Chris Dillow's Blog, page 48

The Outsider

It is fitting that the pre-publicity for Afua Hirsch���s book Brit(ish) should have coincided with the death of Mark E Smith. What they have in common are stories of exclusion and isolation.

Ms Hirsch writes:

This country of mine had never allowed me to feel that it is where I belong. If I were to single out the most persistent reminder of that sense of not belonging, it would be The Question: ���Where are you from?���

Not belonging, though, is also the experience of many clever working class people. Obituaries of Mark E Smith call him an outsider: The Fall were named after a novel by Albert Camus who also wrote The Outsider. As Mark Brown has written in a wonderful essay, ���cleverness meant loneliness.���

And this has been my experience too. My grammar school was on the other side of town and it played rugby, the function of which was not so much to produce rugby players as to signal to people like me that we didn���t belong. And then I went to Oxford which was chocka with charmless dullards from ���nice��� middle-class backgrounds*. All along there were cues that I didn���t fit in.

Of course, the ruling class rarely gave overt outright messages of class hatred, just as Ms Hirsch rarely encountered crude racism. It likes to think of itself as open and tolerant. But this is self-regarding bullshit which rests upon a denial of the real lived experience of the tens of thousands of black, mixed-race or working-class people: Michael Henderson���s ���review��� in the Times is a wonderful example of this.

But the undertow is there. And it has real, material consequences. Black people earn less than whites with similar qualifications and are under-represented in influential jobs. Likewise, people who ���rise��� from working class backgrounds earn less for the same credentials, are more likely to live alone, and are even more likely to die early than those from posh families.

Even if we try to fit in, we never wholly do.

What I���m trying to do here is to lean against a regrettable tendency in identity politics. It is the case that everybody���s particular experience of isolation or oppression is different: Ms Hirsch���s experience is not mine, and mine is not that of a woman or a gay man. But these are different facets of a similar thing: the barriers we face from the beneficiaries of the existing order. Sure, capitalism, patriarchy or heteronormativity are different things. But they have something in common.

Yes, we should rail against the injustices here. But we should also ��� for the good of our health ��� remember our comforts.

One of these is the potential for a greater understanding of each other. It���s difficult (though not impossible) for insiders to understand outsiders because fish don���t know they are wet.; this of course was the message of that song. Many of us with experience of both sides, however, might be capable ��� should we choose to be so ��� of more empathy. One recent study has found that people from lower social classes are better able to think well about inter-personal conflicts. The divisions in the Tory party ��� drowning men fighting for a brick - are perhaps consistent with this.

Secondly, when you realize that there���s no point trying to impress some people you lose ambition and the need to work hard. That can be liberating.

And then, there���s art. There���s lots that we outsiders can feel more strongly about than the privileged ��� from Dostoyevsky** and Camus through to Bowie and Holland. We might have a material disadvantage, but not, necessarily, a cultural one.

* It���s insufficiently appreciated that the more typical product of Oxford is Theresa May rather than Boris Johnson.

** Fyodor Karamazov was just like my dad.

Another thing: there���s a link between this post and my last one. Both are about the need to hear the voices of the excluded.  

Why economists should look at horses

���If economists wished to study the horse, they wouldn���t go and look at horses. They���d sit in their studies and say to themselves, ���What would I do if I were a horse?��� Two things I���ve seen recently remind me of that line of Ely Devons.

When I approvingly tweeted Stephen Marglin���s account of the rise of the factory system, Pseudoerasmus referred me to Greg Clark���s paper (pdf). He argues that factory discipline emerged because when workers had freedom to choose their hours they short-sightedly worked too little and earned too little:

Whatever the workers themselves thought, they effectively hired the capitalists to discipline and coerce them. Even in the factories of the Industrial Revolution they were the ultimate masters of their fate, but weakness of the will meant they delegated that mastery to the capitalists��� Though factory discipline was coercive, forcing the worker to do what he or she would otherwise not have done, the worker was in no sense exploited by the introduction of discipline. The workers voluntarily entered into the temporary servitude of the factory���Had they been able to exercise more self-control, factory discipline could have been avoided for most technologies in the 19th century.

