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February 26, 2020


Ben Oldfield

The old backstop to inexperienced ministers was the civil service but the Tories have stopped their pay rises. This has meant that the civil servants have to change jobs to get a pay rise. I have heard that any one who have not moved at least once a year they are considered a failure. So the government is run by amateurs which may explain the current problems.


"What I’m describing here are specific examples of a general fact. Good government is (by definition) a common good, whereas maintaining power and prestige is a private one. Politics is therefore always in danger of delivering a tragedy of the commons*. "

Its almost as if the less power the State has over its citizens the better.........


I doubt making government a few % more efficient will make much difference. A bit like making a buggy whip factory more efficient.

The real problem is a lack of animal spirits. If we look around tech is soooo boring. No transgalactic transporters or time machines, only shinier mobile phones and tellys. Then there are only so many ways you can package insurance and mortgages, the only advance is how to do it cheaper - aka with fewer people.

The real problem is finding new things to do and everyone else is in the same boat. Even the old competitive advantage of nations has eroded away - ask the Swiss watchmakers. Anything can be done anywhere.

Now UK governments are notoriously useless at picking winners and notoriously short-term investors and notoriously mean-minded when it comes to investing in its people. In this situation we have a couple of options - work cheap or invest in skills.

But what do we mean by invest in skills? How do the middle classes train their kids for the better jobs? Answer start early, take them on ski holidays, to the theatre, galleries, footy, dance classes and hire tutors to get into good schools and keep them away from street fights. That is how you get new creative industries, But that is also where the split between those who become politicians and those who become the doers and creators comes in. So work cheap it is for people like you, but not us.

The question is how do the British train their politicians and how does everyone else, is there a difference?


Really amazed that our blogger seems for one post has left aside his wykehamism where politics is a discussion of principles among gentlemen, where the greater good is prevented only by mistakes caused by cognitive biases or lack of knowledge, and acknowledges that they are often caused by very rational and unbiased and well informed material interests.


«The old backstop to inexperienced ministers was the civil service but the Tories have stopped their pay rises.»

Perhaps, or perhaps the cut of the budgets of several departments by 30-40% over 10 years has been quite devastating. Or viceversa "liberating": cutting the budget for the tax inspectorate by 40% saved rich taxpayers a lot of money.

Also, typically Conservative governments regard the civil service as a socialist conspiracy, and therefore a political opponent of common-sense apolitical policy, which for them is thatcherism.

Robert Mitchell

Goldman Sachs hedged and profited from 25-sigma events. They bought Credit default swaps. The only uncertainty was whether the Fed would bail out AIG so the CDS would get paid. When former GS executives run the Treasury and Fed, how uncertain was a Fed backstop really?

derrida derider

What Robert Mitchell said - they cursed their own stupidity all the way to the bank (or Bahamas based hedge fund, as the case may be).

I think all you are saying is that arrogance and overconfidence pays (which indeed all the labour market research confirms) so arrogance and overconfidence is what we get, even in technical fields. How long O Lord must the wicked prosper?


«I think all you are saying is that arrogance and overconfidence pays»

On a small scale yes, but the examples our blogger and "Robert Mitchell" make are actually self-dealing by a clique of privileged insiders. That is not stupidity.

Consider the AIG case: the AIG traders who sold the CDSes that bankrupted AIG made a *lot* of money in commissions, and so did the executives with bonuses. At some point finance made 40% of the profits of all USA quoted companies (and a large chunk of those go into executive bonuses), almost all of them the result of ridiculously low depreciation of risk, which I reckon was entirely deliberate, as the constant pressure by the finance sector to reduce capital ratios (which has resulted in most of them trading with negative capital for decades).

The movie "The big short" ends with the narrator, the derivative salesman who pushed the shorters to buy CDSes by telling them they would pay out big, receiving a very large cheque in commissions.
That is not "arrogance and overconfidence".

Robert S Mitchelk

When that same salesman said to trust his math because his quant's name was Yang, that was pretty arrogant and overconfident. Banks today are doing the same thing; recently Nomura's McGellicott (his newsletters get quoted a lot by fintwit) recently said "we sell vol, knowing we're backstopped." Volatility is the new CDS and we'll see if the Fed doesn't suppress this recent volatility spike soon ...


Surely evolution has designed us human beings to value arrogance and overconfidence? The mammoth only got slain by someone who said 'We can do that!', tried and succeeded (even if others failed), not someone who said 'Ooh thats a bit hard, and difficult, lets not try!'. The former ate, the latter starved, and our genes come from the former.

Robert Mitchell

Jains have been vegetarian since before recorded history. Jains learned that arrogance and overconfidence obstruct knowledge. I don't want to live in ignorance no matter how confident I might feel. I hope arrogant and overconfident humanity goes extinct. I'd go first if you liberalized suicide markets ...

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