Thursday, December 31, 2009

Stop With The Twitta

I had hoped to end the year on something more profound, but I ran out of 2009 ...

This is fun (ht the normally rather more serious VFR/Lawrence Auster):



And for something more uplifting, check out The Specials doing a guest appearance on The Geary Blog.

Wednesday, December 30, 2009

Some Hope

It is nice to end a dismal year on a positive note.

AIB Bank have come on board to partner my company in developing the AIB-Amárach Recovery Indicator. It builds on earlier work by Amárach and is intended to keep businesses informed about the mood of Irish consumers when it comes to spending, saving and borrowing.

We'll be surveying 1,000 adults every month - combining online and face-to-face methodologies to ensure the results are as representative of the national mood as possible.

Furthermore, the ARI is designed to identify turning points in the economy: and right now we are at one of those points as the majority of people feel the economic situation is bad but stable or even improving. A stark contrast with when we first started measuring attitudes back in April as the chart shows.

You can download the first of the ARI results - for December 2009 - here.

All suggestions for themes/topics/questions that might be usefully addressed in a survey designed to guage trends in consumer behaviour and their impact in turn on the wider economy are welcome.

Tuesday, December 29, 2009

Lesser Britain

The execution of Akmal Shaikh by the Chinese is another, sad symptom of the United Kingdom's decline. He would not have been executed if he was a citizen of the United States. The Chinese still respect the power that comes out of the barrel of a gun - and America still has the bigger guns (economically as well as militarily). Britain obviously doesn't.

This matters to us in Ireland. Not in the "England's difficulty is Ireland's opportunity" sense of old (when, regrettably, it did make some sense). But rather in terms of the extent to which Ireland's economic prospects are still tied to those of the UK: our largest export market and the only country with which we happen to share a land border.

I've fretted about Britain before, and I'm still fretting. Like most Irish people I have a normal, neighbourly desire to see our cousins across the Irish Sea do well for themselves (bound as we are by the ties of history, trade, demography, culture and legal systems). Growing up a nationalist in Northern Ireland I had a rather different attitude. But I've got over it - as have most I reckon.

However the 'difficulty/opportunity' duality might be taking on another form. Optimistic as it may seem, I expect that Ireland will emerge from most of our present difficulties as 2010 progresses. Unfortunately, I suspect that Britain might well enter a very difficult period at the same time. The UK government has still to respond to the challenges of public sector overspending and massive deficits - nor will it until a Conservative government takes power by the middle of the year. Worse for us, sterling looks set to decline further - even precipitously - against the euro: with some already talking of sterling-euro parity in 2010.

At the heart of the uncertainty about the UK is the dawning realisation that Britain - like Ireland - squandered much of the boom on unsustainable policies and practices. As Max Hastings put it recently, Britain's 'long weekend' is over:
The national mood approaching Christmas 2010 and 2011 is likely to be much bleaker than today’s. Most people will have significantly less money. If the Conservative party wins power, it will fail in its responsibility if it does not cull large numbers of state workers. More businesses will go bust.

There are fundamental uncertainties about how Britain will earn its living for the rest of the 21st century, especially as its earnings from financial services shrinks. Optimists talk up the value of intellectual property and the English language. But how many people can live off the likes of television’s Top Gear programme, the history books of Simon Schama and the novels of Hilary Mantel?

The best British manufacturers are world class, but such bosses as Sir John Rose of Rolls-Royce offer warnings about the shortcomings of the educational system in sustaining a workforce fit to compete with young Singaporeans. Service industries, tourism notable among them, will continue to generate substantial in­come, but scarcely sufficient to fund the Trident nuclear deterrent replacement and other symbols of big power status, to which both the Tories and Labour cherish pretensions.

We are cursed with a bloated sense of self-entitlement, reflected in the excesses of public spending. If we possess a capacity for private contentment that some Americans might envy, the reverse of the medal is a reflexive lassitude.

Some lessons there for Ireland too, no doubt. I do hope that England's forthcoming difficulties do not hamper Ireland's opportunities for growth. Though our destiny will continue to be tied to the larger island next door for the foreseeable future - even if Britain's status in the world continues its inexorable decline.

