Stumbling and Mumbling

Counter-education & obliquity

Walking past our local church the other day prompted me to ask: why don’t I believe in God?* The answer - and I think this goes for millions of atheists - is that as a young child I was told stories about a bearded old man on a cloud and as I grew up I reacted against such nonsense; those who kept their faith only did so by redefining God.
My methodist Sunday School failed to produce a religious man. But this is just one example of a wider tendency - that education can be counter-productive.
Take, for example, Shakespeare. How many millions of people are turned away from recognizing his genius by having him stuffed down their throats at school at an age when they are not yet receptive to his language and psychological insights? Wouldn’t he be even more widely and highly regarded if people were to discover him for themselves, rather than be prejudiced against him by school?
Similarly, millions are turned off of maths and science by terrible teachers.
Far from opening doors to science and culture, schools in practice slam them shut. They just give intelligent people something to rebel against. For example, when I was 11 we “did” The Hobbit at school, which only caused me to believe that no man ever spoke a truer word than Hugo Dyson.  And my grammar school - pretentiously - had rugby teams but not football teams. I’ve hated egg chasing ever since.  
Of course, I shouldn’t overstate the point. The thousands of alcoholic teachers don’t turn kids off of drinking. And millions of people’s love of football survives games lessons.
Nevertheless, counter-education is, I suspect, widespread. Which raises a question. Isn’t schooling, therefore, an area where John Kay’s Obliquity might apply? The direct approach - trying to enthuse kids about Shakespeare and science - fails in many cases. So, shouldn’t indirect approaches be tried?
But what would these look like? I’ve suggested teaching kids to gamble? What other possibilities are there? Or am I missing the point - that education is not about imparting culture or science, but is instead about entrenching class division?
* I mean: what’s the reason? not: what’s the rationalization? Bertrand Russell gave us this 83 years ago; Ditchkins add nothing to his arguments.

Laws' lessons

There are three lessons of David Laws’ resignation.
1. If you want to keep your job, following the rules has lexicographic priority over technical ability. Laws was widely regarded, even before the platitudes that followed his resignation, as  superbly able minister. This was not enough to keep him in a job. The message here is that it is better to be a prissy, priggish follower of rules than a man of any other virtues - which is a perfect recipe for mediocrity.
It is in this sense that I agree with James Forsyth, that there’s something very depressing about this affair.
2. Clever people can be stupid. Even if we allow for the fact that Laws’ ability is overstated - journalists and politicians are pathetically easily impressed by any knowledge of finance, statistics and economics - he is a smart fellow. And yet his expenses claim was very stupid. This confirms Dsquared’s old adage, that there are no general purpose experts.
3. Formal legal freedom is not sufficient to create real, felt freedom. Homosexuality has been legal for almost all Laws’ life, and yet - for reasons we needn’t speculate about - he felt he had to keep it “secret from everyone I know for every day of my life.” In a very important sense, then, he was unfree.
The message here is that mind-forg’d manacles can enslave us even when laws do not.
But where do these come from? Social pressure - actual or perceived - is one. But in other contexts, poverty is the origin, as it leads to low aspirations: it’s notorious that many people don’t apply to Oxbridge because “it’s not for the likes of us”.
Herein, I think, lies the tragic paradox of Mr Laws. As an Orange Book liberal, he emphasised the value of legal, formal freedom whilst perhaps overlooking real, felt freedom. But as a human being, he demonstrates that there’s more to freedom than mere law. This - perhaps more than anything else - is why I am on the Left.

