Economists and predictions

Tweet When the latest set of unemployment figures was published, government ministers rushed to claim all the credit for the improvement, whilst opposition politicians tried to find other avenues of attack.  It’s a sight we can expect on a monthly basis from now until the election in 2015 at least, although in any given month when the figures go the other way, the government will blame factors outside their control, whilst the opposition will shout “told you so”.

Will there really be months when the figures go the other way?  I’d bet on it; variation is a normal part of economic outcomes.  Hard and precise prediction, when it comes to economics, is a bit of a mug’s game.

I thought that one of the most revealing comments in the reporting of the latest figures was the almost throwaway comment on the BBC News that many economists were surprised by the figures.  I thought that deserved rather more attention than it got.

It could just be of course that the government figures for unemployment are actually no more reliable than those for hospital waiting lists or crime, both of which have been found to be, shall we say, “wanting” when it comes to the minor matter of accuracy.  It’s more likely though that it reveals an inconvenient fact about economic forecasting – that the term is an oxymoron.

If economic forecasts made by some economists turn out to be right, it’s more likely to be a result of the sheer number of people making predictions and the range of predictions being made, than of some economists being better than others.  It’s a bit like the hypothetical infinite number of monkeys and typewriters producing the complete works of Shakespeare.

Economics, like any other discipline dealing with human behaviour, is of its nature better at analysing the past than at predicting the future.  There are all sorts of reasons for that, not the least of which is that humans hearing any predictions can, and often do, change their behaviour as a result if they actually believe the predictions, thereby invalidating them.

But if there’s one thing that is less reliable than a prediction made by an economist, it’s a prediction made by a politician based on a prediction made by an economist.  It’s unlikely to stop them though…

Forget the apology

Tweet Comments by Michael Fabricant sparked a bit of a Labour-Tory spat this week.  He claimed in an interview that there was no need for Welsh to be used in education in Wales, and that insisting on doing so was holding us back – sentiments with more than a little hint of the infamous Blue Books.

As evidence for his view that Welsh was unnecessary, he pointed to the fact that the Welsh word for neutron was the same as the English.  Others have already pointed out that this is not something which is exactly unique to Wales.  The word itself derives from Latin, of course.  Perhaps we’ve inadvertently stumbled upon the solution to the not insignificant educational problems of England as well – insisting on using English rather than Latin as the medium of instruction is clearly holding them back.

Why anyone would expect the MP for Lichfield to have any useful expertise on matters educational in Wales (even if he does have, as he reminds us from time to time, some Welsh ancestry) is almost as big a mystery as why anyone would take what he has to say seriously.  The point, if there is one, isn’t really about him or the specific point that he made, but about what it tells us about an underlying attitude – ignorance, even – towards Wales, and the Welsh language, amongst those who still make most of our laws.

I don’t blame Keith Davies AM for picking up on that point – although, to be honest, I can perfectly well believe that a similar attitude is shared by many other MPs in London, Labour as well as Tory.  Why on earth, though, did Mr Davies have to pursue the all-too-common political ruse of demanding an apology from the Tories?  It almost invited the even sillier response from the Welsh Tories that “Carwyn Jones is the only person who should be apologising…”.

A serious point about underlying attitudes towards our language in the corridors of power was turned into a slanging match about who should apologise for what and to whom.  And they wonder why politics turns people off?

I really don’t care whether the Tories give a meaningless and insincere apology for the words of one of their members or not.  And I don’t care either whether Carwyn Jones gives an equally meaningless and insincere apology for the state of education in Wales.  I do care about changing the attitudes towards our language, and I care even more about sorting out the educational system in Wales.  I’d have a bit more respect for politicians if I thought that they cared about those things as much as they care about being seen to try and extract pointless apologies.

Socks, gags, and red tape

Tweet A number of MPs and journalists have been getting quite excited recently about what they like to call “gagging clauses” in the agreements under which some public sector employees – notably in the health service – have left their posts.  The suspicion is that, ungagged, the ex-employees concerned would have some juicy stories to tell.

I suspect reality is rather more mundane than that.  What are more properly called “compromise agreements” are not unique to the public sector in any event; and buying the silence of those with whom they are made is rarely – if ever – the main objective (although it would be hard to draw that conclusion from the press coverage).

