Monday, August 28, 2017

In Defence of the Dismal Science


Economists have gotten a bad rap in recent years, but their devotion to data still offers the most practical, bias-free way to assess our most pressing problems

ILLUSTRATION: BRIAN STAUFFER

By Greg Ip

Aug. 25, 2017

Earlier this month, a Greek court convicted an economist for what amounted to doing his job. In 2010, Andreas Georgiou took over Greece’s statistical agency and revised upward the figures for the country’s debt, which had long been suspect, in order to meet European Union standards. Ever since, Greek officials have tried to blame him for the austerity measures and economic hardship that followed. This month’s verdict, which came after Mr. Georgiou had been repeatedly exonerated, was met with dismay by outside experts who call his work exemplary.

Mr. Georgiou’s case is only the most extreme instance of public vilification of economists around the world. After Bank of England Gov. Mark Carney warned last year that leaving the EU could harm the British economy, one pro-Brexit member of Parliament demanded that he be sacked. When the Congressional Budget Office said this year that replacing the Affordable Care Act would swell the number of uninsured Americans by millions, President Donald Trump’s staff called the nonpartisan agency’s work “fake news.”

Many voters share these politicians’ contempt. More than 40% of Americans completely or partly mistrust federal economic data, according to a poll last October by Marketplace-Edison Research.

The backlash can be traced, in part, to the global financial crisis nine years ago, but the ire doesn’t just stem from anger over the failure of economists to predict or explain that catastrophe. Today, there is a growing chasm between how economists and the public (and its elected leaders) think.

Economists pride themselves on being the most scientific of social scientists. This leads them to reduce all human motives and behavior to quantifiable variables such as utility, welfare and income. But people are not by nature quantitative, and their motives often have no economic basis. Today’s most divisive issues, from fairness and inequality to national identity and culture, don’t have economic solutions.

Greece’s statistics chief, Andreas Georgiou, stands outside his agency’s headquarters, Athens, July 22, 2010.

Greece’s statistics chief, Andreas Georgiou, stands outside his agency’s headquarters, Athens, July 22, 2010. PHOTO: PETROS GIANNAKOURIS/ASSOCIATED PRESS

Thus, when economists preach the virtues of globalization, market solutions or cost-benefit analysis, they sound to critics on the left like corporate shills lacking any moral anchor. To critics on the right, they sound like globalist elites who despise patriotism.

Yet it is precisely their love of numbers that makes economists invaluable. By stripping the emotions from pressing problems, economists can often illuminate the most practical ways to tackle them—but only if ordinary people and their representatives are prepared to listen.

Economics emerged in the 1700s as an offshoot of moral philosophy.

Economics emerged in the 1700s as an offshoot of moral philosophy. Known then as political economy, its pioneering practitioners—such as David Hume and Adam Smith —believed that liberating individual self-interest, rather than following religious or political authority, maximized society’s well-being.

Smith made this case most memorably in “The Wealth of Nations” (1776), in which he famously invoked the benevolent “invisible hand” of the free market. But for today’s economists, David Ricardo’s “The Principles of Political Economy and Taxation,” published in 1817, was even more of a breakthrough.

Most people aren’t surprised if a doctor, who could be a better caregiver to her children than a nanny, chooses instead to spend that time seeing patients and pays a nanny out of what she earns. Thanks to Ricardo, economists know that the same principle applies to countries. The average American worker can probably make more tires than a foreign worker, but his edge at producing grain is even greater—and thus the U.S. should export grain and import tires. This theory, known as “comparative advantage,” is both counterintuitive and powerful.

Engravings of pioneering economists David Ricardo (left) and Adam Smith.

Engravings of pioneering economists David Ricardo (left) and Adam Smith. PHOTO: GETTY IMAGES

Ricardo went further, extolling the pacifying power of free trade: It “binds together, by one common tie of interest and intercourse, the universal society of nations throughout the civilized world,” he wrote. Most economists still agree that globalization fosters political stability and cooperation.

Non-economists have always found this emphasis on material interests and motives somewhat distasteful. In 1790, Edmund Burke, who was friends with Hume and Smith, wrote in “Reflections on the Revolution in France,” “The age of chivalry is gone. That of sophisters, economists, and calculators has succeeded; and the glory of Europe is extinguished forever.”