Monday, December 28, 2009

Reality Checked

If you haven't seen Avatar yet - but intend to - then you might want to skip this post. I'd certainly recommend it for the 3-D, cinematic experience: all three hours of it!

Still here? Okay, if popular culture is a reflection of a society's values (however attenuated the expression) then what does Avatar say about contemporary American/Western values? To put it mildly I would say they are somewhat 'conflicted'. On the one hand we have a fantasy about a peaceful, indigenous people living in harmony with nature on planet Pandora - until the arrival of greedy humans wielding superior technology. On the other, we have the reality of 'greedy' humans creating the wealth and the technology that enables them to blow $300 million telling a tale about imaginary blue people on another planet ...

The storyline is a riff on Pocahontas/Dances with Wolves with a bit of the Matrix and a few other movie references thrown in for good measure. Which is not to detract from the visual power of the movie itself: it's pretty obvious where the $300 million went when you see it. Nor is there necessarily anything wrong (or even avoidable) about previously used storylines. The best stories are the ones we keep telling one another.

But the story's 'morality' is decidely different to that of, say, Lord of the Rings which was set outside human time, but featured some of the same themes of good vs. evil etc. Avatar, on the other hand, is set in human time: 2154 to be precise. And we are left in no doubt that it is we humans (or the English-speaking, Western variety) that are the baddies. This has already provoked criticisms from some: ranging from those who think it is anti-White to those who think it is pro-Libertarian. Take your pick.

Or maybe not: you could just enjoy the movie for its entertainment value and ignore any 'messages' in the story. As most people will I'm sure. Some how I doubt if anyone will to join the Green Party on the strength of it. The fact is, we Irish have a fairly clear grasp of the distinction between fantasy and reality. Take, for example, the recent Eurobarometer survey. Asked to what extent they agree that 'economic growth must be a priority for my country, even if it affects the environment', more Irish 'agreed totally' than any other Western EU country. In total, 61% of Irish adults agreed - compared with an EU27 average of 47%.

The Irish have never been shy about seeking opportunities elsewhere: so I guess there'll be a few on the first flight to Pandora - or its equivalent - when the time comes.

Sunday, December 20, 2009

Twitter Ate My Blog

I haven't been blogging much lately: the 'paid-for stuff' inevitably gets priority over the 'fun stuff'. But it seems I'm not alone. John Burns frets in today's Sunday Times that the number of Irish blogs has peaked and may be heading into decline.

Perhaps it's an economy thing: as the economy worsens more people like to sound off about it online in blogs etc. And when the economic situation starts improving then they're too busy making hay to be indulging in rants, no matter how therapeutic. Hmmm, blogs as a leading economic indicator - I had never thought of that before.

But Burns makes another point: more people are using Twitter and Facebook to get their messages across - and it's a lot less work than blogging. I don't use either (though I tried Twitter for a few months). From ePioneer to eLuddite in 27 months - I just can't keep up!

Apres Nous La Neige

They're calling it 'snowmaggedon' in America's North East as a record breaking snow storm brings Christmas shopping to a halt (and everything else besides). The big chill temporarily gripping Northern Europe and North America is perhaps a fitting end to all the hot air we witnessed in Copenhagen.

Weather isn't climate of course, and even in Ireland winter tends to be that bit cooler than summer (though it can be hard to tell sometimes ...) But No Hopenhagen is better than Hopenhagen if we are spared the worst of both worlds: Europeans bearing the costs of self-inflicted eco-rectitude whilst the rest of the world keeps on going its merry, carbon-emitting way. Though it's probably too late for the 1,700 steel workers being made redundant in the UK, for which their employers - Corus - will be 'rewarded' with nearly £0.25 billion in carbon credits.

The farce in Copenhagen nevertheless appears to have succeeded in annoying everybody - unity of sorts I guess. Stewart Brand reminds us that there are four sides to the climate story, and I suspect that none of them are all that happy with what appears to be nothing more than a decision to make a decision later.

Richard Tol has a world-weary take on it all:
One could hope that the failure in Copenhagen will lead to a fundamental re-think of international climate policy. I’ve hoped that for over 15 years now, and I’m not holding my breath this time.
Nor am I.

