Economics and similar, for the sleep-deprived
Does anyone have any idea what might be done about the pointless blob of white space above this paragraph? It seems to be resistant to all my efforts. Update haha, it succumbed.
Thursday, October 14, 2010
Thursday Music Link
Hmmm, quite a lot more left wing politics this week than I've been used to. I hope this isn't leading in the direction of joining a political party.
Solidarity Forever. Leonard Cohen, seemingly featuring some Welsh primary school teachers.
posted by the management 10/14/2010 02:46:00 AM
Wednesday, October 13, 2010
If I were economic advisor to the Shadow Chancellor ...
... something which I suspect is unlikely to happen, I would be thinking about how one might make an advantage out of his lack of formal economic education, while at the same time conveying a gut-level understanding to my new man of the basis of Keynesian economics. I think I would reason like this:
1. It is a common criticism levelled at politicians of the modern stripe that they have "never had to make a payroll" - ie, that they have no real understanding of how the economy works, because they have never been in a situation of managing a business through tough times.
2. This is also true of Alan Johnson MP, as it is of the Chanceller, George Osborne[1]. However, unlike George Osborne, Alan Johnson has experienced something that's quite like managing a business which needs to make its payroll in a recession, which is called "being poor".
3. When Alan Johnson found himself married with two children at the age of 18, with an income inadequate to his expenses, he did not put his family on an "austerity" programme. Instead, he got a job in the post office, attracted to it by the possibility of well-paid overtime.
4. In general, as anyone who has actually found their household in a situation of having too much debt knows, it's really not usually all that possible to get yourself out of a hole by reducing your expenditure. In general, when you've got an actually serious debt problem, the interest bill is already larger than your discretionary expenses, and so "economising", while it will slow down the rate at which the problem gets worse, will not make it get better.
5. Households which successfully get out of debt, in general, do it by increasing their household income - either by having a non-working partner take on a job, or by doing overtime, or by changing career to something better paid. That's what Alan Johnson did, when he was on his uppers.
Unlike the rather sickening lectures Margaret Thatcher used to give about housewives and their clever domestic scrimping and saving, this is an analogy between the finances of a single household and those of a country which actually works. When you have a debt/GDP ratio which is too high, this is nearly always because the GDP is too low and needs to be increased, not because the debt has got too high and needs to be decreased. If you have a debt/GDP problem that can't be made better by investment and growth, then it's likely that you have a debt/GDP problem that can't be made better at all - ie, you need to default, a situation which the UK is not even nearly in.
A few months in, I'd start showing my man a few straightforward back of the envelope calculations, and maybe even chucking a few debt dynamics finger exercises into his speeches, because I have a canny idea that the man in number 11 is not necessarily in command of his numbers and might be shown up if put in a position of having to do sums in his head (I am guessing that former postmen who have worked with the Byzantine schedule of overtime rates might be quite good at this, plus I seem to remember that Johnson as Work & Pensions Minister did a pretty good number on David Willetts over "the pension crisis", which was a similar combat of neoliberal platitudes versus arithmetic). But the key priority would be to a) get the central intuition lodged into his backbone, and b) set up a sensible and comprehensible counter-narrative to all this dreadful New Austerian nonsense about "money in the kitty" and so on.
If any Labour politicians read this blog, take it, it's yours.
[1] Yes, he was christened "Gideon". But he decided he didn't like the name "Gideon" and changed his name to "George", twenty five years ago. So
posted by the management 10/13/2010 10:51:00 AM
Tuesday, October 12, 2010
You don't have to pay the "property price premium" every year to keep living there
It's not that I dislike Cameron, Clegg or even the Miliband boys (and, yes, I know they did not go to private school, but they are still children from one of the best comprehensives whose parents payed a property price premium to live in the catchment area)., says Nick Cohen.
Even if Haverstock School was "one of the best comprehensives" (it's not; it's about average for North London), it needs to be remembered that the Miliband brothers went there in the 70s, not today. Ralph Miliband bought his house in Primrose Hill in 1965. Primrose Hill has always been a quite nice area, due to the Hill, but it wasn't particularly expensive in 1965, which is why a Marxist academic was able to buy a house there.
Since then, obviously the value of that terraced house on Edis Street has gone through the roof, but this is clearly irrelevant to the social and economic standing of the Miliband family in the 1970s.
Quite why so many people feel the need to say that Labour politicians (other than Tony Blair) are upper-middle class, public schoolboys or otherwise children of privilege when they aren't is beyond me.
