Sunday 31 August 2008

New Labour = fascism

Oh dear oh dear.

All in the mind...

I was googling around last week and found something that Matthew Taylor of the RSA wrote on his blog a few months back that chimed with what I've been thinking lately. Here's a snippet:

advances in related fields of inquiry and activity together amount to what could become a paradigm shift. One way of putting this is that instead of being concerned primarily with what we think about the world and how we act on this we may increasingly be concerned with how we think about the world.

By ‘what we think’ I mean conscious thought expressed through the always and ever present ‘voice’ in our heads, and though intentional verbal and written communication. By ‘how we think’ I mean the ways in which the unconscious processes of our brains condition our thoughts and behaviours.

Certainly it does seem that a lot of interesting stuff in the future is going to be based a lot more on an understanding of how we actually think, make decisions etc, rather than assumptions about our behaviour (ie that we will respond rationally to incentives).

Personally speaking, the George Lakoff stuff I've read lately has had a big influence on me. To be honest I find his attempts to apply some of his insights to politics far less interesting than the original theories themselves, which really do reveal a lot about how our minds work. If you accept the idea that our ways of thinking about the world are not abstract and machine-like systems but rather are deeply rooted in our human experiences (including basic experiences like movement) it does put a rather different perspective on things. It also suggests answers to why so many of our ideas don't work, and so many of our predictions are wide of the target. Often I think we simply don't properly grasp what we are dealing with.

Then you've got the rise of behavioural economics, seeking to apply insights from psychology and sociology to economic decisions. I find this stuff really interesting since it has had a bit of an influence already in two areas I've been involved in - pension reform and institutional investment (though the book that first got me interested was probably the Paradox of Choice). It helps explain why when we make economic decisions we don't act like the rational creatures we have been presumed to be. Very small influences, intended or not, can have a significant impact on our actions (for example, the way a game is named can change the way we play it).

My one reservation is that to date a lot of these developments have been better at highlighting how we get things a bit wrong, and make mistakes, rather than helping identify how we might do things better (though perhaps books like Nudge are starting to address that). But in general I think that Matthew Taylor might be right to argue that there is fairly significant shift taking place.

I think the Tories have been quite canny to talk about these kinds of ideas, though I'm still sceptical about the extent to which they will really apply them, as the recent food-labelling decision highlights. In addition I think that some of findings from these new areas of research pose some pretty big challenges for the typical right-of-centre view of the world. It continues to baffle me therefore why the Left doesn't take more of an interest and even champion some of these ideas.

Saturday 30 August 2008

Short review of The Sub-Prime Solution by Robert Shiller

Robert Shiller has written some very interesting things over the years. In my opinion Irrational Exuberance is still one of the best books to read about stockmarkets, and in the New Financial Order he set out some new ideas for democratising finance so that it better serves the public. This book (actually it's more of a pamphlet) draws a bit on the ideas mapped out in the New Financial Order as a way out of the current mess.

To massively over-simplify, Shiller says we need a mix of short-term sticking plasters and longer-term reforms. In respect of the former camp he says we have to accept bailouts as a necessary evil, even though it goes against the moral hazard arguments. he also suggests setting up a revamped Homeowners Loan Corporation which would take on mortgages as collateral for loans to mortgage lenders in return for influencing the form future mortgages take (in order that they offer a better deal to homeowners).

Turning to the longer term Shiller sets out 6 key policies - comprehensive financial advice (based on fees rather than commssions), the establishment of a consumer finance watchdog, the creation of more default financial options (not just pensions, mortgage arrangements could also be included), improved financial disclosure, to improve accountability, the creation of better financial databases which would help provide consumers with better advice and more tailored products, and finally and most radically the creation of new units of economic measurement, based on what things actually cost.

There are big plus points about this book. First, Shiller is willing to think big. he's effectively arguing for more financial innovation, not less, but also that the process should be carried out in a way that meets the needs of the public. Secondly he warns against scapegoating the financial sector. In the epilogue he argues that we should be focusing on the systems that went wrong, rather than seeking to punish the industry as a whole. As tempting as it might be to try to stick the boot into the super-rich in the City, that isn't really going to take us very far. Shiller instead is setting out some new ideas for how we might stop this kind of crisis arising again.

Friday 29 August 2008

TPA says don't even join the LGPS

The TaxPayers Alliance mob are reaching a new level of anger at the Local Government Pension Scheme (LGPS). Now they don't even want Tory councillors to join the scheme (just Tory ones, funny that an independent lobby group only appeals to one political party eh?). The 'argument' is that since the Tories want to cut back the LGPS (though the TPA aren't sure if it should be a DC or a DB scheme) they shouldn't let their councillors join it.

TPA campaigns director Mark Wallace said: "The Conservatives keep talking about public pensions and how they need reforming. With the LGPS they have a real opportunity to show their intent.

"They control the majority of local councils and could put a stop to their councillors joining the scheme. You can’t criticise the level of employer contributions in the scheme while you are at Westminster and then have your councillors signing up to it across the rest of the country."

So Councillors shouldn't even accrue a pension until what's on offer is less generous - no pension is better than an LGPS pension. This is getting close to an actively anti-pension stance, and is already very stupid one. Why not take it further - David Cameron and his colleagues should leave the MPs' pension scheme immediately and when they retire should repay their pensions to the state.

I'm not thick enough to think that increased life expectancy doesn't put pressure on public sector schemes, and that some reforms are probably inevitable, but the TPA don't contribute anything to addressing this. They are only interested in attacking what good pension provision remains without a clear idea of what should offered instead. They say that employer contributions to the LGPS are "very high", yet they are lower than comparable contributions in the private sector and many LGPS funds manage to keep other costs (admin, investment etc) much lower than average.

