Monday, October 31, 2011

Trick or Trick

Here's a horror story for the day that's in it: the EFSF may not be able to raise the money that was supposed to keep Ireland going until we're ready to go back to the bond markets...

ht Irish Economy Blog

Thursday, October 27, 2011

The Devil's Benefit

"And when the last law was down, and the Devil turned around on you - where would you hide, Roper, the laws all being flat? This country's planted thick with laws from coast to coast - man's laws, not God's - and if you cut them down... d'you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake." Robert Bolt, A Man for All Seasons

So I'll be voting No to the 30th Amendment.

Monday, October 24, 2011

The Long Is Short

Apparently I have a 'Present-Future' thinking style. I filled out the short survey on Mind Time Maps and got the chart opposite (with some additional commentary on what it all means). It's a neat way of thinking about the relative importance of the past, present and future in our lives. Though I suspect lifestage (i.e.: getting older) has an influence on one's place on the map. I'll be sure to update it for you in twenty years time...

The time map idea is featured in an excellent report on the idea of The Future Quotient. You've heard of IQ and EQ - now there's FQ. It's a fascinating report, full of interesting ideas, tools and examples. Well worth the read. It also includes a reference to Andrew Haldane's paper that I blogged about previously - whence the title of this post.

The authors are anxious to arrest a perceived decline in thinking about the future. I think any 'decline' is an inevitable consequence of increasing uncertainty. When the near term is so uncertain, what's the point of thinking about the long term? Chris Dillow has a contrarian perspective (as usual): we are moving rapidly from a Fordist era of planning and thinking (writ large in macro economic forecasting) towards a Zaraist era of real time responses to demand (making macro forecasting useless, let alone inaccurate). Alternatively, it could be that we are simply 'over-discounting' the future - we need a better way to price the future.

Perhaps. But there also profound cultural differences. According to Geert Hofstede's analyses of Long Term Orientation (LTO), it is predominantly Asian countries that have the highest capacity. There isn't a measure for Ireland - but I suspect we're not much different to the UK: and their LTO capacity is on a par with Tanzania and Zambia... By the way, another cultural dimension measured by Hofstede is that of the Uncertainty Avoidance Index (UAI). Countries with a high UAI have populations that generally seek to avoid novel situations that are unstructured and surprising or different from usual.

And the country with the highest UAI in the world? Greece. Oh dear...

Sunday, October 23, 2011

Budget Psychology

My latest post over at the Economics, Psychology and Policy blog argues that Budget 2012 will be the most important psychologically in years...

Saturday, October 22, 2011

Your Brain on Animation

I've blogged before about Iain McGilchrist's The Master & His Emissary - one of the most original books I've read in the past ten years - but if you don't have the time to read it, then check out this handy animation from the RSA:

Friday, October 21, 2011

The X-Factor Election

John Waters worries about our narrowing spectrum of possibilities as a nation:
In the Ireland midwifed by materialism and pseudo-modernity, it is impossible to image a patriotism that is not jingoistic, an idealism that is not economistic or a sincerity that is not sanctimonious. We know too much, are too clever, have become over-ironified to the point of cultural self-ingestion. Political rhetoric, then, has become a kind of game, in which only the most pious or populist sentiments are a safe bet...

More than anything yet “announced” by anybody – leader, writer, artist, whoever – this election has declared an end to the present spectrum of possibilities. One thing we now know: we cannot return to this well until we take steps to replenish it. In a culture increasingly driven by scepticism and suspicion, we can find no ideas or images concerning our collective future from within the existing package, but nor does anyone seem capable of generating any new thoughts or symbols that might sustain us into another phase.
Most Irish people under the age of 35 haven't voted in a Presidential election before. I call them the X-Factor Generation and perhaps we should not be surprised that the election has taken on the same 'light entertainment' features of a celebrity game show.

I'm a citizen, get me out of here...

Thursday, October 20, 2011

Cultivating Civility

Kindness is the parent of kindness.
Adam Smith
The Young Foundation have published a thought-provoking report recently called Charm Offensive: Cultivating Civility in 21st Century Britain. The Adam Smith quotation is from the report. So is the graph: a neat framework for scoping the full extent of civility.

