Sunday, 23 October 2016

If There's One Must-Read Book Of The Past Few Years, I Think It Is This One....

In my opinion, one of the most important books in recent years is Matt Ridley’s Evolution of Everything - it's one of the few books in the modern era that I think can justifiably be called a must-read book.

After his excellent works The Red Queen and The Rational Optimist, Matt Ridley’s Evolution of Everything makes the case that bottom-up evolution rather than top-down design is the main driving force that has shaped much of culture, technology and society, and is shaping our future.

He argues, quite rightly that change in technology, language, morality and society is incremental, inexorable, gradual and spontaneous, and that much of the human world is the result of local human action, not of centrally planned human design; it emerges from the interactions of millions, not from the top down organisations of a few.

I should say, though, that while it's true he covers a wide range of topics, and gets most things right - from the internet to bankers, from crop circles to education, from the nurture vs. nature debate to technology, from mind to money, from genes to morality, and many more topics - the book is not perfect by any stretch of the imagination.

Some of the arguments involve selectively loose cherry-picking which is offered up to conveniently support some of his contentions at the omission of perfectly good contra-examples. And in a couple of the chapters, the one on religion being the best example, he builds too many presumptions on top of the central thesis of the book.

The other thing worth saying is that although the book is a very good compilation of how relevant the bottom-up understanding of society is to the reader, it's not as though this is the first time it has been argued. In fact, the book itself is based on the prescient wisdom of Lucretius in his masterpiece De Rerum Natura - (a work I've read multiple times, and one that seems more impressive each time I read it).

Evolution of Everything is also underwritten by decades of formal contributions to economics from the likes of Bastiat, Smith, Ricardo, Coase, Marshall, Hayek, Schumpeter, Mises, Hazlitt, Rothbard, Sowell, Friedman, McCloskey and Boudreaux, about how markets and society evolve primarily through local transactions, not command economies from on high.

It's a must-read for precisely the reason the critics hate it - because it involves a revolutionary (if long-standing) message that the majority of people haven't intellectually assimilated or emotionally accepted. That when left to act freely in accordance with our local initiatives, we frequently bring about societal progressions, economic growth, increased prosperity, reductions in global poverty, and an enhanced well-being and standard of living that puts to shame the self-serving and misjudged attempts to engender this from on high.

It's a message I, and many like me, have been trying to get across for years - one that is anathema to the politicians, ideologues, demagogues, self-appointed authority figures, socialists, environmentalists, cult leaders, and eco-warriors alike - that evolution is a phenomenon that extends far beyond the natural selection of biology. And that things that are widely believed to be the sovereign brainwork of the controlling few, such as morality, the economy, technology, science education, government, money and all manner of cultural norms - are actually, in Ridley's words, "phenomena of evolutionary emergence — of complexity and order spontaneously created in a decentralised fashion without a designer."

Bottom up, not top down
Central to the message is not just that bottom-up evolutionary emergence usually does a better job of organising and innovating that top-down control freakery; it's that the myth that nothing would ever get done without human direction from on high is a continually stultifying, misleading and damaging myth  - not just because of the deadweight costs and inefficiencies it imposes on societies, but because it persists with the precarious cult of personality and perpetuates Thomas Carlyle's anachronistic Great Man theory.

It is all too easy to tendentiously ascribe great theories, ideas and discoveries to great figures in history. As we know, Newton is most closely associated with the incipient knowledge of gravity, Maxwell with electromagnetism, Smith with free markets, Darwin with natural selection, Mendel with genetics, Einstein with relativity, Watson and Crick with the double helix of DNA, and so on. But those theories, ideas and discoveries didn't occur in a vacuum, they were a large group effort, and if it had not been them it wouldn't have been long before other names would have been the associative names.  

Perhaps the best living example of the phenomenon of the evolutionary emergence of a thing of complexity and order spontaneously created in a decentralised fashion without a designer is the means by which you're reading this - the Internet. Nobody sat down one day and planned the Internet as a fait accompli phenomenon - it is a global system of interconnected computer networks that evolved over time, and is still evolving, in a cumulative step by step process of trial and error that tailors to our tastes and needs.

The emergence of the Internet - like cities, cars, houses, clothes, supermarkets, science and medicine - was driven by consumer demand, be it for global communication, widespread knowledge, online shopping, social networking and the countless other benefits it brings to human beings all across the world. It provides a microcosmic example of markets in general - where the complex emergence of order occurs not from being designed top down, but by a long natural selection-type process of good and useful ideas surviving, and bad ones being weeded out.

The same is true in pretty much all walks of life. Leading figures in history don't really proscribe morality, Chancellors don't really run economies, Prime Ministers don't really run countries, and singers don't really catalyse brand new genres. Of course, individuals can be influential and help the world along, but one of the most perpetuated fallacies throughout history, and still alive and kicking in the present, is that these things are planned and designed rather than evolved on a trial and error basis.

The rational calculations of trial and error are the driving force behind our progression, not top-down prescriptions. The theologian that tells you how to be a good person, and the moral philosopher who enunciates the rules for being an ethical citizen are basing their precepts on what humans have already worked out over lengthy execution time through the evolutionary basis of trial and error.

Attitudes to sex are an interesting example of how evolution of thought changes thinking. Once upon a time homosexual practices were utterly frowned upon by large swathes of society, and punishable by law. At the same time attitudes to under age sex and abuse were relatively relaxed. Fast forward a few decades, and now (thankfully) the opposite has occurred in both cases - society is much less tolerant of under age sex and abuse, and homosexuals can live freely and openly in a more tolerant society.

This example, and many others like it, demonstrates how much our morality is an evolved, learned phenomenon. It's also a fact that the more economically developed and prosperous nations have become, the better their citizens have behaved. Similarly, the more state-oppression, dictatorship, and lack of basic rights seen in history, the worse they've behaved.

