Thursday, 27 December 2012

The Best Theoretical Idea In The World?

It’s nearly the end of 2012 – the year I will remember as (among many other things) the year in which I discovered one of the neatest and most brilliant theorems I’d ever heard.  I don’t know how it had not crossed my path before, but I’ve definitely been enriched since becoming aware of it, so I thought it’d be a good Blog subject on which to end the year.  The theorem is called Aumann’s Agreement Theorem.

Here’s how it goes.  You may have noticed (I expect you have) that people in the world disagree about lots of things– religion, politics, ideologies, moral systems, land rights, tastes, facts, and many other things.  And in disagreeing with each other they make points of argument and listen to the counterpoints – back and forth, with each trying to rebut the other’s contentions.  It may seem the most natural thing in the world that opinions vary so widely, but I have long thought that most disagreements are either psychological and emotional, or due to biases, incomplete information, and poor reasoning – so I was delighted to find someone had formally confirmed my suspicions with one of the most elegant mathematical theorems I’ve ever read*.

The idea behind the theorem is that most people disagree on ‘facts’ that are really statements about relations between data points.  Game theorist Robert Aumann stated in his theorem that if two independent computers have the same programs, the same set of data (the input) and the same computational steps, then both computers should display the same output.  Not only that, two computers with different information should still reach the same output provided the computational steps are the same.  Imagine a complex murder scene with 1000 bits of information related to the crime.  The agreement theorem states that if computer A had 500 facts and computer B had the other 500 facts they should both exchange data and come to the same conclusions about who the murderer is.  The probability of their reaching the same conclusion increases further with every single instance of shared facts.  Unfortunately, humans aren't logic machines - they have flawed reasoning skills, misinformation, sensory faults, biases and incomplete knowledge of any situation in its entirety.  If Jill stops John and asks for directions to city hall, and at the end of the journey Jill ends up at the market 2 miles away, we can conclude that either John's information was wrong or Jill didn't follow the instructions precisely.

But despite the many human flaws, the upshot is, two logical, unbiased minds debating a subject (like the computers) ought to soon reach an agreement, either on the right answer, or on how far a human mind can logically accept or deny a set of premises, or else on rare occasions admit a roadblock holts their tracks.   The roadblock may be due to human limitation of knowledge, not having access to all the facts, or it could be that the wrong question is being asked.  But in terms of all the facts, difference in subjective probabilities ought to be solely down to differences in information. This is what Aumann means with the term 'the assumption of equal priors'.  If all disagreements are errors in analysing posteriors then when two people reach different conclusions, we know that one or both may be at fault.  If there is no rational basis on which two people with the same information should disagree, then what two debaters need to do is, first, make sure each has all the information, and second, keep discussing the individual issues face to face with openness and honesty until a resolution is reached. 

This may sound like idealism – but it is idealism only in the sense that we know everyone is not going to start to agree on everything.  That doesn't mean the observation is devoid of genuine power and utility.  One's own awareness of why people diverge in opinions, and the method by which they can understand how to converge, can only be a good piece of wisdom to have. Remember the agreement theorem isn't saying that everyone will agree - it is stating that people can (and perhaps should) in principle converge on an agreement as long ask they honestly wish to find it.  To have that summarised in an elegant mathematical theorem is great if you want a welcome recourse in the face of all those mindless disagreements happening out there.  

I think it is evident that as humans have continued to develop and co-exist the magnitude of disagreement has diminished over time**.  That is to say, the longer humans have been able to develop their knowledge and understanding together, the more closely we have converged in understanding, particularly since the rise of empirical and rationalist paradigms.  The take home lesson is that the reason humans disagree so much is not through lack of availability of data or methods of assimilating that data, which should serve as a signpost for those who genuinely want to enhance their knowledge and understanding, and find themselves in the company of like-minded people who feel the same.  Robert Aumann and Scott Aaronson have given us a mathematical proof that shows this is how knowledge would work if people passionately and intelligently and diligently sought the truth without getting so swayed by emotive or biasing factors.

* Mathematician Scott Aaronson has formalised the agreement theorem by providing a mathematical proof which shows that agreement should be converged upon in fairly quick time.  Aaronson's proof is the best and most comprehensive summary of the theory I've seen. 

** This is offset by the fact that there are now more people, and hence, more things about which to disagree, but proportionally we are increasing our convergence rates.

Thursday, 20 December 2012

Don't Ban Guns - Help Prevent People From Becoming Killers

I’ve had about half a dozen people ask my view on this – otherwise I probably wouldn't have blogged on it. After the recent shooting spree tragedy, President Obama wants to get tough on gun ownership and consider future policies to "help prevent more mass killings". Needless to say there are plenty of problems with this.  As tragic as the event was, I don’t think there is a way to legislate against it happening again – and I don’t think the proposed solution of reinstating the Clinton era law against assault weapons is going to be effective. 

The majority seem to be asking for a complete ban on guns, and the sceptics are asking how much good that will do. The sceptics are asking the wrong question – it’s not whether a complete ban on guns will do any good (it is bound to do some good), it is whether the cost of enforcing such a law outweighs the desires of the population and the good those costs could do elsewhere. 