It's also a very British - even English - report. In my experience the English enjoy a deep culture of civility. Not everywhere and always, nor in every interaction. But enough for a visitor to come away with an abiding sense of English civility. So it seems apt, in a way, that a research institute in England should be fretting about something that - I suspect - doesn't occupy nearly as much attention in other countries. Including Ireland. I think we assume in Ireland that our smallness - and the fact that nearly everyone is three-degrees-of-separation away from each other - is enough to keep us civil.

The Young Foundation report sets out lots of examples of how civility is being shaped by cultural, economic and other forces in Britain. Some are working against civility - busy lives, for example - others are working for civility - e.g.: ethnic diversity and the need to 'get along together'. The report recommends a number of ideas - including nudge-type applications of behavioural economics - to induce a great level of civility in society.

One of the issues they could do with giving more attention to is the decline of shame. Jennifer Jacquet blames the decline of shame as a 'civil-izing' force on the ephemeral nature of so many interactions and relations in today's world which loosen the bonds that gave shame its power. She cites the example of economy-wrecking bankers and their bonuses. Indeed. The problem with shame, of course, is that implies passing judgement - and passing judgement on other people's lifestyle choices is now considered politically incorrect most of the time. Indeed, there are some who argue that political correctness has replaced old-fashioned 'niceness' as the driving force of civility. Which can be problematic.

But here's the thing. I do think that the level of civility in Ireland is quite high - whether by accident or design. And it is something we should make more of when thinking about our future. We are number 2 in the world in terms of civic engagement after all. Also civic, civility and civilization all share the same route in the Latin for citizen. Citizenship is about belonging and as we look ahead to 2016 and the centenary of the Rising we might use the occasion to think again - and together - about what it means to be Irish in the 21st century and how it binds us together.

In a civil manner of course. 

Wednesday, October 19, 2011

When The Lever Breaks

Golem XIV compares the world's leaders to a stress-out rat in a Skinner Box as they keep pressing the 'confidence bar':
Seems clear to me our leaders are just pressing that bar because they don’t have the imagination to think of anything else.  They never did know why pressing the bar delivered the reward. Economics is a Skinner box, a black box, where there no one can see and certainly none of them understands, the mechanism at work. They have theories about the underlying rules and mechanisms and assumptions about human nature and the nature of economic behaviour. Their assumptions are almost all fatuous from any kind of evolutionary perspective. And their theories about the mechanisms are generally drawn from dubious first principles or based on correlations which they have noted – when this has happened in the past then this has followed. But sadly for them the correlations are very often ephemeral. They hold true for a decade or two and then seem to stop being correlated.

...And so they continue to press the bar and attribute anything positive that subsequently happens to their bar pressing. While anything negative is attributed to not pressing it correctly or to malign external factors. If nothing happens, well press it again a bit harder. Remember confidence in the bar is the key to seeing the policy through!
Where's PETA or the ISPCA when you need them?

Tuesday, October 18, 2011

Miserably Happy

The latest Eurobarometer report on the Social Climate in Europe suggests, once again, that the laws of economics stop at Hollyhead. The survey asked respondents throughout the EU for their opinions on the state of their country's economy, unemployment, inflation, health services etc etc. On many of the scores Ireland scored last or in the bottom four or five out of 27 countries for satisfaction with the state of their nation.

But when asked about their satisfaction with the life they lead right now, the Irish scored the 6th highest in Europe! Indeed, as the table below shows, almost half - 46% - of all Irish people said they were 'very satisfied' with life right now. Of course, we're not alone in that regard: Angus Deaton recently reported that measures of the subjective well-being of Americans are more vulnerable to questions about politicians than about the economy.

We're more Boston than Berlin when it comes to happiness and life satisfaction it seems...

Monday, October 17, 2011

Emotional Kapital

Is capitalism now appropriating our emotions and not just our labour? Writing in New Left Review, William Davies argues that:
Capitalism would seem to require an optimal balance of happiness and unhappiness amongst its participants, if it is to be sustainable. The need for dissatisfaction is implicitly recognized by Keynesian economics, which sees the capitalist system as threatened by the possibility of individual or collective satisfaction, manifest as a demand shortfall. Capitalism’s gravest problem is then how to maintain governments or consumers in a state of dissatisfied hunger, and how to find ever more credit through which to feed that hunger.

