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Politics and Metapolitics

Jacob Lyles at Distributed Republic is concerned about the contradiction between advocating policies of individual freedom, at the same time as political structures such as federalism which are likely, in some instances, to produce outcomes which are extremely hostile to freedom.

The problem is not new – since Lenin arrived at the Finland Station, politicians have announced simultaneously policies that should be followed, and structures by which other people should determine what policies are to be adopted.

If I was absolute ruler of the world, all I would have to decide would be policies. As it stands, any practical proposals any of us make are conditional on getting sufficient agreement to practically implement them. That is true whether we acquiesce in the current political structure, or whether we seek to change it.

When we evaluate a proposed political structure, we have three things to consider:

Is it achievable?

Is it stable?

Is it good?

A total autocracy ruled by me has a lot to recommend it, policy-wise, but fails on achievability. We might be aiming at the long term, but there has to be some possibility of bringing our structure about for it to be worth discussing.

Stability is the other side of that. Even if we have established our new order, others will seek to change it. If it was worth creating, it is worth protecting, but protecting the political structure without doing severe damage to freedom is always very difficult. This is where I think our current, deeply unsatisfactory, political systems score. Bad as their policies are, they are cheaper to protect than most alternatives – cheaper both in material and in human freedom. I think that is true even when you count most of the bad policies as part of the cost, in that they consist of building up blocs of society who are tied to maintaining the system. I am hoping to be convinced otherwise on this point, however.

The third question is whether the structure tends to produce good policies. Some would want other things from the political structure, such as fair or just allocation of power, but I am indifferent to that provided the structure can stably produce good policies. That is not to deny that there are arguments that a “just” political order is quite likely to be more achievable and stable than an “unjust” one.

As to what constitutes good policies, that is the other half of the question – politics as opposed to metapolitics. They may be separate domains, but as Lyles’ previous article demonstrated, it is hard to talk about radical political ideas without straying into the issue of what structures might be more likely to allow them than the status quo. Policies also must meet an achievablility criterion, and they may be more achievable within an alternative political structure than in the currently dominant one.

Addressing the original post in this context, what federalism has going for it, arguably, is that (a) while allowing bad policies in some localities, it will allow good ones in others, possibly better overall, and (b) it may be more stable, in terms of not evolving into an overlarge megastate, than a central political authority. The point that oppressive government is harder to prevent where everyone actually wants it is not a justification of the oppression, but a recognition of the achievability and stability constraints on any political structure.

In fact, both federalism and Patri Friedman’s seasteading are in a sense meta-meta-political ideas, since they have the advantage that by exposing multiple different political structures, they may cause better political structures to come about.

Violence and Class

I’m returning once again to the difficult question of whether Britain is more violent, more unpleasant than it used to be.

In the yes corner is Theodore Dalrymple, writing about public drunkenness.

On the no side, older acquaintances who talk of much more casual violence in the past than there is now, and just as much drunkenness.

I think the key to understanding what has changed is the change in class structure. Taking the 50s or 60s as a comparison, there was still a clear distinction between the professional class (“middle class” we would say, but that seems to mean something completely different in America, so I’ll avoid the term), and the larger working class. Over the last half century, the two have merged into one (with arguably a non-working underclass forming or growing underneath, but that’s another question altogether. Also the upper class has always been a law unto itself). That is not to say that professionals have ceased to be wealthier than manual workers, but they no longer have separate cultures.

That would explain the discrepancy – the previously staid professional class has lost its inhibitions, while the working class has the habits of the old working class but the aspirations of the professional class. They all mix without distinction, but those that remember the old middle class are now exposed, by the new mixing, to the activities of the working class that decades ago they would have never heard about, or at least ignored. Add to that the increased purchasing power of today’s revellers, and there’s no need to posit any fundamental change in attitudes.

I’m not sure I’ve got the right explanation (I wasn’t there), but it is important. A lot is riding, policy-wise, on whether we are facing a major increase in violence and drunkenness, or whether it is all just business as usual, blown out of proportion by the press and the nanny state.