In the first place, I don’t think a complete gun ban will do much good. Here’s why. Let’s first ask, on what grounds do people want guns banned? Is it because when disturbed and psychologically damaged people get hold of them they are dangerous and kill people with them? Many may say ‘yes’, but to me that’s fairly obviously misjudged.

Say we have a maniac intent on killing as many people as possible, but he has no gun. What can he do? He can go into his mother’s kitchen drawer, find the sharpest knife and go on a killing rampage. Are these people honestly saying that sharp kitchen knives should be illegal too? They'll have one objection; you can do a lot more damage with a gun than a knife. Even if that’s true, you can do more damage with a car or van or lorries or a box of matches and a can of petrol if you are that way inclined.

To legislate against the most maniacal killing sprees you would have to ban knives, cars, vans, lorries, matches and petrol if you take it to the limit. Heck, it is easy to kick a person to death with heavy boots – are we going to say that people on building sites have to by law walk around barefoot or with plimsolls on? Of course not. 

So the grounds that guns should be banned because when disturbed and psychologically damaged people get hold of them they are dangerous is not much of an argument at all. A disturbed killer in the making will find the tools with which to commit his or her murders irrespective of the law, just as has proved to be the case many times in the UK where guns actually are illegal. 

Next, let’s suppose for the sake of argument that guns are the only way to kill people – would it then be worth having a blanket ban in the shape of a federal law? That depends on how much people want them banned, which depends on whether they are prepared to pay the cost or whether they think the money could be better spent.

It is hard to get an accurate figure for law enforcement, but as a rough idea it is thought that drug laws in the USA cost between $50-100 billion. So how much would it cost to implement a gun law? I don’t know, but I know that any amount in excess of the minimal requirement for tackling persistent gun crime from recidivists would be too much, because any additional expenditure on gun laws would be better spent in helping to prevent people becoming killers. 

The other reason that the cost of the law would be economically inefficient is that most people causing trouble with guns are the sort of people who are likely to be taking up most of the police’s time anyway, so the costs of targeting the rest of the relatively safe gun owners across the country will be vastly disproportionate to the good any such law will do (remember, I said we can't legislate against maniacs outside the police's radar). Put it this way; would you want the police spending lots of their time and resources going after a large sample group who constitute only 1-5% of the threat, or would you rather that majority group kept their guns with virtually no threat of using them? I know what I’d rather see – particularly as valuable police time will be taken away from more pressing and persistent daily crimes. 

The point is, even with a blanket ban, guns will still be traded on the black market, and someone who is desperate to go on a shooting spree will find a gun from someone, whether guns are legal or illegal. And secondly, given the amount of people that own a firearm, it is obvious that lots of people wilfully choose to own one for protection. This is important for one reason; if you solicit public opinion, you may well find that most people don’t want a gun ban.

So what? you may say – guns play a part in deaths, and the anti-gun folk should get their way. But it’s not that simple; given that it costs (even by a conservative estimate) over 100 billion a year to implement such a gun law, it can be argued that those costs may come at the expense of good law and enforcement in other areas, and in spending money that could be used more wisely for prevention, and confidence building, and restoring self-worth in young people's lives. 

Here's another reason why the economics doesn't favour the gun law. Let’s be generous and say it costs only $60 billion for a gun law enforcement – the costs of enforcement must drain the police force to the tune of $60 billion (unless you want to foot the bill for more police, in which case the cost goes up again). The cost of the law at $60 billion works out to about $200 dollars per person, which is $800 per year for a family of four.

Given the vanishingly small chance that you or your family are going to be the victims of a shooting spree (even if you’re excessive in allowing for 100 deaths in an isolated shooting spree every year*, it’s only one in three million), do you think the family would rather have the money and the one in three million chance of dying, or the probability vanished (don’t forget, threats never vanish anyway)?

I’ll bet most families would choose $800 dollars and a one in three million chance of death, because they already demonstrate similar behaviour every day in what they will or not fork out for safety equipment and risk reduction. If anyone decided they preferred to avoid a one in three million chance of death rather than a certain $200, you’ll know they don’t understand risk or probability.  Most Americans don’t earn $200 per day, and each of them has much less than a one in three million chance of dying when they drive or cycle to their place of work. 

While I have sympathy with people’s call to see guns banned, I think it doesn’t make much economic or practical sense. America needs to learn how to irrigate deserts, not wave axes around looking for trees to chop down. I think what is needed is not a focus on guns – it is a focus on getting to the root of the psychological damage that inflicts so many young people. If you want to do good, focus not on guns but on helping people.

It is tragic that we live in a world in which these isolated incidents come along and wreck entire families. But I can see no way to legislate against these things happening – not without imposing a law that will be almost entirely ineffective, and one that imposes tens of billions of costs that will impinge on other police duties, and do nothing to stop isolated incidents. Shakespeare understood more eloquently than most that you cannot legislatively remove human anomalies out of the system of being human:

Whether 'tis Nobler in the mind to suffer
The Slings and Arrows of outrageous Fortune,
Or to take Arms against a Sea of troubles,
And by opposing end them: to die, to sleep
No more; and by a sleep, to say we end
The Heart-ache, and the thousand Natural shocks
That Flesh is heir to?
* And that certainly doesn’t happen 

Tuesday, 18 December 2012

The Truth About Immigration

A recent report shows that the right-wing anti-immigration UK Independence Party (UKIP) has risen six points to gain 10 per cent of support, which is as good as it has ever been for the party.  Euroscepticism, rises in unemployment and increased immigration are probably the primary reasons for this occurrence.  Of course, the kind of people who support UKIP are the kind of people who think rises in unemployment and increased immigration are causally linked – “If it weren’t for all those bloody immigrants our British folk would have more jobs” is what they assert.  They are wrong.    

