Chris Dillow's Blog, page 91

Limits of the profit motive

I've noted before the paradox of Blairism - that people who were so keen that Labour should modernize in the 1990s are now themselves out-of-date. Philip Collins' piece in the Times today shows what I mean.

He contends that the profit motive and business are forces for good. Like many claims in the social sciences, this is very true up to a point. My problem is that the extent to which it is true is less widespread now than it was a few years ago. I mean this in three senses.

First, as Akerlof and Shiller have pointed out, the profit motive doesn't only incentivize good things such as the creation of jobs, products and services but also bad ones such as fraud:

Competitive markets by their very nature spawn deception and trickery, as a result of the same profit motives that give us our prosperity (Phishing for Phools p165)

I suspect that this problem has increased in recent years because of two trends. One is secular stagnation: if it's harder to make money legitimately firms will turn to shadier means. The other is a decline in moral restraint. Philip is entirely right to say that markets have always been "regulated by a moral sense". But this regulation has diminished - perhaps because of the decline of religion, the rise of "neoliberalism" or because lower top tax rates have tipped the balance of incentives towards money-grubbing and away from maintaining self-respect. Whatever the reason, it might be no accident that the examples Philip gives of "capitalism for the common good" come from the 19th century rather than the 21st.

Secondly, the profit motive doesn't just incentivize innovation and investment. It also disincentivizes it, if firms believe it won't make a profit. Again, this problem might be more pressing than a few years ago. Firms might have wised up to the old fact that innovation has always had low returns, and their lack of investment might be due to a fear that future technical progress and creative destruction will render current investment unprofitable. In his speech this week Liam Byrne complained (pdf) this week about capitalists' short-termism without considering the possibility that such short-termism might be a rational response to uncertainty about the pace and direction of creative destruction.

Thirdly, if capitalism does overcome the problem of low investment - perhaps through a burst of animal spirits - we face a new danger. This is that robots and AI might make many of us redundant (pdf), leading to a world of massive wealth for robot owners and poverty and demoralization for millions of others. Personally, I suspect this is a small danger - but the small risk of a horrible outcome cannot be ignored.

My point here is not to decry the profit motive. It has a place. But that place must be circumscribed not only by the regulation of predatory capitalism but also by greater socialization of investment to exploit and develop new technologies and by a more widespread ownership of capital - via worker ownership, a sovereign wealth fund or more widespread participation in equity markets.

Now, I would like to think that my beef with Philip is one of those glass half-empty/half-full arguments. But I fear it might not be. In failing to see the limits of the value of the profit motive, Philip might be embodying the vice of the Blairites - a tendency to live in the past and fail to see that social democracy must, again, be modernized.

Grit beats talent

The later Nobel laureate James Buchanan used to advise his graduate students: "keep your ass in the chair". Woody Allen claimed that "80% of success is showing up." And Gary Player used to say: "The harder you work, the luckier you get." Some recent experiments show they are right.

Leonie Gerhards and Christina Gravert got subjects to solve anagrams, paying them for each one they got right. Subjects could pay to skip a hard anagram or to switch to easier less well-paid ones. They found that subjects that did not skip or switch earned much more than those who did - even controlling for ability, as measured by the number of anagrams they had solved earlier. "Grit trumps talent", they conclude.

This finding, I suspect, has external validity. Among people with high IQs, there is little correlation between intellectual ability and career success. Beyond a certain point - attained by most readers of this blog - what matters is not so much intellect as personality traits such as stickability. This chimes with my personal experience. The most materially successful of my university contemporaries aren't generally the most intellectually gifted ones, but ones who had perseverance - in large part, perhaps, because they found careers they enjoyed.

Indeed, what looks like talent is in fact often the product of grit. Dennis Bergkamp, for example, is generally regarded as one of the most talented footballers of recent years, but:

There, a worn-out brick wall still stands testament to the innate footballing mind, maturity and drive present even in an 8 year old Dennis. He spent countless hours practising, kicking the ball against it, experimenting with different ways of how to control it, seeing how it bounced and how many times, how that affected how it came back ��� things that still don���t occur to most professional footballers. It was here that his technique was refined to such precision that he would aim for a corner of a particular brick, each time with different pace, power and spin to see how the ball���s trajectory changed.

This sounds to me like deliberate, mindful practice - which is the key to success, as Anders Ericsson has written (pdf):

Many characteristics once believed to reflect innate talent are actually the result of intense practice extended for a minimum of 10 years.

