Friday, December 21, 2007

What women want

Via the Freakonomics blog:
Richard Gray at the U.K. Telegraph reports that Sir David King, a University of Cambridge chemist, staunch global warming activist, and one of Britain’s top government scientists, gave the following advice to a woman who asked him what she could do to curb global warming:
“Stop admiring young men in Ferraris.”

A general point here is that I don't think women fully realise the massive collective influence they have on (heterosexual) men via their sexual decisions. Men are very powerfully motivated by the desire to impress women, I think even more than they generally, half-jokingly admit. David King touches on one male behaviour pattern he'd like to see changed, I'm sure you can think of many more. Advantaged men playing fast and loose with the rules, dodging taxes, ripping people off? Disadvantaged young men showing no interest in learning things and instead wreaking havoc on the streets? Men being generally violent, whether outside the pub or with their own families? How different would the motivations to engage in these kinds of behaviours be if within the relevant social groups women treated such men with complete sexual indifference? That is, in each case, if the behaviour led to the man being treated as though he were short, fat and profoundly ugly. Note that in all three cases, if the anti-social behaviour were pointed out, many women would disapprove, but what matters is what they do - revealed preference in econ jargon - and in all three cases I'd argue that it's not the case that such men are shunned. You could even make a case that (perversely) some aspects of these kinds of behaviours are rewarded by women.

Of course, even if it were true that women could exert some influence in this fashion, it would not follow that they ought to. It is the men in these cases who are at fault. But it's an interesting thought that women collectively have a powerful policy lever available.

Tuesday, December 18, 2007

DRiving Me nuts

Itunes' Digital Rights Management (DRM) is driving me nuts. For various reasons I'm sick of the Ipod, but if I switch to a different player, I won't be able to listen to the many songs I bought on Itunes. This is ridiculous: it would be like buying a CD in a Virgin store and only ever being able to play it on a Virgin-branded CD-player. I know there're ways around this, but that's not the point. The point is that DRM as currently implemented on ITunes is immensely clunky.

I'm a guy who loves music and is very happy to pay for it. I want a seamless, easy experience, but that is not what I'm getting. The result? I buy far less music than I might otherwise, because the whole business now just has this association with aggravation in my mind. I can't be the only one: and as bad as I am, I'm surely not the least tech savvy user out there. What all this means is that the music companies are losing out on good business: they're throwing the baby out with the bathwater.

This rant's been bubbling nuder for a while, so I was delighted to find that computer security expert Bruce Schneier (speaking of course from a much better informed position) broadly agrees with me:

So what's going on? Schneier says "I don't see the market righting this wrong", and I have to agree. The prize at stake is near-monopoly control of a sector for at least a while. Apple have it right now with digital music; Microsoft want it with movies. For consumers the problem is this: every company, no matter how innovative, wants to push out it's competitors any way they can: what is most profitable for an individual firm may not be the best route for the industry as a whole or for consumers generally. So paradoxically, today's innovators can turn into tomorrow's monopolists.

In my view, this is what's happening to Apple. Given the technology available today, it's a crying shame that digital music is such a pain. At the very least there ought to be multiple online music vendors with industry-wide catalogues, and open standards giving the ability to play purchased songs on any piece of hardware. This would in turn trigger off intense competition on the part of (i) the online stores, who would have to strain every creative sinew to provide a fantastic music browsing experience, and (ii) the manufacturers of players, who'd be competing on hardware alone.

Maybe the only solution is from outside the market: regulation to make it mandatory to allow purchased digital music to be played in standard formats. Then, let the market work its magic.

Saturday, December 08, 2007

Counterintuitive data: strikes edition

Check out this graph from the Economist:

I find these data pretty surprising:
* Three countries - Germany, Netherlands and Sweden - with strong labour protections lose fewer days to strikes than the US or UK
* Germany and Japan seem to lose something like an order of magnitude fewer days to strikes than the US (!)
* France is just a touch above the OECD average, losing a little bit more than the US, but fewer days than either Australia or Ireland

Is it just me or are these numbers just a little counter-intuitive? I would have expected countries with strong labour protections to lose more days to strikes, and for France in particular to be an outlier. I would have expected the US, and to a lesser extent the UK, Australia and Ireland, all thought of as places where it's easy to hire and fire workers, to lose far fewer days to strikes.

But that's not what we see in the graph. Are these numbers right? Or is this one of these things like unemployment where off-the-shelf numbers need careful interpretation?

(The right would expect easy hiring and firing, weaker worker protections etc. to mean less unproductive striking, with the market taking care of who should get how much etc. The left would expect more strikes in countries with the "worker friendly" policies they like, but they'd view those strikes positively as a mechanism by which workers collectively express preferences. Surely both camps would find these data a little surprising?)

