Why Don't We Like It When The Universe Makes Us Smarter?

The widespread human aversion to correction is one of the most peculiar of all peculiarities. People don't like being shown to be wrong - so much so that they'd rather intransigently yoke themselves to a comfortable falsehood than open themselves up to a refreshing new fact or an illuminating experience of improved reasoning. There are multiple causes of this, with some degree of overlap - the usual offenders are:

1) Lazy-thinking - the path of least resistance is, by definition, the easiest method of approach. It takes time and effort to acquire knowledge and develop your reasoning skills, and relatively few people bother to do this with any aplomb.

2) Status and ego - some people find it hard to admit they're wrong, so would rather stubbornly close themselves off from revising their erroneous opinions.

3) Tribal identity - many views and beliefs are bound up in the identity of a particular group or allegiance, particularly religious and political views, which overwhelmingly bias individuals against changes of mind.

4) Emotional biases and confirmation biases - reasoning ability can be impaired by emotions, and conformation bias occurs as we look to justify our views by seeking out information that supports what we already believe.

There are others too, but those are the main four, and between them they have quite a stultifying effect on human beings' ability to be correct about things. The only cure for this sort of thing is to wake yourself up to how painstakingly, ludicrously irrational this is - I mean, why *wouldn't* you want to be correct about as much as you can be? And related to that, why *wouldn't* you want to be shown an improved way of thinking about a situation or learn a new fact? 

Learning new facts and improving your reasoning is the universe's way of making you smarter - it is one of the things that people should embrace most, yet it is so often one of the things from which people casually shy away.

Here's what I'd advise you to try: from now on, the next time you get even the faintest hint that you're wrong abut something, or that your interlocutor appears to be making a point that could bring about a fresh perspective for you, embrace it - be enthralled by it, and look at it as an invitation to open a door you'd previously only known to be closed.

You see, when we want to be, I think we humans are fairly adept at sensing weaknesses in our own position when up against smarter people. I don't think the feelings and sensations are alien. As an experiment of self-discovery, let me encourage you to try to own those feelings when they arrive. The next time you sense you've been holding on to a view or belief that needs correcting or revising, stop and take ownership of how it makes you feel.

You may feel threatened, or embarrassed, or obstinate, or defensive, or angry with yourself, or even ashamed that if you change your mind you're going to upset people close to you. I promise you, you will feel at least one of those things. But don't worry - it's the universe's way of inviting you to be smarter, and encouraging you to embrace and be glad of the opportunity.

And if that doesn't turn out to be enough to help you engage in the opportunity, remind yourself that what the universe is asking you to do is nothing different to what you've already being doing all your life - enjoying new discoveries and welcoming fresh perspectives. You don't mind being right on whether it's okay to drop litter, or on what the hottest planet in our solar system is, or on the properties of plutonium, or on whether theft should be illegal - you're just being asked to follow what you've started to its logical conclusion and remain consistent with it at every juncture.

Every time you become a better thinker, or less wrong about something, or more rational, you've made gains for life - you've taken another step on the journey of mental exhilaration. Don't fight it: thirst for it, enjoy it, and embrace it with open arms.

With This Basic Error, Trump Is Doing His Best To Hide His 'Genius'

Oh dear, Donald Trump really doesn't get this economics thing at all. We read today that he has now declared he will use NAFTA negotiations to make Mexico pay for the wall. Alas, a 'stable genius' like this really shouldn't be making so many category errors.

Trump has spent the best part of a year explaining to Americans how, under current NAFTA rules, Mexicans export far too many goods and services to America, and that that is hurting the domestic economy.

Yet now through NAFTA renegotiations he's "going to take a small percentage of that money and it’s going towards the wall” - which infers that Americans will receive either US dollars or Mexican pesos as payment for the wall.

At which point, one has to ask: what the heck is Trump on about? If he's on about payment in dollars, then Mexicans first must acquire the dollars to pay the wall bill – and to do this, Mexicans must sell goods and services to Americans. It is only through selling more goods and services to Americans that Mexico will get more dollars to pay for the wall. But this contradicts Trump's rhetoric about dissuading more Mexican exports to America.

And if Trump means payment in Mexican pesos, then his reasoning is equally flawed, because he unwittingly commends the very thing he has spent the last year rejecting - that is, increased sales of goods and services from Mexico to America. 

The upshot is, the only way that Mexicans can fulfil Trump's wish is if they export more real goods and services to America - something Trump mistakenly presumes is a benefit to Mexicans at a cost to Americans. Trump needs to make up his mind whether he wants to slow down the Mexican imports he thinks harm his domestic economy or whether he wants to speed up the Mexican imports to pay for the wall.

Lastly, there is an outside chance that a 'stable genius' like Trump thinks (although I doubt it) Mexico will pay for the wall through US import tariffs. Yet as anyone with even a sketchy understanding of economics will know, tariffs do not just hurt foreign exporters, they hurt the domestic economy too.

If Trump raises import tariffs he will raise the prices of imports from Mexico too, meaning Americans will buy fewer of those goods or pay higher dollar prices for the goods they keep on buying. Either way, Americans are paying for the wall.

And where Mexicans are hurt by higher tariffs, they will have fewer dollars from their exports to America, which means they will have less to spend on American goods, which will do the other thing Trump claims to hate - hurt American jobs. Must do better, Donald!

