Sons and the Welfare State; an update

A few days ago I wrote about my tentative thoughts about applying the parable of the prodigal son to our thoughts about the welfare state. My main purpose was to solicit the thoughts of those more theologically learned than I am, and I was very pleased to get the thoughts of one particularly more theologically learned scholar who doesn't nail his political colours to the mast.

The bottom line was that since Jesus is using a story in the first place, then clearly he has in mind the interpretation he wants to that story, and it's to spiritually lost people, rather than materially lost folk in need of some welfare state and perhaps the intervention of a government. So I guess it's applying an application, one level removed than I'd previously thought about, and that was a good thing to ponder on.

I was seeking objections to making the link, and a few have emerged. One is that the younger son only received the father's welfare state when he came to his senses and recognised how broken he was. In that respect he became deserving rather than undeserving. My favourite right-wing vessel is full of horror stories of families seeking to live off benefits rather than do an honest day's work. Lefties I think do down these stories, righties overstate them. Such folk undoubtedly exist, the question is to what extent - but even that is somewhat moot here. But if these folk do that, taking advantage of the system deliberately and manipulatively, they remain undeserving poor, and if we were to apply this parable to the welfare state, then the objections of righties remain. They haven't returned to the father/Father/government.

What's left then? I thus don't think that the parable can be used as I previously thought; it doesn't change the fact that right wingers think there are millions and millions of scroungers, while lefties think these guys are deserving because of the way the market system has manipulated them. One group is sceptical about those out of work, the other about those that put them out of work, and surely both have their faults.

What are we to be as Christian though? Matthew 5:47 and surrounds point out that if we respond, like for like, we're no better than pagans. So should we be harsh on such scroungers, dock them their benefits, throw them to the dogs? Or should we be gracious?

But should we be a doormat? Equally we shouldn't be doing that; I guess if forced as a non-theologian to find the Biblical reference to back that up, I'd point to 1 Timothy 5:20, but even then I think the context is wrong but that's by the by. Those that are having kids just to get benefits, who refuse to take work because being on benefits is easier, should be rebuked.

I'd like to think that reflecting on the lost sons should make us reflect on whether our attitudes towards those less fortunate to ourselves are not cynical, not judgemental, and instead gracious, but not to the point that things become ridiculous. But I suspect everyone I know who leans to the right would say they already are at that point, whereas all those I know that lean to the left, myself included, would probably say the same. I guess this kind of makes this a rather pointless post!

The Prodigal Sons

It's taken me a little while, but at the end of November I was challenged by a set of talks given by Richard Brewster on our church weekend away about the parable of the lost son. Particularly, it was suggested that there were actually two lost sons, as the elder son who gets upset when the younger son returns and is welcomed, is also lost to his father.

The parable points thus to two sinful sons. The younger is foolish, impatient, aberrant and blows his wealth enjoying the world and all it offers. The elder though is self-righteous and also has a substandard relationship with his father because of this, throwing a strop because the younger son is forgiven, and revealing in doing so that he also doesn't have a good relationship with his father either.

What struck me during these talks was the parallel with the welfare state. The elder son essentially rails on about the deserving poor, wondering why generosity is afforded to those who do not deserve it. It sounds quite familier - a lot like what many are saying about benefits recipients at the moment. The elder son is in the same boat as the folk that complain about the level of benefits: They are forced to live in a system that takes from them and redistributes to others who they see as undeserving of that.

But does the parable really mean that we should thus submit to a government that redistributes? Is the role of the father in the parable, and hence the Father that the parable points to, really to be taken up by governments, or should it just be the role of individuals giving voluntarily? After all, God loves a cheerful givers. I'm not a theologian, so I don't want to push the theological links any further and appeal to those who know much more than I.

My only concern with the privatised situation is that charitable giving, by definition, has positive externalities. This means that the free market outcome will yield a level of giving that is socially sub-optimal, even though it is privately optimal, because private individuals don't realise the full benefit of their giving. Of course though, the solution is not necessarily that we totally nationalise the redistribution system - the optimal solution would be some kind of subsidy to the process, in theory. I haven't really thought fully through whether that would work, nor even bothered to look into what people have written on this in the academic literature. But it intrigues me.

Are those that moan about the excessive levels of benefits simply elder sons, and just as estranged from their Father as those who frivolously waste the Father's good gifts?

The Occupy Movement

Naturally, the Occupy movements around the world are generating quite a bit of media attention, and not a little bit of right wing scorn, and some left wing support.

I wouldn't want to make sweeping statements about what one side or the other says, but I can't help noticing that the essential point being made by right wingers, once again, is that you can't be socialist, or have sympathy with non-business owners, and also be Christian.

The man imposing as Archbishop Cranmer is at it once again, with his last of the linked posts somehow comparing what Fraser did at St Pauls inversely to what Jesus did in throwing traders out of the Temple in John 2:12-25.

In the Torygraph, Tim Stanley writes that those who profess support for the protesters are "more socialist than Christian". What about saving souls, he writes? Well, what about the fact that currently there's a whole load of non-Christians camped at St Pauls? What about the fact that St Pauls isn't throwing them out but instead engaging with them? Stanley justifies his attack on Fraser in particular in the same way that "Cranmer" does - that Fraser is a liberal Christian, and of course once again we're into the internal bickering that goes on, rather than focussing on "saving souls" - it may be that Stanley needs to begin practicing a little more of what he preaches.

Nonetheless, the point of this post isn't so much to attack others as to set out my take, and probably along the way justify being slightly left of centre (I'd hesitate to call myself an outright socialist) and also a conservative Christian. My position I believe is based on basic economic theory which I've learnt over the years (and supposedly teach), but also on the Biblical principles also.

Of course, we must start with the Fall, and acknowledge the sinfulness of man. This gives us the context in which to study all human interaction, something which economics also attempts to do. Economics essentially splits up interaction into a spectrum, with what is often called the non-cooperative solution at one end, where we all individually go about out own interests in our own way, and the social planner solution at the other end, where some benevolent social planner decides what will happen. The latter is essentially unachievable since as any Christian knows, the possibility of a benevolent social planner (outside of God) is essentially zero in our sinful world, but nonetheless this possibility does bound the spectrum of possibilities.

Now, right leaning folk, including those of a Christian variety, are rightly suspicious of power concentrated in one person's hands - any dictator. Left leaning folk should also be wary too but for some reason aren't - the Bible tells us we are sinful, hence any system which concentrates power in the hands of one sinful person cannot be good. Hence we have the idea that capitalism, and markets, are good because they do not concentrate power in the hands of one particular individual.

The problem though, is that this conclusion is based on a number of conclusions in a simple theoretical model called perfect competition. The conclusions from perfect competition that we all like are bound up in the first and second theorems of welfare economics, notably that equilibria from such competition are Pareto optimal in that we cannot improve the resulting allocation of resources without reducing someone's welfare.

But moreover, these conclusions are based on a number of conditions holding, notably that there are no barriers to entry for firms, no barriers to trade, and an infinite number of traders hence no one of them can influence the price - not to mention perfect information, and an absence of any missing markets, or what economists sometimes call externalities (things that cost you but for which you aren't compensated - or vice versa).

As a result of one or most or all of these simple assumptions failing, usually the price mechanism fails to do its job, and this often concentrates power into the hands of a small number of individuals, those who can play the system to their advantage. There are plenty of results in economics which tell us about the adverse selection (the market selecting not the best producer of a product) that results, and the consequences of this. Peaches and lemons, anyone?

So, those of us who lean more to the left at this point say: Shouldn't something be done? Shouldn't we protect those that are the victims of abuses of power, misselling, etc?

Those on the right say, rightly, "not necessarily". There are market-based solutions. Car dealers that sell dodgy cars get a bad reputation and hence nobody buys from them in the future - better dealers offer warranties to send a signal to potential customers that says "I'm reputable".

However, there are decisions and markets in which bad reputation in the light of an unfortunate trade is no concolation. In healthcare, if you happen to pitch up to a shoddy disreputable provider (Nick Riviera in the Simpsons, for example), the cost to you could be death, or severely impaired health afterwards.

The principle is this: If the cost of information being provided to all in markets is high (it isn't, for example, in PC markets via PC magazines), if the cost of a bad decision is high and irreversible, then there is a case for intervention, and it is unlikely that the market can provide solutions.

Extreme right wingers at this point say "how do you quantify these costs" and still choose to ignore them at this stage, but we'll ignore them in the interests of getting along.