They are, rather, an attempt to short-circuit the processes which employees who might feel their dismissal to be unfair could otherwise follow, including of course employment tribunals.  Pay people enough, the theory goes, and you can sack them for any reason you like – even the colour of their socks. 

From the employer’s point of view it avoids the hassle and bother of the legal processes.  That’s what some of the same people condemning the practice might otherwise call “red tape” – that’s certainly a label which has been placed on the process by Tory MPs and ministers in the past.  There’s a certain amount of irony in seeing some of that party’s MPs being so vocal about the practice, given that background.

The “gagging” part is usually incidental.  Is it necessary?  In almost all cases, probably not.  Staff offered such an agreement don’t have to accept it, of course – if they do so it’s probably because they think it’s a better deal than they’d otherwise get.  Having left by “mutual consent” looks better on the CV than having been sacked.

On the other hand, if any employer really had sacked someone because they didn’t like the colour of the socks, I suppose that they probably would prefer that not to come out…

Swords for AMs?

Tweet Amongst the evidence given to the Welsh Affairs Committee by the Assembly’s Presiding Officer last week was the proposal that her job should be renamed as Speaker, because that was more recognisable and is used in Westminster.

Neither of those strike me as being particularly good reasons to choose a different name.  And it left unanswered the question as to what the Welsh equivalent would be, although my guess is that it would continue to be Llywydd.  I can, after a fashion, understand why so many AMs seem to want to ape what they see as a “real” Parliament doing, although it’s an attitude which disappoints me.  It’s a sign of insecurity.

Choosing a name because it is used elsewhere rather than using an accurate and meaningful description seems to be elevating the arcane over common sense.  The origin of the title of Speaker seems to be tied up with the idea that one brave MP should speak on behalf of the whole house to the monarch of the day, suitably quaking in his boots as he did so (they were all ‘he’ in those days).  In practice, however, the Crown usually got its way over who should be appointed anyway, and dispatched (in rather permanent fashion) any who brought them news that they didn’t want to hear.

It’s certainly true that large numbers of parliaments throughout the world do use the term Speaker, although it’s worthy of note that it is particularly prevalent amongst parliaments in countries which used to be part of the British Empire.  Aping ‘mother’ is catching.  I wouldn’t say it’s never used outside of that sphere, but chairman or president seems to be a much more common title outside the former empire. 

I’d be tempted to say that perhaps we should simply dispose of the English title completely and use only the Welsh, Llywydd.  It would be following the example of Ireland - although it’s not an entirely happy precedent; whilst using only the Gaelic titles, the actual use of the language itself has declined.

What was proposed may only be a minor name change, but once the Assembly starts reverting to Westminster customs and habits, where will it end?

Will we have AMs pretending to be reluctant (as if!) to take on the lucrative rôle being dragged to the chair?  Or perhaps we should keep collapsible top hats under the chair for when members want to raise points of order (after all, it’s not that long since the House of Commons got around to abolishing that peculiar practice), or provide pegs for the AMs swords, or have the AMs walking round in circles when they want to vote?

Let’s just forget Westminster and its arcane procedures and titles, and concentrate on the job in hand – building a rather more twenty-first century democracy here in Wales.

Closing the gap

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A week or so ago, German Chancellor Angela Merkel said that Europe has “just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending”.

The implication was clear – this is a gap which is unaffordable and needs to be closed.  It’s the sort of view which one would expect from a conservative politician – and it has echoes in the messages from the three mainstream conservative parties in the UK.

I seem to remember that the leader of the (nominally communist) People’s Republic of China also said something not dissimilar a few months ago; Western benefits payments are too generous.

With a gap of this nature exists, however, there are always two ways of closing it.  Increasing the welfare bill in the poorest countries has the same effect on that gap as does reducing the bill in the richest.  The fact that only one of those options ever seems to be suggested by our leaders is instructive – it suggests an acceptance that the “norm” should be closer to what happens elsewhere than to what happens here.  But why do we let them get away with that?

Totals, averages, and fair shares

Tweet Monday’s Western Mail carried this interesting report quoting a transport consultant as saying that it would be better on average for the Welsh economy to put all new jobs in Cardiff, rather than attempt to spread them around.  I wouldn’t be at all surprised to find that he’s right.

