Sunday, 27 November 2016

2 Great Tips For Considering Dodgy Opinions

Vegans have a fundamental problem – it is impossible to live strictly according to their principles because the sanctity of living things can never be preserved absolutely. It may be easy to avoid eating pork and beef and fish, but it’s impossible to live a life without being complicit in killing bugs and insects and microorganisms. Every time you clean the kitchen worktops or do some gardening, living things are killed. When your house was built, millions of tiny living things had to die for that to happen. Yet I presume even the most ardent vegan is not opposed to the idea of gardening and housing.

By a similar measure, absolute pacifists have a problem. An absolute pacifist believes that whatever the circumstance it is always wrong to act violently or impose force on another person. But are they seriously telling us that if they went out in the garden and saw their young daughter about to be raped by a sexual predator they would still insist on not using force if the attacker persisted? It seems unlikely, and would be a gross solecism against the daughter’s well-being if a parent did fail to stop this awful act.

The wisdom that can be distilled from the above is basically this. If even the most fervent proponents of a belief wouldn’t see it through to its logical end, there is a high probability that what they believe probably needs serious revision. If even the most conscientious vegans aren’t opposed to killing bugs then it’s very likely alright to kill bugs under the right circumstances. By extension, if for example it’s alright to kill flies to stop them going on your food, it’s probably also alright to kill disease-carrying rats, drink cow’s milk and eat free range eggs.
Similarly, if it’s morally permissible to defend an innocent young girl from a stronger attacker, it is probably morally permissible under some conditions to use force to defend innocent civilians against aggression and maltreatment from neighbouring states or tyrannical leaders.

The above method of thinking will get you quite far in running people’s beliefs through the gamut of rigorous analysis. Here’s another method I think can be useful in the area of assessing people’s beliefs – it’s what I call the ‘What if only one person believed it?’ phenomenon. Here’s how it works. Consider any of the countless dodgy and questionable beliefs out there and you’ll almost certainly find that it’s believed by a large number of people. Now imagine that only one person believed it, and ask whether it is likely that that belief would start to spread around the present population with enthusiasm, or whether the sole person who held that belief would in actual fact be a popular candidate for the funny farm.

Here’s an example: suppose genital mutilation didn‘t exist, and then one day a father came up with the novel idea that upon seeing his new born baby girl the first thing it seemed like a good idea to do is hack her genitals with a knife. I’m pretty sure we wouldn’t all rush to make it a national (or even a religious) practice – we’d be rushing to phone first the police and second social services.

There are plenty of other examples; suppose only one person in the world believed that scientology is based on fact, or that the earth is only 6000 years old, or that black people are inferior to white people, or that homosexuality is a perversion of a person's real nature, or that homeopathy is evidence-based science - we'd think them to be absurd. But once upon a time each of those things was thought up by one person, so by definition there was a time (albeit very brief in some cases) in the world when only one person, or a very few people, believed those things.

That there are so many people currently subscribing to these beliefs and views shows how easily absurd ideas are passed on to credulous minds, and how, after a time, multiplicity of belief can act as a protective shield against external scrutiny being employed properly. That is to say, you are less likely to stand out with your absurd belief if thousands (or in some cases millions) of people also share that belief around the world.

Asking if certain acts or beliefs would be socially acceptable if just one person did them or subscribed to them for the first time is largely about creative use of thinking to instil improvements. By getting people to think this way we can strip some of the beliefs of their protective niche and subject them to a more courageous scrutiny.

On the other hand, employing the ‘What if only one person believed it?’ phenomenon the other way: suppose we were a nation of litterbugs, with everyone dropping their litter everywhere they went, completely ignoring the bins (at a huge expense for local councils) - and then some bright spark thought up the idea that every individual should be responsible for putting their own litter in the bin. That would be a good idea that would spread quite fast, and the person who thought of it would be praised.

Everyone alive today exists in an age in which thousands of views, beliefs and ideas are so ingrained in popular cultures that they are pretty much taken to be part of the furniture, often without very much critical and empirical evaluation. There are many we know with ease that they are good, and many we know with ease that they are bad - but there are an awful lot of good and bad views, beliefs and ideas that an awful lot of people think are good when they are actually bad, and bad when they are actually good.

With my above two methods you can subject any view, belief and idea to an interesting method of scrutiny. You can get a good sense of whether people really do apply the extensive logic required to be a vegan, a pacifist, a socialist, an eco warrior, an astrologer, an anti-abortionist, an anti-evolutionist, a Muslim, a Jehovah's Witness or numerous other examples I could proffer. Combine that with the assessment of a view, belief or idea with the ‘What if only one person believed it?’ test and you'll often be surprised how differently you feel about someone's opinion, not just in terms of its veracity, but also in terms of its place in society.

Saturday, 26 November 2016

Do 'Baby On Board' Signs Make Much Difference?

Yesterday lunchtime on Radio 2 a couple of men (I didn’t catch their names) were debating whether families are safer in their vehicle if that vehicle is displaying a Baby On Board sign. It was a heated debate with one man asserting that displaying a Baby On Board sign does make those families safer because other drivers are likely to drive more carefully around vehicles with babies in them; and the other man arguing that this is probably wrong because, and I quote “It’s not as though you deliberately try to crash into a car that doesn’t have a Baby On Board sign displayed, do you?”.