The influence of economists truly blossomed in the 20th century. The Great Depression gave birth to macroeconomics, the study of how consumption, investment, income and interest rates interact in the aggregate.

In search of better tools to manage the economy, the federal government commissioned economists in the 1930s to calculate gross national product. Convinced that the economy could no longer be left to its own devices, Congress passed the Employment Act in 1946, which established, among other things, a Council of Economic Advisers to provide the president with the necessary expert guidance.

The next year, Paul Samuelson’s seminal book, “Foundations of Economic Analysis,” used mathematics to formalize the key axioms of economics. He touched off a revolution that equipped economists with ever more powerful methods for explaining and analyzing economic behavior. They increasingly adopted the trappings of the physical sciences, hoping to achieve a similar degree of objective truth and predictive power.

Math did clarify economic thinking, but it didn’t improve its forecasting accuracy, which remains dreadful. Virtually no economists predicted the financial crisis of 2007-08 and the recession that followed. Nor has economics rid itself of bias. Economists who advise presidents and prime ministers routinely shape their analyses to validate particular political views.

In recent decades, the stature of economists has taken a beating from two critiques in particular. The first, popular especially on the left, argues that economists are slaves to the assumption that individuals act rationally and in their own best interests. These critics point to psychological and experimental evidence that shows how often people violate the axioms of Econ 101: Our spending and investment habits are often driven by emotions, rules of thumb, ignorance and shortsightedness. The financial crisis seemed to be the ultimate proof, as highly paid bankers and traders, armed with state-of-the-art economic techniques, took on so much risk that they nearly destroyed the global financial system.

Economists consider national borders and sovereignty annoying obstacles to the free flow of goods, capital and people.

The second critique originates from populist, nativist and nationalist movements in the world’s more prosperous countries. Economists consider national borders and sovereignty annoying obstacles to the free flow of goods, capital and people. The new movements of the right see them as essential preconditions for national identity and cohesion. Many Britons voted for Brexit because control over immigration and their laws mattered more to them than the pecuniary advantages of the European common market.

These trends have fed a broader mistrust of experts and elites. During last year’s election campaign, Mike Pence, Mr. Trump’s vice-presidential running mate, dismissed statistical evidence of the U.S. economy’s health by saying, “People in Fort Wayne, Indiana, know different.” In the months after Mr. Trump’s victory, his team wondered whether it should even appoint a chairman of the Council of Economic Advisers. (The administration eventually nominated Kevin Hassett, a highly regarded economist from the conservative American Enterprise Institute.)

In Greece, economists aren’t simply mistrusted; they’re prosecuted. During the 2000s, Eurostat, the EU’s statistical arm, had repeatedly questioned the accuracy and political independence of Greek statistics. Soaring deficits in 2009 triggered a crisis and forced Greece to seek a bailout in 2010. Mr. Georgiou, a Greek native who received his Ph.D. from the University of Michigan and spent 21 years at the International Monetary Fund, took over Greece’s statistical agency that August. Officials had already shown previous debt and deficit figures to be understated. He revised them further upward and earned for his agency a clean bill of health from Eurostat.

A customer searches for groceries at a supermarket in Caracas, Venezuela, July 25.

A customer searches for groceries at a supermarket in Caracas, Venezuela,

Politicians of the left and right accused him of inflating Greece’s debts to justify its creditors’ demands for austerity. Prosecutors charged him with making false statements and improperly disseminating statistics without his board’s approval. Courts acquitted him, but the second set of charges was reinstated, resulting in this month’s conviction. Mr. Georgiou, who now lives in a suburb of Washington, D.C., plans to ask Greece’s supreme court for a retrial.

Mr. Georgiou says that his real offense, in the politicians’ eyes, was breaking from the past practice of “resisting” and “negotiating” with outsiders, such as the EU, over what official Greek data would show. The politicians needed a scapegoat to preserve their own “political narratives,” he says. He calls the implications of his case “terrifying” for other professionals responsible for economic statistics.