What we've established is a role for government. Not for a socialist dictatorship, which it would seem is what any right winger thinks all left-of-centre yearn for (see "Cranmer's quote: "The moment you rail against capitalism and economic liberty, you usher in tyranny, despotism, absolutism, totalitarianism and dictatorship." - utter dross when we have already identified here that the market system does not provide liberty for the person duped into the dodgy healthcare procedure that went wrong). Sure, we open up the possibility of cronyism since governments have their own incentives and are highly corruptable - but that cronyism is there anyway when businesses cosy up to governments - what's new here exactly?

What we've also established is that a fully free market system would likely lead to considerable inequality as those who can grab hold of the levers of power (appeal to the legal system is all well and good, but we all know that most people without scruples don't play by the law and get out while they can). Such situations can lead to great levels of social unrest, ordinary folk on the street with depressed incomes noticing those on much higher incomes seemingly benefitting from something unfair.

Now one response is to in a condescending manner tell people they shouldn't envy. I'd have loved to have seen these right wingers wandering around London in August telling the amassed hordes not to envy. Now, of course, we shouldn't - God doesn't permit us to covet our neighbours. But we are sinful and hence we do, and God also makes it clear it is not for us to judge others with haughty eyes.

As "Cranmer" rightly writes, "Caring for widows and orphans, feeding the starving, and clothing the naked, are at the very heart of the Christian vocation", and indeed he is correct. But the bottom line is this: the free market will underprovide charity because it has a positive externality. Should we just wait for Heaven and say "the government shouldn't force me to be charitable"? I believe the Bible is equally as scornful of those waiting for Heaven and doing nothing here as it is of those who lose sight of Heaven and think they can make it here somehow.

So my bottom line is this: The market system is the best system in a fallen world, but it is not perfect. Its imperfections should not be idly observed, they cause genuine pain and grievances and social unrest and most importantly for (Christian) right wingers, deprive people of their liberty, being made in God's image. Our job is not to judge thus those engaged in that, feeling that, but instead to think about what could be done about it. For sure, protest might not be the most effective way, and in particular protest in a church (!), but the bottom line is that those on the right sitting back and judging ("Cranmer" and Stanley amongst others) are just as wrong as the Pharisees were and any of the other many characters in the Bible for which God devotes his distaste.

The Conservatives: The gift that keeps giving...

I try to keep this blog as free from politics as possible, which may be hard to believe given its title refers to the political spectrum, but nonetheless I do try. Again having said that, a motivation to set this up was friends of mine who are Conservative voters suggesting to me it was the "Christian" thing to do, much to my consternation.

I think the main reason I try and keep away from politics and government action is that I don't think that governments should be forcing people to do "Christian" things; so I don't think abortion should be outlawed, and I think all other government actions that discriminate unfairly against people made in God's image is wrong.

I believe Christians vote Conservative because they believe that small governments better enable people to get on in life; bigger governments stifle effort and creativity, crowding out small business and entrepreneurship. But this involves a healthy level of confidence in market mechanisms to deliver, and I believe too high a view of the goodness of man - particularly too high for Christians aware of how sinful man is.

Why do I say this when from Adam Smith onwards, economists have espoused the virtues of the market in mitigating man's own greed and enabling it to contribute towards the greater good? Because there are plenty of situations in which the price mechanism fails. It doesn't need government intervention for the price mechanism to stop doing its job of revealing relative scarcity and relative abundance, it just needs unscrupulous men and women.

I've mentioned in previous posts how a "nice equilibrium" where everyone does a good honest job and hence everyone trusts everyone to do a good honest job - the incentive is there for someone to deviate and do a bad job, and get out while they can (and even if they fail, their actions will succeed in destroying the good equilibrium since now people know with non-zero probability there are some bad people about).

All this by means of an introduction to what I was planning to write about - recent Tory announcements regarding the economy. In particular repeated comments on the 50% tax band, and also recent talk about abolishing all employment protection.  The bottom line of these is a trust that despite bosses being unscrupulous, the end product is a much better, clean, shining functioning economy because of competition - the bad bosses, the nasty ones, will be weeded out and left on the scrapheap if they don't become nice shiny bosses.

If I sound a little sarcastic there, it's because I don't buy it. Those proposing it probably think it has basic economics on side, but it may do: Very classical economics that hasn't considered much recent economic study into areas such as industrial organisation, game theory and behavioural economics. There's no point in me repeating what Chris Dillow writes about much more elegantly, but if you want some demolitions, here are a couple.

Now the question is, as Christians, what should we be doing?  James 1:27 says "Religion that God our Father accepts as pure and faultless is this: to look after orphans and widows in their distress and to keep oneself from being polluted by the world."

I seriously wonder how scrapping the 50% tax rate on those earning above £150k (polluted by the world?!), and stripping away all employment rights of workers (usually pretty low paid - widows and orphans in their disress?!), counts here. The hardest of hard Tories would say "Charity should do the hard work", yet this again ignores some basic economics: If there's a positive externality (net social benefits greater than net private ones) the market (charity) will underprovide it. As was evident before the Welfare state.

Of course, I'm proposing little positive in this post, just getting some things off my chest. The main one being this idea that a small government is what we need, and that it's somehow more Christian, if that were possible.

Executive Pay

Apparently, it's up 50%.

As always, Chris Dillow has something interesting to say about this from a left-of-centre perspective.

What do I think as a Christian, and someone who leans left of centre (but not all that much to the left)? Is it immoral that folk get paid the marginal product? Nope, but then the question is whether they are being paid their marginal product, and that's something that Chris pushes at in his blog.

Your libertarian, right-leaning person (Christian or otherwise) will say that we shouldn't stand in the way of this: The market is determining the right level of remuneration for these individuals, yet is it? Is the price mechanism really at work here?

Basic economic theory says that as well as wages being determined by the marginal product of the worker, it also points to the existence of economic rents that can be exploited by either the principal (employer) or agent (employee) in any given wage situation - there is wage bargaining going on. Right-wingers of an extreme form would say that there exists no power without government, but executives certainly have some form of power to extract the kinds of rents they extract - i.e. the kind of pay they manage to get, which seems to be entirely independent of their performance (again see Chris's blog linked above).

Funnily enough though, I think the solution to the problem is to free markets a little bit more. From my limited understanding, the shareholding structures of big companies is skewed in favour of larger investors (which are usually institutional investors), and these large investors do not necessarily exert the kind of influence that might be hoped for. If instead legal structures were such that the voices of small investors were given more say, then we'd certainly see more shareholder activism, which might not be a bad thing in helping bring companies more in line with social marginal costs and benefits rather than just private marginal costs and benefits.

My Supposed Hubris

I do macroeconometrics, if pushed to define one of my research areas. This is a classic area for criticism by those towards the right of the political spectrum, not least Arnold Kling. Kling has an essay entitled Science of Hubris, in which he carries out his usual attack on what he calls scientism, i.e. any attempt to put really precise numbers on things that we can't be precise about. In Kling's mind, we just can't be precise about any kind of economic aggregate, notably GDP, or investment, because there's just too much going into them, and these aggregates are made up of very different things too.

So essentially, he dismisses the entire field of applied macroeconomics because statistical agencies aren't able to add things up particularly well, and because, well, economists shouldn't be thinking in such broad terms; they should only be thinking at the microeconomic level. Those who practice is, apparently, are the very epitome of hubris; that is, to have "excessive pride or self confidence" as my Mac's Dashboard dictionary tells me.

Of course, anyone who puts their head up above the parapet is liable to accusations of hypocrisy, but folk like Kling at EconLog, and Boudreaux at Cafe Hayek are remarkable examples of precisely this. Kling and Boudreax (and others on their respective blogs) have remarkable confidence in one thing, and one thing only: The price mechanism in a fully free market. They are scornful and incredibly bitingly sarcastic (esp. Boudreaux) of those who dare to suggest anything otherwise, who dare to imagine that government intervention could possibly be a useful thing. To be that requires a heck of a lot of hubris, from what I can see.

And it's not limited to that; Russ Roberts and David Henderson at EconLog had a number of posts about Ideological Turing Tests, and how those on each side of a debate characterise the other, declaring (of course), that those on the right, those nearer to the libertarian school of thinking, were much better than those anywhere else on the spectrum at accurately describing the position of their opponents. Then just today, a post about confidence, where the application is not to Austrians with their remarkable over-confidence in the price mechanism in many inappropriate contexts but, yes, you guessed it, Keynesians (or at least, their crude caricature of them). Utterly stunning the amount of times I think about pot calling kettle when I read Hayekian/Austrians on their blogs.

