Monday, January 31, 2011

The Economics of Revolution

Has the price of revolution fallen? Gary North thinks so. In a brilliant analysis of the current situation in Tunisia and Egypt he observes that:
When the cost of political mobilization falls, more is demanded. When people can mobilize thousands of protesters without any centrally directed agency and without any organization that can be infiltrated and subverted, they are in a position to impose enormous political damage on any existing regime, as long as the regime really is corrupt, tyrannical, and hated.
 The Revolution Will Be Tweeted

Moreover, there are powerful network effects at play. Paul Ormerod has described them in relation to behavioural economics - we are strongly motivated to do what we see others doing. Or as Gary puts it:
When people around the world can see street protesters, this encourages thousands of other protesters, who had attempted to sit the fence, to get off the fence and go into the streets. There is safety in numbers. When they can see on television or on the web that there are thousands of people in the streets protesting, they assume that they will gain a degree of invisibility and anonymity if they join the protests. So, they leave the safety of their homes and join the protest movement. Because of social networking, this can take place so rapidly that government officials are unable to respond fast enough to put a stop to it before it is obvious that there are thousands of people in the streets.
We seem to be approaching a curiously Hayekian/Marxist moment - revolutions can take on a spontaneous order of their own, 'the People' really are revolting, without any leaders in sight. Indeed, Zbigniew Brzezinski is worried that the new revolutionary order might be about to become a global phenomenon. Out with the New World Order, in with the Newer World Order...

But I'm not so sure. Politics - whether dictatorial, revolutionary or even democratic - is about the holding and exercising of power. I subscribe to Bruce Bueno de Mesquita's analysis of the political economy of power. Every political leader - including dictators - relies on the support of core group of supporters. what de Mesquita calls the 'selectorate'. In Hosni Mubarak's case that is the Egyptian army. Once they decide that their power interests - and economic wellbeing for that matter - lie in a different arrangement (be it democracy or another dictator) then Mubarak goes. Stratfor shares a similar Realpolitik view of the world. 

Behavioural Counterinsurgency

Nor should we forget that the military are the most diligent students of social science (see, for example, The Battle of Narratives). Already there is an emerging field of what I call 'Behavioural Counterinsurgency' that recognises the potential to defuse and deflect the kind of dissent now evident in Tunisia and Egypt.  Kenneth Payne has written a fascinating essay in the British Army Review on Some Principles for Influence in Counterinsurgency. Kenneth observes that:
The need to influence attitudes and behaviours is a central tenet of counterinsurgency campaigns. Here, both sides are competing for the attitudes of a wider population. To defeat the enemy, the counterinsurgent must persuade the wider population that his favoured outcome is both preferable and inevitable, and must also persuade the insurgent that he has no realistic chance of influencing them himself. Influence, then, is as integral to counterinsurgency as to all war.
Social network theory is reassuring in that respect. Social networks are not information neutral: we are insulated from most competing ideas by our lack of attention, by lack of access to different ideas from outside our smallish social milieu, and through our inherent cognitive conservatism: our beliefs and heuristics tend to have served us well enough. Why change? Social networks tend to cluster - we know relatively few people, mostly on the order of several  hundred - and many of them know each other too.

...People return to relatively few sources for validation - who do they know, who do they trust? So much the better for the counter-insurgent if those influential actors are on his side.

...Remember, though, that you’re not necessarily after the most obviously important man - but the most connected, and therefore conduits for ideas between different clusters, or social groups.
It is said Napoleon deliberately rebuilt the streets of Paris extra wide so that wannabe protesters would find them more difficult to barricade. No doubt the remaining 'Mubaraks' of this world will be anxiously taking a crash course in how to change the 'digital streetscape' in which their subjects live. But with the price of revolution now so cheap it may be too late for some. It appears to be for Mubarak anyway.

Mind you it does make you think though about our own domestic situation. Imagine a rebellion in Ireland in 2016: the rebels wouldn't have to take over the GPO - they'd just have to take over Facebook. Easier said than done of course.

Sunday, January 30, 2011

Quote of The Day

"This is what it means to be courageous: to place yourself in the path of irresistible force, certain of your own destruction, for a cause higher than yourself and your petty concerns. Flesh arrayed against bullets, bodies against tanks. Lives willingly offered for beliefs and aspirations. Without sacrifice or the threat of sacrifice, there is no courage.