Monday, December 03, 2007

Relative and absolute poverty

I've never understood the notion of absolute poverty, as opposed to relative poverty. The absolute poverty rate is defined by Wikipedia as quantifying "... the number of people below a poverty threshold, and this poverty threshold is independent of time and place. For the measure to be absolute, the line must be the same in different countries."

But what is it that is absolute about absolute poverty? As I understand it, absolute poverty is calculted using a basket of goods type of argument: if you can't afford to buy enough to feed yourself (say) you're absolutely poor. But the amount and quality of food which counts as "feeding yourself" changes with time and place. How much is enough? Raw calories? Enough protein? Fresh fruit and vegetables? The first two were a luxury until recently, the fact that they're now regarded as things everyone should be able to afford is an inherently relative concept. Most people can afford to obtain them, so you are poor if you cannot.

What of education for your child? I suppose being unable to buy books or send your child to school would count as absolute poverty (if education was private, and formed part of the basket of goods and services). But again, these are things which were a luxury not too long ago and still are in many places. So why do we draw the line where it is, and not at say access to violin lessons or playing fields or small class sizes?

My point is that the notion of poverty is inherently relative. The absolute poverty line is determined by social convention, implcitly relative to what others in society can afford. How large a gap is tolerated between those at the poverty line and the median, or some higher rank position, is convention and nothing else. Surely all poverty is relative, or am I missing something?

Saturday, December 01, 2007

Tucked away in the FT...

Tucked away in the Financial Times:

By Simon Briscoe, Financial Times
Published: Mar 18, 2006

The proportion of French youths without work is more in line with other countries than suggested by official figures that put French youth unemployment at more than 22 per cent, compared with 11, 12 and 13 per cent in the UK, US and Germany, writes Simon Briscoe, Statistics Editor.

FT research suggests that 7.8 per cent of under-25s are out of work in France. This is only slightly above 7.4 per cent in the UK and 6.5 per cent in Germany.

The discrepancy reflects the fact that France has a much smaller youth labour force than other countries because a greater proportion go on to higher education after the age of 16, delaying their entry to the labour market.

Now, think of how often you've heard the factoid that 1 in 4 French youths is unemployed or whatever, and how rarely you've heard the point made above. I repeat, for emphasis "7.8 per cent of under-25s are out of work in France. This is only slightly above 7.4 per cent in the UK and 6.5 per cent in Germany" (the corresponding number in the US is around 7.4%, as far as I know).

Why is one particular and highly misleading spin on the numbers so widely disseminated? Your guess is as good as mine, but it's weird.

Wednesday, November 28, 2007

Why does banking pay so well?

Superb article from Martin Wolf in the FT:

He starts with the question: "Why does banking generate such turmoil, with the crisis over securitised lending the latest example? Why is the industry so profitable? Why are the people it employs so well paid?" and goes on to suggest the answer is "banking takes high risks. But the public sector subsidises this risk-taking. It does so because banks provide a utility. What the banks give in return, however, is gung-ho speculation.".

The key point is that (Wolf again; I can't put it any better): "banks benefit from sundry explicit and implicit guarantees: lender-of-last-resort facilities from central banks; formal deposit insurance; informal deposit insurance (of the kind just extracted from the UK Treasury by the crisis at Northern Rock); and, frequently, informal insurance of all debt liabilities and even of shareholders’ funds in institutions deemed too big or too politically sensitive to fail... if things go well, shareholders earn exceptional returns. If they go badly, the downside cannot exceed their equity. Beyond that point, creditors and government share the losses."

This goes a long way towards explaining why bankers are paid so well: during times of profit, banks can pay out crazy wages and bonuses. However, the government guarantees Wolf alludes to above in effect put a lower bound of zero on remuneration: bankers don't ever have to pay back earnings (i.e. receive negative wages), no matter how thinly capitalized their industry or how bad their decisions turn out be. Wolf again: "...a run of profitable years in which shareholders receive high returns and employees are handsomely rewarded. Then comes the year of the locusts ...since they do not receive negative pay, they are able to keep their earlier gains."

Monday, November 19, 2007

An unexpected ally...

It seems as though Bill Gates' dad - of all people! - is on my side about inheritance tax:

Apparently Gates senior's view is:

"...individual wealth is a product not only of hard work and smart choices but of the society that provides the fertile soil for success. They don't subscribe to the "Great Man" theory of wealth creation but contend that society's investments, such as economic development, education, health care, and property rights protection, all contribute to any individual's good fortune..."


Tuesday, November 06, 2007

Where are the doctors?

Here's a curious fact. The UK and US are both countries where doctors get paid very well: UK is (anecdotally) #1 in Europe on this count (or close), and US doctors are certainly far better paid than their European counterparts. Yet the UK and US - and here's curious bit - are not the countries with the most doctors per capita. Germany - to take one example, there are others - has more docs than either the UK or US. The difference is actually quite striking: Germany has 3.4 practicing doctors/1000 people, the UK and US each have 2.4 (numbers from OECD). This is a huge difference of 42%. Absent any fundamental scarcity, a high wage for a given profession should increase the supply of labour and thereby reduce wages. If this is what's happened in Germany, why doesn't it happen in the UK and US? Given the rewards on offer, why don't more people become doctors in these countries?

