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Articles by chris

Don’t abolish private schools

5 days ago

Should we abolish private schools, as some Labour activists are advocating? For me, this is a tricky issue.
The case for not doing so is simple – freedom. My instinct is that folk should be free to spend their money how they want. (I know nobody values freedom these days but I’m an old man, so indulge me.)
As with many other activities, however, this freedom imposes negative externalities onto others.
One is that it creates unequal opportunities. Fees at Oakham School – to take my neighbour – are more than three times as great as average spending (pdf) per pupil in the state sector. Such massive inequality in spending is bound to cause some inequality in results. It’s no surprise, therefore, that the privately-schooled are over-represented at Oxbridge and in top jobs.
The second is

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Disaster capitalism: some doubts

6 days ago

Could “disaster capitalism” actually work? This is the question posed by Grace Blakeley, who writes:

A no-deal Brexit is to Johnson and Hunt what the financial crisis was to Cameron and Osborne – an opportunity to rebalance power and wealth in society away from labour and towards capital.

Here, some distinctions are necessary.
One is between effects and intentions. A precedent for successful disaster capitalism was the 1981 recession. It greatly weakened workers’ bargaining power and caused capital scrapping, both of which helped to restore profitability. This, however, was not Thatcher’s stated intention: she did not expect her policies to cause a recession. And it might not have been her actual intention either.
Similarly, I don’t know whether Johnson really believes a no-deal

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Simplicity: smart & stupid

11 days ago

David Gauke has been rightly praised for this:

Rather than recognising the challenges of a fast-changing society require sometimes complex responses, that we live in a world of trade-offs, that easy answers are usually false answers, we have seen the rise of the simplifiers.

This echoes a fine piece by Ian Leslie who says:

The disease of politics today is not populism, so much, as simplism: the oversimplification of complex problems.

I want to quibble, though. There are – to simplify! – two different types of simplicity, the stupid and the smart.
Stupid simplicity is the sort that Gauke and Leslie are rightly decrying – the sort that denies the reality of complexity. This is the sort of simplicity that thinks there is a simple cause of our problems – be it immigrants, Joos or

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How not to be an arrogant prat

12 days ago

Dan Davies has said that financial regulators should have been active spread-betttors, because only this gives them hard knowledge of how nasty margin calls can be. The same should apply to everybody who expresses a political opinion.
The thing you learn from financial markets is that even your best ideas, your most diligently-research trades, often go wrong – and expensively so. Equity fund managers typically have only a few good stock ideas and most of what they do is either risk management or value-subtraction. And private equity managers expect many of their holdings to lose.
What you learn from spread-betting or (in my case) having to stand on a trading floor after one of your calls has gone wrong is that the only thing that matters is the facts. However much smoke your friends

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Class and optimism

13 days ago

One thing that attracts people to Boris Johnson is his cheerfulness about Britain’s prospects. Liam Halligan and Owen Patterson both praise his “sunny optimism”, whilst Matthew Leeming writes – I kid ye not – that “we need a cheerleader to remind us we are an erect and manly people.” But I wonder: is there a class aspect here?
I ask because of recent paper by Erin McGuire. She shows that:

Individuals who begin their lives by observing an economic downturn remain pessimistic and risk averse with respect to investments over the course of their lifetimes.

This corroborates work (pdf) by Ulrike Malmendier and Stefan Nagel and by (pdf) Miguel Ampudia and Michael Ehrmann. And it’s consistent with research by Henrik Cronqvist and colleagues. They show that people who grew up in poorer

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The Tories’ imaginary world

18 days ago

Sometimes, the Tories offer us a glimpse into their psychology. So it was yesterday when Sarah Vine tweeted:

Watching the #RestaurantMakesMistakes and astonished to learn that people with dementia struggle to get benefits. Is this true? And if so, how is this not a national scandal?