Even if I’m right, it doesn’t mean there’s nothing to worry about. It means there used to be a powerful section of the population which believed it was above punch-ups in clubs and drinking to unconsciousness on the street, and now there isn’t. If something useful could be done, then something ought to be done. I have no useful suggestions, however – the bansturbation approach towards special offers in supermarkets, opening hours, drinks on trains etc. is as useless as it is offensive to liberty, and it’s not possible for a democratic state to clamp down on behaviour most people think of as normal.

There’s no route back to the past, of course. Dividing people back into professional and non-professional classes with different mores would cut off the economy from too many potential skilled resources, quite apart from the question of justice and equality of opportunity.

If there’s any dynamic that could drive up standards, it’s age. People do tend to grow out of destructive behaviour. If the authority of older people could somehow be increased, that might create some restraint on the young.

It will be interesting over the next few years to see how things change in a recession. The long boom may be partly to blame for irrational exuberance in the streets.

See also this earlier post where I suggested a less developed version of this idea

Nappies and Religion

A bit of fun here – the department of food and rural affairs commissioned a report into the environmental effects of disposable nappies, and found that they were better for the environment than washable cloth nappies.

Why, then, did they hush it up?

Partly it was because they would feel stupid, having pushed the opposite line on the basis of no facts, as, for instance, in this from Westminster Council?

But there’s not that much disgrace, surely, in changing policy in response to new information? The real problem is that the environmental movement has nothing to do with the environment. It is entirely driven by the age-old myth that being rich and happy is morally wrong and punishable. It is based on the religious belief that austerity is a virtue. If science weren’t to tell people that, of two choices, the one that was more work was better for the environment, so much the worse for science.

To be fair, if we could actually see this report there might be problems with it. The Times accounts only for kg of CO2 emissions – CO2 is not the only pollutant, nor, in my opinion, is it even the most important. Of course it is likely to correlate well with other forms of pollution.

Here we go again – now for the bit I write after finding the facts.

The report has been “hushed up” in that, according to documents The Times claims to have seen, there has been a decision not to publicise it. But it is on DEFRA’s website

The study does look at environmental impact beyond CO2 emission, and the results are similar (which is not very surprising). In fact, the Times article is surprisingly accurate, except for the claim the report was hushed up, when in fact it was published in 2007.

I also found a speech by Ben Bradshaw, from 2006, where he referred to the study, saying he “feared” that the new study (the 2007 one we’re talking about) would not be able to give any “more clarity” (meaning, the desired answer) on the nappy question. Why is one answer desired and the other not? Religion.

The speech also mentions the Great Crusade of our time – the war on carrier bags – mentioning in passing that cutting down on plastic carrier bags is bad for the environment, as anyone with a brain would expect.

An important point in the nappy report was that, in the interval since the previous study, disposable nappies had become less bad for the environment. How could this be? They were 10% lighter than before, due to manufacturers cutting costs by improving design. Exactly the same thing has happened to other hate objects of the religious environmentalists – drink cans, for example, and our friend the carrier bag.

The supermarket carrier bag is a masterpiece of environmental design. It weighs less than 10 grammes, and can be reused afterwards. But its most beneficial aspect – its lightness and flimsiness – is what so outrages the pompous snobbish environmentalists. They say they are against harming the environment, but really they are against things that are cheap and tacky. But the cheaper and tackier a piece of packaging gets, the better for the environment.

Implications of a Knowledge Economy

The idea of an “information economy” is such a cliché that I’m bored of this article already, and I haven’t written it yet.

But all too often, the key implications are missed.

The central fact of the information economy is this: anything that we know exactly how to do can be done very cheaply.

The bulk of economic activity is now devoted to things that we don’t know exactly how to do – things that we have to work out as we go along.

The important implication is that management is now the largest cost. To improve efficiency from here on, the most important thing is to reduce the cost of management.

That’s an emphasis that’s never been taken before. “Measure twice, cut once” has always been seen as wisdom. But if cutting, and the stuff to be cut, are cheap, and measuring is ten times as expensive, then we need to work out how to get by without measuring twice.

