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Articles by chris

Power, not prices

2 days ago

We’re heading for a cost of living crisis because of big price rises for essential items such as gas and food. Everybody knows this. Which is unfortunate, because it’s not quite true.
Of course, I don’t deny that prices are rising. They are. What’s doubtful is that they are the sole cause of falling real incomes.
Simple statistics tell us this. Since quarterly data began in 1955 fluctuations in annual inflation (measured by the consumption deflator) have explained only 4.2% of the variation in annual growth in real households’ incomes; for longer-term changes such as three or five-year ones the explanatory power is even lower. This tells us that rising prices alone have been only a tiny cause of changes in real incomes.
What’s more, our period of highest inflation actually saw real

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How to commit fraud

11 days ago

It is fitting that Boris Johnson’s premiership should be in doubt so soon after Elizabeth Holmes has been found guilty of defrauding investors, because both show us how easily people are fooled.
Inspired by them, here are some tips for any would-be con artist.
Exploit wishful thinking. Experiments by Guy Mayraz have shown just how easy it is to induce this. People want to believe there’s been a great medical breakthrough, or that an obscure mining company has discovered huge mineral deposits, or that they’ve met “the one” who won’t cheat on them.
Ms Holmes preyed on this: people wanted to believe there was a new Steve Jobs, and the wish was father to the belief. Similarly, Johnson’s supporters in 2019 thought you could get Brexit done by sunny optimism rather than hard bargaining. And,

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Against work

14 days ago

The FT has a nice piece on the rise of the anti-work movement in the US, which encourages people to cut down on their paid employment: although different, this movement has something in common with the “financial independence, retire early” community.
All this contrasts with the Labour party since the 1990s, most of whose leaders – Sir Kier Starmer included – have valorized “hard-working families”*.
By this, they don’t mean people who work hard tending their allotments, practicing guitar or painting Warhammer figures. Instead, what Labour values – and the FIRE and anti-work movements do not – is paid employment.
There is, of course, a very long tradition on the anti-work side. Ancient Greek intellectuals despised manual workers because they could not devote their time to cultivating

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Class, sympathy & solidarity

25 days ago

The conviction of Ghislaine Maxwell has promoted some sympathetic headlines. Both ABC and CBS write of her “fall from grace” and the BBC of her “downfall”. All of which reflects Rachel Johnson’s attitude, that “it’s hard not to pity” her.
What’s going on here?
In part, there’s an echo of a sentiment we’ve largely lost – a tendency to sympathize with the criminal. Vast amounts of country music express this: The Banks of the Ohio, San Quentin, Folsom Prison Blues or Pancho and Lefty to name but a few. Tom Jones version of Green Green Grass of Home, remember, was one of the best-selling hits of the 1960s.
And there’s a reason for this pity. We don’t become criminals merely because we are irredeemable wrong’uns: to believe that is to commit a crass form of the fundamental attribution

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On purified identities

December 12, 2021

One of my favourite social thinkers of recent years is Richard Sennett. There’s one particular idea of his that deserves especial attention today – that of a purified identity.
Such an identity arises, he says, when:

The threat of being overwhelmed by difficult social interactions is dealt with by fixing a self-image in advance, by making oneself a fixed object rather than an open person liable to be touched by a social situation. (The Uses of Disorder, p6)

People with such identities “create an aura of invulnerable, unemotional competence for themselves” by screening out or devaluing evidence that conflicts with that self-image. For such people, wrote Sennett, dissonances are “interpreted as less real than the consonances with what is known.” There are numerous psychological

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The decline of the impartial spectator

December 8, 2021

That video of Allegra Stratton laughing about a Downing Street Christmas party last year shows that the government is taking for fools those who observed the law – even to the point that it meant leaving relatives to die alone. There is indeed “one law for us and another for them.”  
Naturally, this has aroused widespread anger. As Adam Smith wrote, “All men, even the most stupid and unthinking, abhor fraud, perfidy, and injustice, and delight to see them punished.”
This poses the question: what is the disease of which Stratton’s laughter is a symptom?
I ask because to someone formed in the 1980s the sight of a Tory showing contempt for the law is perplexing. Thatcher often and loudly proclaimed the importance of the rule of law; I can’t imagine her laughing about illegal parties in