But averages can hide a lot of important detail.  There’s a danger that governments which are focussed on ‘averages’ and ‘overall’ seize on this type of argument as justification for further economic centralisation, and for allowing ‘the market’ to do what it would like to do anyway.  It’s a lot easier than attempting to exercise some control. 

The question we face if we’re serious about building a better Wales is not simply about how we increase the country’s total wealth, nor even about how we increase the country’s average wealth.  Both of those can be achieved by economic centralisation and greater inequality.  It is rather about how we spread wealth more evenly.  I for one would prefer to have a less than the maximum possible total national wealth if that wealth was spread more evenly, and a less than the maximum possible average wealth if the variation around the mean was lower.  Otherwise we’re just mimicking the UK.

Conceding ground

Tweet It was always going to be simply a matter of time before someone would put their head above the parapet and advocate charging fees for attending state schools.  This week, the headmaster of Wellington College has duly obliged.

Politicians have pooh-poohed the idea at this stage – but I seem to remember that all parties opposed tuition fees for university students at some stage or another, and now all of them support such fees.  It might just be a matter of time until this latest proposal becomes accepted policy as well.

The only thing I found surprising in the proposal is that it is more general in its scope than I expected.  I had thought that the first suggestion along these lines would be for 16 to 18 education, not for the whole of secondary education.  Insofar as there is a logical point at which to draw a line between “free” and “chargeable” education, it is surely the point at which education ceases to be compulsory.

Those who have supported the introduction of tuition fees – and that’s elected politicians from all four parties in Wales – will, on any logical basis, struggle to justify why one form of post-16 education should be treated differently (i.e. charged for) from any other.

Some of the other comments reported I found particularly depressing.

Doctor Seldon said that state schooling was "the last great bastion holding out against the principle of payment".  Sadly he’s right, of course.  Conventional politicians have conceded the principle of charging in so many different areas that it becomes hard for those caught in that mind-set to justify continued ‘exceptions’.  Indeed, the very idea that schools are an ‘exception’ underlines the mind-set.

The concept that services should be paid for by those who use them – even if on a means tested basis – has been allowed to gain the upper hand by politicians who are too timid to argue otherwise for fear of losing the centre ground.  But what they seem not to realise is that their timidity is helping to shift the centre ground.  There are few left who are even prepared to suggest that those who “cannot afford” to pay for services should simply pay more taxes.  But why not?

How big is big enough?

Tweet In its editorial reaction to the report of the Williams Commission, yesterday’s Western Mail told us sternly that “post code lotteries are intolerable within a country of only three million”.  It’s one of those things that “everybody knows” to be true, but it begs two questions.

The first is this: what is the difference between a ‘post code lottery’ on the one hand and differing service levels based on local democratic choice on the other?  The answer, in essence, is that there is no difference; it all depends on perspective.  Centralists instinctively demand complete standardisation and conformity whereas decentralists accept that differing levels and quality of service are an inevitable concomitant – from those two viewpoints they merely describe the same phenomenon in different words.

The second question is this: if three million is too small to allow differing service levels, how many is enough?  It is implicit in any statement saying that ‘n’ is too small that there is a larger number which is not too small; in this case, what the paper calls ‘post code lotteries’ are apparently acceptable if only the population is large enough.  Why?

Hidden behind this is the way in which supporters of devolution – whom I had long thought to be instinctive decentralists – turn out to be centralists in practice in a Welsh context.  Strangely, I’ve heard some argue that they are in favour both of rigid central standards and powerful local government.  I can only conclude that they’re either confused or dishonest, because, for any given service, we really can’t have both.

Somehow, since the advent of devolution from London to Cardiff, an idea seems to have caught on amongst the politicians and media that there is no need or justification for any differences within Wales, whereas differences between Wales and England are perfectly acceptable.  It’s a valid vision for Wales, but it isn’t the one which many espoused before the Assembly was established.  And it isn’t one which ever drove me.

Another missed opportunity

Tweet A cynical description of a management consultant of the sort so popular with businesses and government organisations is “a person who borrows your watch to tell you the time”.  It encapsulates the view that the ‘independent’ ‘experts’ have been hired, first and foremost, to confirm what those hiring them already ‘know’ – but with the extra credibility that comes from being external.

