« The Hayek question | Main

September 15, 2020

Comments

ltr

But there’s another conception, which has grown in recent years. This regards politics not as a matter of solving (or at least ameliorating) social problems with coherent policy, but rather as unifying your tribe – for example by inventing culture wars....

-- Chris Dillow

[ Perfect and awfully important. ]

r s mitchell

Why should policy be coherent when prices aren't? (The more debt governments accumulate, the lower interest rates get, for one example.) Nature isn't coherent. Consistency is the hobgoblin of small minds. Reagan ran huge deficits because he knew they did not matter, preaching austerity for show as he used economists as a convenient tool to justify an incoherent ideological desire to cut social spending ...

Jim

Tribal looks the best explanation.

Cast our minds back pre Brexit. The UK was trundling along, not good and not too bad. But perennial problems persisted - housing, industrial policy and economic policy. Housing was a political football and industrial and economic policy were still intractable problems. People were dissatisfied and the Tory Right were still bucking for a 'free market'.

Well now they (almost) have it, so what might a Tribal Right Wing deliver as a Brexit Bonus. Simply look at what will advantage the rich. Cummings can zone the country for housing - for rental, the BBC can be cut up and privatised on subscription services, the NHS can also be cut up and delivered via an insurance model. That is just for a start and achieves the real aim of Brexit - an ongoing revenue stream to the already rich. Ongoing economic and industrial policy is still TBD and just as intractable but that can be Starmer's problem; eventually.

The result is an economy divided up into low-wage/rented housing sector, a mid-wage/private housing transitioning to rented housing and a high-income/private housing segment living off the previous two. Note the move from wage to income. What is not to like?

MJW

Politics is ultimately about power; who decides and what they decide.

BoJo's philosophy is simple, he doesn't really care as long as he has power. I'm sure he has some underlying views, but they're lightly held and easily sacrificed. He's an outlier, but even supposedly ideologically committed politicians will volte-face when it suits. It's not sustainable long-term, it is by definition short-term, which is why the Conservative Party will ditch BoJo before the next election.

Sunak benefits from a very low bar, not just in the Conservative Party, but from the opposition. For same reason the general public consider Starmer an improvement on Magic Grandpa, without having to actually do anything. But Sunak is also being compared favourably to the worst case counterfactual, which is not actually that unrealistic given the erratic nature of BoJo's administration.

pablopatito

I see politics as marketing. I think it is down to experts like Chris and Simon Wren Lewis to help formulate good policy and then it is down to politicians to successfully market those policies to voters.

Many of Labour's policies in the last manifesto were decent enough mainstream social democratic policies. The problem was that Corbyn was terrible at marketing them.

If Sunak suggested free tuition fees and free broadband I doubt anyone would bat an eyelid. The Tories are generally pretty good at marketing whatever policies they dream up (many of them stolen from Labour).

However, if a politician thinks "what's a good policy for handling the post pandemic depression", I'd want her to think "I don't know but I'll ask Simon Wren Lewis for advice". What I don't want her to think is "I don't know but I'll knock on a few doors in Stoke and ask my punters for advice"

Blissex

«Many of Labour's policies in the last manifesto were decent enough mainstream social democratic policies. The problem was that Corbyn was terrible at marketing them.»

Actually he was very good at marketing them: the right argument, presented by a trusted person, at the right time.

However he got buried by vicious attacks. Were those attacks independent of the social democratic policies, was he really a vicious wannabe genocidal trot tyrant and quisling of the EUSSR?

No, he was attacked obliquely because social democratic policies are not mainstream, they are COMMUNISM. :-)

Read all the comments on the Financial Times site, where he is described as a deranged marxist who would destroy thatcherism and with it the easy money flowing to the tory and whig property and financial elites, or just check this title referring to his policies:

https://www.ft.com/content/5584b204-079a-11ea-a984-fbbacad9e7dd
“The Thatcher revolution is coming under threat”

Look at the article titles here in the even more extreme press:

https://www.google.com/search?q=corbyn+marxist+extremist

ltr

«Many of Labour's policies in the last manifesto were decent enough mainstream social democratic policies. The problem was that Corbyn was terrible at marketing them.»

Actually he was very good at marketing them: the right argument, presented by a trusted person, at the right time....

