Friday, October 2, 2015

Behavioural Humility

Some thoughts I shared at the 2nd Irish Behavioural Science & Policy Network meet-up earlier this week on prospects for behavioural economics and science:

Good evening everyone. My advice to practitioners of behavioural science these days is that you need to be ‘Humble and Ambitious’ – humble about what you know but ambitious about what you can do.

First some reasons for humility:

1. Science doesn’t happen until it happens twice

Take the Reproducibility Project published in August. The project examined 100 prominent psychology research papers and made an exhaustive effort to independently reproduce their findings. What they found was that almost two-thirds of the results they tested didn’t quite hold up. In a few cases, the reproduced experiments gave an opposite result, showing either no effect or an effect in the other direction from the original study. More commonly, the reproduced results were simply smaller than those claimed in the original study, often so small as to not be statistically significant. How sure are we this stuff works? There is no corpus of Behavioural Laws yet - it's still early days and practitioners should admit as much.

2. We are all Bourgeois Gentlemen

There is a famous line in Moliere’s play The Bourgeois Gentleman where the character Monsieur Jourdain discovers ‘I've been speaking prose all my life and I didn't even know it!’ I’ve had similar reactions from marketing managers and advertisers when I tell them that new thinking in economics says people are irrational and often motivated by emotional and subconscious needs, or: ‘I’ve been a behavioural scientist all my life and I didn’t even know it!’ Some disciplines are ahead of others in this respect and the challenge to behavioural scientists is to go beyond the 'we knew that already' reaction they often get.

3. 100 years of psychotherapy and the world is getting worse!

That was the title of a book by James Hillman published in 1992 (so 123 years of psychotherapy...). Sometimes new tools end up over-promising and under-delivering provoking a backlash among users. It’s even worse – to quote Henry David Thoreau: ‘Our inventions are want to be pretty toys, which distract us from serious things. They are an improved means to an unimproved end.’ Behavioural scientists need to be careful they don’t end up as pretty toys, soon discarded in favour of newer ones.

Now for the ambitious stuff:

4. The Age of Ageing

We are culturally, economically and politically (and even personally!) in denial about the ageing of populations in the developed world (and soon the developing world). Ours is a civilisation gripped by Hyperbolic Discounting – we urgently need to create the language, tools and incentives to change our behaviours to help us place more value on the future than we do at present. The pensions and insurance industries will be eternally grateful to behavioural science if you can pull it off!

5. The Leisure-Life Balance

Forget the work-life balance: soon a third or more of us won’t have any work to do anyway thanks to the robots and artificial intelligence (if you believe the forecasts!)  The philosophers have been thinking about this long before behavioural economists, here’s Aristotle: ‘The first principle of all action is leisure. Both are required, but leisure is better than occupation and is its end.’ There will be a growing need to equip us to make the right choices, decisions and investments to live a leisurely life well, and behavioural science should be at the forefront of this task.

6. Forget Happiness

Finally, and more controversially, I’d like to see behavioural scientists paying less attention to happiness rather than more. People can tell you if they are happy (we’ve been tracking it for over 6 years), but they can’t really tell you why they are happy. Nor is it simply about pleasure – Aristotle thought that that was for ‘cattle’ – rather real happiness is something we perceive across a lifetime in terms of fulfillment, contentment, meaning and belonging. And an absence of pain ideally. So ignore calls to measure Gross National Happiness, it will be even less revealing (and relevant) than the existing measure of Gross National Product (conceived as it was during the Great Depression). Instead (and you might want to edge closer to the door here!) we should take a leaf out of Nietzsche’s book: he observed that the two emotions/feelings/experiences we want to last forever are Joy and Love. Now there’s an interesting research task: the economics of love or the maximisation of joy!

So be humble and be ambitious – and go make a real difference in a world that needs all the help it can get.


