Occasional reflections on Life, the World, and Mathematics

Posts tagged ‘capitalism’

Less than zero: A new reckoning

One of the most important lessons I ever learned about capitalism and the nature of wealth I learned from Donald Trump. And now I discover that I was entirely misled, at least as regards Trump’s particular role.

As I discussed in a post a couple of years ago, back in the 1990s I read a newspaper article about Donald Trump’s most recent bankruptcy, and was struck by the fact that, despite having vastly more liabilities than possessions, Trump was still treated as a wealthy man, and not worse than a pauper. And his creditors were willing to come to an arrangement that allowed him to live a rich-man lifestyle, if somewhat less opulent than before. I understood that to mean that modern capitalism makes debt almost as valuable as property, that the person with a billion in debt and the person with a billion in property are considered to be much more similar to each other than either is to the one who has neither debts nor wealth.

Now, having read several books on Trump, including most recently Seth Hettena’s Trump/Russia: A Definitive History, I see that this beautifully esoteric interpretation must yield — at least in the case of Trump — to a simpler and crasser interpretation: At various stages of his career Trump has been propped up by criminals who found the Trump Organisation, and its self-absorbed empty-headed chief, too useful as a cover for moneylending — first for the New York mob, then on a larger scale for Russian oligarchs and criminals from the former Soviet Union — to let it fail. In some sense, this is the value of debt: When there are large numbers in play, it’s easy to hide smaller numbers, just as long as you can come to an agreement to keep the flow going. And it does take a special kind of person to have managed to accumulate that amount of debt in the first place, making Trump’s debt truly a rare and valuable commodity.

I’m perfectly willing to accept a certain claim of innocence, that Trump believed all along that the fact that he kept managing to steer around failure demonstrated nothing but his unique genius. It reminds me of Hitler’s famous comment “Ich gehe mit traumwandlerischer Sicherheit den Weg, den mich die Vorsehung gehen heißt”: I follow, with the certainty of a sleepwalker, the path that Providence has laid out for me.

That narcissistic naïveté probably was, and remains, his most useful quality. First time tragedy, second farce.

Why people hate statisticians

Andrew Dilnot, former head of the UK Statistics Authority and current warden (no really!) of Nuffield College, gave a talk here last week, at our annual event honouring Florence Nightingale qua statistician. The ostensible title was “Numbers and Public policy: Why statistics really matter”, but the title should have been “Why people hate statisticians”. This was one of the most extreme versions I’ve ever seen of a speaker shopping trite (mostly right-wing) political talking points by dressing them up in statistics to make the dubious assertions seem irrefutable, and to make the trivially obvious look ingenious.

I don’t have the slides from the talk, but video of a similar talk is available here. He spent quite a bit of his talk trying to debunk the Occupy Movement’s slogan that inequality has been increasing. The 90:10 ratio bounced along near 3 for a while, then rose to 4 during the 1980s (the Thatcher years… who knew?!), and hasn’t moved much since. Case closed. Oh, but wait, what about other measures of inequality, you may ask. And since you might ask, he had to set up some straw men to knock down. He showed the same pattern for five other measures of inequality. Case really closed.

Except that these five were all measuring the same thing, more or less. The argument people like Piketty have been making is not that the 90th percentile has been doing so much better than the 10th percentile, but that increases in wealth have been concentrated in ever smaller fractions of the population. None of the measures he looked was designed capture that process. The Gini coefficient, which looks like it measures the whole distribution, because it is a population average is actually extremely insensitive to extreme concentration at the high end. Suppose the top 1% has 20% of the income. Changes of distribution within the top 1% cannot shift the Gini coefficient by more than about 3% of its current value. He also showed the 95:5 ratio, and low-and-behold, that kept rising through the 90s, then stopped. All consistent with the main critique of rising income inequality.

Since he’s obviously not stupid, and obviously understands economics much better than I do, it’s hard to avoid thinking that this was all smoke and mirrors, intended to lull people to sleep about rising inequality, under the cover of technocratic expertise. It’s a well-known trick: Ignore the strongest criticism of your point of view, and give lots of details about weak arguments. Mathematical details are best. “Just do the math” is a nice slogan. Sometimes simple (or complex) calculations can really shed light on a problem that looks to be inextricably bound up with political interests and ideologies. But sometimes not. And sometimes you just have to accept that a political economic argument needs to be melded with statistical reasoning, and you have to be open about the entirety of the argument. (more…)

The true face of capitalism

Modern capitalism started with the railways. And today:

A mother has launched an appeal to try to find a generous stranger who bought her stranded daughter an £85 train ticket home.