There is, though, a massive hole here. Clark gives us no direct empirical evidence that this actually happens. He points to no real worker who freely chose factory discipline as a commitment device; to no evidence as to how workers actually chose among different capitalists; and to no worker who was with hindsight grateful to capitalists for saving him from himself. The voice of actual workers is wholly absent*. Clark is not studying horses, but asking: what would I do if I were a horse?

He is not atypical. This is an example of something common in economics ��� ���as if��� modelling. Clark describes the rise of factories as if workers chose them as a commitment device, just as (say) Murphy and Becker describe smackheads as if they were rational maximizers. But this is insufficient. You can describe a woman���s black eye as if she had walked into a door. But if in fact her husband had beaten her, you are missing the truth and overlooking genuine oppression and injustice.

My second example was an exchange on Twitter about Cobb-Douglas production functions. Nobody saw fit to point out that if you want to know how useful they are, you should look at how actual firms produce actual stuff: do Cobb-Douglas functions describe the real world or not? Again, nobody���s looking at the horses.

What happens when they do? One nice example is a study (pdf) of a steel mill by Igal Hendel and Yossi Spiegel. They showed that it doubled production over 12 years with the same plant and workforce. Every time the mill seemed to be at ���full capacity���, its managers found ways of tweaking production methods to eke out more output. ���Capacity is not well defined��� they conclude. If this is true of an old economy steel mill, how much more true might it be of intangibles-intensive firms which are more scalable?

To the extent that this is the case, it has an important implication. It means that growth in demand and a zero output gap will lead not to capacity constraints and rising inflation, but to productivity improvements. Hendel and Spiegel give us micro-empirical evidence for a claim by Joan Robinson:

When entrepreneurs find themselves in a situation where potential markets are expanding but labour hard to find, they have every motive to increase productivity.

Recent data is consistent with this. The UK and US have both recently seen unemployment fall to multi-year lows. And both saw productivity jump in Q3 after years of stagnation.

 If all this is the case, then Unlearning Economics is right: long-run growth can indeed be influenced by aggregate demand. Trend and cycle might not be so cleanly distinguished. A zero output gap is to be welcomed as a spur to productivity growth, not feared as a portent of inflation.

Now, I stress the ���ifs��� here. I���m not saying the evidence for this is overwhelming. All I���m doing in endorsing Sarah O���Connor���s point ��� that the best economists are those with dirty shoes.

* You might reply that we have few first-hand accounts of the lives of workers: history is written by the winners, or at least the literate. We must not, however, let our thinking be distorted by the availability heuristic.

When selection mechanisms fail

Gideon Rachman writes:

Mr Trump has a legitimate claim to three other kinds of ���genius���: political genius, instinctive genius and evil genius. 

If this is a plea not to under-estimate Trump, it���s good. It might however be read as an example of a form of outcome bias ��� a tendency to infer from success that there was intentionality and skill behind it. This causes us to impute qualities to the rich and successful that might not be there.

Sharks and tapeworms are well-adapted to their environments. This is not because of any skill on their part. It���s because they have been selected to be so. Natural selection is a process whereby some blind undesigned and unintended mutations are selected for.

Markets are similar. They too are selection mechanisms. What���s more, as in natural selection, the winners or survivors might be just lucky. Three things tell us this: Paul Ormerod and Bridget Rosewell show that companies know little about the effect of their strategies; Jonathan Haskel and colleagues show that a lot of productivity growth comes (pdf) from entry and exit rather than incumbents upping their game; and Alex Coad shows how firm growth is largely random. All this is consistent with markets selecting among blind mutations.

Now, in the just-so stories which Econ 101ers tell, this doesn���t matter; markets select efficient firms which serve customers well even if that efficiency was dumb luck.