It is this that gave rise to the 10,000 hours rule, as immortalized by the Greatest Living American*.

One under-rated reason for this, I suspect, is that ability is context-specific, so immersing oneself in a particular context for a long time is pretty much the only way to succeed.

Now, I don't say all this to suggest that talent is irrelevant: one reason why people practice football or music for long periods is that they feel they might be good at it - although this feeling isn't sufficient for success.

Instead, I say it to reinforce something I said recently. I suspect that most jobs - maybe not all but most - are like Gerhards and Gravert's anagram task; they require grit at least as much as talent. And, therefore, perhaps intellect is over-rated.

* I find Matthew Syed's account of this more persuasive than Malcolm Gladwell's.

Talent or toxicity?

"Talent management" - the attempt to attract, retain and motivate the best employees  - is one of the buzz phrases of bosses. But it might be distracting them from a bigger problem - that of bad workers.

Michael Housman and Dylan Minor estimate (pdf) that "toxic workers" cost companies twice as much as superstars benefit them. The rogue trader who costs a bank billions or the groper who attracts a big sexual harassment suit can do more damage to a firm than a decent employee does good. Companies should, they say, do more to screen out such workers.

But here's the thing. "Toxic workers" can look attractive; in fact they might be indistinguishable from the "talent" that firms are so keen to attract. For one thing, say Housman and Minor, such workers - those who would be later fired for fraud, violence or sexual harassment - claim to be honest: they are more likely than average workers to tell surveyors that it's important to always obey rules.

What's more, they are often overconfident about their abilities - and we know from experimental evidence that overconfidence is attractive to hirers because they often confound it with actual ability.

Such confounding, though, contains a germ of truth. Housman and Minor also found that toxic workers are more productive - in the sense of working quickly if not well - than others. This is consistent with two other findings. Francesca Gino and Dan Ariely show that creative people tend to be more dishonest (pdf) than others. And in a study of bank managers Douglas Frank and Tomasz Obloj have found (pdf) that those with higher firm-specific human capital are not only better at generating new business but also better at gaming incentive systems to get themselves big bonuses, with the result that such apparently skilled employees are actually a net cost to the bank.

For these reasons, "toxic workers" can not only stay in an organization for some time, but actually thrive - until they actually cause a big loss.

All this fits in with two other findings. One is from Nick Bloom ands John Van Reenen, who show that there is in most countries a long tail (pdf) of badly managed firms - which is what we'd expect if firms can't distinguish between good employees and bad ones. The other is from Luigi Zingales and colleagues who have estimated that one-in-seven US companies is defrauding its shareholders in some way. If you're wondering which firm will be the next VW, there are lots of candidates.

This sounds like a narrow management thesis. It's not. There are two broader points here.

First, there is a great deal of ruin not only in a nation but in companies. Market forces don't necessarily quickly and efficiently weed out bad hires. In fact, as I've said in a different context, they might sometimes actually select for them.

Secondly, what appears to be a narrow technical function is often in fact an expression of ideology and power. Firms' obsession with "talent management" might appear to be motivated by a desire to increase efficiency and "shareholder value." But if these are what matter, then firms should in fact be more concerned with managing "toxic workers" - many of whom will be in positions of influence. So why aren't they? It might be that "talent management" is in fact not (just) a means of increasing efficiency but a cover for rent-seeking - a justification of big salaries at the top of firms.

Intellect in politics

How important is intelligence and education to politicians?

I ask because of Martin Amis's jibe that Corbyn is "under-educated" and "slow-minded" and Tristram Hunt's claim that it is the responsibility of the brightest 1% to "take leadership going forward." Both men seem to presume - without adducing evidence - that intellectual ability is desirable in politicians.

I'm not at all sure of this, for four reasons.

- Ability and knowledge can lead to overconfidence. For example, a study of German mutual fund investors found (pdf) that "sophisticated investors do not earn higher risk-adjusted returns." This is because they over-estimate their ability to spot good fund managers and so waste money on fees, thus offsetting other advantages that can accrue to higher intelligence. I suspect this is relevant to politics because politics, like investing, is about making judgments about an inherently complex and uncertain world on the basis of partial information. One can argue that overconfidence is a common and fatal flaw in politicians: think of Thatcher and the poll tax or Blair and Iraq. 

- A high IQ can cause one to be out-of-touch with voters. Or, just as badly, it allows the media to present one as being out-of-touch. To a biased media, intellectual ability will be reframed as geekiness.

