Knowing and Making

Several old political problems turn out to be based on the same underlying question. Here are some examples. Should we tax the rich more? The "yes" argument says rich people need the money less (that is, poor people's utility from wealth is higher), and wealth partly arises from luck and therefore is a legitimate target for taxation. The "no" argument says that if people expect to be taxed when they're rich (and receive handouts when they're poor) they have less incentive to earn wealth, and therefore less wealth will be produced by society. Should we pay higher unemployment benefits? The "yes" argument: people are unemployed through no fault of their own; their spending will support the economy; it's moral to share resources with the poor; if it happened to you, you'd want benefits too. The "no" argument: it gives people an incentive not to work; it requires confiscation of resources from hardworking people to pay those w...

Davis, Figgins, Hedengren and Klein have put together an interesting survey of American economics professors - asking about their favourite economists, alive and dead, and about the journals and blogs they read. I downloaded the data behind the paper in the vain hope that this blog might be among the long tail of responses not reported in the main paper (it wasn't). But the data does provide lots to think about. An intriguing point (from a survey design point of view, at least) is raised by one of the questions. The survey asked people to choose their most respected/admired economists from two groups: over 60 years old and under 60. I don't know about you, but I'm not sure I'd know the age of many of the economists I admire. I speculate that the respondents might have subconsciously chosen economists who are much older, or much younger, than 60 years of age, in order to answer these questions with greater certainty. Even if aware of this potential bias, I might ...

One of the arguments given against the Alternative Vote system is (as laid out in this good but rather long post ) that " Under AV the person who comes second can win. " Gowers points out in the linked article that this is not true - all it means is that the person who would have come second under FPTP can win . Of course, the whole point of the referendum is that a different person could win under AV than under FPTP. The reverse argument is equally true: the person who would have come second under AV might win under FPTP. But why does this argument have such appeal? Even AV defenders are trying to make a rational case for why it may be more democratic for "the person who came second" to win. Instead, one might expect them to challenge the premise. The reason seems to be that the status quo bias is very strong here. People who might think they don't suffer from status quo bias (in that they have no particular desire to keep the existing voting system) may...

Given the low political chances of any effective climate change reform coming out of Congress in the next few years, I was pleased (and surprised) to see this projection  from the US Department of Energy: ...the level of carbon dioxide emissions in the United States will remain below the rate of 2005 for the next 15 years even if no new restrictions are imposed. That's stunning. And gives us hope that ordinary supply and demand might do at least part of what politicians can't seem to: reducing demand by increasing the price of carbon.

Andrew Sullivan approvingly quotes Barry Eichengreen on Britain: [Britain] failed to develop a coherent policy response to the financial crisis of the 1930’s. Its political parties, rather than working together to address pressing economic problems, remained at each other’s throats. The country turned inward. Its politics grew fractious, its policies erratic, and its finances increasingly unstable. In short, Britain’s was a political, not an economic, failure. And that history, unfortunately, is all too pertinent to America’s fate. Now there's no doubt that Britain's political parties (once they got over six years of intensive cooperation during the war) did engage in a debate about how to run the country. Partly about its role in the world, but more importantly the nature and extent of the welfare state, the kind of industrial policy to follow, and how the education system and the country's infrastructure should be built. Its most important decision about its "role ...

Much speculation today about the signal sent by Alan Johnson's appointment as shadow chancellor. Does this mean Miliband has decided to stick with Alastair Darling's policy of halving the deficit in four years? Is it a snub to Ed Balls, designed to avoid a new Blair-Brown style conflict between Labour's leader and (shadow) chancellor? A search for ' "Alan Johnson" economics ' mainly shows today's news - neither Google nor Bing seems to allow me to exclude articles from the last 24 hours. Fortunately Bing simply isn't up to date yet, so I can find a few old articles - this speech from last October  is typical, being a recital of Labour's standard policy message. The nearest thing to an economic policy statement is his speech saying there's no reason to worry about UK population growth to 70 million; and this item suggesting that the government should nationalise a dock in his constituency to stop it falling into disrepair. But actually,...