The problem is, though, that selection mechanisms don���t always work so nicely. My favourite example of this is 19th century patent medicines, which thrived (pdf) for decades despite being only placebos ��� for reasons which, as I���ve shown elsewhere, also explain the rise of populism. Markets can select for psychopaths, the irrationally over-confident, lucky but clueless risk-takers or mediocrities who fit in. The message of Steven Teles��� and Brink Lindsey���s The Captured Economy is that the US economy now selects for rent-seekers rather than public servants.

Politics is also of course a set of selection mechanisms. And these too have gone awry. Trump became president not despite his lack of intellectual or moral virtue but because of it. As Kevin Williamson has written:

It would never even occur to the low-minded to identify with anybody other than the bully. That���s what all that ridiculous stuff about ���winning��� was all about in the campaign. It is might-makes-right, i.e., the politics of chimpanzee troupes, prison yards, kindergartens, and other primitive environments. That is where the underclass ethic thrives ��� and how ���smart people��� came to be a term of abuse���.[People] today are celebrating Donald Trump ��� not in spite of his being a dishonest, crude serial adulterer but because of it. His dishonesty [we are told] is simply the mark of a savvy businessman, his vulgarity the badge of his genuineness and lack of ���political correctness,��� and his pitiless abuse of his several wives and children the mark of a genuine ���alpha male.��� 

In this sense, I both disagree and agree with Rachman. I disagree that he���s a genius; you could carve a better man out of a banana. But I agree he must be taken seriously because he embodies a massive problem for western capitalism ��� that mechanisms in the economy and in politics that should select for at least adequacy now often select for the worst. 

The Davos non-paradox

Branko Milanovic is good on the apparent paradox of Davos ��� that plutocrats who preside over massive inequality ���speak the language of equality, respect, participation, and transparency���:

They are loath to pay a living wage, but they will fund a philharmonic orchestra. They will ban unions, but they will organize a workshop on transparency in government.

Doug McWilliams, a man not hitherto noted as a class warrior, calls it ���virtue signalling paid for by money in effect stolen from shareholders.���

This juxtaposition deserves closer inspection. For one thing, it is a relatively new phenomenon. Thatcherites never felt the need to appear virtuous, and Thatcher herself was contemptuous of those who ���drool and drivel they care.���

And for another, the case for capitalist does not rest at all upon the character of individual capitalists. Adam Smith famously wrote:

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. We address ourselves, not to their humanity but to their self-love.

Insofar as capitalism is a good thing, it is because competition forces up wages and working conditions and compels capitalists to offer consumers good deals. This is an emergent process which it is independent of the virtue or not of capitalists.

Why, then, the PC talk? Why not just get on with business?

The answer might lie in a version of Maslow���s hierarchy of needs. Once you have more money than you���ll ever need, you want other things like self-esteem. Or it might be that people want what Richard Sennett called ���purified identities���, and this wish encourages the belief that you can do well by doing good.

Whatever the motive, there are two potential effects here.

One arises from the fact that people take others at face value. Cameron Anderson and Sebastien Brion have shown that recruiters hire people who are irrationally overconfident because they send out ���competence cues���. A similar thing might happen at Davos. Plutocrats who give out virtue cues are taken by journalists ��� an emergently na��ve bunch ��� to be actually virtuous. (We see a similar thing with attitudes to Alexis Sanchez; he is assumed to be more passionate and driven than his former team-mates because he waves his arms and shouts a lot.)

But there���s more, revealed by some experiments (pdf) by Benoit Monin and Dale Miller. They gave subjects the chance to signal their non-sexist virtues with cheap talk. They found that those who did so went on to act in more inegalitarian ways:

Participants who established non-sexist credentials, either by dismissing a series of blatantly sexist statements���or by selecting a female or African American candidate in an initial job recruitment task��� were subsequently more likely to express prejudiced-sounding attitudes.

More recent experiments by John List and Fatemeh Momeni have corroborated this (pdf). They���ve found that corporate social responsibility can lead employees to cheat more.

