Markets still don't like racism

As I've written before, you'd expect competitive markets to drive out racism. If firms have "tastes" about which workers they will hire, or they value labour from some groups at less (or more) than its true product, they will be driven out of business. This is the theory—but it's also the evidence. And yet more evidence has added to that we already had.

The first paper, an NBER working paper by Nathaniel Hilger, asks why Asians have high income despite a history of intense racism directed towards them. He finds:

Asian Americans are the only non-white US racial group to experience long-term, institutional discrimination yet today exhibit high income. I reexamine this puzzle. I focus on California, where most Asians settled historically. Asians achieved extraordinary upward mobility relative to both blacks and whites for every cohort born in California since 1920. This mobility stemmed primarily from gains in earnings conditional on education, rather than unusual educational attainment. Historical test score data suggest that low initial earnings for Asians—unlike blacks—primarily reflected prejudice rather than skills. Asian history is consistent with the view that racial earnings gaps driven by contemporary prejudice do not persist in sufficiently competitive labor markets.

Asian Americans used to be paid less than their test scores would suggest, but this evened out over time as competitive markets drove out prejudice. Another paper, by Devah Pager, looks at the same question by focusing directly on bigotry and firm failure:

Economic theory has long maintained that employers pay a price for engaging in racial discrimination. According to Gary Becker’s seminal work on this topic and the rich literature that followed, racial preferences unrelated to productivity are costly and, in a competitive market, should drive discriminatory employers out of business. Though a dominant theoretical proposition in the field of economics, this argument has never before been subjected to direct empirical scrutiny. This research pairs an experimental audit study of racial discrimination in employment with an employer database capturing information on establishment survival, examining the relationship between observed discrimination and firm longevity. Results suggest that employers who engage in hiring discrimination are less likely to remain in business six years later.

Turns out markets are fairer than you might think!

HyperDramatisation: How Adam Curtis was consumed by a fictional reality

The thesis of Adam Curtis’ HyperNormalisation is that over the last 40 years technocratic risk managers and utopian fantasists have fed us a simplified fictionalised reality. The notion that suicide bombers, developments in AI, austerity, “cyberspace utopianism”, Prozac, the efficient market hypothesis, and your newsfeed share an origin story is certainly an audacious proposition.

As such, Curtis has to treat very ordinary political phenomena as shocking, revolutionary developments. Did you know, for instance, that governments lie? And international alliances change? And Russia disseminates propaganda? A lot of events are reduced to caricature. The Syrian civil war can apparently be traced directly and unambiguously to Henry Kissinger’s realpolitik approach to the Middle East peace process. Other important contemporary issues, such as Egypt’s shifting agenda following Gamal Adbel Nasser’s death in 1970 and the precarious position of Syria’s ruling (Shia) Alawite minority, are not mentioned.

Curtis seeks to frame the modern world as peculiarly defined by disillusion, deception, cynicism, manipulation, and injustice. However, there’s no reason to think any past period was somehow different. Curtis suggests that a significant transition happened in the 1970s, focusing on New York City’s fiscal crisis and its subsequent ‘takeover’ (in reality, budget management) by the Financial Control Board.

Curtis’ characterisation of the ideology purportedly behind this (he never uses the word ‘neo-liberalism’) as being premised on belief in stable systems and the infallibility of predictive modelling is a major distortion. If anything, the best (and not infrequently made) argument for free markets is that economic planning is impossible and price signals are necessary precisely because the future is unpredictable and the economy is never in stasis.

Curtis also bemoans a purported retreat of radicals away from politics and into art and irony. He fails to make a convincing case that, to the extent that this happened, it’s actually negative. Curtis quotes Patti Smith criticising large collective movements as stifling and perversely bureaucratic. Nothing suggests she was wrong, and it is odd to think she contributed less to humanity by making music than she would have done if she’d spent her time reading Trotsky. Occupy and the Arab Spring are portrayed as failing because they organised spontaneously and eschewed hierarchy. Revealingly, Curtis refrains from actually endorsing explicitly hierarchical social movements.

