Why we stand up to bullies

Bullies succeed by making their victims fear them. The bully may be stronger than the victim, but he does not constantly use force against them. It is the fear of violence or humiliation that makes victims act in the way the bully wants them to.

Once it has been established that the bully can hurt the victim, the threat is enough. Maintaining that threat is relatively cheap for the bully and for a sadist this may seem like a good deal. This might also seem cheaper for the victim, because the costs of direct confrontation may be very high.

When we tell children to stand up to bullies we do not expect that they will turn out to be stronger or more popular than them, though this is what usually happens in fiction. We assume that standing up to a bully will cause the victim to be hurt or humiliated. But it does make it more expensive for the bully to maintain his power over the victim.

Standing up to the bully means that his actions may not have the long-term effects that make them profitable. And it is good to have a general social agreement that bullies are bad, and should be stood up to. It discourages people from trying the tactic in the first place.

Terrorism often operates in the same way. Very few terrorists could ever hope to win in a full-scale war against their victims, so instead they do shocking, frightening things. Yesterday’s attack on the Charlie Hebdo offices was a very significant example of this, because the terrorists’ apparent goals (‘avenging the Prophet’ for blasphemous cartoons) seem ridiculously trivial compared to the lengths they were willing to go to to achieve them.

It is now clear that Western journalists who blaspheme against Islam may be murdered where they work. And most Western journalists don’t really want to blaspheme against Islam anyway. It’s rude, and it’s rude against a group that does not have much power in the West.

What’s more, that kind of wilful rudeness may drive moderate Muslims away from Western liberalism towards Islamic extremism. On the other hand, I’m not sure a person whose respect for free speech ends at a blasphemous cartoon was much of a moderate to begin with.

But if a bully tells you not to do something, sometimes you should do it even if you didn’t really want to do it anyway. Defiance of the bully is very important to rob him of his power over you, and – just as important – to show to others that bullying is not effective.

Simply talking about how unafraid we are of terrorism is an empty, weak reaction. Cartoons that show the power of pencils are worthless. No Jihadi is disturbed by any of this. What disturbs them is to show in our actions that they do not have the bully’s power over us. The cost of rudeness is real, but it is insignificant compared to the cost of letting bullying work.

Ideas can mean the difference between wealth and poverty

Adam Smith never said that “The real tragedy of the poor is the poverty of their aspirations”, as some people who have never read him think. It is hard to think of a less Smithian view – he was the opposite of that quote’s patrician and patronising voice, and had a deep compassion for people who had been unlucky in life.

But there is some evidence that disadvantaged people underinvest their savings at a huge cost to themselves. This seems to be true even when there are no social constraints or market failures that might cause this to happen.

One reason for this may simply be that poor people do not realise that the investment opportunities exist, or do not really consider that they might benefit from them. Consider those bright young students from deprived backgrounds who have never even considered applying to university, just because nobody in their families ever has either. Your experience of the world shapes how you react to various opportunities that you get.

To test this hypothesis, a group of researchers at Oxford performed a controlled trial in remote Ethiopian villages, where they showed one of several one-hour documentaries about poor Ethiopian farmers who had expanded a business, improved their farming practices or broken cultural norms by, say, marrying for love. “Individuals succeeded largely through their own efforts and by drawing on assistance from community members and available resources, not through outside government or NGO intervention.”

The trial involved a placebo group (shown a comedy movie) and a control group (shown nothing at all) and it seems to have been a success. Six months after the screenings, the documentary group’s savings rate had risen significantly above the control group’s and had also begun to access credit at a higher rate. (These are some of the poorest people in the world, so the absolute amounts – a few pounds – may seem very small to our eyes.)

School enrolment was up by 15 percent in the documentary group, although it was also up by 10 percent in the placebo group so the effect is unclear, and spending on school expenses was up by 17% (compared to no change in the placebo group).

Overall, the results seem to show that showing extremely poor people examples of people like them who had made something of themselves inspired them to invest in themselves and their families.

It’s just one study, but it hints at something bigger. Incentives matter, of course, but you have to be aware of the existence of an incentive for it to work on you. Even if you’re aware of it, you might discount (or exaggerate) its significance according to your experiences. In a complex world, each of us uses a different pair of glasses to focus on what matters and filter out what doesn’t. And no pair is perfect.

There is no obvious public policy lesson from any of this, except perhaps that people don’t always react predictably to incentives. Incentives matter – but so do ideas.