But back to macroeconometric models. What I struggle to understand is this. If an econometric model is built that happens to include all the relevant explanatory variables for an aggregate variable (e.g. inflation) such that the residuals are white noise, then to all intents and purposes, that aggregate variable has been explained. A humble presentation of such a model would not make bold predictions about the future (forecasting is entirely different to macroeconometrics), but would instead make suggestions at what had been learnt from this exercise. But Kling and those in his camp would disregard it entirely.

Kling et al suggest that one of the most dangerous things about Keynes and his teaching was that he let loose governments and convinced the common man that there was intellectual rigour behind their own whims and desires. Equivalently though, via their scepticism of absolutely everything other than what they previously believed in, Kling et al promote an unhelpful atmosphere of scepticism through which genuine academic progress is hindered - all because of their ideology rather than any desire to be scientific in their pursuit of knowledge.

What is the point of Libertarian Economists?

What useful function to they perform? Economics is a practical discipline, studying the allocation of resources by (semi) rational agents in the context of conflicting interests. On of the agents that will always exist is the government - it's fair to say few examples of anarchy have succeeding, for whatever reason (man's desire for power and to control, probably mostly).

The mere existence of that government will mean that there will be an incentive for some to lobby it to further their interests - creating laws, tariffs, imposing taxes, whatever it may be.

So, what is more useful: Libertarians, who spend their entire time talking about how corrupt, inefficient and a pure waste of space government is (here's just one of hundreds of examples I could link to), or other economists who attempt to study the nature of the beast for what is it, and try to devise the best possible solution given that government will always exist and hence incentives to manipulate government will always be there?

Libertarians, who essentially just sit on the side bleating on about how terrible things are, or other economists who actually try and understand the nature of these interactions in order that they may, in the future, reduce the problems of crony capitalism? In response to what I think the latter group of economists do, libertarians would provide some pithy quote from Hayek about how because of information constraints, it is silly of us to think we can design things better. How lame is that? This essentially lumps libertarians in with folk like Creationists who try to get in the way of learning more about the world around us.

I think you know where I stand. I think this is the aspect of libertarians that irritates me most of all - their lack of a constructive alternative that could constitute a stable equilibrium.

I should really stop....

...however, I do keep reading blogs by libertarians. Here's one, where Arnold Kling describes another economist as using the "stupidest argument for stimulus". Apparently, that argument is that teachers are being laid off, and it's stupid because schools could instead be reducing salaries for teachers instead, if they valued these teachers so highly.

Now, of course Kling is averse to just about any argument in favour of fiscal stimulus because he is averse to just about any argument for government intervention it would seem (because the market always performs better - despite unending amounts of economic theory and empirical evidence to the contrary).

However, I think most of all it's just inconsistent of him. He says it's stupid because in economics there's always another way. Yet I suspect that when faced with the assertion "the deficit needs cutting", he wouldn't describe statements like "we must cut spending if we're going to cut the deficit" as stupid, even though perfectly equally, we could raise taxes to cut the deficit.

Maybe I'm just stupid, but I don't see what the difference is, and why Kling is also not advocating the stupidest of arguments, just because there is another perfectly reasonable way to do the same thing.

Academic Reality?

So, as you're aware, I try as much as I can to read what folk I don't agree with are saying. I read from the fringes of the academic debate quite often it seems - certainly from the right-hand side of the fringe in libertarians, and also the left-hand side with quite a few liberal blogs. Anyhow, David Henderson in classic fringe rant style posts this on "academic reality". If you read it, yes you have understood it correctly: A kid, not yet even started at university, has been able to process all the nuances and details of a number of academic fields (chemistry, humanities, English, etc), and come to the conclusion they are all populated by some extreme liberal agenda. And Henderson thinks this is a "one gritty piece of academic reality", apparently.

The liberal agenda that apparently catches this poor student's eye is that chemists have apparently in the mainstream come to the conclusion that global warming is happening. Does the kid (and Henderson for that matter) discuss why she thinks this conclusion is wrong? Does she present some evidence to suggest that, actually, global warming is not happening, or whatever is happening has conclusively nothing at all to do with human activity?

Nope, she just states that this is bias. It's propaganda, it's an agenda. It's polluting kids in the US, and all over the world. Apparently.

Henderson trumpets the rant of a student who hasn't yet studied anything at university about things studied at university. I teach at university and I wouldn't claim to have even all the nuances of my own subject understood as yet, let alone all these other subjects. Yet this kid is qualified in the eyes of Henderson to pass judgement on what is happening at all US (and presumably worldwide) universities.

I guess the botton line is that this is just those on the fringes moaning that they are on the fringe. Throwing some trite "bias" accusations to the mainstream because the mainstream doesn't really care for what they have to say. Now knowing mainstream economics as I do, I don't thus claim the mainstream is right. But I do at least expect criticisms of it to be a little less rant-style than this. Particularly when it comes to something as important as global warming. Yet the level of the debate is that climate change deniers think it's a contribution to post the rant of a kid that doesn't even start to look at the evidence for or against it.

Personally, I like to read the accounts of those I know are able to process and understand the various literatures on this. I'm talking about Prof. Sir David F. Hendry, a man who produced the ideas for two Nobel Prizes that went to other people, a man whose empirical work is as transparent and faithful to the underlying realities he is trying to model as possible. He's written a paper on climate change, it's short (17 pages), and it certainly doesn't just cry that it's all some liberal thing. It engages with the evidence from many fields, and concludes that - shock horror - something does need to be done. Not necessarily what is being done, but something needs to be done. But people like Henderson would just dismiss it out of hand as "propaganda" or something.

I Should Stop Reading This Kind of Stuff...

...however, it does pop up in my Google Reader, and part of me feels that I should at least say how utterly pointless and stupid I find it - although I'm sure plenty do anyhow.

But here we go; for a change, Don Boudreaux writes a "letter" to someone; this time it's someone who happens to have crossed his path on one of his hobby horses - people who (how dare they?!) suggest that after a natural disaster, once things are rebuilt they might just be better than what came before.

It's not rocket science really, is it?

But no, Boudreaux has to take this innocent, encouraging statement to its most absurd length, suggesting we should all go out and destroy things. I just don't quite understand what he thinks he is contributing to anyone by such statements. Nobody is suggesting that, and nor is it helpful to point out that an absurd extension of the logic may just take you there.

In general arguments, we make conditioning statements. Conditional on there being a destructive force on the way called a hurricane, we try to make the best of the situation. We might, shock horror, make the suggestion that when rebuilt, the new capital stock could, due to progress, be a little better than what was destroyed. Why then do we need the kinds of contributions Boudreaux offers us in his latest letter? Other than pointing out an extreme we would never reach (because, duh, we're not stupid), I don't see much. And given that extreme would never be arrived at, I thus don't see the point. But maybe someone can help me out here?

Why I'm not right of centre, or any further right than that

I read quite a bit of what libertarians say, as you might be aware if you read this blog. I'll ignore their perpetual use of reductio ad absurdium to death, although I love this response by Matthew Yglesias to one specific (boring) form of that. They usually misunderstand the point, in my experience, despite the fact they believe they are better than everyone else as representing their opponents' views.

My main problem is that the set of events that libertarians yearn for, a completely private set of markets without any government intervention (other than to keep the rules of the game), would (a) not provide every man with the liberty they believe it would, and (b) would not be a stable situation (or equilibrium, as economists like to say).

On point (a) I've written quite a bit on here. There are just too many situations where imperfect information and/or externalities mean that the price mechanism just doesn't do the job it should if the market was perfectly competitive (or some close approximation to that). The fact that one libertarian I've debated with claimed ignorance of perfect competition neatly epitomises that they don't really care about the details of markets that may lead to them working horribly, and denying a lot of people the liberty to make their own choices and better themselves.

On point (b), I've been coming to this conclusion for a little while now I think. If you do the thought experiments about why a fully free market might be problematic, one aspect is scammers, or those that do a bad job, or even a dangerous job. If the market isn't health where that could lead to your death, the idea is that reputation will matter, and if someone wishes to be in the business long enough, they will avoid providing bad service because it's not in their interest.

