Stumbling and Mumbling

A self-hating provincial?

Oliver Kamm gives us a nice illustration of the poisoning the well fallacy. In showing a"thuggish disregard for free speech" yesterday, he says, "Greenpeace has... given definitive evidence that its voice should be discounted and derided in public debate."
It has, of course, done no such thing. The fact that Greenpeace is wrong on one point does not show at all that it is wrong on other things (they may of course be wrong for other reasons.)
There is an irony here. Oliver is defending the right to free speech of a Prime Minister who is an enemy of that right. I'd have thought that attempts to outlaw inciting religious hatred and glorifying terrorism, and using the law to suppress evidence of plans to bomb a TV station, were more serious attacks upon the right to free speech than the antics of a few twats on a roof.
Now, if Oliver is merely saying that we should tolerate the intolerant, I'll applaud him. But I'm worried there might be something else going on here. It struck me whilst reading his Anti-Totalitarianism. He tends to attack relatively powerless critics of governments (not just Chomsky), or to ignore their suffering (such as that of Iraqi citizens), whilst  - a few criticisms of Bush aside - sucking up to the powerful. This is dangerously close to power-fucking.
And herein lies a curious feature of the biography he gives in that book. Although he mentions several short-term affiliations (his chairing of  Oxford University Labour club and a couple of his City jobs), he omits to mention that he went to school for years in Leicester, which one would imagine would be a formative experience.
Is there a pattern here? Is he a self-loathing provincial who is trying to ingratiate himself into a metropolitan elite by persistently attacking the powerless? I hope I'm wrong.

What Turner doesn't say

Here are four points which are omitted or under-emphasized in today's report from the Pensions Commission:
1. The paradox of thrift. If people save more, they spend less. If capital spending is more sensitive to capacity utilization than to the cost of capital, this will reduce aggregate investment and long-term growth. And lower growth means lower savings. The upshot could therefore be that aggregate savings fall as a result of attempts to save more.
This matters because all pensions are a transfer of resources from workers to non-workers; this is true whether they are state pensions or private pensions. They key to affordable pensions, therefore, is whether workers are sufficiently productive to afford such transfers. That requires that labour productivity be high, which requires (among other things) capital spending.
2. The relevance of cognitive biases. The Commission says (p68) that consumer irrationality causes people to put too little into long-term savings. This is certainly true of some people. But pretty much anything is true of some people. What the Commission doesn't ask is: is this irrationality any more of a problem now than it was in, say, the mid-80s or 1960s, when the aggregate personal savings ratio, at around 5%, was the same as it is now? This matters, because, as the Commission says (p31), current and near-future pensioners are well provided-for. So what's happened? Has a rising stock market  offset past irrationality? Have people become more irrational? What?
3. There's an offsetting cognitive bias that can cause us to save too much - over-optimism about our longevity. This could be economically significant. In the last year for which we have figures (pdf), people left £45.9bn in bequests.
4. There's a rational reason for not investing in many pension funds which the Commission ignores. Yes, it says (p72) that annual management charges of 1.5% are "a significant rational disincentive to voluntrary private savings."  What the Commission doesn't do, though, is cite this research:

We investigate the performance of the UK equity portfolios of 2,175 segregated UK pension funds over the period 1983-97. We find that there is similar pattern in the returns on most of the pension funds and the FT-All Share index, leading us to conclude that most funds in the sample are "closet-trackers". Any measures of outperformance were therefore bound to be small. Over the whole period and across all funds average outperformance was insignificantly different from zero.

That pension funds are ripping off their clients, therefore, goes unmentioned.
Why? Well, the Commission is keen to build a consensus. And there's always a trade-off between achieving a consensus and telling the truth.

The largest ever restructuring?

One thing's bugging me about Gordon Brown's speech to the CBI yesterday. It's his claim that we are "living through the largest restructuring of industry and services the global economy has ever seen."
If this were true, what data would we expect to see? I reckon there are (at least) four things. And all four are absent, namely:
1. High unemployment, if only for frictional reasons - because it takes time for people to find work. But UK unemployment is close to a 30-year low.
2. High inflows into unemployment and outflows from it as some firms shed workers and others expand. But these figures (pdf) show that the sum of inflows and outflows into the claimant count in the last three months has been equivalent  to just 3.9% of jobs. That's less than half what it was at the peak in 1992. And the ratio has been trending downwards since then. US data collected by Robert Hall in this paper (pdf) shows a similar thing; job separations have, if anything, been trending downwards.
3. High yields on corporate bonds, as investors fear that large capital-intensive firms will default. But Federal Reserve data shows that in the US, credit spreads are only around their long-term average.
4. High stock-specific volatility, as investors fear for the future of particular firms. Sure, US data suggests this volatility has trended upwards since the 1960s. But in the UK, low now compared to recent years. I reckon that, in the last 52 weeks, the volatility of the median stock in the FTSE 100 has been only half what it was five years ago.
Now, I'm not denying - obviously - that the world economy will be very different in 5-10 years time than it is now. All I'm saying is that the largest ever restructuring of industry is leaving remarkably few footprints in the data.
So why did Mr Brown make this claim? I suspect it had little to do with the data. Instead, he's just repeating a common managerialist trope. Bosses and politicians like to pretend they are living in times of unprecedented changes and challenges. It flatters their vanity to believe  they fighting against great odds. But it's not necessarily true.