As I've said before, the real problem in pensions is the collapse of good provision in the private sector and that's where attention should be focused. Public sector provision hasn't suddenly become generous overnight, it's a reminder of what typical pension provision looked like in the public and private sectors a few years ago. Yet the TPA's ideological blinkers don't allow them to see this, hence they advocate vanadlising good provision purely because it's in the public sector.

UNI report on private equity investment

UNI has put out a useful little report (PDF) looking at pension fund investment in private equity as an asset class. It helpfully points out where the labour movement has representation in the funds that are investing in PE (actually this is quite common).

It's another sign that unions are developing another element to their engagement with private equity. So far we've had the air war - the 'fat cat' media campaigning - and policy engagement (ie lobbying for changes to taxation, for TUPE to apply to PE takeovers etc). But the next stage looks to be developing the capital stewardship role - finding out which of our pension funds invest in PE, and where we have trustees involved in the decision-making process.

The UNI report is good as it suggests ways that trustees can constructively engage, rather than firing them up to distrust PE as an asset class. And they've produced the set of principles below as a framework.

Global Principles for Private Equity
1. The goal of private equity deals should be to create economic opportunities that align the long-term interests of everyone and that build the value of a company.
• For customers this means a commitment to maintaining good quality services or products.
• For owners it means a fair and reasonable return on capital investment by means of increasing the efficiency and productivity of the company rather than cuts in jobs and benefits.
• For employees it means protection of wages and conditions, decent work and working conditions and fair treatment free of discrimination.
2. Private equity firms must recognize the role of the Global Union Federations in their respective membership areas UNI calls upon them to undertake to develop a global dialogue with the Global Unions.
3. UNI Global Union will endeavour to negotiate global framework agreements with the relevant private equity companies.
4. In these agreements, private equity firms will commit to abide by the core labour standards of the ILO, in particular Conventions 87, 98 and 135, the ILO Tripartite Declaration on Multinationals, and the OECD Guidelines.
5. Where a private equity firm is buying a company, existing union recognition must continue. Such union or unions must be consulted and be able to negotiate the terms of the workers’ participation in the deal and its effects.
6. Such consultations and negotiations should take place, whenever possible, prior to the deal being announced, but in every case prior to the deal being closed. The private equity firm will provide the union with details of the business plan for the company, including equity and debt levels, investment plans, earnings expectations, risks, and other information necessary for the union to be an informed negotiating partner with the company and its new owners.
7. Private equity firms, companies and unions must abide by existing collective bargaining agreements, whether national, industrial, company-wide, or plant-specific. There shall be no unilateral changes or elimination of terms without collective bargaining.
8. Where employees are not already represented by a trade union, companies will recognize their right to organize. The company will allow the union access to the employees. The company will not act in any way to discourage or prevent employees from joining or creating a union.
9. As part of a global agreement the private equity company will agree the most expedited, legally-permitted means for determining employees’ wishes to be represented for purposes of collective bargaining.
10. Private equity portfolio companies will sign up to UNI’s responsible contractor policy and only hire contractors that have a demonstrated record of responsible labour practices, including abiding by all applicable labour laws; honouring the right of workers to organize into a union; ensuring workers fair and decent wages and benefits; maintaining safe and healthful working conditions; maintaining a policy of no-tolerance for discrimination; and providing adequate training to workers.
11. Prior to exiting or ceding control of a portfolio company, private equity firms shall ensure that collective bargaining agreements and related agreements, including outsourcing arrangements and organizing procedures, shall be continued or assumed by the new corporate entity, owner or owners as a condition of sale.

Thursday 28 August 2008

HP sauce

Ooerr… I feel a bit disoriented by the mud-slinging that is going on over the attempt to ‘censor’ Eustonite blog Harry’s Place. You can read the background to the fight... errr... pretty much everywhere in the political blogosphere. But so far I haven’t found a view expressed that I really agree with, and much of commentary seems driven by political point-scoring in respect of bigger issues.

Here’s my random collection of thoughts:

• It’s extremely crap to threaten a blog with legal action because they say things you don’t like. Why not just ask them to remove the article/picture in question?
• It’s also crap to caption a photo naming an individual in a way that implies they have links to the far-right (rather than that they have posted a link to a far-right website), even if that wasn’t your intention. A newspaper could easily get sued over this.

• It is unbelievably stupid to post a link to David Duke’s website, and even a quick glance at said website should alert anyone intelligent to its perspective.

• If the link had been posted by, say, a Tory councillor who also claimed it was a mistake and also subsequently threatened legal action what would our response be?

• I have a problem with the whole strategy of ‘outing’ people for doing stupid things. For a site with a strapline that quotes Orwell, this reminds me too much of ‘orthodoxy sniffing’.

In general if there is one thing I hate it is the form of political discussion that seeks to focus on mistakes or trivial inconsistencies in others’ arguments in a way that (deliberately or otherwise) undermines proper discussion of larger issues. This only makes it less likely that people will say what they really think, and hampers out ability to talk to each other (which I consider to be a pretty fundamental requirement to sorting difficult issues out).

So bizarrely, despite my distaste for his politics and even though he clearly has his own agenda, I have a bit of sympathy for the arguments made by verbose Swuppie blogger Lenin, although he doesn’t rise above getting a ‘you’re just as bad as the Nazis’ jab in himself:

They have behaved unconscionably, thuggishly, in a manner that befits far right websites such as Redwatch (to my knowledge, one of the few other websites that posts photographs, personal information and inflammatory material about private individuals).