The implication that progress can only be achieved through government and collective movements is pernicious. Progress happens incrementally and experimentally in a deregulated environment. For all the dismissal of ‘techno-utopianism’, the Internet has provided enormous benefits for millions of people. If this comes at a price of more sophisticated marketing and people indulging in narcissism, trivia, and echo chambers then it’s still a good deal.

If Curtis is describing something novel, it’s only greater access to information. Reagan did not invent the cultural myth, Blair’s rehabilitation of Gadaffi was not the first clumsy sham marriage of realism and idealism, and the Iraq War was not the first foreign policy disaster founded on lies or mistakes. The only difference (perhaps) is that people have become more aware.

Parts of HyperNormalisation are illuminating, such as the discussion of Trump’s imperviousness to fact checking, the explanation of Vladislav Surkov’s propaganda techniques, and the revelation that Bashar al-Assad had a brother called Basil. However, ironically, by including and connecting everything that’s happened since 1975, Curtis ultimately only manages to portray a simplified, conspiratorial fiction himself.

Yes, we do know what to do it's just being allowed to do it that is the problem

Quite how schools should be run and by whom is one of the great battles of our times. The reason this is a battle is because the government pays for them thus politics defines how they should be run and by whom. Which brings us to the Academy movement, or as it is in the US, the charter school movement.

At which point we have the New York Times. Yes, they're inherently liberal in that American sense, statist even, but if even they are getting the message perhaps there is hope yet:

The briefest summary is this: Many charter schools fail to live up to their promise, but one type has repeatedly shown impressive results.

Hannah Larkin, the principal at Match, refers to such schools as “high expectations, high support” schools. They devote more of their resources to classroom teaching and less to almost everything else. They keep students in class for more hours. They set high standards for students and try to instill confidence in them. They focus on giving teachers feedback about their craft and helping them get better.

Schools that actually try to teach pupils, which monitor the ability of teachers to teach pupils, work well. Our word, fancy that.

Finally, no matter how successful charters may be, they undeniably make life uncomfortable for some people at traditional schools.

Quite so. But what are we running schools for, the education of the children of the comfort of those doing the educating? 

Let us rephrase that. We are, with the defence of traditional as it is now schooling, arguing that schooling should defend the interests of those doing the educating. But what we should be defending is the quality of the education received, not the quality of life of those doing the providing.

Or as it should be put, that free market in education methods tells us, teaches us, which method works. And our method of measurement is and should be - sod the teachers, what about the children?

It doesn't matter who wins the Presidential election, Trump or Clinton

Contrary to popular belief it does not matter who wins America's coming election. Sure, there're all sorts of noises made here and there about how it's the end of civilisation. Either way, who ever gets in, dependent upon who you listen to. But we're here to tell you this isn't true.

For America needs no more governance. There just are no more things that anyone needs to decide upon. Everything is solved. This must be true or this would not be happening:

The U.S. Food and Drug Administration (FDA) considers doing something that may affect Nutella lovers' consumption of the popular chocolate-hazelnut spread. It might change the recommended serving size on its jars. Alongside this, it wants to know how consumers eat the spread: on bread or crackers, on cupcakes, or straight from the jar?
According to CNN, the current recommended serving size is two tablespoons or 37 grams. This amount is equal to 200 calories. Ferrero, the maker of Nutella, thinks a smaller serving amount, which also means fewer calories, might make consumers more likely to buy a jar. For the past couple of years, the company has been petitioning FDA to do the changing.

Yes, really, the vast federal bureaucracy is polling the public to ask whether they use one or two tablespoon fulls as their typical serving of a hazelnut spread. No, really, it's here.

Bernard Levin once pointed out that he was just overjoyed to live in a country where the Advertising Standards people adjudicated upon the crispiness of crisps. For only a society which had solved all other problems would possibly divert resources to this sort of question.

And thus elections are of no more moment in the US. All important matters have been solved and we are now down to whether we should warn of 100 or 200 calories on a jar.

We're done, obviously, elections, government, all solved.

Why does this surprise anyone in the slightest?

Certain things in this world are just obvious. Demand rises the cheaper things become and if you make something free at the point of use then demand will be very high. Possibly even higher than you or anyone else is willing to pay for - for of course even things which are free at the point of use have to be paid for somehow.

