and control are anti-business. I���m not so sure. For one thing, it���s possible that some changes to what Diane Coyle calls our ���ridiculous IP laws��� would help start-ups at the expense of monopolies. And for another, the main problem with ownership is not that of smaller firms but of bigger ones. Kathleen Kahle and Rene Stulz have shown that the number of stock market-listed firms has shrunk in recent year and that those that are listed invest less than they used to. This might be because dispersed outside shareholders do a lousy job of monitoring management; it���s insufficiently appreciated that the financial crisis was due at least in part to a failure of ownership. Looking for alternatives to stock market-type ownership is therefore perhaps compatible with ��� and even conducive to ��� the thriving of many other types of business.

You might also object that Labour���s plans for higher taxes are anti-business. Only up to a point. For many small businesspeople, the chance to pay more tax would be a fine one: Labour���s last manifesto promised higher taxes on incomes over ��80,000 which is a fortune for many small business owners. Insofar as Labour offers more sensible ideas on fiscal policy and Brexit, it will increase profits. Sure, the state will take a bigger chunk of these, but net some businesses might well benefit.

In principle, therefore, even (especially) a quite radical Labour party could ��� with only the smallest of effort ��� present itself as a party of business. I suspect that what is stopping it doing so ��� and what���s stopping such a presentation from being very plausible ��� is tribalism and history rather than current actual policies.

The Infinite Desire For Growth: a review

What���s so good about economic growth? This has been a tricky question ever since Richard Easterlin pointed out (arguably (pdf)) that there is no connection between GDP growth and a nation���s overall subjective well-being. In The Infinite Desire for Growth, Daniel Cohen proposes an answer to this question. It���s that economic growth helps to legitimate societies:

Growth is more important than wealth for the functioning of our societies; growth gives everyone the hope, short-lived but always revived, of rising above one���s psychological and social condition. It is the promise that soothes worries, not its fulfilment.

This echoes Adam Smith:

The progressive state is in reality the cheerful and the hearty state to all the different orders of the society. The stationary is dull; the declining, melancholy.

Cohen places this in a wider context. The Enlightenment, he says, replaced the Christian hope of redemption in the next world with the hope of progress in this one.

This is consistent with ��� and a complement to ��� Ben Friedman���s observation that slower economic growth breeds intolerance and racism: when people lack hope, they get meaner. This is perhaps the single most important fact about western politics today. 

And herein, of course, lies the problem. We are, says Cohen, ���experiencing an industrial revolution without growth.��� Whereas earlier industrial revolutions saw workers leave agriculture to work in capital-intensive factories where they became more productive, today���s revolution is bumping workers out of such jobs and into less productive ones; this is a natural effect of Moravec���s paradox. Sure, tech giants such as Apple and Facebook are very productive. But they are too small a part of the economy. As Cohen says, ���if a worker���s individual productivity does not increase, growth is necessarily weak.���

Whereas growth offers hope for all, its absence has, says Cohen, led to an increase in management by stress; rewards for a few, the sack for others. There���s more stick, less carrot. Again, Cohen places this into a deeper context. Whereas the Enlightenment offered freedom and autonomy for all, these values are denied to people in capitalistic workplaces.

All this poses profound questions. Could decent growth resume? Cohen is pessimistic (though personally I'd have liked him to stress the shortcomings of neoliberal capitalism more than digitization and environmental constraints). If it cannot, he says, we need different types of progress. As John Stuart Mill said, a stationary state of incomes ���implies no stationary state of human improvement. There would be as much scope as ever for all kinds of mental culture, and moral and social progress.���

It���s here that Cohen disappoints me. He offers few suggestions of what such progress might be, and how we might rekindle the legitimating hope societies need. Like Roger Betancourt, I found the end of the book a letdown.

This, however, is only a minor criticism. In a short book, Cohen has packed in countless thought-provoking insights about the links between growth, technical change and society. I suspect that many English readers will share my humility at just how much he has read that I haven���t.

And Cohen is at least posing questions that most of the political class in the west are not even considering. Societies, he says, are ���demonstrating an astonishingly weak capacity to project themselves into the future.��� In a country whose rulers are debating how to project us into the past, Cohen���s book is a much-needed breath of fresh air.

