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Given that 27 other economies were subject to the same EU regulations, and that our domestic red tape is lightly worn, the UK's poor productivity growth relative to our continental competitors is clearly homegrown. The bulk of business "overhead" is endogenous, rather than exogenous. In other words, if bureaucracy is a drag on productivity, that is more likely to be the fault of poor business organisation and systems design rather than the heavy hand of the state, let alone the EU, hence the Torygraph's underwhelming list. Since the 1970s, the right has sought a variety of excuses to deflect attention from the calibre of British industrial management, from unions to the EU. It has successively shot every fox. What new culprit will they come up with to explain under-performance post-Brexit?
Toggle Commented yesterday on Newt troubles at Stumbling and Mumbling
@William Meyer, What would be the minimum qualifying period? If it were a single parliament, then we might find MPs aiming for single-term careers. Why do more if you're set up for life after 5 years? This would incentivise venal opportunists, make them more likely to adhere to centrist policy (to secure initial nomination), and less likely to put in the effort to secure promotion thereafter. If it were a minimum of (say) 3 terms, then this would incentivise MPs to abolish or undermine deselection (which might jeopardise their chances of reaching the finishing line), avoid rebellion and dissent (as this might lead to them losing the party whip), and would further encourage time-servers disinclined to pursue campaigns from the back-benches. Incentives matter, but only if you make them material, as campaign financing "reform" in the US has done. Our problem is not that politicians are easily bribed but that they are predisposed to support the worldview of the rich. As the old ditty about that related creature put it: "You cannot hope to bribe or twist (thank God!) the British journalist. But, seeing what the man will do unbribed, there's no occasion to".
Toggle Commented Mar 22, 2017 on Incentivizing politicians at Stumbling and Mumbling
Perhaps the fundamental assumption of economics - that incentives matter - is right in particular but wrong in general, and simply shouldn't be applied in this context. The idea that politicians must be nudged into doing the right thing demotes agency, and it also assumes we can collectively agree what that "right thing" is. Surely what we want from them is a balance between intrinsic motivation and pragmatism, not more extrinsic incentives that will inevitably produce structural biases. Osborne's career to date suggests a man who doesn't believe in much beyond his own fitness to rule. In other words, his willingness to be subject to the extrinsic incentive of money reflects weak intrinsic motivation. The broader issue here is the neoliberal emphasis on technocracy and the market in human capital (see Tony Blair's praise of Osborne as a "capable guy"). In the case of Davis, I suspect that he has prepared a contingency plan, but he doesn't want to reveal it for two pretty obvious reasons: first, as a signal to the EU27 that the UK doesn't fear a "no deal" outcome; and second, because it would be seized on as a prediction by those opposed to Brexit.
Toggle Commented Mar 22, 2017 on Incentivizing politicians at Stumbling and Mumbling
"If people fear the sack, they’ll not invest in job-specific skills but rather in general ones that make them attractive to future employers". --- But more specialised skills are likely to command a higher wage so the reverse might also be true for skilled jobs: workers may seek to maximise training (where possible) if they feel their time in post might be short. "A lack of protection will encourage people to change jobs more often, as it’s better to jump than be pushed". --- The data suggests that employment churn increases when workers feel confident about finding a new job (i.e. employer demand is robust), not when they feel more vulnerable. The tendency of the majority is to sit tight and hope to avoid any cull. "If firms know they can fire at will they’ll devote less effort to screening or training". Maybe, or they may simply extend the probation period, effectively screening on the job. To assume that this approach would be a drag on productivity, you'd have to prove that the base case - costly up-front matching with psychometric bells on - is efficient, but there is little evidence that this is so. The broader point is that employment regulations actually have a relatively small impact on firm performance. Individuals react to changed incentives in different ways and most (not all) companies prefer to maintain their existing operations rather than seek to heavily exploit new regulatory "opportunities". The UK's relatively poor productivity is mainly a reflection on capital composition not the flexibility of labour.