I mention, merely in passing, that Nick Cohen went to a selective school (Altrincham Grammar). But of course it isn't privilege if you earn it by passing an exam at the age of 11. It isn't even that uncommon to find people who believe that because they passed one exam at some point in the past, that they can ever after attribute all of the massive advantages and legs-up they've enjoyed to their own ability and efforts. Perhaps this is why so many people still put their universities in their potted biographies, ten or twenty years after it could possibly have been relevant.
posted by the management 10/12/2010 10:43:00 AM
Equality
More from Gove ...
In every school year there are 600,000 children.
The very poorest are those eligible for free school meals - 80,000 in every year.
And out of those 80,000 how many do you think make it to the best universities?
Just 45.
I checked, and by "the best universities", Gove means Oxford and Cambridge (he had a spat about this factoid with Ed Balls earlier this year). Oxford and Cambridge have an annual undergraduate intake of about 3000 students each (ie, 1% of each school year if we accept the 600k figure), so if children eligible for free school meals were represented in proportion, there would be 800 of them there.
But, take the Aaronovitch Rule: reverse the figure. If Gove's dream were achieved, what happens to the 79,200 children eligible for free school meals who still don't get into Oxbridge? I don't know, but I suspect that the answer might involve the phrase "fuck 'em". This is, of course, the same thinking that names the "Grammar School System" after schools that are by definition not representative of the majority.
When I saw the speech, I initially assumed that "the best universities" meant the Russell Group, which would have been surely more meaningful (although even that wouldn't include York or Durham, which I think most people would include in that group). The Russell Group between them take in 75,000 undergraduates every year, so scaling that up would give you 10,000 new undergraduates at RG universities who had been entitled to free school meals. That actually would be a pretty radical and meaningful egalitarian move; I would still personally be asking awkward questions about the remaining 70,000 and still making the point that elite universities aren't a sensible metric, but ten thousand people a year moving from the bottom decile to (first approx) the top quintile would not be hay. Is that Gove's actual target? I suspect we'll never know and also suspect he's never considered it, because for some people it's Oxbridgeford[1] or nowt.
Update: yes, I know, done it before. I think once every five years is about the right frequency for a trip round this particular mulberry bush.
[1] Let's not kid ourselves here.
posted by the management 10/12/2010 01:42:00 AM
Money talks and bullshit walks, an occasional series
This week in MTBW, Michael Gove:
I am delighted to announce today that Professor Simon Schama has agreed to advise us on how we can put British history at the heart of a revived national curriculum.
What, precisely, has Professor Simon Schama agreed to do?
I am delighted to announce today that Professor Simon Schama has agreed to advise us on how we can put British history at the heart of a revived national curriculum.
No, sorry, that's not actually very precise at all. It sounds as if Professor Schama has agreed to write a national curriculum or possibly to direct the assembly of source and classroom materials for one. But that would be a very large administrative project, of a scale which would surely be incompatible with his existing teaching, writing and broadcasting commitments if he were to have more than token involvement with producing it. Or perhaps he has agreed to put aside those other commitments to concentrate on this, a self-sacrificing act of public service of the sort that should surely be rewarded with a peerage or knighthood. But it doesn't actually say what level of involvement Prof. Schama has committed to. What is the deliverable, when is the due date for Prof. Schama's contribution and, if I may be so vulgar, what sort of fee arrangement has been agreed?
I am delighted to announce today that Professor Simon Schama has agreed to advise us on how we can put British history at the heart of a revived national curriculum.
"Money talks and bullshit walks".Labels: "occasional series" with only one post in them, mtbwotw, occasional series which now apparently have two posts in them
posted by the management 10/12/2010 01:25:00 AM
Monday, October 11, 2010
Decline of local hero in grim Northern Town
Kevin Mitchell is a really good sports writer. We've discussed this before, including in one of my favourite D^2D comments threads ever (attached to this post) - how can it be, that this man had the strength of will, determination and self-belief to become a world boxing champion, but never had what was needed to step away from the totally destructive influence of his own childhood? I suspect that if we knew the answer to that, we'd be a lot further along the way to solving a hell of a lot of difficult problems in economics.
semi-related link
posted by the management 10/11/2010 07:10:00 AM
Always with the basements, isn't it?
Andrew Marr, the former political editor of the BBC, and Nick Robinson, the current political editor of the BBC, have some things to say about bloggers. Apparently, unlike proper political journalists, bloggers drink too much, spend too much of their time obsessing over trivia late at night, and have restricted social circles which consist only of people like themselves, working themselves up over minor conflicts while ignoring really important issues. They're also in general facially ugly.