As always with such left-wing narratives there does tend to be an unhealthy dose of conspiracy about their explanation. Take Davies description of advertising:
Advertising, like management theory, is fuelled by a critique of the dominant normative-economic regime within which it sits, facilitating safe acts of micro-rebellion against the macro-social order. It acts as capital’s own trusted moral and artistic critic in order to inspire additional psychological engagement on the part of ordinary worker-consumers. Dissatisfaction is reduced to a psychological tendency to be fed back into processes of production and consumption. As a result, understanding such psychological qualities as impulse, libido and frustration—often in the micro-social context of the ‘focus group’—has been key to the development of advertising since the 1920s.
Which would all make sense if it wasn't for the nagging fact that most advertising is ineffective - hence the current fall in ad spending in mainstream media. I guess ordinary worker-consumers are more complicated than ordinary left-wingers realise.

But Davies saves most of his opprobrium for behavioural economists, whom he sees as leading the intellectual charge by capitalism to control the happiness agenda in society:
Happiness economics took off during the 1990s, drawing on data provided by a number of national household surveys, which had included questions on ‘subjective wellbeing’ from 1984 onwards. With it has come the rise of homo psycho-economicus, a form of economic subjectivity in which choice-making is occasionally misguided, emotional or subject to social and moral influences. If homo economicus was unhappy, that was merely because he had insufficient money or consumer choice. But homo psycho-economicus suffers from psychological afflictions as well. He makes mistakes because he follows others too instinctively; he consumes things which damage his health, relationships and environment; he sometimes becomes unhappy—or even happy—out of all proportion to his material circumstances.

...Homo psycho-economicus is less rational, less calculating, than homo economicus; but to what extent is he a social creature? Wellbeing policies can be seen as efforts to get people to conform more closely to the ideal of neo-classical rationality, and the ‘Robinson Crusoe’ rugged individualism that it assumes. 
Missing from Davies' critique is the awkward fact that most people in capitalist societies are happy most of the time. That doesn't mean they are content with everything as it is now - the state of the economy, for example - but nor does it mean that they are in a perpetual state of dissatisfaction, manipulated by capitalist lackeys in the advertising and economics professions. As the OECD's initiative on well-being shows, there are many different influences on the happiness or unhappiness of nations, not all of them economic. Indeed, there are even racial differences in our propensities for happiness - again, well outside the influence of even the most ardent nudgers. 

Anyway, it's Monday so I'd better get out there and do my worker-consumer duty - for my own happiness sake of course...

Wednesday, October 12, 2011

Aladdin Gain

With the banks on strike unable to lend money because nobody wants to borrow, bless, it's encouraging to see people taking the whole money-creating thing into their own hands. After all, why should governments have a monopoly on money. They haven't exactly done a brilliant job of it so far?

I blogged about the Bijlmer Euro before, and today I'd like to introduce you to the Brixton Pound (or B£). It's another example of a local community coming together to grow their own money and to stimulate their local economy.  It doesn't have to be either/or: either fiat currencies or local currencies - right now we need as much monetary diversity as we can muster in order to make local and national economies more resilient to the shocks ahead. The Brixton Pound can even be used as an electronic payment system via text. Again, a nice hybrid of smart technology and local activity, just like the Bijlmer Euro.

And the really cool thing: the B£10 note features a local lad made good - one David Bowie.

Monday, October 10, 2011

The Great British Recession

Whilst Irish eyes are focused on Brussels and Berlin, we shouldn't overlook what's happening to our next-door neighbour.  Only last week the Governor of the Bank of England - Sir Mervyn King - warned that Britain's debt difficulties are "the most serious we've ever seen since the Great Depression of the Thirties, if not ever". He was so spooked he announced a further round of quantitative easing: £75 billion worth, and that's only a starter.

His outburst coincided with the downgrading of 12 British banks by Moodys - so perhaps the Governor knows something the rest of us don't...?