Against motivation

In Obliquity, John Kay argues that many of our most important goals are best achieved obliquely rather than directly. For example, companies that try directly to maximize profits often fail whilst those that aim just to be good businesses succeed in narrow financial terms; Kay contrasts Lehmans and Enron to Boeing and Honda. The reason for this, he says, is that the world is complex, changing and unknowable and in such an environment flexibility, adaptation and evolution is superior to conscious design.
There is one implication of this that he doesn’t tease out sufficiently - that high motivation can be counter-productive.
By this, I don’t just mean the standard Yerkes-Dodson effect, that over-motivation can lead people to choke. Nor do I mean what Dan Pink says - that financial motivation can crowd out other motives such as creativity and altruism and crowd in venal ones such as cheating.
True as these are, I mean a third thing - that high motivation plus ignorance can equal disaster. If you’re heading in the wrong direction, driving fast merely takes you further away from your destination. For example, banks’ efforts  to maximize profits led to the hunt for yield that caused them to collapse. Had they been less keen to maximize profits, they might have survived.
Conversely, a lack of motivation can be a road to success. There’s a scene in Worried about the Boy - which most of us from working class backgrounds will recognize - in which Boy George’s dad berates him for his lack of ambition and for not doing anything with his life. But in fact, dossing around in squats gave Boy George the style and the contacts that led to his subsequent success.
Econ 101 tells us that it’s a good thing to maximize profits or utility. But this is only true under conditions of full information - a condition which, in the real world, never exists. And second-best theory tells us that, in an imperfect world a single attempt to increase efficiency can take us further away from optimality.
Now, you might think this is trivial. It’s just a restatement of Herbert Simon’s satisficing.
Maybe. But there’s a message here which vulgar libertarians might find unpalatable - that we shouldn’t, perhaps, worry too much about policies which reduce incentives. High marginal taxes might deter bosses from undertaking reckless expansions. Nationalizing banks might lead to less pursuit of merely transient and illusory profits and hence greater macroeconomic stability. And allowing people to stay on the dole for long periods gives them time to find jobs for which they are suited.
So, could it be that the widespread emphasis upon motivation and incentives rests more upon  misunderstood economics or simple moralizing than it does upon actual evidence?

What do nationalized banks do?

Should Europe’s banks be nationalized? Here are two contrasting papers. First (via Mahalanobis) Harald Hau and Marcel Thum show that (pdf), in Germany, state-owned banks have done especially badly:

The 29 largest German banks show a systematic underperformance of state-owned banks in the recent banking crisis. Adjusted for size, asset write-downs and losses from the first quarter of 2007 to the third quarter of 2008 are on average three times as large for state-owned banks compared to privately owned banks…
Bank losses during the financial crisis correlate with the financial (in-)competence of supervisory boards. A lack of competent board monitoring is therefore our leading explanation for underperformance of state banks.

On the other hand, there’s this:

If anything, government ownership of banks has been robustly associated with higher long run growth rates

One reason for this, they suggest, is that private high-tech banking diverts banking activity away from growth-enhancing lending, and attracts highly able people into rent-seeking jobs and away from more socially productive ones.
Personally, I suspect there are reasons to doubt the wider relevance of the Hau and Thum paper:
1. Before the crisis, no-one in politics paid much attention to banking, and so politicians might have been slack about appointing supervisory board members. The crisis should have taught them to be more careful.
2. If nationalized banks exist alongside private ones, able board members might prefer to work in the private sector, leaving the duffers for the nationalized sector. However, if all banks were nationalized, better board members wouldn’t have such an attractive alternative.
3. If, despite 1 and 2, governments are still unable to appoint good board members, this is not just an argument against nationalizing banks. It’s also a reason to be sceptical about the efficacy of regulation. After all, if governments can’t appoint good directors, how can it appoint good regulators?
The question, then, remains open: why should we assume that nationalizing the banks is an inferior option to “better regulation” and/or to some kind of bank levy?