The main cause of why people are still stuck in poverty is the unaccountable power of corrupt self-serving politicians against citizens that lack the basics required to be a successful trading nation with access to the global free market economy. Corrupt officials and poverty-stricken citizens are sprung from the same root. This was true for most people for most of human history - now it's still only true for a proportion of people alive today, but still true nonetheless. 

The places where people struggle most are the places where politicians live parasitically off the fruits of the citizens' labour. While once it was primarily for luxury and war, now it is for control and indulgence off the backs of people who've not yet won the battle over the state for free trade, private property rights, stable rule of law, limited political interference, lower taxes and personal liberty.

Darwinian efficiency
What's most vital in all this is that the Darwinian model of natural selection is by far a more efficient and powerful driving force for improvement, prosperity and advancement than any top-down designer, precisely because it is the accumulation of individual efforts into one grand collective effort that sows the seeds (as Leonard Read's tremendous essay I Pencil shows better than anywhere else I've seen - all of our technology and material accomplishments are made by a cooperative endeavours, not by the few people associated with such gadgets).

The energy revolutions that have helped reduce our human effort and replaced it with the harnessing of animals and machines have mirrored nature's law of least effort in providing a correlation between energy expended and progress rapidity. A train being able to get us from A to B quicker than on foot, or a machine that can pack meat into tins quicker than the human hands, are the kinds of progress that when aggregated lead to, on average, a person in country A that consumes 7 times the energy of a person in country B, and one who is likely to be about 7 times richer too.

There is also an interesting observation by Edward Glaeser about the near perfect correlation between urbanisation and a nation's prosperity - that is, the countries where the majority live in cites are wealthier (about four times wealthier) than countries where the majority live in rural districts. Further, the faster the city grows in size, the more efficient it grows per head, largely due to the benefits of recombination of ideas in densely populated areas.

A term called Schumpeter's gale (coined by economist Joseph Schumpeter) is a term that observes that market progress is built on both failures and successes - what he called a 'perennial gale of creative destruction'. In other words, for the economy to progress with strong businesses that have the innovative impetus to survive, it must also contain less-strong businesses whose lack of success makes them fragile to the point of discontinuing. Schumpeter, in using a Darwinian analogue, called this 'industrial mutation'. And as another fine economist, Ludwig von Mises (1881-1973), was shrewd enough to point out in the 1940s:

"The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy."

Émile Chartier had a lovely way of analogising this:

"Every boat is copied from another boat. Let’s reason as follows in the manner of Darwin. It is clear that a very badly made boat will end up at the bottom after one or two voyages, and thus never be copied. One could then say, with complete rigor, that it is the sea herself who fashions the boats, choosing those which function and destroying the others."

The upshot is, the free market is the place where free citizens drive the outcomes - we are the bosses, which is why the things the agents in question govern have the highest probability of being the most efficient. As Matt Ridley reminds readers in the book:

"It is axiomatic among right-thinking people that there are many things the market cannot provide, and therefore the state must.  The sheer magical thinking inherent in this thought is rarely examined.  Because the market cannot do something, why must we assume that the state knows better how to do it? Take six basic needs of a human being:  food, clothing, health, education, shelter and transportation.  Roughly speaking, in most countries the market provides food and clothing, the state provides healthcare and education, while shelter and transportation are provided by a mixture of the tow - private firms with semi-monopolistic privileges supplied by government:  crony capitalism, in a phrase. Is it not striking that the cost of food and clothing has gone steadily downwards over the past fifty years, while the cost of healthcare and education has gone steadily upwards?"

Here's something I find quite intriguing about human progression
This section is probably interesting enough to justify its own separate blog post - but anyway, you may have noticed that more than ever before the world's two dozen most advanced economies are knowledge-based economies - service and technology based expertise are at the forefront of their growth, not the sweat and toil of manufacturing goods, and obviously not agrarian labour.

There is a good reason for this - we progressed from agrarian to manufacturing to knowledge-based economies, as did a handful of other countries that did so at roughly the same pace. All the other advanced economies did so, or are doing so at a slightly slower pace, and there is good reason why.

Not all countries will progress at the same rate - there will always be countries that get their foot in the door first, and are then followed by others. But what underpins this truth is something even more fundamental and revealing - it is probably impossible to jump the natural threefold order of progression: that is, it is probable that every country on the road, from majority poverty to majority well off, has to go through the threefold process of being agrarian, then manufacturing, then knowledge economies.

We see a lot of frustration that some countries are developing more slowly than others, but given that we established that no authority figures control economies, they occur bottom-up and are driven by the people, it could be that every country that is going to progress or advance has to go through the quite hard and labour-rich process of being a manufacturing country first before it becomes as prosperous as the world's leading economies (and even then, things like geography, climate and political situations in neighbouring probably will continue to have a bearing).

I suppose the logic is obvious really - it's difficult to become a financial service economy until you have gradually harnessed the infrastructure through the manufacturing process. National and international progress, again like biological evolution, occurs in small incremental steps, not giant leaps (the only caveat to this is that now so many countries are advanced, and now everyone is globally connected, it's quite likely that the developing nations will have a leg-up in their own version of the progression explosions we enjoyed when no one else was prosperous 200 years ago).

The other remarkable thing, as Matt Ridley points out in the book, is that inventions pretty much always come along at the right time - there are rarely products or services that come along years too early or years too late. Think about it; when have you ever known a good to be invented and sit idly for a lengthy period of time until we developed the technological wherewithal to utilise on it? Equally, when have you ever identified a desperate societal need for something and found we had to wait a lengthy period of time for it to be introduced? The answer is pretty much never.

And the reason is fairy obvious - technological emergence is concomitant with the whole nexus of other emergences - they interrelate, and they emerge in the period of time when they would be most use for a particular industry. Required innovations find their innovators rather than the other way round. Gloves find hands and glasses find eyes, not vice versa.

Patterned evolution
As we now know from reading works like Richard Dawkins' The Selfish Gene, the body of an organism is a mere vehicle for the genes to propagate themselves. It is the selfishness of the gene that is the primary driving force for the survival of the organism (same with markets) - it is these acting in accordance with local effects that goes on to produce the splendour we see in the biological diversity of plants, fungi and animals.