Healthonomics:

This is a frequent phenomenon called Gammon's Law (after Max Gammon), which follows a predictable pattern whereby increase in expenditure will be matched by fall in production, where the more resources a system swallows up, the less efficient it becomes in terms of production per unit of investment. Pretty much any big centralised institution - health, schools, taxation, the EU, the church - when it gets so big that it passes through the efficiencies of economies of scale and begins to suffer from diseconomies of scale (see also the Dunbar number) will show a pattern whereby increased input produces decrease quality of output. In economics, the Rahn Curve (named after American economist Richard W. Rahn) is a graph that illustrates that there is a level of state spending that helps increase growth rates, but that there is a point over which it reduces growth rates. 

Research from the Cato Institute indicates that when government spending expands beyond about 20% of GDP, economic growth diminishes. This often works alongside Gammon’s law, where increase in expenditure will be matched by fall in production, and where resources get sucked into a black hole of diseconomies of scale and the overall production as a ratio of resources inputted diminishes. At the time of writing, the NHS has 1.6 million employees, and there are 66 million people in the UK. That means there is one NHS worker for every 41 people in the UK. You recall we mentioned Wagner's Law, which observes that with increasing economic growth we generally see a rise in state expenditure. Research by the Adam Smith Institute revealed that the total health budget exceeds £100 billion a year, and that management staff numbers increased by about 12% over the past five years, while the number of frontline staff increased by only 2%. It seems clear that the UK's NHS could be managed better: it appears to be simultaneously falling foul of the dangers of Wagner's law, post the optimum point on the Rahn curve, and exhibiting the kind of inefficiencies that Gammon’s law portends.

But whether it is the right type of system being sub-optimally managed, or the wrong type of system altogether is a complex question - not least because the question of the right size of government is an even more complex question. This is due to the fact that humans are adaptive, goal-oriented beings involved in a complex social nexus with lots of incomplete information. And consequently, the wisdom of central intelligence sometimes serves the system best, and other times it is best left to the price systems in the market. 

The challenge, as ever, is to find a way to incorporate the qualities of a kind of socialist-individualist-libertarian triumvirate at the personal level with the qualities of the free market and its concomitant mechanism for price theory to efficiently balance supply and demand. I am naturally sympathetic to a system that draws from the efficiencies of market prices, but I believe that good health care is essential to individual well-being and society's ability to thrive, and no one should be without it, especially society's poorest and most vulnerable people. I'm friendly towards a system in which taxation is collected to fund health care for anyone who is poor and can't afford it, to fund research, to subsidise low earners, to support vulnerable people, and to provide a safety net for every single person who needs it. A nation that doesn't start with that premise is ignoble. But given this as a sine qua non, there are some more complex elements to health care that need addressing. I'm not sure that any health care system that's ever been created is efficient and comprehensive enough to manage the full gamut of complex human needs without sub-optimality in some of its parts - and therefore, the studies that compare different nations' health care systems and look to highlight the relative strengths and failings are probably of limited scope. I think any analysis of health care is (distally) also a study of human society, and is going to have to include the concession that it impossible be maximally efficient and get everything right.

In my estimation, the most efficient healthcare system would be one that reflects the spirit of community libertarianism: that is, it has all the efficiencies of market-based allocation of resources and competition, but it is provided under a framework that reflects a health service free at the point of delivery for all, so no one, rich or poor, ever has to worry about not getting the range of health care they need. Consequently, I think the market is not fully equipped to tackle the complex problem of health provision. 

A typical libertarian argument is this: Doctors are professionals; they know things about our health that we do not, and they can make us better, which is why they command high salaries. Patients, on the other hand, are professionals too - they are professionals over their own lives. But when it comes to our health and well-being, we should approach this kind of reasoning with caution. There is a lot we don't know about our health, our future needs, how our behaviour affects others down the line, what viruses may be lurking round the corner (Edit to add: think of Covid-19 as a prime example), and how much health care we are going to need throughout our life (especially in old age). Even if it an imperfect model, there may be some mileage in preferring a centralised health system, as long as implicit in that framework would be a scenario for individuals where their preferences and their expenditure are more closely aligned. 

The main reason that the healthcare considerations are too intractable for purely bottom-up local market management is that health is a far too complex lottery to reflect the same incentives and value created by the market. Through no fault of their own, some people will have the genes or misfortune or accidents that mean they cost the health service tens of thousands of pounds, whereas others will go through life costing virtually nothing. A civilised society should be one that cares for all its citizens equally, giving everyone the security of healthcare that's free at the point of delivery. A health system that resembles an insurance model with coverage funded by pooled resources is a must in a society that purports to provide a security net for its citizens. The thought of a society that bases health care on what people can afford is one that should be repudiated at every level. When it comes to health, there are some outcomes that some individuals have no chance of managing without the pooled resources of others - and the bottom-up market system doesn't contain all the information needed to factor in the range of complex human health needs.

As an economist, I believe the market solves a lot of the problems a lot of the time, but not all of the problems all of the time. But I think human health (for different reasons to defence and rule of law) is a problem that needs top down centralised information processing, because it doesn't have the foresight required to capture the diverse range of human needs. A society that successfully cares for the complex needs of human health and well-being cannot be at the mercy of market-driven supply and demand computation, which is subject to chaotic instability and power law distributions that would be inimical to comprehensive health provision if left unchecked. It's not often I'll endorse a Marxist principle, but when it comes to healthcare, I think a tolerant and compassionate society should deliver according to the Marxist principle of “From each according to his ability, to each according to his need”. I think the only model that can satisfy this is one in which every worker contributes to a health insurance scheme regulated by the government. Higher earners may if they wish opt for private insurance, and insurance companies can compete for business to provide customers with cover. This would take out the politicisation of the health system.

