On resilience

Two apparently different things I've seen recently illustrate a common mistake which distorts our thinking about politics and organizations.

First, 30p Lee tried to show that one could eat very cheaply with Tesco's Weetabix. And then when somebody posted a picture of a mouldy Tesla, Musk's incel fanboys claimed the fault was "owner error."

Anderson's mistake is to fail to see that whilst one perhaps could subsist adequately if one were a joyless calculating machine (what a great advert for capitalism), few people are such machines. And Tesla's fans fail to appreciate that even if Teslas do keep well in optimum conditions, few of us are so careful of our vehicles.

The common error here is an inability to see that products and systems must be resilient to human error simply because such errors are widespread and an inevitable part of the human condition.

Risible though these examples are, similar mistakes are common.

Brexiters who complain that Brexit has been poorly implemented should have foreseen the chance that the process would have been undertaken by fallible individuals. In policy-making, implementation must not be a mere after-thought. A policy that only works if everyone is competent is not a serious policy at all.

The same is true of those calling for reform of the NHS. Maybe there is some kind of insurance system which would be an improvement. But this is only a voice in your head. In this world, we must guard against the (high) risk that the task of reforming the NHS will be undertaken by vicious incompetents in hock to US insurance companies.

My call for policy and institutions to be robust to human error is in fact one with a long tradition. Burke famously said:

We are afraid to put men to live and trade each on his own private stock of reason; because we suspect that this stock in each man is small.

Marx said that "the emancipation of the working classes must be conquered by the working classes themselves" because he did not trust individual leaders. (Marx and Burke aren't so unalike).

The US's founding fathers created a system of checks and balances "to control the abuses of government." "If angels were to govern men, neither external nor internal controls on government would be necessary" wrote James Madison, knowing that men were far from angels.

And Warren Buffett has said: "I always invest in companies an idiot could run, because one day one will." He looks for companies that are resilient to human error. The damage caused by such error can be enormous; one cause of the financial crisis was Fred Goodwin's tyrannical management of Nat West.

So, what would a polity that embeds this principle look like?

In some ways, like our present one. There are nine decision-makers on the MPC to help guard against any one of them being fallible. Judges are constrained by sentencing guidelines to avoid rogue ones making erratic decicions. Where markets function well, they eliminate the bad products resulting from human error. And there's increasing use of algorithms because, as Daniel Kahneman and colleagues have concluded, "simple models beat humans" (although of course algos can go wrong because they are made by flawed humans).

But could we do better? Yes. Here are four possibilities:

 - A more generous welfare state. In my context, the case for this isn't just that Anderson is wrong and people need an income well above subsistence levels because they cannot budget with maximal efficiency. It's also because fiscal and monetary policy-makers cannot adequately foresee the future which means that discretionary policy is unreliable. Stronger automatic stabilizers - a higher safety net - thus do a better job of protecting is in bad times.

 - Improving selection mechanisms. Our media-political institutions select not for the best but for the worst: they attract incompetent MPs and ministers, and filter out intelligent ideas. They thereby magnify our vulnerability to the human factor: the story of Truss and Johnson is one of systemic rather than individual failure. We must think how to reverse this.

 - Increasing diversity. Cognitive diversity reduces the danger of us accepting bad policy by ensuring that all views - not just those of narcissists flattering themselves they are "contrarian" - get heard. Institutions that might facilitate this include citizens assemblies and forms of sortition.

 - Economic democracy. The UK has a shortage of good managers. Econ 101 says we should economize on scarce resources. We must find ways of reducing our dependence upon incompetent, rent-seeking or hubristic bosses. One way to do so is strong competition policy: in well-functioning markets, bad companies are competed out of business and easily replaced by rivals. Failing that, tougher regulation of financial "services", rail companies or utilities is needed; one lesson of the financial crisis is that our economy was too dependent upon a few flawed individuals. And there's a case for worker democracy too.

I know. All these proposals are vague. I mention them not as a blueprint - there's no point writing a menu if you don't have a kitchen - but to highlight how far short our existing institutions fall from the ideal of ensuring resilience to bad decision-makers.

This issue is, however, off the political agenda. One of the many defects of our political debate is a belief that things will be tolerable if only we could find the right people; this is Bonnie Tylerism, holding out for a hero. This, however, is the wrong question. We should be looking not for good people but for the right institutions, selection mechanisms and processes - devices which would make our economy and politics more resilient to idiots or crooks.