And bullets and tanks are so much more powerful than flesh and bodies, are they not? But here's the trick: once the credible threat of violence by a government against its own people tips over into the actual use of force, the balance shifts. The government forfeits all legitimacy, and the people assume the mantle of moral and political authority over their own destinies. By sacrificing their blood and their lives, the people themselves can seize power from the men with bullets and machines. For there are always more people than there are bullets or machines."

Saturday, January 29, 2011

Definitely Not Longford

I've seen Ireland's future. Or Dublin's anyway:

Quote of The Day

"History suggests the Middle East is running out of time. There is no more ironclad rule than this: surpluses of frustrated young men lead to catastrophic deficits of peace. ...The received wisdom is democracy will somehow solve the problem. This sounds good, but isn’t true. Democracy is a process, not an outcome in itself. Processes don’t guarantee outcomes."

Friday, January 28, 2011

Ireland's Islamic Future

Ireland's Muslim population is forecast to treble over the next twenty years. That's according to a new Pew Research study.  They estimate there are 43,000 Muslims in Ireland today and that there will be 125,000 in 2030. Their share of the total population will more than double, albeit from a lowly 0.9% to 2.2%. We'll still be a long way from the 10.3% forecast for France for instance. They also project there will be 5.5 million British Muslims by 2030 as well.

Of course, theirs is mostly an exercise in assumptions and extrapolations - as are most demographic projections inevitably. And I'm not so sure Ireland's Muslim population will grow so fast or so large. Take the issue of asylum seekers. According to Eurostat we have the lowest level of approval for asylum seekers in Europe (1% in Q3 2010 vs the EU average of 25%) - and as it happens over half of such asylum applicants to Ireland are Muslims (from Nigeria and Pakistan in the main). Add to that the fact that the numbers applying to Ireland for asylum have plunged (a sign, it seems, of improving circumstances in their home countries) and it becomes hard to foresee very substantial growth in Muslim numbers in Ireland over the next twenty years.

Pew don't forecast the number of Christians in Ireland by 2030, but I suspect that Ireland will still be an overwhelmingly Christian country (in ethos as well as identity), regardless of the so-called 'Eurabia' scenario.

The Kindness of Believers

Men are qualified for civil liberty in exact proportion to their disposition to put moral chains upon their own appetites.
Edmund Burke

I was at a fascinating talk last night by Anthony Daniels - aka Theordore Dalyrmple - organised by The Iona Institute.  He ended his talk with the above quote from Ireland's greatest political philosopher Edmund Burke. Anthony is an atheist who believes in the importance of religion as a source of moral behaviour. You can get a flavour of his unique perspective from this recent podcast. He laments the decline of virtue, and in his talk he argued that the decline was responsible in large part for the economic crisis here in Ireland and elsewhere.

Not only is an absence of virtue synonymous with immiseration, its presence is synonymous with prosperity. Take the results of Gallup's global survey on civic engagement which I mentioned before.  It seems that helping strangers, donating to charities and volunteering are good for your material wellbeing. Nor, as Gallup explains, is it just a case of the 'rich' helping others. Income doesn't influence civic engagement, and the causality may even go the other way...

As for religion, the Gallup survey shows that people for whom religion is an important part of their daily lives are significantly more likely to help strangers etc than those for whom it isn't important. I expect we will increasingly rely on the 'kindness of believers' in the years ahead as governments implode under the weight of their unsustainable liabilities.

Thursday, January 27, 2011

Quote of The Day

It's easier to get into Harvard than into McDonald's University in China. Here's why:
Getting into the school is competitive because more than 26 percent of China’s 6.3 million college graduates were unemployed as of July 1, according to the Ministry of Education. That compares with a 4.2 percent unemployment rate for China’s urban workforce, according to data compiled by Bloomberg.

Less Bad

This month's economic sentiment tracker, prepared by my company for AIB, shows a sharp improvement in the economic outlook from the IMF-inspired doldrums of last November. And the nation's emotions have returned to their 'long run' norm, with more people experiencing 'happiness' than 'stress' during the month. Though the 'happiness' measure still remains below the average since April 2009:

Wednesday, January 26, 2011

Quote of The Day

"Narrative history is important because, without a sense of it, the past has no significance. And if the past has no significance the future has none and the present, being the near future’s recent past, is likewise deprived of significance. All that is left is a shallow, meaningless life in which you drift from moment to moment in search of amusement. If nothing anyone else has done is important then nothing that you can do is important."

