Other things on this site...


"The Trap"

[The Trap](http://en.wikipedia.org/wiki/The_Trap_(television_documentary_series%29) is a very thought-provoking documentary programme. It's made by the same bloke who made the enormously thought-provoking and damning series The Power Of Nightmares which was about the current political use of fear rather than optimism, and how it developed into movements like the American neo-cons and the Islamic fundamentalists.

This time it's about the confluence of ideas from economics, genetics, and psychology leading towards a bleak politics in which people are seen purely as self-interested autonomous entities. It's very careful to make sure its main message comes across, which is that the oversimplified models which economists and politicians use to model you and me have drastic effects on the way people are treated. Incentivisation of hospital waiting-lists leads to "game-playing" hospital managers arranging things in perverse and unfair ways; school "league-tables", intended to incentivise improvements in schools, lead to growing inequality rather than reducing inequality, as the well-off buy houses in strategic locations for accessing the "good" schools; and psychological checklists unintentionally make it a medical problem to experience ordinary human emotions.

It makes its point forcefully, and it ties together things that I'd never tied together before (such as connecting Richard-Dawkins-style "selfish gene" biology with market liberalisation). But I was often a bit confused about whether it was connecting things together just as analogies (e.g. at the same time the economists were coming up with game theory, the biologists were coming up with selfish gene theory), or as causally-connected (e.g. the biologists came up with selfish gene theory after reading about game theory).

Democracy, free markets, and efficiency

One big point was about the economists' idea that free-market economics was "more efficient" than democratic politics. This was apparently justification for actions during the 1990s such as freeing the UK interest rate from political control (coincidentally, discussed in the LRB last week in an article considering whether democracy or "elitism" was a better way to run things like the Lords or the Bank of England).

The argument about efficiency is very very easy to understand:

  • In democracy, you have to vote for your representatives and then hope that they work in your interest in future, with no guarantees that they won't (intentionally or not) be more comfortable working in their own interest.
  • On the other hand, in a free market, the providers need to be constantly satisfying your needs, because if they don't you can simply transfer your spending to a competitor who will do it better. The efficiency is built in because (in a free market with no problems with information flow) the providers' success is directly tied to their ability to satisfy your desires appropriately.

What wasn't mentioned in the TV programme was the obvious flaw in this argument, which is that although efficiency helps reduce wasted effort etc, efficiency comes second to fairness. Democracy is fair because of the inalienable right to vote, whereas your free-market "vote" depends on how much money you have; and of course there are some people with much more money than the majority, and many people with no money at all. So free-market economics simply cannot satisfy the "average will" of the population (however you define that), because the "centre of mass" of the economic power is never anywhere near the "centre of mass" of the population.

The programme said that the simplified economics of the recent past was starting to fall out of favour, making the point that some recent Nobel Prizes in Economics had been awarded to economists who had shown that free markets do not neccessarily lead to stability or efficiency. (I don't know which economists he was referring to. Amartya Sen? Joseph Stiglitz? Not sure. Would like to know.)

I'm specifically interested in this point because one of the magazines I read occasionally is The Economist, which has a very rational view of the world and makes very good points about all kinds of politically-tinged things, but it's always in favour of free markets. It often claims that free markets should be encouraged because they lead to a general uplift in living conditions. I'm really not sure what the basis is for such an argument. Maybe, to them, the various examples of market liberalisation leading to problems for the poor and otherwise powerless, are examples of insufficiently efficient situations (e.g. caused by information asymmetries or legislation interfering with the fluidity of the market? Or perhaps they're looking at general trends like a general increase in average measures of wellbeing, and are less interested in growing differences between rich and poor.

They're not stupid and not immoral so I don't think it's a case of blinkeredness. I would like to understand why they think that free-market economics improves the lot of the average person.

Incentives and "game-playing"

The programme related a catalogue of examples of government targets and incentives having led to perverse "game-playing" behaviour from those who were supposed to meet their targets. It didn't mention, but it reminded me of, the story about (a tiny minority of) American soldiers in the Vietnam war shooting innocent villagers to meet "kill quotas". Its examples were from British government, such as the hospitals choosing to schedule the "easy" operations first, rather than the important ones, or re-designating hospital trolleys as hospital "beds". Our own GP surgery indulges in the same kind of game-playing: they refuse to give you an appointment for later in the week, insisting instead that you turn up at 8:15 the next morning to get one of the morning slots reserved for same-day bookings. This has the statistical effect of making it look as if I've got an appointment within a couple of hours of asking for one, whereas in fact I've been sent away the first time I've asked for one and so my waiting time is much longer than will appear in the figures. Besides which I can't plan in advance to take time off work because I don't know when I'll be able to get an appointment.

The programme's critique is that this incentivisation is all due to the economists' managerial approach to government. But the strange thing is that economists know that incentives cause game-playing and cheating. I found this very relevant quote from Freakonomics, in the chapter discussing various forms of cheating to meet targets:

"Cheating is more common in the face of a bright-line incentive (the line between winning and losing, for instance) than with a murky incentive." (p39)

So even if we put aside the programme's allegation, that this incentive-based approach to government is based on a dehumanising view of humanity, the incentivising approach makes the incentives much clearer and brighter than other sorts of approaches (based on morals, social duties, etc). So presumably it leads to more cheating. Incentives are like single lines which can be dodged around, while morals and social imperatives are much fuzzier, which, yes, makes them harder to pin down, but also makes them much less suitable for ducking and weaving to get round in dubious ways.

To paraphrase Churchill, social ties may be the worst way of organising groups of people, "except all those other forms that have been tried from time to time."

| politics | Permalink