When bad arguments work

Many of the most common arguments against Labour’s policies are laughably bad – such as the claim that people earning a little over £80,000 a year will have to pay very much more tax; or the idea that higher top taxes wreck the economy; or the demand that individual spending plans be fully costed; or the notion that nationalization is a cost to the Exchequer.

In pointing this out, however, people like me are missing something important – that even lousy arguments have the power to persuade.

Robert Cialdini gives us an example of this in Influence. He tells of an experiment in which a woman tries to jump queues to use a photocopier in a university library. When she merely asked to jump in, 60% of people in the queue complied. But the question “May I use the Xerox machine because I have to make some copies?” got 93% to agree. Even a meaningless remark (why else would you want to use the copier?) elicited compliance.

What’s going on here is that the mere act of speaking has persuasive power. This has been corroborated by experiments (pdf) by Justin Rao and James Andreoni. They got people to play a dictator game in which one subject was given $10 and then invited to share some or none with somebody else. They found that in the straightforward game, dictators have an average of $1.53. However, when the third party asked for a share of the money, the dictator gave an average of $2.40. The actual wording of the requests didn’t seem to much matter. But say Andreoni and Rao, “the existence of a request matters tremendously.” They say:

Communication, especially the power of asking, greatly influences feelings of empathy and pro-social behavior.

The mere existence of messages, then, gets us to sympathize with the sender.

In this context, there’s a massive bias in the media. People earning over £80,000 might be only 5% of the population, but they account for much more than 5% of communication. This leads us to sympathize with them. Add in the fact that people tend to believe lies, and we get a big bias towards the rich.

It’s often said that many people oppose higher taxes on top earners because they hope (mostly wrongly) to become one themselves. But this is only part of the story. We sympathize with the rich not (just) because we hope to become rich ourselves, but because we hear so damned much from them.

There’s a nasty flipside to this. If we don’t hear from people, we tend not to sympathize with them. Separate experiments by Agne Kajackaite has shown this. She got people to work where the rewards went not just to them but to a bad cause (the NRA). She found that when people chose not to know whether the money was donated to that cause, they behaved more selfishly; they worked harder to make money for themselves. “Ignorant agents behave in a more selfish way” she concludes.

Thigh might well have political effects. Because the worst-off have less voice, we are relatively ignorant of their suffering and so less sympathetic to them. Support for benefit cuts isn’t based solely upon outright untruths, but upon a lack of sympathy for them caused by their relative lack of voice.

Most of us, I guess, can name far more people who are in the top 5% of the income distribution than in the bottom 5%. This introduces a bias towards the rich.

My point here is that the media’s bias isn’t merely conscious and deliberate. There are more subtle ways in which it serves the interests of the well-off.

Comments

[acarraro]

Personally I think there is some logic in believing nationalization would increase the deficit.

Purchasing an asset shouldn't change the deficit one way or another.

But if you purchase the asset because you believe the owner is extracting excessive rents, the equation changes. You could extract the rents yourself, but what would be the point? The importanat consideration is that the current owner will only sell the asset voluntary if you are paying upfront the discounted value of his rents.

Is that really what Labour is proposing?

[windsock]

And on cue:

https://www.ft.com/content/7ef7cc2e-3a16-11e7-ac89-b01cc67cfeec?segmentId=67d087c9-a25a-a9ee-db59-a271d5f46ebf

[Martin Holterman]

Stanley Milgram did these kinds of experiments asking people to stand up in half-empty carriages in the NY metro in the 1970s. Staggering compliance rates.

[David.]

@acarraro

I doubt that the concept of re-nationalisation includes an option for the current owner not to sell.

The (labour) government would not be looking to pay for "goodwill", as it used to be called. The current owners are not, quite rightly, their friends.

The bargain would be as devoid of negotiation as the up-coming Brexit one is likely to be.

The world has changed!
"Goodwill" does sound so much better than "future rent extraction".

[gastro george]

@acarraro

Prices to the customer can be lowered. As long as the "rent extraction" is still greater than the cost of finance, then it's win-win.

Future profits on a regulated utility are dependent on the harshness of regulation. Labour might choose to use that as an lever, but I couldn't possibly comment.

[ADifferentChris]

@Martin

That sounds rational (as does Chris's photocopier example). How often do people ask to jump in line; or for everyone in a carriage to stand? Rarely, if ever. Nearly always with good intentions. If this was abused, people would wise up, and change their default behaviour.

No free lunch theorem, meet Pascal's mugging.

[acarraro]

@David

If the purchase is not voluntary (and the manifesto kind of implies it is voluntary I think), then it's just a wealth tax . I am sure there are more efficient ways to raise money with a wealth tax.

@gastro george
Of course Labour could change regulations and lower future rents. What would be the point to nationalize then? I don't see the advantage.

I am personally see no reason to think nationalization will help railways. Labour nationalized railtrack ten-fifteen years ago (kinda, the company was bust anyway). The government determines the type of rolling stock. It determines the large majority of prices. It monitors quality and it can terminate franchises due to breaches. The Southwest trains is the franchise most directly controlled by the government with the government directly paying a thrid party for services. Are we going to nationalize the companies building the rolling stock? Or the steel mills that produce the track? Nationalization is not black and white, it's a spectrum.

The only possible reason to encourgae nationalization is that it will likely shift a large part of the rent collection from the private company shareholders to the workers. If that was the only effect I could get behind it. But I am afraid I believe this would likely increase total extracted rents, if for no other reason that taxes are progressive which means that spreading the rents between lots of people means their after tax value increases.

[Boursin]

@ David - As a professional translator of annual reports and such, I can assure you that it's quite commonly called "goodwill" even today.

@ acarraro - The point may be that it's politically more possible (i.e. possible to a greater extent) for the public than for the private sector to deviate from the combination of factors of production that corresponds to minimising costs. For the public sector, rent extraction may thus be a means to an end in some ways in which it cannot be for the private sector, even a regulated one.

[Arthur Murray]

Typo, 4th paragraph, 5th line. It should read:

They found that in the straightforward game, dictators GAVE an average of $1.53.

[Chris Mealy]

The funny thing about the copier experiment is that it worked for copying 5 pages but not at all for copying 20 pages:

https://jamesclear.com/wp-content/uploads/2015/03/copy-machine-study-ellen-langer.pdf

Hmmm ... looking at this again, it seems a replication crisis kind of paper. Small n and the numbers are a little too perfect. Somebody should try to replicate it.

[Andrew Curry]

@acarraro, The point about the rail sector is that most of the rents are subsidies from the government to the rail companies, which then get passed on to shareholders or foreign rail companies (see Aditya Chakrabortty on this in the Guardian, passim). But it doesn't stop there.

In some cases, e.g. Southern, the privatisation contract badly mis-incentivises the contractor in such a way that they have no interest, financial or otherwise, in providing decent service. See David Boyle on Southern Rail. (More generally, the alignment between the DfT, wanting to make the franchise system work, and the franchise holders is such that the DfT is caputred by the franchisees.)

And finally, the evidence from the franchises that have been run, briefly in some cases, by publicly managed companies also suggests that service outcomes improve.

Apart from that there's no merit in Labour's proposal.