Andrew Leigh’s excellent speech launching Randomistas

Posted on March 10, 2018 by Nicholas Gruen

RandomistasRobert Solow once referred to the law and economics scholar Richard Posner as writing books the way the rest of us breathe. Andrew Leigh seems to be in this category with his output apparently accelerating on top of his no doubt gruelling schedule as an MP, not to mention being a father of three. 

Anyway, I’ve not yet read his latest but I did go to the Melbourne launch of his book where he lavished the breadth of his learning on his audience. I would have liked a somewhat greater awareness of the foibles of what Hayek called scientism in his speech.

Randomised controlled trials definitely have some very worthwhile things to offer policy making and Andrew’s speech makes that case compellingly. I also endorse his support for randomisation as a modus operandi – not just for all singing, all-dancing RCTs costing hundreds of thousands of dollars by academics, but also for every day randomisation in the way that’s proposed in the Lean Start-up and practised by the most successful IT firms like Google and Amazon.

But I’ve got an uneasy feeling about how randomisation so easily takes on the mantle of ‘gold standard’ for evidence – something repudiated by numerous scholars such as Angus Deaton and James Heckman. Here’s  Hayek in 1942, but he held the same views up to his death around forty years later:

In the hundred and twenty years or so during which this ambition to imitate Science in its methods rather than its spirit has now dominated social studies, it has contributed scarcely anything to our understanding of social phenomena… Demands for further attempts in this direction are still presented to us as the latest revolutionary innovations which, if adopted, will secure rapid undreamed of progress.

This idea that we can prove up ‘what works’ and then build a management system around it is OK as a meta-idea but only if it’s pursued with the scientific caveats that it requires. Alas managers and politicians are impatient with such things. I fear Andrew might be a little impatient with it also. And so, just as academia pumps out graduates who have been carefully trained to generate and operate any number of sophisticated models but have been poorly trained, if they’ve been trained at all, to understand their respective merits and limitations, so it would be easy for whole systems to be built which generate knowledge using randomised trials, but show little care in understanding precisely how far that knowledge can be generalised – how constrained to its context it is. I tried to explore this terrain in my own dinner address to the Australian Evaluation Society Annual Conference last year.

In any event, these issues may be dealt with in the book. Be that as it may, Andrew gave a great account of himself and I warmly recommend his speech, reproduced below the fold, to all. You’ll learn a lot. I did anyway.    Continue reading →

Posted in Best From Elsewhere, Economics and public policy | Leave a comment

Does Integration Change Gender Attitudes? The Effect of Randomly Assigning Women to Traditionally Male Teams

Posted on March 5, 2018 by Nicholas Gruen

We examine whether exposure of men to women in a traditionally
male-dominated environment can change attitudes about
mixed-gender productivity, gender roles and gender identity. Our
context is the military in Norway, where we randomly assigned
female recruits to some squads but not others during boot camp.
We find that living and working with women for 8 weeks causes men
to adopt more egalitarian attitudes. There is a 14 percentage
point increase in the fraction of men who think mixed-gender
teams perform as well or better than same-gender teams, an 8
percentage point increase in men who think household work should
be shared equally and a 14 percentage point increase in men who
do not completely disavow feminine traits. Contrary to the
predictions of many policymakers, we find no evidence that
integrating women into squads hurt male recruits’ satisfaction
with boot camp or their plans to continue in the military. These
findings provide evidence that even in a highly gender-skewed
environment, gender stereotypes are malleable and can be altered
by integrating members of the opposite sex.

by Gordon Dahl, Andreas Kotsadam, Dan-Olof Rooth

Paper Here: http://papers.nber.org/papers/W24351?utm_campaign=ntw&utm_medium=email&utm_source=ntw

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Brexit Scenarios and some Advice for Brexiteers

Posted on March 2, 2018 by Paul Frijters

Brexit is the main political issue in the UK, competing with sex for the attention of the public. It is a daily gamble whether the news headline is about some politician fondling a knee 55 years ago or a row over Brexit.

