Stumbling and Mumbling

From left to libertarian

Arnold Kling asks: why do more people travel from the far left towards libertarianism than make the opposite journey?
He makes many good points, but I fear his contrast between the two is drawn in the wrong place.
He says the far left commit the fundamental attribution error - it "believes that bad policies come from evil motives." However, "libertarians believe that context is more important. We believe that government power is inherently corrupting, regardless of who holds leadership positions or how they are influenced."
No doubt, this is true of many leftists and many libertarians. But I don't think it's the key distinction.
For one thing, many non-leftists also commit the fundamental attribution error. For example, some supporters of the war in Iraq believe that because Bush's motives are good, the policy is good.
Also, many leftists are, of course, smart enough to know that government power is inherently corrupting. Here in England, many think this is the history of the Labour party.
I'd split (right) libertarians and the left on a different issue - how comfortable are you with inequalities of wealth?
This issue, I guess helps explain why people move from the far left to right libertarianism more than vice versa. As folks get older, they get richer. And the richer you are, the easier it is to tolerate inequality, not just for reasons of self-interest.
I'm not accusing Arnold of this. There is, though, one aspect of his autobiography that puzzles me:

From 1986 through 1994, I worked for Freddie Mac, as it made the transition from a government agency to a shareholder-owned, profit-driven corporation. I was involved in several major innovations, including the introduction of credit scoring into mortgage underwriting. These experiences were bittersweet at best. I found myself strongly opposed by the bureaucracy when I tried to persuade senior management to undertake the innovations. Then, when senior management finally agreed to move forward, these same bureaucrats would leap aboard the new project and shove me aside. I came away with very mixed feelings about large corporate organizations. I now say that "You would not be so afraid of large corporations if you had ever worked for one."

But you could draw another inference here. These bureaucrats were, presumably, drawing big salaries despite being mere rent-seekers. Couldn't the lesson therefore be that some inequalities aren't related to economic efficiency, and that market forces don't grind so small as to ensure that inequalities are due solely to differences in productivity?
Maybe, then, Arnold was too quick to abandon the left - not least because leftism is compatible (pdf) with some forms of libertarianism.

The shrinking US stock market

This chart raises some issues. Based on the Fed's flow of funds data, it shows that in the last 12 months US firms have bought a record amount of shares - over $500bn, equivalent to 3.9% of GDP.
I've got four questions here:
1. Is this a vote of no-confidence in long-term growth? Maybe firms are buying shares back because they can't see profitable ways of investing the cash by expanding their business.
2. If this is the case, should we worry? Or are firms as wrongly pessimistic about longer-term growth prospects now as they were wrongly optimistic in 2000-01?
3. With some kind of slowdown coming, is it a good thing that aggregate corporate leverage is rising? Share buy-backs aren't being financed, in aggregate, merely by retained profits. Firms' use of credit market instruments - corporate bonds, bank loans and the like - has risen by $349.7bn in the last 12 months.
4. What's the function of the stock market these days, given that it's clearly not to provide capital? Is it an adequate policeman of poorly performing firms? Or, as I suspect, is it's main function to be a laboratory for the study of decision-making under uncertainty?

What debt problem?

This morning's figures from the Bank of England show why most macroeconomists weren't bothered by that story earlier this week that British consumers had more debt than other Europeans.
The numbers (table A4.1) show that households' bank and building society deposits now stand at £845bn - equivalent to just over 12 months disposable income.
What's more, these deposits have grown by £64.4bn in the last 12 months, whilst non-mortgage debt (table A5.2) has grown just £13.6bn; mortgage debt has risen £104.5bn.
These figures suggest that households in general are in a healthy financial position. Of course, some are in massive debt. But others are waist-high in the spondulicks. These  could well increase their spending as the highly indebted retrench.
This might be already happening. Annual net growth in consumer credit has more than halved in the last two years - from 14.4% to 6.6% - but retail sales are still booming.
Most macroeconomists, then, are relaxed about British households' finances. Not that this makes the headlines. "Economy muddles through" doesn't sell as many dead trees as "We're doomed."

