David Cameron's Confusion Over Statistics & Racism

David Cameron has launched a scathing attack on the universities of Oxford and Cambridge today for failing to recruit more BME (black minority ethnic) students, saying that racism in the UK’s leading institutions “should shame our nation”.

He is right that it's a shame that there are not more BME students in our leading universities, but he is quite wrong to lay the blame at the door of Oxford and Cambridge universities. The so-called fact of Oxford and Cambridge being under-represented by BME students is not to do with institutional racism at our top universities, it is to do with the fact that prospective BME candidates are far outnumbered by white British candidates, which has a lot of complex causes - but none of them are the fault of Oxford or Cambridge.

It is quite easy to be outraged at statistics if you don't understand them, and clearly David Cameron just doesn't get that there are simply not enough BME people in the country to fulfil his wish. A quick Google search reveals to me that if a top university accepted students in a way that precisely represented the UK demographic, then for every 100 people, there would be 87 whites, 7 Asians, 3 blacks and 3 others. Even on strict egalitarian grounds it is very difficult to justify a selection policy that doesn't see BME people outnumbered by whites.

But, of course, that's only part of the flaw in David Cameron's reasoning - the other thing wrong with his misunderstanding of statistics is that Oxford and Cambridge are not looking for a representation in terms of ethnicity or skin colour, they are looking for representation in terms of academic ability. That is to say, Cambridge and Oxford universities are the seat of academic excellence in the UK - and if the statistics show that only a small proportion of BME people get into Oxford or Cambridge, and a large majority of students are white, that does not show any institutional unfairness on the part of Oxford or Cambridge. It merely shows that if Oxford and Cambridge are trying to attract the most academically gifted students in the country, and if by far the greatest proportion of the most academically gifted students in the country are not in the BME demographic, then Cambridge and Oxford's admission policy is completely fair.

There is certainly a conversation to be had about all the ways that BME and under-privileged pupils in schools are disadvantaged or coming up against barriers to fulfilling their potential, but that's not an indictment against our two best universities - and David Cameron should know better - particularly as it's very likely the case that this phony 'outrage' is really just an attempt to court popularity amongst the BME demographic.

Sometimes I Have The Nicest Fans

 

I got a nice comment today on one of my blogs on the misjudged minimum wage law…..

F**k you are a d**k – you wish to privilege rich f****rs earning sh**loads over poor people earning peanuts.

Anonymous 

I thought I'd better say hello!

Dear Anonymous (commenters like you are always anonymous, aren’t you?),

Let me respond more charitably than you, by saying, actually, we do share the same goals (that the poor become more prosperous), we just differ on the best way of achieving this – and by ‘differ’ I mean out of the two of us we differ in the extent to which we have a basic grasp of the subject at hand.

I could explain all the ways the minimum wage is undesirable, but having already read that, you’re clearly not that interesting in knowing these things. All I’ll say, then, is that it is actually you who wishes to privilege rich f*****s because you want to endorse a state-mandated price floor that makes it more difficult for struggling people to get a job.

The best chance they have of becoming more prosperous is being denied by governmental legislation that prohibits them from bargaining to sell their labour at any price below the state-mandated price floor. By your logic, if caring about struggling people means making it harder for them to get a job, why not ask for the minimum wage to be even higher still – then you’ll ‘help out’ even more struggling people?

Yours Fraternally J

James

The Best Analogy I've Seen Explaining Why Economists 'Get It'

Tyler Cowen has perhaps the best analogy I know to illustrate how it is that economists understand the world so much better than anyone else. He refers to A de Groot’s famous experiment in which he showed several chess masters and chess novices images of chess positions for a few seconds and asked the players to reconstruct the positions from memory. The chess experts made relatively few mistakes, whereas the novices made plenty. Then he repeated the experiment but this time he showed them random positions not found in chess, and this time the chess experts performed no better than the chess novices, demonstrating that the expert advantage appears to come from familiarity with actual chess positions, not more efficient memory recall.

 

Tyler Cowen believes this is a good analogy for economic understanding (and I think he's onto something). The 'recognition chunks' related to chess configurations are similar to those of economics in terms of patterns of logic and behaviour. Economics involves understanding those patterns in ways that inform us about good and bad policies, sound and unsound arguments, predictions of human behaviour, and so on. It is one of the mind's most reliable heuristics.

 

But, of course, that's only the first part of it - understanding it is of little use to others if you cannot articulate it to others in ways they can understand. That's what I try to do on this blog - I use what I call the 'Teenager on an envelope' approach, and it comes in two parts.

 

In the first place, if you're going to explain something, make sure you have it nailed in its most simplistic form, such that you could easily summarise it on the back of an envelope. If you can't truncate it that much, the chances are you need to do some more work on it. In the second place, once you've written it on an envelope, make sure it is clear and simple enough so that a teenager not apprised in the subject can understand it, at least in its basic form. If both those conditions are met, your preposition should make sense. Then it should be ready for public consumption.

 

Naturally, the key is to master the habit of doing this without an envelope or a teenager - because when you have your next bright idea you can't guarantee that either of those things will be in sight.

Why Government Meddling Does Harm Even When It Does Good

Politicians come up with all sorts of initiatives to meddle in the market in ways they think are helping - whether it's price controls, wage controls, legal requirements that limit profits, green levies, fat tax, selective subsidies, cronyism with big businesses, and many other examples. Their efforts culminate in a net loss for the nation, not a net gain. Apart from the necessary light regulation required to avoid monopolies, to protect our health, and to protect our individual rights, politicians should resist the temptation to meddle, because a lot of the harm they cause goes largely unnoticed. And of course, as well as hidden harm, there is also tangible failure, because, as I've explained before on this Blog, astute business executives can easily circumvent governmental strictures imposed on them.

For example, if they are forced to pay a minimum wage, they will recoup their losses by increasing prices; if they are forced to offer customers cheapest price plans, they will simply configure their price plans sufficiently to stay within the orbit of the law, and yet still return the same profits as before by locating further profits elsewhere. In fact, in looking to circumvent government impositions, businesses often find additional ways to generate more profits or pay less tax. So government meddling is not only externally harmful, it is usually beset with economic futility too, as company executives are much better at manipulating the system than politicians are spotting them. This is a slight oversimplification, but not in a way that impeaches the overall point.