- Success in politics - and in fact in other occupations - requires more than intelligence. It requires qualities such as doggedness and an ability to get on with people - talents which aren't necessarily positively correlated with formal smarts.

- Basic ideas can work better than complex ones. As Gerd Gigerenzer has shown, simple rules of thumb (pdf) can work (pdf) at least as well as fancy theorizing. The Bank of England has suggested that this is true for financial regulation. It might well also be true in foreign policy: Corbyn's simple heuristic, "don't start wars in the middle east" isn't obviously catastrophic. And I suspect it's also true in welfare policy: a simple citizens basic income might well be superior to complex alternatives.

We don't need to look far for historical evidence here.Winston Churchill was no intellectual, but he is widely regarded as our best prime minister in large part because his simple heuristic - defeat the Nazis - was better than the more sophisticated ideas of his cleverer peers. More mundanely, Thatcher was the intellectual inferior of several "wets", but proved the more successful politician*.

All that said, there is a crucial distinction here, between ability and one's beliefs about one's ability. I would rather have second-rate politicians who know they are duffers than ones who believe they are brilliant.

Now, I don't say this with much certainty. Maybe the humble genius - if one could be found - would be an even better politician than the humble duffer. What I'm doing is posing the question to Amis and Hunt: why should one assume that intellect is a virtue in politics? Because it's not obvious.  

* One could list many succesful politicians - Bevin, Major, Callaghan etc - who lacked degrees. However, in many cases this was because of a lack of opportunity, not ability, so they are not relevant to my argument.

Another thing: I am, of course, ignoring the possibility that Corbyn would have better ideas if only he were cleverer: the idea that people would all agree with us if only they were as smart seems to me to owe more to narcissism than to evidence.

On misunderstanding economics

Most of us have long lamented the general public's lack of understanding of economics. A new paper by David Leiser and Zeev Kril sheds interesting light upon this.

The human mind, they say, "is not particularly equipped to think about economics":

People are remarkably poor at combining causal links into a system [and] are ill-equipped to cope with the aggregate effects of the individual decisions of many people...Thinking in terms of how an interlocking system of causal links produces an emergent outcome does not come naturally to laypeople.

This helps explain the bias against markets of which John Rentoul and Bryan Caplan have complained: because people underestimate the tendency of emergent processes to produce benign outcomes, demands for price and rent controls are stronger than most economists think they should be.

Faced with this complexity, say Leiser and Krill, people resort to metaphors - the most notorious being that governments should manage the public finances as if it were a household. Worse still, they are often overconfident about the applicability of these metaphors. Both of these habits were encapsulated by the silly BBC Question Time audience member who was so ably corrected by Yanis Varoufakis.

There is, though, another heuristic laypeople use, which Leiser calls the "good begets good . He shows that people believe that good things cause good things to happen, and bad things to cause bad things. For example, they think a rise in unemployment is associated (pdf) with a rise in inflation because both are bad - in contradiction of the standard economists' belief in a short-term Phillips curve.

Such a belief, whilst irrational, is not always wrong*: the standard Phillips curve doesn't jump out of the UK data, in part because supply shocks are common. What might be more problematic is that people think government spending is bad, and so associate it with rising unemployment.

I've got three observations here. First, the poor public understanding of economics is NOT a partisan matter. It leads both to anti-market attitudes and to anti-Keynesian ones.

Second, the issue here is not confined to the UK: the bad habits described by Leiser can be found among Israelis, Americans and Australians (and I suspect Europeans too) as well as Brits.

Thirdly, our political and social institutions do not adequately correct these problems, and might exacerbate them. Politicians and the media tend to pander to misconceptions rather than correct them: Mr Varoufakis's reply to that audience member was welcome because it was so rare. There seems little effort to educate the public in economics: the BBC, perhaps because of its commitment to due impartiality, has failed. And I'm not sure academia can or will do the job. It's not just economists who should lament this, but everyone who cares about the quality of our democracy.

* The distinction matters; rationality is about how beliefs are formed, rightness about their congruence to reality. You can be rational but wrong or irrational but right.

Failing conventionally

Here are three things:

- Andrew Hill says companies would rather "try something that seems uncontroversial and is self-servingly supported by a team of paid advisers ��� mega-merger, anybody? ��� even if it is fraught with greater cost and peril" than introduce greater worker autonomy.

