Wednesday , October 21 2020
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Articles by chris

Stealing “libertarianism”

13 days ago

What exactly is libertarianism? I ask because of something Janash Ganesh says about Trump:

His populism tends more to the libertarian than the repressive. The mask-spurning, the cavalier gatherings, the call to not let the virus “dominate”: it is personal freedom to which the president has shown a heedless attachment.

Now, the notion that Trump is a libertarian will come as news to the families of George Floyd or Breonna Taylor or the 829 other people killed by the American police this year. It’ll also come as news to the tens of thousands of people imprisoned for trivial offences. A true libertarian would surely be more troubled by these horrific denials of freedom than they would by wearing masks.
The misuse of the word "libertarian" is however not confined to Janan’s

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On feudal exploitation

14 days ago

“We have abolished capitalism in Poland. Now we must abolish feudalism.” So said Michal Kalecki in the 60s. I suspect that western economies today face a similar task, as feudalism is still rife.
By this, I don’t mean merely that we have the high inequality and low social mobility that characterised feudalism, nor that immigration controls are a form of feudalism in that they ensure that one’s life chances are determined at birth.
Instead, I’m thinking of modes of exploitation.
We must distinguish between capitalist exploitation as Marx understood it and feudal exploitation. The former is an economic phenomenon, arising from capital’s greater economic power over labour. The labour market, thought Marx, was “a very Eden of the innate rights of man. There alone rule Freedom, Equality,

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Savers, capitalism & self-interest

22 days ago

Do people vote in their own material interests? I ask because of the decision last week by NS&I to cut interest rates to almost nothing.
In doing so, it is only bringing its rates into line with market rates. Which tells us two big things.
One is tha the pandemic has exacerbated a long-term downtrend in interest rates.
The second is that from the point of view of savers (let alone anybody else) the government is not borrowing enough. One reason for NS&I’s decision is that it was raising more cash than the government needed – in part because the same pandemic that has raised government borrowing has also made forced savers of many of us and so raised the savings to pay for that borrowing.
From all this, savers should infer two things. One is that capitalism is serving them badly.

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Blaming the voters

September 20, 2020

In the Times, Matthew Parris wrote: "this Prime Minister is ultimately our [the electorate’s] fault." I tweeted that this was absolutely right, but got a little pushback. I should therefore elaborate.
What I and Matthew meant was that Johnson is not doing anything unexpected. He is merely living down to what everybody knew about him. As Matthew wrote:

There was never any reason for confidence in Boris Johnson’s diligence, his honesty, his directness, his mastery of debate, his people-skills with colleagues, his executive ability or his policy grip. We’d seen no early demonstration of any of these qualities but we just blanked that out.

Voters, then, are getting what they voted for. Those who voted Labour in 2001 could say of the Iraq war “I never voted for that”. Those who voted

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Conceptions of politics

September 15, 2020

There is a great and overlooked political division today – between those who think policy matters, and those who think it doesn’t.
Here are some examples of what I mean.
First, Ed Miliband’s speech on the Internal Market Bill was that of a man who thinks a consistent policy would be a good thing. He is exercised by the fact that a man who greeted the signing of the Withdrawal Agreement as a “fantastic moment” now regards it as “contradictory”. Johnson, however, seems to attach no importance to the need for a consistent policy.
Secondly, Rishi Sunak has the highest approval rating of all cabinet ministers among Tory members, even though employment is slumping: the ONS reported today that payrolls have dropped by 629,000 in the last 12 months, a trend economists expect to continue. A

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The Hayek question

September 11, 2020

Thatcher was right. This is my reaction to reports that Dominic Cummings regards Brexit as a way of getting out of limits on state aid and so enabling the government to funnel cash towards the UK’s own future big tech companies.
The problem with this is that, as Thatcher said, the state cannot pick winners. Corporate growth is largely unpredictable. “The stochastic element is predominant” concluded Alex Coad in one survey. “Corporate growth rates are random” found Paul Geroski in another (pdf). “There is low predictability [of corporate earnings growth] even with a wide variety of predictor variables” found (pdf) Louis Chan, Josef Lakonishok and Jason Karceski in a third.
This fact explains why fund managers don’t beat the market. David Blake has concluded: "the vast majority of fund