What���s going on here is a form of moral self-licensing. Once you���ve convinced yourself that you���re the good guy, you can go on to behave appallingly. Why not steal from shareholders or workers if you���re going to give some of the money to good causes? As Roland Benabou and Jean Tirole put it (pdf):

Good behavior in one context may ���justify��� a more mediocre one in another, and people who have recently ���done good��� in one dimension may feel immunized against negative (social or self) inferences, and thus later on act less morally constrained.

Carillion, for example, wibbled about ���visionary engagement��� whilst at the same time blacklisting trades unionists and shafting sub-contractors.

Perhaps, therefore, there is no real paradox between talking about equality whilst perpetuating inequality. The two actually co-exist very conveniently.

Outsourcing: a transactions cost approach

In all the reaction to Carillion���s collapse and the NAO���s report on PFI, one important perspective has for me been under-stated ��� that of transactions cost economics.

Let���s start with an important distinction ��� between private finance and private provision.

There is no justification for private finance of government projects. One thing the state can do better than the private sector is borrow cheaply. Private finance is the result of daft accounting rules described by Laurie MacFarlane rather than of economic rationality.

Private provision, however, is another matter. In principle, competitive tendering by private firms could bid down the cost to the tax-payer of government services.

But there���s a problem here. As Simon says, companies that win tenders by bidding low have an incentive to cut quality. The question is: is it possible to stop this happening?

It���s here that transactions cost economics enters. This perspective began with Ronald Coase���s famous essay, The Nature of the Firm (pdf). Whether we should do a job in-house or through the market depends upon the comparative costs. And, he said, ���there is a cost of using the price mechanism.���

In our context, this cost is the difficulty or even impossibility of writing contracts which ensure good quality provision. As Oliver Hart put it:

It may be prohibitively expensive to write a contract that conditions quantity, quality and price���This is not just because some of the variables are privately observed, but also because, even if publicly observable, the variables are inherently hard to specify in advance. (Firms, Contracts and Financial Structure, p24)

Whether outsourcing is a good idea hinges upon whether this is the case or not. If a contract controlling outcomes adequately can be written, then outsourcing might work. But only might, because a contract demanding decent quality would be an expensive one. The NAO says (pdf):

Our work on PFI hospitals found no evidence of operational efficiency: the costs of services in the samples we analysed were similar���More recent data from the NHS London Procurement Partnership shows that the cost of services, like cleaning, in London hospitals is higher under PFI contracts.

And if we can���t write an adequate contract, the case for outsourcing is even weaker.

The answer here will differ from service to service. It should be possible to contract properly for building work, for example, because a competent inspector should be able to assess quality ��� though even this isn���t always the case. In other cases, though, quality isn���t so observable and controllable; this might well be true of social care (where much hinges upon the manner of the individual carer) or forensic science. 

But why might in-house provision be cheaper? One consideration here is the public service ethos. If people are motivated by an idea of public service, they���ll do good jobs without oversight or detailed contracts. Good culture is potentially a cheap solution to the problem of incomplete contracts.

But only potentially. Such an ethos should not be taken for granted. The Stafford Hospital affair ��� and perhaps the ���failure of leadership at all levels��� in the prison service ��� remind us that it is sometimes dangerously lacking. Martin Wolf makes an important point (in a different but applicable context) when he reminds us that nationalized industries ��� treated users with indifference.���

Which brings me to another question that���s overlooked: how can we build a true public sector ethos in which workers are, in Le Grand���s words, knights rather than knaves? (The answer might well include less managerialism and more empowerment of workers and users.)

It might be a good idea to reduce the amount of outsourcing; that depends not upon ideology but a cool-headed assessment of transactions costs. Doing so, though, should be a means to a greater end, and not just an end in itself.

On capitalist hegemony

How much can a Labour government achieve within the confines of a capitalist society? I ask because of a recent tweet by Paul Mason:

taking power is not enough; behind the state, the elite have line after line of trenches with which to their defend privilege and enforced poverty and ignorance for the rest.