Given that geographical borders are a human invention, I see no rational reason to have any preference, or treat more favourably, a man from Britain over a man from anywhere else in the world.  But let’s pretend we have to for the sake of the anti-immigration folk – what’s usually asked is, are immigrants really bad for the British job market?  But that’s the wrong question – the right question is whether immigrants make us economically and culturally richer.  Even that isn’t the nicest question we can ask, because it only views migration by what we can gain, not by what the person coming into our country has to gain (which is usually much more).  But yes immigration does make us richer – both financially and culturally – but it has to be the right kind of immigration.  By ‘right’ I mean the right kind of immigrant – one who is willing to assimilate himself into the UK’s language and culture, not remain aloof in non-English speaking enclaves that are detached from the rest of he country (although I understand their temptation to do this – if you or I went to live in, say, Turkey or Singapore, we’d probably gravitate towards the more familiar English communities if we could find them). 

Here’s one way immigration makes us richer. Say you have a British worker earning £10 per hour, and he won’t work for less.  If an immigrant comes in and will do the same job for £7 per hour, then as a result is Britain better or worse off on the whole?  Purely in terms of economics, Britain is better off because the British worker was being paid £3 too much (in net terms).  Of course, this sort of thing doesn’t reach a low ebb because we have the minimum wage, and it doesn’t even apply exclusively to immigration.  If you have a Mancunian worker earning £10 per hour, and he won’t work for less, and a Liverpudlian comes in and will do the same job for £7 per hour, the nation is better off because we were paying a man £10 per hour to do a job that we could get done for £7 per hour. 

Most right-wing journalists and politicians seem to be under the assumption that the costs of immigration can be measured by the number of British people who leave their jobs as a result.  But this simple caricatured picture of the Eastern European replacing a British worker on a higher salary is pretty much the opposite of what is happening.  Think about it; any employee who leaves his job rather than taking the wage decrease must either be transferring to a job with similar wages, or he must have better alternatives ready at hand.  The employees who cannot easily leave and as a consequence must take a pay cut are the ones hurt the most.    

Every immigrant is a potential employee, customer, buyer and seller, and provider of services. He bids down wages, but that's a double-edged sword, because while it’s bad for his fellow workers, it's good for employers and consumers.  There is a wider picture though; the costs of immigration are borne by British workers who are hurt by the aforementioned falling wages, and the benefits are reaped by British employers and company owners (who profit from those same falling wages).  The employees’ loss is the employers’ gain, so they cancel each other out.  But there is a wider gain for the British economy because employers and company owners enjoy an additional benefit when the fall in wages enables more profitable expansions to the business, which, nationally, results in lower prices (in some cases) and lower unemployment (in other cases). 

Moreover, and I don’t have any statistical figures to hand, but even when wage drops occur for Brits, they are almost certainly dwarfed (at least in relative terms) by the gains for immigrants.  A Brit who takes a £2 per hour wage drop is probably giving (indirectly) something like a £7 hourly gain to the kind of people for whom that sort of gain is essential for feeding their family. 

So on balance immigrants don't harm the UK; because immigration makes us richer, not poorer.  Also, in the longer run, the excess profits that immigration engenders get competed away and show up with lower prices for consumer goods. Even consumers benefit here; if your wage falls by 5% while prices fall by 10% you're benefiting. 

Contrary to poplar opinion, the minimum wage doesn’t impact this situation all that much. A minimum wage does two things. It shifts capital from employers in an unstable competitive market to low paid workers, and it induces some employers to let their staff go because they cannot afford the wages. If you’re getting £7 per hour and only bringing £6 per hour worth of benefits to your company, you’ll likely find yourself on the dole. In that sense, it is possible to argue that for the good of low-paid workers there should be no minimum wage at all – which is interesting because the minimum wage is supposed to be for the benefit of the low-paid, unskilled workers.  If you are a lower paid man or woman going from here to there in different jobs, you will find less work available with every rise in the minimum wage – and the higher the rate the more unemployment.

This might amount to a road block for young, unskilled workers and the unemployed – which is why tax credits are a more effective method because they target those who have children or high level benefits, and need high wages to make it worth their while signing off benefits, but who don’t have the skills or experience to command that kind of salary.  An efficient tax credit system will leave such people almost unaffected by immigration, certainly with regard to the economy.

There are some notable costs of immigrants coming into our country; most obviously the issues surrounding sex trafficking, drug gangs, and rise of Islamic fundamentalism – but you don’t have to be an immigrant to be involved in those activities – many indigenous folk get involved too.  Yes the Government needs better border control, but it’s a terribly difficult task for any Government to realistically keep a check on the numbers coming in illegally. 