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On press freedom

September 10, 2020

In The Enigma of Reason Hugo Mercier and Dan Sperber argue that the main use of reason is to justify and explain conclusions that we have arrived at sub-rationally. Some reactions to Extinction Rebellion’s blockading of newspaper distribution centres seem to me to illustrate their point.
For example, Culture Secretary Oliver Dowden said their action “damage[s] our democracy”. Johnson said: “A free press is vital in holding the government and other powerful institutions to account.” And Ian Murray, executive director of the Society of Editors, said that “shutting down free speech and an independent media is the first action of totalitarian regimes and dictators.”
Such fancy talk attributes to the press a sanctity it does not merit. And it’s not needed. If XR had blockaded a Cheesy

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On Marxist Tories

September 2, 2020

In one respect, the right-wing conspiracy loons are right: Marxists have captured some of our major institutions – the institutions being the government and Tory party.
I say this because of the campaign to stop us working from home and to get us back into offices. Such a demand is justifiable only if you take a very dark opinion of capitalism.
Those who have faith in capitalism see upside in home-working. Andrew Sentance tweeted:

Why are so many people focussing on the negatives of working from home? It is a great opportunity to reduce transport emissions, stop spread of disease through commuting and mingling at work/in city centres, and provides a more flexible and family-friendly working environment.

To this we should add that whilst WFH does depress demand for retail businesses

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Clarity – who needs it?

September 1, 2020

Tim Pitt calls on the government to set out “a renewed Conservative economic philosophy.” I’m not sure this is wise. Having a clear philosophy requires you to think, which is not a self-evidently good thing in life or in politics. Worse still, it gives people something to disagree with, and so invites party disunity. Constructive ambiguity can be a good thing.
I say this because a new Conservative economic philosophy requires the party to answer loads of tricky questions. Here are a few.
Are you pro-business or pro-markets? Pro-market policies would promote competition by for example relaxing intellectual property laws, reducing planning restrictions, simplifying regulations,  expanding the British Business Bank to encourage start-ups and imposing tougher rules against mergers and

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Tories against Thatcher

August 28, 2020

Be careful what you wish for. This old saying applies to us lefties. For years, we’ve wanted to see the end of Thatcherism. And we’ve now got it. And it’s an ugly sight.
I say this because of Johnson’s campaign to end working from home and get us back into the office. This is anti-Thatcherite in two senses.
For one thing, Johnson is contradicting two of Thatcher’s favourite principles – that “you can’t buck the market” and that managers have a right to manage. Many big employers are happy for staff to continue working from home. So why should the government say otherwise? Ryan Bourne expresses the spirit of Thatcherism when he says it is “quite frankly none of the govt’s business” to tell us what we should be doing.
Also, Johnson is motivated by a fear that city centres are becoming

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The politics of life & death

August 26, 2020

What, if anything, is wrong with the Kaldor-Hicks principle? This is the question raised by Chris Whitty’s argument that the benefits of reopening schools outweigh the costs of doing so.
Even if we suppose that this is factually correct – which it might not be – it does not follow that it is right to reopen schools. As David Hume said, we cannot derive “ought” from “is”.
Which is where the Kaldor-Hicks principle comes in. It says that a policy change is an improvement if the beneficiaries of it could compensate the losers and still remain better off – even if compensation is not actually paid. This idea fills the Humean gap between the statements “the benefits of reopening schools exceed the costs” and “schools should reopen”.
Which leads to the question I started with. I fear there

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For (and against) a sovereign wealth fund

August 21, 2020

In their excellent Angrynomics Mark Blyth and Eric Lonergan recommend that the government borrows at negative yields to establish a sovereign wealth fund. There’s more to be said for this than they think, because the UK is better situated than many countries to have such a fund.
My chart shows why. It shows that sterling tends to fall when house prices do. In the mid-90s, 2008, 2011 and last year weakness in the housing market was accompanied by a weak pound.
Now, I’m using house prices here as a proxy for something more general – bad times for the UK economy generally.  The chart therefore tells us that a UK-based investor makes a profit on foreign currency assets when the UK economy faces hard times. Although house prices didn’t fall then, the Brexit referendum in  2016 is another