Friday, August 31, 2007


I'm always ranting about vacation time. Well, here's where the theory gets put into practice: I'm away for 12 days starting tomorrow (ok, it's not three weeks, but it's a start!), and no, I'm not taking a laptop...

Market failure: the airport edition

A post from Maria at Crooked Timber makes me wonder whether there isn't perhaps some sort of massive market failure going on at airports. Here's Maria:

Here are the things most people would happily pay for at an international transit airport: – a shower – clean underwear (for those of us who habitually forget to pack it) – daylight – an exercise facility to help with the jetlag and minimise DVT – nutritious but not too heavy food – a nap, lying flat, somewhere quiet.

And here’s what is generally available: – Gucci – Chanel – l’Occitane – Bodyshop – Lacoste – Nike – a few plastic seats – McDonalds, dougnuts, and the local variety of fried, sugary dross to add a sugar hangover to your jetlag.

I suppose the obvious point is that as a consumer of travel, your decision about where to travel is not about the airport but the place. If you want to go to London, you have to put up with Heathrow. So the airport company have a captive customer base, attracted by, and in a sense paid for, by the business environment and tourist attractions of the city. It's hard to see a market solution to the problem, except perhaps in very large cities, where you could conceivably have multiple airports in genuine competition.

So is there a solution? Are there any good publicly funded airports? Or are they just as bad? Is this dream airport something we're just never going to get?

Tuesday, August 28, 2007

Bail us out!

Watch this remarkable rant from "Mad Money" host Jim Cramer on CNBC. Isn't it funny how quickly free-market types turn to the government when things go wrong?

Slate's Daniel Gross puts it best when he writes about these characters having a special bye-law which says "The government should never intervene in the economy, unless it is to bail out hedge funds and investment banks". (For the record, I certainly don't hold the position that government intervention should be ruled out because it might help reckless financiers.)

Thursday, August 16, 2007

Only economists...

Here's the start of a piece in the Economist about working hours:

Most people greet the weekend with gratitude. But some economists view it with puzzlement. Why, they wonder, does the bulk of the population rest on the same two days each week? Why does everyone's week end at “the” weekend? From an economic point of view, it would surely be more efficient to stagger days of rest throughout the week. That way, expensive pieces of equipment would not lie idle for two days in seven, and infrastructure would be less congested the other five.

Surely only economists could possibly be puzzled by why people like to have the same days off! More seriously, isn't it a somewhat sobering thought that something as important as the fact that people like to enjoy leisure time with other people might be missing from models used to make decisions about our lives?

Five weeks off

US blogger Ezra Klein writes about vacation time, and says he'd love to be able to take more time off. Here's a fairly typical response from an irate reader:
So here's my problem with Ezra's post:

...I'm not willing to give up a lot for five weeks of vacation a year, right now. I like the Bay Area, and the cost of living is high, here. I'd like to get a house. I'd like to be able to live here AND still have enough money to go on vacation to Japan this year or next. And some of that's going to have to go by the wayside if I lose 8% of my paycheck.
Now, maybe in a few years, that personal equation will change for me, and I'll start thinking of ways that I could shift my work-life balance more towards "life." But I like to think that, if those few years later Ezra's got a kid and a mortgage and needs to hold onto every penny that's coming his way...“

Does anyone spot the flaw in this argument? The problem is a classic Prisoner's Dilemma: if the respondent alone works less, he's in trouble, because houses will still cost the same, but he alone will have less money. If, on the other hand, everyone works a bit less, house prices will have to fall, and so long as his rank position in the earnings table remains unchanged, he's going to be able to buy the same house as before, except that now he'll also have been able to spend three weeks on a canoeing trip. Thus, with respect to "competitive" goods like housing, it is possible to enjoy more leisure without any real sacrifice: but only if it's a collective decision. On the other hand, a Japan vacation or flat-screen TV will not get much cheaper even if everyone in the Bay Area does work less, so those kinds of things are examples of genuine leisure-consumption trade-offs.

So, yes, working less mean earning less, but the substantive effect of the reduction is not as bad as it sounds, so long as everyone else is working less too.

Wednesday, August 08, 2007

Masters of the Universe II

Three further thoughts on the Barksy interview below:

1. When you have “the most profitable industry in the history of mankind” enjoying a “quirk” in regulation, you simply have to ask questions about influences on the political process.