Open Season

Just in case you're not sure what the Finance Bill is all about:

More for your over-taxed entertainment here.

Tuesday, January 25, 2011

Cloudy With A Chance of Pain

From the always insightful Richard Watson:


From Dilbert: the unforeseen consequences of government's pro-business policies...

Quote of The Day

"The welfare state has done to black Americans what slavery couldn't do, what Jim Crow couldn't do, what the harshest racism couldn't do. And that is to destroy the black family."

Monday, January 24, 2011

The Mass Middle

Ireland's forthcoming election is unlikely to see much polarisation between the Left and the Right politically speaking. That's not how we do things. Perhaps we shouldn't be surprised, for Ireland's electorate is firmly in the middle when it comes to the traditional Left-Right spectrum. Earlier this month, my company asked 1,000 adults to answer the question: "In politics people sometimes talk of left and right. Where would you place yourself on a scale from 0 to 10 where 0 means the left and 10 means the right?" The results - comparing the distributions along the spectrum for males and females - shows a high clustering around the middle:

The same question has been asked before in Ireland - using a different methodology - and in the past the electorate have been more right of centre than in our own survey. Again, it may be a matter of methodology. It should be noted that the graph above excludes 'don't knows': they make up a quarter of the population (much higher among females than males).

Nevertheless there do appear to be some demographic differences when it comes to self-positioning on the Left-Right spectrum. In addition to males being more 'right wing' than females, younger adults are more left wing than older adults (though 16-24s are less left wing than 25-34s). Dublin is more left wing than Munster, and people with children are more right wing than those without.

All of this poses an interesting question for political parties as they prepare their manifestos for the forthcoming election: just how far to the Left or to the Right should you pitch your stall in order to win extra votes, assuming you continue to appeal to the mass middle?

Quote of The Day

"The markets are already pricing in the near certainty of a quarter-point rise from the Bank of England by May with another increase expected before October. But perhaps not wanting to be left out, the zealous guardians of Europe’s monetary system, who measure inflation rates across the 17-country bloc to the second decimal point, have recently raised their rhetoric to such an extent that investors are openly speculating that in spite of the continent’s tight fiscal policy European rates are now likely to rise before the end of summer. As they say in the land of macro investing, the cycle isn’t over until the Europeans lift rates. Just don’t bet on money staying tight for long."
Hugh Hendry

Sunday, January 23, 2011

Hayek in UCD

A recent edition of EconTalk featured an interview with Bruce Caldwell about Hayek. Well worth a listen. One of Hayek's papers discussed in the interview is Individualism: True and False - which subsequently became Chapter 1 of Hayek's book Individualism and Economic Order (you can download the pdf here).

What I hadn't realised, until I read it last week, was that Individualism: True and False was delivered by Hayek as the twelfth Finlay Lecture in University College, Dublin, on December 17, 1945. Keynes had previously delivered the first Finlay Lecture in April 1933. Caldwell suggests in a footnote to his biography of Hayek that the title of Hayek's lecture in UCD was likely a 'play' on Oscar Wilde's essay on socialism. As a gesture to his Irish audience perhaps.