Measuring competition

How do you measure competition? I ask because on yesterday's PM programme Lynsey Hooper claimed (15 min in) that Amazon's broadcasting of some Premier League games next season means that "competition is now fierce."

I'm not sure this is right. Amazon will broadcast all ten Boxing Day games, This means it is a monopoly provider of live coverage then: if you want to watch a live match  on that day, you've no choice but to pay Amazon. Similarly, today Sky and BT are monopoly providers of live coverage of particular games. If you get cheesed off with the inane chunterings of Robbie Savage or Michael Owen you can't switch to watching the game on Sky. Nor, in many cases, are games substitutes for each other: West Ham vs Bournemouth is no substutite for the Manc derby, for example.

Yes, broadcasters are competing. But they do so via bidding wars for the right to particular monopolies - much like rail franchises. That's great for Premier League clubs and players who get higher revenues.But it's not obvious that customers get a good deal. It's quite possible that by the time you've paid Amazon, BT and Sky you are paying more to watch football than you would if Sky broadcast all games*.

The point here is one that competition economists have known for some time - that you cannot necessarily measure competition by the number of firms in an industry: the Herfindahl index, for example, can be a bad measure.

One reason for this can be that industries are actually hard to define. If we think of Premier League broadcasting as an industry, there'll be five firms in it from August 2019; three live broadcasters, plus BBC showing highlights and BBC and TalkSport offering live radio commentary. But if we think instead of live TV broadcasting of the Liverpool vs Arsenal game, there's only one provider.

This can matter. It doesn't much matter if there's monopoly in one industry if that industry faces competition from another. if the tinned pilchard industry wre a monopoly we wouldn't worry if it faced competition from sellers of tinned sardines or sild, but we would if it didn't. Similarly, if fans were happy to wait to see only highlights of a game, monopoly provision of live coverage would not be so bad. More seriously, rail monopolies would be more tolerable if buses were a decent substitute for rail, or if it were easy for commuters to respond to bad service by moving nearer to work.

A single provider can be acceptable if the market is contestable - that is, if there are potential entrants or substitutes. Equally, more providers needn't be evidence than customers get a better deal. For example, a market of (say) ten sellers in which switching is difficult can be less competitive than one of (say) five providers where it is easy.

But if you cannot measure competition by the number of firms, how can you?

One alternative, proposed (pdf) by Jan Boone, is profits elasticity. The idea here is that if profits fall sharply in response to a rise in marginal costs then the industry is competitive but if they don't then it isn't. A competitive market is one which punishes inefficiency.

Even this, however, has problems. What if marginal costs don't change much? What if there's uncertainty about whether a firm's cost and price rises are permanent or not, which deters potential entrants from entering the market? Or what if there are threshold effects such that customers will tolerate small price rises but not larger ones?

The point here is simple. Competition is hard to define and measure. For this reason, I fear, the word can be misused in popular discourse, with "competition" being used to justify what is in fact a near-monopoly.

* One could argue that multiple broadcasters have led to an improvement in the quality of its coverage, but most of this, I suspect, came when Sky first entered the market in 1992.

Britain's open borders policy

Whilst cycling the other day, I crossed the Leicestershire-Rutland border. And I was shocked to see���nothing. No border controls, no passport checks, no customs officials. Here in Rutland we have an open borders policy. Any riff-raff can move in. I know: I was that riff-raff.

This is weird. A lot of the adverse effects that are claimed for migration into the UK should also apply to migration into Rutland. If people who move to the UK depress the wages of natives (they don���t, mostly) then surely people moving into Rutland depress Raddlepeople���s pay. Migration into Rutland also increases congestion (getting out of my road takes longer than it used to); puts pressure on local services (it���s harder to see a doctor); and has led to a combination of higher house prices and to new builds on greenfield sites.

What���s more, Rutland is a smaller fraction of the UK���s population than the UK is of the world���s population, so on this count there���s more danger of us being swamped.

Despite all this, however, there is absolutely no demand in Rutland for immigration controls. Nor is there any hostile environment policy: even people from Peterborough are tolerated.

Which poses the question: why the difference between Rutland and the UK?

