Stumbling and Mumbling

Against web rankings

I'm in two minds about this exercise. Part of me thinks it's just vacuous; people who like blogs like Iain Dale's like blogs like Iain's - whoda thunk?
Another part of me, though, thinks it's downright pernicious, in three senses.
First, those who know little about blogs - some dead tree writers, for example - might think the higher-ranked blogs are good representatives of blogging. And they'll be disappointed; most of them are empty-headed, dull and trivial wannabe dead-tree writers. This might turn people away from blogs, not realizing the riches they can offer.
I'm not making a partisan point here. Among just "right-wing" blogs, there's vastly more sign of intelligent life at, say, Matthew Sinclair, Mediocracy or Freeborn John than there is among more highly rated blogs.
Secondly, there's something nasty about the very notion that blogs can be ranked on a simple single ordering. The overwhelming virtue of the blogosphere is its diversity. And the many things that make a good blog are to some extent incompatible; originality versus consistency; passion versus intellectual rigour; number of posts versus quality of individual posts; brevity versus weight of evidence; wit versus gravitas, and so on.
These trade-offs mean the quality of blogs is just incommensurable - we can't rank them. I can't say whether I prefer Tim, Norm, Justin, Paulie or Damian or countless others. I like them all, in different ways.
And even if we can each rank our own preferences, what meaning is there to an aggregate ranking? To pretend there is one is to commit the error that libertarians have often accused utilitarians of making - of believing preferences can be easily aggregated when they cannot be. It's symptomatic of the intellectual decline of the Conservative party that one of its cheerleaders should make this error.
Thirdly, even if others' preferences can be ranked, so what? Why should I give a damn what others think? I don't blog so I can be judged by any middle-class moron who thinks his opinion matters - that's what I go to work for.

Burma, and preference falsification

How likely is the overthrow of Burma's military junta? This old paper (pdf) by Timur Kuran gives us reason for hope.
It lies in the notion of preference falsification.
Imagine you're a junior officer in the Burmese army, with orders to suppress the demonstrations, but you privately think it wrong to do so. Do you disobey the orders?
It depends upon what you think fellow soldiers will do. If you think they'll turn against you, you'll keep quiet and obey orders, falsifying your preference. But if you have a hunch they'll back you, you might disobey, figuring that the miltary top-brass can't kill all of you; the costs to you of disobeying (the risk of death) are then smaller than the cost of obeying, living with a bad conscience.
In this context, apparently strong regimes can be fragile. It might be that everyone obeys orders because each believes that others believe the regime is legitimate, even though everyone believes privately the regime to be wrong.
In such circumstances, a tiny signal can trigger revolution, because it signals to all that everyone else thinks what they think. Mass obedience can then shift immediately to mass disobedience - a tipping point is reached.
A great example of this was the fall of Nicolae Ceausescu. When one man started to boo him, others realised that people thought like them. Having suppressed their true beliefs for fear that they'd be isolated and therefore punished, they realized they could disobey, and booed too. Ceausescu was dead in days.
In this context, the psychological warfare of the Buddhist monks, in refusing alms from soldiers, could be very powerful. What it does is increase the costs to believers of obeying the regime. At the margin, this might tempt just one or two to risk disobedience. And if that signals to others that their private opposition to the regime is widely shared, revolution is possible.

Incentives as ideology

Bosses need big bonuses and share options to give them an incentive to work harder. Everyone knows this.
But it ain’t true. In this new paper, Wendelin Schnedler says:

There are plausible situations in which paying a bonus reduces the incentive to exert effort.

These situations, he shows, are those in which the marginal effect of effort upon the probability of success is low, relative to the chances of success if no effort is exerted.
Although he doesn’t say so, I suspect this might be true for quite a few CEOs with stock options. They might figure:

It’s going to be really hard work to genuinely improve this business. And even if I do so, it might not raise the share price by much, because equity analysts are stupid buggers and the company’s share price depends upon stock market conditions.  I’ll just talk a good game and hope the market rises - as it usually does over time - taking the company‘s share price up with it. If I must do something, I’ll increase the gearing of the company by buying back shares. That’s easy to do, and it’ll increase the share’s beta and hence its chances of the share price rising a lot if the market rises. 

Perhaps, then, talk of incentives is just cover for rent-seeking.

Migration as brain gain

One of the apparently strongest arguments against immigration is wrong, according to this new paper.
The argument is that migration depresses the economic prospects of poor countries, as their brightest people leave.
But this isn’t true.  The authors studied the determinants of education in Cape Verde, a country notable for having a large proportion of its natives living overseas - and, not uncoincidentally, a better economic performance than most African countries.
They found that emigration increased the human capital, and hence aggregate economic prospects, of the remaining population.
This is simply because youngsters get educated in the hope of emigrating. And as some of these either don‘t subsequently emigrate, or come back after they have (with valuable experience)  the result is a higher stock of human capital. The authors estimate that banning emigration from Cape Verde would reduce the proportion of graduates in the labour force by almost 40 per cent. Unless you’re an extreme advocate of education as signalling, this implies a big hit to growth.
This suggests that free migration of educated people can be a form of efficient aid - it helps both donor and host country.

