I’ve seen Andy Haldane speak twice in the last five days…

…and twice the audience disappointed, once courtesy of the IEA and once Occupy. I’ll write up in due course.


The coalition only had less than a one in twenty chance of being this bad! And they nailed it!

By George, they’ve beaten the odds. This might be the most idiotic Government since Churchill put us back on gold at prewar parity. Via KrugthuluSchularick and Taylor have an on the post crisis performance of US and UK economy. Below is the money shot.


You can see that both the US and UK suffered much worse recessions than normal, considering historical experience (and educated guess work). However, while the US is recovering from that recession more quickly than expected, the UK is recovering much more slowly. So slowly in fact, recovery is a misnomer. We are stagnating.

The only organisation, as far as I’m concerned, with the power to move that bottom blue line upwards is the Bank of England. Although operationally independent the Chancellor has the authority to instruct the Bank of England to be more vigorous at any time he likes by changing the definition of the “price stability” which he is meant to achieve.

New Labour initially had the Bank of England target RPIX of 2.5%, but in December 2003, the inflation target was changed to CPI of 2%. Were Osborne to decide to that price stability in fact meant nominal GDP targeting and that some catch up was necessary he could make this instruction without further ado. Osborne has not made this decision despite definitely receiving advice from Vince Cable’s office that it would be a good idea to do so. I don’t have any evidence he’s received advice, but knowing Vince and his SpAd the advice must have been proffered at some point.

It is within his remit within current legislation. It doesn’t matter that it is a fudge. Britain has always fudged crisis management, think of it a 21st century suspension of the Bank Act, British politics is good at muddling through. When it comes to childcare the coalition is adept at misdirection and fraud, when it comes to the disabled, they aren’t afraid to hurt people, but when it comes to the macroeconomy they seem to accept failure gleefully. Given the coalition’s incompetence in managing the affairs of the nation, they need kicking out.

One reason the EU doesn’t deserve the Nobel Peace Prize

Unlike some, I think the EU winning the Nobel Peace Prize is a good thing. Europe was the most warlike place on earth for millennia. I have trouble thinking of somewhere more incessantly violent than pre-1945 Europe.

The Americas, Africa and Australia were both too sparsely populated for properly sustained warfare of the European variety. They also didn’t have the technology to produce viable killing machines. South Asia and East Asia, e.g. the Muhgals, Han etc. settled into imperial systems in which a hegemon acted arbitrarily violently, but which was never as dangerous as Europe”s state of war.

Things got a bit peaceful from 1815-1914, but once Europe had run out of non-Europeans to kill they went back for a hundred-year-giant-slaughter-anniversary bash which they ran, with intermission, from for about the next 30 years.

But, suddenly, since 1945, we haven’t really killed each other that much – apart from the Russians, but we’ve always thought they were a bit odd. In my view somebody needed an award, the EU is good enough. Plus, it has at least been pretending that maintaining the peace is what it was trying to do.

However, a couple of days before EU was awarded the prize, they did something which made the world a marginally more warlike place. Europe killed the BAE/EADS merger. BAE is synonymous with the British military-industrial complex, EADS is the same for continental Europe. A merger would have created one of the largest producers of military hardware in the world.

By killing the deal Europe has managed to prevent the management of BAE and EADS from rushing headlong into a pointless merger and stopped them from destroying millions of pounds worth of weaponised wealth.

Mergers have a terrible history. Rather than enabling synergies and economies of scale or scope, mergers often leave everybody worse off than if the firms had remained separate. The juries out on why mergers so often go wrong; it could be managerial hubris; it could be the winner’s curse wherein the winner is the person who bids ever so slightly too high; it could be something more Hayekian, in that people underestimate the complexity of the larger company.

In any case, I thought it was likely a BAE/EADS merger was a value destroying proposition. Both BAE and EADS are tightly linked to their sponsor states. A merged company would have had to answer to the British, the French and the Germans. Can you imagine them getting anything done if you had those three bosses? It would be a recipe for disaster, but disaster in the “killing things” supply chain is a net plus for the world, so I thought it odd to see these two stories come out at about the same time.