Tuesday, December 15, 2009

Growth Conspiracy

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
Frédéric Bastiat 1848
I was talking to a friend the other day about how we were coping with the recession in our respective businesses. (Or conspiring to expropriate more surplus value from the proletariat, depending on your point of view of course.) He has fifty employees - twice my own number. But we have faced some of the same challenges: reducing supply to meet demand (including, unfortunately, staff levels), and reducing prices to secure sales. In terms of staff numbers and prices, both our businesses are back to about 2004 we reckon. Broadly in line with the economy I suspect.

Neither of us are content to stay in 2004. Like tens of thousands of businesses throughout Ireland who have made it this far, we are juggling the the dual concerns of surviving the remainder of the recession and positioning ourselves for recovery when it comes. Neither outcome is guaranteed of course. To that extent, growth-oriented businessmen are like Bastiat's 'good economist': dealing with the seen and the unseen, including an uncertain future that must be foreseen.

Oddly enough, economics itself has little useful to say about the nature of business, and especially the firm. Nor would it appear that the economic theory of the firm has improved much over these past twenty years - according to Paul Walker. But perhaps it doesn't matter. Most business people work in and run small firms with fifty or fewer employees: the quintessential entrepreneurs. Perhaps understanding the nature of entrepreneurship itself is enough in the absence of any fuller theory of the firm? I like Art Carden's perspective on the topic in an insightful essay entitled A Note on Profit, Loss and Social Responsibility. Here is his take:
The profitable entrepreneur does well by society in that he takes resources and converts them into something more valuable. The unprofitable entrepreneur does poorly by society by wasting resources; nonetheless, even entrepreneurial losses provide valuable information about market conditions and the range of employments of labor and capital that are (or are not) profitable. Profitable entrepreneurs show us what to try. Unprofitable entrepreneurs show us what not to try.

With apologies to Adam Smith, the entrepreneur brings about a socially beneficial outcome which was no part of his intention by seeking his own self-interest. Profitable entrepreneurs are rewarded for creating value, while unprofitable entrepreneurs, though punished for wasting resources, nonetheless confer benefits on society because their unprofitable ventures reveal information about production plans that do not create value. The prospect of profit means that the plan will be tried; the reality of loss means that revealed information will be trustworthy.
I also like Carden's idea that entrepreneurship - and business for that matter - is fundamentally about risk management:
Entrepreneurship is an exercise in risk transfer and risk reduction, and those who become entrepreneurs are those with a comparative advantage in bearing risk. We can say that this is ethically laudable: entrepreneurs (and, in particular, capitalist entrepreneurs) have a comparative advantage in reducing risk and in smoothing out future consumption patterns. It is the job of the capitalist-entrepreneur to advance income to current factors of production (labor and capital) in anticipation of being able to sell output at a future date for more than the costs of production.
This has important implications for Ireland's recovery. Just as there are good economists and bad, so also there are good unintended consequences as well as (the better know) bad ones. In fact, economic growth (and the affluence that it brings to billions) is an 'unintended consequence' of the decisions of millions of individual businessmen. Think of William Nordhaus' calculation that only 2.2% of the value of innovations accrues to the innovators: the other 97.8% goes to the users of the innovations. A very positive unintended consequence indeed.

Cambridge economist Sir Partha Dasgupta reminds us in the 2009 Royal Economic Society public lecture that there are a number of vital elements necessary to sustain growth (reported in the FT). These include physical capital, human capital and technological capital. Here in Ireland we have a quantitatively and qualitatively better supply of these 'capitals' as we end the decade than we had at the start of the decade. We also have considerably more social capital - including effective public institutions - than ten years ago. It is the combination of these capitals that Dasgupta sees as providing the basis to launch and sustain growth to the benefit of society as a whole.

My friend and I - any many other Irish people in businesses - can use these capitals to grow our businesses. Ireland's future economic success - both job and wealth creation - will be achieved one business plan at a time; even knowing that many plans will fail (risk again). Whether it is launching new businesses (I've been following the extraordinary story of Demand Media lately, ht MediaFuturist) or re-launching existing ones, it is unintended consequences that will secure a better future for all Ireland's people.