It���s not, I think, because we are a lightly-populated county that won���t miss one or two fields, or that we have especially good ways of adapting to immigration. What���s true of Rutland is true of most areas. Mancs don���t want to control immigration into Manchester, except perhaps from Liverpool; people in Staffordshire don���t oppose migration from Derby; and so on.

Yes, a few areas have bans on people buying second homes. But that���s a complaint about a lack of immigration. And Cornwall and the Isle of Wight have faintly derogatory terms for outsiders ��� but these are regarded by most other people as expressions of a backward, even inbred, outlook.

Mostly, we have an open borders policy within the UK and almost everybody is happy with this.

Why, then, have migration controls between the UK and other countries when we don���t have them between Rutland and other counties?

You might say it���s because the UK has much higher incomes than much of the rest of the world which means that we���d simply attract too many migrants. This, however, doesn���t explain why the numbers of high-skilled migrants is limited: such people could earn good money in other countries. Nor does it explain why so many support controls on immigrants from other wealthy countries

Instead, of course, there are simple reasons for the difference. One is a fear that high immigration will somehow change the character of the country whereas Raddlepeople aren���t much bothered that folk from Nottingham will change the character of Rutland. The other is that people want governments to be in control; this explains the popularity of Brexit and even perhaps austerity. Nobody, though, wants Rutland council to be in control of very much.

I don���t want to take a view on the merits of these feelings here: they are, I think, feelings more than articulated arguments but that alone doesn���t make them wrong. What is the case, though, is that economics is not the issue. Economicky arguments for migration controls are just distractions and, I suspect, often dishonest ones.

Why the MPC needs experts

There���s no doubt that Jonathan Haskel is an excellent appointment to the MPC. What we should be asking is rather: isn���t he over-qualified?

What I mean is that not much hangs upon interest rate decisions. The Bank���s own work estimates that a quarter-point rise reduces output only by around 0.15%. Granted, it���s possible that the economy might now be more sensitive than this to rate changes now. But even so, the cost of interest rate mistakes are small.

Put it this way. For a monetary policy error to have had the same cost as fiscal austerity or Brexit, interest rates would have had to rise to well over 10%. It doesn���t require somebody of Haskel���s intellect to see that that would be a stupid idea.

I suspect that the ratio of intellectual input to the stakes of the decision is greater for monetary policy than it is for any other decision in public life.

Which poses the question: why does the MPC need someone of Haskel���s expertise?

The question gains force from two considerations. One is that a lot of the job of setting interest rates requires you to interpret noisy high-frequency data and, arguably, to have market feel. Academic economists don���t have a comparative advantage here. The other is opportunity cost. If Haskel is thinking about whether to change rates by a quarter-point or not, he���s not doing other work, where he might well do more good.

There is an answer here. It starts from the fact that the MPC lacks direct democratic legitimacy. Of course, the inflation target is set by governments (and there���s been surprisingly little political debate about it) but the MPC itself is unelected.

And yet it has some power over us. Even the most modest rate rise destroys some jobs; that���s how it reduces inflation. And on the other hand, the lack of a rate rise means millions of savers forego some interest income. What legitimacy does it have to take such decisions? Governments have a licence to wreck the economy because that���s what voters want. The MPC has no such justification.

Which is why it needs experts. The job of MPC members is not merely to make interest rate decisions. It is to give legitimacy to the MPC by having the ability to explain monetary policy thinking to a sceptical audience of other economists, and to appear to the public as wise technocrats. Paul Tucker calls this ���legitimacy through credibility���.

It was for this reason that Ben Broadbent���s remark about the ���menopausal��� economy attracted such attention. Technocrats acquire legitimacy by being grey and sober; ill-judged language detracts from this.

A decent trading-floor economist might well be able to take interest rate decisions as well as Haskel. But he wouldn���t have the authority with outsiders that Haskel has, nor ��� no doubt ��� the ability to construct genuinely interesting economic arguments.

Which brings us to a problem. Even the most genuine expertise, such as Haskel has, is not the only potential source of legitimacy. It���s also the case sometimes that people want decision-makers to be representative of those whose lives they affect ��� hence the complaints that the MPC is too male (and we might add, too white and too posh).