That was the futility of meddling; now the harmful bit. The harm caused is in the indirect consequences of the government's actions in the stability of the market. Yes of course it's possible for government meddling to benefit certain people in business - that's not in question - the issue is that in benefiting certain people, two further things happen; firstly, others are directly artificially disadvantaged (a good rule of thumb: you can't usually artificially advantage one group without artificially disadvantaging another group), and secondly, doubt and uncertainty insidiously pervades the market, which hurts (in particular) small businesses and would-be business ventures (the two groups the government is always saying it is trying to help).

The reason doubt and uncertainty prevail upon the market to the detriment of businesses is because continual government meddling acts as rule-changers that diminishes confidence in investment and innovation. If a danger exists that in the coming months the government is going to impose price controls in the energy sector, or fat tax on fast food, or heavy green levies in the industrial sector, there is disincentive to invest or innovate in those markets because future profits might be decimated by further government meddling.

Let me illustrate with an analogy. Suppose you were tasked with bringing together an instrumental ensemble to play as an orchestra at a big event at the Royal Albert Hall. With your expert knowledge you know how to arrange the string, brass, woodwind and percussion sections, as well as arranging who plays what, and when each player is conducted to play each note and chord in a carefully sequenced arrangement. Suddenly, though, your task is made difficult, because God, being in a devious mood, decides to mess around with the laws of nature to have fun at your expense. After God's mischievous tinkering you find that brass now sounds like string, woodwind sounds like percussion, and some of the notes and chords have been altered to sound different to what they did. And after going to the trouble of learning the arrangements under the new messed-up system, God decides to have fun again by altering everything for a second time, leaving you and the players thoroughly despondent once again.

God's tinkering has messed up you and your orchestra's plans to perform the concert. Not knowing which instrument corresponds to which sound-types, or which chord and note creates which pieces of music, you'd have no idea how many members of each section to have performing on the night, or what sounds they'd produce. The concert would have to be cancelled.

Now, of course, government meddling in the market isn't quite that extreme, as things can still function in spite of their meddling, but to a lesser degree it creates the same kind of instability and uncertainty. By diminishing the stability of the rules, governmental meddling deplete private innovation and initiative, and makes the market less stable and harder to enter. And as a further consequence, the more governments assume control of market situations, the more indifferent to personal responsibility people in business become. If the government legislates to protect one kind of customer, then suppliers tend to take their eye off the ball when it comes to other customers (this is also true when it comes to incentives for future innovations too). As a consequence, businesses become too concerned about the authorities and less concerned about their customers, their efficiency and their competition.

Governments that favour a laissez faire approach to the market provides its citizens with confidence in the stability of their free actions and planning based on the ability to forecast. A government that meddles in a laissez faire market only erodes confidence, induces instability, and impedes free actions and planning.

What the UK badly needs is a huge dose of deregulation - everything from housing, social services, education, the police and small business are being negatively affected by too much regulation. Let's take two of those areas to illustrate the point - housing and small businesses - and see how there would be benefits from deregulation. 

Firstly, excessive regulation hurts small businesses and prospective businesses because it makes it harder for them to enter the market and turn a profit. But while smaller businesses and prospective businesses are being stifled, this hurts not just them but all consumers, because healthy competition creates greater incentives for innovation and efficiency in big businesses too. Bigger businesses enjoy the benefits of regulation roughly to the same extent that smaller firms or would-be businesses trying to enter the market lament them. Small businesses would benefit from deregulation by having a more open market into which they could more easily enter.

Secondly, excessive regulation on housing - such as restricting where houses can be built, and carbon emission targets, is contributing to a housing shortage, as supply is not able to match demand. Environmental controls imposed on the building industry meant that "every new home in Britain would have to be built to a zero carbon standard by 2016" - although thankfully common sense has prevailed and it looks like this idiotic regulation will be relaxed. Housing companies, building industries and people looking for somewhere to live would all benefit from deregulation.

This sort of economic myopia is causing so much social damage – but as long as most of the electorate continue to be blind to it there will be no selection pressure to change (ironically, and I hate to have to say this, but only UKIP and the Libertarian Party are the ones I’ve seen wise and courageous enough to challenge this). 

Why do governments regulate so excessively when such excessive regulation is bad for the economy, and in particular for the small businesses that most need to enter the market? Assuming they are not ignorant of this fact, it is usually either A) They know most of the electorate think the opposite of the truth - that excessive regulation is good because it stifles corporation power and helps small business get a foot hold in the market; or B) When courting popularity, politicians need to keep looking for ways to make people think the government is making a radical difference in their lives.  From what I can see, pledges for bigger government intervention go down well with lots of people who don't understand that the market induces innovation and efficiency much better than the State – so it’s no surprise that they are attracted to this like sharks to a blood-soaked limb.

 

 

The Campaign To Save This Popular Norwich Pub Is Short-Sighted

It seems that in my city there is a popular music pub called The Owl Sanctuary, which has been bought by property developer Richard Pratt with the intention of building flats. However, because of the weight of discord by its regulars, and a concomitant petition to boot, it seems to be that even though the sale of the building has gone ahead in a mutually agreed transaction between property owner and property buyer, Norwich City Council has declared it an 'asset of community value' and is looking to give it protection against it being demolished and turned into flats. The result of this is that the 'community' (basically a lot of indie/goth pub drinkers) will now be allowed to band together to bid to buy it.

Alas, this is another one of those classic cases whereby only the tangible benefits (to those connected to the pub) are being focused on, and not the tangible and intangible costs (to just about everyone else). If the pub goers had more familiarity with things like Marshall improvements and Pareto efficiencies, they may understand that this sale should go ahead, and that the council shouldn't involve themselves in such ill-conceived ideas of deciding what are community assets.