There has been one long-term trend which has improved management efficiency, and that is the trend towards large scale. If a business goes from one steel foundry to ten, the steel foundries don’t become any more efficient, but you might spend less on management. It is easy to observe, that at ground level, large organisations seem to be less efficient than small ones, but this may be justified by reduced management costs. However, I think this trend has gone as far as it usefully can (if not further). A merged organisation may spend less on top management than its preexisting components did, but it has more layers of management, and the efficiencies can cancel out.

There is another trend that has to some extent concealed the increased cost of management, and that is the spread of managerial responsibility down the hierarchy. You do not need to have “manager” in your job title these days to be expected to devote a significant proportion of your time to managerial aspects of whatever process your organisation undertakes. Everyone fills in forms.

The important point is that a better managed operation is not necessarily a more efficient one – not if the cost of management outweighs the benefits. The old assumption that scrimping on planning will always cost more in the long run has to go.

This is not completely new – there is perhaps a parallel to the blitzkrieg or auftragstaktik innovations in the German army in the 1930’s. As I understand it (and military history is not my field), the old principle was that, on encountering an enemy, an advancing force would stop, gather as much intelligence as possible, make a plan, and then attempt to take on the enemy. The new doctrine was, on encountering the enemy, to immediately attempt to outflank. Sometimes the lack of planning and knowledge would leave the advancing force stranded in a blind alley, but war is a dangerous business at the best of times, and the benefits in speed and surprise of skipping the planning stage outweighed the costs.

I was triggered to write this by Simon Jenkins’ account of the 2012 Olympics (spit!). The budget for management of the Olympics has now hit £654 million, more than the cost of building the main stadium. This is partly the plain fact of the knowledge economy, and mostly the result of not recognising that doing something more efficiently, in today’s world, means managing it more efficiently.

There is a secondary point, which is that managers have greater political and social power than non-managers, and that therefore there is stronger pressure to cut non-management than to cut management. But I won’t be able to make that point better than chris dillow does, so I’ll leave it to him.

What was the problem?

Since I have claimed that the derivatives involved in the financial system problems were not too complicated, what was the real problem?

There are many candidates, too many to cover right now. The use of irrelevant statistics to justify risky holdings, as I mentioned before, was a large part of the problem. The government pressure to make more and cheaper loans to less creditworthy borrowers has been widely commented on, and may have contributed significantly, but can’t excuse the banks’ errors.

The actual error made by the banks was very simple – embarrassingly simple, really. They bought mortgages to securitize them. They split the securities into high-risk, medium-risk, and low-risk bits. They valued the bits and found that they were more valuable than the original mortgages, which meant the process was profitable to them. They sold the high-risk bits to speculators and the medium-risk bits to long-term investors. But they kept the low-risk bits. Thats it! That’s the error!

Presumably, after they valued the low-risk bits, they found that nobody actually wanted to buy them at that valuation. What they should have done was price them down until people did want them, then re-evaluate the whole business on the basis of the actual market prices that they got for them. I have no idea whether that would have meant that securitization would have carried on or not. But either way, it would not have left the financial system dangerously exposed to the housing crash. At worst, it would have ended up as the “normal” sort of Wall St scandal – clever investment bankers sell a whole load of toxic crap to investors (see auction-rate, internet IPOs, etc. etc. etc.)

Why did the banks hang onto these investments, rather than sell them? I guess that they believed they were “really worth” pretty close to par value, and that buyers didn’t want to buy them at that price just because they were uninformed. Also, because they were rated as so safe, the regulators were happy to consider them non-risky for the purposes of capital requirements. That was the regulators’ biggest error. Because of course these two justifications contradict each other. If the securities can’t be sold at their alleged “real value”, then they are tying up the banks’ capital, and should be counted as such.

(I’m surprised we haven’t heard more about the mezzanine tranches that were sold to fund managers, pensions, insurance, etc. They were never seen as safe, so the bodies holding them could afford to take losses on them.)

It almost seems a shame that this whole crisis is caused by one such straightforward error. It ought to be something like “derivatives are too complex” or “regulators were subverted” or “government forced banks to make bad loans”. It’s a let-down that it was just “banks held one particular type of investment that it was never their business to hold, just as a by-product of one business line”.