But Hayek's paper addresses themes relevant far beyond Ireland. And indeed, themes still relevant to us in 2011. He was ahead of his time in relation to the present day interest of behavioural economists in 'choice architecture':
The chief concern of the great individualist writers was indeed to find a set of institutions by which man could be induced, by his own choice and from the motives which determined his ordinary conduct, to contribute as much as possible to the need of all others; and their discovery was that the system of private property did provide such inducements to a much greater extent than had yet been understood.
Though he would probably not have been too enamoured with the claimed originality of behavoural economics, given his view that:
For all practical purposes we can still learn more about the behavior of men from The Wealth of Nations than from most of the more pretentious modern treatises on "social psychology."
Hayek postulates an interesting relationship between religion and economics in his lecture:
To the accepted Christian tradition that man must be free to follow his conscience in moral matters if his actions are to be of any merit, the economists added the further argument that he should be free to make full use of knowledge and skill, that he must be allowed to be guided by his concern for the particular things of which knows and for which he cares, if he is to make as great a contribution to the common purposes of society as he is capable of making.
A recurring theme in his paper was that of the distribution of knowledge - and the inability of a small group of men to ever know enough in order to generally dictate the behaviour of all other men:
The fundamental assumption, here as elsewhere, is the unlimited variety of human gifts and skills and the consequent ignorance of any single individual of most of what is known to all the other members of society taken together. Or, to put this fundamental contention differently, human Reason, with a capital R, does not exist in the singular, as given or available to any particular person, as the rationalist approach seems to assume, but must be conceived as an interpersonal process in which anyone's contribution is tested and corrected by others. This argument does not assume that all men are equal in their natural endowments and capacities but only that no man is qualified to pass final judgment on the capacities which another possesses or is to be allowed to exercise.
In light of this classically Hayekian insight into the limits to human reason and knowledge, he sets forward a profound argument in the defence of liberty:
From the awareness of the limitations of individual knowledge and from the fact that no person or small group of persons can know all that is known to somebody, individualism also derives its main practical conclusion: its demand for a strict limitation of all coercive or exclusive power. Its opposition, however, is directed only against the use of coercion to bring about organization or association, and not against association as such. Far from being opposed to voluntary association, the case of the individualist rests, on the contrary, on the contention that much of what in the opinion of many can be brought about only by conscious direction, can be better achieved by the voluntary and spontaneous collaboration of individuals. The consistent individualist ought therefore to be an enthusiast for voluntary collaboration- wherever and whenever it does not degenerate into coercion of others or lead to the assumption of exclusive powers.
Hayek was not, however, advocating the 21st century concept of individualism as, essentially, libertinism. In fact, his case for individualism leads to the conclusion:
That true individualism affirms the value of the family and all the common efforts of the small community and group, that it believes in local autonomy and voluntary associations, and that indeed its case rests largely on the contention that much for which the coercive action of the state is usually invoked can be done better by voluntary collaboration need not be stressed further. There can be no greater contrast to this than the false individualism which wants to dissolve all these smaller groups into atoms which have no cohesion other than the coercive rules imposed by the state, and which tries to make all social ties prescriptive, instead of using the state mainly as a protection of the individual against the arrogation of coercive powers by the smaller groups.
And finally, Hayek warned his Irish audience about the danger of dismissing 'irrational' morality and social conventions as obstacles in the way of a more 'efficient' social order:
The belief that only a synthetic system of morals, an artificial language, or even an artificial society can be justified in an age of science, as well as the increasing unwillingness to bow before any moral rules whose utility is not rationally demonstrated, or to conform with conventions whose rationale is not known, are all manifestations of the same basic view which wants all social activity to be recognizably part of a single coherent plan. They are the results of that same rationalistic "individualism" which wants to see in everything the product of conscious individual reason. They are certainly not, however, a result of true individualism and may even make the working of a free and truly individualistic system difficult or impossible. Indeed, the great lesson which the individualist philosophy teaches us on this score is that, while it may not be difficult to destroy the spontaneous formations which are the indispensable bases of a free civilization, it may be beyond our power deliberately to reconstruct such a civilization once these foundations are destroyed.

Hayek's lecture in UCD is not, alas, available on the UCD website. But if there is a present day heir to Hayek in UCD - the philosopher not the economist - then that is undoubtedly Professor Gerard Casey. His advocacy of libertarian and Austrian philosophical thinking is unique in Ireland. There's a useful summary of his thinking here, and an interview with him about the current situation in Ireland here.

I find it reassuring that the values of individualism and liberty espoused by Hayek in Dublin on that winter's evening over 65 years ago should have a champion now ensconced on campus in UCD.

Saturday, January 22, 2011


Yesterday I focused on emigration. But let's not forget immigration. The ESRI are forecasting 35,000 immigrants to Ireland over the next two years. As with the emigration statistics the surprising thing is that returning Irish people make up a large proportion of the total number of immigrants (43% last year alone). The same will likely apply to the ESRI's projections for 2011-12.

But there's another angle to immigration we shouldn't overlook. I read recently that American survivalists see Ireland as an ideal retreat locale in the event of TEOTWAWKI (sometimes confused with WTSHTF). Ireland, they tell us, is conservative, rural, armed and an island - so easy to defend.

Some how I can't see Tourism Ireland running with it as a major marketing theme. Pity that, it would make for some fun advertising. And I've got the perfect soundtrack in mind:

Quote of The Day

Ambrose Evans-Pritchard on Europe's Shoddy Attempt to Vilify Ireland:
"The Irish are being sacrificed like the Royal Dublin Fusiliers at Cape Helles in Gallipoli, slaughtered for a bad strategy without negligent cover of their own big guns."