So why this surprises anyone is unknown:

Millions of patients are putting unnecessary strain on the NHS by seeking medical help for minor complaints such as colds, insect bites and dandruff, according to a report.

Overloaded GP surgeries and A&E units are having to divert scarce resources into dealing with flu, sore backs and travel sickness, the Local Government Association said.

One of the functions of pricing is to actually ration access to such services. No, not to stop the poor from getting their due, but to stop those who don't need the services from blocking access to those who do.

Even the famously more liberal and socially democratic than we are Swedes have got this message. A visit to the equivalent of a GP costs money, real money. Not a lot, it is true, and there's a cap on the annual amount but enough to make people think about whether a sniffle best treated with a handkerchief is really worth some portion of an hour's time from a paid professional.

It works too - as anyone with even a passing knowledge of supply, demand and the role of prices in balancing them would know from the outset.

Sadly, we're ruled by those who don't know these things, aren't we? Or at least our health care is managed by those who don't.

Cannabis tampons: an answer to the period problem

A US company called Foria has just released cannabis-infused tampons made from cocoa butter, THC oil and organic hemp. Although they’re currently expensive and unapproved, they offer pain relief that many users say is more effective than any other form of PMS painkiller without giving off the psychotropic (“high”) effect.

It may sound gimmicky and silly, but it brings to light a worldwide (and somewhat taboo) problem women face that has huge social and economic consequences: periods. According to a study by Cleanmarine, seventeen million days of work are taken off annually in the UK due to PMS, with a third of women taking four or more days off every year. This makes sense, considering a NHS survey found that 90% of women experience period pain and 14% of women are frequently unable to work because of it.

The economic impact of PMS is somewhat hard to gauge, although it is clear that periods set back women to a greater or lesser extent across the world. A US study showed that women who have heavy periods are 72% less likely to be working as women with normal or lighter periods. This amounts to an annual $1692 income loss per woman with a heavy flow, and this figure is likely to be even higher with inflation taken into account.

The economic losses associated with menstruation are heightened in poorer countries. Nearly one in four Indian schoolgirls drop out of education as soon as they get their period, primarily because they are quickly married off. However, even the girls who stay on at school miss on average 60 days of school per year because of menstruation due to lack of sanitary products. The economic and social repercussions of women not going to school are huge, with one study showing that GDP goes up by 0.3% with every 1% increase in girls attending secondary school.

Although British women are not suffering the way women in places like rural Uganda are - where 11% of girl’s school days are missed due to periods – menstruation’s impact on workplace productivity cannot be ignored in any country. Taiwan, Japan and Indonesia all see period pains as such a limiting factor on women’s workplace productivity that they all offer for paid menstrual leave.

However, again, paid menstrual leave costs the economy and raises gender equality questions, as men may feel resentful about covering women’s lost work and women miss out on workplace experience that may help them further their career. Women may also be accused of cheating the system, particularly as it is hard to prove how much pain a person is actually in. When the concept of menstrual leave was debated at the Festival of Ideas in Cambridge, an Indonesian boss said that many of his female workers who took time off for PMS turned out to be taking time off to go shopping together.  

Of course everyone should be entitled to take time off when they are in too much pain to work, but effective pain relief – such as cannabis tampons - addresses the root of the problem of PMS in a way that legislative sick leave does not. As we can see with schoolgirls in India, when women are forced to take time off because of menstruation, it is harmful to both them and the economy. Supporting scientific innovation which allows women to get on with their life and work is therefore the answer.

A fascinating question about womens' health care

Nadia Sawalha has revealed that vaginal birth under the NHS has left her mildly incontinent. In The Guardian we are told that this doesn't happen in France. Women who have given birth in the traditional manner are, there, given a course of physiotherapy including the use of Kegel weights and electrical stimulation of the pelvic floor.

This sounds to us like a very useful thing for a health care system to be doing and the question becomes, well, why do they and why do we not? 

Of course, while the embarrassment or comic potential of this kind of procedure is high, there is a serious point to make. Although electrical stimulation can be prescribed on the NHS, referrals to special “continence centres” aren’t routine. And an estimated 50% of women don’t seek treatment in the first place. But with the necessary, fairly small equipment, this treatment could even be offered – as it is in France – by local professionals rather than at specialist centres.