India Ballancore, 16, missed her return train to Bristol from Stockport, Greater Manchester, on Sunday.

Her mother Andrea said the stranger stepped in and paid for a new fare after India was told her ticket was not valid for the next service.

Of course, the only reason why she needed this kindness from a generous stranger is that Cross Country Rail employees couldn’t resist the opportunity to profiteer off a vulnerable girl who had already paid for a ticket, but had missed her train.

The sound of one invisible hand clapping

There is a Rand-ian trope (or Mises-macherei) that attempts to reverse the Marxian notion that labour is the unit of economic contribution, that working people are the creators of our world, and capitalists mere parasites. The opposing view — pushed by Ayn Rand, and advocated in increasingly stark terms by right-wing politicians, is that the capitalists and managers are “job-creators”, that everything exists because of their contributions. From Adam Smith’s idea that capitalism enables the private greed to be channeled into promoting the public good, we have come to the notion that private greed is itself almost a form of charity.

The reductio ad absurdum has been provided (of course) by Donald Trump, in the less commented upon portion of his bizarre attack on the family of killed-in-action Muslim American soldier Humayun Khan. Responding to Khizr Khan’s attack “You have sacrificed nothing — and no one,” Trump said

I think I’ve made a lot of sacrifices. I work very, very hard. I’ve created thousands and thousands of jobs, tens of thousands of jobs, built great structures. I’ve had tremendous success. I think I’ve done a lot.

For Trump, a rich man’s “tremendous success” is itself a sacrifice, to be matched against an ordinary man losing his child.

Brecht’s take on this question is below. I cited it in the last US presidential election as well.

(more…)

None dare call it “evasion”

Just another example of how the business elites have normalised their criminal activities:

So when politicians, journalists and the public ask rude questions about how Google can pay its chief executive more in one year than it hands over to the British tax authorities, the company should have a simple answer. You make the rules, we obey them – if you don’t like it make some new rules, otherwise go away and leave us alone.

The article suggests that Google is suffering from a sick compulsion to hold itself to a higher standard than is just obeying the rules.

Except, they don’t actually obey the rules. What they do (as I’ve discussed at greater length) is to create structures to exploit the ambiguity in such legal terms as “residence” and “business activity” and “profits”, ambiguity that is in the rules because the lobbyists would otherwise squeal about unreasonable constraints and irrational behaviour being forced upon them by more specific regulations. The law doesn’t actually permit you to pretend your business is actually transpiring at the shell address in the Cayman Islands, but it’s sufficiently hard to prove otherwise, and the elite civil servants are sufficiently unmotivated.

In fact, despite the billions of dollars they spend on tax lawyers in lieu of taxes, they’re not even particularly conscientious about keeping their plausible deniability plausible. Former London Google employee Barney Jones gave evidence to HMRC:

He had watched Matt Brittin, his former boss at Google, give evidence to MPs on the Public Accounts Committee with interest but also mounting disquiet. Mr Brittin emphasised to the PAC one reason Google paid so little tax in the UK was that it did so little business here. The bulk of its work was generated through its Dublin headquarters – where corporation tax was lower than in London.

Mr Jones, a father of four and a devout Christian, knew that wasn’t true. He had worked in the London office from 2002 to 2006 and had his own view of the large turnover of work that was really going on in the UK. He took the facts to PAC chair Margaret Hodge and then on to Her Majesty’s Revenue & Customs (HMRC), which took his evidence but wasn’t exactly overjoyed by it.

“They seemed quite defensive and seemed to be more interested in justifying their position.”

For that matter, it’s not even entirely true that they don’t make the laws. Unless you think the US Treasury just decided in a purely independent and disinterested way that the European Commission doesn’t really understand its own tax rules.