Oh, and why would two medium firms merge into a large one if it is such a bad idea? Well, its a bad idea for the owners, but for the management

When Amazon own everything

A couple of days a go, my friend Linn sent me an e-mail, being very frustrated: Amazon just closed her account and wiped her Kindle. Without notice. Without explanation. This is DRM at it’s worst. 

I cannot verify whether the e-mail exchange actually happened or whether both parties are being honest, but it is instructive of the trouble with digitally “owning” something.

In digital form, in extremis, you own very little of what you think you own. A lot of the time you are merely leasing the material. So long as nothing goes wrong, and so long as you stay onside with the usually unburdensome terms and conditions nobody will notice.

For example, most music, films and books bought online are in fact leased. You have full use rights of the material you purchase but you don’t own it, and your use rights can be revoked if you transgress the terms and conditions nobody reads.

Most people don’t know this, and this is why people don’t mind. However, as seen at the link at the top of this page, when you break, or are thought to have broken, the terms and conditions of the lease it can be cancelled and all the content you thought you owned will vanish.

This points to one reason people pirate material. Pirated material is material you own, unlike most of that provided commercially. Paradoxically, it is in the real world that ownership allows anonymity. In reality, we are all very traceable on the internet. Each click or digital transaction involves electronic data passing between two known, verifiable and unique IP addresses.

When you buy something in a shop in the real world you usually don’t know where the other guy lives, but on the internet you know just where their computer “lives.” That means if you annoy the person from which you bought a game, song, book or movie they can slip in and silently take what you bought.

The internet and tech sector is growing much more quickly than the rest of the economy. That means that digital goods are becoming a bigger part of what we own and these problems are multiplying. As the digital world expands more and more of the valuable things you own could end up being leased and power will pass from the state and from individuals to private companies.

Kinda creepy when you think about it.

How’s this for bad incentives?

Six Italian scientists and an ex-government official have been sentenced to six years in prison over the 2009 deadly earthquake in L’Aquila… The seven – all members of the National Commission for the Forecast and Prevention of Major Risks – were accused of having provided “inexact, incomplete and contradictory” information about the danger of the tremors felt ahead of 6 April 2009 quake, Italian media report.

The Italian scientists who said “there probably won’t be a big earthquake” before a big earthquake are going to be sent to prison. This is because in this region of Italy, a small tremor isn’t normally a warning sign of a larger quake, it is just a small tremor, nothing more, nothing less. They said this, and now face jail.

The problem with this should be obvious, the incidence of predicted earthquakes that never happen will now go up. This won’t make anybody safer, in fact, evacuations are dangerous, so this will make the world a more dangerous place not to mention ruining the lives of seven innocent men.


Environmentalists are conservatives

The psychologist and political theorist Jonathan Haidt declared that what separated the right and left aren’t at separate ends of a spectrum. In reality morality is divided into five main categories of moral concern — harm, fairness, loyalty, authority and purity.

The left care a lot about harm and fairness but not much about loyalty, authority and purity. The right care about all five values about equally. While the environmentalists usually line up with the left on most matters there is a striking difference between the left and environmentalists.

Environmentalists care about purity. One of the things that derives environmental politics isn’t just a concern for the natural world for its own sake, but a feeling that it is should not be interfered with, that it should be kept pure. It is this adherence to purity that makes environmentalists and economists get along so poorly.

Conservatives care about human purity too, one of the reasons they hate the gays (or hated, much of the right has come a long way), is because they violated particular ideals of  masculinity. That and bum sex is icky. Environmentalists have a similar views on nature, there are ways nature should be and then there are ways mankind perverts it.

I began thinking and this in this way after reading Tim highlighting Mike Moffat‘s troubles with environmentalists in Canada. From Mike’s takedown of David Suzuki:

“But if you ask the economists, in that equation where do you put the ozone layer? Where do you put the deep underground aquifers of fossil water? Where do you put topsoil or biodiversity? Their answer is ‘oh, those are externalities’. Well then you might as well be on Mars, that economy is not based in anything like the real world,” Dr. Suzuki goes on to say. Dr. Suzuki’s remarks on externalities were clarified in an interview given to the magazine Common Ground: “I won’t go into a long critique, but currently nature and nature’s services – cleansing, filtering water, creating the atmosphere, taking carbon out of the air, putting oxygen back in, preventing erosion, pollinating flowering plants – perform dozens of services to keep the planet happening. But economists call this an ‘externality.’ What that means is “We don’t give a shit.” It’s not economic. Because they’re so impressed with humans, human productivity and human creativity is at the heart of this economic system. Well, you can’t have an economy if you don’t have nature and nature’s services, but economics ignores that. And that’s an unbelievably egregious error.”