[ Perfect, but when British media has become a reflection of the passions of Rupert Murdoch after a time it becomes ever so difficult to remember who a Corbyn was for decades and looking ahead to take a Corbyn seriously. ]

Jim

I think Blissex is a bit hard on the FT. That journal is fairly left wing compared with the DT and DM and is not a totally rabid rubbisher of left-wing ideas. I agree with Pablo that politics is largely a marketing/sales job.

The key with marketing and sales is to look and sound smooth and competent, don't pick your nose, use deodorant, don't sound like an oik and be competent at lying. We have discussed politics as 'show business for ugly people' before.

The right wing press has many advantages, selfishness sells, it has better jokes and story-tellers, more money and better production. To be fair The Staggers is not the dull turgid rag of 20 years back but it does have a hard job to be as amusing as the Speccy. The Left is lumbered with the Unions and the LSE, neither of which have an amusing story to tell. Therein lies the rub, most people have never read a manifesto and only read the Mail/Sun/DT. Blair is reviled by parts of the Left (and Right) but he was good at marketing and sales, he did use deodorant. Snag is he pooped on the Left's own doorstep.

The tragedy of Brexit is that the Right will carve up the pie for themselves, the Gammons will be well and truly cooked and Starmer will be left to pick up the pieces, find it an impossible job and Labour will get kicked out again and go back to the outer darkness.

Blissex

«a bit hard on the FT. That journal is fairly left wing compared with the DT and DM and is not a totally rabid rubbisher of left-wing ideas.»

First, I was referring to the *commenters* on articles in the FT. But to use "fairly left wing compared" is just submission to the "There is no alternative" plan: the FT is a right-wing. 100% globalist whig-thatcherite propaganda organ in its analysis, thus the outrage at the threat to the "thatcher revolution". The worse newspapers cover the range from far-right to extreme far-right, like the Conservative party itself.

«I agree with Pablo that politics is largely a marketing/sales job.»

There is an element of that, but I rather disagree, I think that while a minority of the public are gullible and can be swayed by political marketing, and by the cognitive biases it cleverly exploits, most voters do vote their interests.

Most tory voters "button issue" is property, and they will vote even for someone like Johnson if he looks like a champion of their interests. They will hold their noses and vote their intererests. More on this later.

Blissex

«it is down to experts like Chris and Simon Wren Lewis to help formulate good policy and then it is down to politicians to successfully market those policies to voters.»

I despair when I read naive comments like that, or naive posts like this one on which we are commenting: politics is not about philosopher-king experts like mr. Dillow or prof. Wren-Lewis analyzing the situation and coming up with the best policies, and then philosopher-king politicians wrangling the consent of the voters to the best policies.

It is about power and money, two concepts that depend on each other. Big interests don't spend huge amounts on lobbying and giving plum jobs to politicians and ex-politicians to fund the search and the marketing for the best policies.

Also while some voters are gullible and fall for marketing, most vote their "book", they vote closely for their material interests, and usually do so advisedly, whatever the marketing bullshit is. They may be wrong as to what their interests are, but they usually pursue them. Some supporting examples:

* Despite a wall of brutal calumny, from inside and outside his party, Corbyn's "Labour for labourers" actually got 40% of the vote in 2017. Voters knew well what they were voting for: social democracy on economics, and reluctant acceptance of brexit with close relationships with the EU, Norway-style, for international politics.

* A commenter on "The Guardian": “I will put it bluntly I don't want to see my home lose £100 000 in value just so someone else can afford to have a home and neither will most other people if they are honest with themselves”.

* Tony Blair: “people judge us on their instincts about what they believe our instincts to be”, and those instincts are about material interests for most voters, like "aspiration" (to faster house costs inflations for New Labour/Conservative/LibDem voters).

* Grover Norquist: “«And then, our job as conservatives is to wake up every day and say how do we make more of us and fewer of them. And the left's position is the same. I passed out a series of trends here; I'd be very interested in whether people think I'm missing stuff. I would suggest the biggest trend is the number of people who own shares of stock directly. We've gone from 17 percent of Americans owning stock to up over 50 percent of households. According to Mark Penn, two-thirds of voters in 2002, 2004, somebody who owns at least $5,000 worth of stock is 18 percent more Republican and less Democratic. African-American, no stock, 6 percent Republican; $5,000 worth of stock, 20 percent Republican. Every demographic group gets better with share ownership. Rich, poor, all colors, all genders, with the exception of women who earn more than $75,000 a year, who are already thoroughly Republican and don't get any better. [...] The growth of the investor class–those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result — is strengthening the conservative movement.»

