Stumbling and Mumbling

Decline of press, decline of parties

Gaby Hinsliff and Brendan O’Neill agree that the closure of the News of the World might accelerate the decline of the press.  This has implications for  party politics.
I mean this in two senses.
First, insofar as the media has any influence at all - and this is over-rated - it tends to buttress the two party system. It does so in several ways:
- in presenting a narrow range of opinion, from far right to centrist statist left, it helps to maintain support for the two main parties, by marginalizing other views such as classical liberalism, left-libertarianism and anarchism.
- because journalists work in and are sympathetic to hierarchies, they have a bias towards centralized statist control and an antipathy towards decentralization, whether in the form of markets, blogs or spontaneous disorganized protest.
- journalists’ love of human interest stories entrenches the fundamental attribution error. To journalists, things go wrong because of individual failure, because the wrong individuals are in charge, rather than because of impersonal structural social forces.
In these ways, journalism - the BBC as well as the papers - helps entrench the two/three party system which is based upon narrow disagreements within the confines of hierarchy and tolerance of inequality.
This means that, if the press were to go into accelerated decline, support for the two main parties might decline.
There’s a second sense in which this is the case. When the press had millions of trusting readers, politicians could reach voters through the newspapers - hence the cult of the spin-doctor under New Labour. The efficacy of this strategy is already doubtful; Labour lost four million votes between 1997 and 2005 despite (or perhaps because of) the best efforts of Alastair Campbell. But how much less effective will it be if fewer people read such stories and even fewer believe them? As Dave says, there’s no point Labour being subservient to the press any more.
If politicians can’t reach millions of voters through the mass media, they’ll have to try to reach a few thousand at a time through new, more diverse and fragmented media - or even through the old media of talking in the pub and at work.
This, though, requires a grassroots network - thousands of people willing to spread the party message fragment by fragment, handful of people by handful of people. With membership of political parties having slumped in recent decades, though, this looks infeasible.
In these senses, the decline of the press is a threat to the party system. No wonder Ed Miliband’s response to the NotW scandal is barely more coherent than David Cameron’s.

Yes - equality of opportunity exists

Is Britain an equal opportunity society? This sounds like one of John Rentoul’s questions to which the answer is no. But it's not. If we consider opportunities for happiness rather than income or power, then the UK is reasonably egalitarian. This new paper says:

Characteristics of the child and family at birth predict no more than 1.2% of the variance in average adult life satisfaction. A comprehensive set of child and family characteristics at ages 7, 11 and 16 increases the predictive power to only 2.8%, 4.3% and 6.8%, respectively. We find that the conventional measures of family socioeconomic status, in the form of parental education, occupational class and family income, are not strong predictors of adult life satisfaction…[This] implies that there is high equality of opportunity to live a satisfied life.

Some back of the envelope maths corroborates this. The correlation between fathers’ and sons’ incomes is positive - which means there is inequality of opportunity for income - but well short of unity (pdf). Call it around 0.35. And the correlation between an individual’s income and his happiness is also positive but “modest” (pdf). Let’s call this 0.2 (pdf). Multiplying the two together gives us a correlation between fathers’ incomes and sons’ happiness of  0.07.
This is pretty close to the zero that would represent equality of opportunity for happiness.
You can see why the old Etonian David Cameron is so keen on focusing on well-being rather than incomes.
This raises the question: what, if anything, is wrong with looking at equality of opportunity for happiness rather than equality of opportunity for incomes?
It would be odd to say that income matters more than happiness. After all, what’s the point of income if it doesn’t buy us happiness?
Instead, I suspect there are two answers here.
One is that inequality of opportunity for income matters not because it represents injustice but because it is economically inefficient. It means the talents (or potential talents) of poor kids are wasted, and we are recruiting “top people” from too narrow a pool.
My preferred answer, though, is that perhaps this shows the limits of using happiness as a guide to policy. If people have adaptive preferences, and reduce their expectations to match their diminished circumstances, then they might be quite happy. If so, then equality of opportunity for happiness might tell us no more than that the poor have adapted to their poverty.
This might be equality, but is it justice?

The dark side of competition

The News of the World scandal shows that competition has a downside. Glenn Mulcaire says:

Working for the News of the World was never easy. There was relentless pressure. There was a constant demand for results.

