Stumbling and Mumbling

The Tories' structural weakness

As a lefty, the disarray in the Tory party provides a lovely schadenfreudic coincidence – that the same intellectual failing that causes the party’s bad government also causes it to elect unsuitable leaders.

This failing is an inability to see failures of collective action – to see that what is rational for each individual is often bad for everybody.

An obvious example of this came in 2012 when Cameron advised people to top up their petrol tanks in advance of a strike by lorry drivers. He failed to see that whilst this might have been sensible for any individual, its aggregate result was to trigger panic buying and fuel shortages.

There are, though, other examples. Collective action problems mean that public goods such as infrastructure are under-supplied and public bads such as pollution are over-supplied: each individual thinks it won’t make any difference to the climate if he gets on a plane, with the result that too many do so. If everybody – especially the government - tries to cut their borrowing the result is not lower debt but lower incomes for us all. Similarly, whilst you might be able to incentivize any one person to find work by cutting benefits, you cannot incentivize everybody this way: the result is just misery for those out of work. And we cannot rely upon shareholders to control company managers because the hard work of doing so is borne by the individual shareholder whilst the benefits are spread widely over all, with the result that we have inadequate corporate governance. And so on.

The point of politics is to solve collective action problems such as these. The Tory party has, however, under-rated the importance of such problems and so have given us austerity, economic stagnation and an inadequate response to the climate emergency,

Here, though, is the nice irony. The same blindness to collective action problems that caused the Tory party to wreck the economy is now causing it to destroy itself.

What I mean is that its choice of leader suffers the same problem. Each individual considering who should be leader thinks of his personal perspective: who personally do I find simpatico? Whose ideology is closest to mine? And, for MPs, who will give me a job?

These considerations of private gain, however, neglect the collective good (from Tories point of view) of the health of the party. What matters for the party is not that it has the leader closest to your own ideology, but that it has the right leader – that a round hole be filled by a round peg.

This is true in business. As Boris Groysberg and colleagues have shown (pdf) If a company needs a marketing man as CEO but hires an engineer, things go wrong. But if it needs a marketer and gets one, it does well.

And it’s true in politics too. For example, Churchill was a man of massive flaws. But in 1940 many of these faults, such as bombast and belligerence, became virtues. And other failings – such as his racism and ignorance of domestic economic and social matters – weren’t important. In 1940-45, Churchill was a round peg in a round hole. Before and after then, he was not.

Or consider Cameron. He was the right man to detoxify the Tory party in 2005. But the same overconfidence that led him to stand for leadership despite a lack of experience also caused him to call the Brexit referendum. What was a strength in 2005 was a catastrophic weakness in 2016. He stayed the same shape, but the hole changed.

Or consider May. One can imagine circumstances in which her stubbornness would be a strength – if the party had a good strategy which needed sticking to. But these are not the circumstances we’ve had recently. We’ve needed a negotiator – someone with intellectual flexibility and interpersonal skills. And May is wholly lacking such skills.

What matters, then, is the match between the requirements of the job of party leader, which vary from time to time, and the qualities of individual. Sometimes, as in Churchill’s case, the match is good: the man’s vices can either become strengths or be easily overlooked. What we have now, though, is a terrible match: May’s weaknesses are horribly exposed.

If Tory members and MPS consider only their private gain – “who most agrees with me?” – they’ll not ask who is the best match. It is only by accident then that they’ll elect the most suitable leader. And it’s a long time since this accident happened: the party’s last five leaders – Hague, Duncan-Smith, Howard, Cameron and May – have all left something to be desired.

But it was not always thus. Before 1965 Tory leaders were not elected but rather chosen by grandees. Because they were often old enough to have sloughed off ambition, such men put a higher weight upon the good of the party and less upon their private gain. They solved the collective action problem, and the Tory party was much stronger for it. The party has, however, now lost this solution. And the delightful irony is that the same blind spot that has caused it to wreck the country is now causing it to wreck itself.

How inequality makes us poorer

I welcome the Deaton report into inequality. I especially like its emphasis (pdf) upon the causes of inequality:

To understand whether inequality is a problem, we need to understand the sources of inequality, views of what is fair and the implications of inequality as well as the levels of inequality. Are present levels of inequalities due to well-deserved rewards or to unfair bargaining power, regulatory failure or political capture?

I fear, however, that there might be something missing here – the impact that inequality has upon economic performance.

My chart shows the point. It shows the 20-year annualized rate of growth in GDP per worker-hour. It’s clear that this was much stronger during the relatively egalitarian period from 1945 to the mid-70s than it was before or since, when inequality was higher. 

This might, of course, be coincidence: maybe WWII caused both a backlog of investment and innovation which allowed a subsequent growth spurt and a desire for greater equality.

Or it might not. This is not the only evidence for the possibility that inequality is bad for growth. Roland Benabou gave the example (pdf) of how egalitarian South Korea has done much better than the unequal Philippines. And IMF researchers have found (pdf) a “strong negative relation” between inequality and the rate and duration of subsequent growth spells across 153 countries between 1960 and 2010.

Correlations, of course, are only suggestive. They pose the question: what is the mechanism whereby inequality might reduce growth? Here are eight possibilities:

1. Inequality encourages the rich to invest not innovation but in what Sam Bowles calls “guard labour” (pdf) – means of entrenching their privilege and power. This might involve restrictive copyright laws, ways of overseeing and controlling workers, or the corporate rent-seeking and lobbying that has led to what Brink Lindsey and Steven Teles call the “captured economy.” An especially costly form of this rent-seeking was banks’ lobbying for a “too big to fail” subsidy. This encouraged over-expansion of the banking system and the subsequent crisis, which has had a massively adverse effect upon economic growth.

2. Unequal corporate hierarchies – what Jeffrey Nielsen calls rank-based organizations - can demotivate junior employees. One study of Italian football teams, for example, has found that “high pay dispersion has a detrimental impact on team performance.” That’s consistent with a study of Bundesliga and NBA teams by Benno Torgler and colleagues which found that “positional concerns and envy reduce individual performance.”

3. “Economic inequality leads to less trust” say (pdf) Eric Uslaner and Mitchell Brown. And we’ve good evidence that less trust means less growth. One reason for this is simply that if people don’t trust each other they’ll not enter into transactions where there’s a risk of them being ripped off.

4. Inequality can prevent productivity-enhancing changes, as Sam Bowles has described. We have good evidence that coops can be more efficient than hierarchical ones, but the spread of them is prevented by credit constraints. Poverty reduces education levels by making it impossible to afford books, or encouraging bright but poor students to leave earlier than they should, and women and BAME people might avoid careers for which they are otherwise well-suited because of a lack of role models.