The pro-boycott mob in the UCU will (rightly) have been stung by this mistake, and maybe they ought to consider how it is that one of their number can read something written by a far-right nutter and not find anything wrong in it. I’m not at all suggesting that this implies that they are anti-semitic. Though I disagree with them I genuinely don’t believe that this is the case. But I do think it demonstrates that their arguments often degenerate to a cartoony level which really aren’t any more sophisticated than those propagated by the far right.

But equally let’s not pretend that publicly (and imprecisely) naming and shaming an individual for a foolish mistake in a way that may cause them all kindsof problems is some kind of noble expression of free speech. I bet the UCU member who is at the centre of this is getting all kinds of abuse since her name is plastered all over the interweb. Yet it’s Harry’s Place that gets the emotional expressions of solidarity for the terrible injustice it has suffered.

And what was the extent of this attack on free speech? The HP site was down for what, a day or so, whilst mirror sites sprang up immediately and the issue was plastered all over numerous other blogs. Somehow I don’t think Pastor Niemöller would beat himself up too much over this one.

Fidelity bungs the Tories another £30K

In May this year, according to the Electoral Commission website:

Conservative And Unionist Party [The]
Conservative Central Office
Fidelity Investment Management Ltd
status: Company
company reg no: 2349713
Oakhill House
130 Tonbridge Road
TN11 9DZ
£ 30,000.00

Coincidentally I've just done my first post on Labour Outlook about this very issue (before I had the latest figures though).

Chief execs earn less in unionised firms

This is from the US, would be interesting to see what the stats are like in the UK. Full article here.

A scathing report claiming that U.S. CEOs are earning outrageous pay packages while corporations fleece taxpayers through corporate bailouts and loopholes in capital gains, deferred compensation, stock option accounting and other financial rules was issued Monday by The Institute for Policy Studies, a Washington-based independent center for progressive research and education.

And, according to the Executive Excess 2008 report, CEOs at nonunion companies take home nearly 20 percent more than their fellow executives in unionized firms while workers in unionized organizations average $200 more each week than their nonunion counterparts.

Hat-tip: Iain R

Wednesday 27 August 2008

Tories fudge their first Nudge?

There is an interesting piece in the FT today that includes a bit about the Tories’ proposed approach to food labelling. Here’s the relevant bit:

Its proposed deal rejects the “traffic light” system of labelling foods for fat, sugar and salt content, favoured by the Food Standards Agency and used by some supermarket chains.

The Tories will commit to stopping government promotion of such traffic light labelling. Wednesday’s deal backs the rival “guideline daily amounts” (GDA) system championed by, among others, Unilever.

Given how much noise the Tories have been making about behavioural economics and social psychology this is a pretty weak decision. So much for their faith in Nudges.

As the article states, there are two different food labelling systems currently in operation. The ‘traffic light’ system provides colour-coded guidance on the salt, sugar, fat etc content of each product. So a something high in fat will get a red bar or segment for fat, but if it is low in salt will get green for that, and so on. This system is backed by the Food Standards Agency. More info about it here.

The other system is the Guideline Daily Amounts (GDA) system. Here the product comes with a label that calculates the amount of, say, fat a product contains as a percentage of the recommended daily intake. So each product provides a series of percentages. This system is backed by a group of food and drinks companies such as Unilever, Coco Cola, Tesco etc. More info about this system here.

Now which system do you think is actually more likely to influence consumer behaviour? One that states percentages, or one that is based on a colour code system?

Personally speaking I've experienced both and have a pretty clear view. I quite often get my lunch from Tesco, which operates the GDA system. I’ve got used to checking the percentages on the GDA labels. I guess I’m fairly health conscious so I might be slightly more likely than average to regularly check. Sometimes we get shopping in from Sainsbury's, which opertates the traffic light system. In this instance you really don't need to check, the colour coding gives you an obvious steer.

As a customer I definitely find the traffic light system easier. In addition it makes a difference to how you approach particular choices. In the colour code system I'm not going to even pick something up if it's got a lot of red on it - unless it's a treat. (Incidentally me and Mrs Tom already refer to a Sainsbury's label on product like a dessert that has all or mostly red on it as a Wheel of Death (!) so it's an easy system to get used to).

With the GDA system I have to pick something up and look at the numbers before considering whether to buy it or not - I suspect just having picked something up makes us more likely to buy it since we feel in some way it is ours.

Then I have to consider how the percentage stated will fit in with what I expect to eat later, and as such whether it will take me 'over the limit' in a given category. Again this might conflict with how we actually plan. I might tell myself it's OK to get the product with more fat at lunch because I will eat healthily in the evening. But when I get to the evening will I still feel the same way?

There's also a problem with the way that servings are dealt with. I noticed recently on the GDA labels the percentages don’t necessarily tally up with the content of the product. The GDA label may refer to, for instance, percentages for a typical 100g serving, whereas the packet you have in your hand might be 250g. I noticed this on a can of soft drink recently where the difference between the two figures would have been pretty dramatic as you can imagine.

I would suggest that a lot of people won’t even bother looking to see if the GDA label refers to the specific quantity of the product they are buying, they will assume it does. I didn’t spot this for a while, and I’m enough of a geek to be interested. In addition even if you do bother to check that means you are going to have to work out the actual percentages yourself. So to find out if what you are buying is healthy or not you will have to do a calculation. Most of us won’t find it difficult – though some will - but it’s another level of unnecessary complexity.