Comments

[ltr]

"My call for policy and institutions to be robust to human error is in fact one with a long tradition...."

The point however is that Britain has been selecting institutional administrators and policy designers who are attacking and undermining what were previously successful policies and institutions. Imagine selecting the run of Tory leaders from Cameron on setting aside a Labour leader such as Corbyn for a Starmer.

[aragon]

Starmers NHS reforms:

Independent GP's are a systemic protection against over mighty managers, and GP gate-keeping is to protect hospital specialists.

Starmer is undermining resilience in the NHS.

[Blissex]

«products and systems must be resilient to human error simply because such errors are widespread and an inevitable part of the human condition»

Ah our blogger is today channeling NN Taleb, but the same issue afflicts both: who is going to make more money if products and systems become more resilient, in particular will that boost property or share prices?

There is here I guess a difference between NN Taleb and our blogger, because NN Taleb simply reports that more resiliency means more survival, while our blogger seems to make the further step of assuming that it also means better outcomes for more people in the long run, which to me seems a more benthamist/wykehamist position.

«Anderson is wrong and people need an income well above subsistence levels because they cannot budget with maximal efficiency.»

For the rentier class that's an advantage, not a defect, if there is a huge reserve army of workers.

«the story of Truss and Johnson is one of systemic rather than individual failure.»

At a systemic level, the UK economy has been booming for 40 years for the people who matter, with only two brief periods in which property prices fell, and literally trillions of pounds have been redistributed from "low productivity" workers to "high productivity" rentiers. That does not seem like a systemic failure to the 43%/14 million voters who chose Johnson.

«One way to do so is strong competition policy: in well-functioning markets, bad companies are competed out of business and easily replaced by rivals.»

That is a great point: markets deliver when they are competitive rather than merely "free". Look for example how keen the governments of the past 40 years have been on more competitive labour markets («Tony Blair was urged by Bank of England governor Mervyn King “to open the labour market without transition on the grounds that it would help lower wage growth and inflation”»).

«one lesson of the financial crisis is that our economy was too dependent upon a few flawed individuals»

Maybe in part it was made a bit worse by them, but by and large highly competent and very smart managers responded to incentives as intended by policy makers, making themselves and their class much, much richer in general, knowing that the FOMC/BoE "plunge protection team" would whitewash all the downsides.

[aragon]

I had a long post I tried on Saturday/Sunday.
I may repost in parts or a part (too long it seems).

Starmer says that the Corbyn manifesto is to be rewritten from scratch.

On current form, prepare for the ladybird book of political policy.

Energy, Health, Environment, Starmer has no concept of resilience of even practicality.

He doesn't understand the issues and is not equipped to address them.

The idiot in charge has to be able to make changes or is everything preserved in aspic?

[Laban]

«One way to do so is strong competition policy: in well-functioning markets, bad companies are competed out of business and easily replaced by rivals.»

But not if there's an endless supply of cheap labour. As I pointed out in the comments to your last post, employers who couldn't make a profit paying market wages used to go bust, now they petition government to reduce market wages by increasing labour supply. See Boris Johnson's 1.1 million UK visas granted July 21 to June 22.

>

But what if the diverse views belong to "conspiracy theorists" or "Putin fanboys"? Surely people with the wrong views should be excluded?

[Laban]

Bloody odd software, typepad. Deletes half the comment.

[Jan Wiklund]

And Peter Drucker who said exactly this some 55 years ago (The Effective Executive, 1967): since most of us are mediocre (of course!), jobs must be tailored so that mediocre people can do them. And that includes CEOs and ministers.

[Jan Wiklund]

I am reminded about what the 40s Swedish parliamentary undersecretary of state for social affairs Per Nyström said later about the exceptionally high standards of the 30s-40s government he took part in: It consisted of people who were tried out in hard social battle before they became ministers. Only the exceptionally gifted got appointed, because those who appointed them couldn't afford bungling.

On the other hand I am reminded about what George Orwell said about the 30s British ruling class: They have such a thick padding of money between themselves and reality so they don't need to know how things are.

[Blissex]

«Starmer says that the Corbyn manifesto is to be rewritten from scratch.»

That's "pragmatism":

http://averypublicsociologist.blogspot.com/2022/12/wes-streeting-vs-nhs.html?showComment=1670944323523#c5685324252015284575
«Starmer on the Andrew Marr show. He was asked what had happened to the Ten Pledges. The answer, “Look, I’m a pragmatist, not an ideologue.»