For the last 18 months, the debate in London has been surreal. Unhindered by much expertise about the issues, the politicians have given full reign to fake news, ranging from Boris Johnson who kept pretending there would be more spending on health outside the EU, to the latest improbable claim by some Minister that he has 21 agreements with countries outside the EU ready to sign after Brexit.

Rather than laugh at these statements, one should see them as the logical, and indeed intelligent, reaction of politicians to a situation neither they nor their voters like: they pretend a bad reality is simply not true and waffle on about what they do want to be true. That may be bad economics, but it is good politics. The UK has been the home of fake news for over 2 centuries, and still going strong.

If we forget about the current smokescreens by the politicians and think about the end game, a key question is just how easy or difficult it would be to stop the Brexit process. In the press, both in the UK and in the EU, the March 2019 deadline has been presented as an immutable wall, one that forces parties to agree to something before the end of 2018 so that 28 parliaments\governments can ratify the agreement.

I think that ‘mainstream scenario’ is absurd. Each of the three ingredients in that mainstream scenario seem highly unlikely to me. Just ask yourself: do you believe that the Brits could internally come to an agreement before the end of 2018? Do you think they could then negotiate that agreement with the EU negotiators within a few months? And do you buy the idea that 28 parliaments\governments are going to agree without using the opportunity to be difficult? I don’t expect any of these three things to happen, and I doubt that the more intelligent politicians ever expected it to happen. So nearly everything you read in the press about deadlines and watersheds is missing the real game.

What then? How can this saga end?

Well, funnily enough, a quite plausible scenario is that is simply doesn’t end at all but is rolled over, much like a loan that supposedly has to be paid back at a particular date, simply leads to another loan to pay back the previous one. Continue reading →

Posted in bubble, Cultural Critique, Democracy, Geeky Musings, Humour, Political theory, Politics - international, Social, Society | 10 Comments

Me on forecasting

Posted on March 1, 2018 by Nicholas Gruen

Above is my presentation to CEDA’s Outlook conference in Brisbane a couple of weeks ago. I came after a McKinsey’s consultant talking about digital disruption which is always a fun thing to present or listen to because there are lots of ‘wow’ moments when you wheel out the cool ways people are using data and so on. Anyway, I was pleasantly surprised when people said that they’d found my presentation very enjoyable and instructive – which is what I was hoping for. If you’re interested, the original powerpoint slides can be downloaded from this link.

I was also on a panel the video of which I reproduce below. I certainly didn’t intend to take the discussion towards one of my hobby horses of deliberative democracy, but the occasion seemed to call for it. Several people told me how ‘inspiring’ it was – so there you are. Would I lie to you? Would they lie to you? No. We wouldn’t. Will you be inspired? As Lady Brackness says, statistics are sent for our guidance and if they were inspired, of course you will be inspired? 1  The video is over the fold.  Continue reading →

  1. This forecast is certified to the 3% accuracy level plus or minus the usual statistical margin error. ↩
Posted in Bullshit, Cultural Critique, Economics and public policy, Health, History, Humour | Leave a comment