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The end of evidence-based centrism

November 27, 2021

One of centrists’ great conceits is that they are rational and moderate whist the left are fanatical ideologues. New Labour for example championed “evidence-based policy-making”; Chris Leslie claimed (pdf) that they favour “evidence not ideology”: and Steven Pinker has a BBC radio show telling us how to think better. Two recent interventions remind us that all this is self-serving nonsense.
One came from David Blunkett, who told the Today programme (2"57′ in) that if we let in a few refugees, “Nigel Farage might end up being Prime Minister”. That of course is mere speculation. What is evidence is that the UK does not get many asylum applications. There were only 29,456 in 2020, compared to 102,525 in Germany, 37,860 in Greece, 86,380 in Spain and 81,735 France. Lord Kerr is right: “we

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Frames, stories and political change

November 18, 2021

Sometimes, opinions change a lot even though the facts change only a little. So it seems to be with the case of MPs second jobs. Everybody knew for years that many MPs had them but most regarded it as acceptable. Until, suddenly, it is sleaze.
What’s happening here is not so unusual. We often see it in financial markets. In the mid-90s, for example, several Asian countries ran large external deficits. And for a long time, these were seen as healthy because fast-growing countries should suck in foreign investment – until, suddenly, they weren’t and we had a financial crisis. As Sushil Wadwani, a former MPC member said (pdf):

Countries with a current account deficit can have a currency that stays strong for a surprisingly long period, until, sometimes, there is an abrupt adjustment.

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The decline of economics

November 14, 2021

Edward Luce writes:

Bill Clinton’s 1992 campaign watch phrase was “it’s the economy, stupid”. Today it would be “it’s the culture, idiot”.

He’s right, but this poses the question: why did this change? The question of, course, applies to the UK as well as the US.
One fact deepens the puzzle. It’s that trend growth in GDP per capita has halved since the 90s*. This should have made economic issues more important, because it’s much less obvious now that the economy can thrive without policy intervention. Back in the 90s, politicians might reasonably have thought “the economy will take care of itself as long as we don’t do anything too stupid, so let’s focus on other matters.” Today, we cannot take growth for granted.
But in fact, the opposite has occurred. As economic performance has

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Working less

November 8, 2021

Many people believe we need to work less if we are to avoid catastrophic climate change. We must “dramatically reduce economic activity” says George Monbiot. “We should cut working hours to save the planet” agrees Simon Kuper.
In truth, though, there are other reasons to work less, as Martin Hagglund argued in his brilliant This Life. Our most fundamental possession, he says, is time, and we can only be truly free if we can choose what to do with this scarce asset. For many of us, though, having to work long hours or for many years deprives us of this freedom.
Which runs into the objection that working significantly less would be bad for the economy.
Hagglund’s solution to this is ingenious. What we need, he says, is a “revaluation of value”. We must judge economic success not by how

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Government spending, profits & capitalism

October 28, 2021

Simon Clarke, Chief Secretary to the Treasury, says there has been “something of a philosophical shift” in Tory attitudes to public spending. Which poses the question: why?
I’m not sure it is the result of high-falutin and rigorous debate. Instead, I’d suggest something else. To see it, let’s start from the perspective that philosophy follows interests and that the Tory party is emergently intelligent: whilst any individual seems cognitively limited, the party itself has a formidable genius.
If these premises are correct, we have a ready explanation for this “philosophical shift”. It’s that the health of capitalism, for now at least, requires big government. This is true in several ways. I’ll focus on just one – that big government spending is necessary to support profits.
To see my

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Markets and freedom

October 24, 2021

One of the great political changes of my adult lifetime has been the right’s abandonment of free market economics, as illustrated by the government imposing trade frictions within the UK and putting up the tax burden to what the OBR says will be “its highest level since Roy Jenkins was Chancellor in the late 1960s.” Two books I’ve read recently pose a question: might this shift be due in part to an awareness that markets are no longer the foundation of freedom we once thought they were?
To see my point, let’s start with the classical liberals that so influenced Thatcher. They thought free markets were essential for a free society. As Friedman wrote:

Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time

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Productivity in late capitalism

October 18, 2021

In the debate about how to increase productivity, everybody seems to be making an assumption that I find questionable – that feasible policy changes can make a significant difference.
We need some historical context here. My chart shows that big, sustained productivity growth is in fact very rare; growth of over 2.5 per cent a year was only seen over lengthy periods between 1945 and 1990. Our idea that rapid growth is normal and stagnation not  might owe more to the influence of our formative years than it does to the wider historical evidence.
To see why strong growth should be so unusual, imagine an industry could treble its productivity over ten years. If it accounted for two per cent of the economy, it would add less than 0.3 percentage points to total annual productivity growth.

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The house price puzzle

October 14, 2021

Everybody knows that the housing market has become financialized, as Josh Ryan-Collins among others has documented. But what kind of financial asset is housing? The answer is far from straightforward.
In one sense, house prices are like share prices. Both are claims upon future incomes – profits in the case of equities and wages in the case of houses (it’s fair to assume rents are a stable fraction of wages). Both tend to fall in recessions. And both have over the years delivered a risk premium – though how great depends upon which time period you use, how you account for liquidity risk and so on.
But there’s a massive difference between house prices and share prices.
Since the mid-90s house price valuations have soared. In 1998 the average house prices was 3.1x the income of

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Skill as a social construct

October 12, 2021

Imagine we lived in a society scared of germs, which prized cleanliness not only as a way of ensuring good health but also of improving productivity as people avoided the sniffles and minor ailments. In such a society good cleaners, who could get a place really spotless, would be highly valued and paid.
This isn’t a wholly fanciful example. In industries that need ultra-clean rooms, such as semi-conductor manufacturing, cleaners are indeed well-paid and valorised. It tells us that the value we attach to jobs is a product of culture. A germophobic culture would regard good cleaning as a skill and pay accordingly for it.
You might think such a culture would be irrational. Maybe, maybe not. But the valuations our current society attaches to some jobs is also irrational. City University’s

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In search of the centre ground

October 3, 2021

In the FT, Robert Shrimsley writes:

Starmer is leading his party back to the centre ground and has positioned it where it needs to be and patently was not under Jeremy Corbyn….The problem in contesting the centre ground is that you do actually have to fight for it and the Tories will not lightly surrender.

This poses the question: what is this centre ground, and how can it be said that the Tories occupy it?
It’s a puzzle.
We could define the centre ground as being what the median voter believes. But the majority of voters want a £15ph minimum wage, higher taxes on the rich, and nationalization of railways and utilities. From this perspective, Starmer is leading his party away from the centre ground which Corbyn and McDonnell claimed – a ground which the Tories don’t occupy.

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The minimum wage dilemma

September 28, 2021

Should the national living wage rise to £15 an hour? For me, it’s a dilemma because there are two competing and powerful perspectives.
The economic perspective is sceptical. Econ 101 says a higher price means lower demand, so a higher minimum will lead to job losses or – just as importantly but often overlooked – cuts in hours.
Granted, Econ 101 might be wrong. Where employers have monopsony power, a higher minimum wage can lead to employment actually increasing.
Which leads us to the thorny question of empirical evidence. Here, we have a problem. It’s possible that previous rises in the minimum wage have had little effect upon labour demand simply because they have been small – enough to generate favourable effects by reducing monopsony but not so big as to have the effects predicted

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What Starmer misses: the C-word

September 27, 2021

One word is notably absent in Sir Keir Starmer’s recent essay – capitalism.
Our most successful politicians have had something to say about this – whether it be Thatcher’s belief that capitalism needed low inflation and weak unions if it were to thrive, or Blair’s belief that governments and people needed to adapt to capitalist forces of globalization. Starmer, however, has no such analysis.
For example, he notes that, “entering the 2020s, Britain faced stagnant wages, vast inequality and the slowest growth in living standards since the second world war.” But he attributes this solely to “Tory failure”. Which is dubious. It omits the fact that slower growth in output and productivity – and the symptom thereof, lower real interest rates – are global phenomena. Larry Summers didn’t (re-)

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The death of free market ideology