As ever, Tim Morgan - from Tullet Prebon - has a crystal clear explanation for the mess Britain is in (updating their extraordinary analysis that I blogged about previously):
Between 2003 and 2010, Britain – by which in this context we mean both the government and individuals – borrowed an average of 11.2% of GDP each year. This isn't sustainable, and never was. Borrowing at this scale did deliver apparent 'growth', but at an appalling cost, with each £1 addition to national output coming at a cost of £2.18. Meanwhile, between 1999-2000 and 2009-10, government spending increased by 53% in real terms. The two drivers of the economy, then, were public spending and private borrowing. The denouement of this recklessness coincided with a global banking crisis, but no amount of 'neo-endogenous growth theory' could disguise the fact that basing national prosperity on borrowing always contained the seeds of its own destruction. 
That last point is crucial. For as Morgan explains, most of the British economy is now ex-growth:
The first problem faced by the UK, then, is that both of the economic drivers of the last decade – private borrowing and public spending – are dead in the water. The second (and bigger) problem lies in the way in which the era of recklessness skewed the economy against organic growth.
The biggest beneficiaries of private borrowing were real estate, construction and financial services. With the era of ever-increasing private debt well and truly over, these sectors cannot grow, which is a bit of a snag, because they account for almost 40% of economic output.

Meanwhile, the ending of public spending largesse has also put a stop to growth in healthcare, education and public administration, collectively a further 18.8% of the economy. With falling real incomes impacting retailing as well, the total proportion of the British economy which is now ex-growth rises to almost 70%.
Which isn't good news for us in Ireland. We export more to Britain than we do to France and Germany combined. There are tough times ahead for Britain - including the real risk of a prolonged recession. Britain, like Ireland, overdosed on cheap credit and is now going through economic detox. And like Ireland, our neighbour face a stark choice:
... there are no wholly good options, only choices between the fairly unpleasant and the downright nasty. 
Let's hope for our neighbour's sake - as well as our own - that Britain makes the choice quickly and that the after effects are not contagious...

Image credit: Strange Maps

Sunday, October 9, 2011

Morton's Fork

From Ambrose Evans-Pritchard:
My sympathies go to the hard-working citizens of Germany, Spain, Italy, Portugal, and Ireland for being led into this impasse by foolish elites.
A global system biased towards export dumping has had unhappy effects on the US, UK, and Club Med. These countries have faced a Morton’s Folk over recent years: an implicit choice between job losses at home, or accepting credit bubbles to mask the pain.
They chose bubbles. That was a mistake. This strategy of buying time cannot safely be repeated because fiscal woes are already near "boiling point", in the words of the BIS. “Drastic improvements will be necessary to prevent debt ratios from exploding," it said.
He expects a lurch towards protectionism: sadly I think he's right.

Friday, October 7, 2011

Anxious Times

I have a new post over at the Economics, Psychology and Policy blog.

We live in anxious times.

Quote of a Lifetime

"No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary."

Steve Jobs

Wednesday, October 5, 2011

Placebo Nation

Here's a simple way to cut the cost of health care in Ireland: arrange for our pharmacists to randomly issue placebo pills to half of all those presenting prescriptions from their doctor. It might seem cruel - but the funny thing is it might not make any difference to the wellbeing of the pill takers. Other than, of course, to reduce the amount of tax they have to pay to keep our health service in the style it has become accustomed to.

Jonah Lehrer recently wrote one of the most disturbing articles - as in 'rock-your-world/I-didn't-know-that' kind of 'disturbing' - for The New Yorker. His article is called The Truth Wears Off, and in it Lehrer points out that science isn't, em, working the way it's supposed to. He reports example after example of studies (e.g.: drug tests) that have been repeated over time - only for the statistically significant effect reported in the earlier studies to gradually disappear in the later studies. There's the freaky part: the effects gradually disappear. If it was all down to mere randomness then the effects might fail to appear in one set of tests and then suddenly appear (even more strongly perhaps) in a subsequent set of tests. But they don't. Instead they just 'wear off'.

And here's the even freakier part: it isn't just studies concerning humans that are seeing these gradual declines. For example, research in the early 1990s among different bird species showed that female birds were more likely to mate with male birds with symmetrical feathers. But then something strange happened:
In 1994, there were fourteen published tests of symmetry and sexual selection, and only eight found a correlation. In 1995, there were eight papers on the subject, and only four got a positive result. By 1998, when there were twelve additional investigations of fluctuating asymmetry, only a third of them confirmed the theory. Worse still, even the studies that yielded some positive result showed a steadily declining effect size. Between 1992 and 1997, the average effect size shrank by eighty per cent.
Perhaps the female birds were reading the journal articles and decided to not be so predictable?

