Tuesday , December 1 2020
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Chris Dillow: Stumbling and Mumbling

Stumbling and Mumbling is a personal blog of Chris Dillow, an economist who spent eight years with one of Japan’s largest banks. He blogs about British politics and provides thoughtful analyses on the British economy and sports.

Lockdown threats to capital

Many economists agree that a premature lifting of the lockdown will not necessarily boost the economy greatly. As both Simon and Jo say, if people fear catching the virus they'll avoid shops and restaurants even if they are open. Which poses the question. Why, then, are so many on the right so keen to lift the lockdown? In part, the answer might lie in a useful concept of Michal Kalecki's (pdf) - their "class instinct." This tells them that a prolonged lockdown - especially combined with...

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Why so little anger?

Richard Murphy asks why there is not more anger at the government's mishandling of the pandemic and predicts increased anger as unemployment rises. I agree that people should be angry: the UK's excess deaths per million exceed those of comparable countries and the government has not done enough to protect workers. But as recent history teaches us, the fact that something should happen doesn't mean it will. There are reasons for the lack of anger. One, I suspect, is that in crises people...

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Origins of a disaster

The FT reports that Johnson " is now convinced that the economy is facing a cliff-edge unless it starts to reopen." But as Simon says: [This] is a tragic error, not just because it will lead to yet more deaths but also because it will delay any economic recovery...The idea that there is a trade-off between protecting the economy and protecting people’s health is not only wrong, it is also dangerous. But why do so many ministers and their supporters believe otherwise? I...

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Tail risk in policing

One of the key things you learn in finance - often the hard way - is that averages and majorities are not sufficient statistics. What also matters - and matters a lot - is the distribution and in particular the extreme of the distribution. Making a profit in 99 days out of 100 is little use if the hundredth day wipes you out. This tail risk comes in many forms: bonds can default; liquid assets can suddenly become illiquid; uncorrelated assets can fall together; and the rare event such as...

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Racism as emergence

Instinctively, I have solidarity with those taking a knee to protest at racism. But I have a problem here. We cannot eliminate racism merely by being nice to each other, any more than we can prevent recessions by wanting to be richer. I say this because racial disparities aren't just the product of racist attitudes - important though these are. They can also arise from human action but not human design: they are also an emergent process. Such a possibility shouldn't surprise anybody. When...

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Hoist by his own petard

There is genuine anger at the behaviour of Dominic Cummings not just among the usual suspects but among some Tory MPs such as Roger Gale and Douglas Ross. It's worth exploring why this should be the case. It's because of cultural evolution. Early humans worked out (or stumbled upon) an important fact, that we often thrive best when we cooperate. As Axelrod and Hamilton showed in a classic paper (pdf): Cooperation based on reciprocity can get started in a predominantly noncooperative...

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Austerity, power & BBC bias

George Osborne gave a revealing interview (1'52" in) to Radio 4 yesterday - revealing, not untypically for the BBC, for what it did not say. Osborne said that sometime in the "next two or three years": Markets, and indeed the country, will look to governments to set out plans for how they are going to eventually bring balance back to the public finances. The first thing that was not said here - and certainly not by his fawning interviewer - is that the more educated parts of...

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What we don’t see

Daniel Hannan recently tweeted: Around 80% of us say we support the lockdown. But, looking around me, I’d say that no more than 20% are still observing it rigorously. Is this a case of what economists call “revealed preference” - or do people want everyone else to apply stricter rules than they do themselves? It might well be neither. Instead, it’s an example of the sampling bias. The people we see are, by definition, those who are outdoors and thus who are disproportionately...

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How to be wrong

“The tradition of all dead generations weighs like a nightmare on the brains of the living.” I was reminded of these words of Marx by the Telegraph’s report that some Treasury officials are pushing for tax rises and spending cuts in part because there is a “plausible” risk of a sovereign debt crisis. Of course, Simon is right: there is no such risk as the Bank of England can, in extremis, buy up gilts. Certainly, financial markets aren’t worried; the latest gilt auction saw record demand....

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Technocrats & class

Are centrists even more utopian than socialists? I’m prompted to ask by a passage at the end of Anne Case and Angus Deaton’s Deaths of Despair. They write: We believe that capitalism is an immensely powerful force for progress and for good, but it needs to serve people and not have people serve it. Capitalism needs to be better monitored and regulated, not to be replaced by some fantastical socialist utopia. This comes after 260 pages in which they document how American...

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