Stumbling and Mumbling

Stupid Conservatives and Mill

Joe quotes John Stuart Mill's letter to Sir John Pakington:

I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative.

Joe says this is not a claim that most Conservatives are in fact stupid.
In logic, Joe's right. But in practice, he's not.
It all depends upon the proportions of Conservatives and stupid people in the population, and what Mill meant by "generally".
In the general election the year before Mill wrote those words, voters split 40-60 Conservative-Whig. Let's assume this represents the proportion of Conservatives in the population.
So, what did Mill think was the proportion of stupid people? Here's a clue from On Liberty:

On any matter not self-evident, there are ninety-nine persons totally incapable of judging of it, for one who is capable; and the capacity of the hundredth person is only comparative.

Let's put the weakest possible construal upon "generally" - just over 50%. It then follows that  over 50% per cent of the population are stupid Conservatives. That's more than all the Conservatives in the 1865 election result; maybe some were too stupid to vote.
On this weak reading of "generally",  the majority of Conservative voters in the 1865 election are stupid as long as more than 40% of all people are stupid.
On a a stronger reading of "generally" - three-quarters - then the proportion of stupids in the population has to be below 27% for the majority of Conservative voters not to be stupid. Given Mill's view of human intelligence, he probably didn't believe this.
One wrinkle here is that women and the working class could not vote in 1865. However,  large numbers of these would have to be Conservatives to overturn my maths.
So, I reckon Mill did mean to say that Conservatives were generally stupid, and he was fobbing Sir John off, in the belief that, as a Conservative, he'd be too stupid to do the maths.

What you don't read

My source sends this exclusive report on the world shares slump:

Expected returns on the FTSE 100 posted their biggest one-day rise since May 17 yesterday, because investors' risk aversion rose.
Analysts agreed there was no obvious rational explanation for the increase. They were unconvinced that a bigger than expected drop in US durable goods orders was to blame.  "Anyone who's looked at the yield curve in the last  few months has known that the economy's heading for a soft patch or worse. Such a volatile figure adds little to this belief"  said some geezer who's paid a fortune for saying how many beans make five.
Nor were they worried by reports that the Chinese government plans to crack down on speculative dealing. "No sane person has ever trusted the Chinese to respect investors' rights"  said Ronnie Rent-a-Gob of the Bank of the Bleedin' Obvious. "That word 'Communist' sends a bit of a clue."
"Investors taste for risk has just changed a little. There's no reason for this - it's just one of those things, like the fashion for size-zero models"  said Henrietta Meeja-Hoare of Helping Suckers Buy Crap Bank.
So-called experts confessed that they hadn't the foggiest where there market was heading. "If I had that much foresight, I wouldn't need to get out of bed at five in the morning to earn a living answering dickhead questions from twats like you" said Bertie Bigmouth of Boreclays.
"All we know is that lower prices usually mean higher expected returns. So the longer-term outlook for the market is better or less bad than it was last week"  said Larry Loudgob of hedge fund Ripoff and Runne.

Against tax breaks for marriage

David Cameron asks: "The Prime Minister said today that marriage is a good thing. Well if it is, why not back it [with tax breaks]?"
Three reasons:
1. There are lots of things that are good: cats, cricket, celebrity Dancing on Ice and Cesc Fabregas to name but the Cs.  But we don't back these with tax breaks. Why not? Because there's no clear positive externality to encourage. It's the same with marriage. An average marriage in which kids are brought up averagely well creates no benefits to others; the world is already more than adequately stocked with people.
Sure, bad parenting is a negative externality. But this is  not cured by tax breaks for marriage.
2. Incentives don't necessarily work. The reason we don't give tax breaks to Cesc is that people can't be incentivized to become Cesc. A similar thing's true of marriage. Sure, at the margin tax breaks will encourage cohabiting couples to marry. But do we really want kids to be brought up by the sort of folk who marry for money? That's a different sort of marriage than the ones that happen now.
3. Tax breaks have a deadweight cost. Many go to people who'd do what they're doing anyway. And they increase the complexity of the tax system, which means more civil servants.  These costs must be borne by those who don't get the tax breaks. That's a burden on others.
So, let's be clear. When Cameron calls for tax breaks for marriage, he's not addressing a social problem. He's just trying to bribe median voters.

Brown doesn't get it

Yet again, Brown is calling for a "national purpose":

We know that other countries have a strong sense of national purpose, even a sense of their own destiny. And so should we. And it helps us deal with issues as varied as what Britain does in Europe; to issues of managed migration and how we better integrate ethnic minorities.