Anybody who knows anything about economics as practised in ivory towers or government knows that this is nonsense. An externality isn’t something which economists ignore. It is something which those economists study will ignore until they are made to pay attention. A factory owner will ignore his pollution’s effect on those downstream because he receives the benefits from cheap waste disposal but none of the costs. This can be dealt with through negotiation, if those downstream have property rights over their water. It can be dealt with through regulation, if coordinating those affected proves to difficult without a state. Economists don’t just ignore it.

In fact, economists have for years been deeply concerned with coming up with ways of dealing with externalities. Pigou was worried about rabbits, Coase was worried about pollution, one of the paper’s that got Paul Krugman his Nobel prize wouldn’t have been possible without the concept of “positive” externalities. That’s over 30,000 citations from three works from three of the most well known economists in the world. This isn’t marginal stuff.

So why would an environmentalist ignore such a canonical part of the economic literature? I would say it is because they share with conservatives a respect for purity which economists and I do not share. Whereas an economist sees a problem of balancing benefits and costs, an environmentalist sees a problem of protecting something from contamination. This implies a different balance of benefits and costs. It implies a steep cost curve going down but only a gradual one going up. Easy to go there, hard to come back.

This means that while economists think they can ameliorate things by changing prices, environmentalists are more worried. Pricing externalities so that those who cause them pay the costs (or receive the benefits) seems like all too little effort for protecting nature’s purity. This means that environmentalists misinterpret economist’s offers of help as capitulation. And economists misinterpret environmentalists’ failure to campaign for the right things as ignorance.

I’ve sketched out a caricature of an environmentalist for this post (likewise a caricature of economists), but I think it gets to a fundamental problem that bedevils environmental policy making. A lot of the policies that would help achieve environmentalists immediate aims are not compatible with their high level aims of maintaining nature’s purity. For example, carbon prices and nuclear power could help eliminate carbon fuels, but environmentalists are uninterested because carbon pricing is too weedy an instrument and nuclear too powerful a technology. Likewise, fisheries are being ravaged because it is very difficult to privatise the seas to encourage careful husbandry and environmentalists see privatising the seas as despoiling their purity.

It is a tragedy of miscommunication, and not one to which I think there is an answer. Sensible policies only get enacted once we know what they are and there is a coalition able and willing to force it through. We know the answer to many environmental questions, and we have a movement able to force those policies into practice, but the will is lacking.

So. Much. Stupid. Conservative blind spots edition

Alex Tabarrok

Hey, black dudes! Its great having a big willy! Why you get so mad?! Us white guys are complimenting you!

Okay, that’s not what he said. But he did say this of Asians:

Alex Tabarrok

Hive mind is not even an insult it’s a compliment – like wisdom of the crowds. The hive mind diffuses knowledge and cooperates–it’s not all thinking alike it’s all using the best of each.

Perhaps I better back up a little and give all this a little context.

Noah Smith wrote a post saying that an academic paper  on A Garett Jones paper called “National IQ and National Productivity: The Hive Mind Across Asia“. When I hear about IQ and economic development I reach for my pistol. Noah Smith is just as sceptical. Personally, I don’t see the mechanism. As Chris Dillow says, there are models and mechanisms. You can come up with a pretty model and then become angry when the world deviates from it or you can think about how your pet theory would work its way through the real world.

I can understand a mechanism that uses slight changes in IQ to predict which “nation” will develop first. I’ll describe the one I have in my mind. There are thousands of institutional forms –  “rules of the game” – and only a few of them are compatible with economic growth and prosperity. A higher IQ gives a group 1) a wider the selection of institutional forms to choose between 2) those institutional forms will on average be more complicated 3) better institutions are more likely to be chosen 4) once successful institutions are identified a more intelligent group will be more likely to keep them.