Any system where information is transmitted, provided there is reproduction fidelity and random elements, should mirror the evolutionary process we see in biological kingdoms, including ideas and the sharing of knowledge. It's a sobering thought, but had the materialist philosophies of Democritus, Epicures and Lucretius - particularly the idea that nature is made up of constituent parts - not been both suppressed and surpassed by competing monotheistic theologies of the era, we probably would have known about many of the post-1550 scientific discoveries long before we did.

Final word
To finish, we said earlier that the Internet is perhaps one of the best analogies of microcosmic free market in action - it has evolved into a wonderful nexus of human activity, all unplanned, all emerging from local incentives and bottom up ideas. On top of that, it should also be noted that if you transported an arcadian farmer from his habitat to the present day and showed him the Internet he would think it too sophisticated and complex to have emerged evolutionarily, and far too wonderfully ordered to be the result of local evolutionary emergence.

Yet if you apply Leonard Read's I Pencil model to something as complex as the Internet you'll find it takes something as prodigious as the collectivised human species to design something like it. Further, just imagine how much we'll take our sophisticated emergence in the years ahead - imagine the future digital democracy (as some have called it), is ability to share more and more ideas, and make people accountable like never before - what people from Lucretius to Ridley have posited is just the beginning.

Think back to a few hundred thousand years ago, and consider those primeval grunts from our ancestors as they began to make sense of their surroundings. They never could have imagined that those inceptive primate sounds would one day evolve into the entire world of languages, literature, poetry, philosophy, science and technology that we have today. And just as Lord Of The Rings, the Manhattan skyline, space travel and the Hadron Collider would have been far beyond the imaginative precipitations of our primeval ancestors, so too is much of humanity's future evolution beyond us today.

We are picking up pace in this modern age as we reach new heights and new depths in shorter passages of time - and the driving force behind this is bottom up, local ideas, as people gradually wean themselves off the old top-down ways of thinking. I think that is the essential realisation that the greatest number of people need the most, and Matt Ridley's book Evolution of Everything is a good place to start.  

Saturday, 22 October 2016

Why Shops Stock Up On Christmas Goods So Early

For the past few weeks I’ve heard/read several people bemoaning the fact that shops are stocking Christmas goods earlier and earlier. You only need to see a tree and tinsel in the shop window in late October and there will be a mass moan. Here’s what the moaners don’t understand – you cannot really blame the shops for opening earlier and earlier, it isn’t really their fault. If the critics knew about non-linearities and feedback effects they would understand what is happening.

To see why shops are opening earlier, consider this simplified feedback model. Suppose we have M & S, Debenhams, John Lewis and Jarrold’s in the city centre. A long time ago all four shops used to stock their Christmas goods from December 1st. One day M & S try to obtain the advantage over the other three by stocking their Christmas goods a week earlier (from November 24th). 

Debenhams, John Lewis and Jarrold’s have three choices; they can do nothing, they can emulate M & S, or they can go one better and stock their Christmas goods earlier (say, from November 17th). If they do nothing they risk losing a week’s vital Christmas trade from opportunist shoppers to M & S; if they emulate M & S then there’s nothing stopping M & S doing the same again, leaving Debenhams, John Lewis and Jarrold’s on the November 24th date and stocking their Christmas goods a week earlier (from November 17th).

So, quite naturally in response they pick the best of the three options by stocking their Christmas goods earlier than M & S. But it doesn’t stop there – what then happens is that each one of their competitors will look to outdo the other by choosing a date earlier than the others. This continues over the years – and if you obtain the statistics you would find a pattern of increased early Christmas stock to match and/or outdo the competition. .

This is what happens when feedback effects occur; the shops are continually under pressure to stock their Christmas goods earlier and earlier to obtain an advantage, which is why you see all these shops beginning their Christmas trading at times that are, to many of you, premature. Their hand has been forced, lest they lose vital trade time to their competitors.

The shops are subject to "feedback" effects – whereby a particular parameter x changes and via a "feedback" route the change in x causes further change in x (thus x is "feeding" back to itself). Feedback systems, depending on the kind of feedback involved, can produce varying "curves" of change when plotted on graph paper – some of which are quite chaotic.

There is a ‘but’ of course – if it were just down to procuring an advantage by trading earlier, then M & S, Debenhams, John Lewis and Jarrold’s would all begin their Christmas trading on January 1st. But, of course, it isn’t like that – there is a balance to be struck, because the shelf room they take up with Christmas stock amounts to a loss of shelf space for other more saleable goods if they are displayed too premature for the festive season. 

The decorations, wrapping paper, cards and bumper chocolates would be counter-productive stock if they were displayed in August in the hope of obtaining a festive head start on the rival shops – which is why the balance between being too early and too late in the year is of huge importance.

* This article was first published here at the Adam Smith Institute.

Thursday, 20 October 2016

Why We Cannot Ever Get Our Money's Worth From Governments

It shouldn’t be much of a surprise that we have a natural curiosity about whether morality can be assigned some sort of value system – value systems are inherent in most of our thinking. We measure with calculus, we calculate with algebra, we assess shapes with geometry, and perhaps most essentially here, we estimate and forecast with probability theory.

A question about value was asked this week on a BBC 2 programme called Who's Spending Britain's Billions? It asked the kind of question I'm repeatedly answering, even when you don't ask (heh!) - and that is: What sort of value does the government provide for us? The programme focused primarily on all the profligacy that comes as a result of officials spending other people's money more frivolously than they would their own, but I want to take a different angle tonight.

As I'll explain, and as you won't be surprised to hear, government value is far tinier than you may think. Perhaps the main reason that people think governments provide so much value is because they do not think of alternative providers or the countless ways that the public sector could be improved. That's not to deny that the government is worth having - it's just a very mixed bag.