I think the traffic light system works on the same basis (ie the figures presented are based on a certain size serving) but that doesn’t affect the colour coding, which illustrates that the product has a high, medium or low amount of sugar, salt, etc.

Looking ahead you can see how the traffic light system could also be developed to increase its effectiveness. The size of the label could be increased, so everyone can easily see if you're clocking up a lot of Wheels of Death. In addition your receipt could include a little summary comparing you to the average consumer.

Taking all these factors into account, I would suggest that the traffic light system is going to be far more influential in improving consumer understanding (and helping consumers make healthier choices if they want to) than the GDA approach. The former seems to me to be quite obviously the better 'nudge'. Given all the recent Tory rhetoric this seems a particularly craven sell-out to that part of the food and drinks industry that is afraid of informed consumers.

Tuesday 26 August 2008

Animal spirits

It's a few weeks old but I just spotted this line in a WSJ article by former SEC boss Arthur Levitt:

A regulator can never, and should never attempt to, control the animal spirits of the market. When markets are going up should a regulator stop them? How can a regulator "decide" that the market is too high? That it is just a bubble? They can't -- no one can.

Defending public sector pensions

The Tories have made it crystal that if (when?) they get back in power they will have a crack at the pension schemes offered to public sector workers. As I've argued before I think this is fundamentally wrong-headed, and attacking the wrong problem (the real issue is increasingly poor provision in the private sector). But then I'm a bit old skool and think people ought to have decent pensions to retire on.

One thing is sure, the labour movement needs to prepare for an attack on public sector workers' pensions. I think it's really important that these arguments are framed in the right way to try and give us the best possible chance, so here are a few ideas.

1. We should describe an attack on public sector pensions as levelling down. This is exactly what it is - knackering good provision where it remains and bringing everyone down to a lower standard. If the impression is developed of an unnecessary and damaging intervention, talking in these terms might also appeal to people's bias in favour of the status quo.

2. Get figures together on typical pensions in payment. For example the typical LGPS pension in payment is about half the national average. Repeating these kinds of facts can challenge the myth propagated by the Right that these are gold-plated pensions.

3. We should stress any 'reforms' as removing valuable benefits. The message ought to be that something valuable is being taken away. People hate the idea that they are losing something they already have, so this could be an influential message. It will be tricky as presumably the Tories would close the current schemes to new members rather than attack current members' benefits.

As much as some on the Right seem to relish the opportunity to attack public sector pensions I think it could be a very costly battle if we take a bit of time to frame the arguments correctly in advance.

Thursday 21 August 2008

Pensions Regulator gets heavy

Oh dear, what is this all this about? Much as I will stick up for the Regulator's role (which some self-interested types in the industry constantly seek to undermine) and much as I am fairly critical of the crud that typifies much financial journalism, I really don't see how this is a smart move.

Reading the follow-up story (which is about the removal of a independent trustees from a number of schemes), I don't really see why the Regulator is taking such a tough line as they state that members' benefits are not at risk. Perhaps they think it would prejudice criminal action?

Hat-tip: Fitzy

SHARE expands

A quick plug for the excellent work done by Canadian shareholder activist group SHARE. They are expanding staff wise and adding to their innovative shareholder resolution database. If only we had an outfit like them in all the markets with big pools of workers' capital.

Wednesday 20 August 2008

Robert Shiller on bubble psychology

Robert Shiller has a short book out on the sub-prime crisis and how to respond to it. I'll bung up a review once I've read it. He's big on the importance of psychology and in particular the idea of contagion as reasons behind the current mess. Below is a good bit on the late 1990s stockmarket bubble (about which he has obviously written a great deal):

That boom inolved a transformation of people's thinking about their role in the economy. The idea developed that we ought to expect to make a lot of money investing. The transformation went well beyond opinions about particular investment strategies to alter the very self-esteem mechanism that supports our egos. The Protestant work ethic that had underlain the national psyche for so long underwent a makeover. To a substantial extent, we no longer admired those who were merely hard workers. To be truly revered one had to be a smart investor as well.

It is the change in thinking about ourselves that is the deepest cause of the bubble, and maybe the slowest to unravel after the bubble comes to an end. George Akerlof and Rachel Kranton have shown persuasively that economic theorists must take as fundamental that people care more about who they are and how they are viewed than the kind of food they are eating or car they are driving. A life as an investor has become more than a means to an end, it is an end in itself.

The first para in particular rings very true with me, having seen a few people get carried away in the TMT surge. I also agree that speculative booms must have an impact on how we see ouselves and others. I tried to argue previously that I think financialisation has had a cultural impact, but I think Shiller in more accurate in describing it as a psychological one. When everyone else seems to be making money out of shares/houses/tulips there must be a very strong pull to join in.

Tuesday 19 August 2008

Boris the Menance to get big train set

BoJo is going to chair TfL without help it says here (via Iain Dale).


TUC Member Trustee News

The TUC's regular newsletter for pension fund trustees is available to download as a PDF here.

This issue's contents: Conference report - taking the long view, Fourth international union trustee meeting, Core of fund managers still keep votes secret, Myners advisory group must not be industry talking shop, Pension centenary, Research shows progress towards more MNTs', Pensions Bill and Personal Accounts update, TUC calls for full review of buyouts model to safeguard members' interests, Growing interest in promotion of corporate standards.

Strange move by M&S

Have a look at this story in The Times:

Marks & Spencer plans to slash the redundancy benefits for its 60,000 staff by up to 25 per cent in a move that has infuriated employees and triggered fears of a middle management cull.

In an internal memo seen by The Times, the high street retailer is proposing to reduce the maximum payout that employees can receive in relation to their length of service from 70 weeks to 52 weeks.