5. Inequality can cause the rich to be fearful of future redistribution or nationalization, which will make them loath to invest. National Grid is belly-aching, maybe rightly, that Labour’s plan to nationalize it will delay investment. But it should instead ask: why is Labour proposing such a thing, and why is it popular?

6. Inequalities of power – in the sense of workers’ voices being less heard than they were in the post-war period and trades unions becoming less powerful – have allowed governments to abandon the aim of truly full employment and given firms more ability to boost profits by suppressing wages and conditions. That has disincentivized investments in labour-saving technologies.

7. The high-powered incentives that generate inequality within companies can backfire. As Benabou and Tirole have shown (pdf), they encourage bosses to hit measured targets and neglect less measurable things that are nevertheless important for a firm’s success such as a healthy corporate culture. Or they might crowd out intrinsic motivations such as professional ethics. Big bank bonuses, for example, encouraged mis-selling and rigging markets rather than productive activities.

8. High management pay can entrench what Joel Mokyr calls the “forces of conservatism” which are antagonistic to technical progress. Reaping the full benefits of new technologies often requires organizational change. But why bother investing in this if you are doing very nicely thanks to the increased (pdf) market power of your firm? And if you have, or hope to have, a big salary from a corporate bureaucracy why should you set up a new company?

My point here is that what matters is not so much the level of inequality as the effect it has. And it might well be a pernicious one. If inequality has contributed to weaker growth, then it is very likely to have contributed to the rise of populism and to Brexit and the divisions with which both are associated. In this way, inequality does political damage too.

From this perspective, pointing out that the Gini coefficient has been flat for years (which is true if we ignore housing costs) is like saying that because the bus has stopped moving we need not care about the man who has been run over by it. It misses the main point.

Debating the far right

The far right has been defeated. Andrew Neil’s interview with Ben Shapiro and Andrew Marr’s with Nigel Farage have exposed both men as shifty, vacuous and evasive. Their support will therefore disappear. What took the might of the Red Army in 1941-45 has today been achieved by two ageing Scotchmen.

Or not. For one thing these episodes won’t weaken the far right’s resolve. Farage is playing the victim card. “We are not just fighting the political class, but the BBC too” he says. Sure, his opponents think his interview was a disaster but his sympathizers don’t: Andrew Lilico called it his “best ever.” Such reactions demonstrate the pervasiveness of asymmetric Bayesianism – that we interpret evidence to corroborate our priors.

If we’re being honest with ourselves, many of our political views – by no means just those on the right – were formed sub-rationally. And as Jonathan Swift said, “reasoning will never make a Man correct an ill Opinion, which by Reasoning he never acquired." This is especially the case if the protagonists are debating in bad faith.

Now, many of you will object to this that whilst such interviews and debates might not persuade rightists themselves, they might help turn neutrals away from the movement. I’m not convinced, and not just because Marr and Neil are only watched by a handful of politics nerds.

One issue here is that defeating rightists in debate is like playing whack-a-mole; even if you knock one down, another pops up. It’s generally agreed that Nick Griffin made a fool of himself on Question Time back in 2009, and sure enough he has since fallen into deserved obscurity (although the BNP did increase its vote in the following year’s general election). But other far-right figures have replaced him, such as Stephen Yaxley-Lennon.

There’s an analogy here with snake-oil sellers. Even when reason and evidence did show that a particular product was inadequate, customers did not shun snake-oil generally. They simply switched to other sellers instead. As Werner Troesken showed in a fantastic paper (pdf), demand was unaffected by failure.

A second problem is that we’ve no good reason to believe that people are swayed by fact and reason alone. We know that huge numbers of voters are ignorant of basic facts, which makes them credulous about all sorts of daft ideas. We know too that they are swayed by things other than rational argument, such as looks (though in fairness these are unlikely to win Mr Farage much support). Rationality doesn’t just require intelligence. It needs immense self-discipline, which many of (not least me) just do not have – and in the case of politics, have neither the means nor incentive to acquire it.

Which means neutral observers – even assuming there to be such things – are prone to countless cognitive biases. A particularly dangerous one in this context is the mere exposure effect; the more we see or hear something, the more we like it. It’s possible (pdf) then that Andy Dawson is right: “the blanket coverage [Farage and UKIP] have been afforded has directly led to the shifting of the political landscape in Britain.”

What matters here is not just Farage’s personal appearances on TV. It’s also what gets discussed. The more time the BBC devotes to the concerns of the right – ethno-nationalism, anti-“elitism”, Brexit and so on – the more normal people think such debates should be. And conversely, in crowding out other matters, such as the decade-long stagnation in productivity and real wages, these become fringe issues. The agenda matters. And merely debating with the right shifts the agenda onto their terms.

I fear, then, that the right will not be defeated by debate. We must instead pull out the roots of its support. It is surely no accident that right-wing populism has increased around the world at a time of economic stagnation. Reducing its support therefore requires an end to that stagnation. It won’t be done by talk alone.

On media influence

Not everything that stinks causes disease. Yes, there is plenty wrong with the press and BBC, but how much influence does it actually have?

I ask because of Simon’s recent post blaming the media for the sheer incompetence of this government. I’m not so sure about this. The press has always had a right-wing bias, but we haven’t always had a government as lousy as this one. This alone tells us that other factors are at work: mechanisms that select for fanatics and against competence have strengthened in recent years.

Equally, it would be stretching things to blame the media for the rise of coarse right-wing populism. The press has been fomenting this for decades: the Sun ran the headline “Up Yours, Delors” way back in 1990. But it is only in recent years that it has become so widespread. This tells us to look elsewhere for explanations – for example in increased (perceived) threats to old white male supremacy or to the psychological impact of economic stagnation. As Martin Wolf says, “sharing out losses generated by a financial crisis, followed by the inevitably weak recovery, always creates public rage.”

What’s more, the cognitive biases research inspired by Kahneman and Tversky shows us that people are perfectly able to be idiots without reading the papers. Pro-capitalist ideology can emerge without their help.

And personally, I find blaming the press to be aesthetically displeasing: I fear it can sometimes come close to conspiracy theory, and under-rates the importance of emergence.

We also have empirical evidence from the US that the press doesn’t much matter. Matthew Gentzkow and colleagues used the opening and closing of daily newspapers to estimate effects on voting behaviour and found (pdf) “no evidence that partisan newspapers affect party vote shares.” One reason for this is that papers respond to readers’ ideologies (pdf), not vice versa.

But, but, but. There’s also evidence on the other side. Jonathan McDonald Ladd and Gabriel Lenz show that Sun readers were more likely (pdf) to vote Labour in 1997 than otherwise similar people who didn’t read the rag, implying that the Sun’s shift to supporting Labour in the 1997 election did shift votes. US evidence shows that the roll-out of Fox News boosted the Republican vote. One study has found (pdf) "quantitative and qualitative evidence that media coverage may have played a unique causal role in increasing support for UKIP," And the fact that young people are far more left-wing than oldsters – something which was not the case in the 80s – might be due in part to the fact that they don’t read the papers.