Given that Marshall improvements and Pareto efficiencies are usually along the same lines in terms of optimal outcome, I will just use Pareto's model to explain. Pareto-efficiency is the measure by which an action occurs that if it makes someone better off it makes someone else simultaneously worse off. An event or action is called 'Pareto-superior' if it can make someone better off without making anyone worse off. Now although economies and societies are vastly more complex than simplified Pareto models can fully capture, they can usually do a competent job of informing us when ideas are good and bad in terms of inefficiency and consumer/producer surpluses.

The reason economists are best at knowing whether ideas are good or bad is because economic thinking attunes people to seeing where the market will naturally facilitate a more optimum outcome. Suppose between them Jack and Jill have enough potatoes and sausages for 20 platefuls of bangers and mash, but Jack has all the potatoes, and Jill has all the sausages. A mutually beneficial allocation of resources through trade means that both Jack and Jill can have 10 meals consisting of bangers and mash. Without the trade, Jack would simply have 10 boring meals consisting of potatoes, and Jill would have 10 boring meals consisting of sausages. Because Jack and Jill are best equipped to look after their own interests, nobody has to tell them to undertake a trade.

Obviously most market situations are more complex than that, but a simple application of the same principle can show us why the Owl Sanctuary transaction should go ahead. Who is made better and worse off if the Owl Sanctuary is converted into flats? We know the people connected with the pub - basically the manager, bar staff and customers - are made temporarily worse off because a handful of people have to find new jobs, and a larger group no longer have their venue in which to perform, drink and socialise. But just about every one else is better off: the two people involved in the buying and selling of the property (as well as those collecting fees), the builders involved in demolition and construction, all the other people involved in property development, and all the people that buy the properties once the project is complete. What will also be a benefit to Norwich as a whole is that the land on which the properties are built will be used more efficiently than if left as it is.

Don't misunderstand, I'm not unsympathetic to the people that are against the loss of their highly-valued pub - there are pubs I value too, and I would be sad to see them demolished. But being sad to see them go is an emotional feeling, it is not the same thing as saying what the most efficient outcome is in net terms. Because, in net terms most people gain, and even the few that temporarily lose will adjust and adapt to the changes, because by and large the things valued in this situation are not bricks and mortar, they are people.

What will happen without the needless council intervention is that the sale of the Owl Sanctuary pub will generate further opportunities for other music-friendly pubs to take its place, or perhaps offer a pub looking to become more established on the music scene the chance to fill the gap. Basically, whatever happens, the market transactions, without the intervention of the city council, would have all worked out fine in the end, as people are pretty good at adapting to changes by themselves, without needing the government to hold their hand.

They Can Get It When It's Meat; Why Can't They Get It When It's Trees?





I was looking through some old writing of mine, as you do, and I found this little scribbling I wrote in 1998:

The recent hysteria-driven campaign to recycle more and more paper on the grounds that it's a virtuous tree-saving exercise is to me pretty evidently going to turn out to be not just incorrect, but the precise opposite of the truth. The proposition fails in its logic, which means in all likelihood future evidence will show it to be mistaken.

Here's why. Most wood used for the purpose of producing paper comes from trees planted and grown for the purpose of producing paper, in exactly the same way that farm animals are bred for the purpose of meat consumption. If you recycle paper in mass quantities you lower the need for as much tree-planting, which amounts to shifting the demand curve down and making price and quantity fall. This means that tree-planting and the land used for tree planting no longer hold the same value for wood production. The number of trees will diminish as a result of mass recycling, just as the number of farm animals bred will decrease if lots of people suddenly become vegetarians.

Almost everybody can get the logic when you talk about animals and vegetarians, yet so few people get it when you talk about trees and paper. Presumably this is because many people support recycling because it gives them an ethical buzz of virtuousness, and when people have that buzz it often makes them myopic towards the efficacy of the policy.

Seventeen years later, and with it now being evidential that paper recycling means fewer trees, the above seems quite prescient. It's always good to remind the people who claim to care about preservation of trees that if they really cared they should be against paper recycling, not for it. Understanding how prices work helps you understand that paper is cheap and that recycling is worse for trees and for consumption. Many trees are farmed for economic reasons - for making wood pulp for paper production - and in commercial terms they are planted for future sales, and plentifully so, which is why the logic is fairly easily translated into evidence.

If You Don't Understand This Yet, It's High Time You Do - It Will Greatly Enhance Your Enjoyment Of Future Blog Posts!

In a world in which nonsense is pretty uniformly frowned upon (everyone adheres to this principle, they just disagree on what actually constitutes nonsense), the biggest lot of nonsense believed by large groups of people always has at least one fundamental flaw of logic underpinning it at the start, which I'll explain.

For example, if you take the beliefs of repeat offenders such as young earth creationists, socialists and climate change alarmists, you'll find one key underlying fundamental flaw that feeds into all the other misinformation. With young earth creationists that fundamental flaw is the mistaken base assumption that evolution by natural selection is in conflict with theism. With socialists that fundamental flaw is the mistaken base assumption that human beings can arrange an economy from on high better than the natural price signals that result from the intersection of supply and demand curves. And with climate change alarmists that fundamental flaw is the mistaken base assumption that you can have your economic growth cake while eating it too.

If you're observant you'll probably be able to spot a common fault running through all three mistaken belief systems - they all involve the failure to get to grips with complex systems theory and the extent to which self-organising structures amount to each individual contributing to a successful whole while looking after its own interests locally.

Although they differ slightly in the physical mechanisms that underwrite their drive forward, biological evolution, the global economy, and the state of living things in terms of the planet are all bound up in nature's thermodynamic principle of the law of parsimony - that is, nature's principle of least effort. Whether we are talking about Newton's laws of motion, the biological mechanism of natural selection, electromagnetic radiation, the second law of thermodynamics, or running a successful clothing business, installing machinery in a new factory premises, trying to get from London to Brighton, or setting up a remote controlled railway system for your children at Christmas time, these are all underpinned by the law of parsimony - that what works most efficiently is the path that takes least effort and uses the least energy.

It is this understanding, and pretty much this understanding alone that informs us that complex biological organisms do not have to be designed by a Deity in one fait accompli swoop (as used to be thought quite commonly), that billions of individual acts of trade in an economy serve the interests of the whole far more efficiently than any government control, and that in order for humans to continually increase their efficiency in terms of the environment the energy we've expended and the resources we've used thus far have been an important stage in that process.