The magic of markets

I find The Times fascinating, as a peek into the id of the British establishment. Thus, it usually seems sort of objective and reasonable — and I find its science coverage excellent, for a daily newspaper — until some event hits the nerve of class interests and establishment ideology, such as on the day after Jeremy Corbyn’s election as Labour Party leader. Then the news and editorials fall into line with a kind of mirthless sarcasm that astonishes in its combination of vituperation and simplemindedness. I find myself then reading it, like the scripture of some weird sect — I’m not naming names here — wondering, does anyone really find this either amusing or insightful. With the extra frisson of remembering that those who find it both amusing and insightful are running the country.

Today there was an editorial bashing the NHS. After one of those it-was-probably-clever-the-first-time-someone-said-it quips about how at current growth rates, the NHS will exceed 100 percent of the British economy by 2100, the writer (Ross Clark) refers to one of today’s news items:

A new threat to NHS financial stability has emerged: thanks to the increasing complexity of drugs it will cost a lot more in future to produce generic versions.

At present, drugs typically fall in price by 95 per cent once their patents expire. But new drugs that rely on biological agents are expected to fall in price by only 25 per cent, drastically cutting the £13.5 billion  the NHS saves every year by using generic drugs.

The NHS should have cottoned on much faster to the fact that generic drugs cannot be relied on indefinitely. It should be using its power in the marketplace much more to push prices down.

I bet there are heaps of overpaid NHS managers slapping their foreheads, thinking “power of the marketplace, why didn’t I think of that?!” The whole point is that these new drugs are expensive to produce, so no pharmaceutical company is going to rush in to sell it for 5% of the original cost, regardless of whether it is protected by patent rights. We’re seeing a change in the relative cost of development and production. (It’s the reverse of the change in the music industry from the early days of CDs when the physical production of the CD cost several dollars to now when the marginal cost of an album is infinitesimal.)

No amount of “cottoning on” by the NHS is going to change this fundamental reality.

Gender asymmetry…

… and the “pussification of America”. This term came up in an article in Slate about the decision by the American retailer Target to remove the gender attributions from its toys. Since I had children I’ve been amazed at the extent to which children’s clothes and toys have become gender-specific since I was a child in the 1970s. And it amazes me as well how closely identified the colours pink and blue have come to be with girls and boys, despite the fact that it’s an obviously artificial (and quite recent) tradition. (Jo B. Paoletti has written a book on the subject, Pink and Blue: Telling the Boys from the Girls in America.) I have also long been intrigued by the way people seize upon even the most tenuous evidence that “science has proved” the validity of this or that gender stereotype.

Anyway, someone set up a honeytrap fake Target customer service Facebook account to collect the outrage that some people (men and women) were spewing over this issue. As chronicled in AdWeek, there are some biblical arguments, like

God made a difference between male and female as there should be. I would never give a boy a barbie doll. It’s not chauvinistic but the BIBLE says women are the weaker vessel I Peter 3:7 so many people are making their boys the weakest link and making their daughters manly.

(Interesting that “as there should be”. Not that she’s simply going to accept on faith that God got this one right. But she approves.) And many rants against PC

You guys should listen to the people who spend money in your stores, not the liberal, PC Complaint people that don’t have two cents to rub together.

I thought the PC Complaint people were wealthy elitists…

Anyway, I thought this comment was particularly telling:target-troll-12a

This is classic Simone de Beauvoir stuff. This is an American woman, outraged at a refusal to emphasise gender distinctions, because it will feminise America. Because America is a man, and if America can’t get a steady diet of trucks and toy soldiers when he’s a boy, he’ll be “pussified”. She’s not concerned that America will be toughened, or dickified, or whatever the corresponding word for “pussified” would be.

Powerless

The Oxford Mail moans in a recent headline that the Oxford city council is “powerless to prevent the spread of graffiti”.

MORE than 1,000 cases of graffiti scrawled on private property are blighting Oxford…

That sounds pretty bad. What sort of extraordinary, perhaps dictatorial, powers would the council need to be granted in this state of emergency, to enable them to rescue us from this blight? The article continues that the graffiti cannot be removed

 because firms are not paying to have them removed, the city council’s graffiti team has warned.

“But 99 per cent of them don’t pay because of the cost and they think they shouldn’t have to.

“There are more than 1,000 jobs on my database we can’t touch –and we have the equipment and the training to deal with them.”

The council charges £27 an hour on top of £15 per square metre for the removal of graffiti from privately-owned property.