Alas, both contributors missed a whole host of economic factors that would have informed their contributions better. For example, from what I recall, economist Sam Peltzman conducted a long study into driver behaviour. One conclusion he reached was that drivers with a Baby On Board sign tend to be involved in fewer accidents than ordinary cars. But that doesn’t tell us as much as we think about whether cars with Baby On Board signs are safer. This is where our first radio contributor went wrong: simply concluding that fewer accidents means safer driving is a model of over-simplicity that just won’t do.

Let’s assume it is safer to be in a Baby On Board car – by how much is it safer? That’s an incredibly difficult question. That Baby On Board cars have been involved in fewer accidents isn’t 100% conclusive, because car drivers cause accidents between two other cars all the time, and drive off unawares (or unwilling to stop). But it’s even more complex than that. It could well be the case that the sort of person who would buy a Baby On Board sign for their car is the sort of person who is already risk-averse and mindful of careless driving – so the odds of those kinds of people being reckless or careless may well have been slimmer anyway. 

Then there is the group of drivers who are reckless by heart, but who have children and then buy a Baby On Board sign. What percentage of those drivers become less careless after the Baby On Board sign and what percentage become more careless? Nobody really knows – and these are important statistics for our overall conclusion. Quite naturally I can conceive of many new mothers being extra cautious and less careless than when they only had themselves to think about. 

But doubtless there will be some who become even more carefree in the presence of a Baby On Board sign because they believe that their sign is inducing more careful driving and increased braking distance from other drivers around them who’ve seen the sign. We know this is likely to be true because we know already that there are many cases in which perceived safety increases reckless behaviour (seatbelts and contraceptives being two examples).

The upshot is, a proper analysis has to factor in not only that there are likely to be results that confound our expectations, but also that the complexities of human behaviour mean that sometimes results that are consistent with our expectations could be this way for reasons that weren’t properly understood or even considered at all.

* As well as having the consideration of safer driving, Baby On Board signs are also, of course, there to alert emergency services that when they arrive at the scene of an accident there could be a child on board. However, the success of this is contingent on parent drivers actually taking the sign out when they are not travelling with children, otherwise emergency services staff can waste valuable minutes looking for a child that isn’t there. A quick Google search indicates that this fact is shockingly absent in many parent drivers’ repertoire of information:

“Only 1 % of parents with Baby On Board signs removed it when they were driving without a child in the back 99% said they didn’t think it mattered, or weren't aware of the real use of the Baby On Board sign”

Thursday, 24 November 2016

Libertarianism & The Possible PR Problem

I saw recently that the Adam Smith Institute, to whose Blog I contribute from time to time, has disassociated itself from the term 'libertarian' in favour of the definition 'neoliberal'. I have sympathy. If you believe a set of things, labels don't often do them justice, and they can frequently give people the wrong end of the stick. As long as you're not someone who seeks comfort and fulfilment in group identification (which I definitely am not), you're probably wise not to get too identified with labels, as they are so often open to all kinds of loose interpretations.

Although I lean heavily towards the pro-market ethos of libertarianism and its concomitant liberal attitude to our freedoms (most associated with the Philosophers John Stuart Mill, John Locke and David Hume - and Adam Smith, of course), I am equally aware that libertarianism, like most groups, has extreme ends of the spectrum where one will find all kinds of radical, immoderate zealots with whom one has little in common. Hereafter, when I use the term libertarian I am defining it in a relatively moderate form that embraces freedom and markets, desires far less interference and regulation by self-serving politicians, but does recognise the role of the state in our lives.

Under that definition, I find libertarianism has the only genuine regard for a system that works for everyone, because it cares about all the people in the world, it understands that trade and competition are the main determiners of what works for human beings, and it is unbound by geographical borders and nationalistic preferences. Almost any sane mind wants a government to interfere in our liberties only when the benefits of their interference outweigh the costs.

To be a libertarian, I find, is simply to show that you understand the economic, logical, empirical and philosophical arguments regarding when it is good for the state to be involved and when it is bad. It is about understanding that there are vital thinking tools that people well-informed in economics have that most other people do not. These tools are roughly translatable as being the following 8 things that need to be understood but frequently are not.

1) Almost every action has tangible and intangible benefits, and tangible and intangible costs, and if you haven't considered all of those factors thoroughly you do not understand enough about what you're doing.

2) Just because there are good intentions and a perceived ethical stance behind a view or an action, this does not mean what you have is a good idea. In fact, quite often good intentions and a perceived ethical stance actually mask the reasons why many ideas are bad ones.

3) Just about everything in life is a trade-off, where something happens at the expense of something else (primarily time, money, and material resources) - and there is rarely anything you can do, or ought to do, that lies outside of this consideration.

4) If there is one thing that should almost never be interfered with it is the mechanism of prices that are dictated by the supply and demand market. Prices are not just sums that tell us the value of something, they are vital information-carrying signals that inform us of the outcome of billions of transactions throughout the world. No politician can know the market clearing price of anything better than the market knows itself.