A system in which most health care insurance was run independently by private operators, where providers would compete with other providers for patients based on price and quality of service, can form part of the national health framework. After all, many private companies successfully provide goods and services for public health institutions. Under a benevolent libertarian system, some providers would be part of big corporations, whereas others would be large cooperatives, and others still smaller businesses specialising in particular practices. There probably would even be many charitable organisations funded by benefactors. This would also open the market for insurance companies to offer incentive based premiums for a diverse range of people with diverse lifestyle choices (and no, I don't mean like the cost inflation-inducing American insurance system). It might be a health system rather like that of a shopping mall, where doctors, dentists, pharmacists and opticians are linked together by a nexus of industry and efficiency, where prices, supply, demand, value and incentives are more coterminous in their relations. 

If that seems like moonshine, remember, someone in the 1950s would be quite astonished to think that you could walk in to a supermarket, scan the goods in your basket and tap a payment card on the sensor to complete the transaction. Imagine in the future when money earned and money spent on health care can be so much more prodigiously efficient thanks to advanced technology. An awful lot of positive developments in society are made possible by life-changing technology. Think of any detective movie in the old film noir era with Humphrey Bogart and Robert Mitchum and imagine how much easier their cases would be to solve with a smart phone. Think of how much easier the protracted scientific revolution would have been if all the exponents had laptops and the Internet. Think of how much quicker the Industrial Revolution would have gathered momentum with more advanced electrical and combustion capabilities.

I said earlier that competition is usually good for efficiency. But with ill health and injuries, this causes me some concern, because when you have small-scale competition for cherry-picked services, firms tend to opt for services that are easy to manage and readily profitable. Not only does this tendering process amount to increased bureaucracy, and excessive use of time and staff resources - it very often is awarded to poor quality low bidders whose profits are made by cheap resources, and under-trained and under-staffed units. This doesn't work so well for patients whose health is at stake, because injuries or illnesses that are complex and risky are in danger of being refused.

In summary
There must be a negative effect on any health service model because of those who use health care too much because of bad decisions (alcoholism, smoking, drug use, binge eating), making supply shorter for the majority who need health care through no fault of their own. The system might be more efficient if people who make these bad decisions pay a higher insurance premium. But I'm not sure there could be an efficient top-down system that could be less costly than the extra costs these people would cost a public health service. Equally, a health care system, like a car insurance system, that said 'yes' to every single claim everyone wanted would be providing too much health care and costing the nation too much money, so there needs to be an optimum amount of health care provide. For example, if everyone visited the doctor every time they had a cold or a blister, the GP surgeries would be inundated beyond the capacity to cope. And I'm very sceptical of large scale operations that try to operate with the dual mandate of serving the public and trying to be financially profitable - you usually get the worst of both worlds, where failure to serve the public well enough is blamed on the financial pressures of solvency, and the failure to remain financially solvent is down to the pressure to serve the public to full capacity.

Given the complex nature of health, human physiology, diseases, infections, health prevention, research and future unknowns, I have a feeling that healthcare is one of those institutions where public service must take precedence over tight financial regulatory, and that we might just have to accept that erring on the side of generous expenditure to cover pubic need is a requirement for the kind of healthcare coverage that provides the safety net that gives everyone free health care at the point of delivery, and the peace of mind too. I'm not denying that every effort should be made to ensure money is spent as prudently as possible. But in terms of outcomes, quality and efficiency, a healthcare insurance system that combines the universal 'free at the point of delivery' safety net of a public service with the consumer sovereignty, competition and the innovative dynamism of a market system looks to be the one that will give citizens the closest approximation to what they need. The free market can do a lot to reduce inefficiency in society, but markets can't do everything - they involve people responding to the incentives that markets and free enterprise provide - but health is likely to remain far more complex than that, and should continue to yield to a model that prioritises a compassionate ethos, peace of mind, and safety net.

 

Another Thing Corbyn Doesn't Get: Opinion Polls Are Deceptive About Our Preferences

Jeremy Corbyn's New Year speech was full of buoyancy about how he's a Prime Minister in waiting because the policies he endorses are popular with voters. The problem is, he misunderstands the most primary error in his evaluation: that opinion polls are deceptive about what people actually do want, as opposed to what they say they want.

Below is a recent poll showing the public appetite for the nationalisation of various services in the UK. As you'll see below, more people want energy, water, railways, post, health and education to be run by the state than not. The corollary is that although many people think Corbyn the man is a bit of a plonker, his policies are apparently more widely popular than they are unpopular. In this post I will show you why popular opinion ought to be meaningless in creating government policy.

Alas, the YouGov poll is fairly meaningless, because it doesn't tell us what people actually desire - it tells us only what people claim to desire when they don't feel the costs of those desires. I want a £4000 top of the range television if you are going to buy it for me; whereas if I'm buying my own television, I'll probably spend about a quarter of that.

Similarly, when a British citizen is asked if she wants more public money spent on health care, railways and the energy sector, and if she wants employers to be forced to lower their staffing levels so others can receive a minimum wage, she will quite happily say 'yes' if she doesn't have to bear any of those costs. She may have to bear a tiny proportion of the costs through increased taxation, but those costs are spread thinly enough that no one individual feels it very acutely.

Moreover, a poll asking you whether you support renationalisation of the railways is not very likely to have the result affected by your vote, so you are less likely to have spent much time analysing the pros and cons of a nationalised railway.

The only poll that genuinely covers your revealed preferences is the poll where you feel the full costs and benefits of your decisions - and that only happens when your decisions are market-based, with the full gamut of consumer surpluses and opportunity costs factored in. I would buy a £1000 television for the consumer surplus, and wouldn't buy a £4000 television because of the opportunity costs associated with that additional £3000 expenditure.