Toggle Commented Mar 15, 2017 on Deregulation fantasies at Stumbling and Mumbling
I am not convinced of Harford's argument, nor your gloss on it, not least because it displays the characteristics of Hirschman's rhetoric of reaction: perversity, futility and jeopardy. The backfire effect may be real, but not every debunking produces a perverse outcome. Ostentatiously calling out the likes of Hopkins and Milo may often be counter-productive virtue-signalling, but suing the one and hoisting the other by his own petard seems to have been of some value recently. Harford's story about Big Tobacco ignores the central "fact": that despite decades of obfuscation, smoking went into steady decline from the moment that the evidence of its link with cancer was published. The facts weren't futile - they simply took a while to impact, which probably reflected generational habits as much as the temporary manufacture of doubt. The implicit jeopardy, in Harford's words, is that "More facts mean more grist to the motivated reasoning mill". In other words, we must avoid inciting the mob with our expertise for fear they go full Fascist. This strikes me as just another example of liberal pearl-clutching. It comes as no surprise that he advocates de haut en bas propaganda: "What we need is a Carl Sagan or David Attenborough of social science". I agree with your central point that we need to change the agenda, but I doubt this would lead to general enlightenment and sweet reason. There were plenty of rightist rentagobs with something to say about stagnation and "the right to manage" in the 70s, suggesting that wherever you shift the argument the reaction will produce new counter-arguments and advocates. That said, anything that marginalises David Goodhart is surely a good thing. PS: @Patrick Kirk, the finding was that 96% of people didn't consume "enough serious news", not that they were politically disengaged. See what they did there?
@Luis, Blackrock are buying: a) goodwill/insurance, in the sense that future chancellors now know where their best interests lie with regard to the specific company; and b) publicity, in the sense that we, like much of the media, are talking about them.
Toggle Commented Mar 10, 2017 on How capitalist power works at Stumbling and Mumbling
There is always a common ideology. For example, PPE assumes that politics, philosophy and economics are complementary (which leads to teaching that seeks to make them so) and also that they are members of a distinct "class" of knowledge. If broader degrees are beneficial, then why not politics, ceramics and physiotherapy?
Toggle Commented Mar 2, 2017 on In defence of PPE at Stumbling and Mumbling
Another way of looking at it is that it was Nick Clegg's fault. The decision to enter coalition with the Tories not only committed the country to austerity but collapsed the LibDem vote in 2015, thereby handing the Tories a majority that in turn led to Cameron ceding the EU referendum to placate his right-wing.
The improvement of productivity in the 80s was in part simply a return to trend following the negative impact of the oil-price shocks of the 70s, though higher business churn (i.e. exit/entry) following the carnage of the early-80s will also have played a significant part in this. Technology (digitisation) did provide a boost to manufacturing in the 1990s, though again this was amplified by the churn occasioned by the recession early in the decade. It's possible that the current low impact of technology on manufacturing productivity growth reflects the limited company churn since 2008 - i.e. extend and pretend and weak wage growth pressure are bigger problems than a lack of innovation. PS (and in response to Ian Dykes), manufacturing jobs are not intrinsically boring. People like making things and solving problems. In comparison, service industry jobs are often tedious and more alienating (in the sense of not seeing the fruits of your labour). While some have a high anxiety/satisfaction spectrum because of direct human interaction, a lot involve screen-based admin and old=fashioned paper shuffling.
There is of course a risk in changing manager after a 20-year incumbency, however Arsenal will have to do it at some point (Arsene isn't immortal) so it makes sense to grasp the nettle at a time when the club's structural advantages (increased revenue, some promising youth) may offset the cost of change. The window of opportunity has been open since 2014. Had it not been for the two FA Cup wins, and the belief that these heralded a step-change, I suspect Arsene would have called time a couple of seasons ago. Arguably, our failure to finish above Leicester last year (despite beating them home and away) was the decisive moment. Ironically, this was obscured by the hilarity of Spurs screwing up. I suspect most Arsenal fans have now come around to the view that a season of turmoil (not qualifying for the CL, finishing behind Spurs) would be worthwhile if the club then met the expectations associated with its current capabilities, i.e. that the 5th richest club in the world should at least make the CL last 8, rather than always going out in the round of 16, and should be able to challenge for the Premiership until April most years. Wenger's place in history is assured, not just the history of Arsenal or English Football but of the global game, however his time has passed. His insistence on playing the last pure number 10, on crafting a team out of unusual individual talents, and of wanting to win more than to avoid losing, is beautiful but quixotic, showing the formative impression that Platini's France of 1984 had on him (he started his managerial career at Nancy in the same year). Change is gonna come.