Thursday, September 17, 2015

Europe's Principal-Agent Problem

Thanks to qualified majority voting (QMV), the EU's member states won't have a choice in relation to the number of refugees they accept at the behest of the European Commission. Some might see this as a necessary response to a crisis, others might see it as part of a plan:
But in Europe right now, there is a bigger problem than border control, and that is the cynical weakening of national borders, and of the popular sovereignty within those national borders, by an EU oligarchy not remotely interested in freedom and autonomy but rather determined to water down democracy itself in the name of allowing small cliques to set quotas, write regulations and determine national destinies. Here is the great tragedy of the refugee crisis: it’s being used to dilute democracy further. 
And that's from someone who supports open borders. If anything the EU's response to the refugee crisis highlights an even bigger problem, namely the growing disconnection between Europe's leaders and its voters. It's the Principal-Agent Problem of democracy: often it's in the Agent's interest (i.e.: the politicians) to sell out the Principal (i.e.: the electorate). Peggy Noonan describes it quite starkly:
Decision-makers fear things like harsh words from the writers of editorials; normal human beings fear things like street crime. Decision-makers have the luxury of seeing life in the abstract. Normal people feel the implications of their decisions in the particular. 
The decision-makers feel disdain for the anxieties of normal people, and ascribe them to small-minded bigotries, often religious and racial, and ignorant antagonisms. But normal people prize order because they can’t buy their way out of disorder. 
People in gated communities of the mind, who glide by in Ubers, have bought their way out and are safe. Not to mention those in government-maintained mansions who glide by in SUVs followed by security details. Rulers can afford to see national-security threats as an abstraction—yes, yes, we must better integrate our new populations. But the unprotected, the vulnerable, have a right and a reason to worry.
Even The Guardian is beginning to notice that it's the working class who get hit hardest by in a refugee crisis of the kind we are experiencing.

The Principal-Agent Problem arises from asymmetric information: in other words, the people acting on our behalf know more than we do. This has moved Scott Adams to point out that asymmetric information is even worse in politics than in finance:
And if you believe you can make intelligent decisions on politics based on inaccurate information and lies, why aren’t you already rich from doing the same thing with stocks? 
I’m a big fan of voting (when other people do it, not me) because it gives people a sense of ownership in the process. So please vote. But don’t confuse that with being psychic.
Right now the greatest information asymmetry relates to what's going on in the Middle East, especially in Syria. The news editors don't know what's happening, not even the border guards. Though the fact that we're witnessing the 'sudden' the decision of Syrian refugees already in safe havens in Turkey for several years to migrate to Europe does suggest that some people know what's going on.

Then again, I've always subscribed to the cock-up theory of history than to the conspiracy theory. People just aren't that clever, nor consequences all that easy to control. Indeed, if there's any truth in the view that people are getting dumber (or 'cumulative mutation damage of the genome' if you prefer), then things may be worse than we (can begin to) think - take it away Bruce:
However, for the past fifty years and increasingly, we have been getting a taste of something different; and most nations and large organizations are now being run by - not the least impaired people - but energetic incoherent semi-lunatics; because in a mass media democracy, that is what the more-seriously-crazed majority seem to want. 
Democracy as a system for choosing government has never made much sense; mass democracy in a mass media addicted world makes even less sense; democracy in a lunatic asylum is... crazy.
Principal-Agent Psychosis - now there's a Problem.

Sunday, September 13, 2015

The Party's Over

I was a student at the LSE when Michael Foot penned 'the longest suicide note in history' in the 1983 General Election. I thought Labour's manifesto was just what the UK needed; though I've mellowed a little since. Still, as they used to say at the LSE, if you're not a socialist before the age of 25 you haven't got a heart; if you're still a socialist after 25 you haven't got a head.

So is Jeremy Corbyn's election as Labour's new leader a big deal? Yes and no. It's a big deal for the future of the British Labour Party - they don't have one - but it's not a big deal for the British. Most media outlets employ political correspondents whose job it is to tell us every day how important politics - especially party politics - is to our lives and the future. But it isn't. For starters, more people are members of book groups than political parties: only 1 in 50 Irish voters is a party member, the EU average is 2 in 50. To put it in perspective, the Catholic Church in Ireland - battered and all as it has been in recent years - can still count on more than ten times as much active engagement from the Irish people as all the Irish political parties put together.

Yes we get to choose the political parties we want, the religion we grow up in not so much. But that's only every 4 years or so, and even then most of us end up governed by a party or parties we didn't vote for (just like 63% of the UK electorate last May).