So, why in the UK are we encouraged by adverts to accept incontinence pads as inevitable when in France doctors routinely prescribe this treatment (as well as physio for the abdomen)? And since when did incontinence get euphemised with the term “sensitive bladder”?

Whether the problem is our inability to talk about it, or simply that the treatment isn’t commonly offered, it’s hard to say. But, if I, as a serial birther, can now leap on the trampoline with glee – surely British women, too, should be offered the chance to swap a few hours of embarrassment for a lifetime of dry knickers?

We would insist that the answer is in the structure of those health care systems. The NHS is, as we all know, a monolithic abhorrence planned along almost Stalinist lines. The treatments on offer are those the bureaucracy thinks should be on offer, in the volume and at the time and place deemed suitable by the bureaucracy.

The financing of the French system is mildly different but it does devolve to government guaranteeing treatment for all. But that guarantee covers myriad suppliers. That is, they have a multiple provider of health care environment. There are for profit suppliers, charitable, government owned, self-employed and just about every other possible and potential form of economic arrangement. All of whom compete for those government guaranteed and insurance company funds as the individual patient picks among suppliers.

That is, they have a market in the provision of health care even if there's a substantial state element in the financing of it. And as happens in markets, however financed, suppliers end up supplying what it is that consumers think best increases consumer utility.

Such as, for example, improving pelvic musculature among post-partum women.

Why do British women not get this routine in other places addition to their health care? Because the NHS. Why do French women get what improves their lives so much? Because not-NHS.

Markets deliver what consumers want as consumers exercise their choices. Monolithic bureaucracies, not offering choices of supplier, do not offer what consumers want. Which is why we want to have, with significant involvement of government in financing and even regulating health care, markets in the provision of health care.

That mothers should be able to partake of carefree leaps upon a trampoline may not be a convincing argument but a lifetime of dry knickers for all mothers seems like a reasonable enough goal. We do already spend 10% of everything on health care and it only needs a tweak to how we organise that spending to reach the goal.

A doctor’s mandate

Following today’s High Court judgment, it’s an easy commonplace that the Brexit project has been thrown into disarray. Better to take a clinical look at its effect upon the heart of May’s claim upon authority: the timing of an orderly process. Our unelected Premier has to control the pace of events, lest the ups and downs of Brexit negotiation spill over into delays by investors and recruiters or into acute market volatility. Given enough time, one or the other is bound to threaten the real economy and undermine her command. 

We gather that the Supreme Court is to pronounce definitively in mid-January. Notwithstanding the apparent clarity of the lower court judgement, this gives time for the Attorney General to come up with arguments for a reversal. The Court may even welcome them as excuses to avoid the disrepute of frustrating the popular will. 

If not, the parliamentary manoeuvre of an affirmative resolution (a simple yes-no vote - sounds familiar?) may cow such inclinations in the Commons. Save for one or two Remain zealots, the current mood on the Tory benches would be to support such a resolution. And with seventy percent of sitting Labour MPs coming from constituencies voting Leave, Corbyn is most likely to avoid embarrassing them by whipping abstention, failing which a free vote. Such manoeuvres may even dish the Lords for the time being, but make no mistake: they will not scruple from kicking over the traces once they see the Great Repeal Bill. 

In addition, some lawyers are saying that such a vote might also be open to court challenge, and that only a conventional bill with full scope for amendments in both Houses satisfies today’s ruling. If this is right, May’s momentum is definitively challenged by an adverse ruling on appeal. The government’s resort can only be faster enabling legislation. The conventional device, a guillotine motion, risks upsetting the Commons and in any event has restricted purchase upon the Lords. In such circumstances, May will have all the excuse she needs for a snap election. It is hard to see how she would fail to increase her majority, campaigning on the platform of a doctor’s mandate to implement the referendum in an orderly fashion without giving the game away to the other side. 

Given the incidence of the holidays, the earliest date for an election would be mid-February. May also needs a good reason to call it. Paradoxically, a disobliging ruling in mid-January, however unwelcome, would be just the ticket. 