As you'd expect, the government quite naturally spends its money wisely and poorly. But perhaps the big thing against it, aside from its waste and inefficiencies, is that its control of the market is so minimal it is virtually negligible. An economy is so complex that no individual group can hope to predict it accurately. Even when you find an accurate prediction, what you're seeing is cherry-picking, as that prediction almost always omits the parts the predictor got wrong or incorrect parts on which the predictor chose not to predict.

When the government spends well, the world gains. If it is prudently allocated foreign aid then mostly poorer people benefit from water, food clothes and shelter; if it is on health the sick benefit; if it is on road maintenance the drivers benefit. But if it is spent poorly, on wars (some wars are injudicious), on profligate enterprises like consultants fees and think-tanks (which are often a waste of money) then everyone need not necessarily suffer financially.

It may surprise some of you, but poor government spending can still lead to a somewhat accidental overall job growth, because when people’s resources hit a significant loss, borrowing increases, which hikes up interest rates, which dissuades people from holding onto money, which has the corollary effect of increasing spending, which drives up prices, which either leads to business expansion (creating more jobs), or a concomitant rise in employees’ wages commensurate with the employers’ profit increase, which means workers have more to spend, and so on.

But excepting the above, by and large when governments interfere in the economy they do more harm than good. When the government prints extra money it expands the money supply, but that means it devalues the economy. Say a government prints £1 billion pounds – the prices of all consumer goods are increased by exactly one billion.

This principle is easily explained – when you go out tonight and spend £100 in your local supermarket you put up the price of everything else by a net total of £100. If instead you burned the £100 (and of course I wouldn’t advise it) you would decrease the price of everything else by a net total of £100. Naturally those sums are so small that society never notices when we’ve made the economy richer or smaller, but technically we have.

Just like physics has the law of conservation of energy – it can be transferred but it cannot be created out of nothing – the same principle applies to the economy. Resources can be transferred from one state to another, but equity cannot be created from nothing. If the government prints £1 million pounds, the economy as a whole is £1 million worse off. If I have a million pounds and I put it under the floorboards and nail them shut the economy is £1 million pounds better off for as long as the money stays under the floorboards. It is true that governments can sometimes do better things with resources than most individuals (although not always) but when any amount of money is transferred in an economy it has a correlative effect elsewhere.

Imagine this as a microcosmic example of a macroscopic state of affairs; the government hikes up my taxes by 13%, which means I have 13% less of my equity to spend. The government gains more roadworkers or local council administrative officers, but my gymnasium loses in the subscription fee from which I withdraw. Then the gymnasium has less money in its bank, which means that bank has less to loan to Sue for starting up her new business, which means Sue’s shelf prices are higher than she planned, which means Mary her customer spends more on a washing machine, which means the curry she was going to have at the weekend is forgone, which means Roshes the Indian restaurateur has less money in his till, and so on.

That is how the economy works – and no government can make us richer on average, they can only shuffle money around from one place to another. There is also the little matter of the futility of governments getting involved in prices. To emphasise this point, you have to realise that prices find their level based on the entirety of human market transactions in the global society. It is literally impossible to make this more efficient by tweaking a few knobs - impossible.

To illustrate this, suppose the government decided to take control of the fruit and veg industry, whereby everything grown, imported and exported is under their management. Everyone in society would still be best off if all fruit and vegetables continued to be priced at its market clearing rate, because any price the government set outside of the market value would either be too high or too low, which means there'll be the wrong amount of fruit and vegetables.

If the price is fixed too low then demand will increase and willing suppliers will diminish, creating a shortage of supply. If the price is fixed too high then consumption will decrease, which in the case of fruit and vegetables will achieve the opposite of the desired effect. The only way to optimise the price is to leave it to market forces, which, of course, involves no price-fixing at all.

Finally, I'd like to draw your attention to this article from American economist Robert Murphy, who roughly (but soundly) calculates a $2.6 trillion increase in annual economic output if "the government were to restrict itself primarily to its classic role of protecting the country's residents from criminals and invaders".

Wednesday, 19 October 2016

The Moral Fuzziness Of The Moral Calculus

Here’s a moral question for you to consider (based loosely on a real life scenario in 1884 called the lifeboat case: The Queen vs Dudley and Stephens). Four students named John, David, Derek and Alan are stranded on a boat with no food in the middle of the ocean after their engine fails.

The students call for help but their rescue crew won’t get there in time, meaning they look set to die of starvation. There is a revolver in the cabin, and a possible solution to save three of the four students - with one student being shot in the head (for a painless death) and then being eaten by the other three, ensuring survival until the rescue crew arrives. Would it be morally wrong to kill one to save the other three (the famous trolley problem has a similar dilemma)?

The answers to that question tend to depend on how the person to be shot and eaten is chosen. If you asked 100 people whether it would be right for David, Derek and Alan to gang up and nominate John to be killed, most would feel uncomfortable with this scenario. If, however, you asked 100 people whether it would be right for the students to put the four names in a hat and then randomly pick a student to be sacrificed for the greater utility of the other three, many would feel much better about that scenario (as I argue in this blog post, in scenarios like the trolley problem we should pretty much always take the consequentialist action).

One of the many interesting things about moral dilemmas is that we get to draw the important distinction between what we ‘should’ do and what we ‘would’ do. If forced to choose between pushing a button to kill your one child or pushing a button to kill 500 randomly chosen strangers, you probably should save the 500, but many probably wouldn’t. If faced with a screaming child on the top floor of a 3 storey house on fire, we probably should go up and try to save the child, but ‘should’ and ‘would’ are two different things. It’s always easier to say what you ‘should’ do than be sure of what you ‘would’ do.

Moral philosophy enables people to exclaim (and often exaggerate) their own probity in defining what is theoretically the right course of action - but, as the old maxim goes, actions speak louder than words - and the real life evidently can bring about a gulf between what we should do and what we do end up doing. If it didn't, there would be no wrongdoers in the world.