Space disco, Kate Bush, and more: the ASI’s best of 2014

Ben:

Song: #####.1 by #####

Album: It’s Album Time by Todd Terje

Musician: The Pizza Underground

Movie: Grand Budapest Hotel, but I’m ashamed to say I only saw five

Book: Pale Fire by Vladimir Nabokov

Restaurant: Rex and Mariano, Soho (runner up The Manor, Clapham)

Favourite article: I Can Tolerate Anything Except the Outgroup, by Scott Alexander

Favourite moment: #Gamergate

Favourite person: Scottish highlander on BBC Question Time

Kate:

Song: Wild Child by Kenny Chesney, with Grace Potter

Album: 1989 by Taylor Swift

Musician: Jason Aldean (for continuing his tradition of writing songs about trucks)

Movie: Magic in the Moonlight

Book: Goodbye, Mr Chips by James Hilton (1939)

Article: Bring Back the Girls – Quietly by Peggy Noonan (WSJ)

Political moment: #Bridgegate

Person: Senator-elect Cory Gardner, CO (I have now forgiven Colorado for their nightmare decision in 2012. Ohio, on the other hand, I am still not speaking to)

Charlotte:

Song: minipops 67 [120.2][source field mix] by Aphex Twin (because it only took 13 years to come out proper)

Album: Rivers of the Red Planet by Max Graef (jazz/hip-hop/house, good background music)

Musician: Kate Bush (the year I got round to listening to her albums)

Movie: Under the Skin (amazingly shot)

Book: Perfume: The Story of a Murderer by Patrick Suskind (one of the few I actually read)

Restaurant: Bone Daddies, Soho (who can’t love a huge bowl of pig fat & garlic)

Article: The Socialist Origins of Big Data - The New Yorker (on Chile’s project Cybersyn)

Political Moment: The world thinking Kim Jung Il’s public absence was because he broke both his ankles because he ate so much Emmenthal (because obviously)

Person: Shia LaBeouf (for everything he’s given us)

Sophie:

Single: Shake It Off by Taylor Swift (I do not enjoy this song but LOVE watching Charity, one of my best friends and Swift’s greatest fan, singing it)

Album: Artpop by Lady Gaga (the pop genius’s works are not only the epitome of freedom of expression and individualism but Gaga demonstrates the natural force with which the world sucks up anything walking into a gaping hole in the market)

Musician: Kate Bush (my eyes opened to her brilliance and creations this year by Sam, her sounds and voice open creative avenues in my mind)

Movie: La Grand Bellezza (released 2013 but watched this year, you MUST see this, it’s an indulgent party for the senses to devour)

Book: The Rational Optimist by Matt Ridley (only read this year though it was released in 2010)

Restaurant: Le Relais de Venise, Mansion House (holds fond memories of both an amazing steak and my first time dining with the ASI team)

Political moment: remaining a United Kingdom (were endless obscure and hilarious ones in 2014, though building up to the referendum for two years and the elation experienced at the result makes this undoubtably number 1)

Person: Malala Yousafzai (the 17-year-old global role model is courageous, ambitious and hard-working, existing to fight for others’ education—I was reduced to tears of inspiration when she spoke at my university)

Nick:

Song: Fancy by Iggy Azalea and Charli XCX (albeit for entirely non-I-G-G-Y related reasons)

Album: Kenny Dennis III by Serengeti (see No Beginner, Off/On)

Musician: Jonwayne (partly for being the neckbeardiest rapper/producer going – see Andrew, Be Honest)

Movie: Locke (of the four or so I watched)

Book: Time’s Arrow by Martin Amis (1991) or The Rise of the Meritocracy (1958) by Matthew Young (honourable mentions to We by Yevgeny Zamyatin (1921) and Girl, 20 by Kingsley Amis (1971))

Restaurant: Jam Jar, Jesmond, Newcastle, if only for their Cow vs. Pig burger

Article:Tories should turn their backs on Clacton’ and ‘Voters, not the politicians, are out of touch’ by Matthew Parris, King of trolls (Times)

Political moment: The UKIP defections and the resulting betting, which netted me a sum of no less than £10

Person: For me, 2014 was the year of the unimullet (s/o r/YoutubeHaiku)

Sam:

Song: Attachment by Hannah Diamond (My top 50 singles of the year are here, Youtube playlist link here)

Album: It’s Album Time by Todd Terje (Thanks Ben for introducing me. I also enjoyed FKA Twigs’s album LP1 and got into Susanne Sundfor in a big way this year)

Musician: AG Cook / the PC Music grouping in general

Movie: Interstellar (but I only saw about 5 films all year)

Book: Vanished Kingdoms by Norman Davies (Worth it for the chapter on the Kingdom of Dumbarton Rock alone. Matt Ridley’s The Red Queen, on the evolutionary biology of sex, was a close runner-up)

Restaurant: Santana Grill (a burrito stand on Strutton Ground near the office—just delicious; I also ate at KFC at lot)

Article: An open letter to open-minded progressives, by Mencius Moldbug (I disagree with much of Moldbug’s work, but I can’t think of a more interesting contemporary political thinker)

Podcast: Serial

Political moment: Shinzo Abe storming to victory in Japan (also for his amazingly awkward handshake with Xi Jinping)

Person: Richard Dawkins (boring as an atheist, brilliant as Social Justice Warrior-bait)

Philip:

Song: Turn Down for What by DJ Snake and Lil Jon

Album: Syro by Aphex Twin

Musician: Matador

Movie: Guardians of the Galaxy

Book: Intuition Pumps and Other Tools for Thinking by Daniel Dennett

Restaurant: Gymkhana, Mayfair

Article / blogpost: How Farming Almost Destroyed Ancient Human Civilization by Annalee Newitz

Political moment: The landing of the Rosetta spacecraft’s Philae probe on Comet 67P

Person: David Sinclair (for his work on lifespan extension)

Local government cuts needn’t be the end of the world

Local governments are having their spending power cut by 1.8% in real terms next year. Local councils pay for things like social care, some education, public transport and roads, and some of the arts. So this cut is not so popular in some quarters.