2. Market wages do not necessarily reflect the true, long-term "usefulness" of work (except under very strong assumptions). Many professions pay more than others because they deviate from a perfect market, not the reverse: medicine is a good example. Taxes which are used to pay for workers (firemen, nurses, scientists) who are under-valued by the market can then be seen as rightly rewarding productive work by using the excess rewards which accrue to those in over-valued sectors. (The fact that estimates of the extent to which different kinds of work are over- and under-valued are both very rough and highly politicized does not invalidate this general defence of taxation.)

3. The labour market distortions induced by extremely high wages in the finance sector are worrying. Put simply: is it really efficient to have legions of bright young physicists and engineers (usually trained at great public expense) slugging it out in the City in the hope of a becoming lucky young millionaires instead of doing research on, say, sustainable energy, or designing genuinely innovative new products?

Masters of the Universe

Are people in finance overpaid? Should hedge fund managers be able to pay a lower tax rate, as they do in many cases? I'm sure regular readers can guess my views on these and related questions, but it was interesting to read an interview in the New York Times with hedge fund manager Neil Barsky, which touched on some of these questions. Barsky is certainly a “finance type” and used to be a reporter at the Wall Street Journal, so he's certainly no leftie. Some excerpts:
[On tax rates]
First, let me state the obvious: there is no public policy reason for hedge fund and private equity managers to pay a lower tax rate than teachers, doctors, or lawyers... I suspect that this debate is the result of a quirk in the tax code... No legislator in his right mind ever said, “We have to tax hedge fund managers this way, otherwise they’ll have no incentive to work hard!” So let’s not kid ourselves — the tax code is a gift to the industry. Of course, accountants and some managers will find clever ways to circumvent the new laws, so perhaps the proposed bills won’t generate the revenue they are meant to...The notion that the most profitable industry in the history of mankind (I hyperbolize, but on a per-person basis, this might in fact be true) requires a lower tax rate to take risk and make investments, simply does not square with logic. I know of no manager who would stop working or stop investing as a result.

[Short-termism in business thinking driven by financial markets]
This is a great question: does the presence of short-term-oriented investors such as hedge funds alter the behavior of the companies they invest in? Let me throw a few more questions out there: To what extent does widespread options issuance create an incentive for a CEO to focus on his or her stock price to the exclusion of building long-term business value? Does the ubiquity of earnings estimates cause companies — unconsciously or, ahem, intentionally — to distort their business practices in order to please investors? Does all the money sloshing around hedge fund coffers allow them to throw their weight around and often force managements to make bad business decisions? My answers would be: Yes. A lot. Yes. Yes. Short-term thinking infected Wall Street some time ago, and I would suggest it was performance-obsessed mutual funds that got the ball rolling back in the 1980s bull market.

[Social and labour market effects of hedge funds]
I don’t believe hedge funds necessarily provide a social good, but I also do not believe they are a social evil (generalizations are always dangerous, but bear with me here). And it is unfortunate that the “best and the brightest” no longer seem to want to go into government or medicine or teaching (I did say I’d be generalizing here), and instead seem to gravitate to the best-paying professions... In general, the compensation differential between jobs in finance and jobs in virtually every other part of society is sad.

Monday, August 06, 2007


James Surowiecki writes on "rent-seeking" in the US student loan business in this week's New Yorker:
[Student loans] ...isn’t a free market in any meaningful sense of the term, because the government effectively determines prices, insures against losses, and subsidizes volume. In this environment, most of the competition among private companies is really just squabbling over how to split up the spoils. Economists call this behavior—when a company seeks to manipulate economic conditions rather than actually create value—“rent-seeking.” It’s common in areas where the fetish for privatization has taken hold, such as the outsourcing of homeland security to private contractors and the boom in private Medicare insurers. (The private insurers are less efficient than Medicare and receive billions in subsidies from the government.) Outsourcing tasks to private companies is supposed to let government reap the benefits of the free market. But sometimes it just ends up uniting the worst of government and the worst of the private sector into one expensive mess.

If you're in the UK, does any of this sound familiar? Isn't rent-seeking exactly what's been going on in many of the botched attempts at privatisation, from the railways to Heathrow?

First They Came

First they came for the Jews
and I did not speak out
because I was not a Jew.
Then they came for the Communists
and I did not speak out
because I was not a Communist.
Then they came for the trade unionists
and I did not speak out
because I was not a trade unionist.
Then they came for me
and there was no one left
to speak out for me.
Pastor Martin Niemöller

-- Attributed to Pastor Martin Niemöller (1892–1984)

Wednesday, August 01, 2007

Why does Bergman matter?

Ingmar Bergman's death has triggered off a mini-debate about the merits of art cinema. Here is one example, from today's Times; last night's Newsnight is another. The question being asked – and I welcome the fact that it is being asked – is why we should care about film-makers whose films are not popular, and which are in the opinion of many, unenjoyable.

This question goes to the heart of what art really is. If art is meant to be enjoyable (in some broadly defined sense) and if each person's view counts as much as any other, then surely, the argument goes, the Farrelly Brothers are greater artists than Bergman ever was.