Now, I���m honestly unsure how much force these complaints have. What is clear, though, is that unelected policy-makers need some form of legitimacy; this is true not just of the MPC but of judges, quangos and so on. Expertise is one source of such legitimacy - maybe in most cases the best ��� but it���s not necessarily the only one. Unelected policy-makers should be chosen not just by their ability to take decisions, but by whether they enhance the authority of their office.

Does economics matter?

Does economics matter? I ask because I suspect I would understand political debate better if I realized that it doesn���t.

Everybody tends to over-rate the importance of their profession: it���s part of deformation professionelle. Lawyers over-rate the importance of the law, artists of the arts and so on. Maybe economists do the same. Perhaps we should realize that most people who are interested in politics just aren���t interested in economics.

If we adopt this perspective, a lot falls into place. It helps explain centrists��� hostility to Corbyn. If you���re not interested in capitalist stagnation and responses to it ��� Ian Austin, for example, never mentions the economy in this piece ��� you���ll not see much to admire in Corbynism: all that will stand out are associations with ant-Semites and Stalinists, student leftist politics and a rejection of conventional Westminster methods. For such people, the enthusiasm people like me have for Corbyn and McDonnell���s attempts to build an alternative to neoliberalism look as eccentric as would an actor endorsing Corbyn because of an attractive policy towards theatres.

Rightist politics also become more comprehensible once we recognise that economics doesn���t matter. The strongest case for austerity and immigration controls is that these have nothing to do with economics. Like Brexit, they are instead attempts to assert that governments have control over social affairs. Their supporters just don���t care about their economic consequences because other things matter more: sovereignty and an assurance that the government is on top of things.

Brexiters talking about economics are like dogs walking on their hind legs. One partly admires the gymnastic trickery, but the job is badly done and the animal���s heart isn���t really in it.

Of course, the right and the media do talk about ���the economy.��� But by this they mean something very different from what I understand by it. To them, the economy is not about real people struggling to make a living. It is a reified hyper-reality, a means through which politicians try to establish credibility. This is why ���the economy��� has often been equated with the public finances.  

You might object that the right certainly do care about economics when it comes to opposing Corbyn���s call for higher taxes on the rich. I���m not so sure. Opposition to tax rises is perhaps instead like land-owners shouting at ramblers: ���get orf my land���. They are motivated less by fears of material loss but by the violation of (perceived) property rights.

And here���s the thing. There is some justification for this denial of economics. The link between income growth and subjective (pdf) well-being is weak and even many of the worst off feel they are living comfortably. Granted, this might be a sign of adaptive expectations. But it also tells us that things other than economic growth are important: community, autonomy, physical and mental health and so on. From this perspective, perhaps it���s understandable that politicians should want to offer a sense of security ��� as in various ways austerity, Brexit and immigration controls do ��� rather than higher incomes.

But, but, but. As Benjamin Friedman has shown, economics does matter. Growth makes people more open-minded and tolerant whilst stagnation makes them meaner: it���s no accident that a decade of stagnation has led to a rise of reactionary populism. John Stuart Mill claimed that a stationary state of incomes provides ���as much scope as ever for all kinds of mental culture, and moral and social progress���. Subsequent history, however, suggests he was wrong.

It might be the case that most politically-engaged people don���t care about economics. But nevertheless, economics does matter.

Corbyn: the heir to Blair

It���s not 1997 any more. This shouldn���t need saying, but attacks on Jeremy Corbyn such as this from Ian Austin suggests it does. He accuses Corbyn of wanting to turn Labour into ���something very different��� from its traditional mainstream social democracy.

What this misses is that Labour must reinvent itself, because the economic challenges we face now are very different from those of the 1990s. Take four examples:

1. In the 90s, real interest rates were high: longer-dated index-linked gilt yields were over 3.5% when Labour took power. Such high yields meant that the fiscal arithmetic worked against government borrowing; even modest deficits would have meant an ever-rising debt-GDP ratio. There was therefore a good reason for Labour to be ���fiscally responsible���. Today, however, real yields are negative so the fiscal arithmetic means deficits are compatible with debt sustainability. And with Bank rate close to the zero bound (whereas it was 6% when Blair was first elected), there���s a much stronger case for looser fiscal policy.