All in all, immigration benefits a nation.  Yes there are sceptics, but here’s an amusing way to catch them out.  The next time someone says there are too many immigrants in the UK, ask them how many immigrants there are.  They will usually say they don’t know – to which you can respond by asking how they can say there are too many immigrants when they don’t know how many there are in the first place. If they try to be clever and give you a figure, ask them how they can know the number when apparently the Government doesn’t even know. 

Sunday, 16 December 2012

What The Dickens? - Two Kinds of Miserliness

Reading my Christmas edition of The Spectator that arrived this weekend, I came across an article by Toby Young entitled "Dickens and the profit motive" in which he says the following about Dickens's feelings towards the ills of capitalist businessmen:

"In virtually all of his books, from Great Expectations to Hard Times, capitalists are depicted as mean and heartless* - men whose humanity has been eaten away by their relentless desire to make money. Ebenezer Scrooge is a case in point.  When the Ghost of Christmas Past takes him back to his youth, we see Scrooge actively choose his love of gold over his love of Belle, a beautiful young woman"

The trouble is, Toby Young is only focusing on one half of the situation and overlooking the other half.  Plus, regarding the half on which he is focusing, he has rather misunderstood the effects of the actions.  In economics, people are negatively affected not by other people's hoarding of money, but by other people's spending or use of resources.  In terms of how Scrooge's behaviour affects everyone else's financial well-being, he is the opposite of "mean and heartless" because he is hoarding his bank notes and not spending them on resources - which leaves more for everyone else**.  This is because people aren’t rich by having money; they are rich because of what that money buys (goods, free time, holidays, etc).  Scrooge is the opposite of what he is accused of being, because he has the money to be rich, but he keeps it in the attic, away from the many goods, free time, holidays, etc that he could consume.

A hat tip to Steven Landsburg here, but when Scrooge earns a bank note and doesn't spend it, the rest of the world is one bank note richer, because Scrooge produced one bank note's worth of goods and didn't consume them. By not using fuel, there is more for everyone else; by not having a big mansion there is more bricks and mortar for everyone else; by not having servants there are more employment opportunities for those who might wish to employ servants themselves.

I said that in hoarding his bank notes and not spending them on resources, Scrooge leaves more for everyone else.  How are those extra resources shared around?  Well it depends on how the savings are made.  If Scrooge puts £1 million pounds worth of banknotes in his attic and never touches them then everyone else is better off by £1 million pounds, which they'll find by having the prices of goods driven down.  If Scrooge takes his £1 million pounds out of the attic and puts it in his bank, he will bid down interest rates to the tune that others will be able to afford £1 million pounds worth of goods or services.  Conversely if he buys £1 million pounds worth of timber he will bid up the price of timber for everyone else, and reduce the supply too. 

So although Scrooge’s character is "mean and heartless", his effect on the economy is just the opposite – it is full of gains for those who probably didn’t realise they were benefitting from his miserliness.  Of course, the wonderful thing about A Christmas Carol is that its message has a specialness far beyond economic outcomes; it is about the wonders of a personality transformation, after which one sees others in an entirely different light because one can see oneself in a different light.  To this extent, economics is amoral. 

* You'll also find lampooning and ridiculing too; you may recall that relatives of Martin Chuzzlewit are criticised for their collusive attempts to obtain the inheritance; the Lammle family in Our Mutual Friend learn the costs of marrying for money; there's an odiousness about moneylender Daniel Quilp in The Old Curiosity Shop; and there is something pathetically desperate and uenviable about Uriah Heep in David Copperfield.   

** And when it comes to paying wages, I don't even think it can be assumed that Scrooge’s wages to Bob Cratchit were evidently stingy; I mean, from what I can remember, Cratchit's wages were low, but he was free to seek employment elsewhere.  Say Scrooge pays Bob Cratchit £20 per week, and Cratchit is worth £25 per week in labour and skills - why doesn't Fezziwig or one of the other prospective employers offer him £22.50 per week?  Then Cratchit would be £2.50 better off, and Fezziwig would get £25 worth of skill and labour for £22.50.  Maybe Scrooge was only paying Cratchit what he was worth. 

Wednesday, 12 December 2012

Are Sons or Daughters Better for Marriages?

Since yesterday I’ve been pondering an interesting stat I read - apparently in a survey of 3 million people undertaken in America, a couple is 5% more likely to divorce if they have a girl than if they have a boy.

The first thing that springs to mind is to wonder whether this suggests women who have daughters don't feel such an intense need to stay married, or whether fathers prefer staying in wedlock for sons.  Then I wonder whether sons improve the quality of the marriage, or whether they exacerbate the travails of getting divorced. Or it could be that daughters either exacerbate the travails of a troubled marriage, or that they improve the prospect of separation.  Having thought about the statistic for a bit, I have further ideas – but first I will mention a particular objection you might have (and someone actually did have) – that 5% is not a very significant percentage to prove causation as well as correlation.

Given that the survey had a sample space of 3 million, it’s clear that 5% is very significant. Here's a simple illustration showing why it proves causation as well as correlation. If you gave 3 million people one coin each and asked them to toss it, and then separated them into two groups - those that landed heads and those that landed tails - you'd get two statistically identical groups in all the ways that you'd want to measure the average - average annual wage, height, weight, intelligence, and all manner of things.

