Credit and Confidence

One can get the impression that things that happen in the economy – like the recent credit difficulties – are the outcome of some strange arbitrary game played by bankers. It is worth pausing to explain the story, not in terms of ABCP issued by SIVs holding MBSs but in terms of real people and real stuff.

Credit is letting someone else use your stuff for a while. Lets say we have two farmers who each have one field, neither of which can be efficiently divided. In the long run the fields produce more if left fallow from time to time, but neither farmer can afford to do without his only field this year.

They make an agreement. Farmer B will leave his field fallow this year, and Farmer A will give him some of his output, to make it possible. Next year, they will switch; Farmer B will provide A with part of the output of his newly nitrogenated field, and A will rest.

A is giving B credit. A is running two risks: one is that he will later discover that he needs, or can make better use of, the product he’s given B. The other is that B might not stick to the agreement – he might get sick, or have his crop eaten by locusts, or run away with blacksmith’s daughter.

Nonetheless, if A is confident that he will get back his stuff, he will make plans based on that assumption. He may even make agreements with other parties that involve him giving some of that stuff to them after he gets it from B.

If something then happens that makes it even doubtful that B will be able to give A his stuff, there will be some immediate effects. A may have to change plans he has made, and abandon projects he has already started. He might not be able to make the deals with C that he was hoping to make, because C doubts whether he will have the stuff he is owed by B. If he has already promised stuff to D, then D will have to start revising his own plans in the same way. Thus a fall in confidence in credit can ripple through a wide network, and have large effects, even before any debts have actually defaulted.

I have deliberately left out of this explanation money and banks. In the real world they play a major role in making credit deals easier, but the fundamental situation rests on people and on stuff.

That Teddy Bear

Two claims I have heard:

1. “She ought to have known”. Really? I mean, maybe she stepped over a well-known line that anyone out there ought to have known, but I’m not going to take the Sudanese authorities’ word for it. There might be something quite different going on.

2. “If you go to live among barbarians, you run the risk of being treated barbarically”. Normally, I would tend to agree with that, but I’m not convinced we treat teachers any better in this country. Not that we flog them, but if you combine the ever-present risk of being drummed out of your career for some political incorrectness at least as obscure as the proper naming of soft toys, with the physical risk of being killed, maimed or driven clinically insane by violent pupils that you’re not allowed to defend yourself from, the overall risks may be lower in Sudan, despite the occasional flogging or lynching. It makes more sense to turn it around, and say that, just as there are various hazards associated with being a deep-sea fisherman or a coal miner, anyone choosing a career of teaching has to be aware of the occupational hazard of being unjustly had up for corrupting the morals of the young, whatever country you work in.

Ingredients of Modernity

Looking at modern Western society, and comparing with the past, there are about five things we have which clearly distinguish us from past societies.

We have:

  1. Prosperity
  2. Individual Freedom
  3. Democracy
  4. Political Stability
  5. Secularism

Following Mencius Moldbug, I have been wondering, particularly, what the relationship Democracy has to Freedom and Prosperity. Is it synergistic with them, as normally assumed, or parasitic on them, as MM claims?

I’ve thrown the last two into the mix in case they are important. Much of Europe has been politically unstable within the last 70 years or so, but possibly that is long enough. The fifth ingredient is really the weakened influence of religion, or at least of Christianity; I’m not sure that secularism is exactly the right word for what I mean.

I’m prepared to accept without discussion the dependence of prosperity on freedom. The freedom to do business freely means the freedom to associate, to communicate, to hold private property, and so on – those freedoms can only be taken away at the cost of stifling economic development. This podcast went into detail, but the basic idea is simple enough.

I think it is at least equally obvious that prosperity depends on political stability. Revolutions are just so damned destructive.

So how does Democracy fit in? The pro-democracy argument is that democracy is the buffer that allows freedom and political stability to coexist; that a non-democratic state will generally be forced to curtail freedom in order to preserve stability.