But say all market participants are good and honest after a long process of the bad eggs being weeded out. Then all customers know that all firms provide a good, honest service. I don't believe this can be stable, because it's then in the interests of some unscrupulous person or group of people to exploit the believe that all providers are good and honest, and provide a shoddy performance. Particularly, say, in financial markets - someone like Bernie Madoff turns up. They provide a seemingly wonderful service for a while, and people are attracted to their service, not realising its a scam. Then just before they are found out, they flee the country (Panama, say), and run with the money.

Then the equilibrium is gone; people no longer believe that all providers are good and honest. The atmosphere may not be ripe for more scammers, but the point is that reputation alone will not ensure a good, stable equilibrium in fully free markets. Can regulation though, of course, is the response - and the right one too.

My sense is the libertarian accepts all of what I've said so far but says "so what?", because the market situation with regulation is likely just as bad as the one without - certainly Madoff made it abundantly clear that whatever the rules of the game, there will always be that incentive to get around them to play scams. Now this I don't doubt, but the point is this: Stripping us back down to fully free markets won't solve any of the kinds of problems we have now, despite what libertarians might assert.

An Example of Right Wing (or Libertarian, or Hayekian) Logic

There's going to be an excellent debate on the radio this evening, between a number of economics, aired on BBC Radio 4.

The theme is Keynes vs Hayek, or as Cafe Hayek puts it, Hayek vs Keynes. On that link is another link to a clip of the debate where one of the Hayek proponents, George Selgin, apparently delivers a beautiful put-down to Skidelsky's Keynesian remarks. Really? For sure, there's some applause, but is that really a put down? For me, its a cheap points scorer.

It kind of also backs up my point about the way Hayek fans argue - they construct straw men. Skidelsky points this out to Selgin, and he retorts with a remark about how clueless politicians are. But is that a put down, a debate winner, about why Hayek was right and Keynes was wrong? On another Hayekian website, mises.org, they've already declared Hayek the winner (surprise!), and there they make the same remark: That Keynesian economics supports the bank bail out.

As Skidelsky clearly, audibly points out, Keynesian economics does not say the government should spend on anything (all the farcical examples Selgin rattles out) - it says that in the absence of any other productive investment opportunities (a highly, highly unlikely situation in any economy and any state of the world), then we might pay people to dig holes and bury things in them. But that's just never going to happen, it's a complete extreme event, and it's classic Hayekian, or libertarian arguing - you contort the position of your opponent so grotesquely that you can easily take care of his or her arguments.

And then Selgin responds with a quip about how politicians had clearly run out of all ideas hence they bailed the banks out. Apparently that's proof that Keynes would have bailed the banks out, that all Keynesian economists are bank bail outers. But it's criticising Keynes and his economics for the botched implementation of his ideas by a government - since when is that the way to criticise someone's ideas?

Sure, Keynesian economics promotes the role of the government, and so libertarians would say this is a natural consequence, but of course its not. The government will always exist, and always has done, and its mere presence as an entity will distort all market activity - this was the case long, long before Keynes came about, as I've been reading recently regarding the Panics of 1873 and 1893 in the US. To blame Keynes for governments doing stupid things is a real cop out of an argument and doesn't even start to engage him on the real meat and bones of what Keynes said.  Straw manism if ever I saw it, and not even slightly helpful for debate...

A Classic Right Wing Stance

I've started subscribing to the feeds from Dale & Co, another right-of-centre website it seems. It's good fodder for why Jesus was not a right winger (and also home of a number who wouldn't bother with Jesus at all anyhow). Here's a great example of that: All taxpayer funding of charities must stop, apparently.

Because I have quite a bit to do, I'll just copy and paste in my rather snarky response in the comments rather than re-write it all out:

Erm, externalities?

I know right wingers tend to as much as possible deny these inconvenient things exist, but basic economic theory says that where there are externalities involved (costs or benefits incurred by agents without payment or compensation), then the privately optimal market outcome will differ from the socially optimal market outcome.

If the externality is positive (which is safe to assume if we're talking about charities), then the market will under provide.

Thus, charitable giving alone will not be sufficient, and there is an arguable role for the state in supporting them.

Of course, the nature of that role is up for debate. But the point is there is a simple and incontrovertible argument on basic economic grounds for some government support for charities, although I'm not going to deny that in practice that support was probably not optimally provided by the previous government. I'm yet to be persuaded though that this government understands basic economics, and so I doubt the new arrangement will be particularly good either.

To add what I think is necessary to that, given the name of this blog, there is of course the Christian angle. I don't think it can be Christian to blanket say taxpayers should not support charities given the reason outlined above - the market will under-provide many vitally important goods and services in society without some form of government assistance. Of course, that leaves the system open to abuse: Charities that governments like will get funding, ones they don't like won't. That, however, is not an argument against the provision of support in the first place, but an argument for better systems of support that are less open to political manipulation.

Equivalently of course, as I say in the final paragraph, I doubt the current system that is being dismantled was particularly effective either. There shouldn't be indiscriminate support for charities since its hard to say what the necessary support is by government to bring the social outcome nearer to the private one. But initiatives like Gift Aid (which allows charities to claim the income tax on whatever you donate) are the right kinds of policies since they augment the giving by private individuals. Equivalently here, Jesus was not a left winger either...

11th Commandment

So Alex Tabarrok has a post today on suggestions for an 11th Commandment, seemingly suggesting that the 10 already proposed thousands of years back weren't enough.

Abstracting from warnings about adding to the words of the Bible, and the utter irony of the created man saying to his creator "I don't think you got this quite right", this is a great example of how I think most people view Christianity - something to pick and choose from, and amend if we don't like it.

I think most of all is the silliness of the proposed commandment - at what point is the sixth commandment (thou shalt not murder - especially taken in the context of Matthew 5:21-24) not sufficient to cover not spreading the Word of God by the sword?

It probably reveals another common misunderstanding or misperception of Christians, that they should all be following all these rules, and if they don't, they won't get into Heaven, and hence when they fail (like spreading the word by the sword) they are criticised as hypocrites. Christianity is about relationship with the Lord Jesus, about forgiveness of sins, not about becoming perfect and not sinning in the here and now.

 

Straw Man Ahoy!

A little while back, I read (and blogged) about David Henderson's reflections on left vs right, or liberal vs libertarian discussion. Henderson commented that, on balance, libertarians were much better than liberals at characterising the position of the other side. He's since gone on to write a lot about turing tests, which appear to be attempts by people to argue the position of somebody ideologically opposed to them. On reflection, the best response to that is something involving the words "stones", "throw" and "glass houses".  Particularly because libertarians are up there with the worst of us liberals at creating straw men of the other side of the argument, and today on Cafe Hayek there's another priceless example: Aggregate Healthiness.

My suspicion is that the analogy isn't lost on anyone who has ever studied economics or reads up on economic issues. Aggregate Healthiness is Aggregate Demand, and Gross Bodily Health (GBH) is Gross Domestic Product (GDP). Boudreaux is, of course, trying to mock his straw man Keynesian, who says: "Doesn't matter what government spends on, but government must spend if GDP falls - gotta keep AD up!"

Now, maybe that's the simplistic Keynesianism exhibited by newspaper hacks the world over, but I don't know of any genuine economists who would actually state such a thing. My suspicion is that the Boudreaux response would be: Well, you believe in the national accounts identity that yields AD, i.e. AD=C+I+G+NX, where NX is net exports, C is consumption, I is investment and G is government spending, and hence you must believe any type of G is useful in raising AD and hence GDP! We should even dig holes and bury banknotes, since paying people to do that will stimulate the economy!

Now of course, that could be done, and the amount of money in the economy would increase since people would be being paid to dig these holes. But the supply capacity of the economy would remain unchanged, and arguably would actually contract - since those folk might have done something productive instead of digging holes for the government.

The essential point is it would be the most blind and blinkered economist to assert that "it doesn’t matter" what is done to raise AD provided it is raised, just as it would be a crank doctor who did that. Yet, apparently, Boudreaux thinks he characterises Keynesian economists really well here.

Anybody who has any ounce of common sense would say that what the government spends its money on, if it engages in some counter-cyclical stimulus package on AD falling, matters: If it is digging holes then we're all in trouble. On the other hand, if it is investments which create the conditions for expanding investment and hence potentially consumption, then a stimulus package may well be successful.