September 23, 2021

Free market economics is dead as a political idea.
The government’s subsidy to CF Industries to ensure that it supplies a product that is (checks notes) soaring in price is just one of several examples of this. It has also introduced trade barriers within the UK, an almost unprecedent move for any developed nation in modern times. Even before the rise in National Insurance, it was planning on raising the share of taxes in GDP to what the OBR says would be “its highest level since Roy Jenkins was Chancellor in the late 1960s.” And you can interpret all the talk of “levelling up” (and it is all talk) as a renunciation of the free market idea that companies will relocate to areas where land and labour are relatively cheap.
All of this fits with Johnson’s “fuck business” remark; his

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Capitalism and the state

September 19, 2021

Greg Smith and Dehenna Davison write:

For many in left behind parts of the country, the reality is that the private sector is stifled by a bloated public sector that is almost Soviet-sized in some areas of the North.

This seems to me to be a case of confusing correlation and causality. The reason why the public sector accounts for such a big share of economic activity in some areas is that the private sector in those places is so weak.
In fact, I’d suggest that – for the economy as a whole – a bigger state can work to the benefit of capitalism.
My story here is not about the several mechanisms through which the rich (pdf) disproportionately influence government policy, nor about crony capitalism, corporate welfare, bank bailouts and implicit subsidies, important as all these are.

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Cancel culture, & the death of classical liberalism

September 18, 2021

Most of us by now are bored with rightists complaining about cancel culture. But we shouldn’t be, because they show that the left has won an important battle about the meaning of liberty.
What I mean is that such complaints show that the right has abandoned a classical liberal conception of the term.
Let’s take Friedrich Hayek’s discussion of liberty. He defined this in negative terms, as the absence of coercion, where coercion is something which “occurs when one man’s actions are made to serve another man’s will, not for his own but for the other’s purpose.”
But what exactly is and is not coercion? Here’s Hayek:

Coercion should be carefully distinguished from the conditions or terms on which our fellow men are willing to render us specific services or benefits…in a free society

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The politics of abstraction

September 10, 2021

“Migrants will be turned back to France” cheers the Daily Express – alongside a picture celebrating Emma Raducanu who is herself a migrant, the Canadian-born daughter of Chinese and Romanian parents.
Of course, an Express front page should normally be beneath our notice. This one, however, is significant as I suspect it embodies a widespread phenomenon in mainstream politics – the prioritizing of abstractions over real people.
The Express’s doublethink has happened because, for much of the right, “migrants” are not real people such as Ms Raducanu, or the parents of most of the England team which did so well in the summer’s Euros, or the perfectly nice people you meet at work and in shops. They are instead an abstraction, a phantom invoking a vague sense of the nation (another

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What’s the mechanism?

August 19, 2021

The late great Andrew Glyn always asked: “what’s the mechanism?” The west’s abject failure in Afghanistan highlights both the importance of this question and the fact that too many policy-makers and influencers fail to give it sufficient attention.
President Biden says “we did not go to Afghanistan to nation-build.” Which poses Andrew’s question: what, then, was the mechanism through which the Taliban would be defeated? We know for certain that it was not the ones actually operating: western military strategy as it was implemented failed.  
Exactly why this was the case is another matter, and one not relevant for my purpose*. Instead, my point is that the failure to satisfactorily ask and answer Andrew’s question was not confined to those supporting the military adventure in

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Ambition in capitalist society

August 12, 2021

Ambition, writes Lucy Kellaway, is both necessary and corrosive. She omits an important aspect here, which adds to its corrosiveness – class.
Class influences the level of ambition through two channels. One is that it distorts your awareness of opportunity. In Michael Apted’s superb TV series Up, the privately-educated Andrew knew (16’21" in) at the age of seven that he would go to Cambridge and become a lawyer. For the rest of us, our path to even modest success is not so pre-determined. I never thought about Oxford University until a teacher told me I could get in, and I never met anyone with a degree who wasn’t a teacher until I was in my 20s. If you’re not aware of the possibilities, you are less likely to be ambitious.
Another mechanism is that class sets the reference level of