John Reid: racist or moron?

Is John Reid a moron or a racist? I ask because of this:

We joined this party because we wanted to see a more equal and just society, where people are no longer held back by the accident of birth...
I'm putting fairness at the heart of everything we're doing in the Home Office.
That's why I favour tighter immigration controls.

Does the man not see the obvious contradiction here?
The fact is that being born in a poor country is a terrible accident of birth - far worse than most able-bodied Brits suffer. And if you stop such people entering rich countries, you are holding them back by an accident of birth.
There might be a case for limiting immigration. But it ain't based upon fairness. Unless, that is, you think fairness doesn't apply to foreigners.

Why I blog

Richard North isn't everyone's cup of tea, but I reckon he's got a point. The convergence between (some) bloggers and the MSM onto an obsession with "fluff" and gossip is to be regretted.
I fear, though, that this question is badly posed, and not just because of the slightly hectoring tone:

You – collectively – can continue to play your little games. Or you can show up the media and the politicians and make the running. Which is it to be?

For me personally, though, there is a third possibility - non-involvement with the MSM. I say this for three reasons:
1. Blogging is a completely different activity. It's a conversation between equals, not ex cathedra statements of "fact."
This contrast always strikes me when I compare my blog with my day job. In the latter, I come across as an arrogant bastard, to a greater degree than I do in the blog. This is not just because I am an arrogant bastard, nor even because I'm a rubbish writer, though I'm both. It's because the architecture of blogging, the links and comments, allows for an egalitarian democratic debate. This is missing from the MSM, where there'll always be a them and us.
2. The MSM is profit-oriented. And profit-making sometimes excludes other ideals. You have to give readers what they want, rather than tell them awkward truths. You have to pretend to be well-informed, because people pay for expert knowledge, not for the opinion of any idiot. Honesty and egalitarianism can therefore disappear. And even when they don't (for example) in my day job, openness does disappear; my articles are behind a subscription wall.
3. The MSM won't change. It will always be hierarchical, deferential to "experts" and "senior figures", and obsessed with gossip. For this reason, I don't like Mike Ion's idea of what blogging's about:

Blogs...influence important actors within mainstream media who in turn frame issues for a wider public.

I don't think this is true. And I hope it isn't. For me, the ideal isn't to influence "important actors", but to abolish them - in both the MSM and in politics. And because this ideal is unattainable, the next best thing is to ignore them.
At risk of sounding pretentious (pretentious, moi?), I prefer to take my lead from Alasdair MacIntyre. There's a parallel between our hierarchical MSM and political elite and the late Roman Empire:

A crucial turning point...occurred when men and women of good will turned aside from the task of shoring up the Roman imperium and ceased to identify the continuation of civility and moral community with the maintenance of that imperium. What they set themsevles to achieve instead - often not recognizing fully what they were doing - was the construction of new forms of community within which the moral life could be sustained so that both morality and civility might survive the coming ages of barbarism and darkness...For some time now we too have reached that turning point. (After Virtue, p263).

Sen's Identity and Violence: a review

The big idea in Amartya Sen's Identity and Violence is simple and true. We all have multiple identities, many different groups with which we identify:

I can be, at the same time, an Asian, a British citizen, a Bengali with Bangladeshi ancestry, an American or British resident, an economist, a dabbler in philosophy, an author, a Sanskritist, a strong believer in secularism and democracy, a man, a feminist, a heterosexual, a defender of gay and lesbian rights, with a nonreligious lifestyle, from a Hindu background, a non-brahmin...This is just a small sample of diverse categories to each of which I may simultaneously belong.

It is, he says, cruel, tyrannical and stupid to reduce us to single identities. And yet this is what British multi-culturalism - which he re-names called "plural monoculturalism" - does. It reduces people to members of religious communities. He complains:

Must a person's relation to Britain be mediated through the "culture of the family in which he or she has been born?...A nation can hardly be seen as a collection of sequestered segments, with citizens assigned fixed places.