However, again, the Hayekian in Boudreaux will say that it's impossible, absolutely impossible, that the government could possible think up any such investment that would actually be better than what the private sector could have done without the government intruding. That's mainly because Hayekians cannot fathom situations where the price mechanism in the market doesn't function properly, and hence where market outcomes are inefficient, and things can be done to improve the situation (the classic example being some form of Pigouvian tax/subsidy in the case of externalities). They do this mainly because they ignore the possibility of imperfect information in markets. However, I'm in danger of starting to mischaracterise Hayekian economists if I carry on much longer...

 

Reagan: The Contrast

So this week, to commemorate 100 years since his birth, a statue of Ronald Reagan was unveiled in London.

I'm too young to have been around when he was President, but I'm intrigued by the perhaps predictable contrasting views on this from Liberal Conspiracy and Cranmer. It is, of course, easily explained. Those that decide he was not respected on these shores (and drag up memories - good ones! - of Spitting Image), ignore the many good things he must have done (heck, even the Guardian writer linked above, is positive about Reagan).

Yet those that venerate him (Cranmer - and I'm not sure what a "Christian" minister is doing venerating any fallen, sinful human being to the extent Cranmer does with anyone on the right of the political spectrum) ignore the bad things (see the cocaine related stuff to do with Nicaragua in the Liberal Conspiracy post.

I guess blogs that just take neutral and balanced views go unnoticed...?

Would Jesus Have Gone On Strike?

I should probably comment on here about the strikes of yesterday. That is, something likie 750,000 public sector workers going on strike about pension reforms.

I'm a product of our education system here, and certainly those that study economics at A-level I think come out with a rather odd internal inconsistency. They tend to be anti-market, but also anti-union, and from reading the essays of my students this year, I think that hasn't changed.

However, after pondering it, I am with the strikers. I've said it before, and I think it well and truly applies here: The Tories are remarkably good at propaganda. For all the criticism Labour got while in power for spin, the Tories really are the masters at this. They managed to convince the public that Britain was essentially becoming Greece and that austerity had to happen, and even as we lurch into a prolonged depression people still blame Labour for it (austerity, that is).

Why do I say this? Well, this little exchange between Evan Davis and Francis Maude. It shows the height of the Tory misinformation campaign - present the current system as unaffordable; have people go on the radio repeating this ad infinitum, and soon everyone will believe you. Certainly, everyone I've chatted with about this has presented this idea. But as Evan Davis points out, somewhat flippantly, is that this is not what the Hutton Report says, the report that the government is trying to use to justify the pension reforms. In fact, as things stand without reforms, the share of GDP going to public sector pensions will fall over time. How about that?!

Then on top of this, there's the fact that MPs also get pensions twice the size of teachers' pensions, and I think you can start to see why I'm supporting the strikers.

The only other argument I haven't addressed is the supposed "fairness" of public pensions vs private pensions. Comparisons abound about pay in the public and private sectors and almost all of them have a political angle, as Tim Harford pointed out on Radio 4 a week or so ago. How do you compare the different skill levels, different experience levels, plain different types of jobs in the two spheres? Are teachers really much better paid than their private equivalents (I doubt it), and if not, are they really that much worse than their private equivalents? Teachers tend to work investment banker style hours and get anything but an investment banker salary for much of their working lives. Why shouldn't they thus get a somewhat generous pension as a result of this? What is "fair" about cutting that pension, exactly? Don't we want to be attracting people into the teaching profession? The bottom line is that money talks and proposing to cut back an affordable-and-not-spectacularly-generous-relative-to-MPs pension system doesn't seem like the way to keep attracting people in...

Essentially, there's no pressing need to reform the pensions since they aren't unaffordable, and if there is a villain around, surely it's the self-interested politicians not interested in reforming their own system.

Once Again, Right Wingers Are Blinkered

It's hardly new that I make a post on what some right winger (often libertarian - perhaps I should stop attacking the easy extremes, but these guys blog a lot and I wouldn't want there to be no opposition to their prejudicial rantings and ravings) has said. I just read that David Henderson is convinced that healthcare spending is a Ponzi scheme. For those unaware, a Ponzi scheme is a fraudulent scheme that pays returns to investors not out of profits but out of the investments of others in the scheme - it's fraud.

It takes a remarkable, breathtaking amount of blinkeredness to talk about how healthcare is a Ponzi Scheme. To focus only on the contributions people must pay, and what they individually get out of it in the end. To what extent are insurers thus not engaging in Ponzi Schemes?

Moreover, it shows yet another example of a total disregard for the informational problems in healthcare markets. Libertarians and staunch right wingers usually try and get around this by saying that regardless of what the informational problems are, the market still provides best. But does it? Can legislation and regulation and maybe even public provision not help solve the kind of informational issues in healthcare?

Let's just recap. Are we, as customers, well informed about our own health, and what the possible healthcare options are to us, and how much we need them? Answer: No. If we all did 6+ years of medical training, maybe. But given we all have other things to be doing, then no. So in a nice free market (something libertarians are want to compare healthcare to), your doctor can command a fee from you (or your insurer) if he undertakes some procedure on you. You see your doctor every now and again, and realistically there's no way to know whether what he/she is giving you is needed, harmful, etc. It really doesn't take much insight to see there are chronic problems associated with healthcare due to informational problems. Furthermore, the cost of a mistaken "choice" (it's hardly a choice if we aren't informed) is ill health and possibly even death. It's not like after we find one bad producer we can just costlessly switch to another, like we would if we decided that the bad producer was dodgy (and thus set about sullying his or her reputation).

It just doesn't stack up, and only confirms what I've really began thinking recently. If you take extreme positions on either side of the spectrum, left or right, you have to become blinkered and prejudiced, twisting truth and ignoring many important considerations to substantiate your position.

Pro Manipulated Choice

I found this rant quite astonishing: It's some chap called Sunny Hundal, who clearly has little time for people who have any religious beliefs about them, and it relates to some propsed changes to how abortion is organised in the UK.

The change is quite simple: It puts a stop to the situation where the NHS only funds an abortion at a clinic if the abortion goes ahead. Reason being fairly obvious: It makes it in the interests of the abortion clinic to go ahead with abortions.

Yet this is met with huge volumes of vitriol by Hundal who apparently from his comments doesn't care what others think of him.

Regardless of one's views on abortion (and as a Christian, it's quite hard to be in support of them), I find the vitriol directed towards this by pro-choice (which is an odd monicker for them given the attitutes displayed here) towards anyone who might just happen to tinker with the system in a way that could possibly just about with a pinch of salt be described as pro life is incredible.

The fact is, the current system is pro manipulated choice. And by defending the system, and attacking in such a hostile way the proposed changes, it seems that these people reveal that they are not pro choice after all. Pro choice people would favour a system where people made informed decisions, and were not being given advice by people for whom the financial incentive was to get them to say yes. If this was happening in financial markets, it's likely these same people would be in uproar.

My stance on abortion is that I can't force others to do the things I think are right, nor should I. But I would like people making such a life changing decision to be as well informed as possible, and it is clear that the current system cannot do that if clinics only get paid if people actually go ahead with an abortion.

Shock horror: Leftists Don't Understand Rightists, and vice versa

I think it's quite a hilarious little piece this one, by David Henderson. I was thinking about blogging on David Henderson and libertarians more generally and their pure cynicism about everything related to the government and I probably still will - my feeling is the arrogance of the position of people like Henderson in their market fundamentalism is incompatible with Christianity which exhorts humility, and emphasises just how fallen the world is. Of course, likely they don't care that it's at odds with a Christ-like witness, but the point of this blog is to try and point out where right wingers are totally at odds with what the Bible tells us.

But back to the article at hand. In it, Henderson quotes a bit by Krugman about how right wingers (conservatives) are unable to actually describe things like a Keynesian, or left-wing position. The funny thing is of course, Henderson says how he thinks this isn't true, and asserts that actually the converse is true. Is this real? It's so schoolyard it's hilarious. It's talking past each other on steroids.

His test of the hypothesis is also quite amusing - read Krugman until you find where he miscategorises a right winger/conservative. That's not really a test of his hypothesis really, is it? There's no checking when right wingers and conservatives get Keynesianism completely and utterly wrong (those are of course ten a penny). It's not really a test at all.

Striking Out

Strikes are in the news: There's going to be a mass walk out, it seems, on the 30th June. I think unions are another thing where people have very muddled thinking too - at least if the near-800 exam papers I marked this year are anything to go by. Students hate the free market, and describing something as free market is perjorative.