Economists bear some blame for the public and political backlash. Their disagreement with populist policies has often colored their predictions. British economists, including Mr. Carney, thought that Brexit would unleash so much uncertainty that markets and the economy would tank. American economists foresaw similar swoons if Mr. Trump became president. Both were wrong, at least thus far: Economies in both countries have chugged along, and stock markets in particular have soared. There may be long-term costs, of course, but those may be hard to detect.

Economists didn’t predict the financial crisis, but they did help to arrest it.

But such misjudgments don’t justify the charges leveled at economists. Take, for example, their inability to predict financial meltdowns. Crises almost by definition are unpredictable. In a recent essay, Ricardo Reis, an economist at the London School of Economics, argues that failing to foretell a financial crash is no more an indictment of economics than failing to predict when a patient will die is an indictment of medicine. Economists didn’t predict the financial crisis, Prof. Reis notes, but they did help to arrest it by applying theory and experience: “The economy did not die, and a Great Depression was avoided, in no small part due to the advances of economics over many decades.”

Another caricature of economists is that they try to emulate physicists, fetishizing elegant, abstract mathematical models disconnected from economic reality. Paul Romer, the chief economist at the World Bank, derisively calls this approach “mathiness.” The critique is certainly fair in some corners of academia, but it is increasingly untrue of the profession as a whole.

In 1963, roughly half the papers published in the top three American economics journals were theoretical, according to a tally by Daniel Hamermesh, now at Royal Holloway, University of London. By 2011, that figure had shrunk to 28%; the remainder were empirical papers based on public data, on data gathered by the authors or on experiments. Economic debates these days are won not by the best theory but by the best data: Statistics are more important than calculus. Economists are far more obsessed with measurement than with math. When public discourse is plagued by innumeracy, this capacity to count is no small thing.

Economists are also instinctively skeptical of simple explanations. They are trained to look for equilibrium, which is another way of saying, “When you change one thing, how do other things respond? Where do things settle once all interactions have occurred?”

Advocates for a higher minimum wage extol the benefits to workers. Economists ask: Will it change employers’ demand for workers who earn the minimum wage? Or what they pay workers who earn just above the minimum? Or the prices they charge, or how much market share they lose to companies that don’t face the higher minimum or how much they invest in automation? Does it reduce turnover and thus make workers more productive?

Advocates of tariffs on imported steel focus on the benefit to domestic steelmakers and their workers. But economists ask: What happens to steel-consuming companies that now face higher prices, as well as to their workers and customers? Does penalizing imports boost the dollar and hurt U.S. exports?

The more data economists collect, the better they can map such complex interactions. Seemingly simple questions seldom have simple answers. A higher minimum wage helps workers in some circumstances but hurts them in others. Tariffs help some workers but hurt many others. Global warming will do some economic harm, but not enough to justify banning fossil fuels.

Sometimes, this attachment to numbers conveys a false precision. Critics say that the Congressional Budget Office overestimated how many people would get insurance under Obamacare and must therefore be overestimating how many will lose it if the law were to be replaced. But the CBO always warned that its estimates were highly uncertain; what no economists doubted, including those working in Mr. Trump’s administration, is that the number would be large. Economists could confidently predict that price controls would lead to shortages in Venezuela, though not how severe they would be.

Non-economists see all this as hopeless equivocation, but it is actually the way that evidence drives science. Economists still have their ideological leanings, but data has helped to restrict these biases. Surveys of top academic economists by the University of Chicago show considerable agreement, even among liberals and conservatives.

For example, the scholars almost all agree that fiscal stimulus reduced unemployment after the last recession and that trade with China benefits Americans by providing them with cheap goods. A study by Gordon Dahl and Roger Gordon of the University of California, San Diego, found that disagreement among economists was greatest where the empirical research was most sparse, as with the issue of whether natural-gas fracking helps U.S. exports.

Though economics remains an imperfect science, it has come a long way in 200 years. Its greatest challenge today isn’t the quality of the analysis it supplies, but whether there is still sufficient demand for it.

Appeared in the August 26, 2017, print edition.