5) The economic pie is not fixed, nor is it zero sum. If I have a slice of it, this does not mean it leaves less for you, because the economy can keep growing, creating wealth and value for both of us.

6) The principal drivers of human prosperity, increased well-being and economic growth are trade and competition.

7) Just as in the market of goods and services, tax is also something that also ought to be opened up to competitive forces.

(Note on 7: Just as shops and restaurants compete with one another for your custom, so too do governments of nation states in their rates of taxation (they would be able to do this more successfully were it not for the fact that so many people are under the misapprehension that society would be better if the rich were taxed more). Governments are competing with governments of other countries for foreign investment, where attracting more external workers and more capital investment from foreign entrepreneurs benefits the nation. People want to work and invest in nations where they are not taxed too heavily on their income and their investments, which is why sensible politicians will not tax too heavily).

8) To properly understand economics you have to understand incentives. When one person goes out to complete a transaction based on self interest, he (or she) adds a little bit of value not just to his own circumstances, but to every agent involved in the transaction (the seller, the transporter, the manufacturer, those mining for raw materials, and so on). Multiply that one transaction by the billions that have been going on every day in the past century and a half (in particular) and the result is the Smithian invisible hand mechanism that aggregated to all the increased prosperity and well-being the world has seen.

Understanding these 8 points provides the bedrock on which you can build pretty much your entire arsenal of economic understanding, political analysis and societal commentary. Virtually everything you need to speak rationally on any of those three things is bootstrapped by the wisdom of 8 points above. When I associate with the libertarian ethos, it is the above with which I am identifying when I call myself a libertarian.

But as I alluded to a moment ago, and this is where I am of a similar view to the ASI and the IEA, I certainly do recognise the important role that a state plays in society even if, as I covered in this paper, there are an awful lot of ways in which politicians distort and harm trade. Incidentally I do think there are several institutions and services that are currently state-provided that will one day not be, but in many cases the transition will likely be gradual, because it has to occur evolutionarily, not as a sudden change in the status quo.

Not only should it be acknowledged that the state (for now, at least) provides important functions in our lives - we also have to remember that people's decisions are affected by the information they have - and sometimes they need regulatory protocols to ensure they obtain that information about goods and services. So clearly, for this reason, being a libertarian doesn't mean adopting a 100% erosion of state influence.

Many regulatory laws are superfluous, but not all of them are. We need laws that protect factory employees from working in dangerous conditions unbeknown to them. If Jack is employing Jill and surreptitiously putting her life at risk due to faulty equipment or dodgy wiring that she could know about, I don't want Jill to be devoid of protection through the law. Nor do I want Jill to be a victim of trade description issues, or poor quality of product, or banking malfeasance - basically all the things that we as consumers wouldn't wish to be victims of due to asymmetry of information.

There are also some cases in which state regulation protects consumers from monopoly power, and also makes businesses accountable for their negative externalities. But by and large, with the qualities of the free market you are all but guaranteed (through price theory) to facilitate the most rational, incentive-driven allocation of resources possible, as well as minimising inequality, lifting masses of people out of poverty, and maximising the successful co-existence of humankind and the natural world.

The other thing you have to think about is the question of what kind of society you want to live in, and what kind of society is most likely to engender that. We can first ask which elements of daily living are most important, and then ask which political services are most important. So, for example, seeing what people are always saying they value, I would say off the top of my head regarding the question of which elements of daily living are most important, these are the following 8 things:

1) A country in which no one is unfairly discriminated against due to colour, gender, ethnicity or sexuality.

2) A country in which reason, logic, evidence and free enquiry are of primary value.

3) A country in which every citizen has enough food and a place to live.

4) A country where individuals are the rightful owners of their own lives and therefore have inherent freedoms and responsibilities

5) A country in which religious beliefs remained personal, and are largely kept separate from politics and legislation.

6) A country in which every couple can have a formal union with their beloved (either marriage or civil partnership) based on their beliefs and preferences.

7) A country in which free speech is afforded to its citizens, to the extent that (except for very extreme cases) anyone is free to say anything they want to anyone they choose.

8) A country in which the terminally ill have the legal right to assisted suicide (providing stringent legal precedents to avoid manipulation).

As for the political services, a government should largely be focused on doing the following:

1)  Protecting our freedoms and rights through the rule of law.

2)  Administering justice.

3)  Providing a military defence for its citizens

4)  Lightly regulating the economy

5)  Providing all the services the public sector currently provides more effectively than the private sector.

What you may notice about the above is that as things currently stand the 8 qualities are the ones best served by our having a free and open choice-driven society, whereas the 5 that follow them are, for now at least, qualities and services that the majority of us are happy to be looked after by the government.

On that note, one also has to consider present perceptions against future perceptions. For example, as I hinted above, there are some services that the state currently performs in the present that markets will be able to perform better in the future. But naturally in some cases the transition will take time, and some libertarians are fine with the notion there is a time and a season for specific optimum changes.