If you ask this man, he would tell you it's all because of their education - all teaches are whacko lefties and they indoctrinate students to be left-of-centre too. Apart from those with right-wing parents of course. But that's by the by. Because despite people having an inherent distrust of the market, they also think that unions should be "smashed", and that the job the Tories did on the Unions in the 1980s was an unfettered good thing.

Why do I find that odd? Well, in a free market wages are set theoretically where marginal costs equal marginal revenue for the firm. Not though if they have any bargaining power though and are able to extract economic rents. In most situations, the firm is a single unit bargaining with many disparate workers in the absence of unions which gives firms bargaining power. In addition to that in most situations the outside option (what they get if bargaining breaks down) for the worker is unemployment while for the firm they can just hire from the pool of unemployed workers. The more than likely upshot is that firms can bargain wages down in the absence of unions to below the marginal product of labour, and surely lower than if workers were able to organise themselves into a single bargaining unit.

Potentially my students will realise on entering the workforce that actually, a system by which wages are bargained higher and nearer to marginal product is handy.

Now of course, the unions do other things. Most libertarians I know, and Cranmer, paint them as sinister organisations, and the linked article is nothing but personal attacks on various union leaders; a great example being this:

One fully expects the NUT’s ghastly Christine Blower to insist that her members ‘have no alternative’ but to strike. But when meek and mild Mary Bousted of the ATL screeches from the same multi-faith meditation sheet, it may indeed be ‘a warning shot across the bows to the Government’.

The main offence all these people commit, in Cranmer's eyes, is they are "leftish". That they may be, but what they are doing is trying to ensure that they get a fair deal, something that might not otherwise be the case. Cranmer also attacks them as being entirely in the way of any kind of education reform - Cranmer's implicit assumption is that all education reforms proposed by the "rightish" Conservative Party must be sound and sensible, and should just be passed through parliament like the rest of those reforms that haven't yet seen U-turns.

On the subject though of U-turns, I liked this on politicalbetting. Why? Well it gives a nice insight to the bargaining aspect of all of this. The government has started making a whole load of U-turns, and so why wouldn't the unions sieze upon this to try and get a better deal?

Now of course, I do realise that there can be nasty elements in Unions that get in the way of progress - just as there can be nasty elements in firms (British Airways springs to mind) and in the government that seek to crush unions. But how much of that is propaganda (like Cranmer) and how much of it is reality? Why should workers be crushed from trying to organise and get their wage up nearer to marginal product? How do we know where the wage currently is, and who, really, are we to comment?

Of course though, if we are a staunch right winger (or leftie for that matter), we will respond by taking one side or the other. But I do still find it amusing that in otherwise leftie products of our education system, scepticism towards unions is strong...

The Blame Game

Apparently, each month YouGov asks people who is to blame for the cuts, and in the latest offering it seems Labour is still very much blamed. 

This blog gives away that I am not a right winger, but I'm also not about to defend left wingers either on here.

What interests me most however about this is that people really don't seem to get the economics going on.

I am fairly confident that if you talked to most of those involved in this survey, they would suggest that paying benefits to people out of work and making income tax proportional to how much you earn (so more for those earning over 40k etc), are reasonable things.

Yet if you believe in those two things, then in a recession you have to also accept that deficits will be run: More people lose jobs hence are unable to pay income tax, and may well also claim benefits. We're talking at least a million people that make this transition. People also spend less, meaning that indirect tax receipts (VAT mainly) must fall too. Firms make less in profits, hence corporation tax receipts fall also.

The bottom line is that in a recession, government receipts will fall, and expenditure will rise, if a system is in place that pays benefits to the unemployed, and taxes people and firms based on their income.

When that recession is the biggest in 70 years, is six consecutive quarters of negative growth, then all the more so will a deficit be run - and a big one!

So much so that in fact, looking at data just over the last 30 years (I'm working on getting a dataset for over 100 years - watch this space!), based only on previous government action relative to the state of the economy, the recession was so steep that in fact a deficit larger than that run by the past government should have been run!

That is data, not party politics, or even economic theory talking. It says that in recessions, the budget deficit worsens, and if the last government followed how all previous governments since 1981 behaved, it would have run a larger deficit than it did.

But these kinds of fact-based reasonings are generally lost, let alone the economics behind it, when politics come into play, alas...

Comparing pet food to healthcare now

It's not the first time, by any stretch of the imagination, that I've flagged up stuff posted on Cafe Hayek on here. As I always seem to say about Hayekians, or Austrians, or libertarians, they tend to ignore issues of imperfect information when launching their defence of markets in everything. The latest example, continuing with the healthcare debate in the US, is:

I have a question for anyone who believes that a single-payer health-care system (where the single payer is government) will reduce the quality-adjusted cost of health-care: will a single-payer pet-food system (where the single-payer for pet food is government) reduce the quality-adjusted cost of pet food?

The question is: Can the government deliver a most cost effective healthcare system than fully free markets could?

We can bring to bear fairly simple economic ideas relating to imperfect information to say: It is possible, because both extremes are probably not helpful places to begin.

Fully free markets would most likely be a disaster. Why is that? Well, customers are not well informed about their health, and healthcare procedures, and nor will they likely be even if there was an attempt to inform the public better. After all, a doctor does not learn in a few newspaper articles all he or she knows about operating on a patient.

Furthermore, what are the costs of mistaken choice in this market? Well, death is one possibility, and severely impaired health is another. It's not like if we're trying out different chocolate bars, or pet foods, where if we find we don't like it, well the cost is the cost of the bag of pet food or the Snickers bar. This is the crux, and why Boudreaux's attempt an an analogy completely fails and is in fact dangerous.

And we haven't even got on to talking about the externalities surroudning infectious diseases, or the problems of moral hazard and adverse selection in health insurance markets!

Other arguments could be brought to bear on this to argue in favour of some form of intervention - the market can't correct the kinds of information difficulties here as it might in other industries (with things like What PC magazine, etc). The only thing left is to ask: What form should that intervention take?

One thing would be to force all citizens to take out insurance to mitigate adverse selection (premiums going up because good healthy folk leave the market), but then that leaves moral hazard where providers (doctors, hospitals) convince patients to take out excessive healthcare since the insurance company pays, not the patient.

We could carry on. There are pros and cons to all systems, and healthcare is so damn complicated it's hard to sit in a room and theorise about things. But funnily enough, a report has just been released showing that out of all the decrepit, socialized (to use the North American parlance) health systems, the NHS actually comes out as most cost effective.

The thing I love most about the table on the link is the healthcare spending per capita. The US is at $7,290, while the UK is at $2,992. Last time I checked, health outcomes weren't all that different here in the poor old UK...

 

More on what I don't like on the left

Here's another example: Lindsay Mackie rails on about the Royal Mail privatisation at Liberal Conspiracy.

Before going into the complete lack of balance in the article revealing the writer's prejudice, one question needs to be asked. Was the Royal Mail not in private hands, what justification would be given for public provision of mail services? What about the mail delivery market makes it so special that it needs to be government run?

There is no reason why the delivery of mail needs to be a government service, no reason why competition between different providers couldn't improve the service. What about transporting valuable items? Insurance would work just fine for that. What about delivering to remote places? Pigouvian subsidies would bring the private marginal benefit of delivering to the Shetland Islands just as well as having the government run the whole shebang.

On the various criteria on which we might justify government intervention, there is little doubt that actually, Royal Mail doesn't really tick any of the boxes.

Furthermore, Mackie reveals a very obvious bias/prejudice (tick as appropriate) against all market provision of everything. Statements like "so we can have privatised competitors whose aim is not public service but profit" are very indicative, and really show an incredible level of blinkeredness. Is it really possible in a free market that by actively trying not to serve the public interest (provide products people want etc), a private company could make profits? No, is the obvious answer. To make profits in a competitive market a private company must serve the public interest.

Now of course, markets run badly such that participants have market power (become too-big-to-fail) give great examples of why markets are apparently so bad.

Yet funnily enough, Mackie uses BT as some example of where apparently we've done badly out of selling it off. Why on earth should we have the government running telephones?!?! And more to the point, would we have seen the kind of innovation in the telephone industry without the sell-off? Where BT could have made perpetual losses safe in the knowledge it would be bailed out? I think the answer is abundantly clear, and the use of this example really shows the absurdity of what Mackie is trying to propose.