But at least scientists now have a name for this: they call it 'the decline effect'. Though as Professor Jonathan Schooler points out in a relate article in Nature, just because you give something a name doesn't mean you have an explanation for it! Both Schooler and Lehrer feature in a brilliant Radiolab podcast on Cosmic Habituation - their phrase for 'the decline effect'. Sounds even better.

One obvious message from these observations is to proceed cautiously with claims about scientific validity and certainly with claims about the potency of new drugs. Even existing ones - as noted in my recent post on mental illness in Ireland. Indeed, recent research on Prozac has shown that placebos are 80% as effective as 'the real thing'.

We're only scratching the surface of the placebo effect and related mysteries like the decline effect. But we don't have to wait until the science is sorted. Perhaps as part of a budget balancing experiment we should try putting the entire nation on placebos for a while just to see what difference it makes. The outcome might be surprising...

ht Barking Up The Wrong Tree

Tuesday, October 4, 2011

Zero Sum Politics

From a fascinating (though somewhat gloomy) op ed by Peter Thiel - founder of Paypal:
The give-and-take of Western democracies depends on the idea that we can craft political solutions that enable most people to win most of the time. But in a world without growth, we can expect a loser for every winner. Many will suspect that the winners are involved in some sort of racket, so we can expect an increasingly nasty edge to our politics. We may be witnessing the beginnings of such a zero-sum system in politics in the U.S. and Western Europe, as the risks shift from winning less to losing more, and as our leaders desperately cast about for macroeconomic solutions to problems that have not been primarily about economics for a long time.
It could be dismissed as the jeremiad of a bitter old man - if he wasn't so young and successful! More importantly, he believes in investing for the future: hence the recent announcement of the first of the 20 under 20 Thiel Fellowships. Politics might be a zero-sum game at present: but the future doesn't have to be. 

Monday, October 3, 2011

Thank You Communism

...for a giant leap for mankind. So says science fiction writer Neal Stephenson:
"A grizzled NASA veteran once told me that the Apollo moon landings were communism’s greatest achievement."
Stephenson goes on to lament the demise of 'the big stuff' to inspire us and guide us (as a fellow fifty-something 'child of the space age' I lament it too). He attributes the demise to a growing fear of failure - and therefore to the fear of litigation that error provokes in the private and public sectors. But his explanation is too simplistic.

For starters, the demise of the big stuff happened much longer ago than he presumes. Perhaps nearly fifty years ago - in 1975 to be precise, when human capability peaked by some estimates. Long before paranoia about 'health & safety' and 'public liability' turned playgrounds into play-dough.

So if not a legal force for the demise of 'the big stuff' then what else has happened in the past fifty years? The blogger Whiskey's Place provides an answer - in a critique of another science fiction writer's take on our modern malaise - and the answer is the sexual revolution and the demise of marriage:
This is the ugly truth of it. Western Civilization is built upon repression. NOT as feminists say, half-truthfully, on female repression. But upon repression of women's ability to get the sexiest men. Western Civilization requires soaking up all those men who create violence and poverty into marriage. Into making them stakeholders directly into society, by giving them a small family, all their own, which they will mostly (not always but mostly) work themselves to death to keep and improve. 

...Western Civilization is the long slow grind, the constant search for new advantages, requiring massive amounts of nerdy, focused men who search for advantage because they like it, and are good at it, and need to ... feed their families. Thus nerdy obsessions turn to the Green Revolution, not World of Warcraft. Polio Vaccines not Angry Birds. The invention of Television not Magic the Gathering. Real technology to accomplish something of value, creating Western Advantage, not trivial past-times for men outside the mate market.
It is odd how often science fiction writers and futurists miss the social in their obsession with the technological. Robin Hanson made a similar observation recently. The short talk below by Arthur C. Clarke is an example of extraordinary prescience about science, but again the things that have changed the most (we still live in houses and drive cars after all) are the social changes he didn't foresee (ht Kevin Kelly):

So if we can 'thank' Communism for the peak of Western Civilization, should we 'thank' Feminism for its demise?

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