Sunday, August 20, 2017

Election Risk

Introduction

A fundamental difficulty with democracy – all democracy – is the tension between vulnerability to rent seeking and freedom to appoint your own leaders. Typically the result is some level of unavoidable exposure to governments and therefore elections.

In NZ this is for the most part relatively low, reasonably foreseeable and can be managed. There are plenty of reasons to believe that is no longer so.

Visiting the Tales of the Distribution - The New Normal?

The outcomes over 2016 / 17 tell the story. Brexit, Trump, Corbyn, Macron and, here, Ardern (to date). These are not results plucked from anywhere near the middle of any bell curve. They are a bunch of outliers from the tails of the distribution we have come to manage around.

Turnarounds and surprises are a better bet than the results most indicators tend to turn up. Scrambling media, commentators, experts and forecasters reinforce their role of making astrology look good.

In N.Z. the Middle May be Even more Scary

Some sort of ‘hung’ situation or weeks of ‘Winston wrangles’ are a strong possibility post 23 September.

Centre left and centre right, no matter how civilized the labels may sound are also synonymous with at least two words which are perhaps more accurate and certainly involve more risk – ‘muddled’ and ‘timid’. The combination is even worse but currently seductive.

Things to consider

Probably most businesses and the boards that govern them already plan for Election risk. If they don’t they know they should. Typically Plan A is some sort of BAU assumption with actions under a change of government being Plan B. This election I suggest, a very real requirement is Plan C – what to do if under a Pea Soup Scenario – as close as it gets to ‘no government’.

Basic Prudence – anticipating horror shows

At the very least the board should look at these spreadsheet scenarios (if it takes longer than 2 hours to run these up re-visit your summary reporting – fast):

P&L with a two year 15% sales drop

Hike your payroll by 20% (that’s less than a move from min wage to ‘living wage’)

Up your cost of capital by 300 basis points and look at the interest bill

Drop at least two growth projects out of the next two years plan

Slow your receivables collection rate by 20% (add 10% to 90 days and drop 10% off your current)

Run your purchases at an exchange rate of $NZD:USD $0.80 for 18 months.

Now do some combinations of some or all of these. How are you looking? What’s the plan for this?

Cup of Tea Risk

Arguably more difficult (not least because it is ignored) is the risk of ‘sweet nothing’. What happens if there is a stalled result or ‘shared centrism’. The consensus of an oh so democratic ‘Dunno’.

At least the following:

Renewal of grants, subsidies, funding programmes and any kind of ‘assistance’ from the Beehive slows or stops or is stuck in abeyance;

Regulatory and legislative changes, reforms, alterations, approvals, extensions to rules, inclusions of this or that activity all stop or go on hold or slow to snail’s pace; and,

Submissions, lobbying, petitions, discussions, ‘socialising ideas’, explaining, pleading and other rent seeking activity grinds to a halt either temporarily or for good.

Moreover there is no one to ‘blame’, sanction, kick or otherwise motivate into approving your vital piece of action, change, budget or anything much else.

And as for ‘getting stuff done’ where bureaucracy is concerned, the key motivating driver – political gain – is stymied. Where there no clear gains there is little point in taking risks.

Boards should envisage what such a scenario might leave them. The effects too are indirect and follow knock on impacts not just naked, direct exposures.

Keynes is, for once, helpful but not as much as Friedman

In the long run we’re all dead says the Lord but the alt Lord Milton says “the long run is a series of short runs added up”. Most businesses want to add up short term successes to get a long run. Their boards want to govern businesses that do just that.

Think right through Election risk, in 2017, in New Zealand, in your business – past ideology, past the people pageant piece, past the first round - to the commercial everyday impacts. And do some numbers. Then write up (yes write it down) some actions.

Thursday, July 20, 2017

Blockchain the Transformer

Do yourself a favour and read this to “get it” about blockchain and why it matters… or try to make time stand still.

This from Kevin Cooney – ASB’s National Manager Rural:

It's vital that New Zealand's agri industry pays close attention to blockchain development and ensures we are well positioned to capture our share of new value this technology could unlock.

Mention blockchain and agriculture in the same breath, and the image of a heavy duty chain towing one farm vehicle behind another pops into my mind.