Polls, therefore, are fairly meaningless in telling us what politicians should do with our money, because the poll choices are divorced from the personal ramifications of those choices. To discover what British citizens really want you have to allow them to spend more of their money, and reveal their preferences in a market-based economic landscape. Unlike in state policy, the market will respond, as prices and quantity will adjust accordingly to supply and demand.

Homework For Owen Jones In 2018.....

The regularly confused Owen Jones had an article out over Christmas in which he laments what he perceives as the rise of individualism and the demise of solidarity in society (Jones' perception is based on the results of a survey by the European Commission, where apparently 52% of the people surveyed are hoping for more solidarity).

Owen Jones predictably blames all this on what he calls 'Thatcherism' or 'neoliberalism', which, according to him, has encouraged a maximisation of individualism that has sought to "bulldoze every last remnant of solidarity we felt".

This is, of course, utter hogwash, built on the fact that neither Jones nor the European Commission understands the concepts they are trying to evaluate. Humans do not look to maximise individualism, we look to maximise utility. In conjunction with this, economics is a proper empirical method for assessing what humans prefer given many combinations of goods, services and opportunities for mutually beneficial exchanges.

Therefore, what Owen Jones sees as selfish individualism is no such thing, because the pursuit of human utility for each individual is underpinned by solidarity in cooperation. Once you factor in the billions of combinations of goods and services and the billons of combinations of tastes and preferences, you see that suppliers only provide what consumers desire, and at a price people are willing to pay.

Consequently, economics is about human preferences and behaviour played out in the form of mathematics (utility). For example, indifference curves represent a series of combinations between two different economic goods, and they play out in geometrical terms when slopes of indifference curves on a graph reflect marginal value. This is the very basis on which utility operates - but fairly obviously this is based on cooperation between buyers and sellers, not on the kind of isolated individualism that Jones thinks has bulldozed this country.

What Jones also doesn't understand is that the process that drives the death of failing industries in the UK is part of the very same solidarity we were just talking about. Industries that fail do so for exactly the same reason that salt and vinegar flavoured crisps succeed at the expense of strawberry flavoured crisps - people are revealing their preferences and relying on each other to try to maximise their own utility.

So when small corner shops close because their customers switch to the nearby Tesco; and when a music store closes because people download their tunes straight from the Internet; and when businesses are made better off by importing Chinese steel than by supporting British steel, there is no bulldozing of solidarity - just cooperation with more efficient agents for the benefit of increasing utility.

The market's revealed preferences are simply instances of increasing utility spread thinly across society, whether that's by producing things cheaper, using fewer resources or being more efficient with time. These matters of individual utility are part of solidarity in cooperation; they are not at odds with solidarity as Jones thinks. Cooperation helps individuals to maximise net utility.

The Rapid Immiseration Of A Nation State Blighted By Socialism

A video has been doing the rounds, with the following tagline:

In just one generation, Venezuela has gone from being one of the richest countries in the world to 2nd to last, just above to North Korea. Today, people are starving and Nicolas Maduro's military and police forces are set against the civilians protesting in the streets.

How could this happen? In a word: Socialism.

Overly-simplistic? Yes! But the kernel of the point is a valid condemnation of a system of thought that has brought about mass misery every time it has been tried. This point wouldn't be so compelling were it not for the fact that currently in the UK the leader of the opposition, Jeremy Corbyn, is a vocal advocate of Venezuelan-style socialism, and wishes to impose something similar on our country. To that end, the only thing more shocking than the lack of disgust at Jeremy Corbyn and John McDonnell is the shock that so many people will give his facile and dangerous policies the time of day. Let me explain why.

One pretty normal thing about human beings is that we positively promote things that are good for us and no one bats an eyelid. Protein is good for us, as are carbohydrates, as is exercise, fresh air, happiness and security. A writer who advocates the virtues of any of those things is not likely to be heavily criticised.

Alas, humans do not always follow this consistency through; for there are some things that are really good for humans that many don't take full advantage of. Perhaps the most obvious example of this is how so many fail to value the quality of revealed preferences and the value in having freedom to make personal decisions. In fact, quite often they advocate having a state that makes those decisions on their behalf with far less knowledge than the agents in question. It is, in my submission, one of the most absurdly self-impeding things we do: it's part of the human propensity for lazy thinking and uncritical delegation - what William Blake called the 'mind-forged manacles'. 

Why socialism never works
Society is made up of billons of life choices each day, and the prices we see in the marketplace are a reflection of those choices and the value we place on things. Cars are popular among 50 year olds, whereas roller skates are not, because 50 year olds tend to prefer cars to roller skates. Beer is more popular than mint tea in a nightclub because people value beer more than mint tea when they are clubbing. These are society's revealed preferences, and prices reflect those wants and needs.

In most cases, therefore, when choice is involved, society would be better off if resources (labour, goods and services) were allocated based on individual preferences, not on top down nationalisation. Our country's defence, for example, is fine as a nationalised service, because everyone wants to feel protected from foreign attacks, and few people want to spend much time and energy choosing between different defence alternatives.

You can make a similarly good case for road maintenance and the police force. But most things we consume are not of this kind - we value the choice to spend our money on what personally benefits us, and society thrives on the basis that our choices are all different.

The Venezuelan problems, though numerous and complex, belong to what's known in economics as the economic calculation problem - which is that centrally planned economies are dangerous and inefficient because they lack reliable price signals, and therefore fail to distribute resources rationally. As has been seen in every country that has tried a state control of an economy, what it leads to is shortages, brutality, oppression, mass suffering, and ultimately total immiseration of the country. 