Appealingly democratic though this argument is, I think it misses out on an essential aspect of enjoying art, which is adaptation. Our response to a given stimulus is not fixed from birth to death, but capable of undergoing change. In many cases, enjoying something involves learning: we have to undertake an initial investment to even be able to appreciate the thing. This initial effort may not be enjoyable at the time, but is undertaken in the hope that it will lead to greater joys in future.

Consider what happens with food. The first time we go from fish fingers and ketchup to good tomatoes and olive oil, it doesn't seem nice (or at least it didn't to me), but over time you learn to enjoy food in a way that makes the entire process of eating more fun, not less. A business invests money, foregoing profits in the present to add to profits in the future. In the same way, this sort of training is a hedonic investment: a decision to enjoy a little less in the present in order to enjoy more, or more sustainably (I'll write more on this aspect in a later post), in the future.

So what has all this got to do with art? You could argue that art is essentially a sort of product or service whose enjoyment requires specialized training. The idea is that learning to appreciate the artform opens up new possibilities for enjoyment, and it is in the hope of realizing these possibilities that anyone bothers. Of course, there is a strongly subjective component to all of this, so each individual has to make a guess as to exactly which hedonic investments are likely to pay off for her. (Typically this is done by looking at people who we assess to be in some way like ourselves, and who have clearly learned to enjoy something, and then following the route they've taken. In other words, we use role models.)

Coming back to the specific case of Bergman (or for that matter any relatively unpopular but feted artist) I think what tends to happen is that at a given point in time, only a small number of people make the effort, or even have the inclination, to seriously get into cinema. Over time, their tastes certainly evolve away from the mainstream, but there is a sense in which these film-buffs are getting more out of their trips to the cinema than the average person. They love Bergman, and we can appreciate their specialized ability to enjoy film, even if we do not share it, so we take note when he dies. This seems perfectly reasonable to me.

Furthermore, since most film-makers tend to themselves belong to this small set of serious cinema fans, over time these arthouse films influence more popular work, to eveyone's benefit. Indeed, many of today's popular films – Pulp Fiction or the Usual Suspects say - would have seemed far too complicated for popular consumption in the 1950s. But their makers are film-nerds. They themselves made hedonic investments, devouring films that others may have thought unenjoyable, and learning how to enjoy, and use, storytelling devices which were not common in the mainstream. Years later, they've been able to use that learning to craft widely enjoyed but relatively sophisticated entertainment. That sounds like progress to me.

Friday, July 27, 2007

I Know Which "Times" I Prefer...

Dan Kennedy draws attention to the state of US cable news in the Guardian. UK television news is certainly much better than in the US, but when it comes to newspapers and magazines, in my view the best publications in the US are far better than their British counterparts.

These days UK newspapers - yes, even the "broadsheets" (for non-UK readers, these are the four "serious" newspapers, namely the Times, Telegraph, Guardian and Independent) - contain little more than re-worded press releases plugging some product or another ("10 best stir-fry pans" etc.), or paraphrased versions of the Reuters wire. There is nothing remotely equivalent to the serious journalism you see in the New York Times. By this I mean pieces where the journalist makes the effort (and has the background) to understand the issues for herself, and then puts the evidence together into a coherent story.

The opinion pages are even worse. In the UK papers, opinion pieces are droll enough, but very rarely have the depth of the best of the New York Times or Washington Post's op-ed pages. I really can't imagine a serious economist like Paul Krugman having a regular column in the Times of London. Instead we get the likes of Boris Johnson: a funny enough writer, but a literate generalist with absolutely no expert knowledge of anything.

Finally, where are Britain's magazines? America has the superb New Yorker, the New York Review of Books, and the more mainstream Newsweek and Time (light, but readable enough). Germany has Der Spiegel and Stern. Leaving aside the Economist, which is a much more specialist outlet than any of the above, we have nothing comparable.

Thank heaven for BBC news...

Thursday, July 26, 2007

Youth unemployment

I've written previously on how difficult it is to compare rates of joblessness between countries. One of the trickiest areas is the youth labour market. Suppose countries A and B each have 1 million 16-20 year olds. Out of this population, each country also has the same number - let's say 50,000 - of youths who are neither at work nor in education. Now, country A is less generous with funding for education, so 450,000 of the the 950,000 kids at school there work part-time. Country B offers more support for education, so only 50,000 of the kids at school there work. Now, the unemployment rate is, by definition

number unemployed / (number unemployed + number employed)

Thus, the formal youth unemployment rate in country A is just 10% but in country B a whopping 50%. Both countries have exactly the same number of kids who are not usefully occupied, but A's situation looks better simply because it has more of its students at work. (You could even argue that B's position is better, since the long-term pay-off of good education is high, and it may well be the case that it's preferable if students don't have to work.)