Anyone aged over 41 would receive only three weeks’ pay for each year they had worked at M&S if made redundant, compared with 3.75 weeks’ pay at present. M&S wants to introduce the new conditions by September 1.

Employee representatives have warned the M&S board that the proposed changes had caused “an unprecedented level of feedback, concern and anger”.

In a letter sent to management last week they added: “There is zero confidence that we will not be entering another round of redundancies, and a strong suspicion that this is one of the reasons behind the proposal.”

The last two paras say it all really. I can't see how this is going to do M&S any good in the long run for a number of reasons.

1. It's obviously going to worry a lot of M&S staff. Worried people don't always work the hardest or the most effectively.

2. This cut applies to all staff. That means that if M&S does cut jobs even those lucky enough to survive will have a gripe. One of the reasons that companies tend to lay people off rather than reduce wages is that in the former case disgruntled victims are outside the organisation, whereas in the latter they remain within it, only with added knackered morale. M&S seems to be willing to annoy staff it wants to keep.

3. Taking away something people already have is always going to nark them off because of the endowment effect.

Monday 18 August 2008

Back in business

Back in London after an extended weekend in Bangor. Seeing as how Norn Iron was basically underwater the last few days, we decided the smartest thing to do was stay in and watch the Olympics, which was great. How quick would Usain Bolt have been if he had actually run the 100m as fast as possible rather than showboating at the end?

Two quick blogging plugs. First a good post on S&M that in part explores the question of taxing the super-rich. Short answer: superficially attractive, practically pretty pointless. Second a bit of bloggernomics from Tom Freeman, with graphs and everything (I have no idea how to do this on Blogger).

Thursday 14 August 2008

Minor news update

I'm going to be a dad, early next Feb if everything goes to plan. We had the first scan a couple of weeks back and everything is ok so far. Mrs Tom and I are off to see the in-laws (who are rather pleased as you might expect) in Norn Iron this evening, so won't be blogging for a few days. Providing I can survive the delicious but deadly Ulster fry my mum-in-law always does when I'm over, normal service should resume early next week.

Wednesday 13 August 2008

Health league tables - pros and cons

Another interesting bit from my latest read. In 1989 the New York State Department of Health initiated a programme to improve the quality of care for coronary artery bypass graft (CABG) surgery by applying market forces. Basically they started providing hospital- and surgeon-specific performance figures. The idea being that punters would respond by avoiding the poor providers of care, thus providing a market discipline.

Two things happened - mortality rates associated with CABG fell, a good thing. But conversely there was no significant shift in patient demand - the punters didn't move from high-risk hospitals to low-risk ones, even when public awareness of the available mortality data was high.

A few things might be going on here. For example, maybe patients are wary of making a choice for themselves (because it's a high stakes choice) and hence are instead relying on personal recommendations from friends and family. So people stick with hospitals they know and like, regardless of data. Another interpretation is that the publication of data made surgeons more risk averse. They might not want to take on high-risk patients if it knackered their batting average. So apparently improved mortality data might tell a different story.

Notably however research found that one in five doctors with bottom quartile performance ended up leaving cardiac surgery, which suggests that maybe there was a bit of a 'punishment' effect, even if it wasn't the result of punter pressure.

Dawkins vs The Times

For some reason The Times seems to have it in for Richard Dawkins and his current series about Darwin. Libby Purves had a pop, Dawkins replied, so she had another pop. And today AA Gill has a go.

As it happens, though I share his views I actually think Dawkins has a hectoring approach when he is discussing religion that often doesn't do his arguments justice (I have to say this quietly as Mrs Tom is a major Dawkins fan). However I think his latest series has provided a really good overview of evolution, and based on what has appeared in The Times I find myself wondering if I am watching the same programme. There are certainly some digs at religion in there but a) these are few and far between, most of it is just the science and b) he gives believers the opportunity to say their bit.

I thought the latest programme was good as it saw him try and reconcile his own left-of-centre beliefs with the brutal nature of survival of the fittest. And again, even though I'm basically on the same side, I thought he came up short. But at least he acknowledged that there is a real contradiction between his beliefs and what he knows about evolution.

The twonks at The Times on the other hand seem to want to pretend that there isn't an implicit and fundamental challenge to religion in Darwin's ideas. Hence they have a pop at the tone of the programme, and celebrate superstition:

In the end, the wisest and most memorable observation came from the mouth of a schoolboy. After a day on the Jurassic coast, discovering ammonites, he said that yes, he believed in evolution, then paused and, with a faint smile, added: “But I’ll still say my prayers.”

What is 'wise' about continuing with a superstitious ritual in the face of contrary evidence?

Tuesday 12 August 2008

Unions as investor representatives

Just a quickie about the idea someone ran past me recently. This is that a investment fund could be created that is affiliated with the labour movement. It could have union officers as trustees to make sure the thing is run cheaply and effectively, and pursue an ownership approach in line with the values of TIGMOO. The interesting bit of the idea is that it could also offer investors union membership if they don't have it already. I think the plan is that this would both be a way to new members and give the unions a bit of a role as investor representatives.

Any takers?

Bargaining and biases

I'm afraid the work-blogging balance is tilting in favour of the former for a bit whilst I finish off a project. But there's a very interesting paper here (PDF) from about ten years ago by Linda Babcock and George Loewenstein that looks at how biases can lead to stalling pay negotations and even strikes.

