The Red Flags of Romantic Chemistry

David Robson in The Guardian




 
For centuries, our romantic fates were thought to be written in the stars. Wealthy families would even pay fortunes to have a matchmaker foretell the success or failure of a potential marriage.

Despite the lack of any good evidence for its accuracy, astrology still thrives in many lifestyle magazines, while the more sceptical among us might hope to be guided by the algorithms of websites and dating apps.

But are these programs any more rigorous than the signs of the zodiac? Or should we put our faith in love languages and attachment theory? (That’s to name just two fashions in pop psychology.)

The world of matchmaking is riddled with myths and misunderstandings that recent science is just starting to unravel. From the inevitably messy data, a few clear conclusions are emerging that can help guide us in our search for love.

If you are looking for the secrets of romantic success, the most obvious place to start would seem to be the science of personality. If you are an outgoing party animal, you might hope to find someone with a similar level of extraversion; if you are organised and conscientious, you might expect to feel a stronger connection with someone who enjoys keeping a rigid schedule.

The scientific research does offer some support for the intuitive notion that “like attracts like”, but in the grand scheme of things, the similarity of personality profiles is relatively unimportant.

“Yes, it is true that people are more likely to experience chemistry with someone who is similar to them in certain ways,” explains Prof Harry Reis at the University of Rochester, New York. “But if I brought you in a room with 20 people who are similar to you in various ways, the odds that you’re going to have chemistry with more than one of them are not very good.” It is only the extreme differences, Reis says, that will matter in your first meetings. “It’s not likely that you would have chemistry with somebody who is very dissimilar to you.”

The rest is just noise. The same goes for shared interests. “The effects are so tiny,” says Prof Paul Eastwick at the University of California, Davis.

Eastwick found similarly disappointing results when he looked at people’s “romantic ideals” – our preconceived notions of the particular qualities we would want in our dream partner. I might say that I value kindness above all other qualities, for instance, and you might say you are looking for someone who is adventurous and free-spirited.

You’d think we’d know what we want – but the research suggests otherwise. While it’s true that certain qualities, such as kindness or adventurousness, are generally considered to be attractive, experiments on speed-daters suggest that people’s particular preferences tend to matter very little in their face-to-face interactions. Someone who stated that they were looking for kindness, for example, would be just as likely to click with someone who scored high on adventurousness – and vice versa. Despite our preconceptions, we seem open to a wide variety of people showing generally positive attributes.

“We can’t find evidence that some people really weigh some traits over others,” Eastwick says. He compares it to going out to a restaurant, ordering a specific dinner, then swapping food with the table next to yours. You’re just as likely to enjoy the random dish as the one you’d originally ordered. 

Given this growing body of research, Eastwick is generally very sceptical that computer algorithms can accurately match people for chemistry or compatibility. Working with Prof Samantha Joel at Western University in Canada, he has used a machine learning program to identify any combinations of traits that would predict mutual attraction.

Each participant completed a 30-minute survey, with detailed questions about their personality traits, their physical attractiveness, their political and social values and their dating preferences (whether they were looking for a fling or a long-term relationship). “It was very much a ‘kitchen-sink’ approach,” says Eastwick. The researchers then put the participants on blind dates and questioned them about whether they were likely to hook up afterwards.

Pubgoers at a speed-dating event in 2021. Experts find that we bin our romantic ideals at such gatherings. Photograph: Alberto Pezzali/AP

Surprise, surprise? The algorithm could accurately pick out the participants who were generally considered to be more attractive to a larger number of people. And it could pick out those who were generally less picky and more open to second dates with a larger number of people. On predicting the particular level of attraction between two specific people, however, it performed no better than chance. There was no magic formula that could ensure a sizzling first date.

Most dating apps and websites keep the details of their algorithms secret, but Eastwick thinks it is unlikely that these companies have stumbled upon some secret that is missing from the psychological literature. Indeed, he suspects that romantic attraction may be an inherently “chaotic” process that inherently defies accurate prediction. 

Reis is similarly downbeat about the chances of algorithms correctly predicting the prick of Cupid’s arrow. “The evidence that they have is very, very low-quality work.” In his opinion, these apps may rule out the people with the most extreme differences in personality and interest – but beyond that, it’s largely chance.

According to psychological research, we are much more likely to be swayed by the flow of the conversation and people’s nonverbal cues. “It’s whether the other person is smiling at the right moments, whether they’re really listening and showing that they understand what you’re saying,” says Reis. That’s impossible to gauge before the encounter from data gathered in a survey.

An additional problem is that the questions on a survey are necessarily rather abstract; they can’t capture the tiny details of someone’s life that might promote bonding. You might not bond over a general love of travel, but your mutual love of a particular location that you just happen to mention in your conversation. You might even start out with differences, but then change your mind on a certain topic as your date persuades you to see things their way – a process of reaching a joint understanding could provide the point of connection. “No algorithm is going to be able to tell us that’s going to happen ahead of time,” says Eastwick.