The 'foreseen unseen' - Bastiat would approve.

Sunday, December 13, 2009

Our Destiny Is Simplicity

I've written this blog post in Ommwriter (and then pasted it into blogger obviously). What is Ommwriter? It is a kind of 'ambient word processor' (for Macs only unfortunately): it is designed to filter out distractions - something we face all the time when we spend a lot of our time online (The Sunday Times reports that our brains are currently bombarded by 2.3 words per second, or about 100,000 words a day).

The experience of using Ommwriter is really ... rather ... mellow ... like something Brian Eno would produce. The experience is auditory as well as visual, so you can choose different background colours and even different keyboard sounds as you type.

I feel it is designed for poets and novelists rather than bloggers - there is no hypertext function for instance (the links in this post were added by me using Blogger). But then isn't hypertext the apotheosis of distraction?

On the other hand, I am working on a non-fiction book, and anything that reduces distraction is very welcome. Though I might be concerned about productivity - the experience is so mellow I could just get tooooo relaxxxed. What's the hurry man?

Ommwriter is another example of the Quantified Self (one of my favourite topics), i.e.: using the potentialities of emerging technologies to forge a deeper connection with the user - and to life's tempo - and a deeper level of self-awareness as a result.

What I also like about Ommwriter is how clean the user interface is. No menus (they're hidden until you move your cursor to the menu space); and a screen completely filled with a serene image (currently a snow covered field on a foggy day). I have often thought that our destiny is simplicity: that the ultimate trajectory of The Technium - to use Kevin Kelly's phrase for the evolving world of technology - is to enfold itself back into the world of flesh and blood people.

Robin Hanson is right, this is the dreamtime, and our descendents will look back at us in bemused wonder. But they will do so via tools like Ommwriter. A sufficiently advanced technology will be indistinguishable from humanity ...

Friday, December 11, 2009

Economists from Outer Space

Marx wasn't a Marxist and Christ wasn't a Christian. And now it seems Malthus wasn't a Malthusian. Or so says Adam Martin in a guest blog on Aidwatch who notes that Malthus never assumed that people would keep on having babies regardless of the consequences (namely: mass starvation). Instead Malthus observed that:
"Impelled to the increase of his species by an equally powerful instinct, reason interrupts his career, and asks him whether he may not bring beings into the world, for whom he cannot provide the means of subsistence."
In other words social innovations (marriage before sex) and technological innovations (condoms/the pill) could potentially avoid the outcome he and others worried about. The other side of the equation of course is food production. As it happens food production has outpaced food consumption since Malthus' time. Again thanks to the technological innovations of Fritz Haber among others.

But let's not forget the economists. As Martin reminds us, the laws of economics are more powerful than the laws of physics:
I once saw Deirdre McCloskey illustrate this by placing a $100 bill on the table. The laws of physics, she reminded the class, dictate that an object at rest tends to stay at rest. Economics tells us that errant $100 bills laying out in the open do not remain unattended for long. She assured the students that, were she to leave the room for several hours, economics would better predict Mr. Franklin’s fate.
Indeed: and it seems that the biggest influence on population growth is affluence - women in more affluent societies tend to have fewer children, as noted by Andrew Jack in the Financial Times recently. However some observers fear that this process in now going into reverse:

Using data from 1975, he and his colleagues confirmed a classic straight-line inverse correlation between wealth and fertility in dozens of countries. A fall in total fertility rates – the theoretical number of births in a woman’s reproductive lifetime – coincides with a rising score on the UN’s human development index, a measure of standard of living, education and life expectancy.

But replotting to include data from 2005, they spotted a striking number of exceptions among richer countries that had exceeded the very high score of 0.9 on the index, suggesting instead a rotated “J” curve – the start of a rise after a steady drop. The US, the UK, Denmark, the Netherlands, Norway and Germany were among those showing a recent rise in fertility.