The reason being; what you have is the mathematical law of large numbers; a huge sample space (the group population) and a random component (the coin toss). Suppose next we take the mathematical law of large numbers and try it on parents, where the sample group is divided according to last born child's gender. Once again we have the same number sample size, meaning we have two statistically identical groups in all the ways that you'd want to measure, and the gender of the last born as the random component (that's as random as the coin toss). Since every other variable returns two statistically identical groups regarding the average, the 5% difference has to be down to the last born child's gender.

Now back to the significance of the 5% statistic.  The first thing I noticed was that although the figure was 5% in America, it was higher in countries that place a greater premium on sons – higher in Mexico than America, even higher in Kenya, and even higher still in China (a country notorious for favouring male progeny).

As well as the 5% divorce statistic, it also proved to be the case that divorced women with daughters are much less likely to get married again than divorced women with sons.  This might suggest that daughters are more inimical to a successful 2nd marriage market than sons – but that seems to be a rational decision from mothers protecting their daughters, because a new stepfather is a new risk by being a potential predator from which the daughters’ sexual innocence needs protecting (even if most stepfathers don’t turn out to be a threat). 

So, if a couple is 5% more likely to divorce if they have a girl than if they have a boy, then do boys help sustain marriages or do girls help with divorces?  Statistically boys develop their careers and end up being better economic providers for their parents' old age – so this might explain why the percentage is so much higher in China than in America. I also think there is something in the idea that daughters improve the prospect of separation for mothers.  Furthermore, if the notion of passing on the family name has any analogue to passing of genes (which it might have) then that might be another factor that keeps men in marriages with sons. 

Here’s another thing to consider. Given that boys bring more anti-social stigmas back into the household, this might suggest the mother-son single life is harder than the mother-daughter single life - which may be a factor in the above stats, and may suggest mothers prefer having fathers around with boys. Moreover, I suspect a corollary of this is that mother-daughter bond is strong to the extent that a life together without a husband strikes the mother as being more secure and manageable.  I became more strongly drawn to this hypothesis when I found out that nearly three quarters of all divorces involve the wife leaving the husband, which suggests that men might not be staying married for the sake of their sons or daughters, but that significantly more women feel more confident leaving their partners when they have a son than when they have a daughter.  Even so, a man with a greater incentive to stick around for a son probably will be a man who tries harder at his marriage.  This could also explain a further stat – it emerged that parents of daughters are significantly more likely to try for another child than parents of sons – and this feeling also increased upwards from America through to China as it did previously, which seems to support the view that sons are preferred by men. 

I did visit one webpage in which a clinical psychologist (I didn’t register her name) who had done work with adoption agencies tried to rebut the idea of preferences for boys by showing in her findings that the records of adoption agencies show a higher demand for girls than boys.  But I think the psychologist has her reasoning backwards; in a world where parents have a preference for boys over girls, it stands to reason that couples looking to adopt will more likely choose a girl.  The distinction may not be significant enough to have a major effect – but it doesn’t have to be huge, just a bit will do.  As long as probability is considered, it will always be slightly preferable to adopt a girl, because if boys are preferred by their natural parents then boys put up for adoption are more likely than girls to have a personality less conducive to preference. 

In marginal or nominal circumstances, sometimes a more extreme analogy can give clearer exhibition to the point – so I’ll give you one. Imagine a world in which 99 out of every 100 people preferred to own dogs over cats.  Suppose you visit an animal sanctuary looking for a pet, and your choice is between a quantity of dogs and cats that have previously been pets of someone else.  In a world with a 99/100 preference for dogs, you’re going to be much more put off the dogs on offer because you’ll assume that the previous owners gave up their dogs because they weren’t easy to have as pets.  This is almost certainly the same reason why records of adoption agencies show a higher demand for girls than boys.  Their rationale won’t always be right for couples looking to adopt, but it has a higher probability of providing a more favourable outcome – and that’s what matters most to people’s instincts.

Sunday, 9 December 2012

Taking the £ out of £hristmas

There's a famous paradox called the Abilene paradox, based on an account of a family who had taken a day out to Abilene even though none of the family members really wanted to go. Each family member expressed an interest in going on the trip due to thinking the other three family members wanted to go, only to find out on their return that none of the four had wanted to go in the first place. They did it to keep the others happy – which is a noble gesture, even if initial honesty might have produced a better outcome.

The situation with that family is a bit like the situation most of us are in regarding the excessiveness of Christmas gift buying and card-swapping – except in this case keeping our family and friends happy is only a small part of it - the biggest part is the intense cultural pressure we have put on ourselves as we’ve become caught in a knotty web of unwanted card and present buying– one that most of us don’t really want, but from which many don’t feel able to escape. 

Let me be clear, this is not meant to be a commentary on present buying for immediate family or close friends – I am talking about the much wider circle of friends, family, colleagues, and extended social milieu with whom we are entangled in this web of cultural pressure to exchange cards and presents. 