The French Film Festival: 2018

Posted on February 27, 2018 by Nicholas Gruen

Festival Website | Films | Schedule

Top Picks
Trailer Icon 03 C’est La Vie! (Opening Night)
Over a career spanning more than 30 years, Max Angély has enjoyed a celebrated career as a caterer and event organiser. Today, it’s all hands on deck for Pierre and Héléna’s nuptials in a breathtaking 17th century French chateau. As per usual, Max has everything precisely organised but, as the celebrations get underway, Murphy’s Law takes over, and his perfectly planned occasion risks disintegrating into a chaotic farce. Can Max and his team pull together to make Pierre and Héléna’s special day memorable for all the right reasons?
☆☆☆☆☆ IMDB
Thirteen-year-old Ava is on a summer holiday in the Medoc region when she learns a degenerative condition that is turning her blind has accelerated. Rather than wallow in her imminent disability, Ava chooses to embrace her remaining senses and explore her burgeoning sensuality, as encouraged by her mother. An encounter with a young troublemaker Juan, sends Ava on a series of adventures she would never have dared to do before her prognosis.
☆☆☆☆☆ Cine Vue
☆☆☆☆☆ Filmoria
☆☆☆☆☆ IMDB
With the death of his father looming, Jean returns from his Australian winery to his childhood ‘domaine’ in Burgundy after a 10-year absence. He takes over the family’s vineyard along with his siblings Juliette and Jérémie. Over the course of a year, Jean, Juliette and Jérémie put aside their lingering resentments about the past as they seek to maintain their father’s legacy and defy expectations – financial, emotional and professional – of those around them.
☆☆☆☆☆ IMDB
☆☆☆☆☆ HeyUGuys
☆☆☆☆☆ The Upcoming
If you think the countryside is calm and peaceful, then you might want to think again. France’s most unconventional farm plays home to a number of mixed-up animal folk. We are introduced to a fox that thinks he is a chicken, a rabbit that acts like a stork and a duck that wants to replace Father Christmas. Not surprisingly, their shenanigans are as hilarious as their identity confusion.
☆☆☆☆☆ Eye For Film
☆☆☆☆☆ IMDB
Swann Arlaud, one of French cinema’s most exciting up and-coming talents, plays a lonesome 30-something dairy farmer, Pierre, whose life revolves around his veterinarian sister, his parents and his property. A deadly virus affecting cows hits France and Pierre finds one of his much-loved herds infected. Distraught at the prospect of losing even one cow, he attempts to hide the outbreak from authorities and vows to fight to the bitter end to save them, even if it means resorting to drastic and irreversible measures.
☆☆☆☆☆ Borrowing Tape
☆☆☆☆☆ IMDB
☆☆☆☆☆ The Movie Waffler
BPM (Beats Per Minute) throws us into the milieu of sexual and political activism during François Mitterrand’s Government of the early 90’s. As seen through the prism of the ACT UP movement in Paris, this film passionately illuminates the fight for social acceptance by people living with HIV in the face of drug manufacturers reluctant to expedite treatment breakthroughs. Nathan joins the ACT UP collective and is immediately drawn to the radical and somewhat militant Sean, a 20-something man living with HIV. As their relationship develops, and Sean’s condition deteriorates, BPM evolves skilfully from documentary-style to intimate drama, in a way that has captured the hearts of audiences across France.
☆☆☆☆☆ Cine Vue
☆☆☆☆☆ Eye For Film
☆☆☆☆☆ IMDB
☆☆☆☆☆ Slant Magazine
Coby – as was Jacob’s transitioning name – was 23 and partnered with Sara when he decided to take testosterone pills in his first step to becoming male. Surgery came next, as did cutting his hair short to assist his family in their acceptance. With a world of YouTube viewers watching Coby emerge from his gender chrysalis, those closest to him arguably underwent the more radical change – a change of perspective – which is something that sits at the heart of this documentary and informs it even more than the physical awakening. With Coby now reborn as Jacob, the final step in the transition is a hysterectomy; a crucial choice given Jacob’s partner, Sara, does not want to bear a child. Jacob’s father expresses the conundrum they face most eloquently when he says, “Changing has consequences. Not changing also has consequences.”
☆☆☆☆☆ IMDB
☆☆☆☆☆ Queer Guru
This heart-stopping drama charts a family’s struggles with the fallout of divorce, and the resulting arrangements for (and impact on) the two children. Miriam and Antoine have recently separated. While she’s willing to permit their 17-year-old daughter Joséphine to decide living arrangements for herself, Miriam is desperate to keep her youngest, 12-year-old Julien, away from his father. But the magistrate rules in favour of joint custody, and suddenly the boy is thrown directly into the middle of an escalating parental conflict, where it seems inevitable that sides must be chosen.
☆☆☆☆☆ Cine Vue
☆☆☆☆☆ Eye For Film
☆☆☆☆☆ IMDB

Continue reading →

Posted in Films and TV | 2 Comments

Our countries need us.

Posted on February 24, 2018 by Paul Frijters

Humanity is at a high point. What our ancestors dreamed of is slowly becoming a reality: a world without hunger in which the vast majority of mankind live peaceful and long lives. We are not there yet, but in Europe, East Asia, Latin America, and even in Africa (our cradle), mankind is emerging from dark times. People live longer, healthier, happier, and more educated lives. Paid for and organised by countries, helped by international flows of people and information.