To finish, I should mention that to the perception of many, libertarianism also comes with a stigma of being ethically questionable, as people are quick to accuse capitalism of being about selfish, uncaring pursuits of individualism, driven primarily by the greedy profit motive. This is both unfair and short-sighted. The truth is somewhat opposite: libertarians understand something that makes the left very uncomfortable - that it is the people themselves, rather like in a democracy, that decide how society progresses - it is bottom up, not top down - and this makes control freaks very uncomfortable. The reality is, there is no proletariat revolutionary class within the bowels of the free market capitalism - mere organs controlled by the body of the bourgeoisie - the people are in charge and always were, as Mises was shrewd enough to pint out in the 1940s...

"The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy."

The principles of the libertarianism I've described cannot therefore be immoral or uncaring, because its ethos is built on the championing of progress for everyone, not minority groups, which is what its opponents advocate (often without knowing it). We build our more formal ethics on our reasoning, but initially more so on our intuitions about instances that exemplify wrongdoing according to our conscience. These are the pivots around which ethical codifications revolve.

The free market, as regular readers will know by now, is literally the aggregation of all the world's mutually beneficial transactions. That's what it is in a nutshell. And by mutually beneficial transactions, we mean an act when both parties get a surplus from a transaction - that is, the buyer gets consumer surplus from the purchase, and the seller gets producer surplus from the same transaction.

The free market simply couldn't evolve into the complex multi-faceted nexus of connectivity it is now without the underpinning moral and ethical concomitants. However, given the up and running ethical substrate on which trade and competition can occur (the two biggest drivers of human prosperity), one should only desire government involvement in areas where the market doesn't already engender optimal outcomes - and that is the quintessence of my beliefs, however one chooses to label it.

Sunday, 20 November 2016

You Voted For Failing Businesses

In a recent blog post I wrote about how our individual market decisions are what create wealthy people, and as a side-effect, in-country inequality. This blog post is also about our individual market decisions – it’s about how we collectively punish failure by the nature of our voluntary spending.

While it’s true that in the short term when businesses close or industries shrink the people directly involved feel the cost - for society as a whole it is good when inefficient firms go under because it’s society’s way of signalling that our preferences have changed.

The next time you’re thinking it’s bad news when a firm can no longer survive, console yourself with the fact that we democratically voted it to be that way with our buying habits, and that what it actually means is that a competitor is doing well at the expense of someone’s else failure.

We’ve probably all noticed how the newspaper industry has diminished in recent years as more and more news is disseminated online and through more numerous television sources. I happened to notice on Forbes the other day just how much it is diminishing with the following graph charting its decline:

As long as there is no foul play, and as long as industries aren’t being hamstrung by politicians, then every instance of failure is a good thing. It’s we the buying public that have decided the world got to a point where it had too many newspapers being printed, too many VHS recorders, too many fax machines and too many landline telephones. And that’s all fine and dandy, because the main thing the market is good at is changing its shape, pace and structure according to the aggregation of every mutually beneficial transaction that occurs in society.

Incidentally, I’ve often pondered whether the reason a lot of people are so averse to the market is because it is so proficient at dealing with failure. Many people are quite risk-averse and they are disenchanted by the nature of competition, which may be why they see the market as a cold and uncaring system, when in reality it's the opposite.

The other thing that may be a factor is that a lot of people have control freakery when it comes to society. They can't stomach a free society where individual transactions shape the landscape rather than rulers from on high. The human mind simply does not have the breadth and cognitive wherewithal to coordinate anything as dynamically complex as an economy – we have to be guided by supply and demand and the price-signals it engenders.

It is those signals that tell us about preferences for newspapers, twixes, comedy shows and mobile phones, and many people feel pretty insecure by the fact that billions of market choices based on trial and error are infinitely better at running an economy than any human minds that try to govern it.  

Tuesday, 15 November 2016

The World's Greatest Healthcare Plan?

In just about every economy I know of, there are numerous state-mandated distortions going on whereby normal market signals are being skewed either by being exaggerated or by being suppressed.

Because of this, people frequently get paid more than the marginal value of their labour, higher prices get passed on as costs to customers, as do lower prices as costs to providers (the medical profession - the topic of this blog - is perhaps the worst case in point), and the whole price system of value being attached to choices becomes distorted.

As well as all the other costs to society in the shape of lost value and forgone opportunity, what also happens is that people are given perverse incentives, which means when they are acted on there are all sorts of sub-optimal outcomes in relation to supply, demand, cost, quality, access and lifestyles.

Now it's fair to say that America's healthcare system has been in a bit of a mess for the past few years, with Obamacare proving to be far from effectual. For those unfamiliar with how it works, I'll try to summarise what I see with an analogy, where the people around the table are American citizens. 

There is a group of 7 friends sitting at a table with a big cake they are about to share. Obama's grand plan was to invite 4 other friends around to share the cake while at the same time promising that the 7 people's share of the cake wouldn't be any smaller. Obama carried on maintaining that the USA is a country of 10 or 11 people eating a cake and only 8 or 9 are paying for it, and thus he wanted the other 2 to chip in.