Toggle Commented Feb 17, 2017 on Replacing Wenger at Stumbling and Mumbling
We do indeed need a historical perspective here. Most of the intellectuals associated with the Labour Party, certainly up to 1970s, were not middle class but upper middle, a distinction that Orwell was keenly aware of. This began to change in the 1960s with the expansion of tertiary education and the related growth in professional roles, both in the public and private sectors. The conflicts within the party that reached boiling point in the late-70s were a result of this new middle class formation (both on the right and left) competing for policy control with an industrial proletariat already in retreat. Despite the sentimental solidarity of the 80s, what was really happening was an acceptance by the middle class that the proletariat had missed its historic cue as an agent of progress and would have to take a back seat. New Labour formalised that marginalisation and sought to redefine social democracy in a way that would appeal to middle class (rather than upper middle) values, such as technical expertise and managerialism. Culturally, Labour under Blair went from a high+low-brow mix to pure middle-brow (e.g. setting "output targets" for arts funding). The current problem is not that the Labour Party's policies alienate the working class (policies can be changed), but that the working class are conscious of being expected to take a subordinate role (with no hope of change). Patronisation is ultimately a bigger issue for the party than immigration. Consider how often the latter is bookended by "I'm not racist but ..." and "but they [politicians] don't care". We laugh knowingly at the former and miss the importance of the latter.
Does this mean we can now start referring to older workers as job-blockers?
Toggle Commented Feb 15, 2017 on Low job mobility at Stumbling and Mumbling
@Blissex, I wouldn't say that Tom Walker (Sandwichman) argues that there really is a lump of labour but that the fallacy is a strawman that is usually employed to undermine labour movement demands for reduced working hours. The broader point is that labour is rarely perfectly fungible, hence an experienced worker retained beyond the state retirement age is not the same as a young worker, as David Br notes (the lump of labour has impeccable micro-foundations, being demonstrably true at the level of the firm). While this may be a wash in terms of aggregate demand, it may exacerbate intergenerational inequality.
A quibble. I'm not sure you're correct to say that young people cannot "complain about high pensioner incomes to the extent that these are due to more pensioners having jobs". While there is no lump of labour, there is a different dynamic at work with pensioners compared to immigrants added to the labour supply. Pensioners who push back their effective retirement age will often do so by staying in existing jobs, even if at reduced hours. This incumbency means lower employment churn, which has the effect of reducing the number of better-paid vacancies that open up for the young because we are living in an era when newly-created jobs tend on average to be more poorly-paid than established ones. More working pensioners means more aggregate demand and thus more new vacancies elsewhere, but if those new jobs are of a lower calibre then we can legitimately say that pensioners working longer (as incumbents) is detrimental to the young without invoking the lump of labour fallacy.
The problem is that the low-hanging fruit of privatisation and outsourcing have long since been plucked. The student loan book is trivial at a macroeconomic level. A privatisation capable of stimulating the economy today would mean encroaching on the NHS or state pensions, neither of which would garner electoral support and either of which could prove counter-productive by depressing demand through precautionary saving.
Toggle Commented Feb 10, 2017 on The case for privatization at Stumbling and Mumbling
Incentives tend to be a projection. Rich people insist they need the incentive of more riches because they are motivated by wealth. The rhetoric surrounding child refugees has centred on the idea of cheating ("check their teeth!") because those who object often assume everybody else is on the make and will always take advantage. They are projecting their own cynicism and probably their own habitual cheating.
Toggle Commented Feb 10, 2017 on "Incentives" as bigotry at Stumbling and Mumbling
Confidence is an slippery term because it can mean either a belief in the reliability of something or access to restricted information, plus there is a third sense, combining the two meanings, in which confidence implies the membership of an informal group. Thus: I am confident the bus will arrive shortly; in all confidence, the bus driver is an alcoholic; I have the confidence of the bus driver's wife. In practice, the sort of "confidence" displayed by Sarah Sands is a rational display of the first ("I'm in") consequent on an appreciation of the last ("I'm a member of the in-crowd"). What won't be revealed is the second - i.e. whether she was actively encouraged to apply on the understanding that the job was hers if she wanted it (she clearly didn't send her CV in on spec). "Top" jobs are rarely filled by open competition, as both Sands and Tristram Hunt know. They are by invitation only.
