Monthly Archives: June 2013

The A – Z of Music: B

Passing over many good contenders, I’ve settled upon an obvious choice, The Beatles.

But to make it less obvious, I’ve not gone for something by Lennon or McCartney, but Something by George Harrison:

P.S. Just so as not to leave Ringo out!

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I’m Forever Blowing Bubbles

Ladies and Gentlemen! I give you the magic money tree, the perpetual motion machine, the fountain of eternal youth, the philosopher’s stone, the goose that lays the golden egg, the gift that keeps on giving. Despite all the laws of economic gravity, house prices keep rising:

Express

But why should this be, when real incomes have fallen drastically, there’s high unemployment and GDP still hasn’t recovered from the recession? Well the government has pretty much thrown the kitchen sink at keeping prices up. But should they? Are high house prices really so important, especially compared to other pressing problems we have.

Here’s a couple of thought experiments which show why I think the obsession with house prices is silly:

  1. I know an easy way of doubling house prices. Let’s pull every other house down. Of course this is a ridiculous idea – yes, those still with houses would find them more valuable, but we’d have a lower standard of living as a country because of it. High prices are just a reflection of scarcity – more people want houses than there are available. They are a way of showing we don’t have as many homes as people want, and therefore we don’t have the standard of living – those real assets that give us somewhere to live, and raise a family and be near work – that we could have.
  2. “Food Prices Keep Rising” – imagine that was the headline. Would that be seen as a good thing? Of course not. Housing, like food, is something we all need. And surely the important thing is how much housing we get for our money, not how much money we need for our housing. The ideal should be that we can all buy mansions for £1, not a shed for £1 million.

There are of course reasons why high house prices are bad:

  1. The more we have to spend on it, the less we have to spend on other things.
  2. It prevents young people from moving out and starting new families.
  3. It prevents people from being able to move to where there are better opportunities for work and so forth.
  4. Governments have to spend a huge amount on housing benefit to subsidise people to live as housing would be unaffordable otherwise.
  5. It encourages too many people to think the way to get rich is to buy a house and wait, rather than having to find some useful good or service to provide for others. It never ceases to amaze me that the same newspapers who become incandescent at the thought that people receive £70 a week when they’re not working become ecstatic that people can gain £1,000’s in their assets for doing an equal amount of sweet F.A.
  6. The same forces that keep homes pricey keep land prices pricey more generally. Imagine someone wanting to build a new factory or shop. If the land they need to buy to start building is expensive, the investment becomes correspondingly more costly and so may not happen, snuffing out economic activity before it happens.
  7. House price bubbles (when prices keep rising because everyone thinks they will rather than being rooted in fundamentals) are behind an awful lot of economic misery. Japan still hasn’t really recovered from a real estate bubble popping back in the late 80’s/early 90’s. One of the primary causes of the recession we’re still in was a housing bubble in the U.S. Places like Ireland and Spain are suffering from similar causes. And Britain has had similar experiences.

That’s not to say there aren’t people who benefit from higher prices, they get a feel-good factor and can borrow more money. They get a bigger capital gain when they sell up, but of course the next house will be more expensive so that gain won’t go so far. Housing is not net wealth.

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Big Data Is Watching You – And Wants You To Be Happy

Big_Brother_Ken_Dodd

Christopher Hitchens once said, “Everyone has a book inside them, which is exactly where I think it should, in most cases, remain.” Just as I won’t take my religious opinions from his, I’m minded to ignore this piece of advice.

I’m quite a fan of futuristic dystopias, such as Aldous Huxley‘s Brave New World. This book, and others like it, takes contemporary social, political and scientific trends and extrapolates them into the future. For instance, the book begins with students being shown babies being born on a production line. After all, Henry Ford, who made the assembly line famous, is the closest thing to a God in the future. Their dates are labelled A.F. (After Ford), to record how many years have passed since the first Model T was produced, and “Our Ford” replaces “Our Lord”. Soma, a psychedelic drug, is universally consumed, and sex has wholly lost its procreational character, becoming fully recreational.

The world is governed by a World State (inspired no doubt by the League of Nations) in a command economy (ditto the Soviet Union). Every one is kept beautiful and youthful-looking, until they die a pleasant, peaceful drug-induced death aged 60. Mass production, recreational drug use and sex, supranational institutions and government services, plastic surgery and euthanasia – these are all things that are prevalent now, but Huxley perceived these trends in the 30’s and takes them to an extreme.