Friday, January 21, 2011

Emigrating Immigrants

The ESRI's forecast that net migration will total a combined 100,000 in 2011 and 2012 has understandably been greeted with dismay. The prospect of tens of thousands of our young people being forced to find work and a future abroad is truly appalling.

However, one thing overlooked in the coverage was that not all emigrants from Ireland are Irish. In fact, as recently as last year (see Table 3 from the CSO's Population & Migration Estimates April 2010), only a minority of emigrants from Ireland were Irish - 42% to be precise. The greater part of the remainder of emigrants were Eastern Europeans. This is inevitable. Most of those who migrated to Ireland during the boom years did so for economic reasons. Work mostly. And now they are leaving for the same reasons - probably to work in their home countries (most of whom, especially Poland, have come through the recession unscathed and are already recovering strongly).

So not all of the 135,000 emigrants projected by the ESRI (they forecast 35,000 immigrants hence the net 100,000 figure) will be Irish. Indeed, if the trend of recent years continues then most of the 100,000 will be non-Irish. That still means that tens of thousands of young Irish men and women will emigrate. It is still an appalling vista for their parents who, until recently, had hoped to bequeath them a better country than that they inherited.

But we should remember that the forecast is not the future. There is no 'natural limit' to the numbers of people who can be employed in this country. By removing the shackles from Ireland's economy (especially those we control ourselves as a nation such as the amount of tax taken from employees, and the costs imposed by the state directly and indirectly on businesses) then the domestic economy can grow just as the rest of the world is growing.

That's the very least we can do for our youth in these dark times.

Thursday, January 20, 2011

Quote of The Day

"The basic problem, across the whole range of the human helping relationships (like aid) between what might be called the “helper” and the “doer,” is that success lies in achieving more autonomy on the part of the doers, and autonomy is precisely the sort of thing that cannot be externally supplied or provided by the would-be helpers. This is the fundamental conundrum of all human helping relations, and it is the basic reason, not complexity, why engineering approaches and the like don’t work."
David Ellerman

Wednesday, January 19, 2011

Pay As You Squirm

This is for everyone who will get their pay slip this week or next and wonder 'what do taxes pay for?' It's one tongue-in-cheek answer anyway, from The Simpsons:

They left out the bank bailout unfortunately.

For a related explanation of what's really happening to your 'before tax income' see this from Economic Incentives.

Quote of The Day

"Every financial collapse is really just an ethical collapse that happened a few years earlier."
Umair Haque

Tuesday, January 18, 2011

Civic Rights

Ronan Lyons recently gave us eleven reasons to be cheerful here on Depression Island. Now let me add a twelfth: despite three years of recession, anger, fear and anxiety, Ireland is the second most civically engaged country in the world. That's according to Gallup, who measure civic engagement by:
...assessing individuals' likelihood to volunteer their time and assistance to others. Respondents are asked whether they have done any of the following in the past month: donated money to a charity, volunteered time to an organization, or helped a stranger or someone they didn't know who needed help. In 127 out of 130 countries, people are much more likely to either say they have helped a stranger in need or donated money in the past month than they are to say they volunteered their time to an organization.
Their findings remind us of the depth of social capital in this country, and the capacity we have to weather change and uncertainty whilst retaining our decency throughout. We may feel some shame about our present predicament, but here is at least one reason to feel proud.

The Visible Fist

The word freedom appears three times in the 1916 Proclamation. The freedom then asserted wasn't just political freedom - the rebels also had in mind economic freedom: 'the unfettered control of Irish destinies'. Sadly, as we approach this year the 95th anniversary of the Rising, the indicators are that our freedom - economic and political - are in retreat.

Take the recently published 2011 Index of Economic Freedom. It didn't rate a single mention in the Irish mainstream media as far as I can tell. Which is a pity since the report contains a warning: our economic freedom, while still high relative to most other countries in the world, has deteriorated recently due to the Government's handling of the banking crisis. Not only has there been a structural increase in the size of the public sector thanks to the socialisation of private sector losses, but so also has there been an increase in the power of the State due to the legislation arising from the crisis. The Credit Institutions Stabilisation Bill 2010 establishes the State not only as the biggest property developer (via NAMA), it also equips the Minister for Finance with special powers to imprison bank employees should they ever publicise the fact that the Minister has used the powers given him by the bill!