We don't need to invoke ���deep state��� conspiracy theories here*. Elites really do have considerable ability to restrain a Labour government.

We can, roughly speaking, distinguish two types of power here.

One is brute economics. Although talk of capital flight is overdone (if investors want to dump sterling assets to whom will they sell them?) the fact is that capitalists control the bulk of capital spending. And as Michal Kalecki pointed out:

This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. 

On top of this, there���s their lobbying power. Capitalists have money; politicians have political influence. And guess what ��� that means there���ll be a trade. As Pablo Torija Jimenez has shown, ���politicians in OECD countries maximize the happiness of the economic elite��� rather than that of the median voter.

There���s also the fact that the rich can dodge taxes, by shifting cash offshore or simply by passing on corporate tax rises to workers or customers. They might not therefore be the big source of revenue that social democrats imagine.

And this is not to mention the power of finance to act, in J.W.Mason���s words ���as the enforcement arm of the capitalist class as a whole.��� High corporate and personal debt, for example, not only serves as a form of debt bondage but also strengthen���s Kalecki���s point: it means that ���confidence��� must be maintained to avoid a credit crunch.

There is, though, a second dimension of capitalist power which means Paul is bank right to invoke Gramsci**.

It was he, more than most Marxists, who emphasized that power is exercised not just through force but through ideology; the ruled come to accept the beliefs of the rulers. This is true today. To give three examples:

 - Managerialism. The question: to what extent are bosses parasites rather than value-adders (because of abilities to organize production)? has for years been off the agenda - though maybe Carillion will change this. Instead, they have been portrayed (even by social democrats) as heroic risk-takers to whom we must defer. This, and leadershipitis generally, generates a bias towards hierarchy and against worker control.

 - Accepting inequality. Inequality tends to perpetuate (pdf) itself, for example because perceptions of what���s fair are shaped by actual inequality, and in part because people just resign themselves to it.

 - Anti-politics. Na��ve cynicism about politicians (���they���re all the same���, ���in it for themselves���) sustains a hostility to collective action and thus to the maintenance of the status quo.

And this is not to mention the media!

It���s in this context that the Labour left is right to want to build a mass party. This might act as a form of countervailing power to capitalist elites; millions of everyday conversations between party members and their friends and colleagues might help undermine capitalist hegemony and act as a counterweight to capitalists' influence over a Labour government.

That might be too optimistic. What is clear to me, though, is that winning an election is nothing like sufficient to achieve lasting change. In the face of capitalist hegemony, the idea that being in government gives you all the ���levers of power��� you need is hopelessly romantic. As I���ve said, it is centrists who are the dreamy utopians.

* Sentence rewritten thanks to a tweet by @SpinningHugo.

* There���s a small but notable stylistic difference between Paul and I. He tweeted that ���it begins with Gramsci.��� I wouldn���t say that. I���d say that it begins with the scientific evidence on cognitive biases, which show that Gramsci was right.

Marxism as anti-ideology

Sam Bowles has a nice piece in the FT on the case for pluralism in economics by integration ��� ���marshalling the insights of differing schools of thought and academic disciplines into a common paradigm.��� I���d add only that the points at which the marshalling should occur must be determined by the facts. We learn about economics from the real world, not just from schools of thought.

I want to suggest something that some of you might think paradoxical ��� that Marxists are well-placed to do this because we are, in a sense, less ideological than others.

Take, for example, the question: do higher minimum wages destroy lots of jobs? As a Marxist, I can accept either answer. If they do, we have (more?) evidence that actually-existing capitalism is incompatible with decent living standards. If they don���t then we have a way of making workers better off. Either way, I���m happy. I can allow myself to be guided by the evidence in a way that either free marketeers or their social democratic opponents might not be.

Or another example: could fiscal policy not just stabilize aggregate demand but increase trend growth? If it does, then fine: we���ve a way of making people better off. If not, then my prior that capitalism is prone to stagnation and crisis is strengthened.