Toggle Commented Feb 2, 2017 on Class & confidence at Stumbling and Mumbling
The idea that commerce brings people together is rather antique, conjuring up pictures of sailors dockside and merchants in market squares. The historic trend of trade has been towards segregation (e.g. docks moving out of cities and being increasingly automated) and evanescence (e.g. digital goods and services). What brings people together is increasingly shared experiences, whether in the form of face-to-face work or tourism. For example, the mechanism by which racism declined in British football grounds after the 70s was not "increased commerce between white fans and black players" but that black players attracted and encouraged black fans. This led to the recognition of shared interests among spectators and made overt racism unfashionable. We have probably already reached a point where trade tariffs are likely to have only a weak impact on international understanding, so Tyler Cowen's analysis could be extended from the economic realm to the cultural. Our problem may be that commerce, in the traditional sense, has already lost much of its power to "soften barbarism".
Toggle Commented Jan 29, 2017 on On soft commerce at Stumbling and Mumbling
As leavers never tire of reminding us, the Brexit decision has been made. We don't have to reinforce it with further popular votes and the likelihood of a conclusive referendum on the terms of separation (or even an early general election fought on the issue) looks remote. For that reason, I'm dubious that Labour's electoral prospects would suffer because of its position on this one topic, no matter how fudged, though I suppose it could damage the party's chances by crowding out other issues in debate (I think I espy an agenda). Voters don't only care about Brexit, and those that insist on virtue-signalling (in either direction) through a secret ballot are unlikely to be "reliable" voters anyway. We look to be making a mountain out of a molehill. PS: This comment thread was worth it just for the Freudian slip of "right below our noises".
If the UK economy really were in a position to take advantage of a radical change in circumstances, such as Brexit or comprehensive deregulation, we would expect to see signs of that potential exhibited as tension. In other words, a visible straining at the leash or chafing under existing constraints. In the absence of such signs, you'd have to conclude that either the potential isn't there or that the existing constraints aren't material. In the case of deregulation (of which we've had plenty), it looks to be the former; in the case of Brexit, it looks more likely to be the latter.
I fear you're setting up a false dichotomy between boring facts and frivolous politics, which will only encourage the epistocrats and democracy-haters. The role of gobshites like Young is the result not just of TV execs' lust for ratings but an ideological division of politics into public drama and private competence. The vast majority of actual politics is already dull: think of employer/union negotiations, local council deliberations or the entire third sector. Most "important stuff" doesn't actually make the news. The problem is, as you say in your final sentence, one of "appearance".
Toggle Commented Jan 23, 2017 on In praise of dullness at Stumbling and Mumbling
One cultural change since the 80s has been the tendency for innovators to systematically use large firms as launchpads. In other words, they don't tinker in the garage so much as develop a skunkworks within the corporate host and then decamp on the promise of VC funding and an eventual IPO. Back in the day, the instinct was to stay and convince rather than go solo as soon as an idea was monetisable. This may reflect a growing corporate inability or uninterest in exploiting new ideas that springs from shareholder value, though the tendency to get employees to sign restrictive covenants on IP rights suggests otherwise, so perhaps it is more a reflection of the decline in corporate loyalty and the rise of promiscuous employment (the flip-side of precarity). Of course, these are more effects than causes. The underlying dynamic is probably the shift from physical to intellectual capital - i.e. less plant, more patents. The problem is that this may also be masking an accelerated shift from productive to distributive activities, which would explain sluggish productivity. An example of the distributive trend is the growth of talking shops and vapid consultancy - something that Liam Byrne seems well versed in.