There's a good argument to be made that the US currently resembles country A, and France country B. As economists John Schmitt and David Howell report:

At 22 percent, the nominal youth unemployment rate in France is double the U.S. rate of 11 percent, and even further above the U.K. rate of 9.9 percent...


...for male youth the unemployment-to-population rate is 8.3 percent in the United States and 8.6 percent in France...

And there are of course differences in the rate at which young people work:

In the United States, 23.1 percent of 16- to 19-year-old students were also working, compared to only 1.8 percent of French teenagers. This disparity creates most of the higher statistical unemployment rate.

Be wary of unemployment rates: they really are the most heavily politicised of economic indicators...!

What's the rush?

I've posted previously about working hours, and at various times talked about the relationship between conventionally measured economic output (i.e. in terms of GDP) and well-being. This piece:

by David Rosnick from the Center for Economic and Policy Research does a really good job of bringing these strands together in one article. And given what a rush many of us are in - although thankfully not the Compulsive Theorist - it's nice and brief. Well worth a read.

The key point I would draw attention to is the fact that these issues are not ones we can decide upon in isolation. Choices of this kind pretty much have to be made collectively: this is an area where we really need politics and not just individual choice.

Starving the NIH

Very rarely do I find myself agreeing with anything in the Washington post, but this piece is spot-on:

NIH-funded research, and associated spin-offs, have been for many years arguably the most potent source of biomedical innovation in the US, if not the world. Yet the Bush administration - which when it comes to tax cuts seems swayed by far more tenuous arguments about innovation and technology - sees fit to reduce its support. The effects are substantive. From my own small circle, I can think of several top young scientists - all very smart and enormously hard-working - who have, largely as a consequence of these changes, now reluctantly left the academic sector.

Keeping our heads above water

A couple of observations about the UK floods:

- First, in my view, the UK response so far has been superb. The emergency services have been combing through flooded areas looking for kids and old people who may have been left behind, airlifting people when necessary and generally making sure that serious losses (as in deaths and serious injuries) are prevented. There's been a real community spirit and so far no reports of looting or anything of that kind that I can think of. The news media have been shrill, but they have been holding the government to very high standards. Last night the BBC news led with a piece on how drinking water dispensers in Gloucester haven't been filled often enough. The piece highlighted this failing and the reporter put the criticism directly to the Prime Minister Gordon Brown, who really had to say it would be fixed. Here's the thing: if he doesn't get it right, tonight's news will be scathing. I couldn't help contrasting what's happened with Katrina: the looting, the sign outside someone's house (“I have a big gun and an ugly wife”), FEMA's complete mismanagement of the crisis and Bush's now-infamous response (“Brownie – you're doing a heckuva job”).

- Second, I doubt you can put these floods down to global warming, but what they do highlight is the kind of economic devastation climatic changes will wreak in the years ahead. The so-called “economic” case against action (“it'll cost too much”) is totally bogus. As the Stern report has argued at length, even very conservative estimates regarding the frequency of events like this make a compelling economic case for action.

Why should we care about sustainability, if China and the US don't?

I live in the UK, and a question some people here ask is this: why should we bother about emissions in our small country when any small change on our part will be as nothing next to the impact of China and the US? In my view, this argument is wrong-headed because it ignores the manner in which preferences shift over time.

Consider slavery. At some point, in some "liberal" enclave, some people would have started thinking that slavery was morally wrong. At that point, a nay-sayer could reasonably have pointed out that all the total amount of slave-owning in the room was tiny compared with the vast mass of slave-owning in the Deep South, say. Yet it should be clear in retrospect that the efforts of an initial minority to argue a morally correct case can pay off, as more and more people start to listen and see their own values change. (It seems to me that such changes can be seen as propagating through a network, and can be highly non-linear, such that after a slow start things can really gather pace.)

Moving back to the present, when we in Britain see some European countries recycling and controlling their output of rubbish more effectively than we do, and when we see Germany's sustainable energy use at 12% and rising, it affects our political debate. Equally, when policy experts elsewhere look at our rapid adoption of leading standards for sustainable fishery (MSC) and forestry (FSC), they can see that it is possible to make these issues important to consumers.

These effects are certainly going to be subtle at first, but nonetheless very real. It's just much more powerful to be able to point to a policy choice that is already in place elsewhere, rather than an abstract idea which has not been tried. In addition, technologies or standards which are already working elsewhere are relatively easy to import. We hear this argument all the time in the context of the diffusion of technology, but I think it's just as applicable to ideas.

It therefore makes sense for a small country (or individual) to "go green" on three counts. First, the reduction in impacts, however small, is a good in and of itself. Second, there is a political and moral “ripple effect” which can be a potent source of change, both within and between countries. Third, the push to develop new technologies, standards, accounting practices in one place give late movers elsewhere working tools which can then be rapidly adopted.