You know what it is like – you receive a card from someone to whom you hadn’t planned on sending one, and before you know it the emergency card is pulled out of the drawer by way of compelled reciprocation. And think of the dozens of gifts that have been exchanged from within those “much wider circles” I mentioned a moment ago. Auntie, cousin, niece or neighbour drops round a bag of presents for you and your family, and you hand them your bag of presents to them – both families are caught in a cycle of obligation that neither really wanted, and one that doesn’t really benefit either of them very much. 
The width of your card-swapping and present exchanging circle is much wider than that of your parents when they were your age, and theirs was wider than their parents’ circle. The reason being; each decade has seen an increased effort by shops and businesses to have more £s put into Christmas – and before long it has become the social norm; a norm that has been adding heaps of pressure on most people in Britain for quite a few Christmases now.

Most gift exchanges tend to be in the region of financial equivalence; you open your present from Jenny and find a £20 set of cooking utensils. Jenny opens her present from you and finds a £23 bath robe. Unless you wanted to spend £23 on cooking utensils, and Jenny £20 on a bath robe, no doubt you and Jenny could have done better things with your money – treated the kids, paid a house bill or a bit of money towards school fees, or reduced your debt, or one of the many other things that take priority over the £23 on cooking utensils that you probably already have. 

You know that those in the “much wider circles” very rarely buy you things you actually need (nor you them) – much less things that you would spend the value of your gift to them on.  And things are worse, of course, for those who cannot afford to reciprocate, but feel obliged to do so due to seasonal pressure. If you buy a gift for someone who cannot afford to buy you one back, you’ve probably made things worse for them, despite your nice gesture. 

I think we would be doing each other a favour if we broke this taboo and wised up to the fact that we have gotten ourselves under the thrall of consumerist pressure - and I'd hazard a guess that most people agree. Here's why I'm fairly confident people generally agree with me. Apart from the extreme unlikelihood that these feelings are unique to me, there are two protocols in place in offices that give exhibition to this feeling of avoiding excess in obligation; one is Secret Santa, and the other is the written agreement that people send round via email saying we as a team have opted out of card buying because we feel the money spent on cards would be better going to charity. 

They are right. The charity option is a method of transferring money from the unwelcome obligation of card giving (not to mention the environmental issues) to more worthwhile causes. Secret Santa is good too; it is posited as each team member buying a gift for the one person they draw out of the hat. In reality, though, it is each team member entering into an obligation to not have to buy for the rest of the team that they didn’t draw out of the hat. This is understandable too – a work team of 8 members would exchange a total of 54 gifts if they all bought one for each other. The total number of Secret Santa gifts purchased is 8, which makes Secret Santa fun and worthwhile. 

Whoever originally thought up the Secret Santa idea did so because he or she knew that things are better when all the pressure is off staff members - when they don’t have to worry about who is buying what for whom, whether there will be an imbalance in the giving-receiving ratio, and whether exchanges have price equivalence. There is sound economics behind Secret Santa and sound economics behind opting out of card giving to make a charitable donation to a good cause.

Is Christmas good for the economy?
It’s clear that many people share the same view that the mass consumerism of Christmas has got way out of hand. So the other question that needs asking is this; is Christmas good for the economy? I think not, for two reasons: one it engenders poor use of spending (as we’ve seen, a great many gifts are either unwanted or not the sort of items the recipient would buy for themselves); and two, as a consequence of this, given that many presents are not ideally suited to the recipients, that means an excessive waste of labour, energy and raw materials that would have been more beneficially employed in the hands of people who actually want the things that are produced. 

It's equally false to say that Christmas must be good for the economy because people spend more in December than the rest of the year. Such people have this picture of all the extra money spent 'tricking down' and being 'good for the economy', but this is a myth. Most of the money spent excessively in December would have otherwise been more thinly spent throughout the rest of the year. If instead of buying cards and presents in December the money was spent throughout the year on clothes, furniture and having the decorators in, then retailers and tradesmen gain. If the money stays in your bank, then people who want to borrow from banks gain.

And here’s the real key thing; given that all those unwanted or unneeded gifts are bought predominantly because of social obligation – if everyone could help catalyse a big culture change and bring an end to the mass consumerism of Christmas, it would lift the burden of festive obligation and free us up to spend the money more wisely. If we turned all the money spent on unwanted or unneeded gifts into money given to the neediest people in the world, we really would make Christmas something even more special. Whether it be helping to save starving children across the world, helping to provide fresh drinking water in deprived communities in third world countries, or clubbing together to fund the local help centre that gives support to troubled families, I think it would better than what we have now.

Of course, I’m not trying to take the joy out of gift buying – there will be plenty of gifts given and received that will add joy to our lives. But how sad that this cultural pressure has crept up on us gradually over the years, as shops increase their powers of selling, kids become more acquisitive, and adults become more pressurised into meeting the demands that society imposes on them. 

Not only have we let it get out of control, but my guess is that just about everyone probably can put their hands up and say they too can recognise the need for a cultural change. I suspect fear of being the first one to bring this up in the office or the family gathering makes you reticent; and I assume that it’s easier to go with the flow and avoid the ‘Bah humbug’ or ‘Scrooge’ or ‘Party Pooper’ accusations. 