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Cents and sensibility

August 20, 2020

Would Labour have handled the A level fiasco better than the Tories? There’s a reason to think so, and it has nothing to do with the parties’ relative competence.
Instead, it’s because Labour ministers would have had different sensibilities, or sympathies. They would have been more awake than the Tories to the situation of 18-year-olds from poor schools and hence more alert to developments which might hurt them.
The point here is a Smithian one. Smith thought that sympathy “arise[s] from an imaginary change of situations with the person principally concerned.” But, as Smith saw, our imagination is limited. It’s easier to put yourself in someone’s shoes if you have actually been in them, or if you have friends or family in those shoes, or if you expect to be in them later. Although

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Algorithms & reification

August 18, 2020

The A levels U-turn has prompted the question: what went wrong with the algorithm?
The answer is: nothing, zip, diddly, jack.
What went wrong wasn’t the equation, but people. People create algorithms and they do so according to the principle garbage in, garbage out. The error here was not of high-level maths. It was a basic failure to appreciate the nature of statistics. Statistics cannot discover what isn’t there. And the information we really needed – how to compare students across schools – just wasn’t there. As the great Dan Davies puts it:

No statistical method in the world is going to be able to give you good results if the information you’re looking for is fundamentally not there in the dataset that you’re trying to extract it from

The problem wasn’t the algo. It was that

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Empirical vs fantasy politics

August 16, 2020

News items this week have highlighted an under-appreciated political division – between issues that involve clear harm to identifiable individuals and those that don’t.
Contrast the crime* that is the mishandling of A levels with reports of migrants crossing the channel in dinghies. There’s a massive difference between the two. The mis-marking of A levels imposes real suffering upon identifiable people. But a few migrants in dinghies do not: even if you believe – wrongly – that immigration cuts wages and jobs, it is not the few desperate people who arrive in boats that are doing so.
The latter – what Chris Grey calls an “artificial emergency” – is not the only example of reified, unempirical politics that is unconcerned with real material harm. The BBC reports on record government

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Limits of radicalism

August 15, 2020

Earlier this year, Dominic Cummings appealed for "more genuine cognitive diversity" in government, wanting to hire "true wild cards" and weirdos. The A level results which have seen talented students punished for being poor shows that he has not yet achieved that ambition.
I say this because there was in principle an obvious solution. The government should have adopted a version of the Texas 10 per cent rule, which requires that the top 10 per cent of students from each school be admitted to Texan state universities. Adapting this to the English case would have meant asking schools to give A* grades to the best 8.9% of students in each subject, A grades to the next 18.7% and so on (I’ve used these numbers to match this year’s distribution of grades.)
Such a system would have had six

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On woke capitalism

August 13, 2020

Just because you are an idiot doesn’t mean you are always wrong. So it is with James Cleverly’s denunciation of Ben & Jerry’s "virtue-signalling" after the company spoke out against the government’s ill-treatment of migrants.
The thing is, he was right. Ben & Jerry’s fine words contrast with the company’s reluctance to improve the rights of its own workers until it came under huge pressure to do so – thereby demonstrating the truth of Marx’s claim that "capital is reckless of the health or length of life of the labourer, unless under compulsion from society."
But of course, Ben & Jerry’s are not alone in their hypocrisy. Amazon (among many other companies) has spoken in support of Black Live Matter despite being a notoriously bad employer. Facebook and Twitter bosses have supported

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A policy failure

August 11, 2020

Sometimes, the humane thing to do is also economically efficient, and this government is doing neither. This is the message of today’s employment numbers.
We must not be fooled by the fact that unemployment, at 1.34 million, fell slightly in the second quarter and is unchanged from a year ago. This disguises huge job losses. PAYE data show that the number of employees fell by 740,000 between February and July. And as the furlough scheme is withdrawn, further job losses are likely. On top of this, the numbers of self-employed slumped by 238,000 in Q2,
So, why didn’t unemployment rise? One reason is that there have been lots of jobs lost among the over-65s: 161,000 in Q2. Many of these will have returned to retirement. The number of people who are economically inactive but would like a