The main problem with command economies is that there is no rational employment of capital goods, which stifles vital information signals about how much to produce of what, who desires what, and how much they desire it. Socialism, by centralising the ownership of capital goods, necessarily skews the markets in which these goods are traded, which tramples all over evidence-based economic calculation.

With skewed markets for production, you get skewed prices, which impairs the ability to decipher which lines of production should be pursued, and for how much. That is the base reason why socialism produces material hardship and free markets produce material abundance - there is no magic overseer of markets, it is just that free exchanges in markets allow for much more information-clarity, which is what enables the right amount of stuff to be produced, for the right price, and with as few distortions as possible.

Corbyn's Labour Party, with shades of Venezuela, represents everything that is crass, foolish and dangerous about political influence in the free exchange economy. I wonder if it's too much to ask that Venezuela's calamitous retrogression will be enough to awaken the young Corbynites from the sleep of their foolishness. It is the season for miracles, after all.

Why Some Questions Fail To Get Answered

Many of the big questions people ask are the same questions that they have debated to death for centuries, mostly with no resolution. If we've seen one thread on free will, God's existence, absolute morality, capital punishment, abortion, and questions of that nature, we've seen hundreds.

To my mind, the most probable reason why many of these questions linger is that the questions that are being asked are unreasonable ones. By 'unreasonable' I don't mean it's wrong to ask such questions, I mean they are probably being asked in the wrong way.

Here's a useful tip. Whenever you ask a question, you would be advised to consider whether that question can actually be reasonably asked in the way you are asking it. And as a corollary, you are also at the same time asking whether it can be answered. If the answer to the first part is 'no', the answer to the second part is going to be 'no' as well.

But how do you ascertain whether a question is being reasonably asked? Here's my tip on how you do it. If either or all of the answers you are considering in relation to a question would sit equally well with the reality you perceive, whereby each putative conclusion bears no change to the reality you perceive objectively, then your question cannot be reasonably asked.

Let me make that simpler by giving two examples of questions that cannot be reasonably asked, as per the above. Question 1: Did God cause X to happen? Question 2: Do we have free will?  Again, by that I don’t mean it’s unreasonable to speculate on these questions (and I have done), I mean they are questions where either answers leaves us in the same epistemological position. 

The question Did God cause X to happen? – must be followed by the question; is there any X in nature that can be explained by God that can’t be explained by nature, and vice versa? Empirically speaking, there is not. Similarly, the question Do we have free will? must be followed by the question; is there any action that can be explained by our free will that wouldn’t have otherwise occurred if we don't have free will? Again, there is not.

Over the years I've often found myself saying to antagonists that the answers they get will likely be as intelligent as the questions they ask, and that the rewards of what they get out of an enquiry will be roughly commensurate with the resources they put in. In cases like the above, though, we sometimes just have to remind ourselves that some questions are more interesting than answers, and that badly formulated questions will leave people on an endless treadmill of mediocre, unfruitful debate until they are executed properly.

Why It Is *Possibly* Safer To Drive Home Drunk Than Walk Home Drunk

This is the first time I've ever let someone else write a Blog post here, but I figured regular readers who are interested in the sort of things I write about would probably be interested in this, taken from the intriguing book that is Superfreakonomics by Steven D. Levitt and Stephen J. Dubner. If you're anything like me, you'll probably notice the trade-off between counter-intuitiveness and rationality, and that there's a sleight of hand going on in order to make the argument fly, but it's something you'll likely be glad you got to consider:

Many of life’s decisions are hard. Some decisions, meanwhile, are really, really easy. Imagine you’ve gone to a party at a friend’s house. He lives only a mile away. You have a great time, perhaps because you drank four glasses of wine. Now the party is breaking up. While draining your last glass, you dig out your car keys. Abruptly you conclude this is a bad idea: you are in no condition to drive home.

For the past few decades, we’ve been rigorously educated about the risks of driving under the influence of alcohol. A drunk driver is thirteen times more likely to cause an accident than a sober one. And yet a lot of people still drive drunk. In the United States, more than 30 percent of all fatal crashes involve at least one driver who has been drinking. During the late- night hours, when alcohol use is greatest, that proportion rises to nearly 60 percent. Overall, 1 of every 140 miles is driven drunk, or 21 billion miles each year.

Why do so many people get behind the wheel after drinking? Maybe because— and this could be the most sobering statistic yet— drunk drivers are rarely caught. There is just one arrest for every 27,000 miles driven while drunk. That means you could expect to drive all the way across the country, and then back, and then back and forth three more times, chugging beers all the while, before you got pulled over. As with most bad behaviors, drunk driving could probably be wiped out entirely if a strong- enough incentive were instituted— random roadblocks, for instance, where drunk drivers are executed on the spot— but our society probably doesn’t have the appetite for that.

Meanwhile, back at your friend’s party, you have made what seems to be the easiest decision in history: instead of driving home, you’re going to walk. After all, it’s only a mile. You find your friend, thank him for the party, and tell him the plan. He heartily applauds your good judgment. But should he? We all know that drunk driving is terribly risky, but what about drunk walking? Is this decision so easy?

Let’s look at some numbers. Each year, more than 1,000 drunk pedestrians die in traffic accidents. They step off sidewalks into city streets; they lie down to rest on country roads; they make mad dashes across busy highways. Compared with the total number of people killed in alcohol- related traffic accidents each year— about 13,000— the number of drunk pedestrians is relatively small. But when you’re choosing whether to walk or drive, the overall number isn’t what counts. Here’s the relevant question: on a per- mile basis, is it more dangerous to drive drunk or walk drunk?