Well, what of my idea? In a footnote in a previous post I mentioned Utilitarianism. This, put simply, was a philosophy that saw happiness as the greatest virtue. It sought to maximize pleasure and minimize pain. In its crudest form, it thought that one could calculate exactly how much pleasure or pain someone felt (how intense is the feeling? how long does it last? etc) as a result of each action. So if a government was wondering which course to take in its legislation, it would simply need to work out how many units of pleasure and units of pain would result for everybody, then take one from t’other to see if it was a good or bad idea. Of course, this crude form is nonsense – we can’t put numbers to people’s happiness, which is after all very subjective, with different people being made happy in different degrees by different things. And there are other virtues than happiness, such as sacrifice and duty, which might be unpleasant.

My idea is to take this crude Utilitarianism to an extreme as Huxley took the assembly line. Jeremy Bentham would stand in the place of Henry Ford in this imagined future. Of course, it will be easy to measure pleasure and pain – no need to mess with hedons and dolors. Chips in people’s heads would measure them directly from the brain. This chip would measure and store how every person reacts to each stimulus. How much does a pay rise, a park, a kiss, an illness – cause the pleasure or pain centres of the brain to light up? Indeed, during sleep, State-designed dreams, aimed to simulate all conceivable eventualities, are pumped into people’s heads – all so the government has all the Big Data it needs work out how each citizen would react to every event.

All this can then can be crunched by a super computer – say the Hedonic Calculator – which simply has to work out how to maximize the sum total of human happiness and minimize its suffering.The greatest happiness of the greatest number – this is the whole Law; the rest is commentary.

Of course a book needs more than a cute idea – characters, jokes, … a plot. But there’s the seeds of an idea here.

P.S. Brave New World presents a hedonistic future much like this one. I wonder if this idea is a little derivative? But then, Brave New World and its close relative George Orwell‘s Nineteen Eighty-Four share a common parentage in Yevgeny Zamyatin‘s We.

P.P.S. My story would have some lighter elements than those books just mentioned. I can imagine a cult of people who reject happiness and gather together, moping over The Smiths records and Ingmar Bergman films.

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Why Can’t We All Just Get Along?

Last evening, I attended a training session for my role as a Plymouth Street Pastor (you may know us as those people who give you flip-flips when you’re absolutely wasted down Union Street – you know who you are!) The session concerned Equality and Diversity – particularly focussing on racism.

Plymouth has been reasonably racially homogenous until recently – but has seen a big influx of immigrants in recent years. There’s a lot of tension about it. But the police officer giving the talk was reasonably hopeful.  He said that often people get strong negative opinions about it from family, friends and the media. But generally, racism and anti-immigrant feeling is usually low amongst those with more experience of living in more diverse communities. In particular, young people are getting more experience of it in their classrooms and are growing up more relaxed about it. So he seemed to say that racism is learned, and so can be unlearned.

Another trainee had a wonderful anecdote about a friend who adopted two kids the same age; one white and one black. The two kids used to swap their clothes when they were very young, because they wanted to trick their Mum into getting them mixed up!

So, I guess this song had it about right:

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Gradgrindian Economics?

Immediately upon finishing one rather technical book on economics and social science, I made a start on Charles Dickens’ Hard Times (in a rather fetching cloth-bound cover):

Hard Times

I thought, upon picking it up, that it would be as different from the last book as possible. Not an ounce of economics or social science in it. How wrong I was!

Running throughout the book (well, what I’ve read so far*) is a continuing attack on economic thinking, and the whole growing trend towards statistical and scientific methods that were driving the industrialising society that Dickens was critiquing in the book.

The book, published in 1854, is concerned with a fictional town called Coketown – an archetypal red-brick Northern industrial town full of belching chimneys, thrumming factories and endless identical terraced houses. Looking back, its easy to forget what a dramatic rupture industrialisation was with all pre-existing human societies. While, of course, industrialisation eventually led to humans living longer, healthier and materially abundant lives; there was a huge dislocation between the older way of life. The old social order was being swept away as people were drawn off of the land and into new industrial towns. Work, which would previously have taken place on the land or in small scale crafts, was transformed as everyone, including women and children, crowded into factories and spent their day in monotonous tasks, becoming mere appendage of a machine.