It's too early to tell perhaps. But now there are other worries: instead of worrying about Malthusian starvation we now have to worry about Malthusian climate change. Hence a new initiative by the Optimum Population Trust (OPT) which has launched PopOffsets whereby you can offset your carbon footprint by, er, funding the distribution of condoms and the like. It might sound dodgy but here's their reasoning:
The cost-benefit analysis commissioned by the trust claims that family planning is the cheapest way to reduce carbon emissions. Every £4 spent on contraception, it says, saves one tonne of CO2 being added to global warming, but a similar reduction in emissions would require an £8 investment in tree planting, £15 in wind power, £31 in solar energy and £56 in hybrid vehicle technology.
Fewer people = fewer emissions. Fewer poor people in poor countries that is. I'm uncomfortable with all this for some reason. So is Frank Ferudi, who observes about the OPT initiative that:
Once newborn babies are dehumanised and recast as little pollution machines it becomes possible to advocate their elimination as an exercise in the reduction of carbon emissions. A world that can place an equal sign between a baby and carbon is one that has lost its faith in humanity.

... The OPT’s trade-off between birth control and energy-saving technology – where a simple condom is said to be a better investment for ‘saving the planet’ than hi-tech inventions – is testimony to today’s disturbing mood of estrangement from human life. It is not surprising that offsetting carbon emissions through funding birth control is preferred to technological innovation. Because where technological innovation relies on investing in human potential, Malthusianism is focused on preventing the realisation of human potential.
Poor old Malthus, and maybe a little unfair. Here's Martin again:
What matters is that, when discussing population, we do not forget the basic lessons of economics. A top-down perspective on population that treats treats individuals like mindless lemmings will panic: “Unless we reduce the human population humanely through family planning, nature will do it for us through violence, epidemics or starvation.”

Malthus gets right what both his followers and his more technocratic critics get wrong: the institutions within which individuals make reproductive decisions matter. The way to increase GDP per capita is not to cut the denominator. And while today’s scare tactics (Mali is “really in for a Malthusian disaster,”) and recommendations to stop having babies are not as monstrous as those of yesteryear, we should be wary of those who would intrude on one of the most personal and sacred choices individuals confront – whether to have a child. Nor is population sustainability a mere horse race between libido and technology. Consistent with the approach of classical economists, Malthus treats human nature as constant. Different institutions drive differences in fertility outcomes. In this we should all be Malthusians.

He's right of course. It is economics working with technological innovation that creates a virtuous circle of affluence and abundance that solves the problems that might otherwise engulf us. The same goes for climate change. The government's decision to contribute €100 million to the EU's climate change aid programme is a ridiculous variation on the Population Offsets theme. Instead they and we would be better off announcing 10 x €10 million Carbon Prizes for technological innovations that tackle the causes and consequences of climate change. On the condition that the intellectual property attaching to any prize winning innovations is shared freely with the rest of the world.

We are a young species, only at the start of our story here on Earth. And it won't be confined to Earth. Surfdaddy Orca paints an inspiring picture of the future consequences from the fusion of nano, bio, info, cogno (NBIC) technologies in the latest delightful issue of h+ magazine (h for human that is). One forecast for 2050:

The vast promise of outer space will finally be realized by means of efficient launch vehicles, robotic construction of extraterrestrial bases, and profitable exploitation of the resources of the Moon, Mars, or near-Earth asteroids.

The result of an affluence+innovation wave fuelled by economics. So economics will take us to space: and in that regard, economists are the true astronauts. Live long and prosper ...

Thursday, December 10, 2009

Confidence Tricked

Yesterday's Budget was very, very clever. For weeks now I've been listening to consumers in focus groups and looking at survey results all of which pointed to fearful anticipation of Budget 2010. Now it has come to pass and guess what? ... it wasn't as bad as many (in the private sector, where four out of five work) had feared.

Consumer confidence will be boosted by this budget, and consumer confidence drives consumers spending in the short run. There are other consumer spending stimulants:
  • a reduction in VAT from January (which most expected)
  • a reduction in excise duties on alcohol (which fewer expected)
  • no increase in income tax rates (most expected an increase)
  • our very own 'cash for clunkers' deal on cars (which rather fewer will benefit from)
The carbon tax still leaves fuel prices well below their levels a year ago, so there will be little real impact there. And of course the reductions in public sector pay and social welfare payments will have a deflationary effect - though most if not all of this will be offset by falling savings ratios as people feel the worst is over and they start to loosen their purse and wallet strings. Nevertheless the Government does forecast a further contraction in consumer spending next year. That said, my faith in government forecasts is on the agnostic side I must confess (I like the recent idea from the UK for an independent Office for Fiscal Analysis to separately prepare the economic outlook for their government's budget).