Financial Complexity

I want just to grab one factoid out of the swirl of information and misinformation relevant to the current financial situation – the idea that the problems were caused by fiendishly complicated derivatives (see, e.g., here)

Horribly complex derivatives do exist: a “snowball”, for example, “is a structured swap with a funding leg and a coupon stream whereby the coupon paid on a given date is given by the sum of a fraction of the coupon paid in the previous period plus an amount determined by the realization of the rate process in the coupon period itself”

However, while estimating the value of a snowball requires so much computer power that researchers are designing custom hardware and offloading computation onto graphics chips, the difficulty of valuing a derivative does not depend on the derivative itself being complex. The mortgage backed securities which are the most obvious cause of the current problem are actually quite straightforward. That doesn’t make them easy to value.

The point of the complexity is in fact to make them easier to value. After all, no amount of differential calculus will tell you whether Mr Bloggs at number 11 will default on his mortgage, if you don’t know whether he has a job, and what his credit card balance is, and whether house prices on his street are going up or down. If you have good statistics, however, you might have a decent stab at how much a thousand mortgages are worth, or how much the best 400 out of a thousand are worth.

That was the theory. It failed, not because of the complexity of the derivatives, or because of errors in the mathematics, but because the statistics were crap. Statistics collected over ten years during which house prices only ever went up were not of much use when prices started to fall. Statistics collected on mortgages originated by lenders with their own money cannot be used to accurately model mortgages originated by lenders working only for commission. Et cetera.

The other bugbear instruments in some commentary are the “weapons of financial mass destruction”, credit default swaps. These are simpler still; just a guarantee by one party of a debt owed by another. The main problem with them is their very simplicity – rather than selling them on like securities, someone holding one would just create a new one to cancel it out. That’s what makes it so difficult to sort things out when a participant like Lehman defaults – its net position is manageable, but that net consists of astronomical credits and debits that almost, but not quite, cancel each other out. If the CDSs were more sophisticated (with central clearing), the problems would be smaller.

I think that this New York Times piece is very good, except for the one point, that the difficulty of valuing a mortgage derivative is not due to its inherent complexity, but mostly just because it’s made out of mortgages.

Anomaly UK

I’ve been doing this for three and a half years, and some of the first things I posted I’d written up to a year previously. I want to recap over the major propositions that define what a newcomer would find.

Global Politics

I think the arguments used to advocate the Iraq War were legitimate, but that the costs of the war, both to the OIF alliance and to everybody else, outweighed the benefits and it was therefore a mistake. There were people who correctly anticipated this, but I wasn’t one of them; I was a “don’t know”.

The major competing political forces in the world are the EU’s corporatist totalitarianism and the USA’s residual individualism. No other world power or ideology – including Russia, China and radical Islamism – comes close to challenging either of them.

Many foreign countries are crap places to live, but I don’t think there is any strategy for improving them by military action that will have overall beneficial results, although it might get lucky now and again. I think it is more beneficial to respect the sovereignty of other countries’ governments, even where they are very nasty.

Democracy

Democracy necessarily entails class divisions. Either democracy is working within a ruling class and is kept “straight” by the need to efficiently resist revolt by the disenfranchised class, or else the important division is between politicians and non-politicians.

Most people would be better off in a society with minimal government as advocated by the libertarian movement. However, this is against the interests of politicians, and therefore is not achievable, under democracy or under any other political system. A wider understanding of the situation would result in marginal improvement, however.

For those not being directly promised bribes by one candidate or another, the amount of predictable improvement in policy by electing one candidate rather than another is often outweighed by the difference in entertainment value between the candidates, as estimated using the market prices of entertainment. Democratic politics can therefore be seen as a small section of the (huge) entertainment industry. That is not to say that government is insignificant, just that the changes that can be made to government by democratic politics are.

Climate

The Climate Change debate is about politics, not science. The question is whether the small chance that disastrous change will happen but can be averted by a concerted global programme of austerity justifies the costs of such a programme. The dangers are exaggerated by those who support austerity or transnational government or both. The dangers are minimised by those who support prosperity or small-scale government or both. The latter group includes me, but I try to avoid dishonesty.