This pressure, though, did not come merely from his bosses. It came from market forces. The News of the World operates in a very competitive marketplace and this competition created a demand to get stories.
The standard reply here is that, as someone once said, markets need morals. Competition can only be satisfactory if it operates within ethical guidelines.
But morality is endogenous. In some cases strong competition will lead to bad behaviour, simply because people will sometimes think the benefits it - getting the story, keeping one’s job - outweigh the costs, the risk of getting caught. (The fact that Mr Mulcaire's assessment of the costs and benefits seems, a few years later, to have been mistaken is relevant only in hindsight.)
This is not the only example of competition having a downside. To take just two things I’ve read today, John Kay describes how competition leads to infuriatingly opaque pricing by airlines and phone companies. And this paper - based on a study of classical composers - shows that:

Competition incorporates a large negative externality in terms of a decreased state of health and premature death.

If I were a bog-standard lefty I’d add to this list and say that it all shows how the “neoliberal” emphasis on market forces destroys lives and moral standards.
But I’m not. The history of centrally planned economies, surely, shows us that the absence of competition does not mean an absence of incentives to misbehave. Given its offsetting benefits, competition is necessary even in a socialist society. In fact, I suspect that something like the News of the World scandal might have happened even if the paper were run as a socialist co-op. After all, the motive that led to phone hacking was an instinct which all good journalists should have - the desire to get a story which people want to read; the fact that the News of the World is a right-wing rag controlled by evil capitalists and the fact of its misbehaviour might not be perfectly related to each other.
Instead, my point is directed at those who often - and often rightly - praise the virtues of competition. Such folk - yes Mr Worstall, I mean you - love to tell us there ain’t no such thing as a free lunch. They’re more right than they know. Competition ain’t a free lunch either.

Rebekah Brooks & modern management

At risk of sounding monomanic, one issue raised by the News of the World’s hacking into Milly Dowler’s phone is: what is the function of management?
We can think of the relationship between managers and the production process as lying across a spectrum*.
At one extreme, there are bosses who try to know everything - for example, the early factory owners who invented the processes they controlled and needed only unskilled labour and minimal administration by others, or Taylorite scientific managers. Among today’s prominent bosses, perhaps Jamie Dimon comes close to this extreme.
At the other extreme there is the management described by Robert Protherough and John Pick:

Maintaining a distance from that which is being managed is a key component of the modern managerial process. The achievement of modern managerial goals generally involves a high degree of mental abstraction, but little direct contact with the organization’s workers, with the production of its goods or services, or with its customers and users. (Managing Britannia p 32)

Many bosses, says Henry Mintzberg, “try to manage by remote control, disconnected from everything except the ‘big picture’” (Managing, p9)
In this context, I can believe Rebekah Brooks’ claim not to have known about Glen Mulcaire’s criminal behaviour. Such ignorance is the result of a remote control management that spends all its time on “strategy” and none on the production process; any modern boss can spend weeks in meetings solely about futile efforts to redesign a website.
In this sense, she has something in common with her friend David Cameron, as described by Philip Stephens:

Part of Mr Cameron’s problem is inattentiveness. He does not like to be burdened by paperwork.

This too is remote-control management.
And there is something to be said for this. No-one wants a control freak breathing down their neck - it’s just demotivating. And when knowledge of complex organizations is bounded, it’s entirely sensible for bosses to delegate: Cameron and Brooks’ problem is that they delegated to oafs and criminals. 
 This, though, raises the question. If remote control management doesn’t directly** monitor its workforce, what function does it serve?
Old-fashioned scientific management had an obvious rationale. It could claim to move firms closer to the production possibility frontier and so increase efficiency - a claim consistent with simple exploitation of workers.
But remote control management doesn’t bother with the production process. Yes, it’s obsessed with brand-building. But for the economy as a whole, this is a zero-sum game; Coca-Cola’s brand is a liability for Pepsi. All that obsession with strategy and growth has not led to any observable rise in aggregate trend economic growth since the heyday of more hands-on management. And studies of firm growth find that the process is largely random, suggesting that a lot of managerial effort to pursue growth is wasted. 
Which raises a possibility. Could it be that remote control managers function much as the gods did in ancient times. They get blame when things go wrong and praise when they go right, but in fact have no power at all, except that which ignorant people impute to them? They are, technically, redundant and are sustained in their lucrative positions only by superstition and ideology.
* I stress spectrum. Many management structures, such as the M-form, lie somewhere in between.
** I stress directly. Like Mafia bosses, senior managers leaves the dirty work to their underlings.