This, like much else in the book - such as the demonstration that "western values" of tolerance and democracy are not truly western - is excellent. But there are four issues which aren't tackled fully.
1. How do some identities become more salient than others? Take Shehzad Tanweer, one of the 7/7 bombers. He was a son, brother, Yorkshireman, Englishman, university graduate, shopworker, Muslim. So why did he choose to identify himself so strongly with just one portion of his identity - Islamism - that he was willing to kill? Sen is excellent on the pathology of the "colonized mind". But is this the whole story?
2. Is my word "choose" here the right one? How far can we choose our identity? Clearly, there are limits.  Sen is right and wise to oppose the two polar opposites - the wholly rational, freely choosing economic man on the one hand and the person fully constituted by a single "culture" on the other. But what happens between these two polar opposites? Do people choose identities? If so, to what cognitive biases are they prone? What rationality do they use to choose?
3. What tricks do rulers use to manipulate us into single boxes? Sen says:

A Hutu labourer from Kigali may be pressured to see himself only as a Hutu and inclined to kill Tutsis, and yet he is not only a Hutu, but also a Kigalian, a Rwandan, an African, a labourer and a human being.

True. But this misses the important point - that it was so easy for this multi-faceted human being to become a mono-identitied murderer. How did this happen? What can we do to stop it? Why is it so easy (apparently) to get people to identify with religion and ethnicity, when Marxists have generally failed for decades to get them to identify with their class?
4. Power. Sen does not fully challenge a key fact - reducing people to single identities is in the interests of our rulers. If people are seen only as Muslims, "community leaders" can get power and influence by claiming to speak for the "community," in a way they could not if being Muslim was seen as only one part of people's identity. And politicians go along with this, becase it's easier to manage people if they are boxed and labeled.
This raises a question. If we are to regard each other as we should - as multi-identitied human beings, rather than carriers of a mono-culture - don't we have to change social structures as well as thought processes? Shouldn't we break down the hiearchies that have an interest in reducing people to mere symbols?

Equality and war

Economic inequality in the US is jeopardizing the country's chances of defeating the Iraqi insurgency. That's the claim of this new paper. Authors James Galbraith, Corwin Priest and George Purcell show that economic equality is highly correlated with victory in war:

From 1962 through 1999, the more egalitarian countries prevailed in 31 of 42 pair-wise comparisons. From 1816 to 1962, restricting our attention to bi-national wars, the more egalitarian country prevailed in 64 of 80 cases. From 1715 to 1815, the proportion was 24 of 26. Taking all together, we find the presumptively more egalitarian country prevailed in 119 of 148 cases.

For example, egalitarian Israel has consistently beaten its less equal neighbours, Communist Vietnam beat the US, the egalitarian North beat the Confederacy.
They reckon the pattern extends into ancient times:

Like the armies of Alexander, the Golden Horde of Tamurlane, Genghis Khan and Attila owed their vast military success in part to a comparatively flat hierarchy; nomadic tribes everywhere are more broadly egalitarian than the domains they ravage.

They cite three reasons why equality causes military victory:

Egalitarian countries have stronger social solidarity, and therefore better morale. Second, inegalitarian countries often structure their armed forces to handle internal regime security, at the expense of efficiency at meeting external threats. Third, deeply unequal countries face a problem of loyalty in the lower ranks.

This, they say, has implications for the war in Iraq:

The American military is under obvious stress from this fact [of increased inequality], for the simple reason (among others) that as a career it cannot compete for the services of the prosperous...But the Iraqi insurgency of 2006 represents an egalitarian mini-state.

Kick this one around, yourselves - I'm just the messenger.