But the recession isn't over yet. Unemployment and business failures are 'lagging indicators' of the state of the economy: so I expect both to worsen even as other indicators (including consumer confidence) start to improve. I expect to see a peak in business failures (especially retail) and unemployment in Q1 (possibly a sharp one); some levelling off in Q2; with the potential for real economic growth setting in in the second half of the year (including consumer spending).

Remember, most consumers don't have debts, and most employees (87%+) will keep their jobs. There is a lot of pent up replacement demand out there (cars especially), and deflation means a lot more bargains to tempt those with money to spend. Indeed, recovery might come sooner if exports improve more quickly on the back of an international recovery now underway; and employers move quickly back into hiring mode. After yesterday I think there's a 60-70% chance Brian Lenihan's bullish prognosis that the worst is over and recovery will gain traction next year is right.

The odds on a June 2010 General Election have just gotten shorter.

Monday, December 7, 2009

The Invisible Hook

Markets abhor a vacuum, which is one reason why piracy is doing so well these days. Did you know that:
Somali pirates have established a stock exchange in Haradheere to raise capital to fund their piracy. It seems to be quite an enterprise. Financiers from near and far are investing. Shares are traded just like on Wall Street, and 10 of the 72 so-called “maritime companies” currently listed have conducted “successful” (presumably meaning profitable) hijackings.
That's according to a fascinating article on the economics of Somali piracy. Piracy has been around for a long time and is probably one of the, er, oldest professions of a collective nature. And there is something admirable about their organisational abilities, even if in the end they are just crooks. As Peter Leeson explains about his book The Invisible Hook in a fascinating interview over at EconTalk, the pirates of old showed remarkable organisational skills in organising their affairs so that piracy was a positive sum game (for pirates that is) rather than deteriorating into pirate-on-pirate violence.

And not all piracy involves speedboats and RPGs these days. There is clear evidence that 'piracy' of digital content is increasingly accepted by young people around the world, regardless of the consequences. And the recession appears to be making it worse.

Here is Ireland we haven't had many pirates since the exploits of Granuaile. But their second cousins - smugglers - are still thriving, as witness the huge shipment of 120 million illegal cigarettes seized in October.

But there is an economic cycle to smuggling as well as to piracy. And a 'piracy bubble' may be at hand judging from developments in Somalia:
One woman interviewed in the Reuters report was waiting at the stock exchange to collect her share of a ransom collected from a Spanish tuna fishing vessel. She had contributed a rocket-propelled grenade that she got in alimony from her divorce. “I have made $75,000 in only 38 days since I joined the ‘company’,” she said.
Of course if they ever want to go legitimate and buy some cheap Irish properties with their ill-gotten gains then I'm sure NAMA could help them. The sooner the better for all concerned.

Sunday, December 6, 2009

The Celtic Leopard

The Sunday Business Post today reported on my article in the latest issue of the Irish Banking Federation's About Banking entitled: The New Normal - Why Personal Banking Will Never Be The Same Again (pages 9-11).

I suggest that Ireland's banks are like Fabrizio, Prince of Salina, in Giuseppe di Lampedusa's one and only novel The Leopard. They are on the cusp of a new era: driven in the short run by our economic crisis and in the long run by less favourable demographic trends.

Though perhaps an opportunity for a budding Don Calogero, the Prince's bourgeois nemesis in the novel.

Saturday, December 5, 2009

Tie Ulysses to the mast

The Government's negotiators need to put wax in their ears. The public sector pay debacle is a classic example of conflicting time preferences. On the one hand there is the short term promise of no public sector strikes if the government cuts a deal on unpaid leave. On the other, there's the long term need to secure fundamental, structural changes to public sector pay arrangements that will undoubtedly entail serious industrial conflict. Fragile peace at a price now or secure peace at a cost in the future?