We are at a dangerous point in our history. Not only have the mistakes of this government cost us our economic sovereignty, they now threaten to undermine our political freedom as well. The upcoming centenary of the Rising in 2016 should be a beacon to remind us of the hard-won freedoms we have secured, and duty of all of us to continue to defend them.

For if we don't, then our children will be next...

Quote of The Day

Modern power is a time machine, not for moving back and forward in time, but rather expanding the time in which we can do other things. As the scale of power production gets larger, costs become less expensive, making the power more generally available. Modern power has lifted billions of people out of the grind of poverty, improving both quantity and quality of life.
Jon Boone

Friday, January 14, 2011

What Women Want

I've blogged before about the myth of the gender wage gap: but I think I may have got it wrong. Apparently the reason men earn more than women is because women want it that way. Don't take my word for it (you wouldn't anyway), for according to YouGov nearly two thirds (64%) of married women wanted to marry a man who earnt more than them before they got married. And 62% did.

Now to me this is all very obvious: it's what women and men do as part of the implicit (and even explicit) marriage contract. The woman intends to bear children when she get married, foregoing income from paid employment as a result, and the man intends to look after her and the children during their dependent years. All very obvious and normal... and all very upsetting to most feminists. For apparently motherhood castrates women.

Catherine Hakim has written a fascinating paper on Feminist Myths and Magic Medicine which addresses this very subject. According to her, it is a feminist myth (no. 9 of 12) that women prefer to earn their own living and hate financial dependence on men. Instead, data shows that:
Women’s aspiration to marry up, if they can, to a man who is better-educated and higher-earning, persists in most European countries. The Nordic countries share this pattern with all other parts of Europe. Women thereby continue to use marriage as an alternative or supplement to their employment careers. Financial dependence on a man has lost none of its attractions after the equal opportunities revolution. Symmetrical family roles are not the ideal sought by most couples, even though they are popular among the minority of highly educated professionals.
The YouGov research confirms this, and it also confirms Hakim's observation that the feminist fetishisation of paid employment ('better a wage slave than a sex slave' is how it goes I think) is something that most people reject. In fact, nearly half of all men (47%) agree that 'society pressures women with children to go to work'. This rises to 59% of all women.

But while 'marrying up' has been with us since time immemorial (nurses marrying doctors, say) what is different now is that doctors marry doctors. And there's the problem: with women better educated and better paid (thanks to their 'unfair' high share of third level places and 'unfair' low share of the unemployed) there is a diminishing pool of men to whom they can 'marry up'. It's called the Apex Fallacy and one inevitable result is that it is only men who earn above average wages who are more likely to get married. Since being married boosts married men's earnings relative to unmarried men (and the gap is getting wider) it follows that women's aspirations to marry a man who earns more than them will lead to greater income inequality for men (married versus non-married), and greater inequality between the earnings of men and women (since women prefer to drop out of paid employment when they have dependent children but men don't). Ergo the gender income gap is the result of women's preference for men with higher incomes.

But enough of marital economics. What do women really want from marriage? And men for that matter? Dennis Prager wrote two excellent articles in the Jewish World Review at the end of last year that get to the nub of the matter. To sum up - and do please read both articles - a woman wants to be loved by a man she respects; and a man wants to be respected by a woman he loves.

Incomes and wages play only a small part is making that particular arrangement work...

Quote of The Day

No policy could be more dangerous, more certain ultimately to produce a social explosion, than to educate young people for many years and deny them first the opportunity to earn a living that they believe is commensurate with their education, and then the opportunity to earn a living at all. But this is the policy that many countries persist in following on both sides of the Mediterranean.
Theodore Dalrymple

Wednesday, January 12, 2011

Quote of The Day

We gravitate to forecasts because they give us the illusion that we understand more about the world than we do, and that we can take certain steps to to make it better.
FT Alphaville

Drift Taxing

Worthwhile Canadian Initiative makes an insightful connection between overfishing and charitable donations. It's a stretch, but it works. He uses the results of a recent economic experiment to show that beyond a certain point people's generosity - like fish stocks - is rapidly depleted to the point where more effort (fishing/collecting) produces less output:
In the real world, however, multiple fundraisers chase the same donors. Each request for money, taken in isolation, is perfectly reasonable. In aggregate, however, the total amount requested by fundraisers could easily be more than donors consider to be fair.