What she’s expressing here is the cognitive dissonance that her own party’s policies actually have nasty effects upon real people. Her consternation arises from the fact that, for many Tories, this is not supposed to happen. Many of them, I suspect, are not actually evil but rather guilty of a recklessness that comes from a particular conception of politics – a conception which sees it as a game of positioning, and of pandering to the imagined world of the Daily Mail. Politics is a post-modern activity

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The human factor

20 days ago

Could AI replace managers and even politicians? In their now-famous paper (pdf) describing how half of American jobs could be replaced by computers, Carl Frey and Michael Osborne say no: they estimate that chief executives, line managers and HR managers are among the 10% of occupations least likely to be computerized.
From the perspective of neoclassical economics, this is weird. It pretends that the job of bosses is to maximize profits, given a production function and prices of inputs. This is a constrained optimization problem which can easily be done by a computer.
Similarly, if you believe, Sunstein-stylee, that policy-making is a technocratic function of choosing optimal fiscal or monetary policy or the right choice architecture, the job can be delegated to computers, which have

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The recrudescence of zero-sum thinking

25 days ago

President Trump believes we live in a zero-sum world in which one country’s gain is another’s loss. This is evident in his reaction to Mario Draghi’s comment this week that additional monetary stimulus will be needed if euro zone inflation doesn’t rise. Trump tweeted:

Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.

Adding that this is “very unfair to the United States!”
This, of course, is bollocks. The US would actually gain from monetary stimulus to the extent that it strengthens the euro zone economy, thus allowing US firms to sell more to it: exports are more sensitive to demand

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New Labour: success and failure

June 16, 2019

Did New Labour really ignore inequality? Responding to Corbyn’s claims that successive governments have neglected it for decades, Blair replies that New Labour “made the UK more equal, more fair and more socially mobile.”
Both men, I think, are partially right.
Blair is correct to say that New Labour massively increased spending on public services and reduced child and pensioner poverty.
However, overall inequality did not change much under New Labour despite that fall in poverty. One reason for this is that as Robert Joyce and Luke Sibieta at the IFS have pointed out (pdf), their tax and benefit reforms “had relatively little net impact on the top half of the income distribution”. Another is that pre-tax inequality rose in one important respect at least: the share of pre-tax incomes

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The Johnson puzzle

May 28, 2019

One of the puzzles of our time is why Boris Johnson is considered – not just by Tory members but by much of the media – to be a credible contender for Prime Minister when many of us regard him as a oafish buffoon, serial liar and associate of criminals. One answer to this paradox, I suspect, lies in the concept of ambiguity aversion.
This is the notion that people much prefer the familiar to the unknown, and known risks to unknown ones: they strongly prefer (pdf) 50-50 bets to ones on unknown proportions. Such ambiguity aversion explains a lot of behaviour in financial markets, ranging from the home bias in equity portfolios to the US’s “exorbitant privilege.”
It also, though, explains political attitudes.
The thing is, the Tory party is for many people the familiar option; it is after

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The Tories’ structural weakness

May 23, 2019

As a lefty, the disarray in the Tory party provides a lovely schadenfreudic coincidence – that the same intellectual failing that causes the party’s bad government also causes it to elect unsuitable leaders.
This failing is an inability to see failures of collective action – to see that what is rational for each individual is often bad for everybody.
An obvious example of this came in 2012 when Cameron advised people to top up their petrol tanks in advance of a strike by lorry drivers. He failed to see that whilst this might have been sensible for any individual, its aggregate result was to trigger panic buying and fuel shortages.
There are, though, other examples. Collective action problems mean that public goods such as infrastructure are under-supplied and public bads such as

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How inequality makes us poorer

May 17, 2019

I welcome the Deaton report into inequality. I especially like its emphasis (pdf) upon the causes of inequality:

To understand whether inequality is a problem, we need to understand the sources of inequality, views of what is fair and the implications of inequality as well as the levels of inequality. Are present levels of inequalities due to well-deserved rewards or to unfair bargaining power, regulatory failure or political capture?