Obscenity, morality and emotivism

Is the undoctored version of this picture (via) by Nan Goldin, taken from the Baltic Centre, obscene? For me, the question raises lots of awkward general philosophical questions.
One set was raised by Richard Cork on Radio 4’s Front Row. He said (around 5 min in):

If I found it on the internet, I’d go completely berserk…but context is all.

My immediate reaction was that this is unacceptable in two ways. First, it’s an anti-democratic and elitist attempt to claim a “benefit of clergy” of the sort Orwell deplored in supporters of Salvador Dali:

The artist is to be exempt from the moral laws that are binding on ordinary people. Just pronounce the magic word ‘art’ and everything is OK.

And secondly, “context is all“ is a slippery slope which leads to a moral relativism in which anything goes: stoning gays is acceptable in the context of a fundamentalist Islamic society.
But are these reactions legitimate? Many occupations need some form of “benefit of clergy.” We don’t judge soldiers in the way we would judge ordinary killers; context is all on the battlefield. And sexuality is often about context: there’s a difference between a woman going topless on a beach and on the street, a difference between a parent’s photo of their children and child porn.
So, perhaps context is all in some cases. In which case there is a space in which moral relativism is legitimate. But how do we mark the boundaries of this space?
I’ve got other questions.
1. How far are we responsible for the effects of our actions? Ms Goldin’s motives (and mine) in displaying this picture were wholly innocent. But it’s obvious that the picture can be used in ways almost all of us would find distasteful or immoral. Is Ms Goldin responsible for this wholly foreseeable effect of her work? If not why not?
2. Do our visceral reactions matter? My instinctive response to this picture is revulsion and discomfort. But is this a meaningful reaction? Why are my feelings important? Or is it that I just lack sophisticated aesthetic judgment? Or is it instead that supporters of this work are themselves just striking a posture of what Fabian calls pseudo-iconoclasm, an empty and phoney “challenging” and “transgressing” our sensibilities?
3. Might there be a genuine conflict between aesthetic and moral values - that something can be morally horrible and yet good art ? Might it be that our “want it all” mentality stops us seeing this trade-off, as Bryan Ferry discovered a few months ago?  Or should it be that aesthetics really should be subordinated to moral values? And if the answer’s “sometimes” how do we decide what those times are?
I’ve no idea what the answers are here. But I know that the picture raises them. And I suspect our culture, with its debased emotivist moral language, is incapable of answering them.

Incentives at the racetrack

Yes, incentives matter - to racehorse trainers. This paper by Glenn Boyle says:

If financial incentives are important, then races with low stakes may see some trainers exert less than full effort, thereby upsetting the calculations of race bettors. By contrast, races with high stakes are less likely to be affected by unobservable variation in trainer effort, so bettor odds should then be a more reliable predictor of race outcomes. In a sample of 30426 horse races, I find that lower race stakes are indeed associated with more unexpected outcomes: the success rates of bettor-favorite horses are lower and the average payoffs received by winning bettors are higher. These results continue to hold when low-information races are excluded from the sample.

The effect seems significant. If a race is in the 20th richest percentile of prize money, the favourite is 5.5% more likely to win than is the favourite in a race in the 20th poorest percentile of prize money.
This adds to quite a long literature on the economics of betting, such as this, this, this and this (pdf).

Libel costs

Everyone has rightly complained about our illiberal libel laws. What hasn't been said is that such laws are, in theory, potentially very expensive for the whole economy in a globalized world.
The thing is, a major effect of our libel laws is not that reporters get sued, but rather that the threat of the hassle of legal action deters papers from publishing even true stories. As one law firm puts it:

We ensure high-profile court cases are the exception, not the rule. We use the law as a tool to protect the reputations, privacy and confidentiality of our clients – by helping them and their PR advisors manage what is published about them.

The upshot of this is that reports about rich people are bland.
But what if readers know this, and know that reporters hide the truth about the rich? Then they'll adopt a cynical attitude to profiles of the rich. They'll read "hard man" as meaning "has competitors killed", and "friends with politicians" as "corrupt", and so on.
Now, what if an entirely decent rich man wants to come to the UK in a high-profile business venture? Reports about him will be bland simply because he's a decent man. But readers  won't know this. They'll read the reports as meaning that he's a ruthless criminal.
This could be expensive for him. Potential business partners will shun him, and he'll not get the public respect and admiration that rich men often crave.
At the margin, and other things being equal, he'll prefer to move to a country with less restrictive libel laws. This is because such a country allows papers to tell the truth about corrupt businessmen and therefore allows honest ones to stand out more easily.
The problem's a bit like that of grade inflation in exams. If everyone gets an A grade, the genuinely bright student can't stand out.
There's also an analogy with the market for lemons. Just as sellers of good used cars can't signal their cars' quality, with the result that only bad cars end up on the market, so good businessmen - unable to signal their virtue - will stay out of the country, and only corrupt ones will enter.
In this way, repressive libel laws will lose the country the investments of honest businessmen, and attract criminals and asset strippers. In a globalized economy, where many rich men cross borders, this could be very expensive.
Our libel laws, then, aren't just an affront to freedom. They are also economically damaging.