- In the IC, I note that professional asset allocators prefer mindless futurology to the "sell on May Day, buy on Halloween" rule, despite the overwhelming empirical evidence in favour of the latter.

- The ECB is considering more QE, even though the policy is of dubious efficacy especially when bond yields are already low.

These are all examples of Keynes' famous saying, it is better for reputation to fail conventionally than to succeed unconventionally. (The context in which he says this is also still relevant today - the tendency of professional investors to follow short-term fashions.)

The question is: why is this?

One reason is simple self-interest. The CEO who thinks that his minions know better than he does, or the fund manager who thinks that asset allocation can be done by the calendar rather than by professional judgment or fancy optimization tools, will lose his raison d'etre. And as Upton Sinclair said,"it is difficult to get a man to understand something, when his salary depends on his not understanding it."

The same thing explains Keynes' example. The fund manager who bets against the market risks under-performing and hence losing his job - as Phillips and Drew's Tony Dye famously discovered during the tech bubble. The one who goes with the herd keeps his job.

There might, though, be a second reason.

The Overton Window doesn't just exist in politics, but in finance, economics and management too. Some things are inside the window and acceptable - such as mergers, "professional judgment" and orthodox QE - whilst others, such as worker management, simple investment heuristics or helicopter money*, are outside it. Bosses, fund managers and experts want to maintain their image as Very Serious People - defined by Paul Krugman as "someone distinguished by his faith in received orthodoxy no matter the evidence". To signal this, they support for policies within the Overton Window, regardless of their merits. In doing so, they are exercising expressive rationality - signalling that they are proper members of the elite.

Identity politics isn't just the province of silly teenage students. It can be found in boardrooms too.

* In fairness to the ECB the politics of helicopter money for the euro area would be monstrous.

On expressive rationality

Have I been wrong for years? What I mean is that I have often attributed ideas I believe to be mistaken to cognitive biases. But as Dan Kahan points out, this might not be the case. Thinking, he says. is not always a means of reaching accurate perceptions of the world. It can also be a way of protecting our status and (self) image - of expressing who we are.

Take for example a classic experiment (pdf) by Lord Ross and Lepper in the late 70s. They showed a group of people with strong views for and against capital punishment some empirical studies of the issue. They found that this led to greater polarization. This is inconsistent with conventional Bayesian reasoning. But it is entirely consistent with the theory that people form beliefs to maintain a coherent and consistent self-image. As Sherman and Cohen say (pdf):

People defensively distort, deny, and misrepresent reality in a manner that protects self-integrity.

Professor Kahan says this is not necessarily irrational. For most people, there is no cost to having erroneous beliefs about political issues, simply because their individual vote doesn't affect the outcome of elections. But there is a cost to being "good" Bayesians: you'll feel uncomfortable if you come to doubt your long-held beliefs, and you might even lose friends if you don't fit in. It can, therefore, be rational to hold views which are mistaken from a Bayesian perspective*.

One fact is consistent with this. Professor Kahan points out that people with greater cognitive skills tend to be more partisan than others. They have the skill to be what Glaeser and Sunstein call asymmetric Bayesians: they are capable of discrediting evidence against their beliefs whilst seeing the scientific merits of corroborative evidence.

Perhaps, then, I have often been guilty of a category error. Beliefs that I have attributed to irrational biases might instead be the product of a different form of rationality - expressive rationality.

One should ask of any theory in the social sciences: how widely does it apply? Many things are true of some people, but not of all. For example, I don't think expressive rationality is very relevant in my day job. When retail investors' make losing investments, it is often because of cold cognitive errors rather than expressive rationality**. There are, though, domains where it might be applicable:

- Stephan Lewandowsky says climate change denialism is motivated by ���identity-protective cognition��� - a desire of free-marketeers to reject interventions in the market.

- "Very Serious People" believe things which uphold their self-image as sober and serious people, regardless of their empirical validity. This, I suspect, is why professional investors prefer futurological judgments to the much more empirically grounded "sell on May Day, buy on Halloween rule".

- "No platforming" and "safe spaces" are absurd from a Bayesian point of view; they entail being wilfully blind to dissonant ideas. But they make sense from the point of view of a desire to maintain a coherent self-image. When rationalists such as Nick Cohen and Richard Dawkins criticise such policies, they might be committing the same sort of category error of which I might have often been guilty.