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Government for spiv and rentier

August 6, 2020

“The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.”
Recent news seems to vindicate Marx’s aphorism. Today, Robert Jenrick relaxed planning laws a few months after seeing big donations to the Tories from property companies. This is of a pattern with his giving planning permission for a development by Richard Desmond soon after Mr Desmond made a donation to the Tory party. Support for jobs and businesses is being used to pay dividends and big CEO salaries. And an advisor to Liz Truss made millions from selling unusable PPE to the NHS.
So, Marx was right.
Not so fast. My chart tells another story. It shows that there is a decent correlation (0.48 since data began in 1998) between the dividend yield on the All-share index and UK

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Truth, utility & education

August 5, 2020

Katharine Birbalsingh, headteacher of Michaela Community School, says the Black Lives Matter movement is a distraction. I think her claim is defensible – albeit because it raises an issue many of us would rather ignore.
The Times quotes her:

The problem with getting angry about racism is it’s distracting. It leaves you with less energy to help you succeed, like working hard.

This alerts us to a nasty conflict – between beliefs that are true and those that are useful. It is true that black people face discrimination: for example, the ONS says that Black Britons earn 7.7 per cent less than their white counterparts even controlling for factors such as qualifications and occupation.
Telling Black pupils this is, however, not necessarily useful. It might demotivate them. Better instead

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The economics-politics divide

July 31, 2020

Duncan Weldon made a good point recently when he tweeted that the “disconnect between British political discourse and opinion of mainstream economic opinion feels extreme.”
Whilst political discourse talks of balancing the government’s books, most economists (outside the IFS) point to negative borrowing costs and think it more important to look after the economy. Instead, whether left or right, we have other priorities: how might monetary policy better support the economy? How can we end the long stagnation in productivity? Why are house prices so high and what can we do about them? How can we best fight climate change? How might tax or planning policy better promote longer-term growth? How strong is the case for a national wealth fund, basic income or jobs guarantee? How should banks

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Maskphobia: the face of conservativism

July 29, 2020

Why do some rightists oppose mandatory face-coverings? Tory MP Desmond Swayne has called them a "monstrous imposition", Peter Hitchens says they leave us "muzzled in face-nappies" and of course James Delingtwat and Laurence Fox have jumped on the bandwagon – although Mr Fox has at least the redeeming virtue of possessing some talent.
I don’t think the answer lies in the proposition that there’s little evidence of masks’ effectiveness. For one thing, there is. For another, risk is not merely a matter of facts but of feelings, and common sense says that masks reduce the risk of infection. And for a third, rightists are not always fastidious about following evidence. (Hint – the B-word).
Instead, I suspect something else is going on. Mask-wearing shows that the fulfilment of our

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Ideas, interests and capital

July 26, 2020

One of the problems with being a Marxist is one so rarely gets intelligent criticism. So I was delighted to see Eric Lonergan’s thoughtful reply to my review of Angrynomics.
In many ways. I agree with him. He’s right that there is a “vacuum of thought” about economics – a vacuum filled by snake-oil peddlers of nationalism. But this vacuum is much more evident in politics & the MSM than it is among economics. Angrynomics itself is a treasure trove of policy ideas. If we add the work of people such as Diane Coyle, Ian Mulheirn, Geoff Mulgan, Radix, Stian Westlake and Sam Bowman (among others) we are struck by the almighty chasm between the intellectual heft of centrists outside of politics with the vacuity of centrists within politics. This surely warns us that there are powerful filters

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Attention, fashion and false consensus

July 23, 2020

One of the pitfalls of growing old is that one is often befuddled by the modern world.
So it is with the reaction to the Intelligence Select Committee’s report on Russian influence on UK politics. This has highlighted the fact that Russian oligarchs are using London to launder their dirty reputations and dirty money.
But, I splutter, we’ve all known this for ages, even decades: I’ve been referring to Chelsea "Football" Club as the money launders for years.
In fact, I have a similar reaction to many things. For example, several tenets of MMT – that sectoral balances matter, that its is banks that create money out of nothing, and that there’s no financial constraint on government borrowing – strike me as old hat*.
Equally, talk of heterodox economics such as the work of Kalecki,