Anti-democrats can argue that democracy is frequently corrosive of political stability, freedom, or both. But that argument is not sufficient. It may be that democracy does not guarantee either freedom or stability, and yet it may nevertheless be the case that the conjunction of freedom and stability depends on democracy.

Are there historical non-democratic states that were both free and stable? Some past European monarchies might be claimed to fit. For that matter, Victorian Britain was not democratic in the modern sense, due to property qualifications. Were these free enough to count? If attempting to change the government is an essential freedom, then no non-democracy can be considered free, but even without begging the question that way, it is still debatable.

And perhaps it is not freedom that is incompatible with stable non-democracy, but freedom plus prosperity. If the poor are poor enough, they have no power which needs to be recognised by the system. Once a modern economy gets going, they have sufficient resources to demand a share in power.

That actually sounds very plausible to me. But perhaps there is some alternative to democracy that can square the circle between a proletariat unconstrained by either poverty or lack of personal freedom, and a government that excludes them from power.

The best answer that MM has come with is the machine gun.

Perhaps the great tragedy of democracy is that mob power became identified with political power at exactly the last point in history at which mobs were militarily relevant. In the age of the machine gun, the military is at all time sovereign whether it likes it or not. As long as it acts in a unified and disciplined way, it can do whatever it wants. As the experience of China shows, it’s by no means always a mistake to fire into a mob. If the sovereigns of the Concert of Europe had realized that technology was on their side, the murderous degringolade of the 20th century might never have happened.

It might be the kool-aid, but somehow I’m just not able to find that convincing. Surely it can’t be that simple? I suppose the standard objection is that at some point the army will refuse to fire.

I haven’t changed my mind since July: While I accept many of the criticisms of the anti-democrats, and the proposition that democratic states preserve freedom only by restraining democracy, the costs of defending a rationally-run state seem prohibitive.

In other words, I don’t really like democracy; I think it’s basically a trick, but it’s a necessary trick. Giving the mob enough power to pacify it is less damaging than forcing it to accept not having power.

This conclusion is significant for developing countries. I think they need individual freedom, they need political stability, they need prosperity, and, in the long run, they will need democracy in order to make the new forces created by prosperity and freedom balance. Starting with democracy is the wrong way round, as without freedom and prosperity it will be only nominal.

The Data Leak

I haven’t got round to making a big deal of the loss of Child Benefit data. Like the Samizdatists, I see it as a hopeful development in terms of public recognition of what large-scale government data collection actually means. I’m not disturbed by it for two reasons: first, because I’m not surprised. I have years of professional experience developing and supporting systems using large amounts of data, and I know how difficult it is to keep stuff confidential. I also have a generally low opinion of the competence of government. It’s more surprising that this got out than that it happened.

The other reason I’m not disturbed is that in general I’m more worried by what the government will deliberately do with the data than by what it will accidentally do with it. The copies of the data still in government hands may be used to decide, for instance, who can and cannot be allowed to learn basic science. Nothing so unpleasant is likely to develop from the copies that have gone astray.

And, to justify that point, I don’t believe in identity theft. It is not that I don’t believe that fraudsters use the names of other people in their frauds, but that I don’t believe that the person whose name is used is the victim of that crime. The actual victim is the party that the fraudster transacts with, and I do not accept the position often taken by the real victims, that their losses are in fact to be borne by an uninvolved third party.

If, for example, a credit card issuer believes that I owe them money, they should have to prove to a very high degree of certainty that they I actually borrowed it from them. That they have at some point in the past received a piece of paper in the post with my name on should not be enough for them to even go to court on, let alone stand any chance of winning. Some kind of human witness to my being their customer should be the minimum to even start.

If this makes life too difficult for financial services providers that do without local branches, so be it. There are considerable savings made by such remote operation, which are shared with customers, but there is no justification for imposing the resulting costs and risks of fraud on uninvolved third parties. Either they find some way of reconciling their cheap business model with reasonable standards of proof, or we can all go back to visiting our local bank branch for a credit card or personal loan.