That is an interesting model, but it doesn’t seem to bare any resemblance to the history of the world. The more accurate picture is that various interest groups fought it out in various different places until, in north western Europe a powerful merchant group came into the ascendency and won political concessions that secured their property rights. This happened to have happened after the political revolution following black death in which western European peasants won a degree of autonomy and near some coal. That combination of secure private property, freeish though expensive labour and cheap energy happened to produce sustained economic growth. Nobody planned it because they were smart. It wasn’t sustained because it was smart by the best of my knowledge either. Because Europe was the most violent place in the world, everyone had to strive towards economic growth or face political annihilation. So greed, luck and violence seem far more important to the first sustained initiation of economic growth than IQ.

Similarly, why are some nations wealthy now and some not? Well there is again a similar model where clever nations adopt good institutions and stupid ones don’t, merely out of ignorance, but that doesn’t seem to be the mechanism we observe. Very poor places had their institutions fucked up by white people – psst, that’s Africa, Latin America, China, India etc. – and it takes a long time to get it together after an occupation and negative structural shock. National IQ sounds racist, and while I concede it might have some predictive power with regard to who’s developed, it doesn’t accord with most of the other mechanisms we have for where economic growth comes from – so I’m fairly happy to dismiss it.

So it is into this milieu we jump.

Noah argues that the paper discussed, by Garett Jones, uses lots of racist tropes and should handled with care. He provides some evidence contrary to the predictions of the paper of varying degrees of convincingness. Scott Sumner, whom I respect greatly, hits back that there is a great deal of explanatory power in culture and that Noah shouldn’t throw around the word racist because it is a bad thing. The only problem is that nobody was talking about culture, they were talking about racially innate IQs, and their explanatory power with regards to economic growth. And that brings us to Alex Tabarrok’s comment, at the top of this post and left underneath Scott’s saying how a “hive mind” is a good thing.

This gets to the heart of the real problem.

For some reason, those on the left can see the context in which things happen in a way those on the right cannot. Noah isn’t too left wing, but he seems to have this special power (and attribute of the left wing hive mind, no doubt).

Because for conservatives it often seems context means nothing. I mean seriously; when, in any cultural artefact ever created, any film, novel, piece of art, daydream or utopian novel has a “hive mind” been presented in a positive light? From Zamyatin’s We, to Huxley’s Brave New World a hive mind is not presented as something good. The hive mind does not refer to the wisdom of crowds.

Lets go back to black people, because its easier to talk about racism against blacks. What has been one of the most persistent racist tropes about black people? That they are sexually promiscuous, even sexually aggressive. This is why white people going on about black guys large cocks is usually racist in content, and often racist in its implications. For a female example, the Hottentot Venus wasn’t exhibited for Londoners to gawp at just because white people were/are racist, but because they were/are racist in particular ways. The ways in which people are racist must colour the way in which we view statements.

Context matters. Asians have been stereotyped as sneaky, corrupt, uniform, “hive mind” automatons for over a  century. You still see it in most western reports of strikes and social unrest in China – shocked, shocked reporters that Chinese people are rebelling against their bosses or bureaucrats. Jamie covers Mass Gathering Incidents frequently and there is a good article length treatment of labour unrest here. Hive mind? Tell that to Foxconn. Considering a racist slur in context is not hard, it takes effort in fact to abstract away from the negative connotations of most racist slurs, yet conservatives do so all too often.

This is sometime around the 1970s conservatives realised they were losing the fight for intolerance, so they changed tactics and tried to reframe the debate. They were no longer arguing in favour of racism, oh no, they were arguing against over earnest antiracism. This was politically convenient for two main reasons.  One, lots of the ground work of antiracism was carried out by those on the left. Two, it gave racists someone to vote for. Now in the UK Labour had an at best mixed record on race, especially with regard to housing policy, but during the 1980s they were much more focussed on antiracism. During the same period conservatives began to create a victim mentality where attacking antiracism became more important than attacking racism.

Alex Tabbarrok might like the idea of being part of a hive mind. And some white men might like the idea of being sexually promiscuous with a mighty, large penis. But to completely ignore over a century of casual and institutional racism is plain stupid. But it is a pattern conservatives find themselves slipping into too often: attacking antiracism more virulently than racism. This post is less than completely satisfactory, but I’ll leave it there, and pick up in the comments if necessary.