Faced with a barrage of requests, a donor's generosity collapses. People begin screening their calls, throwing requests for funds straight into the recycling bin, or putting the phone down with a single word: "sorry."

With altruism, as with fish, overexploitation is partly attributable to technological change: lower telecommunication costs and new forms of communication reduce the cost of requesting funds. Data mining is the sonar of the charitable world, allowing potential donors to be located precisely.

It doesn't just stop with fishing and charities of course. Take taxation for example. The government will become increasingly desperate to meet the agreed IMF/ECB budgetary criteria in the coming years (it won't be much easier for the next government either). So expect to see more 'drift taxing' in future budgets (plastic bag taxes and the like): and more efforts by the 'fish' swim into the deeper, blacker parts of the economy to avoid extinction.

Tuesday, January 11, 2011

Tweet of The Day

“The problem with Internet quotations is that many of them are not genuine.” — Abraham Lincoln @patrickmadrid

Quote of The Day

In short, we are witnessing the end of The End of Capitalism as the world waits to see whether free markets and the private sector can bail us out of the mess left behind by massive expansion of government spending and monetary extravagance.
Terence Corcoran

Monday, January 10, 2011

Exploding Japanese

“I see Japan as a nuclear bomb strapped onto the chest of the global economy.”
That's the ebullient Hugh Henry explaining why he's bearish on Japan. You'd never have guessed. For a more considered exegesis of his exploding Japanese thesis check out the Eclectica Fund's December newsletter. It's entertaining, even if you end up thumbing through the Golden Pages for nuclear fallout shelters...

Willem Buiter has a somewhat more orthodox exposition on Japan - via a detailed analysis of the eurozone's prospects (not good). He notes that:
For the same fundamentals that support the benign low interest rate equilibrium, there also exists a ‘fear equilibrium’. In a ‘fear equilibrium’ the marginal holder of Japanese sovereign debt believes there is a non-trivial likelihood of sovereign default (or of an inflationary and exchange rate depreciation solution to the public debt overhang) and interest rates rise sharply, thus validating the fear of worsening public finances that triggered the increase in interest rates in the first place. The timing of the shift to a ‘fear equilibrium’ cannot be predicted with any degree of precision. But absent any determined and sustained commitment to tackle the unsustainable fiscal programme of the sovereign, the shift from the benign to the fear equilibrium seems bound to happen sooner or later.
He also has a sobering view on Ireland:
Ireland is the prime example of a country where the sovereign is at material risk of default because of the support extended by the sovereign to the banking sector, through guarantees of unsecured debt and through large injections of capital. Like Iceland, the banking sector in Ireland was too large to save. Unlike Iceland, the Irish sovereign, when faced with the likelihood that it would not be possible to make whole both the banks’ unsecured creditors and its own creditors, did not leave the banks to sink or swim on their own but extended bank guarantees for initially up to €440bn worth of bank unsecured liabilities. With the consolidated sovereign and banking sector likely insolvent, in our view, the key remaining question is whether it will be the banks who default, the sovereign or both.
Probably a lot sooner than Japan. Though hopefully we won't go nuclear. Oh well, maybe Hatsune Miku will save us...

Sunday, January 9, 2011

Quote of the Day

Over the centuries, the millennia even, the track record is clear: Governments are cack-handed and dumb. If they do not start out dumb, they wind up dumb. Hubris, overreach, and the great weight of managing complexity overtakes them.
Mercenary Trader

Friday, January 7, 2011

The Worried Rich

A recent worldwide Gallup Poll (in French only) paints an extraordinary picture of inequality. Not that sort of inequality. I'm talking psychological inequality. For it seems that the world's wealthiest nations are suffering from an unfair share of pessimism right now. The chart plots income per capita (horizontal axis) against the percentage in each country who think 2011 will be a year of economic prosperity. The world's richest countries are mostly in the bottom right hand box, but look at who is in the top lefthand box (low incomes but high expectations): Nigeria, Vietnam, China, Brazil etc. (Ireland wasn't included in the survey but I think you can guess where we would be on the chart).