Marxism and scepticism

Shuggy is good on that old question - why do people tend to become more conservative as they get older? It is, he says, "all to do with scepticism." As we grow older, we grow more sceptical.
He distinguishes two forms of this. There's epistemological scepticism - the belief that "nobody knows anything so one learns to be suspicious of those who have a theory that can explain everything." And there's a scepticism about the human condition - a recognition that people  have limited rationality, and that the human condition is hard to improve.
Shuggy's right. But I don't think these scepticisms justify anyone abandoning anything but the most half-baked varieties of Marxism.
And here's the paradox - this half-baked Marxism has been adopted by our ruling class. I pointed this out here, but it's also evident in  Tony Blair's recent speech at the Lord Mayor's banquet:

This is a world integrating at a fast rate, with enormous economic, cultural and political consequences...Globalization isn't something done to us.  It is something we are, consciously or unconsciously doing to and for ourselves....There is a real danger that the institutions of global politics lag seriously behind the challenges they are called upon to resolve...This is a test for all of us.  A test of our commitment to make globalization work.  A test of our global leadership.

This expresses several Leninist features: a belief in a law of economic development (globalization), the notion that this economic base should determine  the superstructure ("institutions of global politics") and the belief that these laws can be harnessed for the good of all by a vanguard ("a test of our global leadership.")
Those of us who are aware of the limits of rationality - epistemological scepticists - oppose this managerialist rhetoric. Scepticism, then is opposed to New Labour and the boss class, as much as to Leninism.
Indeed, there's much Marxism - when shorn of Leninist nonsense - that's consistent with scepticism about rationality and the human condition: his theory of history (stressing the importance of technical change), his analysis of profits and exploition and his concept of primitive accumulation.
What's more, Marx's theory of ideology can be seen as a more sophisticated version of the Conservative idea that people are irrational. Whereas Conservatives think irrationality is a feature of the human condition, Marxists try to ask whether particular forms of irrationality are produced by social structures. It's only when this theory of ideology takes the degraded form of believing that you and your friends alone have true knowledge of society that Marxism and scepticism collide.
Is it a coincidence that one of the greatest modern scholars of Marxism  - Jon Elster - has also written extensively about the limits of rationality?
One final point. In one sense, Marx was a conservative in that he was deeply sceptical about the prospects for reformism. G.A. Cohen has said (Self-ownership, Freedom and Equality p11):

[Marx] thought that anything short of an abundance so complete that it removes all major conflicts of interest would guarantee continued social strife.

Conservatives would agree.

Tatonnement (sort of)

Norm suggests a new game:

1. Take a book from your shelves with more than 200 pages.

2. Find some real person's name on page 200.

3. Find out his or her date of birth.

4. Find someone else born on the same day.

5. State a connection between this person and yourself.

Here’s my first shot:

1. Amitai Etzioni, The Moral Dimension (the first that came to hand – honest).

2. Leon Walras.

3. Born December 16 1834.

4. Also born on December 16: Joel Garner.

5. Link: the subject of one of my favourite stories. At a party, a woman looked Mr Garner, who’s 6’10” tall, up and down lasciviously. She asked: “is it (cough) true that you’re, er, built in proportion?

He replied: “No, mam. If I were, I’d be 9 feet tall.”

The great thing about neoclassical economics is that you're never far away from a knob gag.

Turner's job destruction

If you raise the price of something, people will buy less of it. Trivial as this fact seems, there’s a danger it will be ignored in the discussions of the Turner report on pensions.

The Sunday Times reckons the report will recommend that all employers be forced to contribute 3% of employees’ salaries to a pension scheme.

This will raise employment costs. Common sense therefore says it will cause job losses.

How many? My back of the envelope guess is just over 200,000. Here’s why.

For many employers, there’ll be no cost increase at all, as they’re already contributing. This report (pdf) reckons that 38% of private sector workers are active members of a company pension scheme. Let’s assume that, for the other 62% of employees, firms face a 3% cost rise.