I hate relying on ‘waste cutting’ as a way of making spending cuts, but local councils really do seem to waste a lot of money. Since 2010 they’ve made £10bn in efficiency savings, and a third of councils say they can make bigger savings. I’m sure at least some of the other two-thirds are just being shy. The Local Government Association estimates that local governments can continue making efficiency savings at between 1 and 2 percent per year. So that’s something.

The big spending items are social care and waste spending. Both of these can be reformed so that people who can afford to have to pay for themselves. Waste collection is often contracted out, and there is academic evidence that doing so results in significant cost reductions. (There’s an easy way for councils who do not already do this to save some cash.) But more significantly there’s no real reason that more of the actual payments for this should not be moved to private residents as well, at least those who can afford it. 

Social care is much trickier and, as the population gets older and lives for longer, paying for it is becoming a bigger and bigger problem. Those people who can afford to pay for their end-of-life care should do so, but there is the problem that this disincentivises saving. Nevertheless it is hard to see a case for people who live in social housing and earn low amounts of money paying for the end-of-life care of people who own the big houses that they live in. Reforming this wouldn’t solve problems in the short run, but it might help stave off a bigger funding problem in the medium run.

Normally everyone focuses in on arts funding. In my view, there is no role for government in arts funding at all. I won’t convince you of this here, but Pete Spence might. And there are all the weird little things that local governments spend their money on that could be cut to save even a tiny bit of money. Where I live, in Lambeth, half the adverts I see seem to be thinly-veiled political campaign posters (paid for by me and my neighbours).

And, funnily enough, there’s one way councils could raise quite a lot of money and solve another problem in the process. The country needs a lot more houses, and planning permission is the main thing standing in the way. In some parts of the country, a piece of agricultural land that gets planning permission rises in value by one hundred times. Councils should be allowed and encouraged to auction off development rights for new houses. That would raise money for them and help tackle the housing shortage.

The problem here is that housing demand is not equal across the country, and it’s the richer places like London and the south east that would benefit the most from this. So there’s probably a case for some minority fraction of the money raised being redistributed to poorer authorities. In general I like the principle of council funding redistribution from rich to poor parts of the country, but that does reduces the incentive for councils to improve the economic prospects of their own areas. Though perhaps they lack the powers to do this anyway.

We have a government deficit that most people want reduced, some very large areas of central government spending that most people want increased (pensions, healthcare), and a general consensus that economic growth is a good thing (so tax rises are out). Something’s gotta give and there is almost nothing that can be cut painlessly. But given some willingness to reform alongside cutting, local government cuts could be the right way to go.

A miracle cure for central bank impotence

Are central banks ever unable to create inflation? The question may seem absurd – why would we ever want them to create more inflation?

The typical answer is that deflation can be a lot worse than inflation. But this ignores the fact that prices can fall simply because we can produce things more cheaply. Falling oil prices mean cheaper production, which should mean cheaper consumer products. That’s ‘good’ deflation.

But ‘bad’ deflation, caused by tight money, can be very harmful, and indeed is what Milton Friedman blamed the Great Depression on. A variant of this view, which looks at market expectations, blames expectations of deflation for the crisis in 2008. Those of us who think that nominal GDP is what matters – since contracts and wages are set in nominal terms – recognise that deflation can knock NGDP off-course and cause widespread bankruptcies and unemployment that would not have taken place in a more stable macroeconomic environment. (Free banking, say.)

So if inflation is sometimes desirable, when it prevents deflation (or collapses in NGDP), the power of the central bank to create it really does matter. That’s where Paul Krugman and the Telegraph’s Ambrose Evans-Pritchard have clashed. In response to Krugman’s claim that central banks are impotent when their interest rates are zero, Evans-Pritchard writes:

Central banks can always create inflation if they try hard enough. As Milton Friedman said, they can print bundles of notes and drop from them helicopters. The modern variant might be a $100,000 electronic transfer into the bank account of every citizen. That would most assuredly create inflation.

I don’t see how Prof Krugman can refute this, though I suspect that he will deftly change the goal posts by stating that this is not monetary policy. To anticipate this counter-attack, let me state in advance that the English language does not belong to him. It is monetary policy. It is certainly not interest rate policy.

The piece is worth reading in full. I’m less convinced that ‘helicopter drops’ are actually needed now – if central banks said that they’d do as much conventional QE as it took to raise the inflation rate or NGDP level to x%, that may well be enough. But Evans-Pritchard’s basic point that central banks are never ‘out of ammo’ is what counts.