Perhaps the main barrier to realising all these things is that people like to feel a sense of control and they like simple explanations. Because of this, the idea that things can be managed neatly from on high and cannot be left to run on their own steam is a seductive one. Consequently, too many people are beset by a hubris that convinces them they are better at controlling systems than the natural process of trial and error - what Hayek referred to as “selection by imitation of successful institutions and habits.”

The best way of correcting this misunderstanding is developing an understanding of how those self-organising structures look after themselves locally and at the same time contribute to a large, complex and efficient whole that runs best by its own componential processes. That will constitute the real death of young earth creationism, the erosion of the economic hard left, and the diminution of climate change alarmism. In the latter case it should bring about a greater realisation that for now the fossil fuel reliant industries of developing and emerging countries are going to have to go through their own version of the kind of progression-explosion of economic growth we went through during and after the Industrial Revolution if they want to pull themselves out of hardship, and that the climate change lobbyists are often retarding their progress when they pile on pressure to cut down their carbon emissions - something that, unlike more developed countries, they are much less well equipped to do.

If you'd like to see the quintessence of this blog post in action, you should check out this awesome video, based on Leonard E. Read's classic essay I, Pencil, in which he illustrates how many people it takes to make a pencil, once you factor in the loggers, transporters, ore and graphite miners, steel manufacturers, lacquer appliers, and countless others in the production process.

 

 

My Best & Worst of 2015

 

Best Bar: The Playhouse

Best Restaurant: Toss up between Bill's and Roots

Best Food: Lamb Moussaka, Creamy mashed potatoes and Halloumi

Best Drink: Jack Daniels for nights out, Pineapple juice mixed with grenadine for nights in

Best Event: Going to Barcelona

Best Politician: Jacob Rees-Mogg

Worst Politician: Diane Abbott and the bloke she used to have relations with (UK). Donald Trump (US)

Best Social Commentator: Douglas Murray or Janet Daley (UK), Deirdre McCloskey (US)

Worst Social Commentator: Oh, pick one from Yasmin-Alihbia-Brown, Polly Toynbee, Owen Jones - the usual bunch.

Best City: London

Best TV Drama: Breaking Bad (hey, these are what I saw/read listened to in 2015)

Best TV Comedy: Catastrophe

Best Movie: Barney's Version

Best Music: Old favourites are always a pleasure, but good new music to my life this year has been Cinematic Orchestra and Yo La Tengo. 

Best Book: Matt Ridley's The Evolution of Everything

Best Magazine: The Spectator (Matt Ridley's ‘The Climate Change Agenda is a Conspiracy Against the Poor’ is probably the best article I read there in 2015).

Best Blog: The Adam Smith Institute

Best Thing About 2015: New friendships and enhanced old ones, and continually having an exhilarated mind.

Worst Thing About 2015: It's been a really tough year, apart from those new friendships and enhanced old ones, and continually having an exhilarated mind.

 

All that leaves me to say is, thanks for being with me throughout 2015. Here's to more blog posts in 2016 - and I hope next year is a happy year for you all!

Adding More Weight (Pun Intended) To The Sex Pay Gap Myth

Regular readers of economics will know that despite common myths to the contrary, the reality is there isn't much of an unfair pay gap between sexes. As service-based industry has emerged more prominently, coupled with increased technology that make domestic jobs less time-consuming, and women's lib, the wage gap that used to exist has narrowed so much that it has equalised. In fact, if you measure just male and females in their 20s and 30s, females earn slightly more. Obviously this tails off in the late 30s and 40s as motherhood becomes the primary driving force in the re-introduction of a wage gap - but it's not to do with discrimination, it is to do with biology and life choices.

There's an interesting paper from health economist Heather Brown who observes that single women with a higher BMI (body mass index) tend to earn higher wages than similar women with a lower BMI. Married men also have a wage rate that is positively related to their BMI - the more weight they carry the higher their wages tend to be. The opposite is true for single men and married women - there is a negative correlation between their age rate and BMI - the more weight they carry the lower their wages tend to be.

Why is this? The most likely reason is that being overweight doesn't disadvantage men in the market for marriage to anything like the same extent that it disadvantages women - but it does encourage women to invest more in their careers to compensate for the disadvantage in the marriage market. Or to put it another way, very attractive slimmer women have a much higher likelihood of marrying financially well off men than overweight women, which means according to Heather Brown's studies they do not have quite such high incentives to invest in their careers as women who are disadvantaged in the marriage market.

Studies by Pierre-Andre Chiappori, Sonia Orefice ad Climent Quintana-Domeque also show that as a result of this, overweight women are more likely to marry low-income men. If single, heavy men know that a) they are less likely to marry, and b) if they do marry they are more likely to marry a low-income man, it makes sense that there would be a pattern whereby heavier women invest more in their careers.

The flip side of the coin, however, is that all the slim, attractive women under-investing in their careers because of expectation of marrying higher-income men may be affecting the 'pay gap' statistics - but in a way that makes the lack of a sex pay gap even more substantiated. That is to say, not only is it not the case that there is no sex pay gap due to discriminatory forces, it may well be the case that women in their 20s and 30s are earning slightly more than men even though a significant number of them (those with a lower BMI) are under-investing in their careers due to future marital expectations.

Have The Pauperised North Been Architects Of Their Own Downfall?

I saw an article today that claimed that nine of the poorest regions in northern Europe are in the UK. Ignoring a bit of dodgy geography attached to the claim, it is certainly true that many of the northern parts of England that used to rely so richly on industrial manufacturing have failed to keep up with pace of the service industry-based economic growth seen in London and much of the South East.

This article piqued my interest because it has to be said that, if the truth be told, some of the people in the north are in no small way architects of their own downfall. Not wholly, of course, but certainly in part, particularly given that the fundamentalism of the hard economic left is so often so strident and anti-progress. I mean, this current crop of Corbynites are the ones who thought that the socialist Ed Miliband was too right wing, which speaks volumes really.