Here���s a third example. Are financial markets informationally efficient or not? I can accept either answer. If they���re efficient, then fund managers are ripping people off and we have another example of the exploitative nature of capitalism. If they���re inefficient then we have another mechanism whereby capitalism can generate instability. (In fact, both might be true, as markets might well be micro efficient but macro inefficient). Being a Marxist has, I suspect, made me less bad at my day job than I otherwise would be.

A fourth example is Brexit. Being in or out of the EU is orthogonal to my Marxism. Again, therefore, I���m happy to be guided by the evidence on whether Brexit will make us better off or not.

There���s another thing here. As a Marxist, I haven���t invested my human capital in only one paradigm. Marxist economists must be pluralists simply because we must run our Marxism alongside the orthodox/mainstream/whatever economics we learn at university and in my day job. Integrating different perspectives ��� which might of course mean ditching large parts of some ��� does not therefore threaten the destruction of my human capital as much as it does specialists in one paradigm.

On a lot of issues, then, we Marxists can be intellectually flexible simply because there are a lot of fights in which we have no dog.

But, you might ask, if this is the case, isn���t your Marxism just an unfalsifiable pseudo-science?

No. There are some claims which ��� if true ��� would weaken my Marxism perhaps to the point of refutation, for example: if capitalism could deliver sustained full employment with good working conditions and satisfying jobs; if it could be shown that capitalism were non-exploitative; if the capitalist state were genuinely neutral; or if capitalistic relations of production were never fetters upon growth. These claims, however, have not been satisfactorily established.

I���ll turn the question around to centrists, Tories, libertarians or social democrats. What equivalent claims (if they could be established) would falsify your political position?

What I���m trying to do here is weaken the prior of many anti-Marxists. Many of you have traditionally seen Marxism as a fanatical ideology opposed to the cool-headed rationality of mainstream politics.

I���ll concede that there might be something in this: the worst advert for Marxism has often been those who profess to be Marxists.

For me, though, the opposite is the case: in some respects, Marxism takes the ideology and fanaticism out of some debates.

Genes & the left

Does intelligence or schooling matter? These are two questions raised by the recent furore over Toby Young���s now-rejected appointment to the OfS. Good people have fiercely opposed Young���s ���progressive eugenics���, and rightly so. But I fear they haven���t sufficiently acknowledged the germs of truth in what he says.

One such truth is that IQ is heritable. One survey has found (pdf) that:

Correlations of IQ between parents and offspring range from 0.42 to 0.72.

These aren���t the words of right-wing nutjobs. They���re those of Sam Bowles and Herb Gintis, two of the greatest leftist economists.

The question is: so what? It���s here that people like Young go wrong.

For one thing, as Bowles and Gintis show, these correlations explain only a minuscule fraction of the intergenerational transmission of wealth, income and status. One reason for this is that plenty of things other than IQ explain earnings such as effort and social skills, which might or might not be inherited. Another reason, of course, is that rich parents don���t only give their children higher IQs: they also give them role models and networks.

This, though, is a minor point. What���s more significant for me is that higher IQ does not justify inequality. Young writes:

All things being equal, a country���s economy will grow faster, its public services will be run better, its politicians will make smarter decisions, diseases are more likely to be eradicated, if the people at the top possess the most cognitive ability.

That phrase ���all things being equal��� is doing too much work. Cognitive ability is no assurance of better policy. In fact, it���s possible that high IQ is a drawback as it might make one less able to get people on your side and more willing to pursue tricksy complicated policies than simpler ones. We���d be better off today if we���d had basic first-year undergraduate macroeconomic policy implemented by dullards rather than austerity implemented by cleverer people*. And many of us would prefer a simple basic income to Gordon Brown���s complex tax credits.

Leaders -in politics or business ��� must justify themselves by their day-to-day decisions and not by their score on some abstract IQ test. Intelligence is context-specific: the world is full of people who are brilliant in their fields but daft outside.