The other big social change was the emergence of a rising middle class of industrialists and businessmen, who began to usurp the landed nobility and gentry. It was the economic interests of this new class which the classical economistsThomas Malthus, Adam Smith, David Ricardo – are associated with. It is among this new class that the dominant character of the first part of the novel, Thomas Gradgrind, comes from. His first words (the first in the book), which go some way to explaining his character, are:

Now, what I want is, Facts. Teach these boys and girls nothing but Facts. Facts alone are wanted in life. Plant nothing else, and root out everything else.

Having made his money in the hardware trade, and now the headmaster of a school; he has no time for imagination, or creativity, or sentiment… Fancy as he calls it. His children (a couple whose first names are Adam Smith and Malthus in another dig at economics) are not allowed to read fiction or go to the circus, but are fed a steady diet of lessons, lectures and scientific experiments. The pupils at his school are mere vessels to be filled with Fact – mathematical equations and chemical reactions – all the better to prepare them for their place in the industrial machine they will no doubt become a part.

Things that can be measured and added and subtracted are the only things that matter to him. It is immediately apparent that it is this spirit: trying to reduce human existence to mere calculus, that Dickens is attacking**.

Despite being a little harsh and narrow, he’s not necessarily a bad man. He takes on Cecilia ‘Sissy’ Jupe, a circus girl whose clown father abandons her and agrees to educate her at his school. She’s a bit of a free spirit and doesn’t take to learning too well. I’ll quote extensively from the next section, as it contains many funny swipes at economics.

In this scene, she’s discussing how hard she finds school with Louisa Gradgrind, Thomas Gradgrind’s daughter:

‘I am almost ashamed’, said Sissy, with reluctance, ‘but today, for instance, Mr M’Choakumchild was explaining to us about Natural Prosperity.’

‘National, I think it must have been,’ observed Louisa.

‘Yes, it was. -But isn’t it the same?’ she timidly asked.

‘You had better say, National, as he said so,’ returned Louisa with her dry reserve.

‘National Prosperity. And he said, Now, this schoolroom is a Nation. And in this nation, there are fifty millions of money. Isn’t this a prosperous nation? Girl number twenty, isn’t this a prosperous nation, and an’t you in a thriving state?’

‘What did you say?’ asked Louisa.

‘Miss Louisa, I said I didn’t know. I thought I couldn’t know whether it was a prosperous nation or not, and whether I was in a thriving state or not, unless I knew who had got the money, and whether any of it was mine.

That’s a brilliant last line. Economic statistics (National Prosperity is something we would think of nowadays as GDP, a common measure of how rich a country is) leave out as much as they explain. They only point to aggregates or averages – and doesn’t necessarily describe individual experiences, which is what matters to most of us. Sissy also realises it also doesn’t say how that prosperity’s shared out. But no one thinks GDP is the be-all-and-end-all. The same economic science that can measure GDP can make descriptions of inequality, which can inform more subjective debates over fairness.

The conversation continues:

‘Then Mr M’Choakumchild said he would try me again. And he said, This schoolroom is an immense town, and in it there are a million of inhabitants, and only five-and-twenty are starved to death in the streets, in the course of a year. What is your remark on that proportion? And my remark was – for I couldn’t think of a better one – that I thought it must be just as hard upon those who were starved, whether the others were a million, or a million million.’

Again, Sissy makes a wonderful point. If only 0.0025%*** of the town starves to death a year – it is still a tragedy for that 0.0025%. 0.0025% is too much. But it’s better than 1%. And knowing the scale of the problem can only be beneficial in solving it. Maybe it will spur efforts to reduce the number to 0.001% next year.

My final quote is taken slightly later, where Dickens is describing one of the factories in Coketown:

So many hundred Hands in this Mill; so many hundred horse Steam Power. It is known, to the force of a single pound weight, what the engine will do; but, not all the calculators of the National Debt can tell me the capacity for good or evil, for love or hatred, for patriotism or discontent, for the decomposition of virtue into vice, or the reverse, at any single moment in the soul of one of these its quiet servants, with the composed faces and the regulated actions. There is no mystery in it; there is an unfathomable mystery in the meanest of them, for ever. -Supposing we were to reserve our arithmetic for material objects, and to govern these awful unknown quantities by other means!

