Stumbling and Mumbling

AK-47 prices

You all remember that scene in Fools and Horses when the Trotters were banged up in a Spanish jail. Rodney says to Grandad: "You mean you were gun-running during a civil war?"  Grandad replies: "That's the best time to do it, Rodney."
Well, Grandad was wrong.  This new paper finds no significant impact of civil wars upon the prices of AK-47s. This could well be because suppliers follow Grandad's advice, so supply rises to meet demand.
What it does find, though, is that  AK-47 prices are around $500 lower in Africa than elsewhere - around $150 compared to $650. This is another way in which the law of one price doesn't hold.
This suggests an obvious policy - western governments should buy Africa's AK-47s. This would transfer wealth to the continent and reduce the means of conflict.
The drawback, however, is the time-inconsistency problem.

Power deludes

One of the wisest sayings about power is that of Kenneth Boulding here:

All organizational structures tend to produce false images in the decision-maker, and that the larger and more authoritarian the organization, the better the chance that its top decision-makers will be operating in purely imaginary worlds.

I was reminded of this by Jack Straw's claim that:

The core democratic values of freedom, fairness, tolerance and plurality...define what it means to be British.

As Tim, John and Robbie all point out, this is a remarkable statement from a minister in a government that has created 3000 new criminal offences.
So how could Straw be so stupid as to make it?  Because, as Boulding said, power deludes as well as corrupts. People in power eventually lose - if indeed they ever had it - their sense of self-awareness and self-absurdity. We see this every time a boss spouts managerialist jibber with a straight face, and indeed, pretty much every time any person in authority expects to be taken seriously.
Straw's just conforming to type.

The curse of rich parents

My instinctive reaction to this sob story from Sebastian Cresswell-Turner is that you'd need a heart of stone not to laugh out loud. But it also raises two serious points. Tim makes one. The other is that having rich and respectable parents can be curse. He bleats:

Even though my friend and her husband – both professionals like their parents – earn the considerable joint salary of £140,000 a year, the bourgeois ease of their youth seems unthinkable. In spite of their undisputed professional status and more-than-respectable earnings, they are downwardly mobile...
A headhunter who is often asked by his friends how they are meant to get by on, say, an MP’s salary of £60,000 a year, has no answer. “I just don’t want to think about it,” he told me.

A household income of £140,000, even with two children, is more than 97% of the population gets. Even on £60,000, you're doing better than 75% of people in the UK.
So how can someone in such a position think themselves  poor?
This is where the curse comes in. Coming from a rich family raises your expectations; you expect to have (as Seb does) second homes, expensive meals out and private schools for your kids. And you often feel the need either to compete with your father, or to live up to his high expectations for you.
The upshot is that even if you do very well economically, you feel bad.
By contrast, those of us from worse backgrounds are freed from such desire. All I got  from my dad was glaucoma and a bad temper.  The upshot is that even though  I earn much less than £60,000, I feel I'm doing well. I don't have to worry about the leccy bill or the rent-man and I can afford all I want. Nor do I feel any need to compete with family and neighbours; my reaction to other people living in Belsize Park is like that of Sammy Davis Jr when he moved into Beverly Hills: these people can't be doing that well - they've got me for a neighbour.
This is why - as I've said before - I don't envy public schoolboys. I have something many of them don't have - the freedom that comes from low expectations.

Liam Byrne: idiot

Liam Byrne likes a challenge. In the face of considerable competition, he's fast-becoming the most stupid and odious member of the government, and this attempt to defend the Union is - again against strong competition - one of the worst articles ever to appear in the Spectator.

There is perhaps no better illustration of our economic ties than the UK’s huge financial services powerhouse. The UK has rapidly consolidated its global leadership of the industry in the last decade. But £8 billion of the business is based in Scotland.

The latest figures (pdf) we have are only for 2004. These show that Scotland's income from financial intermediation was worth £6.8bn, compared to £76.6bn for England and £32.7bn for London alone.

We have something else in this country, which is an indomitable spirit. What is its anatomy?

Spirits don't have anatomy - by definition.

Well, it is partly the sense of adventure that drove Brits to scale Everest first.