For those of you who don't know, in terms of left and right economics the UK is a pretty divided place. Since the war, and the Clement Atlee socialist government, Britain had been awash with economic hardship and putrid nationalisation projects that were being choked by overly-powerful unions. This went on until the 1979 Thatcher years, when she and her party upset a lot of people by transforming an economically impotent Britain into one of the world's economic superpowers again. It's true that a lot of this comes from, and remains in, London - but power law distributions make this unsurprising - the whole point is that much of Britain is an economic powerhouse once again, and it's largely thanks to Thatcher's terms in office in allowing the free market to bear the fruits it couldn't under a stultified socialistic system.

The economic left have a different picture, but despite the myths, Thatcher didn't destroy our industry. Manufacturing output was actually higher when she left than when she began - and what the left is missing is that although the industries they are constantly talking about (like coal and steel) declined as a proportion of the aggregate economy, other sectors (like service industries) expanded. To capture the point, next time you’re in London – the country’s economic epicentre – have a walk around and see how many sectors are providing manufactured goods compared with service-based goods.

You might also like to note that the exact same thing happened in all the other prosperous economies too - it's just the way the world was changing, and sadly, too many Brits couldn't bring themselves to change with the economic tide - instead foolishly assenting to callow ideas that placed a premium on Britishness - "British jobs for British workers" and all that xenophobic guff.

When steel and coal industries declined across Europe and America, that declension was offset by huge expansion in service industries, all making those countries richer. The UK miners, led by Arthur Scargill (their megalomaniacal, economically illiterate leader) were perhaps most symptomatic of the prudence of the economic right vs. the foolishness of the economic left. The Thatcher government had a strategy to discontinue unprofitable industries - as it should with its responsibility to its taxpayers - because despite emotional attachments up north, this unprofitability couldn't carry on under the pretext of it being British unprofitability (replace 'British' with 'white men' and see how it sounds a lot like racism)

The reality is that due to the changing landscape, Britain's coal industry had been declining long before Thatcher. In fact, it's quite famously known that more coal pits were closed under Wilson's Labour governments than under the Tory Thatcher's ones. The reason is obvious - but also widespread across other advanced economies - we saw not only the rise of cheaper coal abroad, but also the rise of first oil and then gas and later nuclear as less ecologically unfriendly sources of power. With that comes a decline in industries that relied on coal, in favour of industries that relied on oil and gas.

A few misjudged trade unionists would have preferred to have kept subsidising inefficient and less profitable coal mines (and have the taxpayer pay to prop them up), all in name of Britishness, but as well as sounding a lot like racism to me, it certainly sounds illogical and economically parochial.

Alas, I came to the conclusion that many in the north of England - where the majority of these industrial disputes took place - had been orchestrators of their own plight. Many have spent the last 30 years on unemployment benefits, whinging that 'Thatcher has ruined our industry', and they've never got over it. I don't dispute that it was a hard pill for them to swallow, as jobs were lost, families broken up, communities clubs shattered, and so forth - but equally what holds us together is going to have to be much more than industrial nationalism.

In global economies, climates change all the time - and we humans have to adapt to those changes. So when I hear the north of England say they have been left behind, forgotten and marginalised by the much more prosperous south, I feel compelled to say that, actually, their failure to respond to the changing economic climate, and their preference for wallowing in self-pity is surely a significant factor in the bringing about of their own marginalisation.

That was a bit of hard cop, now for a bit of soft cop. The fact is, economic changes are really hard on societies that are set up to not adjust to a changing climate that easily. But what it emphasises most critically is that having poor adjustability and an over-reliance on one speciality is a problem that can go on to bite the society on the bum. Communities that are not well-equipped to enjoin themselves to diversity are going to get caught out eventually in a global economy that dynamically shifts and changes all the time.

It may surprise you to know that it was once forecasted that economic progress in Manhattan was coming to a close because the island had nearly reached its capacity regarding the horses it could contain. If you’re only focusing on quantitative change your narrow vision only has you looking to see where you can fit more horses; whereas if you’re focusing on qualitative change you look to advance beyond horses to industrial machinery, and eventually from industrial machinery to computers. Here's another example; the Great Irish Famine wasn’t just due to unfortunate infestations in potatoes – it was over-reliance on one single crop that severely added to the plight. Whether it is potatoes for food or horses for transportation, it is important to diversify, because diversity leads to increased qualitative change. That's another reason why you can be sure that our technology will continue to progress - we diversify our skills and our imagination by not having an over-reliance on too narrow a range.

What the UK has seen is that from the earliest periods of the Industrial Revolution talented people and money have been gradually gravitating towards the ever-more prosperous south (in fact, the whole process began in Scotland, where the incipient stages of the England-Scotland union, when passed in an act, was really England giving de facto permission to the wealthy elite of Scotland to move south with their money and join London's political establishment).

So although the north created a great proportion of Britain's wealth during the Industrial Revolution, the steadily increased London investment was soon going to make it the financial epicentre of the UK. I don't have any research to hand, nor am I sure if any exists, but if you measured the number of people in England moving from the north to south versus the number moving south to north, I'll bet the former figure is more than double the latter figure.

Not only are power law distributions concentrating a lot of wealth and growth in regional areas of England that are service industry-rich, it's also bound to be the case that an awful lot of talented people from the north are moving south, making it harder for the north to compete with the success of the south.

Alongside that, the other thing that disadvantages communities built on past manufacturing glories is that large-scale manufacturing countries like China, America, Germany, Japan and the ever-emerging nations like South Korea have much more of the global market share of consumable goods than our own industrial regions, which adds to the weight of the proposition that while it has been a tough culture shock for many of England's northern regions, at the heart of their stasis is a failure to keep up with the market changes in a highly evolving and competitive global economy.

Why This Is Happening To Quality Street Tins

This picture of the various sizes of quality street tins over the decades seems to have gone viral, with everybody glad to see what they knew all along - that our products are smaller than they used to be. The term for this in economics is called 'shrinkflation'. This is where sellers surreptitiously reduce the size of their goods (the mass of a chocolate, the size of the tin, etc) as a way to put up the price of their goods while appearing to be competitive.