I've got three objections to this:
1. It fails to see that the state is not like a private company. Companies have obvious single objectives, but states do not. Nowhere has Brown considered, let alone rebutted, Michael Oakeshott's view that the function of government is to be an umpire adminstering the rules of the game, not the captain inspiring and directing his players. As Oakeshott asked: "We tolerate monomaniacs, it is our habit to do so; but why should we be ruled by them?"
2. It's illiberal. Brown claims that "Britain can lay claim to the idea of liberty." But the point of liberty is that each individual chooses his own purposes, his own life. To disregard these in favour of a national purpose is to misunderstand the very basis of liberty.
3. It's impractical. Brown seems to think a shared national purpose will help defuse Muslim fundamentalism. But will it really? Will we really integrate marginalized Muslims by imposing some spurious invented national purpose upon them? Or wouldn't we integrate them better by showing that people thrive best within liberal diversity rather than struggling under a common yoke?
* Brown's demand that immigrants do community service before being accepted as citizens is too silly to merit comment.

Income & health: new evidence

Everyone knows that rich people live longer than poor ones. Reducing income inequality would therefore improve the health of the poor, right?
Wrong, according to two recent papers.
First, economists at the IFS show that increases in personal incomes in the UK in the 1980s and 1990s did not lead to better health. If anything, the opposite: "a 1% increase in income lead to about 0.7 to 1 more deaths per 100,000 persons among the prime aged population in any given year." Also, rising incomes lead to more smoking. And there was no significiant link between  rising incomes for individuals and better respiratory or cardiovascular health.
Second, is this gem (pdf) from Esther Duflo and colleagues. They studied the impact of the income losses upon French wine-growers in the 19th century caused by Phylloxera:

We examine the effects on the adult height, health, and life expectancy of children born in the years and regions affected by the Phylloxera. The shock decreased long run height*, but it did not affect other dimensions of health, including life expectancy.

Put together, these papers suggest that changes in income, for good or bad, don't cause changes in health. Which in turn means increased income equality won't necessarily improve the health of the poor.
There are three possible reasons why not:
1. It's inequalities of status, not of income, that kill.
2. The cross-sectional correlation between health and income might run from health to income (healthier people work harder and earn more), or might be the result of a common cause; intelligence or low time discount rates cause people to have high incomes and to take better care of themselves.
3.  The time lag between income and health is very long. Perhaps it works through generations, with richer women having healthier children. 
* Height data was collected by the French military, who presumably wanted tall soldiers as they could raise white flags higher.

News vs truth

The massive coverage of the Cumbrian rail crash shows that news and the truth are two different things.
Rail crashes make the news because they are rare. Most car crashes don't make the news because they are common.
But the truth is that car transport is far more dangerous. In Q3, 840 people died on our roads and 7630 were seriously injured (pdf). This means Cumbria's casualties  - one dead, eight seriously hurt - are equivalent to around three hours of road accidents.
Put this another way. In 2005 there were 6.35 deaths and 57.5 serious injuries per billion vehicle kilometres on the roads (pdf). On the railways, there were 0.1 deaths and 11.6 injuries per billion passenger kilometres. Even in the worst recent year on the railways (1999-00) there were just 0.9 deaths and 18.6 injuries per billion miles.
So, however you cut it, road transport is much more dangerous.
The media's disproportionate focus upon newsworthy railway accidents rather than road accidents invites the public to commit the salience heuristic - of judging the probability of train crashes to be more likely than they are, simply because they get so much attention.
This error might have dangerous consequences. If someone chooses to travel by car rather than rail as a result, they expose themselves to greater risk.
And if policy-makers insist upon tougher safety standards on the railway - which cost money and so drive up fares - they divert people onto roads, which are more dangerous.

Proud to have been Militant

Oliver Kamm writes:

When an activist in the local Labour Party where I was at university, I formally tabled [a motion] rejecting the membership application of someone who now writes a well-regarded blog on economics, on grounds of my certainty of his membership of the Militant organisation.