2. Labour productivity and investment were growing OK in the 90s. That meant the job of economic policy was largely to keep the show on the road ��� to offer business a stable policy framework within which confidence to invest and innovate would be maintained. Today, of course, things are very different. Productivity has pretty much flatlined for years, and the share of business investment in GDP was a percentage point lower last year than it was in 1997. This suggests a case for governments to take a more active role to raise productivity and investment.

3. New Labour thought that a stable policy framework was sufficient to ensure macroeconomic stability. We know now that this is not the case and that even with stable policy, capitalism can generate severe crises.

4. In the 90s, the inequality that bothered Labour was the 90/10 ratio. It was reasonable to ameliorate this through tax credits, a minimum wage and university expansion. Today, though, even once middle-class people are struggling, especially those too young to have bought a house. Instead, the inequality that matters most is the share of incomes going to the very top. In the 90s, this was just over 10%, but rising, whilst today it is over 14%. It���s plausible that this inequality ��� and the inequality of power that generates it ��� has contributed to our poor economic performance.

Even the most narrow-minded technocrat must therefore see that our changed economy requires a changed response (and in fact many technocrats in the Bank of England or IMF do see this). As Joe Guinan and Martin O���Neill write:

If we are serious about addressing real economic challenges then we need a different set of institutions and arrangements capable of producing sustainable, lasting, and more democratic outcomes.

Such arrangements mean not just looser fiscal policy but, as they say, measures to increase investment and oppose managerialism, such as worker coops. Measures such as more public ownership, a state investment bank and more co-ops are things any European would recognise as social democratic. Yes, it���s a different from of social democracy from New Labour���s. But a different economy requires different policies.

This is not to say that Corbynism is perfect. Far from it. I���m not keen on its student politics anti-imperialist posturing,and have my doubts about its economic plans: I���m not sure whether it can raise billions more in corporate taxes; its desire for more coops requires tons of detailed work; and I���d like to see more acknowledgement that there is still a big role for markets and entrepreneurship to play.

My gripe with Labour���s centrists, however, is that they seem oblivious even to the basic fact of capitalist stagnation and the challenges it poses: Austin writes as if a decade of falling real wages hadn���t happened.

And herein lies a paradox. Corbyn and McDonnell are, from this perspective, the true heirs to Blair. They recognise ��� as Blair did in the 1990s ��� that a new economy requires a new form of social democracy. And their critics, like Blair���s critics in the 90s, seem unaware of this fact.  

Food: a class issue

I���m pleased to see Phil McDuff joining free marketeers in complaining that anti-obesity strategies of the sort promoted by Jamie Oliver will hurt the poor. For me, though, there���s a deeper and nasty question here: if we can���t trust the poor to feed themselves properly, what can we trust them to do?

Yes, there are mechanisms whereby the poor might choose bad diets.

One is the fact that coping with poverty is so stressful that it depletes (pdf) cognitive bandwidth.

The other is a form of ego depletion. After a long soul-destroying day, people seek relief in drink or junk food. As James Bloodworth writes:

When we walked through the door at midnight at the end of a shift, we kicked off our boots and collapsed onto our beds with a bad of McDonalds and a can of beer. We did not ��� and nor have I met anyone in a similar job who behaves this way ��� come home and stand about in the kitchen for half an hour boiling broccoli. Regularity of dietary habit is simply incompatible with irregularity of work and income (Hired, p52)

There is, however, no reason to suppose that bad choices will be confined to diet. Quite the opposite. The poor face tight budget constraints and so have an incentive to look for the best value food, and we all know that bad diet can kill us. On both counts, they face strong incentives. Also, buying food is something we do regularly, which means we should eventually learn from experience how to do the job well. Yes, people can make mistakes. But cognitive biases apply most when we are making judgments under uncertainty: there���s a clue in the title of Kahneman and Tversky���s first book. But this is not the case with food: we all know what chips taste like.  

If people make bad decisions about their diet, therefore, they are likely to make bad ones elsewhere. If we can���t trust them with their food choices, why should we trust them to vote, given that ignorance of basic political facts is widespread?* In this sense, anti-obesity policies are a slippery slope.