Another thing to consider is this. Does acknowledging the right thing naturally mean that one must always do the right thing? I'm not sure it does. For example, in the trolley problem, could it be the right thing to do to push the fat man to save the five, but not morally essential to do so if one's personal deontology trumps the consequentialism of the act? It's possible. Furthermore, are there actions for which any of the two outcomes are either both moral or both immoral? It could be conceivable that pushing the fat man and not pushing the fat man can be argued to be moral, and I suspect, immoral too.

What we often find objectionable is when we think people are being used as a means to ends. But I've often thought the whole notion of means and ends to be limited - after all, what are ends to some consequentialists could be regarded as means to other consequentialists. And clearly an end isn't always an end in itself - it is frequently another means to a further end, which is a means to another end, and so the story goes on.

There is another reason why what we should do and what we would do don't always translate into a personal moral philosophy - most people don't really live their lives with an underpinning moral philosophy, they only think they do. That is to say, we humans have a tendency to place more emphasis on the theory of moral systems than is actually the case in action. We talk so often about creating moral rulebooks or philosophies, but they don’t seem to have much influence on our behaviour. 

Perhaps the theories are like maps we consult every now and then, and our daily lives are like trips around a territory with which we are habitually familiar. And just maybe that is actually good for the emotions – after all, a human that followed a book, or a rigid set of instructions, or a mathematical formula, or advice from a guru every time he was looking to do the right thing would be rather too much like a robot.  

We are not like robots, of course - we are much more dynamical, and hence much more inconsistent because of that. The trouble with the dynamical approach, I find, is for people not very proficient or balanced it could lead them into a life where they scarcely have anything of moral value at all. They end up being selfish, parochial and so unaccustomed to the pursuit of human excellence that they let themselves down and cause upset to others. 

What we actually find, in fact, is that humans tend to oscillate between what we might call "Working out our actions from emotional desire one situation to the next" and what we might call "Having a firm and consistent set of moral values" - and we are frequently trying to find the right balance between the two, which is why you'll often notice that some of our strengths lead to faults, and some of our weaknesses lead to positive qualities. And you'll find in some cases that the two are quite inextricably entangled. Or to paraphrase W.H. Auden, if you take away some of our devils you take away some of our angels too.

The danger, as always, is that those who live by their own self-regulated moral standards tend to make those standards comfortably low - thereby making it harder to fall short of them. The primary thing that reawakens our wrongness every day, every hour perhaps, is the wrongness we do in spite of knowing full well these things are wrong, even if it just mild solecisms like selfishness, bad temperedness and uncharity.   

For example, I have written a whole book on morality - and it's a very long one too - it covers just about every aspect of morality through the lens of philosophy, economics, psychology, religion and science. But even with all that knowledge and understanding I am, and continue to be, way short of where I want to be morally, and every day is a reminder of how much better I can be.

By no stretch of the imagination am I one of the world's worst people - but most of my badness is not contingent on any lack of knowledge or any logical inconsistency or lack of symmetry - it's to do with the fact that with our daily goings on we have continual daily reminders of how much better we can be. The knowledge, logical inconsistency and symmetry that increases our morality simply makes us aware of how, on a daily basis, we can do so much better.

On that spectrum our general human behaviour is bell curved shaped. That's why for most of us our failings are failings that we humans have made largely socially acceptable due to their commonality - failings like being too impatient with someone, acting a bit too selfishly, not speaking to someone nicely due to being a bit tired and grumpy, needing to take more time to show care for people we haven't seen for a while, not volunteering more of our time for good causes, being unwilling to give up more money to worthwhile things, and things of that nature.

There is no real moral philosophy in the equation - most of us are very rarely in positions in which we get to see how we'd react in those age-old moral dilemmas. And most of us are very rarely in positions in which we and are under great pressure to be amazing human beings, or ensnared in a situation in which we are terrible - our lives are played out as a kind of weighted average of the whole spectrum, in which we usually never allow ourselves the self-rebuke or the self-congratulation of extreme badness or extreme goodness.

Sunday, 16 October 2016

On The Higher & Lower Pleasures

The test of a higher pleasure, according to John Stuart Mill, is that those who have experienced both the lower and the higher always prefer the higher. So, for example, a man who could claim categorically that he always prefers the works of Sophocles to the works of Ibsen can say that, to him, Sophocles constitutes a higher pleasure than Ibsen.

There are a few problems with Mill's higher and lower pleasures - not the least of which is comparing apples and oranges (and oranges and books, and books and holidays, and holidays and sex, and sex and fast cars - you get the point), and the issue of the distinction between pleasures necessary for survival (food and drink) and pleasures unnecessary for survival (Shakespeare and The Beatles) whereby the latter may be higher in terms of pleasure but lower in terms of necessity.

But the problem I want to focus on here is the possible bias a Victorian polymath philosopher might have towards pleasures, compared with, say, a twenty-something working class female in 2016. Let me first start by trying to identify what I think the best physical pleasures are. I'm assuming that if it's true for me there's a good chance it'll be true for others too.

Good sex with someone you love is right up there with the best physical pleasures, as is eating a delicious meal when you're famished. Relaxing in a comfy recliner chair after some hard exercise is a very nice sensation, as is the feeling of freshly washed and ironed sheets on your skin when you first get into bed. A nice scenic view is very pleasing, as is cuddling, and doing something kind and generous for somebody else is highly rewarding too (you may want to classify the last one as an emotional pleasure).

But what about the intellectual pleasures associated with things like philosophy, art and literature? Is the complete works of Shakespeare a higher pleasure than the complete works of Alan Bennett or the complete box set of Nicolas Cage films? Is Van Morrison's Astral Weeks or Radiohead's OK Computer a higher pleasure-pairing than David Bowie's two Tin Machine albums?

John Stuart's Mill's test of a higher pleasure - those who have experienced both the lower and the higher always prefer the higher - may not apply to a man who loves Nicolas Cage films and is bored stiff by Shakespeare. It may be very difficult to get him to prefer reading Hamlet to watching Con-Air. In what has become a hugely famous quote, John Stuart Mill explains how we understand and not understand higher pleasures:

"It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied. And if the fool, or the pig, is of a different opinion, it is only because they only know their own side of the question.”