- Professional trolls such as Toby Young and Katie Hopkins hold beliefs which are wrong by our standards. But they are rational from their point of view, because they have based a career upon them. Newspaper and TV editors don't want columnists and guests who say "we don't know: the evidence is missing and ambiguous and the world's a complex place", even though this is often true.

You'll notice that these examples come from across the political spectrum. Insofar as expressive rationality has eclipsed Bayesian rationality, it is not a partisan phenomenon.

* Of course, if everyone is expressively rational there's a massive cost in terms of bad policy and terrible political discourse. This is another example of how individual rationality can conflict with collective well-being.

** Herding is an ambiguous case. People can jump onto bandwagons and buy at the peak of bubbles because of cognitive error - a mistaken belief in the heuristic of social proof - or because of a desire to be part of a group, to do what others are doing.

Tax credits: journalists' failure

It's not just George Osborne who has got some thinking to do after the Lords' vote against his plans to cut tax credits. So too has the media, including the BBC.

What I mean is that their immediate reaction to July's Budget was generally positive. Not many journalists flagged up the looming trouble over tax credits. This poses the question: why did they fail?

Part of the answer is simple pressures of time, exacerbated in some cases by spin doctors not going out of their way to paint a clear picture. But there were also three other things going on.

One was a failure of maths. Pretty much the first thing you should do after a Budget is to look at the Red Book's costings of the policy measures. These tell you which of the Chancellor's announcements involve serious money and which don't.An immediate look at these in the summer (table 2.1) would have told you that the cuts in tax credits were big - a cumulative ��20bn between 2016 and 2020. That should have set some bells ringing. But what of Osborne's claim that the higher living wage would offset these losses? The natural reaction should have been: "what does the OBR say about this?" A quick look would reveal that they reckon this would add ��4bn to wages by 2020; par 8.10 of this pdf. You don't need to be a maths genius to work out that that there's a big gap here. But this was beyond many political journalists.

A second problem, I suspect, was a framing effect. We have, said Adam Smith, "a disposition to admire, and almost to worship, the rich and the powerful." This predisposes even "neutral" journalists towards the Chancellor. And the fact that the election victory loomed larger in their memories than the "omnishambles" Budget of 2012 exacerbated this tendency to exaggerate Mr Osborne's talents.

Thirdly, there's the heuristic of social proof: if other people seem to believe something, we tend to at least sympathize with that view. It was perfectly natural to look at Tory MPs cheering the Budget - remember IDS's reaction? - and infer that it was, from their point of view, a good one. This too would have made it hard to see that there was a big problem with it.

My point here is that the favourable coverage of July's Budget was not merely because journalists were Tories - though of course many were. It's also because there were psychological mechanisms at work which led them to miss what, in retrospect, was the big story. I too - in the day job but not the blog - was guilty here. We should, therefore, question whether even non-partisan journalists are doing a sufficiently good job of scrutinizing the government.

Two Blairs, or one?

Here's a juxtaposition. One the one hand, Tony Blair's partial apology for the Iraq war has reminded us of the greatest failure of New Labour whilst on the other hand, Speri's Tony Payne reminds us that Blair delivered "many substantial achievements" - among them the reduction in pensioner poverty, decent productivity growth and introduction of tax credits.

But what, if any, was the relationship between the two? Was Blair really a split personality PM, being good if limited Dr Jekyll in domestic policy and evil warmongering Mr Hyde in foreign policy?

I suspect not. Here's a theory. Some of the thought processes that took Blair to war were also processes which underlay his thinking about domestic policy. I mean this in four ways:

- An excessive faith in the "intelligence" that told him that Saddam was a threat. This represented a failure to see that knowledge is often severely limited. There's a counterpart to this in domestic policy: the belief that public services can be managed by targets also rested upon a belief that fragmentary dispersed and partial knowledge can be known to a single mind.

- Leadershipitis. A feature of New Labour was a faith in leadership and bosses. Peter Hennessy has described Blair as a "command and control premier" who believed that "you either have a strong and determined approach to the job or, just like that, you have weakness, indecision and chaos.*" This belief in the importance of leaders led to the idea that deposing a bad leader was sufficient to transform Iraq for the better. In both cases, there was a failure to see the limits of leadership and importance of complexity.

- Modernity. "If there is a single word that might capture the essence of Labour's social and political project then it is 'modernization'" wrote Alan Finlayson. Blair seemed to believe in a simple linear view of history in which modernity was both self-evident and good. I suspect he had a similar attitude to Iraq: he thought removing a dictator would turn the country into a "modern" liberal democracy. Sadly, it wasn't that simple.