The average American walks about a half- mile per day outside the home or workplace. There are some 237 million Americans sixteen and older; all told, that’s 43 billion miles walked each year by people of driving age. If we assume that 1 of every 140 of those miles are walked drunk— the same proportion of miles that are driven drunk— then 307 million miles are walked drunk each year.

Doing the math, you find that on a per- mile basis, a drunk walker is eight times more likely to get killed than a drunk driver. There’s one important caveat: a drunk walker isn’t likely to hurt or kill anyone other than her- or himself. That can’t be said of a drunk driver. In fatal accidents involving alcohol, 36 percent of the victims are either passengers, pedestrians, or other drivers. Still, even after factoring in the deaths of those innocents, walking drunk leads to five times as many deaths per mile as driving drunk.

So as you leave your friend’s party, the decision should be clear: driving is safer than walking. (It would be even safer, obviously, to drink less, or to call a cab.) The next time you put away four glasses of wine at a party, maybe you’ll think through your decision a bit differently. Or, if you’re too far gone, maybe your friend will help sort things out. Because friends don’t let friends walk drunk.

The Popular Annual Myth Of December 11th

Today is December 11th, and the chances are that at some point today you've seen at least one of the many articles doing the rounds informing you that December 11th is the most fertile day on the calendar in the UK. There are articles (albeit old ones) in The Telegraph, The Daily Mail, The Guardian, and The Times being shared around Facebook, all making the claim that more babies are conceived on December 11th than any other day of the year, and that apparently this happens year on year.

Despite appearing in reputable newspapers, my initial instinct was that this story is poppycock, and that what we are seeing with this account is lazy, uncritical journalism. Save for one of those extremely rare coincidences that one expects every now and then when the law of large numbers throws up some irregular statistical patterning, the probability of the same day each year being the most fertile day of the year is vanishingly small. There are just too many variables and complex interlinking causes for such a peculiar pattern to emerge, and I could definitely smell a rat. 

So after a bit of probing, I found out that December 11th is not consistently the most fertile day on the calendar in the UK, this was simply an example of the researchers distorting the evidence. It turns out on closer inspection that they merely did a survey collating people’s birthdates and found that September 16th is the most popular within that survey period (and by slight margins). This is not the same thing as saying that year on year December 11th is the most fertile day on the calendar in the UK - the search space consisted of only a small, unrepresentative sample that would hold to no patterned regularity once broadened.

One thing of interest though

Even though it turns out that the specific date reported is untrue, it is apparently true that December is the most fertile month of the year on a consistent year by year basis, and that is something that may still be of interest to readers here. The fact that there is consistently a particular month of the year when most sexual unions occur ought to be no surprise really, particularly if there are regularities in human behaviour that could easily cause such a statistic to be true.

I can think of three reasons why December might be the most fertile month of the year:

 

One is that colder air helps to improve sperm quality. Actually, I didn't think of that one - it was reported after the media consulted a biologist. What the biologist didn't mention, though, is that by itself that's not compelling, because the 'colder air' factor should only narrow it down to winter months, not specifically December.

 

Two is that quite a few parents plan pregnancies in December so that their children’s birthdates are in September, which increases the probability that their children are among the oldest in their school year (giving those children an advantage).

 

Three is that early to mid December is when the country has lots of Christmas office parties and work nights out*, which might amount to an increase in sexual activity in early to mid December. 

So my best guess is that it’s a combination of the colder weather, school planning, and Christmas conjugation that gives us the statistic that December is the most fertile month on the calendar each year. 

 

* Note that Christmas office parties usually happen on Fridays and Saturdays, and those days are different dates each year, which increases the spread of probability away from any specific date in December.

 

A Radical Way To Change Politics For The Better

I have three radical, brilliant and yet wacky ideas for how to revolutionise our political system. The first one involves ditching constituencies and drastically reducing the number of MPs with a new system of representation (your local council could fulfil any need your MP can). The widespread mediocrity of our MPs is a lot to do with the fact that they are working within a system that does not provide much of an incentive for moral probity or intelligent policy-making. 

It's only when professional people are accountable for their actions or words that we lessen the duplicity and complacency. I doubt we would have seen the MP expenses scandal nor be subjected to the regular tosh to which we have become habituated if we had upstanding MPs who feared the opprobrium (and voting power) of the electorate, and had to conduct themselves with integrity and intelligence to secure their next vote. 

The main cause of this lack of incentive is that too many MPs are in safe seats in their constituency, and party associations that choose the candidates for constituencies can ensure that those in Ministerial roles get the safest seats. My antidote to this is a whole new system that instils some kind of accountability to MPs, and ideally brings in a better and more scrupulous calibre of candidate, and a more carefully thought out voting process.

Idea 1

First we need to decimate the notion of votes attached to constituencies according to geographical borders. As a replacement, my radical proposal would be that candidates will stand to represent surnames demarcated into sections of the alphabet, not regions of the country. We could reduce the exorbitant number of MPs down to about 500 (that'll save on expenses) - and then have a system in which MP 1 represents everyone whose surname begins with Aa-Ad, MP 2 represents everyone whose surname begins with Ae-Ah, and so on. 

Under such conditions, an MP really would have to work hard to forge a good reputation and the prowess for positive influence, because the people he or she represents would be all over the country, and they would make up a body consisting of a diverse range of classes, cultures and ethnicity. MPs are much less likely to be complacent if they are required to have a positive impact on tens of thousands of people scattered across the country rather than people concentrated in a specified area of the country - they will have to think more innovatively about plans, policies, investments and strategies.