This adds 0.62 x 3 = 1.86% to the aggregate wage bill.

Now let’s assume a price elasticity of demand of 0.5. This is in line with several international estimates (pdf), although globalization might be increasing the elasticity in UK manufacturing (pdf).

This points to a cut in employment of 0.5 x 1.86 = 0.93%. With 22.87 million workers (pdf) in the private sector, this implies just over 200,000 job losses.

This sounds like a lot. In fact, it’s only around one month’s inflow into the unemployment figures (table 10 of this pdf). As the increase will probably be spread over many years, it’ll be undetectable in the macroeconomic data. So it won’t get much attention.

Degrading economic reporting

The Times confirms why I couldn’t work for a conventional dead tree. It reports these figures (pdf), showing a fall in research and development spending as a “blow to Gordon Brown.” Economic issues are thus subordinated to the worst soap opera in the country.

There are two things that are offensive about this.

First, the figures could be a blow to all of us, because they might lead to slower economic growth generally.

The link here is both causal and diagnostic. Lower R&D spending could cause slower technical progress, which is the main contributor to long-run GDP growth. And it could be diagnostic of slower growth, as it signifies that firms are pessimistic about the future.

Second, there are interesting questions here. Why is R&D spending falling when interest rates are low and corporate cash balances healthy? Have firms cut the productive or unproductive parts of R&D spending? Can they tell?

But the dead tree ignores these issues. All that matters to it is the fleeting convenience, or not, of some politician.

An anti-job application

Jarndyce is spot-on in his complaint about a lot of bloggers: they are, rather contemptibly, begging for jobs with the traditional media.
Not me. I've got a different message for the dead tree industry - don't offer me a job. You wouldn't want me. I'd be rubbish*.
For one thing, you don't know what I'm going to say (hey - I don't know either). I can't guarantee being able to strengthen the prejudices of your readers - and that's what sells papers. Sure, if I were at the Groan, I could write articles bashing bosses. And if I were at the Torygraph, I could write in favour of free markets. But the problem is, I'd get confused and do things the other way round.
Worse still, whatever dead tree I worked for, I wouldn't fit in; whoever heard of a "left-winger" who believes in free markets writing for a dead tree? I've no strong view on many issues, especially foreign affairs, and have no interest at all in talking to politicians. And above all, I've no desire to be the things you look for in a columnist: serious, heavyweight, credible, respected.
And here's a nice coincidence. Not only do you not want to employ me. I don't want to work for you.
1. You're too hierarchic. The thing that shocked me most when I moved from the City into journalism was just how inegalitarian it is; there are writers, senior writers, senior writers (brackets), assistant editors, deputy editors, managing editors, publishers and so on. Here's my hunch: not only is the newsroom of the Guardian much less ethnically diverse than a City dealing floor, it's much more hiearchical.
2. Dead trees have no concept of the nature of intellectual enquiry. How often do you see Bayes theorem used, or writing about standard errors, correlations and R-squareds - the standard tools of statistical analysis?
3. You're obsessed with trivia. Not good important trivia, like this, but genuine trivia like politicians' careers. Take this from the Times - which I mention only because its close to hand. In an otherwise good report showing how state schools do badly at educating bright kids, we get this clunker:

The findings present a huge challenge to Ruth Kelly, the Education Secretary, as she fights to win Labour support for reform of secondary schools.

Now, I respect Ms Kelly a damn sight more than I do most politicos. But surely, the important challenges here are those faced by the tens of thousands of people whose lives are blighted by crap schools. Your're perpetuating the sick illusion that some people are more important than others.
4. I n moving from blogging to writing a column, I'd lose the challenge of thinking of a newish idea every day. My biggest hope for this blog is that people come to it not knowing what to expect. Apart from Matthew Parris, of how many dead tree columnists  can this be said?
5. I don't want a big readership. Most people who take newspaper columnists seriously are mentally ill. I don't want that readership. As some guy once said: cast not your pearls before swine.
* Pedants might point out that I do work for a dead tree. I do, but it's a different sort of one.

Hutton, Keynes and pensions

Pensions minister John Hutton has repeated one of the common illusions surrounding the talk of a “pensions crisis.” He told the Today programme:

When my grandparents retired, they could expect to live maybe 10 years after retirement. Today we can expect to live another 19 years after the age of 65.

Mr Hutton’s grandparents must have been very old. Figures from his own department show that even as long ago as 1951, a 65-year-old man could expect to live another 12 years.

That’s pedantry, though. The key point is that, like everyone who trots out this line, Mr Hutton is ignoring an important fact.

On the DWP’s figures, male life expectancy at 65 has risen 58% since 1951. But productivity - GDP per head – has risen much faster than this. It’s more than trebled*.