I think a good way to frame it would be like this. We can accept that there are people who prefer the complete works of Shakespeare and people who prefer the complete box set of Nicolas Cage films - but if you found people that know them both, and asked them whether they would choose to spend the rest of their life in the Lake District with only the complete works of Shakespeare or the complete box set of Nicolas Cage films, the vast majority would choose Shakespeare.

The reason being, of course - it would not be difficult to find out that works of genius like Shakespeare's plays are imbued with possibly unsurpassed deep and enriching qualities that get right to the heart of the psychology of being human, and the important questions of life that we grapple with.

Why is it, then, that in these modern times (particularly) more people seem to gravitate towards the easier and more superficial pleasures over the arguably more rewarding and deeper pleasures? I think there are two main reasons. The first, and probably the lesser of the two reasons, is that people are getting a smidgen of those rewarding and deeper pleasures in their more superficial pleasures - be they books, TV shows, movies or video games.

The second, and I think by far the primary factor, is that when it comes to straightforward simple pleasures that demand little brainwork versus the more complex intellectually satisfying pleasures, humans have a tendency to favour the path of least resistance. Or to put it another way, when faced with the immediate prospect of watching Citizen Kane or Face Off, more people would choose Face Off because, although Citizen Kane may turn out to be ultimately more artistically nourishing, it's a lot easier to relax on the sofa with a beer watching an action movie like Face Off.

Implicit in this is the phenomenon known as hyperbolic discounting - the tendency humans have to prefer current rewards over distant rewards of a higher value. So for example, if I offered you £100 tomorrow or £110 this time year next year you'd probably pick £100 now. But if I offered you £100 on this day in 2017 or £110 the day after in 2017, you'd quite rationally choose the latter. Humans are said to discount the value of the later reward by a factor that increases with the length of the delay.

Psychologist Daniel Read of Warwick Business School and his colleagues have conducted experiments that indicate a connection between hyperbolic discounting and why we are more likely to choose a film like Face Off over a film like Citizen Kane the majority of the time.

What Read and his colleagues found was that experimental participants (students, from what I recall), when given the opportunity to select a film like Citizen Kane or Face Off to watch next weekend, were more likely to choose the highbrow film. But when the weekend arrived, they often changed their minds if given the option.

I think hyperbolic discounting has a lot to do with why so many people tread along nicely with the lower pleasures like surfing YouTube for funny videos when ultimately they'd find life more enriching if they pursued the higher pleasures. There is a human habit to suppress those deeper desires for fulfilment whereby what wins through more often than not is the seduction of the low hanging fruit.

For many it would take being stuck on an island or in a log cabin with a choice of lower or higher pleasures before they invested their time in the indulgences of the higher pleasures. But those higher pleasures definitely do exist; even if, prior to the effort of commitment, they can be quite abstruse and arcane.

Saturday, 15 October 2016

Some Things You May Not Have Considered About The Process Of Voting

The hideous Trump vs. Clinton contest has probably made more people feel like not voting than in any time in recent American history. The prospect of choosing their President this time around is rather like voting for a four year dose of haemorrhoids or a four year chronic earache. 

If you are someone to whom the above applies (and ditto the British political equivalent), I have one or two things to say. I've written before (here and here) about how in terms of probability your individual vote in an election or a referendum almost certainly won't make the slightest bit of difference to the outcome.
A challenger once tried to prove me wrong by posting a link doing the rounds to a low-turnout local election in which a councillor had won a district seat by two voles. What he should have realised is that the fact that an outcome like this is so newsworthy and shared so many times is all the indication one needs that 99.9999% of the time individual votes (or even a few hundred votes) don't make any difference to the outcome.
That doesn't necessarily mean I'm advising everyone not to vote - for some people the experience is worthwhile, and it's not for me to tell people how to behave. When it comes to deciding on whether to vote, people should do whatever is valuable to them. But it's always important to remember that value is measured in a whole range of things, and everything is a trade off. If you get x, you get don’t get y.

If you choose y you get less of z, and so on. One is ill-advised to just think of voting as ‘Well everyone should do it!’. Those for whom voting is a beneficial trade off should do it, and those for whom it’s not, should not. As with most things, it’s easy to plug in the numbers and ascertain probability for whether a trade off is beneficial, to yourself and to the wider population.
Here's an illustration to show why it probably isn't worth your while voting. Suppose a single vote costs you £3 of your time. In addition you are made an offer – if you care that much about the outcome you can buy as many additional votes as you like for £50 a vote. In other words, if you want to vote 11 times for your local MP or councillor it’s going to cost you £503 (that’s £500 in cash, and £3 in time).
Given the astronomically low chance that your additional 10 votes are going to make any difference to the outcome, I would think that most rational minds would agree that in the trade off – negligible chance of securing a candidate vs. not sacrificing £500 – you’d be ill-advised to waste £500, because in all likelihood your £500 of additional votes is likely to mean that the winning margin will be, say, 6031 instead of 6041 (or reverse that if you vote for the winner).
It’s pretty obvious to me that if offered additional votes for money, your individual demand curve for increased probability of outcome is pretty flat, and ditto almost the entire population. Therefore, taken to its rational conclusion, and in full knowledge that almost nobody else is going to change their voting habits based on the above wisdom, you’d be wise to take the logic to its farthest conclusion and trade off the vote that costs £3 of your time.
A friend replied with the following comment:
"I suppose the exception would be in the cases where the difference in the outcome would be so high that it would offset the negligible probability when working out the expected value. In the recent Scottish Independence referendum, 400,000 votes would have altered the outcome. At £50 a vote that would mean £20million would be the cost of a different outcome - so if you thought Scotland being independent would bring more the £20million in value to you then the £50 investment would be worthwhile (not to mention the £3 of time to vote). Admittedly, this exception would only apply to a very small number of people.
Also, there's surely an altruistic implication to this. If the £20million of value wasn't something that I saw for myself but for society as a whole (and people on both sides of debates of these kind are throwing around numbers much larger than £20million), then surely that provides a very compelling reason to vote - I am using my time (or in your hypothetical example, money) to produce a greater expected value for society than the cost I have incurred to do so. It seems to me that the smallness of the odds of an individual vote changing the outcome is mitigated by the largeness of the potential payoff of changing the outcome compared to the cost of casting that vote."
My friend is partially right - I could conceive of instances in which that’s the case, yes. However, by equal measure, uncertainty of the ramifications of an outcome has to be factored in too, as does the trivial nature of some outcomes.
In the case of the latter, in the grand scheme of things it really makes little difference whether the city councillors for Blackpool south wards are Labour councillors or Lib Dem councillors, so even if a millionaire could affect the outcome by buying £50,000 pounds’ worth of votes, I’d argue there are far better ways he could spend the money.
In the case of the former, it’s very difficult to know the exact ramifications of a massive decision like Scottish independence or hard and soft Brexits – much of it is contingent on numerous factors not yet apparent, so you could argue that spending millions of pounds affecting the outcome might be a bit of a blindfold in the dark-type of bet.
Finally, sometimes in life we find that even big outcomes could be settled in trivial ways, particularly if the democratic process has primacy, as I argued in this blog post about deciding the Scottish referendum by tossing a coin.