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Embracing Blair’s legacy

August 7, 2021

Sir Keir Starmer wants Labour to “embrace Tony Blair’s political legacy.” Which poses the question: what is that legacy?
The usual response is merely an exchange of tribal grunts: “Iraq” versus “won three elections”. The truth is more interesting.
Blair’s (and Brown’s) great genius was to see that social democracy had to adapt to new times. So, for example, his expansion of universities was a response to the increased wage inequality between graduates and non-graduates; tax credits were an attempt to tackle the prevalence of low pay caused in part by the weakness of trades unions and globalization; fiscal rules were a reaction to high real interest rates; and the granting of independence to the Bank of England represented the awareness that policy uncertainty had contributed to

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The social mobility con

August 4, 2021

Strange as it might seem, we owe some thanks to Digby Jones – because he has reminded us that social mobility is a con.
Over the weekend he tweeted:

Enough! I can’t stand it anymore! Alex Scott spoils a good presentational job on the BBC Olympics Team with her very noticeable inability to pronounce her ‘g’s at the end of a word. Competitors are NOT taking part, Alex, in the fencin, rowin, boxin, kayakin, weightliftin & swimmin.

Now, Ms Scott epitomizes the meritocratic ideal of someone coming from a poor background and succeeding through personal ability. She is a child of Thatcher:

 it doesn’t matter what your background is. I believe in merit, I belong to meritocracy, and I don’t care two hoots what your background is. What I am concerned with is whatever your background, you

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Cummings on complexity

July 28, 2021

One of the more interesting errors people sometimes make is to have a useful insight but draw incorrect inferences from it. So it is with this tweet from Dominic Cummings:

I get all sorts wrong all the time. And i don’t *know* if Brexit is good or bad. Unlike remain twitter I think the world is highly complex & rapid error-correction of inevitable constant errors is almost the ultimate value.

It is wholly correct to stress that the world is complex and that errors of planning and policy are therefore inevitable. Politicians and journalists should be more aware of this.
I suspect, however, that Mr Cummings might not have drawn the right inferences from it..
Our reaction to complexity should not be to blunder around with a sledgehammer and then try to absolve ourselves by saying:

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Honesty vs electability

July 22, 2021

How dishonest should politicians be? I ask because of an encounter between some ex-Labour voters* and Sir Keir Starmer.
Some gammon claims (2’10" in) that “there’s a lot of people under the age of 25 who just don’t want to work” to which Starmer replies initially: “you’re always going to get some people who maybe don’t want to work.”
What he might have said, of course, is: “you’re just a bigot, and a mug for believing Tory lies”. My chart shows the point. It shows that until 2007 a higher proportion of 18-24 year-olds were in work than were 50-64 year olds. Isn’t it an amazing coincidence that the number of young people who didn’t want to work increased during the financial crisis, fell during the subsequent recovery, and rose again during the 2020 recession? Isn’t it incredible that

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On professional deformation

July 15, 2021

Phil recently tweeted that one problem with Starmer is that he doesn’t realize that “politics isn’t the same as running the DPP.” This hints at a problem many of us have.
Phil’s right. Leading the Labour party isn’t like running the DPP. For one thing, the party isn’t as hierarchical as the DPP: people don’t simply do as they are told. And for another, a Labour leader needs to be a salesman, whereas the boss of the DPP does not. Moving from the DPP to the Labour leadership is like a boss moving from a monopoly utility to a growth company needing to catch customers’ attention in a competitive environment. The two jobs require different skill sets.
What’s more, the forensic skills Starmer acquired as a lawyer aren’t necessarily very useful to him now. He needs to intuit what voters will

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(Not) reading Marx

July 13, 2021

How well-read should we expect politicians to be? This is the question posed by Rachel Reeves’ recent boast (33’50" in) that she hasn’t read Marx’s Capital*.
She, of course, is by no means the worst offender. It’s become fashionable on the right to betray a complete ignorance of Marxism – as for example when they decry taking the knee as Marxist: some Tories think it’s impossible to be a decent person without being a Marxist, which is further than I would go. As the great John Spiers tweeted:

The number of people on this platform using the word Marxist without even having a rudimentary understanding of what it means is hilarious. Like teaching a dog to say sausages and claiming the dog knows what it means!

Such ignorance is in one sense inevitable. It is impossible to have read

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