What’s more important for me, though, is perhaps the role of the press in shaping the agenda, in deciding what gets talked about: in this context is the constant drip, drip of stories that matters more than any individual one. Simon is right to say that media stories of Labour’s over-spending created a climate receptive to Tory claims that government borrowing was a big problem. The MPs’ expenses “scandal” helped to foster a distrust of parliamentarians*.  And anti-immigrant stories in the papers might well help explain the otherwise curious fact that anti-migrant sentiment tends to be strongest in areas which have low immigration. When people can compare the evidence of their own eyes to newspaper stories, they disbelieve the latter, but when they can’t…

Of course, if the press puts some things onto the agenda it follows that others things are kept off it. Not least of these is the truth. The fact that people were ignorant of basic facts about the EU in 2016 and that Tory MPs needed a training session this year on what a customs union is both tell us that the media does a lousy job of informing people.

The facts, though, aren’t the only things avoided. In talking about Brexit, immigration, identity politics and so on, important questions get ignored – such as the causes of stagnant real wages or of inequality. Even well-meaning journalists, in their search for heroes and villains, tend to under-rate the importance of emergent social phenomena.  One of the BBC’s greatest failings is perhaps a tendency to take its agenda from the press, thereby exacerbating the bias against understanding.

Net, then, I suspect our media is indeed a problem, though not the only one. Which means that one task of the left - a task it has for years failed at - is to change what we talk about. 

* The fact that some of the most imaginative writing in English literature has sometimes been in journalists’ own expenses claims was curiously overlooked in that affair.

Yes, ownership matters

I welcome the creation of the Common Wealth think tank, which aims to promote “deep shifts in property relations and ownership.”  There’s one possible preconception about this project which must be debunked, however. This is that it is hippy-dippy yogurt-weaving idealism. It’s not. The question of who should own and control companies is bog-standard mainstream economics: at least three Nobel prizes – to Hart, Williamson and Coase – have gone to economists working on this and related issues.

And in fact, stock markets themselves are calling into question the feasibility of existing ownership structures. In the UK the number of companies listed on the main market has dropped from 1747 to 1156 since the start of the century, a trend which matches those in the US and Europe. And as Kathleen Kahle and Rene Stulz show, those that are listed are bigger and older than they were then and are less profitable and hold more cash.

One big reason for this is that dispersed share ownership does not adequately control management. This is partly because of a free-rider problem. With hundreds of outside shareholders each one has an incentive to piggy-back off of others’ efforts to oversee management. Everybody therefore hopes that somebody else will be the active investor, with the result that nobody is.

As Michael Jensen pointed out in a famous paper in 1989 this is fine for companies with lots of potentially profitable projects who need to raise money to finance them: it’s no disaster if poor oversight of managers causes them to select projects with a 20 rather than 30% return on capital. But, he said, it is a problem for companies facing slow growth or which have lots of cash and few good investment opportunities. And in a world of secular stagnation there are more of these. For them, dispersed ownership is inappropriate – which is why we see fewer companies listed on western stock markets.

This problem can often be solved by more concentrated ownership. But there’s another issue here. To see it, ask: who should control an asset? In theory, it should be the one who stands to lose most if the asset falls in value and gain most if it increases. This person is the one who has the strongest incentive to maximize the asset’s value. Traditionally, this person has been the owner – be it the shareholder or direct owner. This, it has been thought, is because other stakeholders such as workers, bond-holders, banks or suppliers are protected by contract, leaving the owner as the residual claimant.

This thinking, though, is wrong. As Colin Mayer says (pdf):

Contracts are very restricted…Shareholders are not therefore by any means the only party exposed to the misfortunes of corporations and the more that we strengthen the rights and powers of shareholders, the more we threaten the interests of others.

There are at least four other actors who are residual claimants:

 - As we saw with the collapse of City Link or Carillion, subcontractors often get shafted when a firm fails whilst owners and directors can extract large “consultancy fees”.

 - Workers who have invested job-specific human capital in a company cannot get so good a job if the company fails. As Oliver Hart has written, “a party with an important investment or important human capital should have ownership rights.” (Firms, Contracts and Financial Structure, p48)

 - The failure of large firms, or those that are key hubs in a network, can cause deep recessions, as we saw in 2008. Pretty much all of us suffered from the collapse of the banks. And as Edward I – a man not noted for socialist sympathies – said "common dangers should be met by measures agreed upon in common.*"

 -  For companies that are contributing to climate change, future generations are in effect a residual claimant: they are at risk from the firms’ actions.

All this raises some questions.

First, could these parties exposed to corporate risks be protected by changes in regulation, contracts or carbon taxes? We know that they have not been so far. And I fear that the power of capital to block such changes means they won’t be.

Secondly, shouldn’t market forces select against bad companies? In part, they don’t simply because the forces of competition don’t grind so finely. The fact that there is a long tail (pdf) of inefficient companies in all countries shows that bad management isn’t strongly selected against. And even when it is, the process is disruptive of people’s lives so the residual claimancy problem remains.

Thirdly, can the market alone achieve efficient changes in ownership? The fact of de-equitization suggests that sometimes it does. There are, though, at least two issues here. One is simply that there are credit constraints: the best owner of a firm might not be able to raise finance the buy it. A second is that new forms of ownership might require legal change. The limited company was we know it was created by two acts of parliament in 1844 and 1855. (The notion that free market capitalism is somehow natural and emerged without state intervention is a fiction.) Other new forms might require such change, or at least government encouragement, perhaps through use of its procurement activities as is happening in Preston. 

Fourthly, who should own companies? The answer, as in most economic questions, is: it depends. In some cases, it should be workers. Where these have serious investments in the firm, in the form of job-specific human capital or a lack of outside options, they have sufficient skin in the game to warrant ownership or control. They also often have dispersed fragmentary knowledge about corporate performance and how to improve it that managers cocooned in the C-suite lack: worker control can be a solution to Hayek’s knowledge problem. This is especially the case if such firms don’t need to raise lots of equity finance. For other firms, Mayer has suggested ownership by a public benefit company, which ensures that firms fulfill a stated public purpose beyond mere maximization of profits: as John Kay has shown, the latter is better done as a by-product of other aims, such as producing great goods.

Fifthly, if all this is the case, why has ownership been off the political agenda for so long? One reason is that since about the 1930s Labour thought that it could achieve social democratic objectives without challenging existing ownership structures – by using macro policy, taxation, regulation or strong unions. The collapse of post-war Keynesianism in the 70s, and weak growth in our neoliberal order since, however, suggests that this belief was wrong. Maybe, therefore, ownership does matter – and in some cases at least, it might be in the wrong hands. And this is to consider the question without even raising the matter of justice and equality.