The whole paper is worth a read. Although much of it is based on experiments they did also analyse school pay negotiations in the US. Some of the findings will come as no surprise - for example, both unions and employers are self-serving in terms of selecting comparator groups for wage rates. But it does point up (to me anyway) how useful developing an understanding of these types of biases could be to the labour movement. I'd be very interested to hear if any unions haved looked at this or plan to do so.

Monday 11 August 2008

Bubble trouble

More from the Corrigan report - this is from the Emerging Issues section (PDF).

It is painfully obvious that practitioners and policy makers alike have been less than successful in recognizing the implications of building asset price bubbles even in the advanced stages of their development. In the private sector, this failure reflects the competitive reality that there is a natural aversion against being the last institution in or the first institution out when selective sectors of the economy and financial markets are booming. In the public sector, and especially among monetary authorities, there has been something of an aversion against monetary policy initiatives designed to “target” asset price bubbles on the grounds that (1) such bubbles are difficult to recognize and (2) such policy initiatives may have a disproportionately large impact on the economy as a whole. Even worse, efforts to curtail bubbles may misjudge whether a bubble even exists, such that policy initiatives driven by false signals would have wholly unnecessary adverse consequences for the economy as a whole.

The issue of whether the private sector can do a better job of anticipating asset price bubbles is discussed in the core precepts and in the section on Risk Management. Similarly, public authorities, particularly central banks, are also reconsidering whether monetary authorities might be able – at the margin – to better anticipate asset price bubbles and respond with at least a “tilt” toward a more restrictive monetary policy. Finally, some have also raised the question as to whether the use of contra-cyclical supervisory policies (i.e., selective increases in capital charges) might be contemplated.

The Policy Group believes that active consideration of all of these areas of inquiry is desirable, but in saying so it is also mindful of the “laws of unintended consequences”. That is, this subject matter is highly complex and is one where miscalculation or misjudgment can have serious adverse consequences. Finally, and most importantly, there is no substitute for sustained discipline in both public policy and private action, which remains the best recipe to limit the severity of asset price bubbles and contain their damage when inevitably they occur.

Sunday 10 August 2008

Loss aversion and LBOs

Another interesting snippet from my latest read (which is providing lots of useful ideas), this time about the psychology of buyouts. The research into the effects of buyouts on employment levels typically shows that management buy-ins (ie new external management) have a negtive impact, whereas MBOs don't. This might be an expression of loss aversion on the part of incumbent management.

The reluctance to downsize might stem from emotional reluctance of executives to fire people (though self-interest surely plays a role). An aversion to firings and layoffs is an organisational manifestation of loss-aversion. For most managers this is... an activity which they dislike but which is good for shareholders... [Not sure I agree with that bit, obviously!]

Jensen suggested that the emergence of the leveraged buyout (LBO) organisational form has been a useful mechanism for downsizing (and other large changes in governance would help too). An important feature of the LBO is that control shifts to new investors (the LBO partnership), who typically have no emotional attachment to the firm's workers. This element of psychological transfer, and willingness to accept a "loss" from the firm's previous policy, may be central to the success of this kind of restructuring. Of course, the LBO form also offers huge financial incentives to restructure, and to do so rapidly (because of the large debt service burdens). But maybe these large rewards just reflect how emotionally painful downsizing is for most managers.

That makes a lot of sense to me, and demonstrates why unions are right to be fearful of LBOs. The research into organisations also suggests some ideas for how best unions can frame both their relationship with the new owners and, if things turn sour, decisions the new owners make. One for another day though!

Saturday 9 August 2008

Bank bonus culture part of the problem

Say FSA chief Hector Sants in his interview with Robert Peston. High pay isn't just a question of fairness, we also need to think about (perverse) incentive effects. When you combine huge incentives with overconfidence it's not surprising that big risks get taken.
In relation to the causes of the credit crunch, Mr Sants disclosed that the FSA is unhappy at the way banks rewarded their star bankers during the boom years.

He says that there was an incentive on these bankers to take excessive risks with their firms' capital. That foolish risk taking has come home to roost in the form of massive losses on investments linked to US subprime lending.

Mr Sants said that the FSA would find a way to penalise any banks which continue to incentivise staff to take dangerous risks. He said there would be "consequences" for banks that pay employees too much for doing imprudent deals.

Friday 8 August 2008

Corporate narratives

Some interesting stuff from my latest book. This is very much the sort of view I've been groping towards, especially the stuff about narratives making info more enjoyable to hold and easy to recall. Fascinating really.

Organization theorists have argued that a narrative or story is a common way of encoding information about what to do in an organisazation. If the punchline of the story is success or failure, a story is basically an instruction about how to behave. Narratives may be a superior encoding form from the point of view of human memory - if they are better remembered, they will not degrade as nmuch as other kinds of information when passed down from older workers to new ones. If it is fun to tell stories - they often involve humour - they may spread more rapidly and reliably than boring instructions.

And here's an interesting footnote to the para above:

Memory appears to be encoded into episodic memory (time-stamped events) and semantic memory (facts about the world and a distillation of episodic memories). Corporate narratives harness the power of episodic memory. Narratives often involve drama, humour, and emotion as well, which provides added "depth of processing" that enhances their memorability. From a neural point of view these may provide a kind of engineering redundancy because memory is then supported by multiple interconnected systems: Who did it? How did it feel? When did it happen? From the brain's point of view, a story may therefore be simultaneously stored in different locations which are associated, improving retrieval.

Oil prices

Here are a couple of pieces about falling oil prices. The Telegraph and Snowflake5.

Thursday 7 August 2008

When bloggertarians attack!

I've just noticed that a rather foam-mouthed commentator on the Telegraph (which kindly linked here) has chosen to really get into the detail of my views on Nudge:

obviously a total arse

the very antithesis of liberal, libertarian or even likeable.