In other words, there are two ways to increase prices of goods of variable size and quantity - you can do it the transparent way by adding a sum on to the original price, or you can retain the original price and reduce the mass of the product. That is what is happening with those tins of Quality Street - the unit cost is increasing but at a rate whereby the purchase price, relative to former purchase prices, has not shifted in a way that puts off price sensitive consumers.

How Women's Lib Made Us More Unequal....Well, In One Way

The Women's Equality Party is a party whose main agenda is to use women's lib to reduce inequality and make women a more prominent force in society. Women make up just over 50% of the UK population, and we can all be glad that they have been liberated from so many of the impediments that used to hinder them.

But being the sort of seat of the pants reality gambler that I am, I can actually conceive of why, in at least one area of consideration, women's lib would actually have the knock on effect of increasing inequality. Not that that's any reason to dislike it, of course - there are all sorts of things that increase inequality that we ought to, and do, like.

What women's lib probably has produced, albeit indirectly, is an increase in household income inequality, by which I mean inequality between sets of households. The logic is fairly straightforward. Women now work in the job market a lot more than they used to, and like men they tend to (but not in all cases) have a job roughly commensurate with their education. Given this fact, which means they are going to mix more with people in their academic group, and the fact that assortative mating is very prominent in selective choosing, you are going to find like-minded people will tend to marry each other, which means high end earners will marry other high end earners, and the same with middle and low ends.  

This means that household incomes will be increasingly unequal. Two shelf stackers and two lawyers are more likely to marry each other rather that two shelf stackers married to two lawyers. Obviously there are plenty of exceptions, but generally what I've said is true. But what it also means is that household rises in income inequality are not only not much of a problem at all - they are, in fact, very directly linked to the things we rightly celebrate, like the liberation of women.

A Budget Surplus Is A Trivial Achievement

I was just catching up on my Guardian reading, and came across this article about George Osborne relying on rising immigration numbers to reach his fiscal target of a budget surplus by the end of the decade, with Osborne feeling the pressure by assuring us that "the economy will grow robustly every year"

The Guardian writer isn't enjoying himself either though, expressing a worry that "the only feasible way to achieve a budget surplus by 2020 would have been through additional spending cuts or tax rises".

Alas, judging by the language they are both using, both Osborne and the Guardian columnist are paying precious little regard to the concept of value, as they speak as though the nation's value-based economy as a whole is the same as the government's economy. It is not.

A budget surplus is where the government's income is greater than its expenditure. A deficit is the opposite. But just because a government runs a deficit that doesn't mean the nation as a whole is in deficit - a government can run a deficit while the country overall has an income that is greater than its expenditure.

Furthermore, given that government income comes from taxation, even Osborne's goal of a budget surplus by 2010 would not be guaranteed to be anything as like as good for the nation as he supposes. That is to say, although we'll be glad to see the back of a deficit, a surplus does not guarantee value because the government does not earn money in the same way that businesses creating value earn money.

When a business makes a profit it is because its output is worth more than its input, which is based on the extent to which people value the good or service more than money. If you buy a Domino's pizza for £12 you are signalling that you value it more than the £12, otherwise you'd buy something else. Suppose you value a £12 large Domino's pizza at £15, the £3 difference is what is known in economics as your consumer surplus. If Domino's makes £7 on the pizza (their producer surplus) then society has a net value gain of £10. That applies to anything – cinema tickets, washing machines, clothes, DVDs, and so on. Because both buyer and seller benefit from the transaction we know value is being created in society. Firms that cannot create value do not make profits and they are likely to go out of business.

Nothing like what I described above occurs when the government 'earns' its money through taxation, because its earnings are not based on the value it creates. We taxpayers do not choose how the government spends its money - on wars, on public sector salaries, on agricultural subsidies, on hugely uncompetitive contracts, and so on. If by 2010 George Osborne's government spends £800 billion and has a surplus of £3 billion that does not show that the citizens of the UK enjoyed £800 billion of value, because what the government collected in tax was not money voluntarily handed over in transactions where what we got in return for our money created value (this point is compounded when you think of all the government waste that goes on). The best thing any government can do to help create more value in society is by drastically reducing its expenditure and letting us keep more of our money.

 

 

 

 

Wowzer!! How's This For Being Totally & Utterly Misconstrued?

So this happened, and it's one of those rare things that when it does happen it reveals fascinating things about humans. I just joined a Mensa debating forum containing what seemed like a few select, intelligent people, and just as I was given access by the admin, a woman called Amber happened to start a thread with her opening statement - a statement that was definitely wrong.

So, maintaining politeness at all times, I made a statement that was definitely right and contrary to what she had reasoned, and subsequently a couple of people joined the thread to tell me how wrong I was. Then after explaining to them where they were going wrong, they were so shocked at what I was saying they accused me of being a troll and within 20 minutes the admin had banned me! By then there were about six contributors + Amber, all thinking I was saying what I was saying to wind them up, when actually I was explaining what are, admittedly counter-intuitive, but absolutely correct points.

It is fascinating when you meet people who are so confused that the opposite of their falsity (the truth) seems so bizarre that they mistake you for a trolling nutter who is not even worthy to remain in the group.

Those that want to know what the discussion was about will be pleased to know that I copy and pasted all the text before losing access to the group, and put the meat of it in this blog post I just created. It's a funny old world!

 

There is only one negative thing that comes from having frequent sexual encounters with multiple partners - there is more chance that sexually transmitted diseases will be passed on.

(Opening statement in a Mensa group. from a lady called Amber)

Realising that that is not just wrong, but the opposite of the truth, I responded with:

Actually, no, there is only one positive thing that comes from having frequent sexual encounters with multiple partners - there is less chance that sexually transmitted diseases will be passed on. 

Here is how the rest of the conversation went.

Amber: Do pray tell James how?

JK: Here’s how it works - the more people in the promiscuity pool, the more people having one night stands, which means those infected have a reduced chance of having sex, which equals a reduced chance of the infected ones passing on their infection. It is counter-intuitive, but many true things are.  It may seem intuitively that the more people you have in a pool of people who are having sex when one has an STD, the more people end up having STDs, but precisely the opposite is true! The more people you have in a pool of people who are having sex when one has an STD, the fewer people end up having STDs. It's a simple case of numbers - the more people in the pool, the greater the competition, so the greater likelihood that Mr. infected won't pass on his DNA.