I fear, however, that there might be something missing here – the impact that inequality has upon economic performance.
My chart shows the point. It shows the 20-year annualized rate of growth in GDP per worker-hour. It’s clear that this was much stronger during the relatively egalitarian period from 1945 to the mid-70s than it was before or since,

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Debating the far right

May 14, 2019

The far right has been defeated. Andrew Neil’s interview with Ben Shapiro and Andrew Marr’s with Nigel Farage have exposed both men as shifty, vacuous and evasive. Their support will therefore disappear. What took the might of the Red Army in 1941-45 has today been achieved by two ageing Scotchmen.
Or not. For one thing these episodes won’t weaken the far right’s resolve. Farage is playing the victim card. “We are not just fighting the political class, but the BBC too” he says. Sure, his opponents think his interview was a disaster but his sympathizers don’t: Andrew Lilico called it his “best ever.” Such reactions demonstrate the pervasiveness of asymmetric Bayesianism – that we interpret evidence to corroborate our priors.
If we’re being honest with ourselves, many of our political

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On media influence

May 9, 2019

Not everything that stinks causes disease. Yes, there is plenty wrong with the press and BBC, but how much influence does it actually have?
I ask because of Simon’s recent post blaming the media for the sheer incompetence of this government. I’m not so sure about this. The press has always had a right-wing bias, but we haven’t always had a government as lousy as this one. This alone tells us that other factors are at work: mechanisms that select for fanatics and against competence have strengthened in recent years.
Equally, it would be stretching things to blame the media for the rise of coarse right-wing populism. The press has been fomenting this for decades: the Sun ran the headline “Up Yours, Delors” way back in 1990. But it is only in recent years that it has become so

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Yes, ownership matters

May 3, 2019

I welcome the creation of the Common Wealth think tank, which aims to promote “deep shifts in property relations and ownership.”  There’s one possible preconception about this project which must be debunked, however. This is that it is hippy-dippy yogurt-weaving idealism. It’s not. The question of who should own and control companies is bog-standard mainstream economics: at least three Nobel prizes – to Hart, Williamson and Coase – have gone to economists working on this and related issues.
And in fact, stock markets themselves are calling into question the feasibility of existing ownership structures. In the UK the number of companies listed on the main market has dropped from 1747 to 1156 since the start of the century, a trend which matches those in the US and Europe. And as

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Against solipsistic politics

April 30, 2019

Everybody knows the country is divided. What’s not so well appreciated is that there is also an implicit unspoken division about how we conceive the very nature of politics.
The dominant popular conception is that politics is much like ordering something from Amazon. You say what you want, expect it to be delivered, and get the hump when it isn’t. That leads to demands that politicians “just get on with it”, to talk of a betrayal of democracy, or even to demands for a “strong man” to sort things out.
There is, though, another conception. It’s that politics is not just another retail experience. It is about the conflict of interest between people: Robinson Crusoe had no politics until Man Friday pitched up. Such conflicts arise simply because we want different things. The essence of

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Who’ll defend freedom?

April 25, 2019

In the last few days we’ve seen rightists attempt to bully Greta Thunberg out of the public sphere rather than engage with her arguments; Tony Blair’s demand for ID cards and that immigrants have a duty to integrate; and rightists (backfiring) efforts to shame Diane Abbott for drinking on a train. These all have something in common. They show that the right and centre are enemies of freedom*.
These are not the only examples, nor the worst. New Labour created thousands of new criminal offences, a trend continued by the Tory government such as in its ban on legal highs, its counterproductive porn block and its "hostile environment" policy. Very many Tories and Cuks voted last year against legalizing cannabis. Chuka Umunna, following the centrist Emmanuel Macron, wants to reintroduce

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When failure succeeds

April 19, 2019

In politics, failure sometimes works better than success. This is the message of this piece by Janan Ganesh, wherein he argues that it is in Trump’s interest to fail on his promise to control immigration, because if he does so it will remain a big issue which will attract voters to him. Janan says:

It is perverse, I know, that a president could make so little progress on his number-one priority during four years in office, only to be rewarded for it. 