Sod off, Tom At Labour And Capital and your big ideas about behavioural changes. You want to live in a panopticon kindergarten, go do it somewhere else, you arse.

Also, hard not to notice that wise Tom is a typical non-jobber. TUC official, now working in "corporate governance" consultancy. No wonder he's so totally devoid of a clue.

He's apparently ticked off because I said libertarianism isn't a big deal in UK politics. My bad.

Lazy round-up

I'm trying to read this during my lunchbreaks this week - it's pretty good, though when it gets into equations I have to skip bits. The chapters on development and on wages are well worth a read.

But as such I ain't got mcuh time to blog, though I'm going to post an interesting idea about Personal Accounts an ex-union colleague recently put to me soon (think union membership combined with share-ownership). So in the meantime here's a few bits and pieces worth a look.

Hat-tip to nick at the Capitalists for alerting me to this piece in The Grauniad which I obviously have a lot of sympathy with.

Also in The Guardian this week was this bit about pay amongst the wealthy which is worth a read if only remind yourself how utterly removed from reality lots of rich professionals are these days. This can't be a good thing can it?:

"We now live in a separate economy, we live on a separate level to the vast majority of people in the country. We don't send our kids to the same schools, we have more choice over schools, we have more choice over health, we have more choice over where we live, we have more choice over where we go on holiday and what we do for our jobs. And we live in a completely different world to the people we live next door to."

Finally, hat-tip to journo mate Sue for sending me a nice quote from Corrigan report discussed in today's FT:

"While this turn of events had multiple causes and contributing factors, the root cause of financial market excesses on both the upside and the downside of the cycle is collective human behavior – unbridled optimism on the upside and fear – bordering on panic – on the downside. As history tells us in unmistakable terms, it is virtually impossible to anticipate when optimism gives rise to fear or fear gives rise to optimism. The last twelve months have been no exception to this sobering reality."

I'll try and post something up about the report itself once I get around to reading it.

Wednesday 6 August 2008

The UK's most generous pension schemes...

...are in the boardroom of course. This is from Professional Pensions:

40% of senior executives enjoy a 1/45th accrual rate

Some 40pc of senior executives enjoy a 1/45th accrual rate, Xafinity Consulting research shows.

The consultant’s annual executive retirement benefit survey revealed this compared to just 3pc of other employees.

But the study also found that only 29pc of companies surveyed were offering higher level or different types of retirement benefits to its executive directors and senior executives, which is down 15pc from last year.

Xafinity said the increase in demand for self-invested personal pensions was a developing trend, with 25pc of employers now offering the pensions product to their senior executives.

In fact I'm surprised by this. In my experience the bigger companies often offer directors 1/40ths or 1/30ths. I can't see what possible justification there is for this from a shareholder's point of view. Fair enough the people leading organisations are going to get paid more, but that already means higher pensions too. What is the justification for letting them accrue benefits more quickly than other employees? I can't see anything other than greed as an explanation, yet this stuff has been nodded through by remuneration committees for years.

PS. The TUC's most recent analysis of directors' pensions is here (PDF).

Man down!

John Gray's computer has rebelled, the machines are taking over.

Tuesday 5 August 2008

Blogger's delight

A few links to stuff worth a read.

I'm totally on the same page as Paulie about political parties, here and here.

Stumbling And Mumbling takes up the suggestion from Tom Harris about virtual opposition.

And I also quite enjoyed the Capitalists' fisking of Labour and Conservative Treasury teams, even though our mob don't come out of it too well!

Finally you may have noticed that I have a new button. This links to the TUC's campaign in support of victimised trade unionists in Zimbabwe. This is an easy one for people to support, surely, regardless of your politics. Click the button to find out what you can do.

Caledonia passes resolution to fund Tories

A quick update on this. Caledonia Investments had its AGM last and was seeking authority to spend £75,000 of shareholders' money on Tory campaigning in marginal seats. You can find the results of the AGM here (PDF), the resolution is number 17. The bottom line is that about 20% of votes did not support the resolution (about 16.5% of that being votes against, the rest abstentions). If you include the fact directors and the Cayzer Trust own 30% plus, that suggests that the actual level of independent shareholder opposition was higher.

But that means that there must be fund managers out there which actually voted in favour of partisan political donations. I think we can probably assume Fidelity are in that club, but who else? If you are a trustee of a pension fund with any more in Caledonia ask your manager how they voted.

It also appears that a few charities may have money in Caledonia - I wonder how this has gone down with them?

Monday 4 August 2008


There's a good review of Nudge from a persepective further Left than mine here. It's worth a read and I totally agree with, for example, their take on the comments in Nudge about privatising the US social security system. However this is the most important bit in the review in my opinion:

"[T]hese are important ideas, because they undermine the notion that free markets exist as neutral arbiters, showing markets as artificial constructs with important regulatory choices built into them. This is a newly emergent set of ideas, and who controls their interpretation will control the public policy choices they imply. As we move into an era where free market fundamentalism dies, it's important to keep our eyes on the framers of the new intellectual moment. Ideas can be used to prop up the corrupt system we have now, or to renew it."

This is it in a nutshell. Behavioural economics is no more Left or Right than any other bit of the world, it's how you apply the information it provides that matters. This stuff should better inform our understanding of how markets do and don't work - isn't that territory the Left ought to be fighting for?

Lib Dems go after public sector pensions

Left of Labour my ****, as Jim Royle might put it. The Lib Dems are helping to stoke up anger at public sector pension provision. As I have argued many times before I think the attacks on public sector pensions are both vindictive and wrong-headed, and I say that as someone without access to a DB scheme.