* Grover Norquist again: «The 1930s rhetoric was bash business — only a handful of bankers thought that meant them. Now if you say we’re going to smash the big corporations, 60-plus percent of voters say “That’s my retirement you’re messing with. I don’t appreciate that”. And the Democrats have spent 50 years explaining that Republicans will pollute the earth and kill baby seals to get market caps higher. And in 2002, voters said, “We’re sorry about the seals and everything but we really got to get the stock market up.”»

* Peter Mandelson, Tristram Hunt, Chuka Umunna: “Labour would only win if the party championed aspirational voters who shop at John Lewis and Waitrose”.

aragon

The trouble is that the house value/price is meaningless if you need somewhere live, within commuting distance of any work. And that cold wind from the north of low pay and insecure job is reaching London.

Look at how Google/Facebook has taken Journalists advertising revenue. Even lawyer and architects are feeling a chill.

The M25 is not a moat. Even parasites know they cannot live forever on a decaying corpse. Just how many of the 1%/0.1% can the Laundromat support?

https://www.fastcompany.com/90550015/we-were-shocked-rand-study-uncovers-massive-income-shift-to-the-top-1

We were shocked, shocked I tell you - somebody has not been paying attention!

https://www.telegraph.co.uk/news/2020/09/16/boris-johnson-has-six-months-left-save-premiership/

Yes, more austerity from a commentator on the Tory/Telegraph.

"Tax and spend is a central issue: the Tories cannot afford to botch the next Budget and Comprehensive Spending Review. Massive increases in tax would doom this Government, condemn Britain to European-style stagnation and ruin Johnson’s legacy. They must be resisted at all costs, which means that the PM cannot afford to go down as another failed social democrat. Instead, spending cuts need to be found and Johnson must rediscover his supply-side instincts. Which takes us to planning and housing, another crucial battle. Britain must build a lot more homes to ensure their affordability: the young voted for Thatcher in the Eighties but they will be all Starmerites in four years’ time if the supply of housing doesn’t increase significantly. Tory MPs must back a version of Johnson’s planning reforms."

Paulc156

Interesting to see the Grover Norquist quote.
According to Krugman just today, circa 95% of all stock is owned by the top 10%. The bottom half owns what looks on this chart to be about 1% of all stock.

https://mobile.twitter.com/paulkrugman/status/1306271693111951360/photo/1

Jim

As said, cold winds doth blast our darling buds, even creeping under the door sills of Middle England. Once upon a time a simple degree would ensure a cushy career - no longer. Even that cushy career was paid for by the masses of miners and shipyard workers and they are all gone.

Reading some literary rag recently I found some history and social science professors going on about the minutiae of some long dead artist's attitudes and philosophies. Only in an advanced nation like ours can we afford to spend time and money raking over such dead coals. But jolly good for them, a professor's pay is not too bad and maybe there are book sales and film rights etc etc. An example of the service economy working and an elite making hay.

But how many history and social science grads are going to get a plum prof's job? Therein lies the problem with education, just how much is worth while. Even if we were able to teach tensor calculus and Heideggerian philosophy to 14 year olds would we be likely to find some usable outlet for their efforts.

Then we might wonder where the new industries are coming from. I see no prototype time machines or transgalactic transporters. Our smartphone chips use 1920's physics, we have merely got a bit better at exploiting old science. And any way, if we look at the history of ARM say we were very lucky to end up with an intellectual capital intensive business which we could then flog off. But none of this led to much in the way of UK jobs, most of the workers and their wages ended up in Asia and some good profits repatriated to Cambridge. Jolly good and no problem - if you have a follow on strategy. Regretably I fear the low-hanging fruits are all taken. The next ARM? pharma is interesting but strictly for poor and ill people.

My own experience was that I made more money doing up houses than coding computers. Start-ups - forget it - too risky, pass the trowel.

Blissex

«My own experience was that I made more money doing up houses than coding computers. Start-ups - forget it - too risky, pass the trowel.»

I know quite a few people who say the same. It makes a big difference benefiting directly or indirectly from immense amounts of government spending and credit or having to actually work for a living. Only idiots have been trying to make money by working or by business in the past 40 years:

«Speaking about his first year in business with Lord Sugar, Mark Wright, the winner of last year’s Apprentice, said the Amstrad founder had given him tips on creating long-term wealth. “Lord Sugar said you make money from property and do business for fun.”»