Ronald:  Maybe this is true on the first go-round. However, that one person infects at least one other -- then you have two others with an infection to spread, and they infect two others... You begin to see the logical progression there?

JK: But that isn't correct, and here's why... I'll try to explain it in a bit more detail - first I'll show you with the mathematics, then I'll back it up with an analogy.

THE MATHEMATICAL REASON: Suppose you go for a night on the town full of people on the pull. That is what we've called the 'pool' - and it consists of, say, forty people; twenty are infected, twenty are uninfected, and you don't know which is which. This means you have a 50-50 chance of finding a safe partner. Now let's say that next weekend the same forty people are out, but it's the annual carnival, where an extra one thousand people are out on the pull. You now have about a 1/25 chance of finding a non-safe partner - hence, the more people you have in a pool of people who are having sex when a few are infected, the fewer people end up being infected. Further, you mustn't mistakenly think that every single person is going to get lucky - the pool won't facilitate everyone's success (mathematically it's almost impossible) - so by adding more to the pool you increase the number of safe people, and thereby reduce the chances that the infected people will get lucky and thus pass on their DNA.

THE ANALOGY: Think of it in terms of pollution - pollution is when a pernicious external force finds its way into a benign or neutral system (it could be ecological, physiological, or whatever). Having a smaller pool is analogous to increased pollution because (to put it bluntly) by not being in the pool the uninfected majority would diminish the chances of an overall de-pollution. Or if you prefer, the pollution rates are greater with a smaller pool. If you are one of the recklessly promiscuous people with a high probability of being one of the infected you add pollution to the pool every time you ingratiate yourself into it. If you are one of the infected, your chances of pulling are decreased by the greater numbers in the pool, because competition for mates becomes fiercer.

Let's now put this into practice by looking at your statement and seeing which way the logic takes us. You said: "Maybe on the first go-round. However, that one person infects at least one other -- then you have two others with an infection to spread, and they infect two others... You begin to see the logical progression there?"

Now then, you are right that one person infects at least one other, and you are right that you then have two others with an infection to spread. But looked at carefully you should be able to see that your statement vindicates me, not you. The reason is this; what would make the pool safer and less polluted - by making it smaller? No, that will only make it less safe and more susceptible to pollution. But if we do what I said the logic dictates and add more people to it, we make pollution less conducive - thus we have a safer pool.

Amber: James your scenario is unsound. It assumes that your small group will be heavily infected, and a large group will be strongly uninfected, thus diluting the infected group. But there's no valid reason to assume your starting assumptions.

JK: Amber, I'm afraid you're mistaken - what I've said is not to do with forecasts about the difference between a small and large group's infection rate. It is to do with more people lowering the probability that the infected ones will get the chance to pass on their infection.

Ronald: But if you pick 20 random people from the population and have sex with one, or pick 1,000 people at random from the population and have sex with one, your odds of encountering an STD are exactly the same.

JK: This is another mistaken approach because it requires an assumption based on no background information. But with the above example you do have background information - you know that the people entering the pool are low risk entrants because they are not promiscuous. I have explained this in my last post - the logic is correct, and its veracity is self-evident because it is based on mathematical facts.

Ok, look, you mustn’t think of the non-promiscuous people having lower probability than the promiscuous people, because you’re forgetting my original claim – that an increased pool of promiscuous people would reduce the spread of infection. That’s the point – we are saying the whole pool is now promiscuous, so you cannot simply imagine that it is only the infected people who are promiscuous.

The reality is, the pool is full of promiscuous people, and the more people that enter it the less likely that infected people will spread their infection. Pretend you are one new person in the pool, and you have been sexually cautious in the past. It's great for the pool that you've decided to become promiscuous. Your presence in the pool is good on two counts (probabilistically): if you pull an uninfected partner you divert that partner from a potentially more precarious tryst; if you pull an infected partner you divert that partner from giving it to someone who might spread it at a more proliferated rate than you. Rinse and repeat that cycle every weekend! ;-)

It's not just that the individual's chances of safe sex are greater, it is also the case that a larger pool = the less likely that infected people will spread their infection! It's a 100% mathematical fact of conditional probability. You keep mistakenly assuming that every single person in the pool is going to mate every single time, when I've already said that's not the case.

Louis: "having frequent sexual encounters with multiple partners - there is less chance that sexually transmitted diseases will be passed on" says James Knight. I think we have a troll in the midst, only an attention-seeker would make such a ridiculous claim. 

JK: Yes, it could be that I'm just trying to seek attention from a bunch of people I've just met and with whom I'm only ever going to have the weakest of social ties, or it could be that, in actual fact, everyone who has contributed to the thread thus far is not quite yet seeing why what I've said is right. I believe that what I’ve said already in this thread more than comprehensively conveys the truth of my claim. I grant you, though, it is somewhat counter-intuitive, and is perhaps akin to a circuit board epistemology where one sudden eureka light can light up the whole situation, leaving you wondering how you missed it to begin with. I suppose these things require a bit more wrestling with precisely because they are counter to our intuitions. Our minds have not evolved to accept counter-intuitive notions very easily - and when one considers things like, say, monotonic voting systems, 0.999 denoting a real number that can be shown to be 1, water being heavier in liquid form than in solid form, the Monty Hall problem, and things of that nature that confound the more intuitive feelings, one understands why a crowd can pull together and argue in the opposite direction.

The picture makes sense to me because, as I said, I imagined a heuristic model in which infection was seen in terms of pollution. In this instance the pollution model meant that a counter-intuitive notion was quite clear. What I've argued is not incorrect - perhaps it requires you to gather it together in a different way - but whatever works for you really. Once you think of it in terms of economics it's fairly obvious really - that if you are a frivolously promiscuous individual with a high probability of causing infection, you are going to pollute the partner pool every time you enter into it with the intention of promiscuity — and for the good of the pool you should be discouraged, just as anybody causing pollution should be discouraged. Therefore, the corollary of that - arguing with the signs reversed - is that that if you are a very circumspect individual with less propensity for promiscuity and a low probability of infection then you are going to improve the quality of the partner pool every time you enter into it. Evidently, in the case of the latter, that’s the opposite of causing pollution, and it would make the pool less polluted - the more of these types, the merrier - for precisely the same reasons that pollution should be discouraged.