Sir Edmund Hillary is a New Zealander, and Tenzing Norgay was Nepalese - their achievement was a tribute to the ethnic diversity Byrne seems to undervalue. Or is he claiming that George Mallory actually got to the summit - in which case, as he died on the way down, what point is he trying to make?

A higher share of our GDP is devoted to trade than any other nation in the OECD.

Apart from Austria, Belgium, Denmark, Finland, Ireland, Portugal, Switzerland, Spain and Germany.

An English argument for dissolving the Union would be a lamentable admission that, in this age of diversity, we were unable to master the task of marshalling, combining and celebrating what is in common between our modern plurality of identities.

But there's no reason why the efficient structure of government should coincide with any common identity, or entail celebration of that commonality. The question of how far Scotland should be ruled from Westminster is a narrow one. Do the economies of scale (governmental overheads being spread more thinly, coordination between national policies, for example) outweigh the diseconomies of scale (such as Scottish people feeling alienated by having decisions made so far from them)?
Most of Byrne's New Labour colleagues recognize this. They have tried to introduce regional assemblies, even though no-one feels an East Midlander or South Westerner. And they acquiesce in the European Union having considerable powers, even though many Britons don't identify with Europe.
Which raises the question. Should Byrne be in New Labour at all? Or wouldn't he feel more comfortable in the BNP?

Against anonymous voting

Replying to this, Tim asks: what's wrong with asking people how they'll vote? This raises one of my bugbears - the scandal of anonymous voting.
Surely, no-one has a right to keep their vote secret. Voting, insofar as it matters at all, is an other-regarding act. And if you're affecting others' lives, you have a duty to explain and justify why you're doing so. To do otherwise is to violate the principle of reciprocity necessary for a minimally egalitarian society.
So, why have a secret ballot? The traditional justification, which led to the 1872 Ballot Act, is that a public vote would leave workers vulnerable to intimidation by landlords and employers. And today, we might add, women could be vulnerable to husbands' intimidation in (cough) traditional families.
This raises three questions.
1. How worried should we be by the possibility that open voting would lead to intimidation? Isn't this only one of many ways in which people's votes can be affected by non-rational means?
2. If many people - sufficient to affect an election - are still vulnerable to intimidation, isn't this a terrible indictment, that 130 years have not led to much progess towards individual autonomy?
3. Could support for the secret ballot instead be yet another example of how we lack a culture of liberty, and fail to see where the individual should be free and where he shouldn't? As Mill said: "liberty is often granted where it should be withheld, as well as withheld where it should be granted." As I say, there's not been much progress since.

Capitalism and character

Gracchi wonders: what impact does capitalism have upon our character, and capacity for virtue? I fear his answer is too pessimistic.
Certainly, I wouldn't start, as he does, from Rousseau. His idea of a "noble savage" corrupted by mercantile civilization seems almost wholly false; anthropologists now believe savages were far more vicious than modern man. Violence and cruelty, says Steven Pinker (pdf), seem to be in long-term decline.
Pinker hints at a more optimistic possibility, described by Deirdre McCloskey in this book - that perhaps the market economy actually makes us more virtuous. For example:
1. A market economy makes us richer. And this gives us the capacity to care for others, as Smith pointed out:

Before we can feel much for others, we must in some measure be at ease ourselves. If our own misery pinches us very severely, we have no leisure to attend to that of our neighbour. (Theory of Moral Sentiments part 5 ch 2)

A man will often kill to stay alive, but rarely to make his tenth million.
2. In a market, success depends upon meeting others' needs. This encourages people to ask: "what can I do for others?" That is, to consider others' wants. In commercial society, other people are potential customers. In hunter-gatherer societies, they are rivals for scarce food. 
3.  Reputations for honesty and fair-dealing are usually commercial advantages. And one way to acquire such reputations is to actually be honest.
Of course, these are only tendencies, with many exceptions. But I would wager that almost all investment bankers are more virtuous (in the sense I understand the word) than, say, African warlords.
So, here's a theory. Whilst markets promote virtue, it is hierarchies that destroy it - for example, by encouraging a competition to climb up the greasy pole and do down others. Weren't the former Soviet bloc societies less virtuous than US society?
For me, this is one attraction of left libertarianism. In cultivating markets, but opposing hierarchy, the (very) long-term effect of a left-libertarian society would be to promote virtue.

