Stumbling and Mumbling

Redwood's hypocrisy

Is John Redwood making just a fatuous debating point here, is he stupid, or is he a hypocrite? In lamenting Ruth Kelly's proposals for road pricing, he says:

I look forward to seeing her contribution to the next Labour manifesto. Coming from the Marie Antoinette school of politics, it will presumably say “The poor should take the bus or stay at home”. It will make its bid to get the votes of the better off by recommending ” You know you can afford it - try one of our motorways now we persuaded those on low incomes to stay off the road. You know you’re worth it.”

This is just drivel. There is in principle, an overwhelming case for road pricing. Roads are a scarce resource, and prices are the best mechanism we've discovered for allocating scarce resources. And using roads imposes costs - pollution, congestion - onto others. Efficiency requires that these be internalized.
If these prices are regressive, the solution is more (and more efficient) redistribution to the poor, not to forego efficiency-enhancing policies.
So, why is Redwood moaning? He's supposed to be in favour of free markets - he's Honorary President of the Selsdon Group which "exists to promote the case for free market policies". So why does he not want a (near) market in road use? Or do I know the answer to that?

Oil: a recession threat?

James Hamilton's got a great piece on the question of the impact of high oil prices on the US economy. I'd add one thing. This chart (inspired by this and this pdf) shows that between 1973 and 2003 there was a close relationship between the  real oil price and unemployment around 12 months later. High oil prices led to recessions, low ones to booms.
However, since around 2002-03, this relationship seems to have broken down.
This casts doubt upon  some the of reasons Olivier Blanchard and Jordi Gali give (pdf) for why the economy has (so far) coped will with high oil.
Sure, the economy is less dependent upon oil now than in the 70s, monetary policy is more credible and there's less real wage rigidity. But these are all gradual developments. They didn't suddenly emerge in the early 2000s. And yet the simple correlation between oil and unemployment did suddenly break down then.
So, here's my theory. For the most part, this rise in oil prices has been very different from previous ones. They were, generally, the result of supply shocks: the aftermath of the Yom Kippur war, the Iranian revolution, the invasion of Kuwait. This rise, however, has been the counterpart of a favourable supply shock. Oil has risen since 2002 largely because of strong Asian economic growth. But this growth has supplied cheap goods to the west, and so helped boost real incomes and hold down inflation and interest rates.
The adverse effect of oil prices has been masked by this bigger, beneficial, effect.
And here's my worry. Perhaps further rises in oil prices (or some part of the latest rise) might be due to supply constraints, rather than strong demand: the Energy Watch group claim (via) that oil supply has already peaked.
Can the economy cope as well with supply-induced price rises as it did with demand-induced ones?

Migration: neither left not right

Just how hypocritical can the Daily Mail be? In attacking Leicester's finest, it whinges:

For more than 40 years, Left-wingers in politics and the media have successfully silenced rational debate on the impact of mass migration.

This is bull. For one thing, many of us on the left want a rational debate about migration - though what place the Mail would have in a rational debate about anything is open to question.
What's more, free migration is not about left and right. It's about freedom. Those of us who value freedom highly - me or Perry say - want free migration. Those who prioritize other values don't.
And it's here that the Mail is so hypocritical. Two of the great slogans of Thatcherism, supported by the Mail, were "management's right to manage" and "get on your bike and look for work"*.
But these are the principles behind free migration - that managers should be free to hire whomever they want, and that people should be free to look for work where they want.
Why, then, was the Mail so in favour of these slogans in the 80s, but so opposed to their application today?
Could it be that the Mail's only principle is hatred for the working class and foreigners?
* Yes. I know Tebbit didn't say that - but the sentiment was the same.

Low-powered incentives

This, I'm told, is the payslip of John Arne Riise, perhaps the world's best-paid bankrupt.
What's curious is just how low the bonus payments are, relative to his basic wage; appearance money and points bonuses account for just 3.5% of basic salary, albeit (I guess) for the month of August when only a few games were played anyway.
This suggests incentives are quite low-powered at Liverpool.
Which raises the question: is this rational? The case for bigger incentives might seem obvious - they'd motivate players more.
But there is a case for lower incentives. There's the Yerkes-Dodson effect, which says excessive motivation can lead to worse performance - a fact corroborated by some cunning economic experiments.   And high incentives might lower team morale, if players' disappointment at losing money causes them be become more critical of team-mates' errors.
Which raises the question. What is the optimum ratio of basic pay to incentives for players? Might it vary from team to team, or even from position to position?