Turns out, that's a handy analogy. Like a physical chain, blockchain connects parties directly with one another to enable fast, secure, and borderless transactions.

Blockchain is often confused with digital currency bitcoin and "dark-web" encrypted networks, which means it's often thought of as esoteric and, perhaps, something to be feared.

That's unfortunate. Blockchain will transform the way buyers and sellers connect, regardless of where they are in the world. It will allow radical transparency of a product's origins and journey to end-customers, even if it becomes part of a finished product. Think fast, secure, transparent, low-cost, peer-to-peer transacting.

Blockchain's ability to record and store data makes it ideally suited for both food provenance applications and the deluge of data expected from future precision-farming applications connected by sensors and digital networks.

Its potential to eliminate inefficiency in traditional agri supply chains will also impact strategic thinking and positioning for agri industry companies. Indeed, blockchain could completely reshape the way New Zealand markets, sells and records the provenance of our produce to the world.

For this reason it's vital that New Zealand's agri industry pays close attention to blockchain development and ensures we are well positioned to capture our share of new value this technology could unlock.

The CEO of blockchain solutions start-up Kickr, David Cassidy, has summed up blockchain's inevitability best: "Those that still ask the question whether blockchain is a passing fad or will form a long-term part of business architectures are genuinely in the dark."

So what is blockchain all about?

At its simplest, blockchain forms a trusted network for buying and selling goods. The technology itself is a digital chain, of which the links are replicated databases that correspond with verified or trusted user companies or businesses.

This distribution of databases across all users is more robust in many respects than the traditional, centrally-controlled, single database that businesses use and rely on today. Its greater transparency in peer-to-peer dealings lends itself more readily to meeting growing demands for rigorous traceability.

Blockchain databases record and update in a synchronised fashion for each transaction that occurs on the blockchain. As no one party can change data without the others seeing and verifying it, it's said to be tamper-proof and therefore highly secure (on current technologies).

When combined with other software, such as a "smart contracts", users of a blockchain have the following benefits:

Buyers and sellers can transact directly, and instantly, rather than having to go through and rely on intermediaries (such as banks, trading and clearing houses);

Borderless transactions;

Automated contract execution that removes credit risk in real (or near as real) time;

Identity verification for counterparties;

Superior transparency with secure record trail;

Low transaction costs.

How might farmers use it?

Early trials transacting agri commodities using blockchain demonstrate its potential to sell agri outputs (such as wheat, wool, meat, livestock, wood or fruit) direct to end-buyers in a way that's fast, secure, with high confidence about origin and food safety.

Across the Tasman, Commonwealth Bank of Australia (CBA) was recently involved in a trial testing blockchain's integration with sensor technology. This saw CBA collaborate with a US bank to help a US-based cotton business sell a cotton shipment to its own marketing arm in Australia.

Instead of waiting for payment from CBA under the usual manual letter of credit arrangement, the cotton business was paid automatically with the necessary verification triggered automatically through sensor-based, physical tracking of the shipment in real time.

Here, blockchain provided greater certainty, reduced errors and accomplished in minutes what usually takes days.

Imagine the potential in the opportunity to also integrate a blockchain solution with data-gathering devices that use 'Internet of Things' technology. Buyers might have access to live on-farm and downstream logistics data giving them all details necessary to determine amounts, quality and status of livestock or produce, for verification, inspection and pricing. This sort of efficiency could lessen the information advantage some intermediaries exploit for their share of margin. Customers and end-users will embrace this technology.

Walmart Stores, one of the world's largest retailers, is harnessing blockchain to catalogue huge amounts of data for managing food recalls.

With traditional methods it can take days, if not weeks, to trace an item from shipment through to retailer following a customer complaint. But with a blockchain database, Walmart believes it can determine all necessary details how and where the food in question was grown and who it was inspected by right down to individual packages.

This enables strategic product withdrawals that companies and consumers can have confidence in, due to the detail and integrity of the data.

The saving to Walmart from tracing and recalling just a few packages as opposed to an entire product line across multiple stores is significant.

While it's still early days, excitement about blockchain is growing as awareness of its practical applications develop.