Maybe not so perverse. There are other examples.
One, as he says, is Brexit. If Brexiters get their way, voters will see that it is in fact no solution to our problems. And Farage would then lose his schtick of being able to claim that the political class is out of touch with the people. If you are practicing the politics of

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Broad-spectrum policies

April 17, 2019

Is there a case for the Bank of England to target house prices? The debate, I suspect, highlights a difference in how we think about economic policy – between what might be called a single-issue technocratic approach versus a broad-spectrum approach.
Many of us, I suspect, agree that high and rising house prices are a cultural and economic menace. They encourage high debt which is potentially destabilizing (pdf). They divert spending towards rent and mortgage payments (and sometimes housebuilding) and away from new goods and services, thereby reducing dynamism and innovation. They encourage people to commute long distances, which increases stress and cuts productivity. And they encourage “property development” at the expense of more productive forms of entrepreneurship.

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Marxism for Tories

April 9, 2019

The Tories have discovered a new boo-word. In the last few days, Iain Duncan Smith, Esther McVey and Suella Braverman have all used “Marxism” to mean a self-evidently Bad Thing. From one perspective, this is odd because in fact Tories should find some aspects of Marxism quite sympathetic.
Not least of these is an admiration for capitalism’s dynamism. Marx wrote that capitalism “has given an immense development to commerce…has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals…draws all, even the most barbarian, nations into civilisation…[and has] rescued a considerable part of the population from the idiocy of rural life.” We don’t deny that capitalism has been a progressive force. We just wonder at what price this has been achieved, and

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Why rent matters

April 4, 2019

Philip Green doesn’t get much public sympathy, but he deserves our thanks for doing one thing: he is reminding us that economists have wrongly neglected David Ricardo’s theories of rent.
Mr G is fighting landlords to cut rents – as indeed are several other high street names. Which evokes Ricardo. He showed that profits can be squeezed not by worker militancy but by rising rents.
The basic idea here is straightforward. Imagine, said Ricardo, there were an abundance of fertile land. A landlord could not then charge farmers rent: the farmers would just move onto other land. As the economy and population grows, however, the best land becomes fully occupied so farmers must use less fertile land. As they do so, the owners of the best land can demand rent from their farmers. And as worse and

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The rise of moral simplicity

April 2, 2019

One of my best friends here in Rutland is a keen Brexiter. I fear, though, that our hysterical political times are jeopardizing such cross-divide friendships. Instead, as Dorian Lynskey has said, many people have fallen into a “childlike moral binary: only people who hold the all correct positions merit empathy or respect.”
Dorian is speaking of Momentum telling us not to feel sorry for Nick Boles. But I think the point generalizes. Not only do Remainers and Leavers have little mutual understanding, but much of the left persists in the “evil Tories” meme whilst some on the Right seem to think that anyone to the left of Tom Watson wants to reopen gulags. We see a similar thing in the debate about whether Michael Jackson’s music should still be played: the urge for simplistic moral

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Decadent Tories

March 29, 2019

The Tory right’s obsession with Brexit might be a symptom of a deeper malaise – the fact that they have nothing else to offer.
To see what I mean, contrast today’s Tories with Thatcher. She could credibly offer material improvement for millions of people. She offered them the chance to own their homes –by selling off council houses and by credit liberalization that made it easier to get mortgages – and to make big profits on them. She offered tax cuts for mid-to-high earners. Professions such as finance and law were opened up to people from previously-excluded backgrounds. The reduction in trade union power was a relief not only to company owners but to thousands of junior managers. And the resumption of growth after the 1981 recession delivered good income growth for those workers who

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The consistency illusion

March 26, 2019

The British Social Attitudes survey reports a fall in the proportion of people saying they voted Leave in the 2016 referendum and a rise in the numbers saying they didn’t vote. This is probably due to panel attrition. But it draws our attention to what is certainly a real phenomenon – a tendency to misremember our past preferences in a systematic way.
This was pointed out (pdf) by Gregory Markus back in 1986. He showed that when people were asked about their views on political issues such as gender equality or drug legalization nine years earlier their recall was poor. Their beliefs as they remembered them was much closer to their current ones than was in fact the case. They understated the extent to which they had changed their mind.
What was going on here is a desire for consistency.