Thursday, July 12, 2007

Tax and Spend

I'm back again after (another) long-ish absence. Here's a comment from one Robert Waldmann on the excellent Economist's View which caught my eye:

George Bush said

"No nation has ever taxed and spent its way to prosperity."

He is, of course, totally wrong. No country which is not sitting on oil or made of guano has ever achieved prosperity without taxing and spending the money on public education. It's not like the pure private sector approach to schooling has never been tried -- it was tried and failed for millennia. So far in history the rule is no tax and spend no industrialization.

Tax and spend is so under-rated...

Friday, April 20, 2007

The solution to unemployment

It's now virtually an article of faith that the the US economic system is a marvellous engine of job creation, especially when compared with Europe, and that the source of this vitality is its flexible labour market and relative lack of social welfare. As I've mentioned previously, what is less well known is just how huge the US prison population is (around 2.2 million, or many times higher per unit population than any other wealthy country), and how this affects our view of unemployment.

Bruce Western at Princeton has tried to account for the effect of the prison population on unemployment numbers, and among other things, has found that the Black male unemployment rate during the 90s boom was a whopping 39%. Put this alongside France's much publicised 20% rate for its minorities, and you have the seeds of an interesting debate about which country is actually doing worse for it's “underclass”. Along with Katherine Beckett, Western has also shown that if you account for prison numbers, US unemployment was consistently higher than Europe's in the 90s. This is a remarkable turnaround of the conventional wisdom. Writing in the mid-90s, when the prison population was a mere 1.6 million, Western predicted that to keep official unemployment low, the prison population would have to rise further. Indeed, in the decade since, it's gone up a whopping 37% to around 2.2 million.

But why should we account for incarceration when we are interested in unemployment? I think the answer to this lies in thinking for a second about why it is we care about unemployment in the first place. We care about unemployment because it is unpleasant to be unemployed. That's it. It's the well-being of the jobless that is the issue. If the unemployed, were, for some reason, perfectly happy to be without work, and if the rest of the labour market was functioning just fine without them, the issue would cease to be of consequence.

Yet being incarcerated is surely at least as bad as being unemployed (and taking into account endemic features of violence, sexual assault and psychlogically devastating things like solitary confinement probably much worse). At the time the standard measures of economic well-being were formulated the prison population was so small - as it still is in most of the world - that it was unnecessary to account for it in national measures of economic health. But the population affected by the criminal justice system in the US is now so large that neglecting to account for it means missing out a huge part of the labour market in that country, and, in my view, leads to a much too rosy view of unemployment there.

These prisoners are not only not gainfully employed, but deprived of basic liberties, and in many cases lose many rights for life. Furthermore, their sorry outcome, unlike that of the unemployed in Europe, is simply erased from the economic accounts (well, actually all the guarding and prison building actually adds to GDP, but that's another story). Personally, I find the way in which the outcomes of these millions of people are effectively erased from US measures of well-being really disturbing, because mass incarceration not only reduces well-being, but perversely gives the impression of increasing it.

Viewed in this way, perhaps Europe's greatest "failing" is actually trying to count all its citizens in economic measures. How much better would European unemployment look if we simply imprisoned a large chunk of the poor and unskilled, and hired some of the remainder to guard them?

Saturday, April 07, 2007

Urban America

In just over a year living in the USA, perhaps nothing has surprised me more than the contrast between the much-vaunted wealth and dynamism of this country and the often mediocre quality of life in its urban areas. This post from urban planning writer Josh Stephens makes this point far more eloquently and passionately than I can:

A nice, and in my view very accurate, observation from the piece:

Many Americans rightfully take pride in so-called gems like San Francisco, New York, Portland, and even Los Angeles on a clear day. But Mercer's analysis indicates that we're fooling ourselves: we're so far from the top that, in true Platonic fashion, we can't even imagine what the top looks like.

You could say that Stephens is being a little tough on the US here. Perhaps US life is fundamentally centred around the car, and that it is this fact that changes everything in terms of how cities are designed. To be fair, I know Americans who dislike European cities because they have pedestrian zones and public spaces and because you have to walk between shops: so perhaps it's just a case of to each his own.

Thursday, April 05, 2007

Unemployment in Germany and the US

A standard piece of conventional economic wisdom says that Germany's labour-friendly regulations and high level of social benefits result in a high level of unemployment. It's not unusual to see unemployment figures as high as 12% quoted in the press, usually in juxtaposition to a US rate of 5% or thereabouts.