Corporate tax and investment

Would a cut in corporation tax boost investment? Intuition says yes. And this report from the Taxpayers' Alliance says the effect could be large. This is because capital is more internationally mobile now, and so a cut in corporate tax would attract investment away from other countries - as Ireland discovered.
This paper (pdf) by Holger Gorg, Hassan Molana and Catia Montagna, however, tells a different story. They estimate that, among OECD countries, there's a positive correlation between corporate tax rates and foreign direct investment - it's higher tax rates, not lower, that are associated with high inward investment.
This, they say, is because high tax rates can be associated with a better educated and healthier workforce, better public transport and social and political stability, all of which attract international companies. They say:

Corporate taxation does not necessarily deter FDI, if it is associated with the provision of public goods than improve the economic environment in which multinationals operate.

This doesn't mean cutting corporate tax is silly. It's just that for such cuts to work, one has to be confident that they won't worsen the social and economic infrastructure that influences investment decisions.

Email and productivity

All those internal emails you get at work aren't just a mindless distraction - they might help raise productivity.
This new paper (pdf) by Neil Gandal and colleagues shows that the size of an individual's internal email network and his betweenness within that network are strongly positively correlated with his productivity. The results are based upon a management   recruitment firm.
Amazingly, email use is more closely related to productivity than age, education and experience put together.
There is a caveat here, though. Do email networks raise productivity directly, by reducing search costs within the firm, and by allowing better matches between individuals and projects? Or are they just measuring the fact that individuals who are good at building internal networks make better management recruiters, because they're also good at building external networks?
If it's the former, then this has implications not just for IT use, but for corporate structure generally. Traditionally, one justification for the existence of hierarchy within a firm - expressed classically by Oliver Williamson in Markets and Hierarchies - has been that it saves upon information costs. This is because within a hierarchy, information flows only up and down, whereas in an egalitarian network it goes all over the place.
But if bigger networks actually raise individual productivity, this argument for hierarchy disappears.

A responsibility to vote?

Libby Purves makes some good points here, but includes this clunker:

One of the sternest responsibilities in a democracy is to vote, surely?

Surely not. To vote is to impose one's own preference onto others. Doing this lightly is not at all responsible - quite the opposite.
Instead, the core responsibility is to consider the options carefully before voting. If, after such reflection, you've decided that no party is worthy of your support, where's the irresponsibility in not voting? 
Isn't it irresponsible to legitimize a system which thinks "democracy" consists in no more than a choice between very similar managerialists?

Centuries, probabilities and asymmetric information

Congratulations to Alec Holden:

A man who bet £100 a decade ago that he would live to be 100 is preparing to pick up his £25,000 winnings this morning.In 1997 bookmaker William Hill offered Alec Holden odds of 250-1. But the retired engineer, born on April 24 1907, celebrates his century today, to the bookies' dismay.

The bookies should be dismayed, as they underpriced the bet by a factor of around 10.
Government Actuaries tables show that back in 1997, the average 90 year-old had an 80% chance of seeing 91, a 91 year-old had a 78.4% chance of seeing 92, falling to a 63.4% chance of a 99-year-old getting his ton.
Multiplying these probabilities together shows that there was a 3.6% chance of an average 90-year-old getting to 100. William Hill should have offered less than 30-1.
Maybe much less. In staking £100, Mr Holden was revealing that his private information about his health suggested he had a better than average chance of seeing 100 than his contemporaries, who chose not to make the bet. William Hill should have cut the odds, on account of this asymmetric information.
So, they were too generous - 25-1 would have been reasonable.
Why did they get it wrong? Maybe a genuine mistake. Or maybe they figured that they'd get more than £25,000 of publicity.
Whatever, the chances of the rest of us making 100 are slim, on current data. Latest tables show that, if I'm the average 43 year-old, I've got just a 0.6% chance, unless Bryan's right.