Apparently also, everything surrounding the privatisation "smacks of ideology". Mackie is clearly unaware that everything she writes is pure ideology. If we want to get away from ideology, we try to look at, as close as we can, objective facts. We start from the premise of perfect competition, and what that would achieve, and then we ask: Where does this model fail? And do the failures justify government intervention? And if they justify intervention, what form is best?

This is something Mackie is 100% not doing, and instead is falling into that trap that all on either extreme of the left/right spectrum are forced to do: To mislead and deceive.

 

Putting your money where your mouth is, or gambling?

Not that the distinction hugely matters, but I'm intrigued by one of my usual inspirations to blog, the Cafe Hayek blog. There, one of the authors, Don Boudreaux, has far too much wealth it seems, as he's happy to throw $10,000 away on what essentially is a 50-50 bet: That less people will die from violent storms in the next 20 years than did in the previous 20 years.

He then cites some numbers over the last few years as evidence, but the amusing thing is: the numbers exclude Katrina! There's a small look at the data here by another blogger, but that really amounts to just fitting a time trend to some data as opposed to any serious attempt to look at it. If I was looking at that data, then actually I would have taken it had I had the money, and had Katrina not happened. Looking at the period 1991-2000, the numbers for both measures presented have completely flatlined. 1991-2010 is the reference period for Beadreaux. If we imagine that this flatlining will continue, then the average 1991-2000 may well drag 1991-2010 above 2011-2030. If Katrina is excluded though, what are the criteria for excluding future big events (which are bound to happen)?

Overall though, the $10k would need to be a sufficiently small fraction of my wealth for me to be interested in the bet. Why? Am I scared? Not really, it's just because it's a random bet which could go either way. Clearly, as a Christian I believe one should be a good steward of the resources God has blessed me with, and that doesn't rule out gambling if there's an expected positive return, since that is a wise use of money (parable of talents and all). However, when as shown, there has been no trend over the reference period in the variable that is being discussed, then I don't think this is much more than a 50-50 bet, and hence I doubt I would ever, regardless of how wealthy I was, be willing to put money down on such a bet.

He was also not a left winger

I rail on this site against right wingers quite a lot, but equally Jesus was not a left winger, and my intention is to try and keep this blog as neutral as possible, also to remove from some people I chat with the room for the accusation that I'm just playing party politics...

Here's an example of left wingers being deceptive in their arguments with maximal effect. There's a private provider of care homes for the elderly in the UK and it's looking like going bust. It's an example of bad management, full stop, period.

However, the linked article would suggest it's much, much more than that. It shows, proves, why we can never, ever trust the private sector with anything to do with healthcare. In what way does it do this? Well, it doesn't, so deception, scaremongering has to take the place of genuine arguments.

The writer doesn't even bother to recognise the fact that more competition would weed out the bad management like this, and a lower level of concentration in the industry amongst private providers would ensure that a failing provider wasn't "too big to fail", as people are suggesting this one is.

Now I say that not as someone advocating opening up the whole of healthcare to the private sector; other articles on here should have made it clear that there are economic efficiency arguments for government intervention in healthcare and that I base my position on that, fairly simple, economic theory. However, the form that that intervention would take would probably not be what most conventional Labour or Conservative voters (and certainly MPs) might propose.

I think most of these MPs, and also the writers of leftie pieces like the one linked above at Liberal Conspiracy, suffer either from a lack of knowledge of the tenets of very, very basic economics, or are seriously bent on deceiving the public. So as a result, lefties are just as bad as right wingers!

Is it Christian to Deceive?

My suspicion is that the answer to this question has to be "no". I don't think I even need delve into the Bible to get any appropriate verses either, it's that self-evident.

Yet there are many who would, it seems, ignore all the attempts at deception by political parties in order to maintain some belief that their party is the more Christian party.

At the last election, a number of people I spoke to would cite voting records of Labour and Conservative ministers, and would trot out the most recent story of some awful behaviour by a Labour minister as if that was evidence that the Conservatives must be more Christian, and hence we should vote for them.

Suffice to say, I said back at the time: Wait a year or two, and then we can compare. Then we can look at how the Conservative party behaves while in power. That'll help us judge whether it really is the more "Christian" party.

Certainly the imposter known as Archbishop Cranmer is still regularly trotting out examples of why the government, and Eric Pickles in particular, is so saint-like.

But do Christian ministers engage in disinformation campaigns that push "facts" that aren't facts? It would seem Eric Pickles does, and quite clearly Andrew Lansley is very good at it. This stance isn't even based on the duplicitous general election campaign run by the Conservatives which ran roughshod over any attempt at applying basic and sensible economics to the economic situation facing the economy. I haven't even mentioned the AV campaign...

The point isn't to paint out the Tories as any worse than Labour in this regard which is why I won't go on about the Tory election campaign or go on and on. My simple point is: Any party which sets itself up away from the centre will have to justify what it does, and almost always do so using lies and deception, as has been so brilliantly exemplified by the Conservatives recently. I know examples exist of where Labour has done that - I'm not defending them nor would I ever want to. The point is neither left nor right can claim to be "more Christian".

Confused

The anti-leftie/liberal rant machine that is Cranmer continues to function. I'm not a lawyer, so I can't really go into too much detail on this post, but I have one question, as the author of a blog trying to counter right-wing slander.  Cranmer says, after detailing the cases of some whistle blowers in relation to the EU, "such tends to be the abuse of power exercised by all authoritarian socialist unions". What I take issue with here is the use of the term socialist in this little tirade. Why is repression of whistle blowers a left-wing, socialist thing? I'm fairly sure, I just don't have the time, that I could find a zillion and one abuses of whistle blowers and other people under authoritarian right-wing regimes (one in Germany in the 1930s and 1940s springs to mind). Why do people have to turn a perfectly reasonable article describing some recent trend into a tirade against lefties without any obvious justification for it?

 

 

Leftist Short Termism?

I'm a big fan of Chris Dillow and his blog Stumbling and Mumbling; it's usually a good source of slightly unconventional but well argued economic thought.

I'm a little unconvinced though by a recent post on road pricing. I think it's an example of where leftist thinking is not dynamic, and can be very short-termist - precisely what lefties often accuse the markets of being, funnily enough.

Dillow says that people are forced to use the roads at peak time as opposed to choosing to, and hence the shop floor assistant at Next will get a short shrift arguing to come in later as it'll cost less to use the roads later in the morning. But it is surely the case that current, standard, working hours are a consequence of free-at-the-point-of-use roads - because they are free, they do not affect marginal decisions - although of course, the possibility of traffic will influence marginal decisions where people attach a monetary value to sitting in an hour's traffic to do a 10 minute journey.

If roads were priced for how much we use them, then this additional cost would be factored into decisions regarding jobs: will you take that job if it also costs that bit more to get there for the particular hours specified? It seems likely that such a move to road pricing would lead to more flexible work patterns and maybe an abandonment of the standard 9-5.

There's another bit of lefty-ness in Dillow's article too: the belief that self-interest of the right underpins such demands for road pricing. Maybe it does, but I sense this is a fear of the unknown thing as much as anything. Who uses roads the most? Well it's probably corporate users - the big trucks hurtling up and down the motorways, and the salesmen in their company cars. Why shouldn't these users pay proportionately more than the rest of us, especially given the mess of the roads that huge trucks make? If there is a set of free riders around here it must be haulage companies, perhaps the companies that moan the most about anything to do with taxes and the roads.

Finally though, Dillow takes a distinctly anti-market stance, suggesting that price signals would not be effective with roads, but it's not clear why that would necessarily be so. Economists have a number of grounds on which some kind of market intervention might be justified (and the current road system is a huge market intervention by government) on efficiency grounds, and roughly speaking they are:

1. Is there perfect competition, or a sufficiently competitive environment for providers to operate?
2. Are there externalities or missing markets such that the privately optimal outcome differs from the socially optimal one? Public goods come under this rough category.
3. How (im)perfect is information spread amongst market participants? Perhaps most important here is how costly are mistaken choices?

It strikes me that of these categories, (1) perhaps poses the most difficulties: Given the road network that already exists, how would/could this work as a market structure? Could roads be owned by particular companies who then charge a fee for each use? The concern would be where a road constitutes the only way of getting from A to B, since this might be seen as a monopoly - although of course it isn't necessarily. If it's the M40 between Oxford and Birmingham, well I can take the train, or I could even if the price was sufficiently high take alternative A roads. It would be in the best interest of the company that owned (or operated) the M40 to offer a sufficiently attractive service that I would be prepared to take the M40 on a regular basis to make that journey.