David Eagleman explores this dilemma brilliantly (I've mentioned his delightful book Sum before):
After all, no one likes to wait. And the only thing worse than waiting is waiting with uncertainty. A team at Emory University examined what happened when people waited for an impending electrical shock. Some people dreaded the shock so deeply that they chose to receive a more powerful shock earlier rather than wait for a lesser shock to arrive at a later, random time.

One of the key jobs of the human brain is to simulate the future, and the less information it has to work with, the more anxious it becomes. Pinning things down in time makes waiting less troubling. With a clear idea about the order and timescale of events, people are more patient and less anxious.
Doing a deal on unpaid leave has the attraction of getting the shock over with, or so it might seem. But there's a bigger problem, as Eagleman points out:
It’s simply that the present holds more sway than the future. Recently, researchers used brain imaging to monitor people making money-now-or-more-later decisions, and they discovered that the neural networks involved in short- and long-term decision-making are fundamentally separate. In situations of choice, the two systems are often locked in battle against one another.

... People manage the influence of the short-term systems by proactively binding their future options. We see this when a person in good health signs an advance medical directive to pull the plug in the event of a coma, when an alcoholic rids the house of drink to avoid future temptation, or when a person socks money into a Christmas account to keep himself from spending it before December.

Such deals with oneself are what philosophers call Ulysses contracts, after the hero who decided in advance to lash himself to a mast to resist the sirens’ song. The present, calm Ulysses was negotiating with his future, more emotional self.

I think that is part of the extraordinary anger that we witnessed earlier this week in response to the government's apparent capitulation to the public sector unions on unpaid leave. The people of Ireland have in their own minds made a Ulysses Pact with themselves - we'll take the pain in the form of taxes, pay cuts, NAMA and the like so long as there's a binding commitment to secure the benefits from same for all the people in the future.

That anger seems to have caused the government to rethink its stance. Just in time: we're getting very close to the island of the Sirens. Put wax in your ears and tie Ulysses to the mast. And ignore, if you can, their haunting music ...


Friday, December 4, 2009

Family Failure is the Health of the State

We Irish don't invade countries, a fact I'm rather proud of. For some other nations war is the health of the state. But not for Ireland. Nor for most European countries these days. So if it isn't wars and armies and the permanent threat of 'the other' that justifies a stronger state, what does? The answer is obvious: family failure.

The chart is from the recent Demos report on Building Character which argues that 'style of parenting' - and the impact it has on children's characters - trumps everything else in determining the lifetime success of children. More important, apparently, than how many parents you live with, or even if they are your biological parents. The chart would suggest that actually these things do matter, but are dismissed by the authors with the observation that:
Figure 4 shows that children with married parents, both of whom are the child’s biological parent, do best in terms of outcome scores. This group is around twice as likely to be in the top 20 per cent of child outcome scores as are children from lone parent families or step-parented families. Conversely, children with married parents are only half as likely to be in the bottom 20 per cent of child outcomes as are children with lone parents or step-parents. Children with cohabiting parents do worse than those with married parents but better than those with lone
parents or step-parents.
Sort of seems obvious really; two parents potentially means two incomes which is, er, twice as many as one parent. But apparently not:
However, when we control for other characteristics – namely parental style and parental confidence – the relationship between family structure and child outcomes disappears almost entirely. The only remaining correlation is a small difference between married parents and cohabiting parents (probably because marriage is serving as a proxy for more stable and happy partnerships). Crucially, the outcomes for children of lone parents and step-parents are explained by the differences in other family characteristics such as parental confidence and self esteem; being a lone parent or a step-parent does not adversely affect child outcomes in itself.
Which sort of sounds like it's the parents fault don't you think? Indeed, Demos approvingly quotes Professor Stephen Scott as observing that:
Poverty is a factor, but not a central one… I am fond of saying poverty of what? And actually it seems to be poverty of the parent-child experience… that leads to poor child outcomes rather than poverty of a material kind.
Or as the Demos authors explain:
A rich research literature demonstrates that healthy psychological development requires nurture, affection, intellectual stimulation, security and stability. These vital ingredients of a good start in life can of course be provided within any family form. However, there is some evidence that lone parents and cohabiting couples do less well in terms of child outcomes than married couples.