I was that man. And what's more, this is one of the few of my youthful dalliances I'm not embarrassed about.
On this point, Oliver contrives to be 100% wrong. He claims that Militant had/has "an ideology alien to Labour's democratic values."
But this is not true. Yes, Militant was democratically centrist. But that only meant that, once  the group had taken a decision, its members should stick to it - it's the same principle as cabinet collective responsibility.
I was attracted to Militant largely because it was (is?) more democratic than old Labour. It aimed to empower ordinary people by increasing democratic control over the economy. And its slogan "a workers MP on a workers wage" was a rejection of the notion that politicians should be a separate elite causing a "potentially dangerous gap between politicians and the public."
And what are these democratic values that "mainstream" Labour holds? In what respects has New Labour increased democracy within the UK? How has it empowered ordinary people?
A few elected mayors seems about the limit. Blair's instincts are in some ways, as Tony McWalter has pointed out, anti-democratic. And in creating around 3000 new criminal offences, New Labour's attitude seems to be that people are to be controlled an corralled, not empowered.
Of course, there's much about Militant that I now dislike - the notion of a centrally planned economy is daft. But for Oliver to call it and me alien to democratic values is plain wrong.
Another thing: One of the more attractive features of Militant when I was a member is that we called ourselves not "Militant" but the "Tendency".  I always liked this implication that political view were to be lightly held. We were all extremists, but we weren't all fanatics. 

Labour and agency

Rather belatedly (via Bel) I see this amazing quote from Ian Gibson:

I don’t think people should have bonuses at all. They are unacceptable.

I suspect Gibson is revealing an interesting bias within Labourism here.
Put it this way. In what world would such a statement be valid?
It would be one in which incentives were unimportant. And this, in turn, would be a world where people had no effect upon outcomes. It's be one where workers filled space, like those poor sods with placards advertising golf sales, or merely obeyed bosses' instructions*. In such a world, bonuses and incentives would be unacceptable, as they'd introduce useless random noise into pay.
This would be a world in which workers had no agency at all, but were merely passive objects to be manipulated.
This presumption illuminates the distinction between mine and Labour's leftism. Much (not all) Labour policy does regard people as passive objects. Workers need minimum wage and health and safety laws because they're incapable of fighting for decent pay and conditions themselves. They need a nanny state as they can't choose correctly how to live their lives. And workers' control of firms and public sector bodies is not even considered, because workers aren't fit to run organizations.
By contrast, my leftism rests on a view that people are capable of running their own lives -  or at least would be if they were given the chance to develop the capacity to do so. Hence my support for free markets, worker control and direct democracy.
I mention this for two reasons. First, please don't think that the "left" is all as illiberal, patronizing and economically illiterate as Gibson. Second, to highlight an oft-ignored fact - that our political beliefs often rest upon a conception of what "human nature" is, or could be.
* And presumably bosses themselves merely obeyed orders - it'll be bosses all the way up.

Post-capitalism

Timothy Garton Ash asks: can capitalism survive? And he omits an important point - property rights.
Put it this way. Feudalism in western Europe did not collapse because people didn't like it, or because it blew up catastrophically. It gave way to capitalism, over centuries, because capitalistic property rights were more effective at creating wealth than were feudal ones; on this point, Marxists and neoclassical economists like Douglass North roughly agree; see, for example this book and this pdf.
This suggests that, if capitalism is to die, it could do so because its property rights prove to be inefficient.
And here's a coincidence. One distinctive feature of capitalism - the company owned by many external passive shareholders - is increasingly thought to be an inefficient way of owning property. Private equity is buying such companies precisely because it realizes that such ownership is sub-optimal. As Robert Peston says:

Ask almost any manager why private equity has been so successful and what you’ll hear is that “it better aligns the interests of owners and managers”...In a way, the rise of private equity can be seen as a rejection of the shareholder-capitalism that has underpinned the US and UK economies for 150 years.

Of course, the shift from publicly quoted to privately owned firms is not the overthrow of  capitalism.
But it hints at at intriguing possibility. Could it be that publicly-quoted firms are (in some cases?) inferior not only to privately owned ones, but also to worker-owned ones? Could it be that the latter aren't more widespread not because they are inefficient, but because workers lack the access to finance that private equity houses have? Could it be that capitalism - like feudalism - will die a slow death as thousands of capitalistically-owned firms gradually mutate into ones owned in more efficient - and egalitarian - ways? So, maybe Norm's hope is right.

Women analysts

Here are three economists who are braver than I - Clifton Green, Yue Tang and Narasimhan Jegadeesh: 

We study the relation between gender and job performance among brokerage firm equity analysts...Women's earnings estimates tend to be less accurate. After controlling for forecast characteristics, the difference in accuracy is roughly equivalent to four years of experience. Despite reduced coverage and lower forecast accuracy, we find women are significantly more likely to be designated as All-Stars, which suggests they outperform at other aspects of the job such as client service.

Cough. Full paper here (pdf).