There are clearly other issues such as externalities (pollution) - but congestion is not a pure externality since it is caused by the current flat-rate (free, well road taxed) pricing system for the roads.

Of course, the reality is that it's highly unlikely anything would ever actually happen in this regard anyway, since too many powerful vested interests would be disadvantaged by it...

Morally Opposing the Rally Against Debt

Archbishop Cranmer (well, his imposter) suggests it is not possible to morally oppose the Rally Against Debt. It's hard to find exactly what this Rally stands for exactly, though it is easy to laugh at it. However, one should be a little less childish about it. There are more important things to say on this.

Before getting on to his blather about the moral case, Cranmer notes that:

The Rally against Debt is, in reality, a moral exhortation to people (and so the Government) to live within their means

Now clearly the Archbishop's imposter isn't really reading anything that doesn't support his prior prejudice. Like some basic economics for example. Basic economics says that when an economy enters into a recession, there will be strains on public finances, since people will lose jobs hence be unable to pay income tax, and will instead draw unemployment benefits. We all accept the principle of helping those out less fortunate than ourselves, I suspect, and I don't need to start drawing out biblical references for that, really. Now, if we look at the actual data, free from any political prejudice, over the last 31 years since 1980, we find a remarkable fact: Given the level of economic contraction in 2008-09, the deficit based simply on the need to pay benefits and the inability to collect taxes, should have been 10% larger than it was! I'm happy to provide the data I used for that (easily available from the OECD also), and tell you more about the methods (simple and standard econometrics) if anyone is interested. It's odd that I'm yet to hear anyone request that.

One good thing to say is that, on my reading, Cranmer has stopped making the false accusation that we pay more in debt interest than we do on health or education. He just now refers to numbers in an attempt to shock us. The most important question with regard the debt interest is: What was done with that money that was borrowed in the past? I'll come back to this.

What is the moral case for debt? Cranmer rather half-heartedly tries to make some theological case regarding debt, attempting to throw some biblical passages in to somehow make it clear that, of course, Jesus would have been at the Rally on Saturday. It's really a rather thinly veiled attempt to attack Labour. So where to start in response to this? Well, if we want to look at Labour's record with the public purse, we only need to look back at that linked blog above that actually looks at real data. The deficit should have been larger, given the size of the recession. That's not mismanagement - at least not in the way Cranmer is suggesting.

Living within one's means and good stewardship, two of Cranmer's central accusations that have some Biblical merit I'm happy to debate, are impossible to prove. How can one prove that the UK is living beyond its means? It is impossible, and as already mentioned the deficit given the size of the downturn should have been greater given the record of all governments since 1980. Is there any indication that the government is struggling to repay the debts it has incurred? Debts, remember, incurred in the main by falls in tax receipts and increases in benefits payments. The answer here is, of course, no.

Of course, the stewardship of God's resources debate. You'd think from the way right wingers blather on about how we're bestowing huge debts on to future generations without anything to show for it - well, are we? Let's think a little bit about it. Paying benefits to keep people from destitution when out of work - why is that poor stewardship? Investing in health and education - again, ensuring these two public services remain up to scratch. Again despite the blather from right wingers, the NHS has improved in the last 14 years on many, many measures (the King's Fund have made this point in many places). Future generations will benefit from this. Poor stewardship?

It is not poor stewardship, and nor is it somehow immoral for governments not to run a balanced budget at all times, especially times when the economy is depressed. Arguably, and I'm not making that point here, it's immoral not to. It's immoral not to pay benefits to people unemployed, immoral to destroy public institutions in the name of deficit reduction, destroy human capital right left and centre in some ideological pursuit of a balanced budget.

The Killing of Bin Laden

I have been left a little confused about this one: The wild celebrations in the US about the killing of Osama Bin Laden.  Matt Yglesias has an interesting post about the reaction in Germany, where Angela Merkel has been criticised for celebrating the death of Bin Laden.  Yglesias admits he finds Christian teaching on forgiving enemies wierd and odd, but I think makes the more important point: That a nation that professes loudly to be Christian also so openly advocates violent methods.

My initial reaction to that is to question the Christianity that is being referred to, on the American right wing: How legitimate is the Christian that picks and chooses the bits of the bible that they uphold and ignores the uncomfortable bits? Is it just that these politicians embrace Christianity for political purposes?

However, that's a bit of an un-Christian response on my part; who am I to understand the delicate calculations that must go on inside the corridors of power, the various forces acting upon the Christian in that situation? Who am I, who as a sinner also picks and chooses from time to time the bits of the Bible I follow (when hitting 80mph on the motorway, when uttering an obscenity - often also while driving), and casts judgement on others - something the Bible says is for God to do alone?

Of course, the Bible does also say that Scripture is useful for training and rebuking, and hence it does not suggest the Christian response is to not mention things others are doing which do not promote the Gospel in a positive light - something many on the Christian Right in America most certainly don't do (epitomised probably best by George Bush). So on balance I think it's right to question those cheering the death of another. I heard someone from a bank who lost almost 700 employees in the 9/11 bombings, and he said that it's somewhat like when the verdict is announced in court: usually the victims aren't the ones leaping for joy, and he felt that.

Bin Laden was a terrible person and most certainly evil, and I have little doubt he isn't enjoying the eternal torment that is Hell currently. But that doesn't mean I'm cheering his death and nor do I think any Christian who is consciously trying to uphold the Bible and glorify Christ should either.

I'm voting for AV

And it's not just because this man is voting against it. My main reason is probably because I'm so unconvinced by the arguments put forward by the No camp, most of which are perpetuated and grossly distorted by Cranmer in his article. I sincerely hope Christians read his article and see it for what it is - full of prejudice, horribly distorted material, and often just plain wrong.

AV won't cost more (and anyway, why does that actually matter?), AV won't result in fringe parties getting in any more than the current one does - and that should never be an argument against a voting system - why is FPTP (first past the post) better because it ignores small parties and gives bigger parties huge mandates from a small proportion of the actual votes? FPTP allows established parties to effectively ignore the fringes and block them out, without ever actually countering the arguments they make, meaning that these parties continue to fester barely beneath the surface. A better system would force the main parties to actually address the issues that matter to the population - not necessarily to enact policies to support them since just because a lot of people think something doesn't mean its right - but addressing them.

And what's wrong with perpetual coalitions? It strikes me that other countries seem to do perfectly well with them, and the genuine discussion instead of mud-slinging it would encourage would have to be a good thing. And broken manifestos becoming more likely under AV? Don't make me laugh - find me a party in the last 30 years that hasn't broken a manifesto promise.

But there's another one given to me last weekend by a good friend. It enables you to not vote for a particular candidate for whatever reason, and not be forced to vote for a party you don't want to vote for just to keep them out. The classic example is Evan Davis, the fierce anti-Christian Lib Dem who was the MP for West Oxford and Abingdon until the last election. Had I been in that electoral ward, then to oppose Davis and to maximise the chance of getting rid of him, I'd have had to have voted Tory, despite my well known dislike for that party. However, with AV I could I have done what I wanted to do, vote Labour, but by putting every other party above the Lib Dems, my vote would still have counted against him.

The question is what exactly is un-Christian and undemocratic about AV? What is it that scares Tories and Cranmer so incredibly much that they write such vitriol? Is it because the simple fact is a lot of people would put the Conservatives as their least preferred party? I don't know, just thinking out loud. But their arguments are far from convincing and as a result, I'll be voting yes tomorrow. Join me!

Transparency is a Wonderful Thing

Apparently the current government is ratcheting up transparency, particularly for financial accountability of public bodies. Which is a good thing of course. From the ramblings of this man, you'd think that the only thing that this process could ever uncover was more sinister activity by the previous Labour government.

So it's particularly interesting to find out which companies contributed to Conservative MPs and their election campaigns, and which have subsequently been rewarded quite nicely. 

All the more interesting given just how much the Conservative Party has talked about the Big Society, getting local charities to do things and be pro-active. Not when it isn't in the interests of the big businesses bankrolling the Conservative Party though, it seems. I had a discussion in the Blenheim a few weeks back with some friends (one of whom votes Tory) about these business conflicts of interest. It was suggested there and then that codes of conduct should sort these kinds of problems out. Hmm.