[Blissex]

«about the exceptionally high standards of the 30s-40s government he took part in: It consisted of people who were tried out in hard social battle before they became ministers. Only the exceptionally gifted got appointed»

That seems to me the usual wykehamist/platonic ideal of the philosopher-kings, the rule of the best-and-brightest. Which boils down to the "end of history" conceit.

But politics for me is representation of interests, and what matters is, within ample bounds, not so much how brilliant the politicians are, but which interests they aim to prioritize; staffers and civil servants matter far more than politicians as to doing things effectively.

[Blissex]

«Surely people with the wrong views should be excluded?»

And here is a loud, passionate call by a "journalist" ("Simon Jenkins") for strict "management" of all media by the "best and brightest" following the direction of the authorities:

https://www.theguardian.com/commentisfree/2022/oct/13/online-regulation-alex-jones-us-court-fine
«There have always been Alex Joneses spreading poison from the world’s soap boxes and pavements. As a boy I used to listen to them at Speakers’ Corner in Hyde Park. We would turn away with a grimace from their rubbish, while a couple of police stood by in case of trouble. Their lies never made it into newspapers or on to the airwaves. Free speech went only as far as the human voice could carry. Beyond that, “news” was mediated behind a wall of editors, censors and regulators, to keep it from gullible and dangerous ears. [...] But if freedom is to be protected and treasured, this means the US and Europe acting in concert. Regulation must burrow down into the global media platforms, “to bring out the best and curtail the worst”.»

[ltr]

Blissex:

«Starmer says that the Corbyn manifesto is to be rewritten from scratch.»

That's "pragmatism"...

[ A perfect portrayal of "pragmatism" as an absence or lack of principles. Really interesting and illuminating.

The need is for discernible principles to be pragmatically implemented. ]

[ltr]

Wiklund:

I am reminded about what the 40s Swedish parliamentary undersecretary of state for social affairs Per Nyström said later about the exceptionally high standards of the 30s-40s government he took part in...

[ Why is it difficult for me to imagine this happening just now? Swedish idealists in politics strike me as an exception now. But why should that be so? ]

[Blissex]

«A perfect portrayal of "pragmatism" as an absence or lack of principles.»

Nothing new, there is even a book about that:

https://books.google.de/books?id=MMCMDAAAQBAJ&pg=PA93
“Value free campaigning? The repackaging of Labour
The SCA and their ‘client’ representative Peter Mandelson provided the impetus behind the re-launch of Labour in 1986. In contrast to previous initiatives, the campaigns that followed were highly disciplined exercises. As Mandelson admitted: ‘Communications means throwing your net much wider than publicity. It means deciding what we say, how we say it, and which spokesmen and women we choose to say it’. The name of each campaign betrayed the party’s marketing conscious approach: ‘Freedom and Fairness’, ‘Investing in People’ and ‘Modern Britain in a Modern World’.
All three were highly media-centred operations. Input from the party faithful was limited to purchasing mugs and other merchandise from the revamped Sales and Marketing department. [...] It also identified significant voter antipathy towards so-called ‘scroungers’ and, by implication, Labour policies devoted to helping these `undeserving poor´. The promotion of such language was a marked feature of New Right Strategy had been popularised through the Tory press during the late 1970s. Lamentably it now began to inform opposition thinking.
In his first major qualitative-based study for the party, Philip Gould argued the party’s ‘minority agenda’ was a major electoral handicap. Consequently Freedom and Fairness was tailored to appeal to what marketers, and particularly those associated with BMP DDB Needham, termed the burgeoning ‘aspirational’ electorate”

And “the burgeoning ‘aspirational’ electorate” is back in vogue of course with New New Labour:

https://www.theguardian.com/politics/2022/dec/22/labour-targets-new-swing-voter-middle-aged-mortgage-man
“Party sees identifying 50-year-old male home-owners as key to electoral success”
“this archetypical voter as male, 50 years old, without a university degree but with a decent job in the private sector and, crucially, a homeowner with a mortgage. This person almost certainly voted leave, Ford added, explaining Labour’s insistence that it will not take the UK back into the single market.”