Both sides of the debate constantly seemed to be lacking two vital things; 1) The solution of making the cake bigger, and how to do it. And 2) The fact that there is more than one type of cake, and by inviting friends over you might have to change from a cake you like to one you don't. Moreover, it would be more fruitful for some of the critics (on both sides) if they learned the difference between health care and health insurance (Those who had a healthcare plan and were on board with Obama's vision probably thought those who were the most recent to sign up would get whichever leftover options were available).

Anyway, Donald Trump, who never seemed that keen on Obamacare has now, after meeting Obama at the White House, decided he might be interested in keeping some of the key provisions of Obamacare.

Given the foregoing, I thought you might be interesting in this proposed legislation for American healthcare, sponsored by a member of the House Republican leadership and a member of the health committee in the Senate - it is modestly titled 
The World’s Greatest Healthcare Plan. Read the whole thing, please do - but for a bullet-pointed summary, here are the major provisions of the legislation:

  • It repeals all the ACA mandates and replaces current tax and spending subsidies with a universal tax credit that varies by age and geography, but is the same regardless of income.
  • It ensures that the health care safety net will always be adequately funded, regardless of the number of people with private insurance.
  • It allows Medicaid to compete with private insurance, since the size of the tax credit for private insurance is roughly equal to the federal contribution to a well-managed Medicaid plan.
  • It allows employers to buy individually-owned insurance for their employees — insurance which they can take with them from job to job.
  • It replaces all tax-favored medical accounts with a Roth Health Savings Account.
  • It gives employers and employees new tools to control costs, allowing them to convert insurance benefits of marginal value, dollar-for-dollar, into take-home pay.
  • It denationalizes and deregulates the exchanges and subjects competing health plans to a type of “free market risk adjustment.”

Here is a summary of the major provisions of the legislation, with links to short white papers explaining each of them. Here are 25 problems in the ACA that the legislation is designed to correct. Whether it would still be beset by many of the political problems that plague domestic healthcare plans is still the big question. But it's an interesting proposal to look over - particularly if you're an American reader.

Friday, 11 November 2016

Let Me Tell You Your Secrets....

Hey, my dear reader, I care about you and feel I know you quite well. Let me tell you some of your secrets. You have a great need for other people to like you; you have a tendency to be critical of yourself; you have a great deal of unused capacity which you have not turned to your advantage; you have found it unwise to be too frank in revealing yourself to others; your sexual adjustment has presented problems for you; you prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations; at times you have serious doubts as to whether you have made the right decision or done the right thing; and you pride yourself as an independent thinker and do not accept others' statements without satisfactory proof.

I also know that while you have some personality weaknesses, you are generally able to compensate for them; that you are disciplined and self-controlled outside, yet you tend to be worrisome and insecure inside; at times you are extroverted, affable, sociable, while at other times you are introverted, wary, reserved; that some of your aspirations tend to be pretty unrealistic; and that security is one of your major goals in life.

Impressed? Feel like I know you personally really well? Well please don't be. I mean, I'm sure I do know many of you pretty well, and some of you better than you think J, but all those things I wrote above are actually part of a psychology test that Bertram R. Forer gave in 1948. It was called his Diagnostic Interest Blank - and it was to a group of his psychology students who were told that they would each receive a brief character vignette or profile based on their test results. One week later Forer gave each student a supposedly personalised sketch and asked each of them to rate it on how well it applied. In reality, each student received the same sketch, with the traits I listed above.

Fairly obviously (I'd hope), what is most noticeable about the traits is that they are far from specific to particular individuals - they are general traits and behavioural patterns that are seen in pretty much all humans. It is a natural human tendency to "prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations" and to "have a tendency to be critical of yourself". As an individualised profile, there is nothing special about the reading at all.

As anyone who has scoffed at astrology, fortune telling, mediums who claim to contact the dead and crystal ball gazing will know - the Forer effect (also called the Barnum effect) is a cunning form of subjective validation which can get credulous people to part with their money by being told things they either consciously or subconsciously want to hear.

Now the thing is, part of the motivations for writing my Blogs, and why I have to be hard on people sometimes, is because the world of elected politicians, media journalists and newspaper columnists is awash with Forer effects designed to manipulate the public into embracing their policies, reading their newspaper articles, buying their books, and so on.

And it's no coincidence that the variables most strongly influencing the Forer effect in gullible customers are very closely similar to the variables that underwrite the misleading political narrative that so many people fall for - namely: the subject believes that the analysis applies chiefly to them and their life conditions; the subject too easily defers to authority of the speaker without much critical evaluation of what's being said; and lastly, the subjects prime themselves to narrowly focus on all the positives they hear while blocking out or not considering the negative connotations (as per Bastiat's Seen and Not Seen, which forms the basis of most economic and political errors of judgement).

The Trump election - which I'm not going to go on about repeatedly in Blog posts - provides an interesting window into this effect in action, but also with a strange twist of tonic. On the one hand many of the Clinton supporters were carrying on being naïve to the subjective validation her establishment kind comes out with. While on the other side, there appeared to be a mass rejection of the establishment Forer effect, but by almost equal measure a mass of wide-eyed anti-establishment suckers who ended up electing a complete moron like Trump by falling for his subjective validation. Oh how the world needs an intellectual revolution right now!