In theory, this massive rise in productivity should have allowed for a big increase in our leisure time – for either shorter working weeks or longer retirement.

This, in fact, is just what Keynes predicted in his essay, Economic Possibilities for our Grandchildren, written in 1930. He said:

In quite a few years – in our own lifetimes I mean – we may be able to perform all the operations of agriculture, mining, and manufacturing with a quarter of the human effort to which we have been accustomed…the standard of life in progressive countries 100 years hence will be between 4 and 8 times as high as it is today.

The economic problem, he thought, would be solved, to be replaced by the problem of how to use all our extra leisure.

So what went wrong? Why are we now talking about working longer?

It’s not that Keynes’ productivity forecasts were wrong – if anything, they were too pessimistic. And it’s not that longevity has risen as fast as productivity – it hasn’t.

Instead, what Keynes failed to see is that our wants would rise as our productivity rose. Insofar as there is a “pensions crisis” – which I doubt – this is its cause.

* I’m using GVA per head, code identifier YBGT, available here.

Oliver Kamm's Anti-totalitarianism

There are no human beings in Iraq. That's the implicit presumption running through Oliver Kamm’s Anti-totalitarianism: The Left-Wing Case for a Neoconservative Foreign Policy. Kamm claims the war in Iraq "was the most far-sighted and noble act of British foreign policy since the founding of Nato.” But he fails to make this case, because he makes no effort to justify the suffering of the Iraqi people.

The first problem is that he seems to stress the prudential case for war – as a means of increasing western security – more than the moral case, that liberal democracy is a value in itself. He says:

The ‘root cause’ of terrorism is not poverty but autocracy…Western security requires the promotion of democracy. This is the proper justification for regime change (p22).

Elsewhere, he gives the impression that our security is so valuable that the war was desirable even if it doesn’t lead to Iraqi democracy:

The US and UK governments discharged their obligation to protect their citizens from the most likely conduit for terror conducted with weapons of mass destruction. Even if Iraq fails to become a constitutional democracy, and even if – worse still – the barbarities practiced by the Iraqi ‘resistance’ become an enduring part of the Iraqi political landscape, that central case for war remains (p92).

This raises two questions. First: what exactly was Saddam’s threat to the UK? Kamm claims that although there’s “scant evidence” for a link between him and al-Qaeda, his threat was “inevitable.” But he never establishes this. I’ll grant Kamm’s claim that repression, rather than poverty, causes terrorism. But this falls short of a case for toppling Saddam. Kamm says:

If it was not poverty that drove a group of well-educated and affluent Saudis to slam aeroplanes into office blocks and government buildings that September morning in 2001, but the lack of an outlet for dissidence in Arab societies other than through religious fanaticism, then there is a pragmatic case for making the spread of democracy the central goal of foreign policy (p107).

Maybe – but on this evidence, shouldn’t we start in Saudi Arabia rather than in Iraq? Or do we know the answer to that?

Kamm seems to be inviting us into the representativeness heuristic. He’s asking us to believe that, because Saddam is evil, and because terrorism is evil, there’s a link.

This empirical issue is, however, secondary to the moral one – what justification do we have for killing some people to gain security for ourselves? This is the behaviour of the psychopath.

Kamm never addresses this. Indeed, in a truly bizarre passage, he gives us the argument for believing there is no such justification:

There are some issues in politics that irreducible because they express our deepest values. Most liberals who are opposed to capital punishment would continue to oppose it even if it could be reliably shown that the death penalty deterred potential murderers. We find the very idea of judicial execution an affront to liberal values (p101).

The context suggests Kamm thinks the spread of liberal democracy is a deepest value. But if Kamm is opposed to the state killing proven murderers, why is he happy for it to kill innocent Iraqi citizens? The life of an Iraqi, it seems, is less important to him than the life of Ian Huntley or Rose West. This is downright racist.

I found all this deeply disappointing. As a liberal lefty with no strong view on the war, I was prepared to be persuaded. Kamm not only fails to do this, but actually weakens the case – and not merely by contaminating it by racism.

The argument for toppling Saddam is a cost-benefit one. It stands on two pillars. One is the utilitarian argument that (in extreme circumstances) it’s acceptable to impose suffering on some so that others benefit. The other is the empirical one, that Iraqis’ gains – in terms of life and liberty – from a post-Saddam regime will outweigh the suffering caused by the war.

Kamm doubts the latter. He accuses the Bush administration of failing to plan for occupation properly (p83). And, he says:

The cost of war – financially and, much more important, in terms of lives lost – has been greater than the supporters of regime change generally expected (p88).

All this raises a question. If this book fails to convince me of the case for war, for whom is it intended?