I think it was Georg Lichtenberg who noted that a book is like a mirror; when a monkey looks in, no wise man looks out.
posted by the management 10/11/2010 04:09:00 AM
Friday, October 08, 2010
On not being obliged to vote for the Democrats, part three
Right, having established in Part 2 that the expected value of the benefit from voting Democrat is small due to paradox-of-voting issues, and that the non-instrumental arguments for voting can't be convincingly ginned up into an argument for voting for a party you don't support, I think we turn to consideration of the costs. I am not sure that we need to spend too much time on the opportunity cost of the time-and-shoe-leather, except to note that for anyone involved in politics to the left of the Democratic Party, there will always be a single-issue campaign where the time and effort produces greater expected value than a vote for the Democratic candidate in a midterm election, even in a marginal seat. I'm more interested in the strategic cost - not so much the cost of any individual vote, but the aggregate cost of a policy of always voting Democrat, no matter what. This can be defined as the difference between the expected value of the optimal reward/punish strategy, and the expected value of "Dems always"[1].
So we're into Game Theory then - it's been pointed out to me in the pub that I am not in general a big fan of credibility arguments, and this is indeed a credibility argument (one votes against the Dem candidate in the knowledge that doing so might have a very small negative expected value conditional on having gone out to the polling place in the first place, in the expectation of a positive value from the whole strategy). But all rules have exceptions - deterrence and credibility did win us the Cold War after all - and in this case I think an exception needs to be made.
After all, if you're choosing people to play strategic games against, the people most likely to respond in the way predicted by game theory are those who are already trying to play strategic games with you[2]. By introducing the whole median voter/spatial competition argument in the first place, the Democrats have, presumably unwittingly, signalled their susceptibility to being deterred or influenced by credible signalling.
That's the theoretics[3]. How about the empirics?
Well, draw a Boston box. On the X axis along the bottom, write "Have they operated inside the framework of electoral politics described by the Democratic Party?", YES and NO. On the Y axis down the left side, write "Have they in general seen some sort of success for their agenda over the last ten to twenty years?", YES and NO. Now we're going to write down the names of political movements which tend to the Left of the Democratic Party. Every name going into the top-right (mainly worked without Dems, seen positive progress) or bottom-left (mainly worked with Dems, mainly failed) quadrants is a point for me; every name in the top left or bottom right quadrant is a point for people who think that a strategy of always supporting the Democrats is the best way to make progress on left issues.
I'll do mine first:
Top Right: Green Party, anti-war movement, anti-WTO campaign, gay marriage campaigns
Bottom left: Teachers' unions, unions in general, Bono and Bob Geldof, gay military campaign, civil liberties campaigners.
Now you do yours. I will be amazingly generous by spotting you healthcare reform advocates for top-left, but this concession will be swiftly withdrawn if you try to quibble about any of mine.
[1] This is not a straw man. I know someone who makes it a point of political pride to always vote the straight Dem ticket, always donate time and money, and who will even on occasion donate more time and money to the Democratic Party when they shift to the right, to notionally compensate for those other people who might be demoralised. My personal view is that it is hard to understand a sense in which one could really be said that her "actual" political views are other than those of the Democratic Party, but I can't see into people's souls so I'll take her at her word.
[2] Game theory is an excellent way of predicting the behaviour of professional game theorists, which is worth knowing if you are organising, say, a mobile telecom spectrum auction and all the major bidders have hired economists to advise them on bidding strategy.
[3] There is one more remaining theoretical point of interest. My general argument against credibility and deterrence behaviour is the Davies/Folk Theorem - that since any course of action at all can be supported as a signalling equilibrium, "credibility" isn't a very good argument for any particular course of action[4]. Note in this context that the Folk Theorem half of this argument is actually missing an important qualification - you only get the general result of anything goes if your discount rate is not "too high". In plain language, this means that you can only justify credibility and deterrence if you care sufficiently about the future relative to the here and now; otherwise the potential future value of the benefits don't compensate for the up front cost of the signal. This is, in my view, why people trying to make non-supporters of the Democrat party vote for them will always resist any discussion of the long term future, of abstract or general trends, or indeed anything other than the specific horrible thing that will definitely (in the Oasis sense of "definitely maybe") happen right now if the Democrats were to have a 52-48 majority in the Senate rather than a 58-42 majority.
[4] And note, of course, that deciding not to vote Democrat in any given election isn't a "course of action" in this sense; I don't want to argue for a policy of never voting Democrat at all.
posted by the management 10/08/2010 04:51:00 AM
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