Lord Sugar made around 4-6 times more profit from his London property than with any businesses.

Blissex

«The trouble is that the house value/price is meaningless if you need somewhere live, within commuting distance of any work.»

That's the usual bullshit; you could also say that "having a million quid in your pension account is meaningless if you are before retirement age and need to work for a living". Sure, until you can cash it in the property or the pension is illiquid, but that does not mean that it is "meaningless".

Blissex

«Interesting to see the Grover Norquist quote»

From: http://web01.prospect.org/article/world-according-grover very, very interesting, especially the bit about "the vote moving primary issue".
.
«According to Krugman just today, circa 95% of all stock is owned by the top 10%. The bottom half owns what looks on this chart to be about 1% of all stock.»

Indeed, and t5he same for property: almost all property belongs to big landowners, but most owners of a tiny plot with a 3 bed semi in Watford tend to vote thinking they are in the same class as the Dukes of Atholl or Westminster or Lord Sugar.

BTW my usual story connecting both G Norquist and that report is that in the 1970s a Conservatives think-tank discovered the founding point of thatcherism: that *at the same level of status/income* those who owned a property however small, had a car however pokey, owned a share based account however small, tended to vote far more often Conservative than those who rented, used public transport, had a defined benefit occupational pension (Norquist lists the same plus "owner of a gun" for Republican voting tendency)..

After that study the the Conservatives and New Labour were eager to reduce renting, shrink public transport, undermine occupational pensions.

Blissex

Soem other of my usual quote about the politics of interests (mostly property) as opposed to those of marketing, from ConservativeHome.com:

«There were even prophetic council house sales by local Tories in the drive to create voters with a Conservative political mentality. As a Tory councillor in Leeds defiantly told Labour opponents in 1926, ‘it is a good thing for people to buy their own houses. They turn Tory directly. We shall go on making Tories and you will be wiped out.’ There is much of the Party history of the twentieth century in that remark.»

«Is it true that when Clegg suggested there needed to be more social housing, Cameron told him it only turned people away from the Tories? “It would have been in a Quad meeting [the committee of Cameron, George Osborne, Clegg and Danny Alexander], so either Cameron or Osborne. One of them – I honestly can’t remember whom – looked genuinely nonplussed and said, ‘I don’t understand why you keep going on about the need for more social housing – it just creates Labour voters.’ They genuinely saw housing as a Petri dish for voters. It was unbelievable.»

«His Chancellor and chief political strategist, George Osborne, is constantly looking for new ways to create Tory voters.»

and another one on a related point (where "consumer" here means "rentier" and "producer" means "worker") on the politics of interests:

">http://www.prospectmagazine.co.uk/features/david-willetts-margaret-thatcher>
«And behind it was an appeal to the consumer - usually female — over the interests of the producer — usually male and unionised. This potent postwar mix contains many of the ingredients of “Thatcherism.”»

Blissex

«Then we might wonder where the new industries are coming from. I see no prototype time machines or transgalactic transporters.»

My usual story here is simply that the vast majority of "value added" has been created by cheap and energy-dense fuels, and after coal and then oil no new fuel that is both cheaper and more energy dense than oil has been discovered, and the process of diffusion and improvement of oil-based tech has pretty much tapered out.

As prof. Keen says, pretty much GDP=energy consumption. My usual paper from prof. Wrigley of Cambridge:

https://voxeu.org/article/industrial-revolution-energy-revolution
https://royalsocietypublishing.org/doi/full/10.1098/rsta.2011.0568
https://www.cambridge.org/core/books/energy-and-the-english-industrial-revolution/A18E48989B4A915D0E77A29D57D85763

Plus this old one
https://oll.libertyfund.org/titles/jevons-the-coal-question

Consider this example from "The Economist":

«poor Andean farmers. They grow quinoa because little else thrives on their steep, barren plots. Their new competitors, tilling better soil with modern farming equipment, manage yields that are up to eight times higher. An ox takes six days to plough land a tractor can handle in two hours»

The enormous increase in productivity is *obviously* not due to the tractor being more productive than the ox. Consider the case of a tractor fuelled by hay...

aragon

Bilissex: When do you realize a house with a mortgage - (death pledge) on death?