Thursday, 10 November 2016

On Why Those Polls Keep Misleading The Masses

The polls keep drastically confounding expectations, and lots of people want to know what's going on. How can something as relatively straightforward as asking people which way they will vote and collating statistics on that basis repeatedly turn out be so difficult? Like the weather, it should be impossible to nail it to an exact science, but surely the indicators should be more reliable than this, shouldn't they?

I don't want to claim to have a sixth sense - it's probably just good intuition, but the last three big political events have been cases where I felt confident of the result, even though the pollsters looked to convince me I was wrong. The majority seemed confident that Ed Miliband's Labour would win more seats than David Cameron's Conservatives last May, but I felt quite confident that the public wouldn't buy Miliband's message. Ditto Brexit - even though just before bedtime on the eve of the results I felt confident that we'd vote to leave the EU, the pollsters and bookmakers declared it highly unlikely. And now the same with Trump, who was a 5-1 outsider a few hours before the result, but who confounded majority expectations and won the Presidency. Assessing the feeling in the run-up, this wasn't much of a surprise to me either.

My record is not perfect, however - for quite a while I remained unconvinced that rank outsider Jeremy Corbyn would win the Labour leadership election the first time around against what I thought were more mainstream candidates (Andy Burnham, Liz Kendall & Yvette Cooper) - but I was completely wrong about the extent to which hoards of people were ready to vote for someone so far on the hard left.

Given that society can be divided into far more groups that many people ever do, there are clearly important sub-sections of society that are not getting captured in the polls. And anyway, populations are very large, and at best polls are only a small sampling of a demographic - it's difficult to take the pulse of the electorate if you place the measuring instrument on the sole of the nation's foot.

Polls are also seductive to people because many find it difficult to accept open-endedness and uncertainty in life. People are tendentiously drawn to simple stories with binary subplots that fit their preconceptions. The notion that things like elections and referendums are often beyond the scope of human predictions is something that few people wish to embrace, which is probably why the egoism of 'expert'-based prediction hangs around.

What's evident, aside from how polls fail to capture so much public opinion, is that polls are unreliable at capturing the following sets of society: the set in which people have been unsure how they were going to vote, or been unwilling to say, or been susceptible to an unexpected change of mind, or not been honest or open, and also the set in which people for whatever reason thought they'd vote one way but ended up not voting at all.

We have to face up to the fact that there is a huge epistemological gulf between the pre-voting opinion polls and what people have actually voted for on the day. The only sure-fire opinion poll of reliability is the result itself.

Finally, what would help people predict with greater accuracy would be an increased understanding of what the societal landscape is actually like. Taking the UK voting population as a whole, they can be divided roughly into 5 groups.

Group 1) Older people who think the nation needs a big state to govern its people, and like (within reason) the kind of governance we have at present.

Group 2) Younger people who think the nation needs a big state to govern its people, and like (within reason) the kind of governance we have at present.

Group 3) Older people who think the nation needs a big state to govern its people, and dislike the kind of governance we have at present.

Group 4) Younger people who think the nation needs a big state to govern its people, and dislike the kind of governance we have at present.

Group 5) People (older and younger) who think the nation does not need a big state to govern its people, and are gradually trying to influence change in a more libertarian framework of thinking.

Group 5 is currently the smallest group but is also quite a rapidly proliferating group. They are the people who would likely vote if economically savvy pro-market candidates came along, but may not be inclined to vote for the kind of politicians we have at the moment. Group 4 is a large group and is also a rapidly proliferating group. It consists of conscientious, left wing, green-friendly social justice warriors who want a big change of personnel in government. They want more of the same size government (bigger if possible), just not this kind of big government. This group, along with group 3, also feel quite stridently that inequality is a huge problem, that the government screws over the poor, and that the systems needs a complete socialist revolution type of overhaul.

Groups 1 and 2 are the two large groups (with group 1 being a lot larger than group 2) that help perpetuate the status quo by being somewhat complacently accepting of the system as it currently is, and not very much into revolutionary politics. These groups, in particular group 1, consist of lots of people who just vote one way out of habit, dyed in the wool allegiance, or just blithely out of a sense of duty to partake in democracy.

Trying to predict outcomes of elections and referendums involves getting a good grasp, not just of these 5 groups, but also of the multitude of potential sub-groups into which they could divide in the run up to voting day. That's why, once you offer the population a Remain or Leave vote in the EU Referendum, and then in the build up throw in all kinds of complications like reliability of claims, forecasting the cross-national outcomes of either decision, economic projections related to trade deals, immigration and market fluctuations, it becomes a very intractable business to predict - and ditto the UK General Election and the recent Presidential Election.

Wednesday, 9 November 2016

The Deliveroo Riders Should Get On Their Bikes With This One....

I published the following article on the Adam Smith Institute blog yesterday - but there is more to add at the bottom:

In the wake of the recent tribunal which declared that Uber drivers should be classed as employees with rights to the minimum wage, holiday pay and so forth, we read today that something similar is happening with Deliveroo, as riders seek to unionise and gain similar workers' rights as Uber.

