Occasional reflections on Life, the World, and Mathematics

Posts tagged ‘economics’

Golfing VCs

Economist David Blanchflower wrote an article for The Guardian inviting us to pity the poor underpaid university vice chancellors with their paltry sub-million-pound salaries. In discussing what an awful job it is, and why you

A vice-chancellor’s schedule is set for them. The job has a huge effect on family life. There are few places to hide and find privacy. You are always on show, even on the golf course.

Even on the golf course! Have these vice-chancellor-oglers no shame?

Oddly enough, the analysis by this economist, which included the striking phrase “If you pay peanuts, you get monkeys” — the monkey here being everyone who is not a vice chancellor — omitted any evidence that universities do indeed prosper from having non-monkeys doing the job. I mean, there are all kinds of jobs that are hard and important, but there’s a limit to how much you’re willing to pay to get just a tiny bit of extra talent (assuming that you can even reliable recognise those distinctions in the course of the hiring process). The suggestion is that you need to pay huge sums just to get one of the exceptional rare individuals who is even minimally qualified not to run the university into the ground. “In the end, there are few qualified and willing applicants.” I’d like to see some working-out on that problem.

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…)

NHS wants you! (to spread the varicella virus)

I’ve long wondered why children in Britain generally don’t get the chickenpox vaccine. In an article describing a move by drugstores to offer the vaccine for a substantial fee, the BBC quotes the NHS:

The NHS said a chickenpox vaccine is not offered as part of routine immunisations as it would leave unvaccinated children more susceptible to contracting the virus as an adult.

There could also be a significant increase in shingles cases as being exposed to infected children boosts immunity to this.

This is like the cracked-mirror reflection of the usual herd-immunity argument for why, even if you don’t want vaccines for yourself or your children, you have a civic obligation to make yourself immune to avoid transmitting the virus to others. Here they say that children have a duty to suffer with an unpleasant disease, so that they can serve as walking virus reservoirs that will more efficiently infect other children, and boost the immunity of adults.

I suppose there’s a cost-benefit analysis somewhere that shows this is the cheapest approach. And I’d bet that the cost of children’s discomfort is set at zero.

Extra cash

The EU is once again infringing on the British yeoman's ancestral freedom:

Fees for paying with plastic – most commonly a credit card – are routinely levied on everything from low-cost flights and tax bills to cinema tickets and takeaway meals, but the Treasury announced that these would be consigned to history from January 2018.

The government said the move, which builds on an EU directive, would mean “shoppers across the country have that bit of extra cash to spend on the things that matter to them”.

I'm just wondering: If the effect of this regulation is to leave people with more cash to spend, isn't that defeating the purpose? Anyway, I'm sure we can return to credit-card fees (and mobile roaming charges) just as soon as we're out from under the Brussels yoke.

Government intervention

It seems Theresa May has found her strategy for rescuing the British economy from the political damage the Tories are planning to inflict:

The prime minister will publish the strategy at a cabinet meeting in the north-west of England, setting out five sectors that could receive special government support: life sciences, low-carbon-emission vehicles, industrial digitalisation, creative industries and nuclear.

She will say the government would be prepared to deregulate, help with trade deals or create new institutions to boost skills or research if any sector can show this would address specific problems.

Great idea! As one of the people working on developing “skills and research”, I’d like to suggest that it might be a good idea to arrange an agreement to share students, workers, and researchers with our neighbours, who are similarly technologically-developed and share common scientific and educational traditions. We could call it the Anglo-European Union, or something like that.

But no, that would help “old institutions” like my own. The Westminster Pharaoh is only interested in boosting skills or research if it can create “new institutions” as a monument to her greatness.

All-you-can-eat

Ars Technica reports on testimony by Mediacom, a large US cable company, explaining why they should not be required to stop capping data usage:

People thus shouldn’t complain when Internet providers impose data caps and charge more when customers go over them, he wrote. “Even though virtually every other industry prices its products and services in the same way, some people think that ISPs should be the exception and run their businesses like an all-you-can-eat buffet.”

“Virtually every other industry”… Yes, it’s pretty hard to think of any industry that offers all-you-can-eat buffets. Who could possibly afford to offer all-you-can-eat? It’s a fantasy.

Big notes

I remember reading, back in the late 1990s, an article in Spiegel, about the dubious decision of the Euro finance ministers to create a 500 euro banknote. Since the only people who use cash in significant quantities in this millennium tend to be shy people eager not to be singled out for their achievements by prosecutors, the question was raised, why would you want to create a unit of currency that enables law-abiding citizens (and others) to pack five times as much currency into a suitcase as the former favourite $100 bills?* The answer given by Edgar Meister, one of the directors of the Bundesbank, was that Germans had gotten used to having a 1000 Mark banknote, and that if the largest Euro banknote were worth less, people would think this new currency was a weakling.

Eine Währung, die es sich leisten kann, mit so hohen Noten herauszukommen muß wertbeständig sein.

A currency that can afford to produce such large banknotes must be solid.

As everyone knows, that’s why Germany produced this 50 million Mark note in 1923: (more…)

Utility of the Devil

I very much enjoyed reading Richard Thaler’s book Misbehaving, on behavioural economics and his own role in its development. It occurred to me that the basic lessons of that soi disante science may be summarised by a variant on a famous Rolling Stones song:

You can’t always know what you want…

But if you don’t try, most of the time

You just might find you want what you know.

Shut it down!

From John Holbo I got this link to weird libertarian rantings by a financial journalist I never heard of. I was particularly struck by this Randian comment

Maybe we should shut Wall Street down for 24 hours, see how everybody who blames Wall Street for everything likes that.

Well, what would happen? I think I know a fair amount about the role of financial markets in the economy, and while I don’t consider them useless, I really can’t see what the problem would be if they were shut down for 24 hours. Not only that, I’m not even sure what their staunchest defenders might claim the problem would be.

In fact, didn’t we try this experiment already? The NYSE, and pretty much all the New York financial industry got shut down for several days or a week after the 9/11 attacks. Did anyone mind? I’ve heard a lot of commentary about the impact of 9/11, and I’ve never once heard anyone even suggest that there had been negative consequences to closing the financial markets for a week.

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.

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