I think this passage goes to the heart of a common criticism made against economics. It treats people, it is claimed, as desiccated calculating machines. Ultra-rational, forward-looking, utilitymaximizing homo-economicus-es. No room for love or selflessness or stupidity, virtue or vice.

But this is a straw man. Economics seeks to approximate man in his economic life, and if their models do a reasonable job which can match what we see around us, why not?

And that’s not to suggest that they don’t consider man more widely. Scientists do study how we depart from being fully rational. They do recognise that we have other motives than money and self-advancement, and that sometimes it’s better to appeal to these than pecuniary self-interest. They realise we care about fairness and are influenced by peer pressure and social expectations.

And let’s consider that last sentence, “Supposing we were to reserve our arithmetic for material objects, and to govern these awful unknown quantities by other means!” People have used such arithmetic to find how much of a population has a particular disease, or suffers from hunger or illiteracy, or the hours people work and so on. It is as a result of such efforts that perhaps more people than otherwise are healthier, better fed, better educated and have more congenial working conditions.

Economics is not some narrow, autistic subject that treats people as equations and automatons. It is about harnessing our knowledge of how people and societies function in order to allow people to live more fulfilling lives. I’ll leave the last word to an economist, John Maynard Keynes, who hoped that due to the advancement in economic knowledge and conditions:

For the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.

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The Logic of Collective Action

I have just finished reading The Logic of Collective Action: Public Goods and the Theory of Groups by Mancur Olson.

The Logic of Collective Action

The book deals with public goods as opposed to private goods. A private good is something like a chocolate bar, a book or a iPad – I can buy as many as I wish, and it doesn’t really concern anyone else. A public good is then something like clean air, clear roads, an educated population or an efficient police force. They are things that we all benefit from and they necessarily concern many people*.

The main argument of the book is that people will generally not come together to provide enough public goods, without some other incentives being provided. To illustrate this, imagine that we didn’t have a government that provided armed forces to prevent us from foreign attack.

Everyone in the country would have to voluntarily pitch in together to come up with enough money to pay for the pay, training and equipment for the armed forces. Leaving aside the sheer trouble in bargaining, each individual will realise two things. One, it is unlikely that their contribution would be decisive as to whether enough money is gathered; since they bear such a small fraction of the costs. Two, if enough money is collected and armed forces are provided, they will benefit from the armed forces’ protection whether they contributed or not. So it is not rational for each individual to contribute. Individually sensible decisions prevent a collectively sensible decision**.

Luckily, we do have government that forces everyone to cough up through taxation for certain public goods like defence, law and order, schools etc. That is, selective incentives are provided – carrots and sticks (pay your tax or go to jail) – that aligns the individuals incentives with the public’s as a whole. Since a large part of our political discussion revolves around deterring free-riders like benefits claimants and tax evaders who enjoy public goods without contributing towards them – it shows that this issue is not merely academic.

It does raise the question, though, how many other public goods*** are we not providing – like a clean environment or uncongested roads – because we have not figured out what selective incentives we can provide to get individuals to contribute to the collective good?

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Tea Break

I spent several hours this afternoon, as I have been for many recent Friday afternoons, volunteering at my church‘s ‘Tea Break’. It is a couple hours each week where the older members of the church meet over tea, biscuits and each other’s company. They have a very varied programme; from quizzes, to bingo, coach outings, guest speakers, arts and crafts – all sorts.

Today’s session came in parts. There was a brief quiz on America (I only got half marks), in honour of the first guest speaker, who is, as you may now guess, American. Although that may be a narrow definition, for he has an English wife and lives in India in Christian ministry. He gave the thought of the day, which sprang from a Bible verse saying that the Lord demands of us a sacrifice – a thankful heart. He was saying it is very hard to be thankful when we see bad things all around us. Of course, many wonderful things happen, but news outlets don’t often give that as much attention.

As the speaker is someone who has lived in Sudan, as well as India, he is all too aware that his Western listeners have much to be thankful for. Unfortunately, we don’t compare our lives with the billions in the world who really have life tough, but with other relatively lucky people around us – so we don’t realise how lucky we are and are not as thankful or happy as we perhaps should be.

We then heard from a second speaker, a younger member of the congregation, talking us through his photos from his family trip to Indonesia. It appeared a wonderful place – although the number of near-death experiences he had – due to rapid currents, monkeys and mopeds – put me off slightly.

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