As PWC explain it in their new report - The World in 2050 - the 'E7' (China, India, Brazil, Russia, Indonesia, Mexico and Turkey) are on the fast track to overtake the G7 in the next twenty years. And it isn't just a matter of economics. In a similarly entitled report published yesterday, HSBC point to demographic trends as the key driver of the West-East rebalancing now under way. The Worried Rich of the developed world are having fewer babies - whilst the Hopeful Poor are in the demographic sweet spot Ireland occupied until recently: the number of adults at work is expanding even as the numbers retiring are also on the increase.

But all these trends should give us reasons to be cheerful - the title of a recent post by Matt Ridley. Rising affluence means less violence. As he puts it:
What is more, this process generates virtue. The essence of virtue is co-operation: pro-social rather than anti-social behaviour. Study after study confirms that immersing people in commerce makes them nicer: le doux commerce, Montesquieu called it. Growth comes about through people working for each other. Self sufficiency is poverty; prosperity is mutual exchange and specialisation. The more you specialise in doing one thing for strangers and they each specialise in doing one thing for you, the better your productivity and the greater your standard of living. Millions of people you will never meet contributed to making for you each of the objects you use in your everyday life. Far from being a selfish creed, economic growth spreads collaboration.
I read Matt's book - The Rationalist Optimist - over Christmas: a perfect antidote to the doom and gloom loop we are trapped in here in Ireland. We Worried Rich need to get over ourselves. We are in a race to the top, not a race to the bottom. I wish the E7 well.

Thursday, January 6, 2011

Tune Out, Turn Off, Unplug

I got an iPad for Christmas. It's a source of endless hours of fun. But it has got me thinking (when I'm not playing Real Racing HD): what if we have reached another peak, namely: Peak Distraction? They're calling it Divided Attention Disorder (or DAD - a worrying acronym that), the result of information overload that stops people form concentrating on tasks as they search for ‘pellets of social interaction’.

What if, instead of ever increasing online activity, things go into reverse? It might seem absurd to suggest this given the onward march of Facebook (1.76 million users in Ireland alone), but there are a few pointers to the coming Peak Distraction. JWT's 100 things to watch in 2011 identifies Digital Downtime (trend no. 25) as an emerging trend. Just as schools have 'Walk on Wednesday' will we see 'Facebook Free Friday'? Similarly, Marian Salzman identifies a desire for more tangible/manual tasks as part of her 11 Trends for 2011 (see Trend 4 on the counterculture move to break from 'SoMe' - social media). And some neuroscientists are getting in on this new zeitgeist - as they worry that the dopamine enhancing experience of Facebook, Twitter etc may be turning us into digital addicts.

We're not there yet, but don't be surprised to see an emerging counterculture that is less Timothy Leary and more Henry Thoreau. Tune Out, Turn Off, Unplug - but only after I get to the next level on Real Racing HD...

Monday, January 3, 2011

Evil Men

If Sweden is the Saudi Arabia of Feminism - in Julian Assange's memorable phrase - does that make Ireland the Iran of Feminism? Sweden is a monarchy after all (like Saudi Arabia), and Ireland a Republic (like Iran). It's just a thought: one that struck me reading today's Irish Times article on the proposal to import a Swedish law that criminalises men for buying sex, but not women for selling it. Kind of like punishing drug buyers but not drug dealers. Hmm, now there's an idea...

Of course the proposed legislation is simply a 21st century version of the Legion of Mary's occupation of Dublin's Monto district in the 1920s, an area then synonymous with prostitution. Though today's anti-prostitution activists are unlikely to be dedicated to the Sacred Heart. Still it is the same agenda, with a contemporary dose of misandry thrown in for good measure. It is the agenda of those who believe that heaven on earth is just one more piece of legislation away. Be it the Kingdom of God or the Kingdom of Woman. It is the belief that human nature (especially that of males) can be shaped and reshaped by the efforts of those gifted with better knowledge, understanding and insight than those for whom they legislate.

It is also on a par with other misandrist legislation already in place in Ireland: legislation that sentences a man to life imprisonment for incest but not a woman, or that imprisons a boy for under age sex but not a girl. Only men can do evil it seems: being male is the last sin in our secular society. It seems that when it comes to equality for men they find themselves in an unfortunate 'manority', somehow overlooked by the guardians of equality and minority rights.

Robert A. Heinlein famously observed that 'the human race divides politically into those who want people to be controlled and those who have no such desire'. The controllers are in the ascendant once again: Sharia secularism will be just as ugly as the religious version. Welcome to the Feminist Republic of Ireland.
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