But I suspect that what I’ve said is a forecast about a change that will surely come to pass at some point. I predict that when our distant descendants look back on how we let Christmas consumerist pressures get so out of hand, I think they will recognise in us a fault that went on to be corrected by a changed consensus, once people found the courage to speak openly and honestly about feeling trapped in this culture of excessive gift buying and card-swapping. 

This is not a call to become mean and stingy - just the opposite, in fact - it is a call for extra generosity, but a generosity that will do more good than excessive present and card cycles. Besides, if you’re worried this might bring forth the stigma of stinginess, you can always spend extra on people when it is their birthday.

Finally, remember that giving can be much more; to give to those you care about, write an email or make a phone call more frequently throughout the year; or treat them to dinner; or offer to babysit their kids so they can have quality time together; or help with decorating; or offer lifts; or do something to help your elderly neighbours – these are the kinds of giving that really enrich people’s lives in addition to well chosen presents.





Wednesday, 5 December 2012

Tax The Rich: Why It's Not As Moral As You Think

George Osborne wants us to think that he is preparing an economic blitzkrieg on companies like Starbucks and Amazon, as he acquiesces to the general public opinion that their tax avoidance is 'immoral'. I have written before in defense of richer people paying more tax, but as this blog is about the 'moral' issue of taxation, there is something I think many people are missing here.  Have a think about this question; on what grounds is it moral that rich people pay more tax?  I think you'll find that question is harder than you think. I don't think I've ever heard anyone be able to proffer any moral principles from which they can derive a conclusion that Mr. Starbucks and the like are paying less than their fair share. The reason it is hard is because I suspect that the reasons you assume are valid reasons for higher tax for the rich are almost certainly wrong. I gave a few of them in this blog post, but they were economic reasons.  Here I'll give you some moral issues to consider.

The primary reason why people think it is more moral to tax the rich at a higher rate is that culturally they have the old Marxist maxim ingrained - "From each according to his ability, to each according to his need". This amounts to the favouring of maximising the well being of the poorest and least well off people.  Surely this supports the notion of the rich having a moral duty to pay more tax to ensure the poorer people of Britain have a more even distribution.

Most definitely not - that reason just won't do.  Following the "From each according to his ability, to each according to his need" to its true conclusion, this does not support the view that the rich should pay more to support the poorer people of Britain - it says that the rich (and middle earners, and even some of the lower earners) should pay to support the poorest people in the world.  Even today around 1.5 billion live in poverty around the world - their condition would make the poorest people in Britain seem comparably well off. The Marxist principle insists that British people stop complaining that rich people's tax is not going into their reasonably well off pockets in the UK, and instead start complaining that that the money isn't going to help those around the world that most need it.  Giving it to those in global poverty is how you maximise the well being of the poorest and least well off people.  Claiming that not enough of it is coming to Britain is the howl of a person who doesn't care enough about the people who really do need the money - many of whom need it just to stay alive.

Ah but wait a minute, you may say - even if we can't get justification on grounds of 'the needs of the worse off', everyone should be paying their 'fair share' of the aggregate tax bill to cover the total cost of Government spending, shouldn’t they?  The trouble is, I've no idea what everyone's fair share is, because Government spending isn't a singular dimensional expenditure.  Some of our State funded goods are public, but private goods are provided by the state too.  You’ll notice that rich people tend to pay higher prices for their private goods – they usually pay for private health care, they usually are privately educated and they usually pay into more lucrative pension schemes than lower earners.  If a high earner wants to pay for better services then there is nothing ‘unfair’ about that – in fact, he lessens the burden on the non-private sectors of the service.

So ‘fair share’ really limits the consideration to the public goods the State provides, because they are the goods that we all share more or less equally.  That is to say, whether a man is on £200,000 per year or £20,000 per year, he has the same basic access and benefits of the public goods the State provides, such as emergency services, law and order, roads, street lighting, bridges, armed forces, and national defence.  If our troops are called to defend us against an invading nation, Mr Starbucks has the same level of national defence as Mr low-middle earner, just as they both have access to the same police force, motorways, street lighting, road sweepers and dustmen.

So if your concern is ‘fair share’ based on equal treatment for equal services then Mr Starbucks is paying more than his fair share, because he is contributing a lot more tax than Mr low-middle earner for the same level of State provided public goods.  Moreover, if on the other hand you base your view on the notion that everyone should make an equal contribution to society then Mr Starbucks needs to stop paying tax until all those who have been paying less tax than him over the years catch up on their payments, because in the process of acquiring huge wealth, Mr. Starbucks has already contributed more to society than the average earner.  The ‘fair share’ argument doesn’t fly here.

Another way to measure value is by what is called ‘consumer surplus’.  When The Rolling Stones played the O2 recently the ticket prices were high – but not too high, because they sold out.  They sold out because Rolling Stones fans valued the performance more than they valued the cost of the ticket (if they did not they wouldn’t have gone to see The Rolling Stones).  So the consumer surplus of the gig is the difference between what Rolling Stones fans are willing to pay for O2 tickets and what they do actually pay.  If I would have paid £100 for a ticket, but I am able to purchase one for £75, then the consumer surplus is £25.  When a consumer has £25 consumer surplus that means £25 of consumer surplus has been contributed to society.  Given that each ticket sale generates consumer surplus to society, and given that The Rolling Stones only get a proportion of the ticket sales, they must have contributed much more consumer surpluses to society than the vast majority of low and middle earners (this pattern follows in just about analogous situation).  To translate that, the Rolling Stones can argue that if everyone should make an equal contribution to society, then their share of the tax burden is too generous.  So the argument doesn’t really fly on that one either.