Families vs markets

Stuart White has a great post about the Orange Bookers. I’d just like to pick up an issue he raises.
He says Orange Bookers regard a free market economy as a moral baseline, in contrast to liberal egalitarians such as Rawls, who regard equality as the baseline. This yields contrasting attitudes to child trust funds. Whereas OBers see these as an intrusion  onto the market economy, liberal egalitarians see them as a way of satisfying a principle of justice - that all citizens start their adult life with reasonably equal endowments of wealth.
One question this raises is: why should there be a presumption in favour of the market economy?
The natural answer is that individuals know what’s best for themselves. So in a free economy their choices about spending and saving will maximize their well-being.
However, many market decisions do not involve an individual spending for his own benefit. Instead, he is taking decisions about others - namely, his children. And as Milton Friedman said, when you spend your own money on someone else, you “don’t pay anything like as much attention” to maximizing their well-being.
This raises the possibility that some people don’t know or care what’s best for their children. The upshot is that, in a free market, some people - those with bad parents - will suffer.
In this context, we can regard child trust funds not just as an egalitarian move, but as a means of correcting a form of market failure - the fact that some parents under-provide for their offspring and so markets don’t maximize well-being .
What can be wrong, in principle, with this?
One could deny Friedman’s argument, and argue that parents are altruistic and well-informed, and so spend on their children as well as they do on themselves. But this is surely just false. And it rules out the possibility of complaining about a “broken society” and bad parenting.
Alternatively, you could reject the methodological individualism here, and argue that the basic unit of society is not the individual, but the family.
But this has horribly illiberal implications. It means you have no grounds for objecting to the oppression of wives and daughters in traditional (Muslim?) families. If the family is the basic unit of society, then honour killings are no more morally objectionable than suicide - which is stupid.
The point I’m driving at here is simple. The standard argument for free markets is not an argument for the state keeping out of families. Interventions into family life - such as child trust funds - are quite consistent with recognizing the virtues of free markets. Aren’t they?

WEHT "efficiency savings"

There’s one aspect of the Con-Dem cuts announced yesterday, the implications of which are not fully appreciated - that these are not pure efficiency savings.
The cuts in the Future Jobs fund, child trust funds and in 10,000 university places are policy cuts. And a further chunk of the cuts will come in local government and the devolved administrations. This is not the pure attack on Whitehall waste we were promised. For example, in March Osborne said:

We are expecting [government departments] to find, together, £6 billion of savings from the waste that even the government now admits exist - and which the government's own efficiency advisers tell us can be found.
And let me be clear - not a single penny will come from the front line services that people depend on.

And the Tory manifesto said:

We will take immediate action to start cutting Government waste, with the plan to spend a net £6 billion less in 2010-11 than Labour would

In this sense, yesterday’s cuts were a failure - as the Treasury admits.
But why? It could be that Osborne just hasn’t had time to identify waste - though this raises the question of what the hell he was doing before the election*.
There is, though, another possibility. The idea that waste can be identified well by a top boss is deeply dubious. It ignores two central facts of economics: the importance of limited knowledge and of incentives. The true knowledge of where waste lies is fragmentary and dispersed across millions of public sector workers. A Chancellor cannot aggregate this knowledge. Nor can he rely upon civil service managers to do so; these do not have incentives to cut their own departments or jobs. The upshot is that, as I’ve said, top-down management is a terrible way to cut waste.
The question is: did Osborne know these problems, in which case he used talk of “efficiency savings” as a smokescreen for genuine cuts - and remember, there’ll be many more to come? Or was he unaware of them, in which case he’s just stupid?
Either way, I’m with Tom:

Cutting spending is harder than you think. It’s harder for them, and it’ll be harder on us.

* Actually, he was running the Tories’ campaign, as if shadow Chancellors didn’t have other things to do.

Clegg's cuts confusion

Nick Clegg’s argument here seems desperately weak - and his discomfort suggests he knows it. When asked by Andrew Marr why he now supports Osborne’s spending cuts when he opposed them before the election, he says:

I don’t think anybody could have anticipated quite how sharply economic conditions in the euro zone would have deteriorated and that the need to show that we are getting to grips with this [deficit] suddenly became much greater.