The principal problem with pension provision in the UK is the collapse of private sector provision (combined with the fact that it never covered much of the workforce in the first place), not that public sector schemes are too generous. Therefore any sensible approach to pension reform should surely focus on improving what is bad, not attacking what is good. (I accept that costs have to be managed and that this implies reforms over time.)

Yet rather than try and put forward some genuinely progressive ideas, the Lib Dems prefer to play footsie with the Tories and the TaxPayers Alliance and attack the public sector. Hence this release today:

Top civil servants have pension pots worth almost £150m, funded entirely by taxpayers, figures uncovered by the Liberal Democrats have revealed.

The figures show that the average pension pot among the top ten civil servants from 19 Government departments is over £800,000 which could provide a retirement income of more than £60,000 a year.

The average pension pot among members of the public is worth £25,000, which would provide an annual income of just £1,100.

Commenting, Liberal Democrat Shadow Work and Pensions Secretary, Jenny Willott said:

"While many people can barely afford to save for retirement, it is difficult to justify the extraordinarily generous taxpayer contribution they are forced to pay into top mandarins’ schemes.

"These costs are clearly exorbitant compared to what the public can expect their own employers to put in. The Government cannot afford to stick its head in the sand any longer over public sector pensions.

"We need an independent commission to look at the options for reform of pensions for the next generation of public sector employees. They must be fair and affordable both for civil servants and taxpayers."

It's a classic bit of smoke and mirrors. Use the totally unrepresentative handful of top civil servants' pensions as a way to attack the whole lot, even though the average would be much lower.

In addition the figures look a bit wonky. It's very difficult to calculate what the average pension 'pot' is because many people will have several pensions from different employers. In addition in DB schemes talking about a pension 'pot' is pretty meaningless - the value typically used is the transfer value which doesn't tell you much.

One place you can look for information is the DWP's Pensioners' Income Series. If you look at the mean occupational pension for all pensioner units in table 2.1 on page 16 of this PDF you can see it is £93 a week, or just under £4,800 a year. Obviously that is skewed because it is a mean rather than a median but even so the Lib Dem figure looks strange. And bear in mind this is just occupational pension income. Some pensioners will also have built up some personal pension income over time.

FSA's HBOS probe finds... nothing

Can't say I am at all surprised by this.

There is no doubt that false and damaging rumours were circulating about HBOS on 19 March 2008 and these would have had some impact on HBOS’ share price. It is difficult, however, to say how much impact, as the share price was also affected by the interaction of a number of other complex factors on the day, including:

A lack of liquidity in the order book with parties unwilling to enter buy or sell orders, particularly after the automated trading halt; and
The effect of algorithmic trading strategies, which amplified the impact of the initial downward trend in the HBOS share price.
Despite the likelihood that the rumours contributed to the fall in the share price, the FSA has not uncovered evidence that they were spread as part of a concerted attempt by individuals to profit by manipulating the share price.

Full FSA statement is here.

Sunday 3 August 2008

Sunday snippets

Just got back from a really nice long weekend up on the Norfolk Broads. I managed to forget the right lead for my iPod speakers so I was without music for most of it, but actually I didn't really miss it. We went down to Beccles, which is a really nice little market town, and then on to Geldeston Locks, which is as far as you can take a boat down the River Waveney. Geldeston village itself is pretty small, but the Locks pub is nice. I also managed to get a fix of geeky disused railways thrills, as we managed to find the old village station.

Even though it was very relaxing, I couldn't quite leave it all behind and read most of The Black Swan. As I've said before, I really enjoyed Fooled By Randomness, so I was quite looking forward to it. And, about three quarters of the way through, I'm enjoying this one too, though for slightly different reasons. His attacks on fitting narratives to explain events is obviously going to be right up my street. He also makes a lot of references to Daniel (or 'Danny' as he calls him) Kahneman, and confirmation bias is dealt with in quite a bit of detail. Plus a lot of the book is really about epistemology. And when he starts talking about how many forecasters are really in the entertainment business I think most of my boxes have been ticked.

To be honest, a lot of this stuff is not new to me really - but I still enjoyed the book. That made me realise that I what I really like is the thing that most people seem to most dislike about the book - Taleb himself. I agree that he's got a big ego, I agree that he's making a lot out of some fairly well-known ideas and I find some of his stylist quirks (like primo, secondo etc and calling himself NNT) irritating. Yet overall I really like his style, and he does come across as the sort of bloke you'd want to have a conversation with over a few beers. There's a bit somewhere in the book where he says something along the lines that if you accept that some of the biases that affect us (like our desire for narrative) are very powerful, then you might as well use them. And I think that basically he pulls this off. As such I think it's a good book even if I'm not really learning that much from it.

Anyway, back on planet blogging, I've had a quick scan around and noticed a) Labour Outlook has had a rather nice makeover and b) there's quite an interesting Trot scrap going on over on Socialist Unity in a discussion about anti-fascism. The interesting stuff is in the comments where the rather good Socialist Party blogger AVPS has been slogging it out with Swuppies.

Someone has kindly posted a link to Socialist Worker's front page response to 9/11 which is worth a read just to remind yourself what a font of knowledge and wisdom the vanguard party of the working class is. I particularly like the way they state in the second para that no-one knew who was responsible, but by the end of the sixth para are able to state that the attacks were born out of desperation (whose we don't know) and by the final para we are being given guidance on how to make the most of our revulsion.... towards the US. Bleurgh!