I recently re-read  a remarkably prescient article from February claiming the Liberal Democrats would not enter a coalition with the Tories. It gets exactly right the entire set of conditions the Lib Dems would demand for a coalition. The only error - thinking that the Tories would say no. The key reason that the authors think a coalition could not work? Clegg is opposed to forming a coalition because aides and senior MPs argue it would be highly dangerous for the Liberal Democrats to become minority partners in a coalition government on the grounds that the majority party could manipulate the timing of the next election to suit it. The Lib Dems have long campaigned for fixed terms at Westminster to deprive the prime minister of the initiative on election timing. And so we ought to look quite carefully at the 55% threshold for dissolution of Parliament, and instead of assuming it's a Conservative attempt to entrench power, think about the Lib Dems' motivations. In politic...

Regular readers may be relieved to hear that I'll be back onto regular economics soon. If nothing else, even I will be bored of the election before long. But I have a couple more political articles to come first. The debate over forming a coalition to govern the UK seems to be mainly focused on the question of "who won?" Was it the Tories, because they are the largest single party with 36% of the vote (and 47% of the seats)? Was it a combination of Labour and Liberal Democrats, because together they represent over 50% of people? Or, similarly, the Conservatives and Liberal Democrats, who have about 59% between them? Should we reform the voting system so that the majority of votes always reflects a majority of parliamentary seats? All this debate ignores a deeper point. This is not a football match. The electoral system is not intended as a talent contest to award a prize to whoever can perform better and impress more people. It's meant to provide a way for the p...

The election results are almost in, and Nick Clegg has just made a brilliant tactical intervention. Peter Mandelson must be jealous. But more of that later. First, a look back at the days of the campaign. Click each of the links below to see what happened on that day. You'll remember that I rated the three parties each day on their behavioural nous. But who came off best throughout the campaign? The ratings are listed against each day below, and at the end you can find out the totals (ratings are given in order Conservative, Labour, Liberal Democrat ). Day 1 : 7, 7, 5 Day 2 : 8, 5, 4 Day 3 : 6, 7, 4 Day 4 : 6, 6, 6 Day 5 : 8, 7, 5 Day 6 : 6, 8, 7 Day 7 : 6, 7, 6 Day 8 : 6, 6, 5 Day 9 : 5, 6, 8 Day 10 : 3, 5, 9 Day 11 : 5, 6, 8 Day 12 : 5, 6, 8 Day 13 : 6, 6, 5 Day 14 : 5, 6, 7 Day 15 : 6, 5, 6 Day 16 : 7, 4, 6 Day 17 : 6, 4, 7 Day 18 : 7, 5, 6 Day 19 : 7, 5, 8 Day 20 : 7, 6, 5 Day 21 : 8, 5, 6 Day 22 : 4, 5, 6 Day 23 : 6, 3, 7 Day 24 : 6, 7, 6 Day 25 :...

Friday once again was a day for the aftermath of Thursday night's debate. Unforuntately right now, I have no time to discuss it as I'm very busy with the actual election. This is also why updates have been behind for the last week. However, as a precommitment device to combat my own tendency to post hoc rationalisation, here are my summaries and ratings for the last six days of the campaign. Day 25 ( Friday ): Cameron builds momentum on the back of "winning" the debate (see day 24 for explanation via confirmation bias). Social proof from other voters even more important than from head of M&S. Tory: 8/10, Labour: 6/10, Lib Dem: 4/10 (Clegg had most to lose as the unofficial king of debates). Day 26 ( Saturday ): Newspaper endorsement day. The Guardian switched from Labour to Liberal Democrat - a tiny bit sensationalist I think, but their reasoning was understandable. Most others picked the Tories. Social proof again, and the momentum effect continuing to ...