But as Phil says, there is an alternative here. One way to improve people���s diets is to increase their incomes so they can afford healthier food and to reduce the poverty, insecurity and bad working conditions that drive people to bad food. The problem is capitalism, not the poor.

Some of you might have an inkling as to why the millionaire Jamie Oliver and old Etonian Hugh Fearnley-Whittingstall don���t choose this route. But why don���t others?

Phil���s right. It���s partly due to classism ��� ���a deeply rooted belief that the poor are feckless and make bad choices.��� Also, there���s an element of what Nick Cohen called vice signalling. Governments that impose pain upon people look tough, strong and manly ��� even if (as in the case of benefit sanctions) those policies are counter-productive.

These, though. Are both symptoms of a deeper condition ��� a belief that the iron fist of the state must be used against the poor, and never against capitalism. Diet, like everything, is a class issue.

* We can���t rely upon the law of large numbers to ensure that errors cancel out. The point about cognitive biases is that they are, well, biases.

Rationalism, rationality & reasonableness

Rationalism and rationality, wrote Deirdre McCloskey, ���are not often found in the same company.*��� Robert Wright���s piece on the myth of perfectly rational thought reminded me of that saying. People who claim to be rationalists are often not wholly rational. As Robert says:

Cognitive biases are so pervasive and subtle that it���s hubristic to ever claim we���ve escaped them entirely.

Such hubris is, of course, itself that most ubiquitous of biases ��� overconfidence.

I���d add one thing to his examples: ego-involvement. The moment we���ve expressed a view, we feel we own it and have to defend it: this is a form of the endowment effect. We thus look for confirmatory evidence and downplay dissonant evidence. The more public your writings, or the more tied up your ideas are with your sense of identity, the greater these dangers will be**. A recent tweet by Jo Wolff captured a too-rare reaction to this danger:

Just remembered a pre-Dropbox story of colleague who had laptop and hard drives stolen, containing only copies of five book manuscripts that had been in progress for decades. Claimed it was a great relief - now freed up to think about new things.

What���s more, like Michael Oakeshott, I���m not sure that rationalism (at least in some senses) is appropriate for human affairs. We cannot treat these as mere operations of logic in part simply because there are too many plausible premises to start from. Niels Bohr���s saying fits the social sciences well: the opposite of a great truth is another great truth; I find that the appropriate response to very many claims is ���yes, but.��� The crooked timber of humanity does not fit logical schema.

Instead, our thinking should be a movement ��� which for me is incomplete ��� towards what Rawls called reflective equilibrium. We should toggle between general principles and specific judgments and empirical facts until they are more or less consonant.

What matters, I suspect, is not so much that one be rational as reasonable. There are at least three things one can do here:

 - Check for one���s own cognitive biases. In particular, be awake to the confirmation bias, groupthink and overconfidence. It's far easier to spot others' biases than your own. At least try to lean against that tendency.

 - Look for missing evidence and ��� better still ��� uncomfortable truths. The latter are not things with which to taunt opponents, but facts that make you yourself uncomfortable. For me, these include: the fact that there���s little popular demand for worker democracy; the possibility that a high citizens��� income would lead to a drop in labour supply or that it is ill-suited for the disabled or those with high housing costs; or the possibility that open borders would indeed lead to overcrowding. And so on.

 - Construct your own counter-arguments. Our opponents don���t usually help us improve our thoughts. Too often they merely preach to their own side: who���s persuaded by talk of gammons or remoaners? Or they build straw men: the left want to turn us into Venezuela and the right want to destroy the NHS. Or they are just too obscure: Jordan Peterson for example seems to me to be emulating the worst of the post-modernist left. To avoid this, try to build your own arguments against your own beliefs. I���ve tried this here and here, for example.

Of course, I wouldn���t pretend for a moment that I always follow this advice. Although I might in moments of high arrogance consider myself intelligent or well-read or educated, I���d never describe myself as rational.

Here, though, are two problems.

One is that there are pitifully few role models for this sort of thinking. The confident assertions of newspaper columnists are pretty much the antithesis of what I have in mind ��� just as Brian Cox���s ���isn���t science great?��� schtick is a lousy advert for the scientific method.