Copyright exists to correct a market failure: that the creation of new valuable information benefits anyone who obtains a copy, but the costs are concentrated on the creator. Like all interventions to correct market failures, there are dangers, including capture of the regulatory structure by concentrated producer interests, which has clearly been demonstrated by retroactive extension of copyright terms. Also, as with other such interventions, it is not obvious that the market cannot find its own solutions to internalise the externality, nor is it obvious that the costs of regulation and the deadweight losses do not outweigh the benefits of the correction. Getting rid of copyright might be an overall benefit, although it would be dangerous. The evidence is overwhelming that reducing the scope of copyright would be beneficial, and that regulation aimed at suppressing technologies that are used to evade copyright enforcement is very harmful.

Free Software is cool. The overhead of protecting copyright in software is very damaging to the efficiency of the software production process and to the quality of the product.

his post will remain as a kind of “index” to the blog, and I’ll update it if my positions change.

Entertainment and Policy

Boris Johnson’s win is consistent with my theory that politics is a branch of the entertainment industry. Boris won because people liked him on TV, not because they had any confidence he’d do a good job. In fact, it simply doesn’t matter whether he does a good job or not.

Whatever the budget of the GLA, the actual amount of cash he can shift from one activity to another over the next four years is probably on the order of only a few millions. He can change a few buses, approve a few “don’t knife each other, there’s good chaps” posters, approve or deny one or two large buildings.

On the other hand, he will be on television a lot, and get a lot more attention, because now he’s (drum roll) In Government. And if you treat each of his appearances as a light entertainment programme, value it as equivalent to an equally entertaining non-political celebrity appearance, and multiply up the number of such appearances over the four years, his entertainment value to the voters easily outweighs whatever costs might be imposed on the voters if he is a Bad Mayor in a policy sense.

And in fact the predictable cost of Boris vs Ken is near enough zero. Who knows, Boris might even be better. While the predictable difference in entertainment value is huge – not only is Boris more entertaining than Ken on a level playing field, but more importantly the Ken show has run for eight years and we’ve seen all the best bits.

My point is that (a) Boris has been elected because he’s funny and people are bored of Ken, and (b) This is, with apologies to Bryan Caplan, rational voting.

And of course, it is nothing new: Ken was elected in 2000 for just the same good reason.

Black Mass

As I mentioned some time ago, I planned to buy John Gray’s Black Mass when it came out in paperback. I came away from the book very disappointed.

I would guess the core of the book is the second half, which is a criticism of the Iraq war. This is a very strong attack on the overconfidence of the idea that a western democracy could be set up in Iraq, and on both the deception and self-delusion of the leading advocates of war.

That much is fine, but criticisms of the Iraq war are ten a penny. The book as a whole is an attempt to generalise from that to put neoconservatism in a tradition of rational utopianism starting with the enlightenment. Jacobinism, Marxism, Nazism, neo-liberalism and even Al-Quaeda itself are all described as incarnations of a single myth of an end time of perfect rule spread across the whole world by human rationality.

The problem with the thesis is that it proves too much. By the standards he sets, there’s hardly a movement imaginable that would not be able to qualify as utopian. If you imagine a better future than the present, you’re a utopian. If you rhetorically appeal to any religious or mythical glory, you’re a utopian (even if the rhetoric is obvious hyperbole). If you claim that something that worked in one country could work in another, you’re a utopian. If you exhibit undue confidence in the success of your current policy (such a rarity among politicians), you’re a utopian. I felt that the only movements that avoided being labelled as a utopian were those which, with hindsight, actually achieved durable success. Therefore Reagan, despite all his rhetoric, was no utopian, because communism was really defeated.

The book also suffers by the association of the Bush regime with actual evangelical Christianity. While this might casually appear to be consistent with the argument, every earlier version of the utopia myth Gray describes relies on actual human achievement without divine assistance. The accidental coalition between secular ex-Trotskyite empire-builders and devout backwoods millenarialists plays no part in his wider thesis.