He goes on to say that the “black hole” is “in many ways much worse than we could have anticipated.”
There are three things wrong with this.
1. One of the main effects of the euro area crisis is that it jeopardizes our exports - because fiscal tightening in the PIGS will depress demand, and (to a much lesser extent) because it has weakened the euro. One could argue that this adverse demand shock increases the argument against a fiscal tightening.
2. Gilt yields have fallen during the euro crisis, as part of the flight to quality that’s depressed bund and Treasury  yields. This has actually diminished one concern I had beforehand - that gilts would be undermined by a contagion effect arising from a debt crisis elsewhere. With confidence in  gilts  surprisingly high, the case for cuts is smaller.
3. The fiscal position is not worse than thought. Latest figures show borrowing is actually less than Darling forecast.
The truth is that the case for spending cuts hasn’t strengthened at all. I suspect Clegg’s position has changed simply because he had to concede something to get a coalition. His reluctance to say as much suggests he’s still in “old politics” mode.
 Whilst I’m on the subject, a new paper here is grist to the mill of those who are worried about the macroeconomic impact of these cuts. The authors estimate that shocks to government spending have powerful short-run multiplier effects. Their data comes from the US, but the question arises: why should the UK be different now?

Ian Holloway & the Labour leadership

Ian Holloway’s triumph with Blackpool yesterday contains some lessons for Labour’s leadership contest.
Lesson one: great leadership is a matter of context. Holloway’s success at Blackpool contrasts with his failure at Leicester, which suggests that management styles that work well in some times and places don’t work at others.
This might apply to party leaders too. The leader who’s good at inspiring and motivating the party “rank and file” might not be the one best equipped at reaching the general public; the one best able to improve party organization isn’t necessarily one with great policy visions, and so on.
If Labour were serious about wanting the best possible leader, it would first ask precisely what it wants from a leader. As it is, it is in danger of committing two errors: of thinking that a "great man" can solve its problems; and projecting wishful thinking upon candidates, as Polly Toynbee did with Gordon Brown.

Lesson two: good leaders are hard to spot. After he was sacked by Leicester, Holloway was out of football for a year. How many teams which did not appoint him during that time are regretting their decision today?
Labour should learn this: remember, in 2007 it was so confident that Brown would be a great leader that he was elected unopposed.
Lesson three: beware the lure of “gravitas.” One reason why Holloway stayed out of work so long was, I suspect, that his offbeat wit and media whoring gave people the impression that he wasn’t serious. In this sense, Diane Abbot is the Ian Holloway of the Labour party.
Herein, however, lies a difference between football management and party leadership. In football management, being a joker is quite consistent with being good at one’s job. In party leadership, it’s not. This is because jokers naturally lack gravitas, and gravitas - even if unsupported by intellect - is a key quality of a leader.
In part, this is because the media expects it. Journalists, like cowering dogs, are only really comfortable with hierarchy; was I alone in detecting an unpleasant undertow of deference - like fags before prefects - at that first Cleggeron press conference?
But there’s something else. A leader needs to be serious, dull and sober because these are necessary for his legitimation. Leadership is not about mere technical qualities. It is about mystique. And this requires that the roles of jester and king be clearly separated.

The curse of "leadership"

Sunny defends Ed Balls:

Ed Balls was a lot better at getting things done and pushing policies through than many of his colleagues. He was just single-minded…
If people want to see the Labour party actually get some work done then Ed Balls may be the right candidate.