Crucial to this approach is hiring the ‘right’ consultants – they need to be sufficiently compliant – and giving them the ‘right’ brief.  It’s a definition which somehow sprang to mind when I read this sentence in the foreword to the report of the Williams Commission yesterday:

“In establishing us, the First Minister made clear that the status quo was not an option.  We have found extensive and compelling evidence that that is indeed the case.”

The consultants that I’m used to don’t often make their role quite as crystal clear as that; it’s usually a bit more nuanced!  But there can be little doubt that the Commission has told the Welsh Government what it wanted to hear.  Quelle surprise.

Sadly, their brief was written entirely around “governance and delivery”, thereby absolving them of any duty to consider what local government should actually do, and concentrate instead on how they do it.  I wouldn’t argue that there aren’t problems with the how at present, but to adapt a piece of management speak, “doing the wrong things well is probably worse than doing the right things badly”.  It seems, however, that doing things well is deemed more important by the Welsh Government than doing the right things. 

Local Government in Wales is a complete mish-mash of three types of activities, with vague and imprecise boundaries between them:

·         Services where the councils really are free to decide on policy and delivery as they wish.  They can choose to spend more and deliver a better service, or to spend less and cut the council tax.  Different parties and candidates really can promise different approaches which they can then implement when elected.  This category includes things like parks, leisure centres, and libraries.  It’s worth noting that this one area where they have complete freedom is the one area where they currently seem, perversely, to be trying to divest themselves of all responsibility.

·         Secondly, we have some services where the councils have absolutely no scope to set any policy and are totally constrained by the law as to what they can do.  The limit of their scope for being different is perhaps using different and incompatible IT systems to achieve the same ends – things like electoral registration, for instance; or births, deaths and marriages.  I find it hard to see what, if any, value is added in these areas by having locally elected councillors responsible for them.  They are administrative tasks which could just as easily – and probably more efficiently – be managed nationally.

·         Then we have the services in the middle where the local councils like to believe that they have some freedom to set policy and do things differently, but in reality are hide-bound by central directives and standards.  These are things like Social Services and Education – and it’s worth noting that these are precisely the service areas in which local authorities are perceived to be failing.  The two facts might not be unconnected…

I’m not sure whether the services referred to in the third category should actually be delivered by Local Councils at all; I’m open to be convinced either way.  My starting point is that if local councillors with their own democratic mandate are to run services, they should have the freedom to set policy – and the freedom to deliver a poor service as well if they so choose, and if the local electorate choose a bunch of incompetents to run the council.  It’s called democracy.  But if a service is deemed to be too important to be left to local decision-making, then we should stop pretending that local authorities add any value and run the service nationally. 

It all depends on your viewpoint on the extent of any local democratic mandate; I tend to the view that we should maximise local control, and I accept that one inevitable result of that is that service levels and quality will vary; but if the majority believe that consistent service levels are more important, then they should advocate proper central control, as the only way of meeting that objective.

The latest report doesn’t address that sort of question at all – and the Commission is recommending a series of local government mergers on the basis of an assumption that we should simply continue as we are.  The merger process will be costly in the short term, even if we believe that there will be savings in the longer term.  Eyes will inevitably be taken off balls in the process; such problems as we currently have will continue until the process is complete.  It’s a serious missed opportunity.

Being right for the wrong reasons

Tweet I find it hard to disagree with Ed Miliband’s assertion that banks have become too large and financial power too concentrated in the hands of a few.  That alone is reason enough to want to see some of them broken up into smaller banks.

I’m far less convinced about his apparent belief that the additional competition which he expects to result will bring benefits to businesses, such as more lending.  The faith in “competition” as the answer to just about everything is what gave us the marketization of the health service – perhaps he isn’t so far away from Thatcher and Blair as he’d like us to believe.

Certainly, having more and smaller banks will lead to more competition; it’s the leap beyond that to the conclusions about who would benefit that I would doubt.  Smaller banks are likely to take less risk rather than more; they’ll be competing for the safest, most profitable, customers, not the riskiest ones.  And if banks aren’t lending to businesses at the moment, it isn’t because they can’t – it’s because of their assessment of the likely levels of risk and return.

Paradoxically, Miliband’s advocacy of breaking up the banks may actually have the opposite effect of that he claims.  Insofar as breaking up the banks is one of his better ideas, it’s for completely different reasons than those he gives.