Corbyn's election doesn't matter because political parties no longer matter. Certainly Corbyn's victory is a blow to the 'spin-meisters' that now dominate contemporary politics in Western Europe. Even Peter Hitchens admires Corbyn's refreshing authenticity compared to the 'plastic politics' that Tony Blair perfected (and David Cameron has ably adopted). But with the Overton Window shifting relentlessly leftward - in Ireland as elsewhere - then it's hard to see what a Labour Party led by Corbyn is going to campaign for that isn't already a nascent (or full blooded) element of other parties' manifestos. Sure, Corbyn may be more avowedly Marxist than your regular left-of-centre politician, but even if 'a communist is a socialist in a hurry' it's rare to hear anyone or anything labelled as 'extreme left' or 'far left' these days. Remember, we nationalised the main banks in Ireland here a few years ago, so today's 'loony left' platform can easily become tomorrow's 'we have no alternative' emergency legislation.

Also remember that socialism in its various guises killed more than 200 million people in the past 100 years in the process of creating a collectivist 'Paradise on Earth'. Perhaps the demise of the political party as a genuine force in European politics is a small price to pay if it avoids any more experiments in 'humanity improvement'?

Sunday, September 6, 2015

Crisis & Consequences

“We seek not to become just, but to justify ourselves.”     J. Budziszewski 
At the start of the summer David Cameron predicted that the refugee crisis at Calais would last all summer. I thought he was being optimistic, I suspect he knows it himself now. The crisis of refugees/economic migrants/asylum seekers is shaping up to be the defining issue for Europe in the 21st century, never mind the summer of 2015. Given that prognosis, it is all the more worrying how few - if any - politicians are debating and planning for a crisis that will unfold over decades and not mere months.

Such a plan would deal with the following:

1. What is the cause or causes of the crisis?
2. What can be done to end the crisis?
3. What should be done with the refugees and migrants already on the way?
4. What will happen to the refugees/migrants/asylum seekers when the crisis is over?

I don't have answers to all the questions, but I have some thoughts as set out below.

Question 1 is a hard one because it requires facing some 'uncomfortable', long-term realities. First of all, some European nations - the UK and France, but others too - have played a key role in bringing about the crisis by participating in American-led interventions in the Middle East and North Africa. For the best part of two decades they have played a 'Great Game' version of 'Whack-a-Mole'. Anti-Western despots in Iraq, Afghanistan, Libya and Syria? Whack. Islamist terrorists rising up from the rubble of the former despots? Whack. Exporting terrorism to European cities? Whack. Mass displacement of populations as Western powers play off one side against the other? Whack. And on and on it goes.

Then there's Africa where high population growth combined with weak economic growth means that some 200 million young Africans will be looking for work over the next twenty years. The crisis at Calais won't be over this summer, next summer or the one after that. Meanwhile some 3,000 criminal gangs are profiting from people smuggling activities, a number set to grow as demand grows in turn.

Which brings us to the hardest one, Question 2: what can be done to end the crisis? Peace in the Middle East would be a start: but that seems even less likely now that The Great Game has reverted to a struggle between the Great Powers, i.e.: the United States and Russia. As a result, migration has been 'weaponised' as a proxy for direct conflict which means the refugee crisis will get worse before it gets better. More might be done to encourage Syria's wealthy neighbours such as Saudi Arabia, Jordan and Kuwait to increase the number of refugees they have offered to take from their current level of absolute zero. And of course economic migrants from Africa will keep coming so long as economic opportunities are scarce at home - so the opening up of trade relations, foreign investment and technology transfers with Africa will help, but not any time soon.

Building fences won't end the crisis on their own either: people will simply go around them, so the problem will be displaced from one European country to another. Replicating Australia's Operation Sovereign Borders campaign (whereby the Australian navy rescues illegal immigrants at sea but transfers them to locations outside Australia) would probably work, but only in the short run given the growing scale of future migration. Nevertheless, the number of illegal immigrants dying on the way to Australia has fallen from thousands to practically zero since the policy was put into practice: as a result Australians have not witnessed the horror of a young child like Aylan Kurdi washed up on their shores. It is unlikely, however, that all EU nations will agree to such a policy and so Irish navy ships will continue to rescue African migrants and deposit them on Italian soil.

