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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.

Disaster capitalism: some doubts

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...

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Simplicity: smart & stupid

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....

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How not to be an arrogant prat

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...

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Class and optimism

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...

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The Tories’ imaginary world

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...

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The human factor

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....

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The recrudescence of zero-sum thinking

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...

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New Labour: success and failure

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...

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The Johnson puzzle

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...

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The Tories’ structural weakness

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...

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