But is the difference really as great as that? The German government's numbers are calculated in a very different way from the US. As far as I'm aware, in Germany if you work upto 15 hrs a week but register a desire to work longer, you count as unemployed. In the US, if you work just 1 hour a week, you're employed. The OECD tries to correct for these sorts of accounting difference in its "Standardised Unemployment Rates". The current rates for Germany and the US are 7.7% and 4.6% respectively:,2340,en_2825_495670_38234290_1_1_1_1,00.html

However, Germany's social benefits in themselves surely increase the chance that an unemployed person is formally recorded as unemployed: he or she has much to lose by being "off the books". This "pull" factor is very likely much weaker in the US, so I'd expect a greater chunk of the unemployed in the US to be unrecorded than in Germany. Admittedly, this is hard to correct for. Also, the US figures don't include that country's enormous prison population of well over 2 million. It seems reasonable to assume that a good chunk of these people would be unemployed if they were not incarcerated. Accounting for these differences would surely add at least 1% to the US figure bumping it up to around 5.6%.

Finally, while you can never control for all the many relevant factors, there's one event in recent German history that simply cannot be ignored. This is, of course, reunification. If unemployment is three times higher in the East than West, a back of the envelope calculation suggests that unemployment in West Germany is probably around 6%.

This leaves us with a very minor difference in unemployment rates between the US and West Germany. Put this together with the fact that West Germany had really low unemployment for decades previously, and this must surely put a question mark over the claim that social welfare must lead to joblessness.

Friday, March 30, 2007

Milk into babies

In a recent article in Nature, Holmes and O'Connell discuss the depressing state of affairs for women in academia. One of the issues they raise concerns child-friendly policies at Universities:
More universities should provide paid family leave for graduate students and faculty members. Only one-third of PhD-granting institutions provide any sort of daycare for graduate students and most have no childbirth policy.
We're richer than we've ever been. We now have hourly productivity levels which would allow us to work less, at least for those critical years, the technology to facilitate flexible working, and the resources to build the infrastructure we need to make raising children really compatible with work. Yet basic things like good, onsite daycare remain a rare perk rather than the standard provision they could be. What is missing is the political and social climate to make it happen. Perhaps the very fact that we use phrases likes "child-friendly" says it all - when was the last time you heard of a "life-friendly" organization?

Part of the problem is that policies of this kind tend to be seen as leftist and uneconomic. But even if you discount all the non-monetary gains that would flow from a "family-friendly" re-thinking of how we work, the economic benefits are undeniable. Accounting for costs and benefits over a lifetime, there's surely no greater economic good than a well-raised child. Or, as Churchill famously put it: "There is no finer investment for any community than putting milk into babies."

Friday, March 23, 2007

All under one roof

Parents of young children typically have a hell of a time looking after the kids, while balancing mid-career workloads. So they end up spending lots of money on day care, nannies, etc. Yet, in many cases, their own parents would gladly take over, at least for short periods. This seems like a double payoff: the work gets done and the person doing it enjoys it.

One way to make this happen more would be to think up a new kind of old-fashioned family home. Have grandma in her own mini "in-law" unit, so you can meet every day,or at least very often. But, crucially, make sure that physically and psychologically there's just enough distance to stop it feeling like a re-run of the kids teenage years.

Would this be so hard to achieve? I don't think so. We just need some creativity to re-imagine this most ancient of set-ups in a new way. Any ideas?

Robots can't cut hair

Year-on-year, advancing technology automates processes that once required human effort. This puts people out of work in one sense, but in another sense it frees up that same human effort for other things, which are often - though certainly not always - more pleasant or creative. Thus, while a generation or two ago I would almost certainly have been plugging away as a clerk in a monstrous Kafkaesque insurance firm, today I get to do fun research. Wait, I hear you say, there were scientists two generations ago, surely? Yes, but very few, and as a consequence, the only full-time ones were probably vastly more talented than I am, and probably luckier too.

In general, it's the things machines are bad at that become the work of tomorrow. Who would have thought, in 1950, say, that there'd be as many hairdressers as there are today? Hairdressing requires the kinds of motor skills and creativity that is hard to automate, and lots of people enjoy getting what were once movie-star-only treatments. Hence the trend.

But not all creative professions grow. Ones in which the product can be replicated by technological means can actually shrink. A classic example is musicians: once upon a time you had to hire one in order to even hear a tune, now you can put on a CD and listen to Herbie Hancock or Itzhak Perlman or whoever, which has increasingly put medicore players out of business.

So the formula is this: jobs which are both hard to automate and can't be easily replicated tend to be the ones that grow. With that in mind, what occupations might swell their ranks in the years ahead? Research (of course!), and I think especially applied and translational work, which there could be so, so much more of. But also less obvious things like personal services - cooking, surgery, hairdressing etc. Maybe personal shoppers: technology is making shopping for clothes harder, inasmuch as there more choice, so I think there might be a growing demand for experts who do it all for you. Professional childcare should rise: surely everyone wants a Super Nanny on call? Teaching should keep growing, at least until classroom sizes grow small enough that no one cares about further reductions, and demographic changes mean there aren't actually many kids to teach.

So close your eyes and wonder: what would you like to have done for you, if it were really cheap? Whatever it is, odds on your grandchildren will be doing it, having it done for them, or, if you're a really demanding dreamer, still be wishing for the same thing.