But without a credible answer to Question 2 then Europe is on the fast track to an explosive combination of weakening economic prospects (in case you hadn't noticed), rising number of unassimilated immigrants (at a rapidly rising cost), and growing dissent among those Europeans already being left behind by unemployment and inequality (including 4.6 million unemployed youth).  As Ross Douthat sees it:
The countries that have opened the door widest are places like Germany and Sweden, which are motivated by a different theory of moral obligation: A utilitarian universalism, which holds that the world’s wealthy nations have an obligation to accept refugees, period, regardless of whether their own governments bear any responsibility for the crisis that produced them. 
This theory has the advantage of eliminating any messy haggling over who bears responsibility for what. When tragedy strikes, everybody above a certain level of G.D.P. just has to open the gates. (Or, perhaps, to have them open permanently.) 
But it has the disadvantage of being completely unworkable over the long run, as Europe is beginning to discover. The utilitarian theory is blind to the realities of culture, the challenges of assimilation, the dangers and inevitability of backlash. It takes what is a deep, long-term issue for European society — one way or another, over the next century the continent will have to absorb large numbers of new arrivals, from Africa especially — and brings things to a crisis point right now. And then it tries to evade that crisis by treating dissent as illegitimate, which only works until it doesn’t: One day you have a pro-immigration “consensus,” and the next a party with fascist roots is leading Sweden’s polls.
Which is probably why everyone is fixated on Question 3: what should be done with the refugees and migrants already on the way? As the MEP Daniel Hannan recently observed, Germany has effectively 'thrown the doors open' by its recent announcements, and the result is that Europe's immigration policy has effectively been sub-contracted to the people smugglers themselves. That doesn't bode well: incentives matter and if the message going out to the Middle East and Africa is that you 'everyone's welcome' then 'everyone' who wants to will come. I predict a boom for the human trafficking 'business' in the coming months and years. And worse, I predict more Aylan Kurdis as well unfortunately.

By the way, Ireland has sub-contracted its immigration policy to the UK thanks to our non-membership of the Schengen area. Given the non-existent border between our two countries then whatever the UK decides in terms of its immigration policy (including a resolution to the crisis in Calais) then it effectively becomes our policy too.

All of this means that debates about how many refugees Ireland, Germany or anywhere else should take are short-sighted at best. Some 35,000 people migrated to Ireland in the year to April 2015 from 'the rest of the world' (i.e.: from outside the EU, USA, Canada and Australia using the CSO definition) and somehow we coped. So the question isn't whether Ireland should take 2,000, 5,000 or 20,000 refugees this year, rather the question is: how many will we take next year and the year after that and the year after that and so on for years and possibly decades to come? The honest answer is: I don't know. But no politician is honest enough to even ask the question in the first place. As Douthat observes, Europe has unwittingly brought to a crisis a simmering issue that would otherwise have unfolded over decades. No wonder everyone is avoiding the hard questions.

All this is happening at a time when economic prospects - and taxpayer resources - are already quite weak in Europe (outside of Germany that is). Should recession return to Europe (and let's face, it hasn't been a great recovery since the last recession) then European politicians will be faced with much harsher trade-offs than at present. Germany will spend €10 billion on refugees this year alone. They can afford to, for now. Still, this is another reason why Ireland and Europe needs a plan: no matter how generous individual people are in welcoming refugees, it will be taxpayers in general who will fund their needs in the long-run.

And so on to Question 4: what will happen to the refugees/migrants/asylum seekers when the crisis is over? The answer based on past waves of migration is that they stay, have children and assimilate to varying degrees (or not sometimes). Every migrant or refugee is motivated by the same thing: to enjoy a better, safer life for themselves and their families than if they stayed in their home country. And often that's exactly what they get, so why would they go back?

The other side of generously welcoming economic migrants (as opposed to refugees from war and famine) is that their home countries end up losing some of their most talented people (as we have in Ireland down through the centuries). Today, Africa's Catholic bishops are appealing to their young people to "not allow false trappings of wealth lure you to move out of your Countries in search of non-existent jobs in Europe and America". Yet another 'unforeseen consequence' of Europe 'opening the doors' is that it may well worsen the situation in Africa that caused the migration in the first place.