Back to the government, I do think the incompetence shown here is significant, like the case a few years ago of the non-deported released prisoners (which resulted in the whole “home office not fit for purpose” furore), because it gives me the impression that attention is not being paid to government simply doing its various jobs properly.

To expand: government departments are answerable to ministers, and through them to parliament, but both sets of politicians are obsessed with changing policy and passing laws. The actual day-to-day implementation of existing policy only ever gets any attention when it spectacularly fails. The few spectacular failures (which are not successfully covered up) are necessarily the tip of a very large iceberg of general incompetence, which will not change for as long as it does not get attention. For the electorate to give it attention is barely possible, because of the difficulty, common to all organisations, of practically measuring performance.

I have no solution to this problem. My familiar answer is “government should do less”, which I stand by, but it’s not really a solution, because it is a change of policy in its own right. All I can say is that it’s up to those who oppose my policy to explain how their policies can be carried through competently by a government.

Control Order saves the day

In a recent piece I attacked the “attempt to ban from the internet information easily found in chemistry and history textbooks”.

The UK government has taken on board this inconsistency, and is now attempting to ban a “terrorist suspect” (who has not been charged with any crime) from taking AS-level science courses. (Nature)

So that’s alright then.

OK, so it’s true that 50,000 people a year are studying AS-level chemistry, but this move by the government gives me confidence that no bad person will ever find out the super-secret techniques.

Experiment in Basra

(A follow-up to When to Leave Iraq)

It is a couple of months since the British army withdrew from the city of Basra.

The question which I asked in March about the occupation of Iraq is to what extent the soldiers were preventing violent disorder by force, and to what extent they were provoking it by being a foreign army.

There was an early impression that the handover to Iraqi security forces had reduced violence. Iraqis say Basra quieter after British troop pullout

Looking at this month, it’s not so clear:
Iraq’s Basra police chief escapes assassination bid.
Gunmen clash with security forces in Iraq’s Basra

I think that as long as withdrawal (partial or full) isn’t catastrophic, then it’s a good thing. The kind of power struggle that is going on in Basra now is inevitable, and can only be postponed, not prevented, by hanging on longer. It may reach a stalemate or equilibrium, from which peaceful politics can continue. It’s the kind of conflict that exists in many countries. The presence of an occupying army, on the other hand is an irritant, perhaps minor at times, but one that can always get worse but is not likely to ever go away while the occupation persists.

What is hardest to remember is that, even if the politicians and generals want nothing but peace and prosperity for the country they occupy, it is very very hard to convince the people of that. When the subject comes round to the distrust of the occupying force, there is a temptation to dismiss the distrust, merely because it is unjustified. But that doesn’t make it go away.

There will be trouble when British and American troops leave Iraq, or any part of it. But there is trouble already. Unless the trouble after leaving is very much worse, then it is better to leave, because the conflicts that happen between locals move towards a solution, and the conflicts against the occupiers don’t.

More explosives manuals

As I said in my earlier piece:

.. recipes for explosives first appeared in this country 750 years ago. High explosives have been manufactured since the 1860s. Anarchists all over Europe were successfully constructing bombs around 1900. This genie isn’t going back in the bottle.

The immediate context was the conviction of Ahmed Patel for the ludicrous crime of “possession of information likely to be of use to terrorists”. But also in my mind was the equally asinine initiative of the European Commission to outlaw publication of explosives-making instructions on the internet, which I somehow forgot to mention.

It’s easy to assume that this attempt to ban from the internet information easily found in chemistry and history textbooks is another “myth” made up to discredit the EU and spread around by those who are willing to believe anything about the EU that makes it appear stupid. But then, so much of what the EU does looks like that.

Franco Frattini
European Commissioner responsible for Justice, Freedom and Security
“EU counter-terrorism strategy”
European Parliament
Strasbourg, 5 September 2007

http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/07/505

…The benefits of e-learning have also not escaped the attention of terrorists – you can find detailed instructions on all kinds of terrorist tactics, including the production of explosives, on the internet. The proposal I mentioned just now will aim at ensuring that these forms of behaviour will be made punishable across the EU.