It's possible that some people aren't quite getting the point of this vaping thing

A little discovery from detailed research in foreign. Some governments might not be quite getting the point or purpose of this whole vaping thing. We have discovered in Portugal that vaping, as opposed to smoking, is very much a minority pursuit. So much so that it is actually rather difficult to find the equipment, accoutrements and supplies.

We think we might have a clue as to the reasoning too. The Portuguese government has decided that the nicotine contained within vaping supplies should be paying tax just as the nicotine within cigarettes does. Got to keep that all important government revenue flowing in after all. This means that when purchasing vaping juice one picks a flavour, as in other places. But that flavour, that juice, contains no nicotine. Not quite the point.

The nicotine is then added from tax paid containers of the stuff to the desired strength. The imposition of the tax then makes the completed juice some 5 times more expensive than it is in one other continental country of our experience.

This might just be a clue as to why vaping incidence is so low in Portugal.

If you view vaping as just another example of Big Tobacco oppressing the masses then of course this makes sense. If however you think of it as a substitute, one with near (comparatively at least) no health implications then it may well not be all that sensible.

We would tend to the not sensible end of that spectrum of possible descriptions.

A quickie divorce, step three: the financial settlement

We now reach the final element in a quickie divorce: the financial settlement.

A one-off payment, probably in the single billions, will be necessary to cover items such as the UK’s share of EU pension and other future obligations, balanced by its share of buildings and other tangible assets.

Any periodical payment would be to cater for specific programmes that the UK found valuable, such as the Erasmus scheme of student exchanges. This might be a periodic payment in the hundreds of millions.

Some people suggest that the UK might be bulldozed into periodical payments for passporting financial services. City sources claim that as much as 20% of tax receipts from the City (£13.3bn) might be at risk from the loss of passporting or other disruptions. But sums like these are hard to credit, for at least half a dozen reasons:

* International banks do pay around 20% of total taxes sourced from the City, but only a fraction of their activities benefit from passporting into Europe. Passporting is intended to protect consumers, whereas City institutions largely deal with each other or leading commercial or industrial corporations.

* Also, international banks are but one of the City’s activities: others include the UK-based banks providing consumer, industrial and mortgage lending; as well as non-banking activities, including asset managers, currency dealers, hedge funds, life and general insurance and private equity; together with professional services including actuaries, fintech, law and risk-management. Almost none of this is vulnerable to the loss of passporting.

* If, moreover, the international banks concerned are European, they benefit from passporting into the UK, reversing the balance of arguments on the topic.

* Most UK collective investment vehicles operate via the Channel Islands, Dublin or Luxembourg, rather than using their passport from London. This tells us that a low-tax regime means more to them than any gains from passporting. Once again, this opens the way for the UK to revisit its tax regime to make the balance more attractive.

* Since passports were introduced, the growth of UK financial exports to the EU has barely improved. Meanwhile, UK financial exporters sell without passports to their two largest markets, Switzerland and the US.

* Finally, City institutions will adjust. They will find new sources of revenues, to serve as the wherewithal for future tax receipts under whatever regime then applies.

No one knows what the right figure for the sums at risk might be, but no reasonable estimate of them amounts to a good reason to pay into Brussels.

Try a thought experiment: imagine what the EU would charge the UK for full participation in the pertinent aspects of EU decision-making on financial services (one of the main concerns of City Remain voters). To make such participation worthwhile, it would have to include a UK veto on regulations affecting the City, with dispute resolution under the binding arbitration described above. Plainly, this is a pipe dream, which only reminds us of the limits to what a financial settlement can achieve.

-o-

The thrust of these three blogs has been that it is unrealistic to expect too much from prolonged (let alone detailed) negotiations. The EU-Canada trade deal debacle tells us that Brussels will find it close to impossible to develop a position which satisfies all its members. Its negotiators will be discouraged from offering any kind of flexibility to the UK, for fear that concessions are demanded elsewhere. Most of all, the EU has so much else on its plate that it would be delighted to do without the distraction of Article 50 negotiations carrying on till the second quarter of 2019.

The UK has no reason to make things unnecessarily tough for our neighbours. A quickie divorce eases the position for them and cultivates desirable conditions for us: reducing uncertainty at home and overseas, making the best of the EU’s own market and accelerating new departures in international trade.