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Angrynomics: a review

July 22, 2020

Picture the typical angry voter. If you’re like me, your image will not be a twentysomething saddled with huge student debt, extortionate rent and a dull job but rather some russet-trousered gammon with no real complaint.
Much as I liked it, this is one issue I have with Mark Blyth’s and Eric Lonergan’s Angrynomics. “People have every right to be pissed off” they write, “but please, be pissed off about the right things.” For me, though, our politics is characterized by too little of what Eric calls “legitimate public anger” and too much tribal anger. (The book is written as a dialogue between Eric and Mark, which is nothing like as annoyingly twee as you might expect).
This, I suspect, reflects some important cognitive biases. One the one hand, several of these cause people to accept

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Experts: the Caprice challenge

July 17, 2020

What do experts know? This question arises from the reposting the other day of an exchange between Caprice and Dr Sarah Jarvis, wherein Caprice argued for an early lockdown and mask-wearing, only to be opposed by the doctor. In hindsight, it looks as if Caprice might have been more correct. Which poses the question, for economists as much as other scientists: how should we talk to lay-people? Here are some suggestions.
First, know what you know and what you don’t. As Charlie Munger said, “it’s not a competency if you don’t know the edge of it.” Economists, for example, do not know how to forecast recessions. We should admit this fact.
In particular, we should know the difference between the map and the terrain. The doctor told Caprice: “Unless you have read every…statistical modelling

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On cancel culture

July 15, 2020

In the lively debate about “cancel culture” provoked by that letter to Harper’s magazine, there’s one point which I fear is underplayed. This is that there are understandable reasons why reasonably educated middle-aged people should be surprised and discomforted by what the Harper’s signatories call “moral certainty” and what Janice Turner calls an “angry throng.” It’s because several strands of the western liberal tradition simply don’t prepare them  for this, and have left some of us – including me – befuddled by da yoot.
One thing I’m thinking of here is Rawlsian liberalism. This rests upon the concept of a veil of ignorance, which requires that we slough off any knowledge of our identity – our race, gender, religion or intellectual abilities and beliefs – and build an idea of a

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The Deficit Myth: a review

July 11, 2020

One common objection to neoclassical economics is that it underweights the importance of history and class. It is therefore paradoxical that Stephanie Kelton’s The Deficit Myth, which claims to challenge orthodox economics, should be guilty of just these vices.
Let’s start by saying that I wholly agree with the main claims she makes – that a government which enjoys monetary sovereignty can always finance its borrowing. Asking how we will pay for public spending is therefore daft. Instead, the question, as Dr Kelton says, is: can the extra spending be resourced? The constraint on raising health spending for example – if there is one – is a lack of doctors and nurses, not a lack of finance. Where there are resources lying idle, governments should raise spending to employ them. Dr Kelton

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Reclaiming freedom

July 9, 2020

We might be seeing a significant political change, with the left reclaiming freedom and anti-statism from the right.
I’m prompted to say this by the Black Lives Matter slogan, "defund the police" which invites us to see the state as an oppressor. As Grace Blakeley recently tweeted:

People know that the state is fucking them over just as much as their boss or landlord – in fact, it’s helping their boss and landlord fuck them over even more…Rather than saying ‘just give more state power to the goodies (us)’ we need to start saying ‘put power where it belongs – in the hands of working people’.

If we read this alongside the disappearance of right-libertarians (some of whom discovered that they like racism and inequality more than small government) and emergence of big government

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Profits before jobs

July 8, 2020

We live in a capitalist economy. It’s this trivial fact that must determine how we view the Chancellor’s so-called plan for jobs.
The point is that much of what he’s doing is a lot like corporate welfare. For example:
 – The Job Retention Bonus – £1000 to an employer for every employee who remains continuously employed to January – will hand out cash to firms that would have retained staff anyway. At the margin, it will encourage firms to retain employees insofar as it reduces the cost of doing so. But the margin might not be very extensive.
 – The Kickstart scheme pays bosses the cost of hiring onto a minimum wage job a young worker who is currently on Universal Credit. This risks encouraging firms to hire such workers, at the expense of those who are not on UC – such as those leaving

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