Now that's funny, because that coincides with the profile of "Sierra Man" from this speech by Tony Blair in the 1990s, and nearly 30 years later little has changed:

http://www.britishpoliticalspeech.org/speech-archive.htm?speech=202
“I can vividly recall the exact moment that I knew the last election was lost. I was canvassing in the Midlands on an ordinary suburban estate. I met a man polishing his Ford Sierra, self-employed electrician, Dad always voted Labour. He used to vote Labour, he said, but he bought his own home, he had set up his own business, he was doing quite nicely, so he said I’ve become a Tory. He was not rich but he was doing better than he did, and as far as he was concerned, being better off meant being Tory too.”

[ltr]

Blissex, thank you.

And, a question about real estate which I should long ago have thought about and asked. Is there an analogy in British real estate prices increasing far beyond inflation and the similar increase in Japanese real estate prices through the 1980s?

https://fred.stlouisfed.org/graph/?g=of2H

January 15, 2018

Real Residential Property Prices for United Kingdom and United States, 1992-2022

(Indexed to 1992)

[Blissex]

«https://fred.stlouisfed.org/graph/?g=of2H»

Graphs like this are interesting but ultimately misleading because the property markets in the USA and in the UK are bi-modal: property prices have been collapsing in some places and ballooning in others, and the average hides that.

https://loveincstatic.blob.core.windows.net/lovemoney/House_prices_real_terms_lovemoney.jpg
http://www.lovemoney.com/news/53528/property-house-price-value-real-terms-2005-2015-uk-regions

[Blissex]

«an analogy in British real estate prices increasing far beyond inflation and the similar increase in Japanese real estate prices through the 1980s?»

That's an interesting question, and my guess is that the story is quite relevant to the resilience topic.

The japanese property bubble and the USA/UK/Eire/... property bubbles started quite similarly, even if at different times, with loose credit and a "get rich quick" mindset.

But my impression is that there is a completely different political background:

* In "the west" the political power of the elites and their wealth are very much dependent on property, in particular in the UK.
* As a result the elites of "the west" are far more obsessed with pumping up property, and while they are sure that eventually there will be a bust, they think that they just move elsewhere, so they are going to double down to the bitter end. They are making hay while the sun is shining, or as Jamie Dimon said, dancing while the music is playing.
* As part of that the elites of "the west" keep trying to pump up population numbers, to increase the number of servants and tenants that make them rich.

Instead I reckon that:

* The japanese elites feel far more tied to their homeland, and have given up on property. Also japanese voters are less obsessed with property and rely more on filial feelings and social insurance.
* So the japanese property boom was killed by the BoE and was not reignited. Japan is still mainly an industrial and service producer. Rentierism is more in the traditional sectors (one of the early books by Michael Lewis is "Pacific Rift" about the japanese economy and real estate and it is interesting).
* The japanese elites seem very concerned about the "carrying capacity" of their island and their utter dependence on fuel and cereal imports, and my impression is that they are not displeased with a shrinking of the population. An interesting point is that through weird policies they are reforesting Japan.

Put another way, my guess is that the japanese elites care far more about tail events and survival in the long term than the anglo-american elites, and so value resilience more, while the anglo-american elites seem to value it very little, as they expect to be able to stay ahead of trouble ("devil take the hindmost").

Part of the anglo-american elites are indo-europeans and their most successful strategy for the past 3,000 years has been to move west from the Caucasus-Caspian with their war chariots and once a newly conquered areas was exhausted, to move further west, until they crosses the Atlantic and then reached California. What next?

[ltr]

Blissex:

The japanese property bubble and the USA/UK/Eire/... property bubbles started quite similarly, even if at different times, with loose credit and a "get rich quick" mindset....

[ Really nice analysis. I am grateful.

Also, notice carefully the UK battery company bankruptcy. I cannot imagine such a failing had there been a partnership with or investment from China counted on. UK hostility to China is going to be more economically self-damaging than Brexit. This, hostility to China is to me harmful to the UK and appalling. ]

[Alex]

Bloody hell, not citizens' juries and sortition again?

[Blissex]

«An interesting point is that through weird policies they are reforesting Japan»

Apparently there is a book that shows that civilizations last when they have forests, because in bad times forests are a huge source of resources. Or perhaps it is not having forests that makes it makes much easier for a civilization during bad times to collapse completely.

[ltr]

https://english.news.cn/20221002/0515c7f55dc74e26a31f03c2a2c8e59b/c.html

October 2, 2022

Why is a quarter of world's new forest area coming from China?

BEIJING -- China ranks first globally in the area of planted forests and forest coverage growth, contributing a quarter of the world's new forest area in the past decade.