Above all, though, differences in IQ do nothing to justify inequalities of income, status or power. In any unjust hierarchical society men with high IQs might well do better than others; you needed cognitive skills to climb the USSR���s bureaucracy or to pass the civil service exam of medieval China. Maybe the correlation between IQ and status was higher in the USSR than it is in western societies today. But that does nothing to defend the USSR���s social structure.

Con-men are probably smarter than their marks. But that doesn���t justify fraud.

There���s something else Young says that���s plausible:

it is na��ve to think schools can do much to ameliorate the effects of inequality. I don���t just mean socio-economic inequality; I also mean differences in intelligence.

Here, though, is another great leftist economist, John Roemer:

increased school spending is associated with, at best, rather small gains in adult earnings.

But what political ideas flow from this? Yes, this rules out ���blank slate��� romantic notions that every child is a potential Einstein if only they get sufficiently good education. And it tells us that equality of opportunity is a utopian sham.

But many of us lefties have never much believed in those ideas.

In fact, all this evidence actually strengthens one sort of leftism. To the extent that some people are poor because they���ve lost in the genetic lottery then their poverty is due to circumstances beyond their control. And equally, the success of the rich is beyond their control. Luck egalitarianism then mandates that these inequalities be eliminated.

To luck egalitarians, the more true it is that inequalities are due to genetics rather than to people���s own efforts, the stronger is the case for redistribution. In this sense, a belief in the importance of genetics actually strengthens some leftists��� positions.

The issue here is the validity or not of luck egalitarianism, not of genetics.

My point here is a simple one. Maybe it is the case that some people, by virtue of their genes, have more chance than others of being at the bottom of the social heap**. How unpleasant life is at the bottom of that heap is, however, a political choice.

* I leave aside the question of Osborne and Cameron���s IQs as utterly uninteresting.

** This is not to say they are destined to so be: the correlations are less than unity.

Democracy in question

Nigel Farage and Arron Banks are starting to agree with many Remainers that there should be a second referendum. Both sides, of course, do so for the same motive ��� the belief they would win.

What this misses is that the first referendum was, as Robert Harris said, ���the most depressing, divisive, duplicitous political event of my lifetime.��� It was dominated by lies and by ignorance of basic facts. The result in effect went simply to the highest bidder. There���s no reason to suppose that a second referendum will be any better.

Worse still, the result conveyed very little information. What sort of Brexit did voters want? Why did they want it? Was it because they regarded increased sovereignty as an intrinsic good for which they are willing to sacrifice some income? Or did they believe that Brexit would make them better off? Or did they regard Brexit as a means of controlling immigration? If so, why did they want such controls. Was it as a means of raising wages in which case might there be better ways of achieving that goal? Or was it because of cultural concerns? If so, are these justified and are they worth paying for? Or was Brexit just a way of signalling discontent with elites? If so, are there more effective ways of getting elites to change, if change they should?

The referendum told us nothing about these questions, though opinion polls might have. We learned less from it than Tesco learns from a shopper���s most quotidian visit to one of its stores.

Before having a second referendum we should ask: how can decisions be better informed and more informative? This poses important questions. What organizational changes do we need to reduce plutocracy and achieve the democratic ideal of equal say? How can we get better decisions, informed by evidence? How can we ensure that experts are respected servants of the people rather than (seen as?) out-of-touch elites? How can we get a better media? (The BBC falls far short here, not just because it makes a fetish of a deformed conception of impartiality but because too many of its current affairs shows are merely the bantz of posh mediocrities ��� people who are the problem not the solution.)

And underpinning these questions is a deeper one: is healthy deliberative democracy even compatible with (actually-existing) capitalism?

With the very honourable exceptions of people like Paul Cotterill and Paul Evans, however, hardly anybody is asking these questions.

Politics has become like a game of football in which the only thing that matters is that our side wins and nobody cares about the quality or even basic honesty of the game. Most of us have forgotten that we are citizens as well as partisans.