* I suppose the mood of the times requires that I note that he was a vicious anti-Semite.

Against solipsistic politics

Everybody knows the country is divided. What’s not so well appreciated is that there is also an implicit unspoken division about how we conceive the very nature of politics.

The dominant popular conception is that politics is much like ordering something from Amazon. You say what you want, expect it to be delivered, and get the hump when it isn’t. That leads to demands that politicians “just get on with it”, to talk of a betrayal of democracy, or even to demands for a “strong man” to sort things out.

There is, though, another conception. It’s that politics is not just another retail experience. It is about the conflict of interest between people: Robinson Crusoe had no politics until Man Friday pitched up. Such conflicts arise simply because we want different things. The essence of politics is to understand how to cope with this. Sometimes, others’ wants are an immutable obstacle to our own desires, so we cannot get what we want even if there is a democratic mandate for it.

At other times, though, their wants might be malleable. This might be done by persuasion, rational or not. But it can be done in other ways. Thatcher, for example, created a constituency of people with an interest in house price inflation and hostility to property taxes by selling off council houses. Blair’s expansion of universities created a more cosmopolitan, liberal cohort. And Cameron’s great achievement was to take an issue which few (pdf) people cared much about and push it so far up the agenda that it now dominates politics and has changed our political identities.

Radio 4’s Today programme gave us (inadvertently) a nice example of this difference on Friday (2’13” in). Martha Kearney claimed there was “no appetite” in Scotland for an immediate new referendum on independence. Nicola Sturgeon replied that “part of the job of leadership is to set out to people why you think change is needed.” Kearney was using the politics-as-Amazon conception, in which politicians fulfil orders; Sturgeon was using my second conception, of politics as using persuasion to manage conflict.

Such persuasion, however, cannot always be done by politicians alone. It’s a job for all of us. A good example of this is the Northern Ireland peace process. The Good Friday Agreement is perhaps the greatest example in modern times of successful delivery by politicians. And yet the architects of that success have always spoken of the peace process. And for good reason. They know that peace isn’t something that can be delivered from on high by politicians even if the vast majority of people want it. It needs constant work on the ground to persuade potential terrorists to abjure violence. The murder of Lyra McKee was a failure of this process. But the failure wasn’t one of politicians or police. And it didn’t happen when the shot was fired. It happened when someone went looking for a gun and was met with the words “I can sort you out” rather than “don’t be a twat sonny.”

Now, it’s easy for us Remainers to sneer at Brexiters for wanting something that is ruled out by others’ preferences. But the silliness is not theirs alone. Many Remainers are demanding a third referendum but giving us little clue that they’ll do a less piss-poor job of campaigning than they did in 2016. They care too much for their own desires and pay too little heed to how to influence others.

In fact, this point broadens. There are other policies we might like but which might be prevented by others’ behaviour. For example:

 - Higher taxes on the rich or on companies. Whether these can actually raise much more revenue or not depends in large part upon whether the rich regard taxes as a price to pay for living in a civilized country or just a burdensome impost which they seek to avoid. This tax morale varies from time to time and place to place.

 - Wage-led growth. Whether this succeeds depends upon how companies respond to higher wages. Do they betoken increased aggregate demand and hence a reason to invest? Or are they instead a threat to profit margins and hence a reason to cut investment? Again, the answer will vary from time to time and place to place.

These two policies are much like Brexit, in the sense that whether they can be delivered or not is not merely a matter of a democratic mandate. Their feasibility depends upon others’ beliefs and actions. Sensible politics considers what these beliefs might be, and how to shape or change them. Stupid politics, by contrast, acts like a five-year-old solipsistically screaming “I want, I want”.

The converse is also true. There’s a strong case for some policies even though the voters don’t seem to want them. For me, the case for encouraging worker coops falls into this category: they are necessary to increase equality and productivity, whether voters want them or not.

If we lived in an intelligent polity, my point here would be obvious. It’s that politics is not and cannot be another Amazon fulfilment centre. It’s not just about what you want, but about what others want too. The very essence of politics is about how we manage conflicts between different attitudes, and how we might change those attitudes – the latter being a job not just for politicians but for everybody.

Who'll defend freedom?

In the last few days we’ve seen rightists attempt to bully Greta Thunberg out of the public sphere rather than engage with her arguments; Tony Blair’s demand for ID cards and that immigrants have a duty to integrate; and rightists (backfiring) efforts to shame Diane Abbott for drinking on a train. These all have something in common. They show that the right and centre are enemies of freedom*.

These are not the only examples, nor the worst. New Labour created thousands of new criminal offences, a trend continued by the Tory government such as in its ban on legal highs, its counterproductive porn block and its "hostile environment" policy. Very many Tories and Cuks voted last year against legalizing cannabis. Chuka Umunna, following the centrist Emmanuel Macron, wants to reintroduce forced labour. And of course demands to end freedom of movement and restrict immigration are by definition demands to curb freedom.

The only reference the Cuks made to freedom in their launch statement (pdf) was that: “our free media, the rule of law, and our open, tolerant and respectful democratic society should be cherished and renewed.” This looks a little like valuing the freedom of corporations more than that of individuals.

To people of my vintage, this illiberalism looks odd. In my formative years anti-leftists claimed to cherish freedom, and attacked the Soviet Union for denying it to their people.

Which poses the question: why, then, are they so opposed to liberty today?

Partly, it’s because they always have been. Many cold warriors were not sincere libertarians, but only appealed to freedom as a stick with which to beat the USSR. Many of them supported Pinochet and apartheid, and the criminalization of homosexuality. The freedom they valued was the freedom to exploit others.

Another reason is that the enemy of freedom is fanaticism. Friedrich Hayek wrote:

Since the value of freedom rests on the opportunities it provides for unforeseeable and unpredictable actions, we will rarely know what we lose through a particular restriction of freedom. Any such restriction, any coercion other than the enforcement of general rules, will aim at the achievement of some foreseeable particular result, but what is prevented by it will usually not be known....And so, when we decide each issue solely on what appear to be its individual merits, we always over-estimate the advantages of central direction. (Law Legislation and Liberty Vol I, p56-57.)

The more confident you are about your own beliefs, the more weight you’ll attach to the individual merits of any infraction of freedom and the less weight to unforeseeable actions. So you’ll be more inclined to curtail freedom. Although centrists think of themselves of moderates, this is often mere self-love: you can be a fanatical centrist just as much as you can be a fanatical leftist or rightist. Fanaticism and extremism are different things.

