Stumbling and Mumbling

Losing the cuture of liberty

We're not only in danger of losing our liberties, we're losing the culture of liberty. Three recent pieces make me think this.
1. Simon Heffer claims to be a "committed libertarian" but then says casinos "for the masses" are a "preventable evil" that will lead to drug use and prostitution.
But this is a contradiction. The case for liberty is that, as John Stuart Mill said, "over himself, over his own body and mind, the individual is sovereign." This means the state has no business stopping a man gambling his money away, or taking drugs or using prostitutes (assuming women have entered that noble profession voluntarily.) Even if there are adverse social consequences of such actions, the solution is not to ban them, but perhaps to tax them, to internalize the externality.
Of course, you might disagree with this. But you cannot do so whilst calling yourself a libertarian. That's just a perversion of language.
2. Mick Hume rightly attributes the governments proposals to curb pub opening laws to the fact that:

Ministers agree, with the anti-booze and anti-gambling crusaders, that we are all basically weak-willed, vulnerable victims-in-waiting, just a binge or a bet away from addiction; suckers waiting to get hooked like those smokers in the adverts.

This raises two questions. First, even if you subscribe to this view, why does it justify restricting freedom? What's wrong with Mill's principle?:

The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinions of others, to do so would be wise, or even right. These are good reasons for remonstrating with him, or reasoning with him, or persuading him, or entreating him, but not for compelling him.

Second, is the premise that we are weak-willed suckers valid? Since Mill's declaration for liberty we've had a century and half of the Flynn effect and tens of billions spent on education. Shouldn't all this mean individuals are better judges of their interests than Mill presumed.
3. Motorists' Voice, is David Aaronovitch says, an expression of middle-class self-pity. What it fails to see is that driving is an other-regarding act which imposes harm - congestion, pollution and inconvenience - upon others. It's entirely legitimate for the state to tax these harms to internalize them; you can of course object to how this is done but the issue is merely one of empirics, not principle.
That there can be such a powerful pressure group defending a non-existent "right" to engage in unrestrained other-regarding actions, whilst there are no equivalently influential groups pressing the legitimate rights of drug or prostitute-users suggests that Britons just don't grasp the basic distinction between self- and other-regarding acts.
So, isn't it time for a backlash against this erosion of the culture of liberty? Shouldn't we be louder about the following principles:
1. Adverse social effects - even if they can be established - are insufficient reason for banning an activity.
2. The fact that an activity is disatasteful is irrelevant. I think rugby union, Tottenham fans and public schoolboys are distasteful, but I don't really want them banned.
3. Libertarianism is not the defence of privilege.
4. People are the least bad judges of what's best for them.
5. There is a (rough) distinction between self- and other-regarding acts.

Against equality of opportunity

Two people today have corroborated my Bayesian prior, that equality of opportunity is a bad thing. First, Alison Wolf argued on the Today programme against compulsory training and education for 16-18 year-olds. And then Daniel Finkelstein conjectures - rightly I think - that social mobility causes mental distress. He says:

The best way...to reduce Affluenza would be for everyone to know their place. With fewer aspirations and ambitions people might be more content.

The theme here is that the costs of equal opportunity are high, because it's very expensive to educate the ineducable. And the benefits of it are low, because those of us who achieve upward mobility don't end up happier.
Might it not be better for the left to forget about achieving equality of opportunity, and instead focus more upon reducing inequalities of wealth and power?

Freedom and virtue

What's the link between freedom and the virtues?
Maddy complains that "the 'progress' of rationality and freedom has done nothing to enlarge the human spirit."
Shuggy replies that it's [not] "the purpose of a liberal society is to produce 'enlarged spirits'. Only someone who thinks it is the proper function of a polity to be an enterprise association could say such a thing."
I think Shuggy's being too hasty here. It might not be the purpose of a liberal (market) society to make us better people, but it is the effect of such a society to do so.
In a liberal market economy, the route to success is to consider other people's wants and needs, whereas in illiberal societies, success comes from dominating and exploiting your fellow man. Liberal societies make us tolerant, partly because other people's ideas might help make us rich. And if we are free to pursue our own chosen ends we are likely to learn - eventually - that true contentment lies not in great wealth or power, but in peace of mind.
Through mechanisms like these, freedom can promote the virtues. The great Deirdre McCloskey develops this argument here, and in this book.
Now, I'm not saying that the case for freedom lies solely or even mainly in its effect upon our character.
Instead, I think the argument against Maddy is just that she's plain factually wrong. Freedom and rationality do indeed enlarge the human spirit. Just compare this with this.