Allowing trusted groups to trade seamlessly at low cost with radical transparency has huge value potential in a world of future scarcity where consumers are concerned about food safety and provenance, and our large food customers seek lean, transparent solutions for managing food waste and supply chain inefficiency.

New Zealand's strength in agri production and commodity supply chain management give us a tremendous opportunity to lead the world in developing food and agri blockchain solutions that connect, shorten and sharpen global supply chains.

However, as for any innovation, we risk losing strategic ground if we don't invest to understand technology such as blockchain, and its potential to transform the global agri supply chain and associated services. Collaboration between industry and government and across the supply chain is critical.

Australia understands this. The Australian Government has recently released a scientific study of blockchain, which was funded in its 2016 budget. As well as highlighting Australia's claim to be a global leader in the technology, the study found supply chain management, including trade finance reform, is a "highly promising" use-case for blockchain. Pointing the way, it implores companies and regulatory authorities to work together to develop its commercial uses.

New Zealand should take note. We must strengthen our focus on developing a world-class national ecosystem to co-ordinate and engage all elements necessary to building the thriving best-in-breed agri tech industry necessary for this to happen.

Blockchain might just be the vital link that enables New Zealand's farming industry to capture our holy grail of more margin.

Monday, June 26, 2017

The Business of Tax

ONE of the hottest debates in economic policy at the moment is how to ensure companies are paying the optimal amount of tax. On the right, politicians think that a lower corporate-tax rate will lead to more business investment and thus faster economic growth. Hence the initial stockmarket enthusiasm after President Donald Trump was elected on a platform that included cuts in business taxes. On the left, the belief is that business is not paying its “fair share” of tax and that it can be further squeezed to pay for spending commitments. Hence the promise of the Labour Party in Britain’s recent election campaign to push the corporate-tax rate up to 26% (from 19%).

How do these theories translate into practice? To find out the effect on business investment, The Economist took the corporate-tax rates in OECD countries and divided them into quartiles from highest (1st) to lowest. Then we calculated the five-year average in each quartile for gross fixed capital formation as a share of GDP.

image

As the top chart shows, the relationship is not very strong. The countries with the highest tax rates generate less investment than those with the lowest, but there is not much difference. That is probably because the decision to invest in a country depends on a lot more than tax. The underlying growth rate of the economy and the regulatory climate also play a big part. Independent of their tax rates, for example, South Korean and Turkish companies are investing a lot. Perhaps they are catching up with mature economies, perhaps they are over-investing.

What about the tax take? The picture is complicated here, too. Lower tax rates may just work by pinching revenues from other countries. For example, Ireland, with a 12.5% rate, earns a higher proportion of GDP in revenues than France, at 34.4%. And the headline tax rate may not be decisive. Countries with high rates (like America) tend to offset them with allowances and deductions that bring down the effective rate that companies pay.

The idea of using tax levels to boost revenues does not get much support, either. Most countries sit within the 2-3%-of-GDP range (see bottom chart). The countries with the lowest corporate-tax rates receive a bit less in taxes. But the difference between the top and bottom quartiles is only 0.9% of GDP. Grabbing this extra chunk might be useful revenue, but when public spending is 40% of GDP or so, other sources of funding are a lot more important.

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The countries with the highest tax takes (over 4% of GDP) tend to be those, like Australia and Norway, with plenty of natural resources. They can take advantage of captive businesses. But that is not an option for most developed nations, especially given the potential for tax competition. OECD countries are trying to co-operate to stop companies from gaming the international tax system. But it is a tricky task; one man’s tax avoidance is another man’s legitimate business planning.

Two other things are worth remembering. The first is that companies are merely legal entities. To the extent they pay more taxes, they must get the money to do so from elsewhere. Politicians on the left think the money comes from shareholders. But it is not as simple as that (and even if it were, those shareholders may represent the pension funds of citizens). For instance, a large company might not want to reduce the profits it pays out to shareholders for fear of becoming a takeover target. So it could move some of its operations to a lower-tax regime. Or it could recoup the loss by charging consumers more, or by paying workers less.