There’s something else. Centrists and rights have long been naïve about power. Many have been over-optimistic about the extent to which it will be used benignly, no doubt in part because it has traditionally been exercised by jolly good chaps like themselves. It is for this reason that they have long been too relaxed about the coercion that occurs within corporate hierarchies. But the same thinking – or lack thereof – extends to political power. If it is people like you who will exercise power, and minorities or working class people who’ll be on the dirty end of it, you’ll be relaxed about arrogating power to the state.

Which brings me to a forgotten fact. Before the 20^th century, freedom was a leftist ideal: think of Tom Paine, John Stuart Mill, the young Marx, Adam Smith’s jaundiced view of the “rich and great”, or the first word of the motto of the French revolutionaries.  There was a simple reason for this: they all knew that restrictions of freedom helped the rich and powerful and hurt the poor and powerless. It is time for the left to reclaim the value of freedom – because, let’s face it, nobody else will.

* Of course, rightists are quick to claim to value free speech. But Dawn Foster has a point: the infringements of freedom of which they complain are often no such thing but are instead the hitherto voiceless merely answering back.

When failure succeeds

In politics, failure sometimes works better than success. This is the message of this piece by Janan Ganesh, wherein he argues that it is in Trump’s interest to fail on his promise to control immigration, because if he does so it will remain a big issue which will attract voters to him. Janan says:

It is perverse, I know, that a president could make so little progress on his number-one priority during four years in office, only to be rewarded for it. 

Maybe not so perverse. There are other examples.

One, as he says, is Brexit. If Brexiters get their way, voters will see that it is in fact no solution to our problems. And Farage would then lose his schtick of being able to claim that the political class is out of touch with the people. If you are practicing the politics of grievance, the last thing you want is for the grievance to disappear.

But there are other examples. Authoritarian governments use crime, unrest or terrorism as excuses for removing freedoms. For them, failing to suppress crime works better than succeeding. Technocrats and managerialists need to maintain the prospect of further incremental improvements, which requires them to maintain a gap between the actual and the feasible best.

And rightists have sometimes accused leftist parties of wanting to create a “dependency culture” and to maintain inequality and poverty, because doing so ensures the continuation of a constituency that will vote for them. As Gilles Saint-Paul and colleagues write:

Policies that reduce the income of the poor relative to the average income, such as failing to upgrade the skills of the workers and preventing their erosion by new, skill-biased, technologies, paradoxically consolidates the political power of the Left. This is because these policies make the natural constituency of a left-wing party endogenously more dependent on it.

The converse is also true. Success can be failure. Post-war social democracy worked well in raising real wages; it was one of the greatest peacetime policy successes in history. But this helped to foster individualist consumerism which supplanted class consciousness and reduced support for collectivist institutions.  As Nye Bevan wrote in 1952, in anticipation of J.K.Galbraith’s theory of “private affluence, public squalor”:

As modern industry produces new and attractive forms of private consumption, the individual citizen is made all the more reluctant to see his income taken away from him for remote purposes. (In Place of Fear, p134 in my copy)

As Avner Offer has written more recently:

Towards the end of the 1960s, attitudes began a slow shift away from the common welfare and public services as sources of well-being, and towards private benefits…The choice to “go private”, which is widely perceived as a driver of affluence, is perhaps one of the consequences of affluence. (The Challenge of Affluence, p7-8)

In the same vein, the creation of high-quality council houses created a constituency with a strong interest in buying them cheaply from Thatcher.

In these ways, social democrats’ success was also their failure. Corbynomics might suffer the same fate. If it succeeds in the medium-term, it will enable young people to buy houses – but this will create a client base of older property-owners in future who’ll have an incentive to support the status quo.

My point here is a simple one. We flatter ourselves that we live in a meritocracy in which success is rewarded and failure punished. But in many cases, this is a myth. Sometimes we live instead in the world of snake-oil salesmen as brilliantly described (pdf) by Werner Troesken, in which it is failure that is rewarded. Our economic and political institutions are all selection mechanisms, and sometimes they select not for success but for failure.

Note: my target audience is discerning enough to understand the picture reference. 

Broad-spectrum policies

Is there a case for the Bank of England to target house prices? The debate, I suspect, highlights a difference in how we think about economic policy – between what might be called a single-issue technocratic approach versus a broad-spectrum approach.

Many of us, I suspect, agree that high and rising house prices are a cultural and economic menace. They encourage high debt which is potentially destabilizing (pdf). They divert spending towards rent and mortgage payments (and sometimes housebuilding) and away from new goods and services, thereby reducing dynamism and innovation. They encourage people to commute long distances, which increases stress and cuts productivity. And they encourage “property development” at the expense of more productive forms of entrepreneurship.

There’s therefore a case for limiting them. Equally, though, there are reasons to question whether this can be done merely by giving the Bank of England a target for house price inflation alongside its CPI target.

Granted, such a target might work simply by reducing house price expectations, thereby deflating speculative buying – especially if the target is set as low as Grace Blakeley has suggested (pdf).

There are, however, legitimate doubts about its effectiveness. The Bank’s only policy for curbing house prices would be to limit mortgage availability. But how effective would this be if overseas or shadow banks fill any gaps caused by conventional lenders withdrawing? Also, housing booms are often localized, so how would limiting mortgages in Leicester curb London’s high prices? Such restrictions would also be inegalitarian: they’d deny mortgages to young people without deposits but grant them to those who have access to the Bank of Mum and Dad. And, of course, one policy might not be sufficient to cut prices. We might need others such as taxing land, encouraging renting, changing planning laws or simply building more houses. Such policies are outside the Bank’s competence.

Ms Blakeley replied to criticisms such as these by saying, reasonably, that a house price target should be part of a radical reform of the banking system.

Which brings me to the issue. Sometimes – often – there is no single magic bullet policy. Instead, we need a whole range of them. This isn’t true only of curbing high house prices. Here are two other examples:

 - How should we improve the bargaining power of workers? I’d advocate a range of policies: a high basic income; job guarantee (arguably); support for trades unions; and macro policies aimed at sustained (over-)full employment.

 - How to raise productivity? There are countless possibilities: better infrastructure; more vocational training; stronger competition policy; more open international trade; encouraging finance for R&D, capex and intangibles investment; shifting tax from incomes to land; better migration policy; encouraging coops; and so on.

Such a range of policies is a sensible reaction to ignorance and uncertainty. If we don’t know what’ll work we should throw lots of possible solutions at the problem in the hope that something will stick – in the way that doctors, when faced with a patient with a strange condition, might put them on broad-spectrum antibiotics in the hope that something will work.  

Of course, this is only sensible if the policies in question have little or no downside – if they are free hits (which is not true of prescribing antibiotics!). But in the examples I’m considering here, this is largely the case. Even if land taxes don’t reduce house prices much, there’s still a case for them. Similarly, most policies to raise productivity wouldn’t do much harm even if they fail. A few Harberger triangles are not a big problem: as Adam Smith said, there is a great deal of ruin in a nation.