Tariffs vs income taxes

Inspired by Don Boudreaux, Tim asks: “If tariffs reduce trade, why does income tax not reduce incomes?”
As one of the many targets of the question - someone who supports free trade and income tax, a perfectly common position - I’d suggest three reasons:
1. There are often more and closer substitutes for imports than there are for earning a wage.
One of the curiosities of international trade is that there’s a very incomplete division of labour, as rich countries often import and produce very similar goods. This generates an ability to substitute away from imports if a tariff is imposed - either to a very close substitute (domestic vs. imported steel) or a near substitute (home-grown apples vs. imported bananas).
By contrast, the substitutes for wage-earning aren’t so close. Yes, some can slip into the black economy, and others can work overseas. But leisure is - as we all know - a very distant substitute for work.
The upshot is that we can’t substitute away from work as easily as we can away from imports.
For this reason, I’m not sure if Tim’s example of NBA stars moving to low-tax states has huge relevance to the UK. Playing basketball in Texas is a close substitute for playing it in California, so we’d expect taxes in the latter to encourage players to move to Texas. But insofar as working in London is a less close substitute for working in Paris, we’d expect a smaller effect of UK taxes on labour supply.
2. Income tax has an income effect as well as a substitution effect. In reducing our post-tax incomes, income tax might encourage us to work harder or longer. It’s difficult to establish this empirically, because one way in which this happens is that we postpone retirement with the result that taxes in one year might raise labour supply decades later.
It’s not obvious that tariffs have an analogous effect in boosting imports.
3. Tariffs often are not just a tax on consumer goods, but upon inputs. And insofar as point 1 doesn’t hold, this introduces another channel in which tariffs reduce imports. In making some activity unprofitable at the margin, firms might shut down.
Again, there’s no analogy with income tax. Companies might kill themselves in response to higher tariffs on imports, but people don‘t kill themselves in response to higher income taxes.
Now, I stress that these are hypotheses that apply generally and with exceptions. It’s entirely possible - nearly certain - that there are some cases where income taxes reduce incomes and where tariffs have relatively benign effects. The question is an empirical one: how common, exactly, are such cases? And the answer is: it’s hard to tell.
Instead, I’m just trying to motivate the Bayesian prior held by many liberalish lefties like me, which is to instinctively oppose tariffs but support income taxes, unless there‘s good empirical evidence to the contrary. And for the tax rates that are relevant, this evidence is, so far at any rate, unconvincing.

Arguing against expansionary fiscal contraction

Richard Murphy shows how not to argue against Osborne’s fiscal austerity. He writes:

Expansionary fiscal contraction is what is called a ‘general equilibrium model’ based on the ideas of neoliberal economics…
[Osborne] really does think we should all be dancing in the streets and borrowing money to spend now to celebrate the fact that he’s going to give us tax cuts with absolute certainty in the future.