Second, countries do not just want to attract businesses for the taxes they pay but for the workers they employ and for the extra revenues they create for local suppliers. The effective tax take firms generate (on wages, sales and property taxes) is much higher than the tax on profits alone. So there are dangers in driving business away, something Britain needs to contemplate after the Brexit vote.

Some argue that the profits tax should be abolished. Governments should look through the corporate structure and tax shareholders directly. The problem is that many shareholders, such as pension funds and charities, are tax-exempt, and others are based in low-tax regimes. That would also create incentives for individuals to incorporate to cut their tax bills. So such a move should await much more sweeping tax reform. In the meantime, governments will have to make do with what they currently get. There is no magic trick for collecting a lot more.

From The Economist June 17th edition

Monday, May 22, 2017

The Paris Treaty on Climate Change

Matt Ridley notes in respect of the Paris Treaty on Climate change that:

….. the economist Bjorn Lomborg calculated how much the pledges would reduce warming, using standard models and generous assumptions about how quickly the reductions would be achieved and how long they would be sustained.

He found that all the promises made by the US, China, the EU and the rest of the world, if implemented from the early 2000s to 2030, and then sustained through the rest of the century, would reduce the expected rise in global temperature by only 0.17°C in the year 2100. That is to say, instead of rising by 2, 3 or 4 degrees or so by the time our great grandchildren are adults, world average temperature would rise by 1.83, 2.83 or 3.83 degrees. Lomborg put it this way: “Current climate policy promises will do little to stabilise the climate and their impact will be undetectable for many decades”. A different study by scientists at MIT came to similar conclusions. The INDCs add up to the square root of zilch.

However, and this is the crucial point, Lomborg also points out this invisible achievement would come at a staggering cost, somewhere between $1 trillion and $2 trillion a year: “Paying $100 trillion for no good is not a good deal”.

Friday, May 5, 2017

Cohen on Liberalism and Free Speech

Liberalism does not only fail to satisfy the new conservatives who are storming to power across the west. It fails to satisfy many who call themselves “liberal”. It is simultaneously too hard and too soft an ideology to bear. It demands tolerance. But we do not want to be tolerated as if we were poor relations. We want respect, approval and freedom from criticism and insult. In our wilder moments, we want, in our vanity, to be loved.

To paraphrase the paraphrase of Voltaire, the liberal view of sexual tolerance used to be: “I may disapprove of who you take to bed, but I will defend to my death your right to bed them.”

Just as liberals used to tolerate free speech, except when the speaker was inciting violence, so they allowed free love between consenting adults. Few now care about defending rights to the death. Many turn authoritarian and maintain you have no right to disapprove.To recap, the great mid-20th century movement for homosexual rights culminated in the recommendation of the Wolfenden report of 1957 that sexual acts between consenting adults in private should be decriminalised. It did not say that fundamentalist Christians, Jews, Muslims or ordinary secular homophobes must stop believing that homosexuality was a sin. Indeed, their freedom of speech guaranteed their freedom to disapprove. They simply lost the power to call for the police to raid bedrooms.

Equally, the old liberal insistence that free speech must be tolerated, except when it incited violence, did not mean that an audience must approve of a speaker. It remained free to argue back, denounce or satirise in the most robust manner. It just could not call on the authorities to ban speakers or the police to arrest them for “hate speech” when the speech was not so hateful it provoked attacks on its targets.Farron was being a true liberal. He disapproved of homosexuality but was prepared to defend gay rights

The strange controversy the leader of the Liberal Democrats began when he equivocated on whether he believes homosexuality is a sin shows how dead the old liberalism is. On the record, Tim Farron supports “equal rights for LGBT people and LGBT rights in this country and overseas”. But he also believes Christianity is “the most important thing in the universe bar nothing”.

The contortions he put himself through as he dodged questions about homosexuality’s “sinfulness” suggested he took his Bible literally and had dwelt on the murderous condemnations of homosexuality in Leviticus, echoed by St Paul, for longer than is healthy.

If he once did and has now changed his mind, so what? Farron was being a true liberal. He disapproved of homosexuality but was prepared to defend gay rights, just as I disapprove of religious fundamentalists but am prepared to defend their freedom to worship. Even by the low standards of 21st-century culture wars, the Farron “controversy” was absurd.