So back to the plan: what can Ireland feasibly do to prevent the crisis of refugees from the Middle East and of economic migrants from Africa? I don't know, and I'm not sure anyone else does either. And that's what worries me: too many people - in the media, in politics and in the military - are seeking to 'justify themselves' rather than 'become just'.

Our little 'island behind an island' won't shelter us from the crises and consequences ahead.

Thursday, July 30, 2015

Labour's Lost Love

Apparently the Labour Party plans on winning the next election with the support of Ashbourne Annie. Good luck with that. While I'm sure there's more than a few voters out there who would appreciate help with their childcare costs, it's hard to see it being a big vote winner for Labour. And if it does looks like one then expect it to figure in more than a few manifestos.

But Labour's decline in Ireland has little to do with childcare costs or the Ashbourne Annies of this world. It goes a lot deeper than that. Recent analyses of Labour's performance in the UK shed some light on the decline. The problem for Labour in Ireland as in the UK is that it has lost its soul. Here's Luke Bretherton on the topic:
But if any meaningful language and vision of change is to emerge within the Labour Party, it needs to develop a way of talking about love and sin. To do this it needs to focus more on organizing and less on policy and procedure. It needs to be more populist and less progressive. To romance the electorate it must learn again to speak in the idioms of ordinary people. Rather than impose on them brittle schemes of social engineering, it needs to draw on the traditions and customary practices of the people it wants to represent in order to discover ways of forging a common life - a life that cares for the heart and soul, not just the market and the state. 
Admittedly that's not the sort of insight you'll get from a focus group in Ashbourne, or anywhere else for that matter. Modern political parties - on the left and on the right - are entirely managerialist in nature and simply offer to be better bureaucrats than the opposition. No wonder people are disengaged from politics.

Ironically, the left, including Labour, is a victim of its own success. The left replaced the politics of class identity and solidarity with the politics of cultural Marxism. The result was the destruction of much of the social capital and networks that had existed outside of the state and the market and had sustained the historical labour movement in the past. As Bruce Charlton observes:
What we have seen instead has been the near complete destruction of civil society in the West - and the process has bee all but un-remarked and un-noted as a general phenomenon. Almost all forms of human association have been brought under control of the state, most are irrelevant, participation in civil society is very low and feeble, many churches, professions social hobby groups been severely weakened or become extinct. 
Funnily enough, some on the left are beginning to notice that they've taken a wrong turn. John Milbank argues that Labour needs to differentiate between being 'market friendly' vs 'business friendly', recognising that the market economy - with its crafts and guilds which gave rise to the labour movement - predates the capitalist economy. While Chris Dillow thinks Labour needs to lose the blinkered view that only the State or the Market can solve all our problems: again, there are lots of social and economic alternatives that could restore the civil society that used to exist.

Indeed, such a project of restoration might unleash youthful energies that go far beyond the humdrum of politics. The always quotable Camille Paglia has this to say about today's young:
We have a whole generation of young people who are clinging to politics and to politicized visions of sexuality for their belief system.  They see nothing but politics, but politics is tiny.  Politics applies only to society. There is a huge metaphysical realm out there that involves the eternal principles of life and death. The great tragic texts, including the plays of Aeschylus and Sophocles, no longer have the central status they once had in education, because we have steadily moved away from the heritage of western civilization. 
It might be a hard sell to Ashbourne Annie, but it might just strike a chord with a lot of people who used to support Labour, until they realised that Labour no longer supported them.

Sunday, July 19, 2015

Jarrow II

Next year sees the 80th anniversary of the Jarrow March at the height of the Great Depression in England in the 1930s.  Some 200 men marched over 26 days from Jarrow to London in October 1936, to draw attention to the devastating impact of economic collapse on their town and community and to seek support from the British Government. It was a complete failure.

But after World War II, many attributed the new spirit of social reform to the memory of Jarrow and other protests like it that galvanised the country to never again allow such suffering in its midst.