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Against retail politics

March 21, 2019

How did we get into this mess? The story is of course a long one, in which I would argue that austerity plays a big part. But there’s another strand I want to pick out. It’s the rise of a conception of politics as being just another consumer service and the eclipsing of Burke’s notion that MPs should place their judgment above the opinion of voters.
It was this “customer is king” idea of democracy that led Cameron to call the referendum and which allowed May last night to pose as being on the side of voters against MPs. And it lays behind the anger of some Leavers at not getting what they’ve voted for: they see it as being like Amazon not delivering the items they’ve ordered.
Quite why this idea emerged is another story. Some of you might blame “neoliberalism” for promoting the idea

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Beliefs and interests

March 19, 2019

“It is difficult to get a man to understand something, when his job depends upon not understanding it.” The spectacle of rightist and centrist journalists trying to absolve the MSM of blame for the rise of Islamophobia reminds me of Upton Sinclair’s famous quip.
They, of course, are by no means the only people at whom one might direct this accusation. Many of you us might also point it at: fund managers who deny the efficient market hypothesis; mainstream economists who reject some heterodox approaches; managerialists who stick to using crude targets; or centrist MPs who fail to see the need for new economic policies. And so on.
But I wonder: what exactly is the mechanism that Sinclair and those who quote him have in mind?
I doubt that many of us deliberately and consciously adapt our

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On class difference

March 17, 2019

A friend tells me that when I started my first job in an investment bank I did not speak for the first three weeks. He exaggerates, but not much. What I was doing was working out the unwritten rules of how to behave in an alien environment.
I was reminded of this by reading Tony Connelly’s description* of Geoffrey Cox’s behaviour last week in Brussels: he boasted of not having visited the city for 40 years and angered Sabine Weyand by calling her "my dear." Mr Cox did not do what I did –  shut up until you’ve learned what to do.
Herein, I think, lies a class difference. If you are upwardly mobile from a poor background, you have to learn how to fit in. If you are posh, you don’t. You glide from school to Oxbridge to the city or bar all the time surrounded by like-minded people so you

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The need for class politics

March 15, 2019

We need to talk about class. Since Jess Phillips’ interview with the Times there’s been a lot of talk about whether she is authentically working class. This is, as Suzanne Moore says, mostly guff.
We need a Marxist perspective here. To us Marxists, class is not just another identity or another lifestyle – a matter of whether you drink in Wetherspoons or wine bars or shop at Waitrose rather than Lidl. Instead, it is an objective fact about your relationship (pdf) to the means of production. If you lack ownership or control of these, then you are working class – in a position of exploitation or domination. If you do have ownership or control then you are capitalist, or bourgeois.
There are of course nuances here. You can be an exploiter without dominating someone: we can, for example

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Why government borrowing has fallen

March 14, 2019

Phillip Hammond said yesterday that the public finances “continue to improve” “thanks to the difficult decisions we have taken in the last nine years.” This is not quite correct.
To see why, imagine that people and companies were to save a constant fraction of their disposable income, come what may, in the face of fiscal austerity. As their incomes fall in the face of that austerity their spending would therefore fall one-for-one. That would further reduce aggregate demand which would in turn cut the government’s tax receipts and add to government borrowing. We’d then suffer a severe paradox of thrift, in which everybody’s efforts to save more would lead to weaker incomes for all and hence to lower savings.
This tells us that governments can borrow less if and only if somebody else

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Matches matter

March 10, 2019

Jess Phillips thinks she’d be a good PM. I tweeted this morning that this is more a sign of her overconfidence than it is of her ability. I did so for two reasons.
First overconfidence, whilst not universal (pdf), is widespread among those in prominent positions. Underconfident people don’t apply for such jobs, unless pushed, and so are filtered out whilst there is no similar filter against the overconfident. Quite the opposite. Hirers tend to mistake overconfidence for actual ability and so hire the overconfident: one can easily imagine Ms Phillips fluent confidence making a good impression at her CLP.
My base rate probability, therefore, is that Ms Phillips is expressing an opinion typical of MPs – or at least those who court publicity – rather than giving us a diagnosis of her

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