Deliveroo is a company that provides a delivery service on behalf of thousands of restaurants across the country, and it classes its riders as self-employed "independent contractors", on a pay rate of £3.75 per delivery.

It is true that under such conditions they lack some of the regular workers' rights many of us have, such as paid holiday and the right to the minimum wage, but it's incredibly short-sighted to assume that that means there is a problem needing fixing - after all, by equal measure, Deliveroo contractors also enjoy some working benefits most of us do not; namely, the flexibility to work the hours that best suit them, and as little and as often as they wish.

Rather like how the decision made against Uber was so drastically wrong, the same will apply here, because there is an abject failure to understand that in a dynamical and diverse market, a 'one size fits all' imposition frequently harms little niche elements that are doing perfectly well as they are.

The ability of Uber and Deliveroo workers to be classified as flexible, autonomous independent contractors ostensibly running their own businesses as available drivers and riders will be, for many, a much more beneficial set-up (ditto numerous others on zero hour contracts) than the myopic imposition of terms and conditions that would no longer favour their flexible working patterns.

When left alone, firms like Uber and Deliveroo are beneficial to the economy (for employer and consumer) precisely because they involve conditions that those who favour them will take advantage of, and those that do not, won't. Even under the new terms of £4.25 per ‘drop’, most Deliveroo cyclists are earning significantly above the minimum wage as the average worker makes two deliveries per hour, equating to £8.50/hour.

It's hardly rocket science; people who want to earn the minimum wage and have holiday pay and less flexible working arrangement will not be Uber drivers or Deliveroo riders. On the other hand, people who want to be self-employed contractors under the flexible conditions offered by Uber and Deliveroo will. That is the very nature of a free market.

Not only is this far from rocket science, there is even a quote in the article from one of the riders that with closer examination would provide him with the answer he ought to be looking for. The Deliveroo rider laments that "We don't get an hourly fee, so that means at times when there aren't that many deliveries and it is not that busy, we can be waiting for up to an hour for a delivery without getting paid a penny." - which really ought to give the game away.

If only this young man could see that the problem with his campaign is heavily hinted at with the words he utters - for if there are times when it is not that busy, and riders can be waiting for up to an hour for a delivery without getting paid a penny, it's not exactly going to help out the situation by forcing Deliveroo to shell out a state-mandated £7.20 an hour to all its riders, is it? All it will do is skew the market value of the Deliveroo rider operations and harm all the people who benefit from riding for Deliveroo under the present conditions. 
And then, we learn that Labour Shadow Cabinet MP Clive Lewis uttered this little gem - and I mention it only because this is the man who is currently the bookmakers' favourite to be the next Labour leader:

"They need to ask themselves if they have a sustainable business model if they have to exploit their workers like this in order to be viable"

Oh dear, this is infuriating. Who the heck is Clive Lewis to tell them whether their business model is sustainable, or to declare that workers freely involved in a contract are 'exploited'? He's so short-sighted and/or so arrogant that he cannot even entertain the notion that, actually, society is full of people in roles that suit their needs well. That is why the vast majority of Uber drivers - the people the likes of Clive Lewis are deciding on their behalf are 'exploited' - are unhappy about the ruling.

And as is usually the case, what this opposition model overlooks is all the hidden costs - because it never factors in all the would-be Deliveroo riders who won't now work if this ruling goes ahead. An individual – an actual person with a mind and a will – wants to be a Deliveroo rider and is willing to offer his or her services to make some money under the conditions they favour. No one forces this mutually beneficial transaction, but that it happens shows that both agents are better off.

Yet socialists like Clive Lewis are so averse to people having their say in how they conduct their business that they want to wilfully prevent a sub-section of society from enjoying similar benefits, yet sell the idea as though they are trying to help them.

Of course it's true that some Deliveroo riders would go along with Clive Lewis, but their motives are highly dodgy - it's because they think a state intervention can help them earn more than the marginal value of their labour. Alas, it's a nice trick if you can pull it off, particularly if you don't care about the people providing the means by which this arrangement benefits both parties, or about the many intangible losers who don't show up on the radar but who've had an opportunity denied them.

Tuesday, 8 November 2016

Dear Remainers, One Day You'll Be Relieved Brexiteers...

Even though pretty much everyone is behaving as though pretty much everything has changed, the reality is, pretty much nothing has changed. The EU referendum was always an advisory result that needed to be ratified by Parliament, so Theresa May was never going to be able to invoke Article 50 and start formal exit negotiations with the EU without the House of Commons vote taking place.

And apart from the odd disgraceful public servant who should be shown the door,  the majority of MPs will honour the referendum and vote leave, even if they are in constituencies where remain has the majority vote. The reason being, MPs that defy the will of the British people are unlikely to survive after the next general election, which means individual MPs are more likely to respect the referendum result.

As for whether it's a hard, soft, clean or messy Brexit, well the reality is, it probably won't make all that much difference long term, because the mid-to-long-term future of the EU is about as sticky as a lorry full of treacle spilling its load in the middle of the channel tunnel.