Not only will we struggle to compete with Romania and Bulgaria on labour costs, but we will struggle to outbid Ireland on corporation tax and Luxembourg on tax avoidance. The rational approach would be to identify the UK's intrinsic strengths and then exploit them to the max. Those strengths were: a) being in the single market but not the Eurozone, b) providing a business environment that was culturally and institutionally midway between the US and Europe, and c) having a number of centres of expertise in services that can be leveraged globally (finance, law, consultancy, media etc). We've bollixed the first of these for the sake of a dubious sovereignty and a reduction in immigration that will underwhelm its supporters. The second is now looking more fragile under a Trump administration (a trade war between the US and EU would hit the UK harder than either of the protagonists). That pretty much leaves the last, which is why the "Singapore model" is at least coherent. The problem is that it means relying even more on London, so the Brexit heartlands can expect further neglect. Supply-side socialism might be the better approach, but politically this will struggle against a Tory party increasingly focused on the Home Counties and looking to the LibDems and UKIP (and the Blairite remnants) to fragment opposition votes. It also means the Tories will probably be increasingly sanguine about both Scottish independence (the Scots may ironically be pushed before they jump) and Northern Ireland moving closer to Dublin. It may be a good time to re-read Tom Nairn.
@Gary Taylor, The BBC analysis you have used is from 2007, which was not only a single year a decade ago but an atypical year in terms of contributions. To avoid (ahem) cherry-picking, you need to look at the trend over time. Here is a Danish analysis for the 2006 to 2014 period. You can clearly see the anomaly of 2007: This next analysis (see page 2) shows the trend between the 4 largest contributors graphically: In other words, my original statement above - that the UK has "usually paid less in absolute terms than Germany, France and Italy" - is correct. Of course, there are many ways in which the numbers can be represented (hence the analyses vary), to suit all arguments, but the key political truth is that the UK has always had a "good deal". This is actually a cause for some resentment among the EU27, which you can see in the way that the European Parliament presents the numbers, making explicit that the UK rebate is calculated per country, not in aggregate - i.e. France, Italy et al pay for the UK to be a member; the rebate isn't a back-hander from Brussels. I'm not sure that many Brexiteers understand the psychology of this (see the title of this post) and how it will impact negotiations. See:
Toggle Commented Jan 19, 2017 on On Brexit solipsism at Stumbling and Mumbling
@MJW, Exiting the single market does not put an end to cherry-picking. That remains very much alive in respect of the customs union. We must either cherry-pick to preserve advantageous elements or we must start with a blank slate. The former would likely be by sector, so some UK industries will lose out, while the latter would require a comprehensive trade deal that we'd have little chance of negotiating inside 2 years. The EU27 are expecting cherry-picking. The UK has long been a net contributor to the EU, but it has usually paid less in absolute terms than Germany, France and Italy. As a percentage of gross national income (GNI), the UK is actually one of the lowest net contributors, thanks to the famous rebate. Similarly, on a per capita basis, we have traditionally paid in less than the likes of The Netherlands, Belgium, Sweden and Denmark. It's academic now, but the idea that the EU is financially dependent on the UK is simply wrong. If it could absorb new net beneficiaries in Eastern Europe, it can accommodate the loss of the UK. EU contributions are the ticket price for access to the single market etc and the wider economic benefits this brings. The redistribution between contributors and beneficiaries is incidental and marginal overall (about 1% of EU-wide GNI). The UK's seat on the UN Security Council has never been representative of the EU because the UK's policy has been to position itself as equidistant between the US and Europe. It is the French who have traditionally sought to informally represent the EU on the UNSC (though even they are prey to chauvinism on occasion). The EU loses nothing here. The majority of free movement occurs on the continent, not across the Channel, for pretty obvious reasons of geography. If Poland was seeking to "export its unemployment" it would do so to Germany, not the UK. The end of free movement to Britain is only going to be an issue if we deny visas to skilled workers and students (and the objections will come mainly from domestic business) or if we mass-expel existing residents (unlikely). This is going to be close to a non-event for the EU27. English is an advantage for skilled jobs, not low-paid ones like picking beets, and because it is the corporate lingua franca skilled Brits can find work in Berlin (or San Francisco) as easily as French people who speak English can find work in London. There may be an asymmetry of supply (lots of monolingual Brits), but this is offset by a reverse asymmetry of demand (lots of global jobs that require English).
Toggle Commented Jan 18, 2017 on On Brexit solipsism at Stumbling and Mumbling