This, though, is just bad history. Osborne’s policy is not based upon general equilibrium thinking. He wouldn’t know a DSGE model if it were to hit him in the face - something I’d pay good money to see.  The paper (pdf) Richard cites is an example of economists seeing something work (occasionally) in practice and wondering how it might work in theory. It is not the basis of interest in expansionary fiscal contraction. Instead, that basis is the empirical fact that sometimes (pdf) - and only sometimes (pdf) countries have tightened fiscal policy and experienced surprisingly good growth.
Which brings me to how I would argue against the notion of expansionary fiscal contraction. There are mechanisms through which this can happen. But the simple fact is that they don’t seem to apply here and now. For example:
“Fiscal tightening can reduce long-term interest rates and so encourage firms to borrow to invest.” But as a simple fact non-financial firms are barely borrowing at all from either capital markets or banks, and are not stepping up their investment.
“Tightening can be offset by a lower exchange rate (pdf) or by looser monetary policy." However, sterling’s trade-weighted index has been more or less stable since early 2009, and with interest rates at their zero bound, any further monetary expansion must take an experimental form.
“Tightening can encourage firms to invest by reducing the demand for labour and wage militancy (pdf).” But whilst wage militancy might have deterred firms from investing in some countries in the 70s and 80s, it certainly was not a factor behind UK investment decisions in recent years.
“Tightening can be offset by increased personal borrowing.” This needn’t be because of Ricardian equivalence, but simply because - as in the UK in 1981 - fiscal tightening is accompanied by a relaxation of credit controls. Again, though, the facts speak against this. Whilst households are borrowing, they are not borrowing much.
In other words, doubts about Osborne’s policy should be based in the facts, not in some theory to which he doesn’t subscribe
Now, I don’t say this to criticise Richard; I can leave that to others. Instead, I do so for two reasons.
One concerns how we go about persuading others. Laughing at a silly idea and using the boo-word “neoliberal” might win cheers from your own side. But it does nothing to convince supporters of fiscal austerity who’ll simply think you’re attacking a straw man.
The other concerns the nature of economics. For me, economics is not about big ideas such as "neoliberal" economics. Instead, it’s about data and mechanisms; mathematical models are useful insofar as they draw attention to mechanisms and their likely importance. The fact is that there are some mechanisms which suggest that expansionary fiscal contractions can work. But there are also facts which suggest it is not doing so here and now.

The economic base of Blue Labour

Although he never says so directly, Owen Jones’ Chavs shows us the economic base of Blue Labour. Much of his book is a description of how economic change in the last 30 years - deindustrialisation and the rising power of capital - has destroyed the livings standards and communities of the old working class.
Of course, if your experience of change has been pretty uniformly of change for the worse, then you will come to value tradition, to favour the known over the unknown, and to be sceptical about such change. You will become small-c conservative (the emphasis on small c is huge).
Enter Blue Labour (pdf). This, says Craig Berry, endorses a conservatism of “tradition, defensiveness against undemocratic change, and the valorisation of associative bonds.” As Maurice Glasman puts it:

Democratic politics, according to this view, is the way citizens come together to protect the people and places that they love from danger…
This always generates a rich and complex politics that is as much about cherishing what you know and love as about the pursuit of progressive ends. That is why Labour politics has always been radical and conservative.

From this perspective, Blue Labour is the antithesis of New Labour with its enthusiasm for change, modernization and newness against the “forces of conservatism.“ It also represents a rediscovery of Marx’s insight that capitalism consists of the “constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation.”
But we’ve been here before. For the 160 years between the French Revolution and the Attlee government, there was another class that was the victim of economic change - the landed interest. For this period, it was under threat from the rise of capital and then the rise of an egalitarian movement.
And its response to this was just like Blue Labour’s - to develop a conservative disposition, which valued tradition and was distrusting of rationalist innovation. It was Michael Oakeshott who wrote (pdf) that “change is a threat to identity“ but it might have been Glasman.
This conservatism was profound, coherent and attractive. But it did not prevent the landed class from losing much of its relative wealth and most of its political power and prestige. Remember that although it is “chavs” that are stigmatized and mocked these days, it was only a few decades ago that the old aristocracy suffered this fate. They were routinely portrayed as Bertie Wooster-type chinless prats and Alec Douglas Home, the last Etonian PM before Cameron, was laughed out of office. 
Of course, the decline of the landed aristocracy was largely a relative phenomenon; even at their low point they remained very rich.
Nevertheless, this raises the question: what power does ideology have in the face of massive social and economic change?
You could argue that conservative ideology did protect the landed class by preventing a violent revolution - though this view rests upon an untestable counterfactual.  But it’s also possible that even the best political ideas are weak in the face of economic power. If so, then Blue Labour is, as Left Futures says, mere “waffle.”
And this raises another question: how should we regard the decline of the working class? Is this due to “superstructural” factors - Thatcherism and the “neoliberal project” - that might be resisted by good political ideas. Or is it instead due to fundamental “base” factors - the increased power of capital unleashed by the emergence of a massive labour supply in emerging markets - that might overwhelm the puny force of ideas.
In this sense, one’s attitude towards Blue Labour should rest, in part at least, upon one‘s attitude towards classical Marxism.