Migrant numbers: do they matter?

Immigrant workers impose less cost upon society than previously thought. That's the obvious message from the fact that the number of migrant workers is 300,000 higher than the government previously estimated.
The thing is, the social costs of  migrant workers  - crime, loss of social cohesion, pressure on public services, over-crowding - haven't changed. It follows, then, that the social costs per migrant worker are lower than thought*.
Why, then, is there so much fuss about this revision to the figures? Partly, of course, it's just normal party politics. But there might be other things happening.
Lib Dem spokey Danny Alexander  says it "undermines the credibility of the government's claims to be able to deliver a well-managed system for foreign workers." Maybe. But this strengthens the case for free migration - because the state, whoever runs it, just cannot control migration.
Another reason, I suspect, lies in fact fetishism.  People think that aggregate national data - be it the number of migrant workers, GDP, average house prices or whatever - must somehow be important. But it ain't necessarily so. Why should the number of non-native workers in Britain be any more important than, say, the number of people working in Hinckley who weren't born there?
There might, however, be a more sinister reason why the political class is so het up about this. It's that, as Foucault pointed out, facts and knowledge matter not (just) because they explain and describe the world, but because they are a means of controlling people. That the government can't be sure how many foreigners work in the UK is therefore a symptom that perhaps government cannot control us, that there's a crisis of governmentality. And for politicians of all parties, this is a terrifying thought.
* Of course, the benefits are lower too.

House prices: could they fall?

How likely is a slump in the UK housing market? Recent news tells us less than you might think.
First, the Times reports a 0.1% fall in Hometrack's house price index with:

House prices fell for the first time in two years this month, sending a shudder through millions of homeowners.

Not through me, it didn't. The oldest cliche in economic punditry is that you mustn't read much into one month's data. This is a cliche because it's true.
Over the last 10 years, Nationwide and HBOS's house price indices (which have longer track records than Hometrack's) have risen by a monthly average of 0.9%, with standard deviations of 0.8 and 1.4 percentage points respectively. This means that you'd expect the Nationwide to report a house price fall one month in seven, and HBOS to report a fall one month every five, even if prices are on a firm upward trend. A monthly fall, in itself, tells us nothing. What was that I was saying about news being noise?
But what about the news that mortgage approvals have hit a two-year low? Doesn't this point to falling prices?
Not yet. This chart shows that there is indeed a good correlation (0.72, R-squared = 52.2%) between mortgage approvals and annual changes in house prices (HBOS's measure)  in the following 12 months.
But the thing is that approvals, at 102,000, aren't yet low enough to point to falling prices. The post-1987 relationship says this points to prices rising 9.7% in the next 12 months (the standard error is 6.6 percentage points).
The belief that house prices will fall significantly, then, owes less to the news than to our Bayesian priors: the possibility that high ratios of prices to earnings are unsustainable; the prospect of tighter lending critera and lower City bonuses after the summer's financial crises, and so on.
Are these priors right? Well, put it this way - I hope to trade down soon. 

CSI: a question

Just recently, my TV viewing pleasure has included the CSI franchises. But these raise a question that bugs me - why are the women such unrealistically ideal types?
The thing is, although I've met men like Gil Grissom, Mac Taylor or Nick Stokes (though, granted, few with Horatio Caine's uncanny stillness), and can recognise these as realisticish characters, I've never met women who combine intellect, looks and integrity in the way that Catherine Willows, Alexx Woods or Stella Bonasera do. (As for Calleigh, I have far more chance of being abducted by aliens than of ever meeting anyone like that).
Why is this? Is it that CSI has some kind of reverse sexism which requires it to present women, though not men, as improbably perfect?  If so, why is CSI unusual (though not unique - think of Alison Cameron in House) in doing this? The women in Sex and the City, Desperate Housewives and 24 (say) were much more realistic being, variously, neurotic, vacuously self-obsessed and not especially attractive. Or is it just that I've been unlucky? Or what?

The character of our times

Apart from being Good Things, I suspect Josh Ritter and Theodore Dalrymple have little in common. But both this weekend decry one of the characters of our age - the person who wants to stamp (the mot juste) his character upon the world.
Dalrymple says:

Am I wrong to see in the rise of graffiti as a phenomenon the inflamed egotism of mass self-importance, the desire at all costs to impose oneself upon the world?...Of all the virtues, humility is perhaps the least in fashion.