Fundamentally, I think Gray is misunderstanding the importance of myth in politics. The point is not that people believe the utopian myth to be true, it’s that a narrative, whether an explanation of the past or a forecast for the future, feels subjectively more convincing if it accords with some myth than if it doesn’t. The follower of Marxism or neoconservatism or whatever would not say that the final victory was inevitable, but the theories of the leaders would feel more persuasive because they carried in them the essence of the myth. Some ideas are easier to get carried away by than others.

And then there’s the final chapter. Oh dear. I really don’t want Anomaly to become simply a climate denial blog, but there’s something overwhelmingly ridiculous about spending a whole book attacking political movements which you claim are apocalyptic religion in disguise, and then casually, in passing, signing up to the most alarmist of all climate change predictions in their entirety, and citing as scientific authority a book entitled “The Revenge of Gaia“. If someone could explain that level of blindness in otherwise highly intelligent commentators, and I certainly can’t, they would be making a real contribution to the understanding of political history.

The only slight indication of awareness of the contradiction in his position is the following feeble half-justification:

… In another sense the prospect is not apocalyptic at all. In wrecking the planetary environment humans are only doing what they have done innumerable times before on a local level …

In the end the point is that Gray is not against mythology, only against one particular myth:

Happily, humanity has other myths, which can help it see more clearly. In the Genesis story humans were banished from paradise after eating from the Tree of Knowledge and had to survive by their labours ever after. There is no promise here of any return to a state of primordial innocence. Once the fruit has been eaten there is no going back. The same truth is preserved in the Greek story of Prometheus, and in many other traditions. These ancient legends are better guides to the present than modern myths of progress and utopia.

NO! STOP! The problem is with mythology as a guide to policy, not with just one myth. Myths are bugs in the mind, nothing more. The answer to bad policy based on myths is not other myths, it’s accuracy and humility.

Of course, his own continuing preference for myth might explain the vehemence of the book. His claim that neo-liberals believed in their inevitable global dominance struck me as very strange: if neo-liberal means people like me, and I normally interpret it that way, we have always inclined more to pessimism and defeatism than triumphalism, even at the end of the eighties when a few of our ideas like privatisation were spreading across the world. But of course Gray himself was one of us at one time, and if he took a millenarian view of things at the time, then, like me sticking up for the Men in Skirts, he could be expected to turn against his old ideas violently. But his error was not his liberalism, it was his mythologising, and he has changed the myth instead of keeping the politics and rejecting myth.

Gray needs to put down Leo Strauss and the Bible, and read some Pratchett.

The Essence of Government

Further to my previous post, I have come across this piece from last week by Jim Henley, also dealing with the problem of how libertarianism can make a practical difference.

I think libertarians are, rather, the court jesters of politics. I mean that in a good way. We whisper to Caesar that that he is mortal. We caper about, turning ourselves blue if necessary, reminding everyone that government power is inescapably violent and inescapably self-interested. You’re probably not going to care, but we’re going to make you actively decide not to care. And sometimes, maybe you’ll care after all. As a class, we can be stupendously silly people, believing and saying the most absurd things. But our rulers are silly people too, in different and more malignant ways. And as fools, we have the freedom to say so.

I think he’s right, and if he’s right about America, the same is even more true of Britain, where libertarian ideas are that much further from the mainstream.

The problem is that all politics is based on a lie: that the essence of government in a democracy is to serve the people, and that political questions are about how best to serve the people.

In fact the essence of government, in a democracy or elsewhere, is that the strong enslave the weak. What democracy provides is not a different essence, but, by the mechanism of dividing the strong against each other, a situation where the strong enslave the weak much less effectively. The point of democracy is to provide ineffective government, which is a good thing.

So if the debate is about what the government should do to better serve the people, then I am a libertarian (indeed now a Libertarian), and will bore my victims to death talking about lower taxes and more flexible markets and civil liberties and the rest of it. But the policies I complain about are usually not imperfections in our servant, the government. They are the reality of our master, the government, sticking out through the bars of the cage in which it is restrained.