Here’s the thing, it’s fairly straightforward. Anyone with even a sketchy understanding of the very basics of trade and competition should know that any country that leaves the EU’s protectionist bloc will be better off in the medium to long term (there are usually short term shocks and tumults with radical breaks from the status quo, so don’t let it fool you).

This can be understood by anyone who understands why artificially constructed free trade inhibitors make the people within the border worse off as well as those on the outside (something I also covered in the articles attached to the above hyperlink).

You see, this is the first generation of people in the world's history that has had access to the entire world's knowledge, and moreover the ability to communicate so freely at a global level. My prediction involves two main things happening: 1) wider understanding of how trade and competition bolster people's economic well-being, and 2) wider understanding of how politicians retard this process.

Both are likely to happen at some point in the future - it's hard to say precisely when - but what this means is that the EU is being allowed to get away with its stultifying practices only for as long as it can continue to not get found out by a larger number of people.

What they have been getting away with is a socialistic protectionist bloc set up and run to favour its two largest single currency member states - Germany and France. It should be remembered that the European Union was originally a creation of American post-war foreign policy as a bulwark against the communist forces of the Soviet Union. The American plan, tacit though it might have been, was to keep European nations in check against ideologies it felt were threatening or economically repressive.

It was a very unnatural political union. As time went on the EU trade bloc became more and more evidently a sovereignty-stripping monolith used to gradually mould other EU members into the Franco-German line, guarding them against competitive forces and globalised free trade. In other words, the main beneficiaries of EU policies have been Germany and France, its two biggest economies, both having their interests best served by the rules they create.

For most of that time France has been like a microcosmic version of the union to which it is conjoined - protectionist over its own citizens, whereby local French connections are encouraged, with Germany, being the EU's strongest export country, having the most to gain from the EU and the most to lose by its gradual dismantlement.

While all this has been going on, numerous smaller European nations have lost out big-time by supplanting their own national currencies for the Euro, thereby ending their ability to competitively trade their currency against other currencies, and adjusting their fiscal and monetary policies in accordance with market signals. Not to mention that Eurozone nations were able to borrow money far more cheaply with the single currency than their with own currency, which, as is plain for all the world to see, has been an economic disaster for them.

Even if we put aside all the other things that are drastically wrong with the EU, the current situation is rather like this. Germany is like a big company that wants to sell some of its premises to smaller businesses (Ireland, Cyprus, Greece, Portugal and then followed by Italy and Spain) but will also willingly loan the money to the buyers in the hope that they make enough of a success of their businesses to pay them back, but do so by rigging the terms so that debtor submission was always a highly likely culmination - one that domestic politicians surreptitiously pass on to their taxpayers.

But, alas, because of the failing economies of those in debt, paying Germany back is hugely problematical, with the inevitable outcome being the European Central Bank trying to keep domestic banks' heads above water by printing more currency and attempting to hold it in spite of the numerous Eurozone liabilities, not to mention the huge public sector expenditure crisis that's hitting the whole of Europe (including the UK) and will only get worse as domestic governments try desperately hard work to out how to untangle themselves from public sector knots without getting strung up by the electorate.

Mark my words, and remember where you read them, because quite simply, very few people are telling you the truth about the future of the EU and how it is going to be torn to shreds as more and more member states look to follow us in tearing ourselves away.

You may think it's hard to imagine the EU not existing in a form similar to its current set-up, but radical future differences are hard to predict. And one only need imagine how many radical changes someone from the 60s or 70s would have failed to predict about the 40 or 50 years that followed to get an idea of how radically different our future Europe can be. The day when even the staunchest Remainers thank their lucky stars they are not in the EU will, I'm confident, be a reality at some point in the next decade or two -  much like how those that used to argue fervently for the UK to adopt the Euro are now doubly glad we didn't.

Tuesday, 1 November 2016

Try Before You Buy: The Opposite Outcome To What You May Expect

I’ve seen this kind of stat before, but I happened to stumble on this page - an article informing us that in the United States a couple that does not live together prior to getting married has a 20 percent chance of being divorced within five years, whereas if the couple has lived together beforehand, that number jumps to 49 percent. In other words, a couple is nigh-on two and a half times more likely to divorce if they live together beforehand.

Clearly all the indication is that the try before you buy method doesn’t guard against the marriage ending - quite the opposite it would appear. If you’re still in your nascent stages of economics, you might be tempted to ask the question: what is it about living together prior to marriage that increases your chances of being a divorcee? But a better way of doing economic analysis is to first realise that it may not be the living together premaritally that increases the probability of divorce, it may well be, and in fact almost certainly is, more distal factors associated with what kind of people live together before marriage and which do not.

For example, many Christians who would not live together before marriage for faith-based reasons are likely to be the kind of people that take marriage seriously enough not to divorce. By equal measure, many couples who will easily disregard any (admittedly declining) social norms about pre-marital co-habitation will probably just as equally disregard any (admittedly declining) social norms about the stigma of divorce too. A corollary of this is that if you are the sort of person who easily disregards social norms, you are perhaps more likely to be the sort of person who more easily disregards niceties and mindful considerations that keep a marriage safe from divorce.