More on wasting talent

In comments here, Daniel says I'm wrong to claim that a healthy (capitalist) economy requires that talent remain unused. He says:

In general (and blogs are not a good source of unbiased views on this) the majority of people like their jobs and do feel like they’re using their abilities.

But you'd expect people to like their jobs, partly because of selection effects -  if you don't love it, leave it - and partly because people adapt to their circumstances. Given these tendencies, what's remarkable is just how little job satisfaction there is, especially in the sort of jobs are people are supposed to use lots of talent.
This survey of workers in the City - jobs where Daniel says "you are basically able to do as much as you’re capable of (ie to use all your talents)" - reports that only two in five workers say they are satisfied with their work, suggesting widespread unhappiness at how their abilities are being used.
But this is not the only evidence. "Boreout" is widespread , as is time-wasting, suggesting a vast under-usage of talent.
And this paper, and this,  suggests that around a third of graduate workers are over-educated in the UK. Evidence (pdf) from continental Europe - where there are more graduates -  suggests the problem is even greater there. 
And this is not to mention the evidence of our own eyes.
So, surely, wasted talent is not confined to Taylorite-Fordist factories. It's still with us.
This is not, however, to be too damning. Market capitalism is far better at developing people's potential than what Marx called "the idiocy of rural life" - not least because it's good at delivering goods such as software, music and literature that require consumption capital. All I'm saying is that it's just silly to believe that an economy can make the full use of people's talents.

Was Thatcherism avoidable?

Neil Clark says that if Jim Callaghan had called an election in the autumn of 1978, he'd have won and we would have avoided Thatcherism. I'm not sure, and not just because a Labour victory then was not assured. 
I say so for two reasons.
1. The social democratic economy was in real crisis in the 1970s. Even in 1978 - the best year of the late 70s - unemployment was over 4%, twice what it was in the 60s, and inflation was near-double digits. That's clear evidence that the Nairu had increased substantially.
What's more, the non-oil profit rate had collapsed; it was 7.4% in 1978 (the cyclical peak) compared to well over 10% in the 60s.  This suggests that capitalism and social democracy were becoming increasingly incompatible, for reasons I discuss in that book.
None of this was purely because of the oil shock of 1973-74; the Nairu was rising and profitability falling before then.
2. Even under a Labour government, we'd have suffered some recession in 1980-81, because the second oil shock would have boosted the pound and depressed overseas and domestic demand. Against a background of poor profits, this would have led to aggressive cost-cutting by capitalists and rising unemployment.
This would probably have killed off social democracy for good.
This doesn't mean Thatcherism was inevitable. But it does mean a Labour government could not have successfully continued old-style social democracy. 

The talent myth

In his speech yesterday Gordon Brown  made much of the idea of talent:

Each and everyone of us has a talent and each and everyone of us should be able to use that talent...
we must unlock all the talents of all of the people.

This is the purest wibble. Economic success requires that talent not be unlocked, and remain unused.
One reason for this is that customers and employers want consistency, guaranteed delivery, predictability. And this requires that people work well within the limits of their talents.
If you had to go into hospital for a minor operation, who would you rather perform it - the brilliant surgeon for whom the operation is a dull routine one, or the young and mediocre  one for whom it's challenge requiring full use of their talent?
Even in football and music - two areas where "talent" is most valued - this is true. Many musicians feel frustrated because their audience wants to hear their well-known work which they can perform in their sleep rather than their newer more adventuous work. Many footballers can thrive by cutting out tricks - ask Joe Cole; even Cesc Fabregas (pbuh) reins in his full skills.
A second reason is that, as Adam Smith pointed out, the division of labour is the key to economic progress. We get rich by specializing, as this both raises productivity through incessant practice, and allows comparative advantage to generate gains from trade. But this specialization stifles many of our talents. The musician who becomes a lawyer never fully unlocks his musical talent. The cricketer who becomes a doctor lets his cricketing talent wither.
As A.N. Whitehead said, "civilization advances by extending the number of important operations which we can perform without thinking about them."
And then there's capitalism. Capitalism is all about maximizing profit. All profits come from power. And this means disempowering talented workers. As Harry Braverman showed in one of the best books ever written, capitalism requires that workers be robbed of their skills.
And this is why Brown's words are not only stupid, but perniciously stupid.  In pretending that economic progress and human flourishing can always coexist - especially under capitalism - he's ignoring one of the most important and profound trade-offs of all.