Ritter says:

The future is rarely more frightening than the man who has the power to make his own prophecies come true.

Which brings me to managerialism. My complaint about this is not just that it rests upon an absurd premise about humans' power of cognition, nor that it legitimates unacceptable inequalities, nor that it damages organizations and costs us billions of pounds, true as all this is. Instead, it's that managerialism elevates a particular character - the big man who does big things, the leader, the change-maker - over others.
In doing this, nobler characters get lost: the man who pursues excellence rather than the trinkets and baubles of mere effectiveness, the craftsman who believes in doing a good job by traditional objective standards, the man who's humble enough to know that he doesn't have the answers, the one who knows, with Pascal, that "all human evil comes from this, man's being unable to sit still in a room."
I like to think that Ritter and Dalrymple are standing up for these characters, against the vacuous egotism that managerialism promotes. And I'll be with them. When I die, I want my epitaph to read:

He made no difference.

* For those unacquainted with Mr Ritter, here's what he does.

Criminalizing hate speech

Chris Bertram says (clarified here) there might be a case for outlawing hate speech:

If particular groups are so stigmatized and marginalized because of hate-speech messages that their members cannot get their voices heard in the public sphere (they may speak, but most people will not listen to people like them) then the freedom and equality of citizens is undermined, and the formal right that those people have to legal, civil and political equality is of lesser value than the formally similar rights of others. Far from liberty being endangered by hate-speech legislation it may—and whether it is depends very much on the specific social and historical circumstances—ensure that many people continue to enjoy effective liberty.

This is a fine principle. But I'm not sure it can ever apply in practice under our current political arrangements. This is because by the time a group is sufficiently influential to be able to get legal protection against hate speech, it is - by definition - no longer stigmatized and marginalized.
For example, the time when gays needed protection from hate speech was in the 50s, when Alan Turing was being persecuted to death, or the early 80s, when homophobia made it impossible for an out gay man to become an MP. But those were precisely the times when people did not listen to people like them. It is only now that laws against inciting hatred of gays can be countenanced.  But  in these more civilized times, gays - to a large extent - already enjoy equality.
By contrast, the people who most need protection against hate speech today are those so marginalized that they can't get it: these might (very arguably) include asylum-seekers, "chavs", "hoodies", future generations or even the unborn.
Given this contradiction, laws against hate speech are highly likely to be illiberal interventions by an overly intrusive state, rather than attempts to expand the realm of liberal equality.
This is not a complaint against anything Chris has said, but rather against the inherent anti-liberalism and inegalitarianism of our existing political structures.

Martin Jol and hiring problems

Martin Jol's sacking by Tottenham, just months after  he had been given a huge transfer budget, raises the question: why do football directors make so many bad hiring and firing decisions?
In theory, you'd expect the opposite to be the case. Football directors are usually very successful businessmen with presumably lots of experience of hiring people. And football coaches' track record is publicly available, in a way that employees' records in other businesses are not; most us in a job interview could exaggerate our achievements without being found out, whereas Gary Megson could not claim to have done a great job at Nottingham Forest when he applied for the Bolton job.
You'd therefore expect better matches between coach and club than in most businesses. But this is not so. Last season saw 48 management changes at League clubs, implying that the average boss lasts less than two years - much less than job tenure in other businesses.
Here, then are some theories:
1. There are threshold effects. It's moderately easy to hire someone to do a basically competent job - though even here, bad hiring decisions cost economies around 1% of GDP a year. But it's vastly harder to spot someone who can do really well. Spotting real talent is hard.
2. Success in football coaching is not easily replicable. What works at one club can fail at another - the classic instance being Brian Clough at Leeds. So a coach's track record gives less clue to his chances of success than one might think.
3. Football directors' success in business amplifies their over-confidence and egomania. And just as overconfident share traders take too many decisions, so overconfident bosses are too quick to hire and fire, believing that they can get it right this time.
4. Criteria for success are too high, as directors are not just overconfident, but over-optimistic. Worse still for coaches, success raises expectations which increases the likelihood they'll fall short. This contributed to Jol's problems. His record at Tottenham (45.3% of games won, 28.3% lost) was in fact better than Tottenham's long-term average. But his bosses demanded even better than better-than-average.