It seems strange to formulate this in terms of “lacking powers”. My guess is that if they considered it to be a sufficient problem for the public welfare that they wanted to use tax money to fund the cleanup, very few property owners would wish to hinder them. They lack the power to force the property owners to pay because most of the public agrees that, having been victimised by the graffiti writers already, the property owners don’t deserve to be punished with the compulsory expense of cleaning it up.

This is the city council acting like a private company, advertising its graffiti-cleaning service. But a private company would never think to formulate its inability to attract customers willing to pay £27 an hour for its property-beautification schemes as “we are powerless to carry out our plans because 99 per cent of our potential customers don’t hire us because of the cost and they think they shouldn’t have to,” and whine about how unreasonable that is, because “we have the equipment and the training”.

The REF Research Rating Agency

Among the many inefficiencies imposed by the hexennial ritual of centralised research evaluation in the UK is the requirement that some of the nation’s most esteemed academics (thankfully, I am not one of these) need to dial their research productivity down to nearly zero while they spend their waking hours — and some when they might otherwise be sleeping — reading and ranking hundreds of papers, and attending interminable meetings. And then, after the results are complete, the specialised skills they have developed during this sisyphean herculean task are of no use to anyone, other than helping their individual departments get a leg up on the next REF, of course. Wouldn’t it be great — and very British — to enable the researchers who have devoted so much time and effort to monetise the skills they have acquired for personal gain?

This is why I am proposing the creation of a public-private consortium (privately owned, but initially funded by the British taxpayers), to be called the REF Research Rating Agency (REFRRA). The idea is simple: One of the major outcomes of the REF is to induce British universities to hire leading researchers away from other British universities shortly before the REF census date, expecting that their 4* papers will pay their salaries for the next six years. They also hire researchers from outside the UK on 20% contracts to pop by occasionally and credit their  research output to their generous UK host. By these means, the University of Birmingham has had itself crowned the king of UK philosophy.

The problem is the amount of guesswork that goes into these hiring decisions. That is why we need the REFRRA, employing experienced former REF examiners, to provide researchers in the UK and worldwide with Audited REF Score Evaluations (ARSE). For a modest fee, academics can purchase a documented ARSE to list on their CV. This will ultimately lead, it is hoped to a complete automation of the appointments process, whereby academics can simply go to a web site of a university they would hope to work for, put in their ARSE and a few demographic details, and receive an immediate job offer or rejection, based on the calculation of whether their hiring would be a financial net gain or loss for the university.

When I told a colleague about this idea, she said that no one could trust ratings where the ones being rated are the agency’s paying customers. Too much conflict of interest. On further reflection we had a good laugh at her naïveté.

Examination socialism

I was talking with someone recently about the bizarre British practice of allowing the A-level exams to be set by competing exam boards. It’s bizarre because of the well-known agency problems in examinations: The customers are the schools, whose interest is in high marks, not in effective exams. So we get government ministers persistently fulminating against watering-down of exams.

This is typically presented as a capitalist approach, reflecting the British enthusiasm for market-based solutions instead of big government. In fact, while this solution has the trappings of capitalism, it suffers all the theoretical and practical defects of socialism. As I understand it, those who theorise the superiority of capitalism tend to focus on the diffusion of decision-making to the periphery, where the expertise resides, and the virtues of aligning incentives with goals, which is far more efficient than central planning. Then comes the bracing effect of competition to achieve those goals.

In this case, the natural incentives of those looking to make a profit by selling their product to schools are clearly misaligned. Yes, they can fruitfully compete on accuracy and speed of marking, but the essential content and rigour of the exams is a race to the bottom. (This might not be the case if they were providing distinct qualifications, that might be competing for influence with universities. There is the competing International Baccalaureate, adding an extra level of complexity, but the multiple exam boards are supposed to be producing evaluations of the same qualification, the A-levels. We have a similar problem with university degrees, where there seems to be a pious fiction that “first-class degree” is an absolute standard, whether from Imperial or London Metropolitan; but this is clearly not taken very seriously.) The bottom is set by elaborate government regulations — central planning — and all the competitive ingenuity goes into formally hitting those standards while maximising the marks. (I don’t know if this is really true; but that is what you would predict, theoretically, and it would explain the downward spiral of A-levels.)

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