It is meaningful that you have an asset.

However few people downsize or relocate in retirement to realize the asset, and alternate assets (houses) inflate at the same rate (regionally) and you are anchored by your job while working.

If the asset inflates a a greater rate than general inflation you can remortgage to extract cash and take on more debt.

However house prices used to crash on a regular basis as the ability to service the debt was exceeded.

With zero interest rates, longer terms, no deposit, and help to buy other Government schemes this has not happened.

What happens when mortgage duration's exceed your expected working life? Multi-generational loans?

But can propriety prices defy gravity forever and how significant are the paper gains and losses while you occupy the house and service the debt?

Assuming you can service the debt (which is reduced by inflation but increased by compound interest on the principal) and their are maintenance costs...

Will house prices ever fall relative to income?

Inheritance is a different matter if the children can realize the asset (not their primary residence).

How are the Government transferring wealth to property owners (MIRAS is no more - via the banks.) excluding traders/flippers/landlords/council house sales (below market value) or just inflating a life long bubble?

jim

Most people do not realise the asset (house). Well, I and many friends have considered it but nice small houses handy for the shops and the doctor and in a civilised area are rare as hens teeth. Sheltered accommodation comes with too many expensive strings attached. The cash loosened up is not that great. Most of us are hoping to go out feet first.

Such houses are popular with first time buyers and the BTL market but unpopular with big builders - think 'executive homes' or minute boxes on estates. Locally the small house market is rapidly bought up by London boroughs seeking social housing to decant their homeless/problem families. Hence barriers to change.

Bank Underground has a nice series on house prices and the idea that First Time Buyers are getting richer. Low interest rates and availability of loans push up house prices in a constrained market. But I smell trouble, cohort income growth in the FTB sector has fallen and looks likely to fall further. Only the cream of the crop can afford to get on the ladder.

The rest can go rented and if I were an investment company I might schmooze Dommy for some nice Green Belt on which to build Boris Homes. But not in Surrey.

James Charles

"It is about power and money, two concepts that depend on each other. Big interests don't spend huge amounts on lobbying and giving plum jobs to politicians and ex-politicians to fund the search and the marketing for the best policies."
Especially in the U.S.?
“Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens
Martin Gilens and Benjamin I. Page
Each of four theoretical traditions in the study of American politics—which can be characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and two types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism—offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented. A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. We report on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues. Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism. “
https://scholar.princeton.edu/sites/default/files/mgilens/files/gilens_and_page_2014_-testing_theories_of_american_politics.doc.pdf

Blissex

«What happens when mortgage duration's exceed your expected working life? Multi-generational loans?»

"aragon" and "jim", your arguments are bit lame: they boil down to "if you have little house equity that is not much of an asset". Indeed.
But there are millions of people in the south in this situation mentioned by a commenter on "The Guardian" in 2018:

“I inherited two properties in 1995 [ ... ] and the value has gone from £95,000 to £1,100,000”

And that's million quid of (gross) equity gifted by government policy just from the 1990s: the millions of people who bought in the 1970s and 1980s when house inflation was low because it was government policy to keep it low, have been gifted, usually tax-free and always work-free, even more massive profits, accumulating fantastic amount of equity.

Nearly all these people have conception of politics that is far from "tribal": they vote their "book".
Indeed after the house cost inflation crash of the 1990s 4-6 million of them stopped voting Conservative to punish them, until New Labour also crashed house cost inflation and then millions switched back to the Conservatives, or to the LibDems.

Because in the example above there is an average of £43,000, despite two property crashes in between, per year of gross profit, pretty much government guaranteed, plus of course not having to pay tax or rent on one of them if you live in them, and getting rent on the other.

As to realizing, not only there are remortgages, as you have written, but millions of people have moved to Spain or to retirement homes, or have downsized, or taken lodgers, even if less than in the past due to the good final pensions, won by the Trade Unions and Labour, that younger people no longer have.

Again, it is much the same as a million-quid pension account where the government has "gifted" £43,000 a year for 23 years: nobody is forced to realize it, if it generates enough income, or if one has another source of income. BUT IT IS THERE.

Massive upward redistribution of wealth and income has happened, it cannot be hand-waved away by saying that the profits are being partially hoarded instead of wholly spent.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)

blogs I like

Blog powered by Typepad