I have a suggestion for the Greeks: pick 200 (or maybe '300' would be more appropriate?) to march (or lead a motorcade) from Athens to Berlin, taking in Bulgaria, Romania, Hungary, Austria, and the Czech Republic along the way: a distance of some 2,900 kilometres.  Calling on the support of political parties and communities in the countries they pass through who in turn are opposed to 'perpetual austerity' in order to forge a new consciousness across the European Union about what is happening and what needs to be done.

It might take longer than the march from Jarrow to London, but the fruits might come sooner too.

Tuesday, July 14, 2015

Where is Martin Luther when you need him?

The ugly just got uglier - via The Automatic Earth:
The structure of the EU itself guarantees that Germany will always come out on top. But they can only stay on top by being lenient and above all fair, by letting the other countries share some of the loot. 
To know how this works, watch Marlon Brando, as Don Corleone, talk to the heads of the five families in the Godfather. You need to know what to do to, as he puts it, “keep the peace”. He’s accepted as the top leader precisely because the other capos understand he knows how. 
The Germans have shown that they don’t know this. And therefore, here comes a prediction, it’ll be all downhill from here for them. Germany’s period of -relative- economic strength effectively ended this weekend. The flaws in its economy will now be exposed, and the cracks will begin to show. If you want to be the godfather, the very first requirement is you need to be seen as fair. Or you will have no trust. And without trust you have nothing. It is not difficult. 
Germany will never get a deal like the EU has been for them, again. It was the best deal ever. And now they blew it, and they have no-one to blame but themselves. And really, the Godfather metaphor is a very apt one, in more ways than one. Schäuble could never be the capo di tutti capi, no-one would ever trust him in that role. Because he’s not a fair man. But he still tries to play the role. Big mistake. 
The people here in Greece are being forced to pay for years for something they were never a part of, and that they never profited from. The profits all went to a corrupt elite. And if there’s one thing Don Corleone could tell you, it’s that that’s a bad business model. Because it leads to war, to people being killed, to unrest, and all of that is bad for business.
Though in fairness to Wolfgang Schäuble he did actually make the Greeks an offer they could have accepted, according to Ambrose Evans-Pritchard:
In an odd way, the only European politician who was really offering Greece a way out of the impasse was Wolfgang Schauble, the German finance minister, even if his offer was made in a graceless fashion, almost in the form of diktat. 
His plan for a five-year velvet withdrawal from EMU – a euphemism, since he really meant Grexit – with Paris Club debt relief, humanitarian help, and a package of growth measures, might allow Greece to regain competitiveness under the drachma in an orderly way. 
Such a formula would imply intervention by the ECB to stabilise the drachma, preventing an overshoot and dangerous downward spiral. It would certainly have been better than the atrocious document that Mr Tsipras must now take back to Athens.
It may be too late for Tsipras to go back and ask him for more details, but the chances are the Greeks may well refuse the Don's offer anyway.

I mentioned before that Europe needs a second Reformation.  Rather than seeking a better Don Corleone (a dubious ambition to say the least) we would be better seeking a second Martin Luther, willing to speak truth to power almost 500 years after the last one. Though it's unlikely he'll be a German this time round...

Thursday, July 9, 2015

Democaplypse Now

The only distinction that democracies reward is a high degree of conformity. Ambrose Bierce
Steve Keen thinks we are all turning Japanese, or as he puts it more starkly:
We are now in an era of permanent debt-deflation, countered only by government deficits…
The 'We' by the way is most of the developed democracies in the world. In the presence of crushing levels of personal debt - and absent high enough inflation to reduce their share of nominal GDP - then we're up 'Greek Creek'. Even The Economist has started channelling Steve:
So if inflation has been hard to achieve and default looks like a risky option, then stagnation (or near-stagnation) ends up being the outcome. That has been the case in Japan, where sluggish economic growth has been the norm since its asset bubble burst in the early 1990s. But stagnation only postpones the problem. Japan has faced less pressure than most, since it owes money mainly to its own citizens—it does not have to worry about foreign creditors. Yet even Japan has tired of the situation: Abenomics was designed to get the country out of the trap by generating more growth and inflation.
Greece is but a leading indicator of what the rest of Europe will have to face. With one of Europe's fastest ageing populations coupled with unaffordable pension commitments then more debt (private or public) is the last thing the country needs to escape its euro-denominated chains.  