To give the absurdity a sinister twist, there is a genuine story about religion and equal rights that no one covers because it does not fit into the stereotypes of news coverage, where reactionaries are always conservative or Christian and the convergence of the far left and far right is always ignored.

Jeremy Corbyn worked for Iranian state television and spoke at Khomeinist ralliesin London. Everywhere he went, he looked a willing collaborator with a regime that flogs and executes gay men, treats women as second-class citizens and imprisons trade unionists.

If Corbyn was questioned on this, which he never is, he might say he does not approve of every aspect of Shia theocracy. But he worked for it, and was paid by it, and never found the courage to speak out on Iranian television for the victims of its oppression. A liberal society that condemns one politician who bothers God, but gives a free pass to another who works for a queer-bashing, queer-killing regime is so lost that it may never find its way home again.A liberal society that condemns a politician who bothers god, but not one who works for a queer-killing regime, is lost

At second glance, however, perhaps liberal society isn’t making a complete fool of itself. For why shouldn’t a gay man or lesbian be repelled by Farron’s contortions? At some level, they may suspect that although he will defend them he does not approve of them. Why should they accept that as good enough?

To broaden it out, why must a feminist fed up with seeing women portrayed as lumps of meat accept that she must struggle for years to find a link between pornography and rape? Why should a Muslim incensed by the anti-Muslim bigotry of the worst of the right, or a Jew incensed by the antisemitism of the worst of the left, wait until their enemies incite violence? Why not no-platform or call for dangerously fuzzy laws against hate speech before the tipping point?

For those who practise it, toleration is a hard principle to live with. It forces you to engage with enemies you abhor in argument when you don’t believe they have an argument worth hearing.

Concealed within the hardness is a soft centre, one that is too insipid for many to digest. Emotionally, it feels vapid to say that you must win arguments rather than call for the police. It can feel like an act of treason to dignify misogynists, racists or homophobes by agreeing to argue with them in the first place.

But however much the dismissal of tolerance, and the flight to a politically correct authoritarianism, makes emotional sense, practically it has been a disaster. Trump won in part because tens of millions of Americans had had it with being told what to think. Some were genuine bigots. Others could be won over if only “liberals” stopped upholding an illiberal policing of thought.

Unless they understand how they drive so many into the welcoming embrace of the right, Trump’s four-year presidency could stretch to eight. In Britain, we will have at least five more years of Conservative rule. Basic self-interest ought to persuade liberals not to provide justifications for censorship and control when the right – and the right alone – has the power to deliver both.

The politically correct movement is not only an intellectual and practical failure, it fails on the more basic level of human psychology.

You cannot demand respect from others. You can only earn it. You cannot force others to admire you, endorse your lifestyle and drop even private doubts about you. You can only persuade them to see what good there is in you. And if you don’t know by now you that cannot compel others to love you, you never will. All you can do – and all you should want to do – is take the deal when a politician says: don’t ask if I respect you, ask if I respect your rights.

Opinion by Nick Cohen, Journalist.

As originally printed in The Guardian.

Friday, April 7, 2017

Neo wowsers and Regulation

Alcohol Bans in India and the United States

by Alex Tabarrok on April 6, 2017 at 7:29 am in Economics, Food and Drink, Law, Travel | Permalink

The Indian Supreme Court has just banned sales of alcohol within 500 meters of a national highway. The ban affects not just liquor stores but tens of thousands of restaurants and hotels. In response, the Rajasthan Public Works Department announced that they would now recategorize highways in urban areas as roads! Other states may follow suit. (David Keohane at the FT has further background on the India ban.)

Lost in the shenanigans is that even if the ban were implemented perfectly it’s not at all obvious that it would reduce traffic accidents. Alcohol can be easily stored and if you are thirsty driving 500 meters doesn’t seem like very far to go to buy alcohol.

Entire counties in the United States have banned alcohol but that doesn’t seem to have reduced traffic fatalities. It may even have increased fatalities because residents of dry counties drive to a wet county to find a bar and then they drive drunk for longer distances as they head home.