Thursday, 13 October 2016

Ladies, Strength Not Timidity Is Surely The Answer!

I've written before about how this hyper-sensitive 'generation snowflake' society that is being created is turning our young men and women into liberty-unfriendly, censorious whinge-bots that are thoroughly unprepared for reasoned critical debate and understanding the superlative qualities of free expression for all.

I also pointed out on Facebook the other day the sharp contrast between thin-skinned second rate MPs wanting sexism to be a hate crime, and women on the front line in Syria courageously doing battle with the sanguinary thugs of Islamic State.

It's not for me to tell others how they should fight their battles, but I can, I think, make a couple of suggestions on how all this is being perceived in some quarters, and on whether there may actually be a method of handling these situations that's possibly a teensy weensy bit better.

In a blog a few weeks ago I made a point about how exposed modern day socialists are when they shout in anger about issues in which free market economics has claimed victory long ago. This got me thinking about whether, just possibly, the same might be starting to be true in the UK about women’s liberation. It’s pretty clear that for most of our history men have dominated the landscape and oppressed women in all sorts of horrible ways.

As a consequence, women’s liberation has certainly been a necessary and laudable part of history. But now that brains are the key to a successful career, not brawn, and that from the years up to 40 women are now out-earning men, is it perhaps worth considering that in some cases women’s liberation is beginning to send its artillery into battles that have already been won?

I ask because if the answer is largely yes, then there are probably an awful lot of feminists expending energy in places in which such energy is no longer needed, which, by definition, means they are not expending energy in places where it might well be needed.

I'll leave it to feminists themselves to judge where best to devote time to causes - I shall not presume to know the battles they should pick better than they do. But I'd happily offer a couple of suggestions of battles that need a reappraisal.

First, as alluded to in the link above, a good example of poor use of energy is in a video like this one, with the reliably misinformed feminist Kate Smurthwaite arguing with the reliably well-informed Kate Andrews from the ASI about gender pay, and making a mess of things because she has her facts wrong, and is therefore pursuing something that needs no pursuance.

Second, I think when it comes to women facing negativity in the public arena - insults on Twitter, unpleasant comments on Facebook, or vile abuse at the bottom of the articles they write, the women who are saying the right things on this matter and doing the most for women are the women who absolutely refuse to be timid and self-pitying, and who repudiate the merest suggestion that women require any special treatment in the hostile world of Internet debating (contrast Ella Whelan's response at 7mins 38 compared with the feminists on the their side of the debate in this video clip here).

In my opinion, the women that do the most for the feminist cause are not the masochistic, whinging harpes with whom the word 'feminism' is most readily associated; rather they are the women who influence and inspire simply by doing what they do well - being smart, witty, intelligent, creative and (ideally) kind.

For just as it is one of those ironies that we rarely feel sorry for damaged people who are always moaning and feeling sorry for themselves - it is only when they stop that we actually feel sorry for them - so too it is the case that the women who are always running on about how much they are trying to do to fight the good fight for women are usually the ones doing far less good by imploring others to 'Look at me!', 'Look at me!', 'It's really about me!'.

In my opinion, the real champions of women are not the household name members of the witterati with those children's birthday party magic shows going on in their heads - the likes of, Julie Bindel, Polly Toynbee, Laurie Penny, Jack Monroe, Salma Yaqoob, Zoe Williams, Suzanne Moore, Kate Smurthwaite and Yasmin Alibhai-Brown. They are women like Janet Daley, Kate Andrews, Julia Hartley-Brewer, Dia Chakravarty, Gillian Tett, Camilla Cavendish, Claire Fox and Ella Whelan (who competently nails it in this interview on Sky News).

Sunday, 9 October 2016

The World's Most Necessary Diet

The problem with the narrative about all the unpaid tax and all the ways the government is not getting the funds it needs to pay for these ever-expanding services is that the real issue is not being addressed - and that is that the State is far too large with far too much economic liability for public services for which it is struggling to pay now, and has no chance of paying in the future.

Unfortunately this short falling perpetuates because the majority of the people are exacerbating the problem by failing to address the size of the State and how it can give itself over to the more efficient and less burdensome private sector.

To make it clear with an analogy, imagine a mother who started feeding her son cheeseburgers at a young age. After a while she started to feed him too many, and eventually he became morbidly obese as he was eating 24 cheeseburgers a day. Her son's eating habits had got out of control, and had become a burden on the household because she could no longer afford to keep him in that many cheeseburgers.

In order to generate the burger funds she tries everything; getting a second job, doing car boot sales at weekends, even begging her friends for a loan whenever she saw them. Alas, the solution in this situation is obvious: far from trying to locate the funds to feed this horrid cheeseburger habit, what the boy's mother needs to do is get her son on a more balanced diet so he can lose weight and live more healthily. It's by helping her son live more healthily that she will at the same time free herself from the economic burden of having to fork out for 24 cheeseburgers per day.