- Deference. Blair was excessively deferential to those in power - both to President Bush and to military intelligence.

In these senses, the Iraq disaster did not arise from Blair having a personality change. Instead, it was the result of the same ideology he applied to domestic policy - a faith in hierarchy and neglect of the importance of complexity. This ideology also contributed to his some of his domestic failures - such as the failure to increase public sector productivity (pdf) and to restrain the rising power and wealth of the 1%.

In saying this, I don't intend to deny that there were also, as Tony says, significant achievements. And, indeed, these arose in part from the same ideology that yielded failures: without that simplistic faith in "modernity" Blair would not have made Labour so (temporarily!) electable. Strengths and weaknesses are often the same things applied in different contexts .

* "Tony Blair as Prime Minister" in Chadwick and Hefferan, The New Labour Reader.

Marx's relevance today

Simon Kuper, whom I like a lot, says: "Marx. like Freud, has finally died." This is right in one sense. Big teleological theories of history have been discredited; the only people who believe them now are silly centrists and bosses who believe the future is foreseeable and who prate about "modernization" as if it were an uncontestable idea.

However, as you'd expect, I think Marx is still very relevant today. Take four examples:

1. Why have governments encouraged financialization rather than financial democracy? Why were they keener to bail out banks than steel firms? Why did central banks conduct QE with some inegalitarian effects rather that a more egalitarian (and effective) helicopter drop? Why has austerity borne harder upon workers than the rich? One possibility is that the state is not a benevolent agent seeking to maximize a social welfare function but is instead, as Marx said, "a committee for managing the common affairs of the whole bourgeoisie."

2. Why are we in secular stagnation? One possibility is that, as Marx said, the rate of profit has declined (pdf), thus weakening the motive to invest. Another (not exclusive) possibility is that the fear of future technical progress deters investment, by increasing the fear that current investments will be on the wrong side of creative destruction.

3. Both these possibilities suggest that capitalism has become an obstacle to technical progress - that, as Marx said:

At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production.

This might be true in another way: the inequality that capitalism fosters retards productivity growth.

4. Why has the relative position of low-paid workers worsened since the 70s? A big reason is that they have suffered from technical change and globalization. As Marx recognized, socio-technical change doesn't just increase the potential for human well-being; it also has class-biased effects.

In these senses, Marxian questions are relevant today: how does social change or government policy affect classes differently? Are individual choices consistent with aggregate well-being or not? Do capitalistic property rights increases economic growth or hold it back?

I'd add something else. Marx asked, and answered, a fundamental question: what is the point of economic life? For him, it was to increase real freedom and self-realization. Capitalism, he said, doesn't do this but instead alienates us:

What, then, constitutes the alienation of labor?
First, the fact that labor is external to the worker, i.e., it does not belong to his intrinsic nature; that in his work, therefore, he does not affirm himself but denies himself, does not feel content but unhappy, does not develop freely his physical and mental energy but mortifies his body and ruins his mind. The worker therefore only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working, and when he is working he does not feel at home. His labor is therefore not voluntary, but coerced; it is forced labor. It is therefore not the satisfaction of a need; it is merely a means to satisfy needs external to it...The external character of labor for the worker appears in the fact that it is not his own, but someone else���s, that it does not belong to him, that in it he belongs, not to himself, but to another.

As Jon Elster says: "Marx himself condemned capitalism mainly because it frustrated human development and self-actualization."

Again, this is still relevant today. As Bryson and Mackerron have shown, people feel unhappy whilst they are working. Even those of us in comfortable well-paid jobs look forward to retirement, setting up on our own, or escaping from the rat race.

All this raises the question: why, then, are so many people loath to acknowledge Marx's relevance?

One answer is that Marx has been discredited by his followers - not just the barbarism of Soviet dictatorship but also the dogmatism and sectarianism of some of today's Marxists.

Another answer is that there is a tendency - popularized perhaps by Kolakowski's influential Main Currents of Marxism - to think of Marx as an obscurantist Hegelian. To some extent, he was: we are all victims of our education. But there is another Marx. If you start from Engels' Condition of the Working Class in England and start reading Capital not from the beginning but from chapter 10, another Marx emerges - one whose thinking was rooted in empirical facts about the working lives of the worst off and in an urge to improve these. It is this Marx which is still relevant today.