The bias against emergence

John Humphrys gave us a good example of the BBC’s bias this morning – and it’s not the sort you might think.

In discussing the Bank of England’s forecast that real wages will continue to fall this year, he asked (2”10’ in): “are we going to keep getting poorer because of Brexit?”

Now, I think Brexit is one the stupidest things this country has done for years. But it alone is only a minor cause of falling real wages (at least for now!). Three facts tell us so.

First, real wages have stagnated ever since 2007 – long before Brexit was heard of.

Secondly, we haven’t suffered a deterioration in the terms of trade. These have actually risen since May. Yes, import prices have risen. But so have export prices. Exporters are seeing fatter profit margins. Insofar as they share these with workers, real wages should rise for at least some workers.

Higher inflation alone cannot explain falling real wages. They merely pose the question: why aren’t workers getting protection from inflation in the form of nominal wage rises?

The answer, as Mark Carney said (pdf) yesterday, is that productivity is falling – which means a smaller pie for everyone – and that labour market slack gives employers’ the power to hold down wages.

Granted, these aren’t the whole story, and Brexit might be holding down wages by increasing firms’ uncertainty. But they are a big part of the story. Why, then, did Humphrys ignore them and focus on Brexit?

I fear that we have here is another example of a bias against emergence. Political journalists especially focus upon conscious political actions to the neglect of emergent processes.  Brexit is a political choice whereas other, perhaps bigger, influences on real wages are the complex unintended products of millions of dispersed decisions. So Humphrys pays the former more attention.

This is not an isolated example. Political journalists discuss fiscal policy as if government borrowing were set by Chancellors and overlook the (large) extent to which it is the counterpart of global emergent processes such as the savings glut and corporate cash-hoarding.

Nor is it confined to journos. Leftists sometimes blame rising CEO pay on bosses’ greed, as if the rest of us would turn down pay rises, and under-estimate the extent to which it is the result of partly-emergent processes such as globalization (pdf), deunionization, agency failure or managerialist ideology.

In this respect, the BBC has what John Birt and Steve Richards called a “bias against understanding.” In downgrading the importance of emergence, it stops viewers and listeners from understanding social phenomena.

If this bias merely led to ignorance, it wouldn’t be so bad. But it might have a more systematic effect. If we underweight emergence, we overweight the role of conscious individual agency. This causes us to exaggerate what politicians and business leaders can achieve if only they display strong leadership. And that, in turn, helps to sustain inequalities of income and power.

Comments

[Peter K.]

I understand the point of the blog post and share you view about the BBC and corporate media. But I don't have a firm grasp of the macro situation in the UK. If there is labor market slack would more fiscal and/or monetary policy tighten up things?

About the U.S., Greg Ip wrote yesterday in the Wall Street Journal:

"Instead of worrying about robots destroying jobs, business leaders need to figure out how to use them more, especially in low-productivity sectors. Someday robots may replace truck drivers, but it's much more urgent to make existing drivers, who are in short supply, more efficient. Clean energy advocates boast about how many people work in solar power when they should be trying to reduce the labor, and thus cost, involved.

The alternative is a tightening labor market that forces companies to pay ever higher wages that must be passed on as inflation, which usually ends with recession."

A tightening labor market should provide workers with more bargaining power so that workers share in productivity gains instead of it all going to capital.

If there is too much inflation, the central bank will raise rates too much too fast which will cause a recession and throw people out of work. Yellen is trying to kill jobs now by rationing demand/credit and raising rates.

[e]

Or just comfortable old guard lacking incentive to keep up?

[Gerard MacDonell]

I love the concept of emergence, which is new to me, to my shame. I read about it in The Big Picture, by Sean Carroll.

From my novice perch, I want to say that emergence opposes essentialism, perhaps along the misplaced focus on specific events that you identify.

People -- including macro economists -- love to identify an essence, which may or may not refer to anything existing in the actual world, and then to agonize about how to apply it.

A simple example of people being confused by this bad habit is the debate over "monetization." Is this or that policy initiative "monetization" or not?

Who fracking cares? Just focus on the likely effect of what was actually done or proposed. Almost the entire discussion of h money, for example, can be set aside by insisting that an essence need not be an actual thing, you know.

[derrida derider]

Its absolutely true that politicians (for government) and CEOs (for business) and generals (for war) matter far less than people think they do - least of all as much as they themselves think they do. And that this belief leads to undue respect for authority at all levels.

But I aint ready to go to the other extreme and think either individual human agency or blind luck doesn't matter at all. Do you really think wage stagnation in the UK would be as extreme since 2007 if certain individuals hadn't seen a chance to try and dismantle the welfare state to build a Britain fit for "people like us"? Or that a few strategists running a less incompetent and complacent "Yes" campaign would not have made the small necessary difference to the Brexit vote?

[Bonnemort]

"First, real wages have stagnated ever since 2007 – long before Brexit was heard of."

I think that if you look at the ONS figures for real (using the BoE inflation calculator) median male weekly earnings, you'll find that they actually decreased between 1997 and 2015 - an 18 year period. So much for Blair and Brown.

[Bonnemort]

Hours and earnings figures here

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/adhocs/006302annualsurveyofhoursandearningsashetimeseriesofmediangrossweeklyearningsfrom1968to2016

Inflation calc here

http://www.bankofengland.co.uk/education/Pages/resources/inflationtools/calculator/default.aspx

Median male weekly wage 1997 is £356.90, calculator says that would need to be £596.10 in 2016, actual median male wage 2016 is £577.80. Therefore median male worker was better off in 1997 - and I haven't even got on to rents and house prices.