The leaders' debate tonight showed the immense power of the phenomenon of  confirmation bias . The debate was interesting but neutral in terms of campaign impact - in my judgement, the candidates performed about as well as each other. And yet watching it on twitter was very informative yet again, primarily because of the reactions when the post-debate polls were released. Nearly all the polls showed Cameron as the "winner", with Clegg and Brown in second and third place or vice versa. A typical poll (see writeup here ) gave: Cameron 35; Clegg 33; Brown 26 But when you look at the voting intentions of the people who answered, what do you get? Conservative 35; Lib Dem 36; Labour 24 Spot anything? The numbers are almost identical. When there are no clear distinctions between the quality of the performances, people who already agree with David Cameron will think he's talking sense; Labour supporters will think Brown is the only one who isn't lying; and those w...

Oh, Gordon. Today , in possibly the most embarrassing thing that could possibly have happened to a modern politician, Gordon Brown was caught on tape describing a voter as "a bigoted woman". Most of you will know the details all too well by now, but those who don't can read them here and should watch Jon Stewart's take on it - if you can find a video clip that works in your country. Although this was widely considered to have written off Labour's chances in the election, the focus on it has been so intense that Brown has not been harmed as much as expected. Attention is the currency of an election campaign, just as it is in the commercial world. And Gordon Brown has had more attention than he could possibly have bought. The short-term polls bear out this surprising result - Labour has had no drop-off in support since this happened. On the other hand, it creates such a strong narrative that it allows little room for any other story. That gives Labour i...

A bit of personal news first: CountMyVote was mentioned on Rory Cellan-Jones' blog and over 7,000 people arrived via that or the twitter links that followed it - an excellent combination of PR and viral marketing. Some very striking results emerged - the Lib Dems are way out in the lead on 62%, with Tories and Labour both in the mid-teens. This of course reflects a very specific demographic on twitter, but more importantly the emergence of a nascent movement, Obama-style. Other campaign news today : The Institute for Fiscal Studies has accused all three parties of hiding from voters the extent of public spending cuts required after the election. I would dispute their economics a little, but the behavioural point is that it creates an opportunity for one party to get some social proof by changing course and publishing a list of cuts which might win IFS approval. The IFS, incidentally, is universally described as a "respected" think tank whenever it's quoted on T...

End of week three of a campaign that has been very unpredictable. Yet despite the twists, I find myself frequently impatient for something else  to happen. Am I spoiled by life at the speed of twitter? "Internet speed" doesn't quite describe it any more - I realise with amazement that I'm not far from my twentieth year on the Internet, and life certainly didn't feel like it was unfolding at this pace when I started. I built a new  website  from scratch on Thursday, launched it on Sunday and it reached 7,000 visits on Tuesday. Yet I'm already impatient that it only had 3,000 on Wednesday and trying to work out how to promote it further tomorrow. Tonight I've been interviewed on the BBC and tomorrow I'm meeting a major industry figure to discuss the rise of behavioural economics. So why do I need extra political news to keep me even busier? Well, today we've definitely had some of that. However, I'm still a couple of days behind on these report...

If Labour's going to make a fightback, it better start today . Nick Clegg may have made his first tactical mistake - allowing himself to be led, in a TV interview, into making an apparent commitment not to enter a coalition with Gordon Brown as prime minister if Labour comes third in share of the vote. This is a surprisingly concrete commitment, and provides more ammunition for opponents to use against him than it does for him to strengthen his position. By precommitting himself, he loses a lot of power in electoral game theory ; he has to hope that it gains him enough to make up for it. The other problem for the Lib Dems is that the News of the World has dug up a poll showing their support falling by about eight percent, putting them well back in third place. Together, these events offer the other parties the chance to create a narrative about Lib Dem hubris, overreach and collapse. Some policy today. Labour with a believable, therefore clever, attack on Tory policy - sugge...