Herein, however, lies an oddity. What I’m advocating seems inconsistent with the empirical turn in academic economics. The use of randomized control trials or other clever identification strategies give us (at best) precise answers to narrowly defined questions. In some cases, however, what we need are rough answers to big questions.

Marxism for Tories

The Tories have discovered a new boo-word. In the last few days, Iain Duncan Smith, Esther McVey and Suella Braverman have all used “Marxism” to mean a self-evidently Bad Thing. From one perspective, this is odd because in fact Tories should find some aspects of Marxism quite sympathetic.

Not least of these is an admiration for capitalism’s dynamism. Marx wrote that capitalism “has given an immense development to commerce…has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals…draws all, even the most barbarian, nations into civilisation…[and has] rescued a considerable part of the population from the idiocy of rural life.” We don’t deny that capitalism has been a progressive force. We just wonder at what price this has been achieved, and whether the progress can continue.

And let’s get one obvious thing clear. Just as Conservatives no longer believe in locking up homosexuals or hounding them to death, so Marxist don’t want to send their opponents to gulags. Quite the opposite. There has always been a big libertarian strand within Marxist thought. Marx thought that the ideal society was one in which "the free development of each is the condition for the free development of all" and looked forward to the abolition of the state. The nanny state of which libertarians like Christopher Snowdon complain is emphatically not a Marxian notion.

In fact, Marxists share with Tories a scepticism about what state intervention can achieve. Whereas social democrats think that the right macroeconomic and redistribution policies can alleviate the worst features of capitalism, Marxists are not so sure. One reason why we want to supersede capitalism is precisely that we share with Tories doubts about the efficacy of piecemeal reform.

I’ve used that word “supersede” advisedly. Most Marxists no longer believe in violent revolution, or even revolution at all. If you want to find ideologues who’ll wreck the economy by imposing a  utopian fantasy upon it, you should look at Brexiteers rather than Marxists. Instead, we favour accelerationism or interstitial transformation (pdf) – finding non-capitalist forms of organization such as coops or community self-help groups (what Burke called “little platoons”) and encouraging their development.

In this sense, Marxism is empirical and anti-ideological. One reason for this is that we have no dog in lots of conventional political fights. For example: would a much higher minimum wage destroy lots of jobs? If no, then fine; we have a way of helping the low-paid. If yes, then it just shows that capitalism is incompatible with decent living standards for all. Or: can some monetary and fiscal policies prevent recessions and promote longer-term growth? If yes, we’ve got something useful. If no, then we’ve evidence that capitalism is destined for crisis and stagnation. Because we’ve no preconceived ideological answers to such questions, we can let ourselves be guided by the evidence.

What’s more, Marxists are not moralists. We don’t think social ills are the result of bad people doing bad things. They are instead, systemic problems which emerge independently of the intentions of individuals. As Marx said, “external coercive laws [have] power over every individual capitalist.” Marx, like Adam Smith, was an early theorist of emergence.

Some Tories might also be surprised that some apparently Marxian positions are not uniquely Marxist. The labour theory of value and tendency for the rate of profit to fall were both Marx’s elaborations of the ideas of Smith and Ricardo: when Paul Samuelson called Marx a minor post-Ricardian he was saying that there’s less originality in Marx than you might think. And if you’re looking for a belief in the sort of historical determinism attacked by Popper, you should look not to Marxists but to Blair: as Will Bott has shown, his talk of globalization as an “unstoppable force” is more crudely deterministic than most of us Marxists would accept.

It should be clear from this that Duncan Smith is wrong to say Corbyn is a Marxist: that pays him too great a compliment. Labour’s 2017 manifesto was mostly mainstream European-style social democracy.

All this, though, leaves me ambivalent. On the one hand, I think the Tories are right to be scared of Marxism: it poses an intellectually coherent challenge to their class privilege in a way that centrism and much of social democracy does not. On the other hand, though, using Marxism as a merely derogatory term is to misrepresent the history of thought. It is crude philistinism. But then, perhaps that is all the Tories have nowadays.

Why rent matters

Philip Green doesn’t get much public sympathy, but he deserves our thanks for doing one thing: he is reminding us that economists have wrongly neglected David Ricardo’s theories of rent.

Mr G is fighting landlords to cut rents – as indeed are several other high street names. Which evokes Ricardo. He showed that profits can be squeezed not by worker militancy but by rising rents.

The basic idea here is straightforward. Imagine, said Ricardo, there were an abundance of fertile land. A landlord could not then charge farmers rent: the farmers would just move onto other land. As the economy and population grows, however, the best land becomes fully occupied so farmers must use less fertile land. As they do so, the owners of the best land can demand rent from their farmers. And as worse and worse land gets brought into cultivation so the difference in the output of the best and worst land increases, giving owners of the best land even higher rent. As Ricardo wrote:

By bringing successively land of a worse quality, or less favourably situated into cultivation, rent would rise on the land previously cultivated, and precisely in the same degree would profits fall; and if the smallness of profits do not check accumulation, there are hardly any limits to the rise of rent, and the fall of profit….In a progressive country…the landlord not only obtains a greater produce, but a larger share.

This isn’t just true of farmland. It also applies in retailing. Owners of the best sites – those with the highest footfall and greatest accessibility – can charge shop-owners a rent up to the difference in revenues they get between the best and worst sites. As Tim says:

Even in busy London stations coffee sellers don’t make much money because the landowner simply increases the rent. In other words, it’s the landowners via rents who make money in prime locations, not the operators of businesses. 

Retailers such as Mr Green have got the hump with this.

But it’s not just retail space of which this is true. It’s also true of housing. As Josh Ryan-Collins writes in his superb book, Why Can’t You Afford a Home?, “desirable location (typically in large cities) is inherently limited.” And Econ 101 tells us that if demand increases when supply is inelastic, we see big price rises. As Londoners get richer, everybody wants to live in Hampstead, with the result that only Russian oligarchs can afford to do so.

Historically, there has been a mitigation of this. In a lovely paper (pdf), Katharina Knoll, Moritz Schularick and Thomas Steger show that house prices were actually flat in many countries for years in the first half of the 20^th century. A big reason for this was the development of commuter train lines. The opening of the Metropolitan line, for example, allowed workers to travel easily from Neasden to central London. That reduced the monopoly which landlords in the city centre had, thereby squeezing their rents – just as cheap fertilisers would have squeezed farmland owners’ rents in Ricardo’s model.

This effect, however, was only one-off – at least it will be until we invent teleportation. And it has been replaced by another more powerful effect – financialization. Credit liberalization in the 1980s removed the constraint upon house prices imposed by current incomes by allowing people to borrow more. The upshot is that there has been a strong correlation between house prices and interest rates: as the latter have fallen, house prices have risen relative to earnings.