Property rights, instability and FDI

If a country wants to attract foreign investment it must have political stability and good property rights. So goes the neo-liberal orthodoxy.
But it seems to be flatly  contradicted by Shell and Repsol's deal to develop an Iranian gas field.
The thing is, Iranian law forbids foreign companies from owning mineral rights or taking equity stakes in joint ventures. Shell and Repsol will merely get a cost-plus return on the project. This return is likely to be a little over 12% - which seems small given the risks  surrounding the project, one of which is the threat of US sanctions*.  Oil companies have for years been critical of such arrangements.
Which raises the question: why is Shell doing such a deal? There are three possibilities:
1. It's hungry for growth. Though this deal won't raise their reserves, it will boost production after 2011. For a firm that's made a habit of missing production targets, this is a relief.
2. The opportunity cost of the deal is low. Property rights may be bad in Iran, but they're no better in Bolivia or Russia.
3. Shell is buying a call option on policy change. By being in Iran, it's well placed to benefit if the government  relaxes its limits on foreign ownership. The more unstable the Iranian regime is, the greater is the value of this option, as the greater are the chances of such change.
And this raises a nice possibility - that political instability can be good for investment. This paper (pdf) gives more evidence for this counter-intuitive notion.
* The threat of a US attack on Iran - which has a roughly 25% probability this year - is less of a problem; think what it would do to oil prices.

Pay-offs to beauty

Why do good-looking people, on average, earn more than mingers?
According to this paper, it's got nothing to do with ability.
The authors studied the Dutch version of the TV show Shafted and found that there was indeed a big pay-off to looks: people with one-standard deviation above-average looks earned an average of 300 euros more than those with one-standard deviation below-average looks.
However, this wasn't because good-lookers answered more questions, were more confident or more willing to cooperate with other players. It's just that other players were more likely to choose to eliminate ugly players - with women discriminating more than men.
Beauty, they conclude, has consumption value, rather than any direct effect on productivity.
Sometimes, however, this consumption value can be productive - as when people are more likely to give to charity if asked to do so by a good-looking woman (pdf).
This raises the question. If it's illegal to discriminate against workers on the basis of gender or race, why should it be legal to do so on the basis of attractiveness?
My employer, however, practices positive discrimination.

Bring back class

Like all good revolutionaries, I'm deeply conservative. So, I welcome Shilpa's victory for a reason that hasn't  gotten the attention it deserves - it shows that the public wants its celebrities to have style, talent and elegance, rather than be attention-crazed ladettes.
This - I hope - represents a return to the 1950s, when sex symbols were real women like Grace Kelly or Julie London, rather than plastic monsters like Jordan or talentless wannabees like Lindsay Lohan.
This is not an appeal for a return to female modesty and chastity. Exactly the opposite. Grace Kelly banged like a privy door in a strong wind. And Jolie Holland or Gillian Anderson are not only more talented than, say, Christina Aguilera or Lindsay Lohan, but much sexier too.
Is it too much to hope that the manufacturers of "celebrity" will get the message?