Saturday is often a quiet day in the campaign, and both Nick Clegg (day off) and David Cameron (sister's wedding) were spending time with their families today. Gordon Brown wasn't - instead, he spent it with an Elvis impersonator in a somewhat ill-judged campaign stunt. Labour seems to be showing a bit of desperation in its strategy at the moment. I'm all in favour of lots of activity - the more you expose yourself to voters, the more chance one of your messages will resonate. It's the salami-slicing principle again. But there are two caveats to this: The first is that the UK's balanced coverage laws mean that even if Labour holds five times more campaign events than the Tories, they have to get the same amount of TV and radio coverage. So it may be better to have a small number of events with a highly focused, controlled message than dozens of half-hearted low-quality promotions. This argument doesn't apply to newspaper coverage, and it could be a succe...

Note: blogging has been slightly delayed the last few days - I've been working on a new website, CountMyVote , where UK voters can state their voting intentions in order to gauge whether their chosen party has a chance or if it's worth voting tactically. If you're in the UK, please click through and cast your vote and help us build a picture of likely voting across the country. Friday , of course, was all about debating the outcome of Thursday's debate. The consensus that emerged (after a disputed Yougov poll put Cameron slightly ahead) was that everyone was about equal, but some were more equal than others. Gordon Brown got more negative than positive ratings, and Labour continues to trail in most polls. Better news for Brown in the real world, as the economy grew by 0.2% in the first quarter. David Smith thinks this number is likely to be revised upwards, with good reason. Labour still have about twelve days to capitalise on this, but they'll have to start ...

The two stories of today are all about Nick Clegg: There's a debate tonight. Would Clegg perform as well as last week and maintain momentum, or would he be successfully neutralised by the other two (mainly, that is, by Cameron)? The Tory-supporting papers have decided now is the time to focus all their fire on Clegg. Will it work? The debate itself was quite interesting - a much more even performance than last week's. Brown is clearly hoping that people will focus on policy by now, but it's too early for that. The debate format is still a novelty - all the attention is therefore on presentation and on what the three leaders have learned or changed since last week. This inevitably makes it another expectations game - Clegg was expected to be not quite so dominant, Cameron to be a bit better, Brown to be the same old Brown. And nobody did anything obvious to break out of expectations - so the debate will have mostly triggered the  confirmation bias  for voters' e...

I'm writing this at the end of day 17, which has been  much  more exciting. But back to day 16 ( Wednesday ) first. David Cameron has been hit by an egg, which seems to be a tradition of political campaigns nowadays. No real harm done except that eggs are only thrown at people with a chance of winning (and occasionally at people like Nick Griffin of the BNP, but that's a different motivation). So, paradoxically, the egg is probably good for Cameron - confirming that he's still the front-runner. This brief history of egg-throwing confirms that most politicians who've received an egg, a punch or an unexpected buttonholing have gone on to win the election - the exception being Harold Wilson in 1970. The story of the day, insofar as there is one other than tomorrow's debate, is the IMF. Not the IMF's bank tax, which could trigger an interesting policy discussion. But whether, under a hung parliament, the IMF would have to bail out the UK's public finances. ...

Are we really only halfway through this election campaign? Things are no longer moving at the pace they started out. But there are still a few interesting nuggets each day from the behavioural point of view. Gordon Brown is using a (by now standard) concession-and-request strategy, admitting that the liberalisation of drinking laws was a mistake and therefore gaining credibility on his defence of other policies. Nick Clegg has made a populist suggestion that Goldman Sachs should be suspended as a government adviser while it's under investigation by the SEC for misrepresentation. A clever tactic, because it feels cost-free but satisfies voters' desire for fairness . Labour, as governing party, was forced to say that it would not be doing anything of the sort - of course, they probably have no choice (contract law, after all, being a rather fundamental part of our lives) but it makes look less tough on the banks. David Cameron has ripped the head off a chicken (a human ch...