And instead of having constituents and holding surgeries, elected MPs could get involved with local issues through regional councils, primarily motivated by doing good, honest, decent work for the region. There may be occasions when conflicts of interests occur between a local person and a person he or she represents alphabetically, but I don't expect them to be too frequent. Put this system in place and I'll bet we'd see a higher standard of MPs, in a system in which Westminster attracts more candidates who want to be MPs for the right reasons.

Idea 2

In addition, my second idea adds even more intellectual and moral scrutiny to the process - because in order for MP 1 to represent everyone whose surname begins with Aa-Ad, and MP 2 to represent everyone whose surname begins with Ae-Ah, and so on, we could try to lessen party political biases and tribalism by offering category distinctions between policies and parties. In other words, rather than everyone whose surname begins with Aa-Ad voting for a party candidate, they could instead be asked to tick boxes for a large range of policies they support (after reading intelligent annotated arguments for the costs and benefits of each policy - we could make this mandatory), while being blind to the parties to which those policies belong.

I got this idea during the last election, after clicking on one or two of those websites that attempt to tell you which party it thinks you should vote for based on a series of policy selections you've made from behind a Rawls-type veil of ignorance, blind to the parties to which those policies belong. It’s obviously not totally blind, as it’s fairly easy to tell which policy belongs to which party in the most obvious areas - but it certainly was the case that when people did the exercise they frequently ended up being most closely aligned with parties that were not the parties for whom they would usually vote.

Being more economically right wing than most, and more socially left wing than most, when I partook in the exercise it was clear that I am further from all the mainstream parties than any of them are from each other, which means there is no obvious party for me to vote for. However, this isn't true of the average voter - in fact, rather worryingly, a poll seemed to indicate that if people voted for policies not personalities, the Green Party would have won the last election - which does rather suggest that the average voter is likely to make a real mess of things with a policy-only vote, and that democracy would not be all that safe in their hands.

Idea 3

This is where my third idea can help - because, as I talked about in this Blog post, I think the nation pays too much regard to the so-called qualities of democracy. Leaving decisions and policies that require intelligence and evidence-based analysis in the hands of largely uneducated and short-sighted populations is highly overrated. What's needed, in my view, is a voting system comprised of fewer, smarter voters - but having tweaked my system a bit, I'd now wish to incorporate my two above ideas into it.

Added to my above system of having MPs represent surnames rather than constituencies, and voters voting on policies not personalities, I'd also want the outcomes to be in the hands of far fewer, more educated voters - maybe with something resembling jury duty, where a random selection of the population (to ensure a proportional representation of sexes, ages, ethnic backgrounds, income groups, religious beliefs, political views, education, and so forth) - let's say 50 people for each letter group (at 500 groups, that's 25,000 voters) - are called to partake in a rigorous voting process involving careful, considered analytical scrutiny over a number of weeks.

So here's how it would work. The first step is to ensure that voters voting in my reduced voter election are better apprised of the facts, and of the pros and cons of all policies (the seen and the unseen). Rather than decide where your vote should go based on personalities, the 50 x 500 chosen voters get to spend a number of weeks, getting paid for their time, studying the economic, sociological and philosophical tenets of all aspects of the policies in front of them, attending lectures from speakers of both sides of the argument, partaking in group discussions and becoming involved in debates orchestrated by experts in the fields (the benefits of the outcome would more than pay for the financial costs of this, and some of the offsetting savings will occur by not having to employ polling clerks throughout the country on election day).

And then at the end of the process, after developing a much broader understanding of the costs and benefits of all policies, the individuals get to vote on those policies, and then the results are announced, with the winning 500 MPs taking their place in Parliament

You may worry that this will disenfranchise most of the other citizens that don’t get to vote – but there’s no reason to think this.  At the start of play, everyone has exactly the same chance of being selected, and everyone in the country (both those selected and those not) will be secure in the knowledge that the people who are going to represent them in Parliament will have been chosen with more rigour and a higher degree of analytical scrutiny by highly conscientious citizens in the country. That cannot be as disenfranchising as the current system in which every single person that votes knows that that vote will have the same use as if they’d stayed at home.

What I'd also predict will happen is that if politicians knew that their policies would be subjected to proper, rigorous analytical scrutiny - and that they'd have to be credible to pass intellectual muster - the policies offered would be far more carefully thought out, and more in tune with a formal economic accountability.

One would hope the politicians that made empty promises, and sold policies based only on benefits with scant regard to costs, and politicians who took advantage of the electorate from within the comfort of their safe seats, would be greatly diminished, and in many cases got rid of altogether in my proposed system. Who knows - it's even possible that higher quality politicians with properly analysed policies may end up rubbing off on a greater proportion of the electorate.

The Trojan Horse Of Public Goods: Beware Of Politicians Bearing Gifts

Government Minister Greg Clark, the Secretary for Business, Energy and Industrial Strategy, has unveiled a 255-page white paper explaining the party's industrial strategy for the nation. The government is promising to 'invest' in our country and increase productivity with taxpayers' money (although they never mention taxpayers' money, of course).

These are promises that should concern us - and the concern should be based on a well worn economic phenomenon that assesses whether the state should be involved in an industry at all, or whether it is doing more harm than good.

The assessment can be stated like this: if the provision of a good or service would have happened anyway by commercial demand, then it's better if private investors provide it (as I've explained before repeatedly). If the provision of a good or service would not have happened anyway by commercial demand, then it's costly to society for the state to take our money to provide it - even more so when you factor in all the crony capitalism, self-serving lobbyists and special interest groups distorting the market.

The upshot is, when all the costs and benefits are weighed up, there isn't very much that the state should be doing. Consequently, a strategy that's based on all the things the government wants to do for us is going to be one that engenders lots of inefficient use of money that we'd be much better off spending directly out of our own pockets.