The secret behind the rapid growth of China's green landscape lies in its large-scale greening campaign, including conserving existing green ecosystems, adding new forests, grasslands, and wetlands, as well as fighting desertification.

According to the National Forestry and Grassland Administration, the accumulative afforestation area reached 960 million mu (64 million hectares) over the past 10 years, while 165 million mu of grassland was improved, and more than 12 million mu of wetlands were added or restored.

BUILDING "GREEN GREAT WALL"

From the tree planting programs to the world's largest artificial plantation Saihanba mechanized forest farm, China has been striving to build a solid "Green Great Wall" to protect the ecological environment.

China designated March 12 as National Tree Planting Day in 1979, and Chinese citizens voluntarily planted approximately 78.1 billion trees from 1982 to 2021 across the vast country, official data showed....

[The blubbernaut]

The notion that systems have to be resilient to human idiocy is no doubt true, but in terms of the NHS we'd have to ask what type of system that is.

What's clear from the last 13 years is that the NHS isn't resilient in the face of poor policymaking at the government-level. We effectively have a system that relies on the goodwill of governments to fund it properly and the goodwill of providers to offer high levels of care despite patients essentially being a drain on their limited resources. The result is people are now dying on a daily basis because they can't receive basic care in a timely manner.

If you look at examples like the Japanese healthcare system, they avoid this by essentially running hospitals/clinics as independent enterprises. They have subsidised care where you pay a small fee at the point of use (a few pounds for a GP appointment, less than £100 for an MRI scan, etc.) which creates the correct incentives: hospitals actively want to attract patients, they compete for them by providing better quality care and short waiting times, and patients only use the service when they really feel they need to because there's a small fee that's heavily subsidised by state-run health insurance (the cost of which is income-adjusted). This is a system that relies on what's individually rational for providers and patients alike and it works for that reason. It's also resilient to poor policymaking because governments can't easily cut funding without it immediately raising prices for voters.

I think it's right to be concerned at the potential for private US-style insurance companies to consume the NHS due to the idiocy of the government, but the best way to avoid that is by talking about real alternatives that work (like the Japanese system) instead of clinging to nurse. Our current system is fundamentally broken for all of the reasons outlined in this article and clearly we need one that isn't. If it's not Japan we can pick somewhere else.

[ltr]

Japan has easily the longest life expectancy and lowest infant mortality rates among the G7:

https://fred.stlouisfed.org/graph/?g=PIpL

January 15, 2018

Life Expectancy at Birth for United States, Canada, France, Germany, Italy, Japan and United Kingdom, 2007-2020

https://fred.stlouisfed.org/graph/?g=PIpU

January 30, 2018

Infant Mortality Rate for United States, Canada, France, Germany, Italy, Japan and United Kingdom, 2007-2020

[Blissex]

«talking about real alternatives that work (like the Japanese system) instead of clinging to nurse. Our current system is fundamentally broken for all of the reasons outlined in this article»

The NHS has worked well for decades when there was the political will to support it.
Now the political will has gone, because the NHS actually involves two distinct insurance systems:

* Insurance policy against the cost of medical treatment.

* Insurance against being too poor to pay the premiums of the previous policy.

The second point means that in effect the NHS offers an upfront at-birth lifetime cover for medical treatment, to be paid in arrears during that lifetime as a percent of income.

The latter arrangement is refused by older affluent thatcherite voters because they reckon that they no longer need it, because they bet that at their age and given their property wealth their downside risk is minimal, so screw-everybody-else and devil-take-the-hindmost.

Put another way older affluent thatcherite voters are willing to bet that they can self-insure against the risk of being unable to pay for medical treatment, and that's why the NHS is being whittled away, not because it is a bad system or other systems could be better (maybe the japanese system is better, but that's not the point).

[ltr]

Blissex:

The NHS has worked well for decades when there was the political will to support it.
Now the political will has gone, because the NHS actually involves two distinct insurance systems...

[ Perfect analysis, explaining just how anti-social as a class the British affluent have become. "Think as Margaret Thatcher would have you think." ]

[rsm]

《literally trillions of pounds have been redistributed from "low productivity" workers to "high productivity" rentiers.》

Were those trillions just printed in the financial sector, so their money manufacturers view the new money as their property, which never went through the hands of workers at all?

Has Japan used fiscal policy funded by central bank money-printing to keep ppl happier?