Hence, the problem is twofold; it starts with the issue that so far as I’ve seen nobody has any idea how to logically justify their belief that it is ‘fairer’ if the rich pay more tax.  And it carries on with the issue ‘fair’ and ‘more preferable’ are not the same things.  It is not fairer if the rich pay more tax, but it is preferable – and it is especially preferable if the tax of the richest people in the world goes to the poorest in the world – those who need that money for food, health care and regular supplies of drinking water. 

There is only one way to have a system that is not unfair yet at the same time ‘especially preferable’ – but that would involve living in a world in which the rich were glad to pay more than their fair share to provide revenue for their own country, but were also glad to pay a proportion of their tax money for food, health care and regular supplies of drinking water for the poorest in the world.  And that would only happen if the richest Governments got together and set up tax systems that directed a lot more of their own revenues into the mouths of the world’s neediest.  What you’d then have is greater incentives – and people do respond to incentives.  A company like Starbucks or Amazon whose tax avoidance means money is being kept out of the mouths of the world’s neediest would be frowned upon a lot more than a Starbucks or Amazon whose tax avoidance means money is being kept out of British pockets.  Moreover, the tax avoiding Starbucks or Amazon that keeps money out of the mouths of the world’s neediest is likely to be seen as hugely uncaring and immoral, and will likely increase the chances that customers will go to Costa and instead.  Naturally this fear of mass boycotting will provide greater incentive for Starbucks and Amazon to pay more tax.  But things like that only happen when there is a big collective effort to do more for those most in need.  

Saturday, 1 December 2012

Foster Parents: What Politicians 'Say' They Think, And What They Actually 'Do' Think

Just recently Rotherham Council took away three foster children from parents who belonged to UKIP*.  In most cases, the politicians’ reaction (including those on Thursday’s edition of Question Time) has been to overwhelmingly repudiate the view that political affiliations should have any bearing on parents’ ability to foster children.  "Political opinions should not affect a couple's ability to foster children" we hear them assert. 

The problem with this view is that almost no one believes it is true, which makes it a rather strange widespread assertion from our political representatives.  The first mistake being made is that the extent to which political views or affiliations should affect people's ability to foster is not a binary consideration, it is a spectrum - rather like whether a room is thought to be hot or cold is a spectrum, not a binary 'hot' or 'cold' fact.  Saying "Political opinions should not affect a couple's ability to foster children" is a bit like saying "There is no such thing as a hot room".  There are many degrees of temperature increase that would constitute the view that a room is hot - and similarly there are many degrees of political extremism a couple could exhibit that would constitute the widespread view that they should not be able to foster children. 

Let's take an extreme hypothetical; suppose a couple starts a political party called the 'Take them home and shoot them’ party, which has a manifesto urging all foreigners to be taken to their own places of provenance and shot.  Imagine after a year their party has a few thousand members, and that that same couple decides they want to foster children - do you imagine that any of us would support the decision of the Children & Young People Services to grant them a fostering licence?  Of course we wouldn't.

Taking a less extreme case, suppose everyone in the UK had to decide on a couple to foster two children, and with no more information they had to choose between voting for a Labour voting couple from Bradford and a BNP voting couple from Bradford, we feel sure that most people would choose the Labour voting couple from Bradford.  So, evidently, it is not true that political affiliations have no bearing on feelings or wishes.

I think a good indicator of how people really feel is to ask what they would do if it was their own child up for being fostered.  The answer is, not many politicians would want their children fostered by UKIP members, even fewer by BNP members, and they would run a mile from couples in the 'Take them home and shoot them' party.

So let's have it right - almost nobody believes that political opinions are not important in deciding who makes good foster parents - but almost everyone wants political opinions to be precluded from the screening process.  The reality is, political opinions are relevant and important, because the political views people have are very often consistent with the kind of people they are, just as the prior criminal convictions of a man on trial in court are relevant and important when considering the probability of whether he is innocent or guilty, because past convictions are very often consistent with the kind of criminal character in the dock.**  The fact of the matter is a member of the BNP is more likely to make a bad parent than someone of a centrist view, because (save for the odd few exceptions perhaps) a BNP member must have degrees of impressionability, extremism, stupidity, intolerance, and a lack of worldliness and empathy that make his parenting skills inimical to the ideal. 

Of course, this is only a matter of probability - a Labour or Conservative member may make a bad parent for lots of similar (or different) reasons - but almost everything is a matter of probability somewhere - and the fact is, politicians are far more bothered about political affiliations than they care to admit. 

* For those outside Britain, UKIP is a nationalistic United Kingdom Independence Party

** For that reason alone it is completely absurd that the jury does not have access to this information.  To see what I mean, think of any other field or institution in which results are important but crucial data is withheld from the field or institute members - you won't find one.  Imagine trying to do science that way!!