One exception needs bearing in mind though - and that is the kind of product or service that is widely desirable but may not be provided by the market - or could be, but may be better provided by the state. These are what are referred to in economics as public goods.

Public goods and private goods
The state provides some public goods from which we all benefit equally, like national defence and rule of law, but it also provides private goods like health care, education and pensions which would be better run under a 'consumer pays' model. The distinction is that we more or less want the same thing when it comes to national defence, but not so when it comes to health care, education and pensions.

Because the private goods and services that the state provides are devoid of a 'consumer pays' model, there is no measurement of consumer demand for the goods and services nor commercial value in how they are costed.

Before we get into this further, let me deviate for one moment to tell you a shocking fact connected to state provision. Once you factor in all the stealth taxes on top of the more transparent taxes, the state takes on average around 60% of our earnings in taxation. To put that into perspective, that means you have to work until roughly August 7th each year until you begin to earn money that the state doesn't somehow confiscate.

A left wing friend of mine said she thought this was good news because it shows how much we as a society are willing to show we voluntarily care for one another in the form of redistribution. As much as I love my friend, this is a strange view to have because it is just about the opposite of the truth. Tax is taken from us precisely because we otherwise would not voluntarily donate to these things (a point I illustrated before by using the example of foreign aid, and here regarding the welfare state). To explain, let me tell you a bit more about the concept of public goods in economics.

A public good is something that is referred to in economics as non-excludable and non-rivalrous, in that agents cannot be effectively excluded from it, and whereby if one person consumes the good it does make that good unavailable for others. Obvious things that do not qualify as a public good are things like a car parking space and a bunch of grapes. If Jack parks in the only available car parking space, Jill cannot also park there. If Jack buys the last bunch of grapes, Jill cannot buy them. The nice view of London’s skyline from Primrose Hill, on the other hand, is a public good because Jack can enjoy it without excluding Jill’s ability to enjoy it too.

The problem with public goods is that they have what’s referred to in economics as a free rider problem. That is, if a good is a public good it is difficult to prevent others from enjoying that good without having to pay anything towards its cost. Suppose there is an alley between two terraced houses owned by Jack and Jill in an area with a recent spate of burglaries. Jack says to Jill ‘Let’s go halves on a £500 gate to make our alley more secure'.

If Jill wants the extra security but figures that Jack will pay for the gate even if she does not pay her half, then Jill free rides on the security, and Jack foots the bill. Jack may therefore decide to not buy the gate, leaving them both with a less secure alleyway. If the situation was favourable, the government could tax the whole street and put up the gates in all the alleyways on the street. Of course if the alleyway gates are worth their cost to all the residents, then everyone on the street is better off.

But then you have to add further consideration, because in a scenario where only some people paid for alleyway gates, the people that didn’t are made more vulnerable because their unguarded alleyways are now more attractive to burglars. The same is true of burglar alarms; if numbers 1, 3 and 5 in a cul-de-sac install a burglar alarm, numbers 2, 4 and 6 that don't have burglar alarms are more likely to get burgled.

The key analysis with tax and government industrial strategy is assessing whether a good or service is like the alleyway gates, and whether everyone involved is better off by paying a tax and sharing the benefits, or better off being left to their own devices in a free market.

One obvious example of a public good that everyone benefits from is national defence: so effectively the nation is treated as a single consumer paying for this through taxation. Another example of a similar service is the police force, as is the infrastructure that provides the framework for the rule of law. There are people, such as David Friedman in his seminal Machinery of Freedom, who maintain that even things like defence, police and rule of law don't need to be provided by governments, but can be sustained instead by non-coercive market and charity-based systems. But we'll give the state the benefit of the doubt for now in terms of providing a few of these public goods, even if it is easy to envisage a time when things may be different.

When taxes are paid to provide things that the government can provide more efficiently than the market then we should support them. But that is the only condition under which a public service like defence or policing is preferable to a private service. As I reminded people in a recent blog post, public services cost about 30% more to provide the same equivalent service provided privately, therefore it is desirable that anything that can be provided by the market is done so, which doesn't leave the state that much it should be doing, because there are not many things it can provide better than the market.

Junk Food, Junk Theory

Statistics often provoke incredulity. For example, The London School of Tropical Medicine sent out a report that says the surplus (stress, that's surplus) food consumed by all the obese people in the world is enough to feed 1 billion of the world's poorest people. You don't need to be a genius to predict what many will say when they tap away on their keyboards by way of a response:

"Ah, so if the over-eaters consumed normal amounts, we could give all that food to those billion people".

Not quite. That's a bit like saying that if we gave some of Europe's rainfall to Africa, there would be less barren land in Africa. True, but not possible. The same goes with food - obese people consuming less does not mean that we could feed the billon poorest people, because what makes them hungry isn’t just lack of food, it is lack of many of the other things that may otherwise result in enough food.

 

All that said, it would certainly be useful if we were all more careful with our food consumption. Perhaps the most useful and practical measures we can take would be to take the lead of the supermarkets that voluntarily donate their surplus food and drink to good domestic causes - either by spending money on the food donation schemes they run, or by adding some extra items to your shopping basket that you can donate to food banks.

On a happy note to end, well done to the Co-op for being the first major retailer to voluntarily sell food on a large scale at a reduced price after its 'best before' date, in an effort to simultaneously cut its losses and reduce its food waste too. What I like most about it is that it's an entirely voluntary decision - no enforcement, no pressure from regulatory bodies - just a straightforward sensible decision that mutually benefits sellers and buyers.