And yet, our countries are under threat from a disconnect between the elites and the population of individual countries.

The elites are having a great time. They can live almost anywhere they want; they have access to all the food and living space they could wish for; and their children are assured a fantastic education and long lives, aided by all the ingenious inventions of our best minds. They have multiple passports and speak multiple languages, choosing where to live, love, work and die.

This luxury has come with the temptation to abandon their role as the protectors of the institutions and cultures of their countries. Many of them feel constrained by countries, part of a world elite that runs countries and manipulates countries, but is not part of them.

So they live fluid lives, avoiding the duties that countries put on them but enjoying their hospitality and privileges. They and their companies avoid taxes. They trade on internet platforms that evade the scrutiny and regulations of nation-states, which they often re-write. They complain about the stupidity of the populations and how everyone should be like the elites. They are eroding the strength of the countries that gave rise to them.

I too am part of this group, currently living in my fourth country, welcome wherever I go. I am not a billionaire or a famous actor, but part of the academic establishment, the high priesthood of our time. We come and go as we please, enjoying the best of life, working on what we want, and dreaming of even greater powers.

My kind dreams of the world empire in which we are either the emperor or at least important members of his court. This includes the climate scientists who dream of directing the resources and energy uses of the planet. It includes the AI people who dream of a world run by hybrid entities that they create. It includes the economists who dream of transnational structures that they regulate. It includes the lawyers who dream of an international legal order. It includes the businessmen who dream of a world without government.

I too dream of a world governance system that maximises the well-being of the world, for the benefit of the living and the generations to come.

Yet, I say to myself and to you that there will be no world empire and that your country needs you. Yes, your country. You can probably choose which country you want to belong to, but your chosen country still needs you. Continue reading →

Posted in Cultural Critique, Democracy, Economics and public policy, Education, Ethics, History, Inequality, Information, Life, Literature, Philosophy, Political theory, Politics - international, Politics - national, Religion, Science, Social Policy, Society | 9 Comments

Banks, money and bootstrapping capital adequacy

Posted on February 23, 2018 by Nicholas Gruen

Image result for creating money out of thin airBelow is an extract from a recent academic article setting out – rather laboriously I have to say – three ‘theories’ – I’d rather call them ‘ways of seeing’ what banks do in our financial system.

  1. One approach sees them as financial intermediators meeting the needs of those who would invest by aggregating the savings of those who lend to banks – depositors.
  2. An older ‘fractional reserve view of banking says that each bank is a financial intermediary without the power to create money, but the banking system collectively is able to create money through the process of ‘multiple deposit expansion’ (the ‘money multiplier’).
  3. The credit creation theory of banking, predominant a century ago, does not consider banks as financial intermediaries that gather deposits to lend out, but instead argues that each individual bank creates credit and money newly when granting a bank loan.1

It’s worth reading, though it’s nightmarishly repetitive and a little reductive. I’m not sure that examining accounting treatments necessarily proves the authors’ point, but then it’s a lot more scrupulous view of things than is practised in most discussions of banking – including by banking authorities who often imply the first theory. And even amongst policy makers this seems to be a pretty well kept secret. As the advocacy group, Positive Money in the UK uncovered “84% of British lawmakers don’t know that banks create money when they lend”.

In this context the Bank of England is alone amongst similar institutions as far as I know in nailing its colours to the mast:

  • This article explains how the majority of money in the modern economy is created by commercial banks making loans.2
  • Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

In any event, this stuff is exciting and important.

So I thought readers would be interested in how Credit Suisse attended to an urgent capital adequacy matter by creating money, lending it to Qatar and then having Qatar invest in the bank. Nice work if you can get it. Accordingly I reproduce Section 5.2.1 from the article I mentioned at the outset.  Continue reading →

  1.  These descriptions are quoted from the beginning of the quoted article but sufficiently loosley that I didn’t want to disrupt it with lots of quotes and close quotes. ↩
  2. This is about 96.5% of the money in the system the rest being notes and coins manufactured by the state and earning seigniorage revenue for governments. ↩
Posted in Uncategorized | 6 Comments