Similarly, by way of analogy regarding its excessive size, in order to save the public sector from its economic obesity we need to stop feeding it cheeseburgers and give it a more balanced private sector diet of market principles, lighter regulation, lower tax burdens and a greatly reduced bureaucracy that's small enough to put our hands around its throat the moment it becomes too aggressive. Consider this every time you want to see more tax paid, heavier regulation, further price controls, quantitative easing and renationalisation - they are like cheeseburgers being fed to an already morbidly obese boy. 

This blog post and analogy comes at a time when earlier in the week I read the latest report from the McKinsey Global Institute, which says that total world debt may well have exceeded $200 trillion by now - the majority of which is not generated by free trade between willing agents, but by politicians hamstringing the financial economy with excessive regulation, price controls, tax legislation, tariffs, and the tens of billions of dollars in employing the bureaucrats that underwrite it all.

Even if there is a slight exaggeration in that figure - and there may well be - it's still a damning indictment, because to understand why so much of this is counterproductive for the economy, you have to understand that when left to its own devices with only very light regulation, the global economy tends towards the principle of parsimony - that is, the law of least effort.

Just as nature's laws find themselves running according to the principle of maximum efficiency, so too would economics if it were left to the principles of economic laws based on prices, supply and demand. You may object that unlike chemical elements, economics involves that complex and erratic phenomenon known as human behaviour, but that's not a valid objection, for as Adam Smith reminds us, the invisible hand acts as a social mechanism that channels collective objectives toward meeting the needs of the people that make up that society, by ensuring competition between buyers and suppliers, which channels the profit motive of individuals into providing products that society desires at prices which are rarely above cost.

Note: What I'm going to finish with is only a rough approximation from my own sparse and scattered data studies in life in general - it is just something for you to ponder - but in terms of the entire global economy, based on what I've been reading in the past ten years or so, the global imbalance between trading in the supply and demand market is probably somewhere between 65% and 75% of the total size of financial transactions in the world. Just to be clear, that 35% to 25% excess doesn't include public sector industry, that is purely the excess created from all the extraneous credits and debits from things like increasing money supplies, price controls, debt interest, and so forth. On the global balance sheet, that amounts to literally trillions of pounds of an imbalance - the vast majority of which is caused by interference in a market that primarily need only rely on the price signals of supply and demand.

Thursday, 6 October 2016

Two Words That Demonstrate Economic Confusion

Ha-Joon Chang regularly flaunts his economic misunderstandings, and this picture above that has been doing the rounds recently is no exception. There are two words that when uttered in the same sentence are a dead giveaway that the person uttering them is rather confused about economics. Those words are 'trickle' and 'down'. Anyone who understands economics proficiently well wouldn't use the term, let alone complain that money is failing to trickle down.

The term 'trickle down' has been created to be used pejoratively by the hard economic left to take pot shots at society's most successful wealth creators. Here's why no one who understands economics would go on about 'trickle down'. Wealth and value are conterminously linked; value creates wealth and wealth creates value. In other words, to create wealth or value you have to create things that people want or things that benefit people.

Supermarket workers, mechanics, cinema owners, musicians, pub landlords and manufactures of electrical goods all create lots of value for all sorts of people, including many people earning more money than they are. Equally, a CEO of a company creates lots of value for his or her customers (and workers by creating jobs), most of whom are paid lower wages.

The reality is, wealth doesn't just trickle; it drips, pours and gushes, depending on the context - and it doesn't just move downwards - it moves sidewards and upwards as well. Try replacing 'trickle' with 'earned' - that's a much better description of what's happening in a market economy. And please do yourself a favour and stop listening to people like Ha-Joon Chang and Hillary Clinton talking about 'trickle down' economics - it's the grammatical equivalent of saying your when you mean you're and it's when you mean its.

What needs to be understood is that the term 'trickle down' would never be uttered by a credible economist, because credible economists know that the trickling fallacy is a garbled label thought up by the left, having no real bearing on how things actually work. In short, if we don't claim it, it's silly to attempt to counterclaim it against us.

The closest we argue about wealth making its way from higher earners to lower earners is in the form of job creation, increased consumption, higher wages and more affordable goods and services.

While we're on the subject, you probably have noticed that arch space cadets Jeremy Corbyn and John McDonnell have a plan - they want to make society more equal by using taxation to take money from those on the highest income and spread it out among the masses. Alas, it's a plan that's long since been proven to be faulty by some seat of the pants mathematics. In 1996 James Mirrlees and William Vickrey were awarded the Nobel Prize in economics for proving that top marginal tax rates should be zero, not, as Corbyn and McDonnell think, high and punitive.

Mirrlees’ work figured out formally what other economists had long before realised informally - that a flat tax is the best tax for economic growth (a flat tax for everyone, and at about 20%, not the excessive rates we have today, or much worse, the super excessive rates of governments gone by).

Some politicians think it's counterintuitive to lower taxes to increase income - but it ought to be obvious that if you tax too highly you disincentivise higher earners to earn more money. Mirrlees found that not only is a flat tax rate the most preferable for all of us - he also proved that the marginal tax rate on the very highest earner should be zero.

To see why, suppose the highest earner in the UK earns £1 billion per year and is taxed on those earnings at a flat rate of 20%. A tax rate of zero for any earnings over £1 billion per year would not make the government's tax revenue any worse off - but it might incentivise the highest earner to earn even more money, which makes him and society better off (more jobs, increased consumption, more consumption tax for the government).

Not only is it untrue that you can 'tax your way to prosperity' - it's equally untrue that you can make society better off by excessively taxing the nation's highest earners. Corbyn and McDonnell really need to start learning this basic thing - that the way to engender economic growth and make Britain attractive to outside investors is to tax competitively against other nations' competitive tax rates, not greedily from within a parochial socialist dystopia.