The real crisis

The papers agree that there’s a prisons crisis. This is just the latest in a long series. In the last few years we’ve had an armed forces crisis, a school exams crisis, a BSE crisis and more NHS crises than you can shake a stick at, to name but a few.
This raises the question. My dictionary defines a crisis as a “time of extreme danger.” So why does mismanagement, which seems ubiquitous, so often lead to extreme danger?
It’s not just journalistic hyperbole. The disease was identified by Michael Oakeshott in his essay, Rationalism in Politics.
The rationalist, he said, believes in the “politics of perfection” – that all the public’s needs can be filled by the application of reason:

That anything should be allowed to stand between a society and the satisfaction of the felt needs of each moment in its history must appear to the Rationalist a piece of mysticism and nonsense. And his politics are, in fact, the rational solution of those practical conundrums which the recognition of the sovereignty of the felt need perpetually creates in the life of a society. Thus, political life is resolved into a succession of crises, each to be surmounted by the application of reason.

The “crisis” in our prison, then, isn’t that there aren’t enough prison places. This fact is mere routine mismanagement.
Instead, it’s that the rationalists’ claims to fill all our needs are shown to be fictions. The true crisis, then, is that our rulers’ claim to legitimacy – their pretence to competence – is undermined.

Win a Nobel, live longer

If you want a long life, win a Nobel prize.
This paper (pdf) by Andrew Oswald and Matthew Rablen estimates that Americans who won Nobel prizes for physics or chemistry between 1901 and 1950 lived 2.08 years longer than scientists of equal age who were nominated for Nobels but never won them.
This is not because Nobel prize-winners were richer than nominees and richer people live longer; the longevity premium, they estimate, is uncorrelated with the real money value of the prize.
Instead, this confirms that high status prolongs life; here's other evidence, from Oscar winners.
This matters enormously.
The difference in status between a Nobel prize winner and a nominee is small; both are enormously successful and respected people. So, if small differences in status at high levels lead to big differences in longevity, isn't it possible that the bigger status differences across society might explain some of the large differences (pdf) in life expectancy?
If so, isn't it important that we at least ensure that inequalities in status are merited?

Get some in, lose some cash

My step-dad says national service made him the man he is. If he's typical, it also made him poorer. Paolo Buonanno estimates (pdf) that UK national service reduced men's earnings by 4-7% a year; he established this by comparing men just young enough to have escaped national service when it was abolished in  1960 with men who were just old enough to have served.
Most of the lost earnings are because men who did national service got less work experience.
This matters today. Some half-wits want to introduce compulsory national community service. If history's any guide, this will prove far more expensive that it looks.

Splitting the Home Office & transactions costs

Is it a good idea to split the Home Office into two? The economics of firm organization should shed light here.
The idea here is simple. Big organizations exist because there are economies of scale, or because - as Ronald Coase pointed out in this classic paper (pdf) -  it's more efficient to run things by banging people's heads together than by haggling over contracts.
However, these benefits of size are offset by diseconomies of scale. Staffan Canback lists (pdf) four:
1. Alienation. Workers aren't committed to large organizations, partly because they find it hard to see their contribution to the wider organizational role.
2. Bureaucratic insularity. In big organizations, senior managers become unresponsive to either workers or owners. This leads to them living in a world of their own - believing their own managerialist rhetoric - and to rent-seeking.
3. Incentive problems. It's difficult to design good incentives  in large firms. Profit-related pay often won't do, as individual performance  is only loosely related to overall profits. And setting targets leads to workers focusing on these to the exclusion of all else - the classic example being the Soviet nail factory which produced one giant nail a month because its production target was set in tons.
4. Communication distortion. Even with the right motivation and incentives, managers just cannot know enough about what's going on - they have bounded rationality and knowledge.
Now, the case for shrinking an organization - for example when a firm sells a subsidiary - is that the savings of these diseconomies more than offsets the losses from economies of scale and being able to bang heads together.
The question is, therefore: will this happen if the Home Office is split? If there are no synergies between the justice and security functions at present, there'll be no costs to the split.
But will we really cut diseconomies of scale? Will (say) probation officers become more motivated by working for a smaller department than the Home Office? Will (say) their managers be less insular and more responsive to tax-payers? Will communication disortions really shrink?
I'm sceptical - after all, we're only losing one layer of hierarchy.
But that's not the point. The point is that the purpose of management is to minimize these diseconomies of scale. And that means investigating each particular function and employee. You don't cut them merely by bigthink blueprints.