In this sense, we are all neoliberals now. For me, one feature of neoliberalism is the elevation of what MacIntyre called external goods ��� power, wealth and fame ��� over internal goods of excellence. Almost everybody wants the external good of winning power to the neglect of the internal one of arriving at good decisions. Even many people who claim to oppose neoliberalism have, paradoxically, unthinkingly accepted one of its tenets.

The stakes here might be higher than generally supposed. As Steven Levitsky and Daniel Ziblatt point out, we cannot take the survival of democracy for granted. Democracies, they say, ���die slowly, in barely visible steps.��� Constitutions and institutions are insufficient protection against this. What we also need, they say, are ���norms of mutual toleration.��� These, though, are weakening. As Edward Luce writes, democracy ���is only as good as the people who uphold it.��� And we must question whether they (we) are good enough.

Biased to the powerful

���Massacre of the middle-aged men��� shouts today���s Daily Mail. Let���s leave aside the over-entitled self-pitying here and ask how people can possibly believe such guff.

What���s going on here is an old phenomenon described by Adam Smith:

We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent. (Theory of Moral Sentiments I.III.29)

But why do they get such respect, and such sympathy when their rewards fall slightly short of their over-inflated expectations?

Part of the answer lies in an experiment (pdf) conducted by Deborah Small, George Loewenstein and Paul Slovic. They paid people $5 to complete some questionnaires and then invited them to donate to an overseas aid charity. Some were given statistics about millions facing food shortages in Africa, whilst others were shown a picture of a poor girl from Mali and told her name. People were twice as likely to donate after seeing the picture than the dry statistics.

This is the identifiable victim effect. As Dan Ariely says: ���once we have a face, a picture, and details about a person, we feel for them.��� (The Upside of Irrationality, p 241).

The mere fact that politicians are in the public eye, therefore, disposes us to sympathize with them. We have the face and the picture.

Yes, I know: replicability blah, blah. But we do have other evidence here. James Andreoni and Justin Rao got subjects to play a dictator game in which some potential recipients could request donations and others couldn���t. They found that requests significantly increased donations even if they conveyed no significant information. They conclude (pdf):

Communication, especially the power of asking, greatly influences feelings of empathy and pro-social behavior.

This is consistent with an experiment described in Robert Cialdini���s Influence, wherein a woman tries to jump queues to use a photocopier in a university library. When she merely asked to jump in, 60% of people in the queue complied. But when she asked ���May I use the Xerox machine because I have to make some copies?��� 93% to agreed. Even a meaningless remark (why else would you want to use the copier?) elicited compliance.

Merely talking to us, then, elicits our sympathy even if there���s no meaningful information. And of course, politicians (and the rich generally) do communicate with us.

There���s a flipside to this. If we don���t know people or they don���t communicate with us we are meaner to them. Experiments by Agne Kajackaite have found just this. She says:

Ignorance may not only reduce altruistic behavior, as found in previous experiments on ignorance in ultimatum and dictator games, but may even lead to anti-social behavior.

From this perspective, reporting of Westminster politics carries an inherent bias. In giving prominence to mediocre middle-aged white men, it invites sympathy for them.

To see this, do a thought experiment. Imagine if news programmes focused heavily upon particular individuals struggling with poverty whilst paying only minimal attention to Westminster shenanigans ��� that is, if we had more Kate Belgraves and few Laura Kuenssbergs. Research suggests there���d be more sympathy for the poor, and less concern about ���massacres��� of dullards. Our political culture would then be less inegalitarian.

All this said, there is a massive caveat here. The extensive coverage of the Westminster bubble doesn���t actually work very well: most people can name only very few politicians. (Though we might ask why the ones they can name such as Johnson and Farage are disproportionately private-school shysters).  However, I suspect that most of us living in comfortable circumstances can name more MPs ��� and certainly more rich people ��� than we can name users of foodbanks. And this, I fear, does skew our sympathy. To this extent, even apparently impartial political coverage contains an insidious bias.