Ricardo, trade and inequality

Chris invites economists to have a pop at this effort by Mark Braund. Life's too short to give it a  full fisk. But there's a beautiful irony in it.
Mark says we need another theory of economics, one based upon Ricardo's theory of rent:

Ricardo explained the tendency of free markets to promote inequality rather than inclusion in the largely agricultural economy of the early nineteenth century....Ricardo showed how those individuals whom, for whatever reason, start out with the best land, inevitably end up owning most of the land, and thus holding great economic power over the rest of population.

His theory of rent was most clearly set out in his 1815 Essay on Profits, not the Principles to which Mark links. Ricardo writes, apparently vindicating Mark:

In a progressive country, rent is not only absolutely increasing, but...it is also increasing in its ratio to the capital employed on the land...The landlord not only obtains a greater produce, but a larger share.

This happens because of diminishing returns to land. As the population grows, so does demand for food. That means worse quality land must be cultivated, so profits in the agricultural sector tend to fall. This in turn raises demand for the best quality land, and so raises rents.
You can generate a theory of inequality from this.
But here's the irony. What did Ricardo see as the solution to this problem?
Free trade, that's what. If we could import cheap corn, he said, demand for quality land in the UK would fall, as would rent:

If corn can be imported cheaper than it can be grown on [British] land, rent will again fall and profits rise.

In this sense, free trade is a way of preventing inequality rising.
Did Mark really mean to say this?

Taxation as a co-ordination game

I fear Tim is missing a point here:

Clearly, an individual who really believes that the Government is more effective at spending his money would voluntarily offer up more than the legal minimum of taxation. That we have fewer people acting in this manner than are to be found writing columns and making speeches calling for higher taxation shows a certain gap, does it not, between public utterances and private actions?

What he's missing is that public finance is a co-ordination game.
Put it this way. Imagine Polly Toynbee - for she is the elephant in this room - were to send in a cheque to the Treasury. Her Viking God would not then say: "Ey up, Polly's finally stumped up. We can pay nurses more." Her money can only be spent sensibly - in Polly's view - if policy changes. And this requires a certainty about future tax revenues that can only be achieved if everyone pays more. Polly's contributions, on their own, would indeed be wasted.
An analogy might help. Say there was a small fire in a cinema. The best outcome for everyone is that all stay calm, and leave without panicking. But if everyone starts to panic, it's quite sensible for you to leg it.
If Polly were in the cinema, it would be entirely rational for her to call for calm, but then run for it if her calls went unheeded.
Sometimes, collective choice is not merely individual choice writ large.
This doesn't, of course, mean that Polly is right to want higher taxes. And it doesn't mean she isn't a stupid hypocrite. It just means the argument against her isn't, in this case, as knock-down as Tim reckons.

The comic decline of the left

Everyone can see the rich comedy in this:

Scottish sports clubs have been told to recruit disabled players and guarantee them a weekly game under a controversial equality drive ordered by ministers (via).

But there's tragedy in it too. It shows how the so-called left just don't think about equality.
If equality is to be a noble ideal, rather than a comic one, it must mean - in Dworkin's distinction - treating people as equals, rather than giving them equal treatment.
Take an example everyone should agree upon. Everyone is equally entitled to a fair trial - that is, everyone should be treated as an equal in the provision of criminal justice. But no-one thinks there should be equality of treatment, with everyone getting the same verdict.
Proper, thoughtful, egalitarians extend this distinction to disabled people. We should treat these as equals to the able-bodied. This might mean giving them greater welfare benefits because their needs are greater - in the same way the NHS spends more on the care of the very ill. Or it might mean helping them to achieve equal capabilities in Sen's sense. This would mean, say, ensuring buildings are accessible to them, or that they aren't unnecessarily discriminated against at work.
But there's no sensible principle of equality which enjoins rigid equality of treatment of the disabled - ensuring that one-legged men can play football equally with the two-legged, or that the deaf should be professional violinists*. This just reduces equality to a joke.
What's tragic here is that the Scottish executive are ignorant of this basic undergraduate thinking. They just don't think about what equality means. "Equality" for some of the left is just a tribal totem, not an ideal to be thought about.
* They should stick to the bagpipes.