For this reason, as Ryan-Collins explains, high house prices are due in large part to financialization. This, he believes, means that there is a case for banking reform and a land value tax.

The point here, though, isn’t just about policy. It’s also about how economists approach their discipline. As Ryan-Collins writes:

Land and money are two of the most neglected concepts in economic theory. Land is immobile, irreproducible and appreciates in value over time due to collective investment – none of these features apply to capital goods. Yet modern economics and national accounts treat them as one and the same.

Herein lies one reason (of several!) why economists should study the history of economic thought. Doing so can show that classic economists knew things which modern ones have forgotten.

The rise of moral simplicity

One of my best friends here in Rutland is a keen Brexiter. I fear, though, that our hysterical political times are jeopardizing such cross-divide friendships. Instead, as Dorian Lynskey has said, many people have fallen into a “childlike moral binary: only people who hold the all correct positions merit empathy or respect.”

Dorian is speaking of Momentum telling us not to feel sorry for Nick Boles. But I think the point generalizes. Not only do Remainers and Leavers have little mutual understanding, but much of the left persists in the “evil Tories” meme whilst some on the Right seem to think that anyone to the left of Tom Watson wants to reopen gulags. We see a similar thing in the debate about whether Michael Jackson’s music should still be played: the urge for simplistic moral binaries stops some people seeing (despite many historical examples) that a man can be both a criminal and a great musician.

What interests me is: why do so many people fall into such childlike binaries?

One reason, I suspect, is a simple cognitive bias – a version of the halo effect. We tend to believe that people who have one quality have others, so that if they agree with us on an important matter they must also be intelligent and kind-hearted. The converse of this is that if they disagree with us then they are stupid or evil.

A second reason is that – for psycho-political reasons I don’t fully understand – we have lost what Richard Rorty called liberal irony (pdf). Many people are no longer “always aware of the contingency and fragility of their final vocabularies, and thus of their selves”. Instead, our political beliefs have become important part of who we are. The debate about Brexit is not a dry technical matter about our relationship with the EU. It has become just another form of identity politics. This might be a symptom of what Ben Friedman pointed out back in 2006: hard economic times, he showed, produce intolerance and fanaticism. I’m not sure, though, that this is the only explanation.

Related to this is something Richard Sennett described in 1970. People, he said, want to create “purified identities” for themselves, “making oneself a fixed object rather than an open person liable to be touched by a social situation.” One way they do this, he said, was by denying the reality or legitimacy of dissonant experiences or opinions.

I suspect that there are also sociological factors at play. It’s easy for many of us to stay in intellectual ghettos and only meet those with like-minded opinions: how many Brexiters does the typical academic meet? This is reinforced if you are a political activist who spends his/her leisure time with fellow partisans.

Perhaps, though, the media is also to blame. If my only exposure to Brexiters came from the BBC I would believe that Brexiters are arseholes because this is what the likes of Rees-Mogg, Johnson and Francois seem to be.

In fairness to them, this might be because we see all political interviewees out of context, separate from any evidence of any wit, self-doubt or decency they might have. Just as footballers often wrongly come across as stupid because we only see them answer simple questions when they are tired, so perhaps politicians are also systematically misrepresented by the very nature of interviews.

Or maybe there’s something else. The media select for gobshites, egomaniacs and fanatics. It’s these that push themselves forward. And the interviewee who says “I dunno, it’s complicated” makes for lousy  TV or radio.

I concede that this list of reasons is vague and incomplete. But in a sense, this is the point. Some people are calling for a gentler, more understanding politics. What this misses, though, is that there are powerful sociological and psychological mechanisms driving us towards a morally simplistic mutually hostile politics.  

 

Decadent Tories

The Tory right’s obsession with Brexit might be a symptom of a deeper malaise – the fact that they have nothing else to offer.

To see what I mean, contrast today’s Tories with Thatcher. She could credibly offer material improvement for millions of people. She offered them the chance to own their homes –by selling off council houses and by credit liberalization that made it easier to get mortgages – and to make big profits on them. She offered tax cuts for mid-to-high earners. Professions such as finance and law were opened up to people from previously-excluded backgrounds. The reduction in trade union power was a relief not only to company owners but to thousands of junior managers. And the resumption of growth after the 1981 recession delivered good income growth for those workers who had kept their jobs and for those who could afford to save. And her Conservatives could – especially after the 1981 recession – credibly claim to be the party of business, to represent a serious reality-based people.

Thatcherism, then, put money onto the table of a big constituency. Not everybody of course – as miners as industrial workers knew too well. But enough to be a serious (if in my view mistaken) economic project.

Contrast that with her epigones today. What material offer are they making?

None. All we have are a handful of trade deals of minimal effect with small countries, and Johnson’s message, “fuck business.” The Tories are silent on questions such as how to kickstart productivity and real wages. In place of Thatcher’s offer of material betterment, we have nationalist fantasies. As Phil Burton-Cartledge has been saying for months, the Tories are a decadent party.

How did this happen? The answer is of course a long and complicated one. I’ll just sketch a few reasons.

One is that Thatcherism was a time-limited offer. Insofar as her reforms did raise output, they gave only a one-off boost to the level of GDP rather than an ongoing stimulus to growth. Also, tax cuts were financed in part by high oil revenues which have long since fallen and by privatizations. If, as Thatcher said, the problem with socialism is that you eventually run out of other people’s money, the problem with Thatcherism is that you eventually run out of other people’s assets to sell. And of course the capital gains on housing were only one-off: we’ll not see them again.

Secondly, Thatcherism sowed some seeds of its own destruction, such as:

 - The financialization she began has pushed house prices out of the reach of young people: Josh Ryan-Collins’ Why You Can’t Afford a Home is good on this. Whereas young urban professionals were Thatcherites in the 80s, their children, cheesed off by high rents, are definitely not.

 - Thatcher hoped to create a society of people like her father – diligent, benevolent entrepreneurs. But instead we got one of people like her son – amoral chancers. Social norms of trustworthiness, sympathy and moderation have broken down, unleashing not beneficial entrepreneurship but exploitation, socially useless financial innovation and sky-high bosses’ pay.

 - The assertion of “management’s right to manage” has led not to sustained increases in productivity but to rent-seeking, the demotivation of professionals and hostility to productive innovation.

A third reason for the demise of Thatcherism lies in some changes in world capitalism. Job polarization has worsened (pdf) the career prospects of non-graduates: there is no 2010s equivalent of Loadsamoney. And secular stagnation – whether due to a falling rate of profit, lower innovation or whatever – means we’re not getting the income growth many people had under Thatcher.

These changes mean that what is true of Blairism is also true of Thatcherism: the economic base that gave their ideas such power has disappeared and so new policies are needed. Just as centrists have failed to rise to this challenge, however, so too has the Tory right. Quite why this should be is another story: I suspect that both selection effects and incentives (some arising from our piss-poor media) militate against Tory MPs having the ability or willingness to meet the challenge.