Secondly, let��� suppose ��� contrary to the vast bulk of evidence ��� that somebody were wholly reasonable and free of cognitive biases. Such a person would, I fear, never be invited onto the BBC���s political discussion shows. And their political influence would probably be minimal in the face of the overconfident untruths of their more passionate and less reasonable opponents. In the marketplace of ideas there is adverse selection. There is a sharp trade-off between intellectual virtues and effectiveness.

* Knowledge and persuasion in economics, p323 in my copy.

** One reason I like writing for the IC is that the views I express there are distant from my identity: my idea of who I am doesn���t depend much upon my view of whether stock markets are efficient or not. Even then, however, I���m not immune from ego-involvement.

On neoliberalism

Is neoliberalism even a thing? This is the question posed by Ed Conway, who claims it is ���not an ideology but an insult.��� I half agree.

I agree that the economic system we have is ���hardly the result of a guiding ideology��� and more the result of ���happenstance���.

I say this because neoliberalism is NOT the same as the sort of free market ideology proposed by Friedman and Hayek. If this were the case, it would have died on 13 October 2008 when the government bailed out RBS. In fact, though, as Will Davies and Adam Curtis have said, neoliberalism entails the use of an active state. A big part of neoliberalism is the use of the state to increase the power and profits of the 1% - capitalists and top managers. Increased managerialism, crony capitalism and tough benefit sanctions are all features of neoliberalism. In this respect, the EU���s treatment of Greece was neoliberal ��� ensuring that banks got paid at the expense of ordinary people.

I suspect, though, that measures such as these were, as Ed says, not so much part of a single ideology as uncoordinated events. Tax cuts for the rich, public sector outsourcing and target culture, for example, were mostly justified by appeals to efficiency, and were not regarded even by their advocates as parts of a unified theory. To believe otherwise would be to subscribe to a conspiracy theory which gives too much credit to Thatcher and her epigones.

In this sense, I mostly agree with Paull Mason:

Neoliberalism is a time-limited global system sustained by coercive imposition of competitive behaviour, parasitic finance & privatisation.

I'm not sure about that word ���system���. Maybe it attributes too much systematization to neoliberals: perhaps unplanned order would be a better phrase. But it's better to think of neoliberalism as a bunch of arrangements ("system" if you remove connotations of design) rather than as an ideology. Ed has a point when he says that almost nobody fully subscribes to ���neoliberal ideology���: free market supporters, for example, don���t defend crony capitalism.

And it���s useful to have words for economic systems. Just as we speak of ���post-war Keynesianism��� to mean a bundle of policies and institutions of which Keynesian fiscal policy was only a small part, so we can speak of ���neoliberalism��� to describe our current arrangement. It���s a better description than the horribly question-begging ���late capitalism���.

This isn���t to say that ���neoliberalism��� has a precise meaning. There are varieties of it, just as there were of post-war Keynesianism. Think of the word as like ���purple���. There are shades of purple, we���ll not agree when exactly purple turns into blue, and we���ll struggle to define the word (especially to someone who is colour-blind). But ���purple��� is nevertheless a useful word, and we know it when we see it.

If neoliberalism is a system rather than an ideology, what role does ideology play?

I suspect it���s that of post-fact justification.

Put it this way. In the mid-80s nobody argued that the share of GDP going to the top 1% should double. Of course, many advocated policies which, it turns out, had this effect. Some of them intended this. But those policies were justified on other grounds, often sincerely. Instead, the belief that the top 1% ���deserve��� 15% of total incomes rather than 7-8% has mostly followed them getting 15%, not led it. A host of cognitive biases ��� the just world illusion, anchoring effect and status quo bias underpin an ideology which defends inequality. John Jost calls this system justification (pdf). You can gather all these biases under the umbrella term ���neoliberal ideology��� if you want. But it follows economic events rather than is the creator of them.

So, I half agree with Ed that neoliberalism isn���t a guiding ideology. But I also agree with Paul, that it is a way of describing a particular economic system.

I don���t, however, want to get hung up on words: I���d rather leave such pedantry to the worst sort of academic. What���s more important than language is the brute fact that productivity and hence real incomes for most of us have stagnated for years. In this sense, our existing economic system has failed the majority of people. And this is true whatever name you give it.