For the sake of argument, let’s grant the premise.  Does this really equip Balls to be leader? Surely, the ability to push policies through shows that he’d be a fine minister, not that he‘d be a good leader.
Indeed, the single-mindedness that allows him to “get things done” might even be a drawback to being leader, at least in peacetime. A big quality of a good leader - and a good PM - is the flexibility to reconcile conflicting factions, people and ideas and to respond to new events. Such flexibility sits uneasily with single-mindedness.
This is not the only way in which the qualities required to be a minister are different from those required to be leader.
A good minister is the master of a specific policy area, whereas a good leader must be a jack of all trades. A minister must be good at dealing with - or ignoring! - civil servants, lobbyists and “experts”, whereas a leader, especially when leaders’ debates are important, must be better at addressing the general public. And a minister is a manager whereas a leader is a chairman.
It’s entirely possible, then, that an excellent minister might make a lousy leader - and vice versa. Those of you with a higher view than I of Brown’s chancellorship might cite him as an example.
And yet this is not how politics is viewed. Few men who served merely as ministers, however competently, are regarded as political successes and look back entirely happily upon their careers; who‘d be the exceptions - Bevin, Bevan, Jenkins, Howe? “Leadership” is regarded as the prize, and anything less as failure.
This attitude is, of course, not confined to politics. One feature of business since the 1980s has been a growing (and over-) valuation of leadership and a downgrading of professionalism. In most organizations, you’ll be vastly better-paid as an awful chief executive than you would be as a top-rate underling. In business, as in politics, there's little space for the excellent specialist whose self-knowledge is misunderstood as a lack of ambition.
Personally, I find this love of hierarchy not only ugly in itself, but I suspect it is deeply inefficient. Shouldn’t a party vaguely connected to socialism do more to challenge it?

Poverty & attitudes, chickens & eggs

What’s the link between poverty and character? Two recent stories have set me thinking. First, Bob Murphy reports on his experiences of helping Haiti after its earthquake:

The locals viewed us with suspicion. In particular, when they would see a team of HODR volunteers engaging in literal hard labor, using sledgehammers and wheelbarrows to remove rubble from a collapsed residence, many of the Haitians apparently resented the fact that we were "stealing their jobs." In other words, the Haitians — where unemployment is apparently 90 percent — thought they should be getting paid to remove the rubble from their collapsed homes….
Isn't it incredible that after their neighborhoods got wiped out, and hundreds of thousands of Haitians died, that many Haitians were apparently devoting devoting a lot of mental effort to speculating on how much we were getting paid to cart away their rubble?..
It makes sense, in a perverse way, that Haiti is the poorest country in the hemisphere. If this is the predominant mindset, how could anyone start a successful business? I would imagine the jealousy and gossip of his neighbors would be unbearable.

Bryan Caplan says this is an example of how bad attitudes can hold back an economy:

For hundreds of thousands of years, human beings were stuck in societies with informal norms that choked off creativity and entrepreneurship.

I agree that such norms and attitudes are bad for an economy’s growth. But are they really exogenous?
Imagine a poor society with poorly defended property rights. In such a society, the only way to prosper is to predate upon others. This will lead people to distrust each other, and to regard prosperity as a zero-sum game; your success is my failure.
What we’ll have, then, is a stone age equilibrium. Poverty leads to “bad” social norms, which in turn keep a society poor, which in turn entrenches those bad norms.
But which comes first - the bad norms or the poverty? It’s chicken and egg.
Now, take another case. Norm says:

It is implausible (to say no more than this) that all differentials between rich and poor are earned ones, are deserved.

This raises the question: how can we say what is deserved?
Imagine two people of similar innate attributes. Call them Andy and Ben. Both have decent hard-working fathers. However, one day, Andy’s dad is made redundant when his town’s biggest factory closes and he struggles to find work thereafter. Andy infers from this that hard work and decency don’t pay. So he sags off school, and in adulthood drifts between petty crime, low-wage work and unemployment.
By contrast, Ben’s similarly hard-working dad progresses to better and better jobs. Ben infers that hard work does pay, so he studies hard and has a successful career.
Now, if we look at the inequality of income between Andy and Ben, we might infer that it is deserved; after all, Ben is hard-working whilst Andy isn’t.
But these differences in character arise from luck in childhood. So, are they really deserved?
Again, we have a chicken and egg question. Do differences in character cause differences in circumstances? Or do differences in circumstances (in childhood) cause differences in character?
Herein, I think, lies a big difference between “right” and “left”. The right put causal weight on character, the left upon circumstance. My sympathies are with the latter; people are bearers of social relations.
But how can we really tell who’s right? What sort of experiment or evidence would be decisive?