An orderly exit from the euro is Greece's 'least worst' option right now. And if they have any sense they'll introduce the Drachma as a parallel currency before the exit is complete. By the way, we should do the same in Ireland as part of our own Anti-Fragile strategy. Always good to have options.

As usual, Nigel Farage isn't afraid to speak truth to power:

Saturday, July 4, 2015

Morality Tales

The unfolding Greek drama provides a teachable moment, via Interfluidity:
Among creditors, a big catchphrase now is “moral hazard”. We cannot be too kind to Greece, we cannot forgive their debt with few string attached, because what kind of precedent would that set? If bad borrowers, other sovereigns, got the idea that they can overborrow without consequence, if Spanish and Portuguese populists perceive perhaps a better deal is on offer, they might demand that. They might continue to borrow and expect forgiveness, and where would it end except for the bankruptcy of the good Europeans who actually produce and save? 
The nerve. The fucking nerve. Lenders, having been made nearly whole on their ill-conceived, profit-motivated punts, now fear that if anybody is nice to somebody who doesn’t deserve it, where will it end? I’d resort to that cliché about chutspa, the kid who murders his parents then seeks leniency ‘cuz he’s an orphan. But it’s really too cute for the occasion. 
For the record, my sophisticated hard-working elite European interlocutors, the term moral hazard traditionally applies to creditors. It describes the hazard to the real economy that might result if investors fail to discriminate between valuable and not-so-valuable projects when they allocate society’s scarce resources as proxied by money claims. Lending to a corrupt, clientelist Greek state that squanders resources on activities unlikely to yield growth from which the debt could be serviced? That is precisely, exactly, what the term “moral hazard” exists to discourage. You did that. Yes, the Greek state was an unworthy and sometimes unscrupulous debtor. Newsflash: The world is full of unworthy and unscrupulous entities willing to take your money and call the transaction a “loan”. It always will be. That is why responsibility for, and the consequences of, extending credit badly must fall upon creditors, not debtors. There is one morality tale that says the debtor must repay, or she has sinned and must be punished. There is another morality tale that says the creditor must invest wisely, or she has stewarded resources poorly and must be punished. We get to choose which morality tale we most use to make sense of the world. We do, and surely should, use both to some degree. 
Read the whole thing.

With the FT reporting that, come Monday, Greek banks may 'bail in' their customers via a haircut of 30% of deposits over €8,000 (because all the larger depositors removed their money weeks and months ago), then the teachable moment will drive its lesson home good and hard.

Wednesday, June 24, 2015

Wrong Vision

"What discords will drive Europe into that artificial unity—only dry or drying sticks can be tied into a bundle—which is the decadence of every civilisation?" A VisionWilliam Butler Yeats
The bundle of sticks Yeats was referring to back in 1937 was of course the fasces, an ancient symbol that subsequently gave us the word fascism, then on the rise in Europe. Today, Europe's decadence - and Greece's tragic demise - is now tied up in another artificial union that is sure to fall apart.

Greece - and the rest of the European Union - should have spent the past five years helping Greece depart the euro. Instead, the artificial unity has been preserved at all costs, and to Ireland's shame we have been playing the part of Germany's loyal Rottweiler in the negotiations, ignoring Germany's own history of debt forgiveness.

The Greeks are far from blameless in this sorry saga: after all, they still manage to spend 2.2% of GDP on defence, far above the EU average and enough to pay for much of the pension and other spending they are now obliged to cut. Though it may be the price of keeping the Colonels happy.

Someone - a Greek as it happens - once said that there is no such place as Greece. The Greek mindset is in a sense 'pre-nationalist': more focused on regional, party and tribal loyalties. Hence the general antipathy to paying taxes. A bit like Ireland until at least the 1980s come to think of it.

But Greece - and the rest of Europe - deserves better than this shoddy treatment of a people whose ancestors gave us much of what makes us Europeans. There's only one thing a bundle of dry sticks is good for, as Yeats witnessed only a few short years after penning his prophetic words.

HT The Archdruid Report for the Yeats quote - I hadn't come across it before.

Related Posts Plugin for WordPress, Blogger...