Amber: Your whole argument is surely set on the faulty assumption that there's a reliance on the external forces diluting more than helping it spread, is it not?

JK: No Amber, it has precious little to do with the extent to which external forces dilute, it is to do with rates at which infected people copulate, and an increase in pool size reducing the rate, where everyone in the pool is equally promiscuous. More people in the pool, more competition, less success for the infected ones. Hence, my above comment. If you keep increasing the pool further, you will keep diminishing the chances of one of the infected ones pulling a mate, because statistically more of the safer people will pull (this is the nature of probability). You'll keep making the pool safer by adding more fresh promiscuity to it, because those additions will increase the competition further, and continue to lessen the probability that one of the infected will get to pass on his or her DNA on any given night! The competition means that they will pull less frequently. Which means they will get the chance to pass on their infection less frequently. Add even more to the pool and this infrequency is more probabilistic, and so on.

Louis: Yep definitely trolling.

JK: Or in other words, Louis, you don't have a comeback because this conversation is over your head, so you resort to crass, baseless accusations. Look it's fine if you don't get it - like I said, some counter-intuitive things require a bit more of a lateral approach, but if you think about it carefully you will be able to arrive at the same conclusion I have.  

Ruedi: If I understood James Knight correctly, I think his argument works as long as he can keep the sample population expanding at a faster rate than the infection rate. That's not really a feasible approach - sooner or later, the population will reach infinite or somewhere near that, and at that point, the infection risk will catch up and neutralize earlier gains

JK: Hi Ruedi, thanks for an attempt at least at some kind of sensible engagement. I think you nearly got it right when you said "his argument works as long as he can keep the sample population expanding at a faster rate than the infection rate", but then you go off track by saying "That's not really a feasible approach - sooner or later, the population will reach infinite or somewhere near that, and at that point, the infection risk will catch up and neutralize earlier gains."

No, no it won’t. You're missing the vital component in the equation, which is increased competition. As the percentage of infected people is reduced (or equivalently we add more uninfected) there is less chance that they have sex because competition is greater. This could even eventuate in a situation where there is only one infected person who as the group increases in size never gets look in and is thus squeezed out, never seeing intercourse. If you keep adding fresh blood to the pool it is likely you will have a situation where the infected percentage actually goes down as they die off and fail to breed new germs by passing them on. How do I know that? Because that is exactly what happens in biological evolution where alleles get fixed in a population in evolution and others die out. What my pollution model shows is that there exists some critical value of the percentage of the infected where it starts to increase – it’s what’s call the tipping point; on one side of the tipping point the infected percentage goes down and on the other side it goes up – we just need more and more fresh blood to ensure the infected percentage continues to diminish.

Louis: I just cannot believe you've got us all engaging in dialogue about a ludicrous claim that more people in a pool where because of sexual activity diseases will spread makes it more safe than when there are less people in the pool. I'm still calling troll.

JK: Ah, still nothing to contribute except this tiresomely narrow philosophical pez dispenser analysis, Louis - I've all but given up on you guys. I'm not sure I can say much more to convince if you don't already get it by now. I'm reminded of the obvservation by Charles Babbage about having an opponent who strikes him as so confused that he is difficult to understand - "I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question". Ho hum!

I'll have one last crack and then I'm outta here. What you guys have done is erroneously made an assumption that assumes that the probability of infected person copulating is a constant whereas I have repeatedly told you that this decreases with the percentage of uninfected persons in the pool due to competition factors. This in itself would lead to a reduction in the rate of increase of the percent infection; however the absolute numbers infected would still increase.

I haven’t even needed to do this yet as the mathematics justifies it alone – but if I wanted to present more of the real life model I could factor in the disabling effects of the infection - that is the infection causes a loss of the ability to breed the infection - hence infected people are going to drop out of the copulatory pool (when most people find out they have an infection they wilfully remove themselves from casual sex). The infected population is subject to, not one, but two competing rates; not just the rate of increase of new blood but also the rate at which they fall out of the "germ breeding" pool. This means that as the number of uninfected people increases the rate at which the infected persons can spread the infection is less than their disablement rate. Hence their population involved in breeding the germ reduces. If this continues they will die out completely.

It is not that being infected significantly affects competition, it is being in a group in which more members are added - it's not just the infected people who are having less sex - almost everyone in the pool is having less sex (on average) - but because the uninfected new blood astronomically dwarfs the infected, the rate at which the infected's sex drops is more significant than the rate at which the uninfected's sex drops - because remember we are showing that the infection is getting diminished in the pool.

There really isn't much more I need to say in this conversation except that everything you need to establish my opening remark - that with more new people in the pool there is less chance that sexually transmitted diseases will be passed on - is contained in this discussion.

(End of discussion)

After that discussion thread, which I'm glad I saved now, I found I could no longer access the thread or the group, which means I must have been banned - a truly odd thing to happen given that everyone else was getting the wrong end of the stick, and I was actually the only one getting the right end of it. It's a crazy situation to encounter people so unable to grasp the truth that to them the truth seems crazy, and the messenger a troll. I suppose one is reminded of Nietzsche and the quote about those who were seen dancing being thought to be insane by those who could not hear the music.

Anyway, after my ban, I decided to do a bit of research to see if anyone had undertaken any studies on this matter - and to my (not that much of a) surprise I found that a guy called Michael Kremer has a 54 page paper that goes into all the ins and outs of why what I said above is the case.

There's a lot of text to sift through, which I sped-read earlier before wring this blog post - but the first equation on page 16 and the surrounding text is most germane to the discussion above  The first equation on page 16 gives us the value of the rate of change of infection (the Y with a dot over it), with the tell tale being the minus sign where the "Y dot" is equal to the rate of increase of infection minus the death rate of the infected.  

I wish I could have survived just an extra few hours so that people in the group could have seen the proof, rather than them all thinking I'm some kind of trolling nutter who was just there to wind them up. Like I said, it's a funny old world!