But the causal factors at work here are not straightforward. An analysis undertaken by Kiernan of the MCS found that family status was only very weakly associated with children’s development, once other factors – like poverty, maternal depression and so on – were controlled for.
Which does rather beg the question whether family status and structure might actually have caused the poverty? Jennie Bristow has a few concerns with this. As she notes:
What is striking about this is not only the blithe assertion that all manner of social inequalities and life problems can be obliterated by parents simply setting a few house rules for their toddlers. It is the reduction of a child’s moral development, the building of character that takes place over the course of childhood within a distinct cultural context, to a particular parenting style that results in clearly observable attributes amongst five-year-olds.

Worse, we are told in the technical appendix to the Demos report that the children's behaviour and development they are supposedly measuring is actually based on the opinions of (mainly) their mothers in the survey. Not on any observed behaviour itself. Seems a rather weak basis to dismiss family structure as a significant influence on children's development.

But what has all this to do with the State? Lately I've been sounding like Mr Maguire in The Graduate whose career advice to Dustin Hoffman is just one word: Plastics. Only my advice to young people contemplating their future career options in Ireland is just two words: Family Law.
My advice is inspired by the less than inspirational Civil Partnership Bill. And I'm not referring to the first part of the Bill dealing with gay couples - which seems to be getting most (or make that all) of the airtime during the current debate.

No, my concern is with Part 15 dealing with Cohabitants from clause 169 onwards. As I've noted before, we are sleepwalking into a legal, social and economic disaster without any consideration or awareness. Though some legal professionals are finally beginning to take notice. The legislation purports to extend some of the same 'certainties' to cohabiting couples currently enjoyed by married couples. Only they are the certainties that go with the couple breaking up, not staying together. The bill means that any young man or woman cohabiting as a heterosexual couple for more than three years (two if they have children) are legally liable to have to share their incomes and wealth with the other partner should he or she decide to split up. Do you see the career opportunity here folks?

The gay partnership issue is something of a diversion (though a serious issue in itself). The reality is that the number of gay couples availing of the legislation will be trivially small. Just look at the experience of Northern Ireland whose Registrar General has just reported that in 2008 only 86 same-sex civil partnerships were registered in Northern Ireland, down from 111 in 2007. As I keep saying, gays are a tiny minority of the population and only a minority of gays will want to marry/form a civil partnership if the experience of other countries with gay marriage is anything to go by.

Contrast that with the incidence of cohabitation. According to the 2006 Census, there were 77,781 cohabiting couples without children, and 43,982 cohabiting couples with children. In the UK and USA, cohabiting couples are more likely to break up than married couples, and also more likely to break up if they have children. All of which means that the Civil Partnership Bill will entail more work for the courts, for social services, and even for the Gardai. A healthier State indeed.

But I could be wrong: maybe it's the final phase of the gender war and men have finally won? That's according to one tongue-in-cheek explanation anyway.

Family Law: it's going to be (even) big(ger).

Wednesday, December 2, 2009

Val Falvey TD for Taoiseach

Will Val Falvey, TD do to the Irish political establishment what Father Ted did to the Irish Catholic Church? There are some interesting parallels: in Father Ted, Ardal O'Hanlon plays the part of a bumbling, not-quite-sure-why-he's-there character, partnered by a wiser, more cynical sidekick. In Val Falvey TD, Ardal O'Hanlon plays the part of a bumbling ...

The parallels may not stop there. Father Ted made us laugh at the surreal pomposities of priests, bishops and a hierarchy only interested in serving their own interests. But eventually we stopped laughing and started demanding an end to the cover ups and lies that hid an anything-but-funny cesspool of criminal behaviour. With Val Falvey TD we get to laugh at the surreal pomposities of TDs, Ministers and a hierarchy only interested in serving their own interests ...

Which brings us to last night's extraordinary capitulation by Brian Cowen TD at the negotiations on public sector pay. There is now only one logical outcome: the taxpayers of Ireland will be screwed even more than was planned already. Not that logic has ever played much part in Irish politicians' dealings with the public sector. Val Falvey TD would have done a better job.

You heard it here first: Val Falvey TD for Taoiseach.


(You can catch up with the first two episodes on RTE Player by the way).
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