Whatever the cause, though, the effect is the same. The Tory right’s inability to recognise changes in the economic base mean that they have become mindless obsessives living in a fantasy world.

The consistency illusion

The British Social Attitudes survey reports a fall in the proportion of people saying they voted Leave in the 2016 referendum and a rise in the numbers saying they didn’t vote. This is probably due to panel attrition. But it draws our attention to what is certainly a real phenomenon – a tendency to misremember our past preferences in a systematic way.

This was pointed out (pdf) by Gregory Markus back in 1986. He showed that when people were asked about their views on political issues such as gender equality or drug legalization nine years earlier their recall was poor. Their beliefs as they remembered them was much closer to their current ones than was in fact the case. They understated the extent to which they had changed their mind.

What was going on here is a desire for consistency. We want to believe that we are the captains of our soul rather than just a bundle of neurons responding erratically to stimuli and we redescribe our past to make it easier to believe this. There is a line in a lovely Kate Campbell song about a woman who “convinced herself she never needed a man”. And when Orwell has the Ministry of Truth claiming that we have " always been at war with Eastasia" he is highlighting the public's willingness to change their perception of history to maintain their self-image of consistency. Giuliana Mazzoni says such false recall is common:

Picking and choosing memories is actually the norm, guided by self-enhancing biases that lead us to rewrite our past so it resembles what we feel and believe now. Inaccurate memories and narratives are necessary, resulting from the need to maintain a positive, up-to-date sense of self.

This echoes Adam Smith:

The opinion which we entertain of our own character depends entirely on our judgments concerning our past conduct. It is so disagreeable to think ill of ourselves, that we often purposely turn away our view from those circumstances which might render that judgment unfavourable.

But we don’t just misremember the past to maintain a stable self-image. We also reinterpret the present to avoid telling ourselves we were wrong. Psychologists call this choice-supportive bias. If we buy a car that’s slower than we wanted, for example, we congratulate ourselves on its fuel efficiency. Disappointed lovers or voters want to believe they were betrayed rather than that they made the wrong choice. And Brexiters downplay economics and focus on the benefits of sovereignty and need to respect the will of the people. As Robert Cialdini wrote:

Once we have made a choice or taken a stand, we will encounter personal or interpersonal pressures to behave consistently with that commitment. (Influence, p57)

This is one reason we are prone to the sunk cost fallacy: having made a bad choice, we stick with it.

Such self-deception devices mean, as Daniel Kahneman has noted (pdf), that our remembered utilities don’t accord with what we experienced at the time. But it’s memory rather than reality that shapes our choices. And this, he says, means we have “poor accuracy” in predicting what we’ll want in future.

Here again, our attitudes are shaped by an urge for consistency. Just as we wrongly think that our past preferences are like our present ones, so too do we over-estimate the extent to which our future preferences will resemble our present ones. Matthew Rabin call this the projection bias (pdf): we project our current tastes into the future. This is why people pay too much for houses with swimming pools or convertible cars in the summer: they fail to anticipate these will be little use in the winter. It might also explain the well-known tendency for share prices to be too high in the spring and too low in the autumn: investors wrongly project their springtime optimism and their autumnal pessimism into the future. (And fund managers have always been loath to recognise this because they want to see themselves as consistent rational people rather than skittish mood-driven flibbertigibbets.)

All this suggests that we do not have the stable preferences we think we do. Stability and consistency are to some extent illusions which we impose onto our memories, perceptions and expectations. Which poses a question. If an individual’s preferences are unstable to a greater degree than we think can we really speak of a stable “will of the people”? Maybe this is an emergent phenomenon – something that’s true of groups but not of the individuals that compose the group. Or maybe it’s just a fiction.

Against retail politics

How did we get into this mess? The story is of course a long one, in which I would argue that austerity plays a big part. But there’s another strand I want to pick out. It’s the rise of a conception of politics as being just another consumer service and the eclipsing of Burke’s notion that MPs should place their judgment above the opinion of voters.

It was this “customer is king” idea of democracy that led Cameron to call the referendum and which allowed May last night to pose as being on the side of voters against MPs. And it lays behind the anger of some Leavers at not getting what they’ve voted for: they see it as being like Amazon not delivering the items they’ve ordered.

Quite why this idea emerged is another story. Some of you might blame “neoliberalism” for promoting the idea that politics should be just another market place. Others might blame the MPs' expenses affair for diminishing trust in parliament.

Whatever the cause, there’s a basic problem here. Politics is not – and cannot be – just another domain in which consumer sovereignty holds. I say so for three reasons.

First, in ordinary customer markets people have to pay to exercise their choices. This forces them to think, because if you buy rubbish you lose money. Our votes, however, carry no such cost. Which gives us no incentive to think properly. The result is that, as Jason Brennan says “when it comes to politics, smart doesn’t pay, and dumb doesn’t hurt.”

The second difference is that in most situations customers make regular choices and so can learn from experience; if they buy overpriced rubbish they don’t return to the store. In fact, with sufficient skill and experience and a bit of luck, you can even sometimes buy a drinkable pint at Wetherspoons. In politics, however, it is often otherwise. The choices we face are new, one-off ones where we have no experience and so we lack one vital source of learning. We've never had Brexit before, so even the tiny minority of people who know some history had no experience to guide them. .

Thirdly, and maybe most importantly, your political choices impose externalities onto others. If you choose to spend you money on worthless tat it makes no difference to me. Your vote, however, does. As Brennan says:

When a democratic majority picks a policy, this is not akin to you picking a sandwich from a menu. When the majority chooses, it chooses not only for itself, but for dissenting voters, children, foreigners, nonvoters and others who have no choice but to bear the consequence

This, he says, means that an ill-informed vote or – worse still – one based upon vicious motives might be a form of injustice. We have a right to expect that decisions which affect us will be taken properly. Bad voters thus violate our rights.

In these respects, politics very different from most consumer behaviour. In fact, not only are there differences on the demand side, but there are also big differences on the supply-side too. Shops do not ignore the preferences of 48% of their customers. Nor do they expect us to choose a job lot of groceries in advance only once every few years. And nor do they regard increased demand as a problem: we don’t hear the boss of Tesco complain that immigrants are putting pressure upon Tesco’s services.

For all these reasons, politics cannot be just another market place. It must be a separate sphere requiring different rules. We need, therefore, to rethink the very basics of politics: what is a good democratic decision? What institutions must be in place for such decisions to be likely?

A few good people are asking these (pdf) questions. Most partisan politicians, however, are not. They are like bad parents in a bitter divorce: they are fighting for control of the child whilst completely neglecting its well-being.