Using daylight

One aspect of my twice-yearly ranting against the insanity of changing the clocks that I haven’t mentioned here before is the oddness of fiddling about one hour either way, when most people get up around 6 or 7 in the morning and stay up to getting on for midnight.

Mid-night. It’s the middle of the night. If we gave a crap about daylight, we would do our sleeping around the middle of the night. We would go to bed around 8pm local time and get up around 4am. We could get our work done by 2 in the afternoon and have hours of daylight left even in winter.

John Kay raises the same point, but he’s stuck in the same old rut of trying to fix things by government blundering around with the clock. The problem is that it’s so hard to predict the outcome. There may even be a good reason why we do things so late in the day, that neither he nor I have thought of. I think there is an opportunity, as more work becomes more independent, for experiment in working hours. If getting up in the early hours is as good an idea as it appears to Kay and to me, then those least constrained to fit with other peoples’ hours might be expected to try it and stick to it.

I haven’t seen any sign. From what I read of the working lives of writers, for instance, it seems more common for them to sleep even later and stay up even later than those on fixed schedules. If that makes them happier or more effective, perhaps it’s a signal that we all should go that other way.

Free Abdul Patel

BBC

Sentencing Patel, Judge Rook said that the jury had cleared the teenager on the more serious charge – but that he had “no reasonable excuse” for possessing documents that were “obviously likely to be useful to a terrorist”.

If being 17 isn’t a reasonable excuse for possessing explosives manuals, then the terrorists have won.

The earlier report which notoriously included “The Anarchist’s Cookbook” as the “material likely to be of use to a terrorist”, said there were two teenagers remanded to appear today. Perhaps more ordered facts will emerge if this second trial is concluded.

This being 2007, Patel or the mysterious friend of his father probably obtained the Anarchist’s Cookbook from this sinister internet thing I keep hearing about. Back when I was a teenager, I had to actually buy it with money from Waterstones (or Dillons, I can’t remember) in Charing Cross Road. Among the instructions for getting high on bananas and the photographs of 50-year-old rifles are indeed bomb-making instructions, badly drawn and widely reputed to be suicidally inaccurate.

Now of course the inaccuracy isn’t really the point. There is an obvious flaw in the idea of banning only high-quality terrorist literature. However, recipes for explosives first appeared in this country 750 years ago. High explosives have been manufactured since the 1860s. Anarchists all over Europe were successfully constructing bombs around 1900. This genie isn’t going back in the bottle.

One might object, that if the necessary knowledge is so widely available that there is not point restricting it, how is it that actual terrorists are so incapable of actually making working explosives?

Firstly, I think there is a strong correlation between wanting to advance the cause of radical Islam in the UK by violence, and being mind-bogglingly stupid. This is not a global phenomenon. In some parts of the world, Islamism is a serious political movement, capable of attracting intelligent and practical activists. Here, it is an exclusive club of morons that makes Fathers 4 Justice look like a serious political force.

Secondly in terror alarmism, the question of quantity or scale tends to be ignored. To shoot a lot of people, you need a lot of bullets, that weigh a lot, and take a lot of carting around. To blow up a lot of people, you need a lot of explosive, which requires a lot of raw materials, which are not easy to gather. To use chemical weapons effectively, you need tons of the stuff, which is beyond the capability of any conceivable home-grown terrorist organisation.

There are many obstacles to the would-be terrorist. The idea that all they need is “the secret” is Hollywood thinking. There is no secret, there’s just a lot of hard work and risk.

But back to young Abdul. I don’t directly think it is a particularly bad thing that he is in prison. But I would happily let him go in exchange for getting rid of the horrific 1980s law under which he was convicted. “Information likely to be of use to terrorists?”. How about a road atlas? It’s carte blanche for the state to lock up anyone they think is up to no good. In this case they may be right, but if that’s a justification then we should just let them lock up whoever they want. I prefer the rule of law, and law should draw a line between the guilty and the innocent, and this law plainly fails to do anything of the sort.