Even after couples have started dating, it can be tricky to work out which relationships will last in the long term. Analysing data from more than 11,000, Eastwick and Joel found that someone’s perception of their partner’s commitment was far more important than particular personality traits in determining their satisfaction in the relationship.

If you are au fait with self-help literature, you might have come to believe that “attachment styles” might explain your relationship woes. These are supposed to describe different ways of forming relationships with others, based on someone’s childhood experiences with their caregivers. The terms are fairly self-explanatory – you can have “secure”, “avoidant” or “anxious” attachment styles. You will find articles arguing that someone who has an anxious attachment style may find that an avoidant partner only exacerbates their insecurities.

Eastwick and Joel’s data suggest that attachment styles do play some role in people’s relationship quality. Even so, we must be careful not to overexaggerate their influence on our romantic fates. Prof Pascal Vrtička, a social scientist at the University of Essex, points out that our attachment styles can change with time. With the right partner, someone might move from anxious to secure, for instance. “It might take some time to lose some of your insecurity, but it is possible.” Once again, our attachment styles are one factor in a dynamic process, rather than determining the health of our relationships from the very beginning.

Evidence suggests that dating app algorithms produce rudimentary matches. Photograph: Koshiro K/Alamy

The same can be said of “love languages”. While people’s style of expressing affection and appreciation for their partner – whether we prefer praise, or gifts, or hugs and kisses to show our affection – can influence a couple’s initial compatibility, it is possible to adapt and change over time.

Ultimately, our beliefs about relationships and the ways they ought to progress may be just as important as the initial compatibility of any two people. Our love lives, like so many areas of health and wellbeing, are the subject of expectation effects.

To get a flavour of this research, consider the following statements:

Potential relationship partners are either compatible or they are not

Relationships that do not start off well inevitably fail

And

The ideal relationship develops gradually over time

A successful relationship evolves through hard work and the resolution of incompatibilities

People who endorse the first two statements are said to have a “romantic destiny” mindset, while those who endorse the last two statements are said to have a “romantic growth” mindset. (Some people will fall in between – they might believe that relationships need to start out well, but that they can also develop over time.)

In general, people with the romantic destiny mindset will place more importance on the initial chemistry of the first encounter and if that goes well, they may be quick to fall in love. But they do not cope well with disagreements and may lose interest as potential incompatibilities come to light and may even engage in toxic behaviours to extricate themselves. Recent research suggests that people with the destiny mindset are more likely to “ghost” partners, for example. Those with the romantic growth mindset, on the other hand, tend to work harder to cope with the challenges, rather than looking to start again whenever differences come to light.

That’s the romantic side. Prof Jessica Maxwell, a social psychologist at McMaster University in Ontario, Canada, and colleagues have found similar patterns of behaviour in the bedroom. People with a “sexual destiny mindset” endorse statements such as:

If sexual partners are meant to be together, sex will be easy and wonderful


It is clear right from the start how satisfying a couple’s sex life will be over the course of their relationship

Maxwell’s studies show that people with these kinds of beliefs can fare very well, but they tend to be fatalistic if issues emerge. People with a sexual growth mindset, however, are more proactive about navigating their disappointments and looking for ways to improve their own and their partner’s satisfaction.

Research shows that shared interests only give a minor boost to romantic chemistry. Photograph: Dmytro Sidelnikov/Alamy

Some relationships, however, are best left on the scrapheap; even those with a growth mindset need to acknowledge when things simply aren’t going to work out. And if there is no chemistry on a first date, there is no need to put yourself through another excruciating encounter.

But we should also be wary of having too many fixed preconceptions. Whether you are focused on finding someone with a particular profession, personality profile or planetary alignment, overly rigid ideas can blind you to the potential in the people around you.

If the science tells us anything, it is that love is inherently unpredictable. In matters of the heart, we should always be prepared to be surprised.

Why we Trust Fraudsters and Conmen

 

Modern Marriages - For Better or For Worse

By Girish Menon

Recently, I heard the story of somebody who was married for over 30 years and had a hostile spouse for an equivalent time period. This person it was revealed had no moments of intimacy from the outset but they performed the sexual act in a spirit of mutual need. The couple still retain their marital status and one of the partners told the other, ‘I will destroy you but not give you a divorce”.

On the other hand the courts in Mumbai receive over 3000 cases each month. The traditional Indian idea of a family is metamorphosing quickly and even rapidly catching up with the western world. My cousin has this quip,‘ While the Indian woman has changed the Indian male has failed to adapt to this change’.

From an economic point of view this increasing divorce rate is a good development. In this era when GDP growth is the altar that we are duty bound to worship, then more divorces mean an increased contribution to GDP growth. Every splitting couple will employ a minimum of two lawyers, they will need separate houses and their children will need some childcare. All of this creates economic opportunities and contributes to the GDP counter. Second marriages and divorces also further contribute to economic growth.

Among Malayalees the absence of ‘yogam’ is the catchall phrase used to explain away any failed marriage. In simple terms, it means the couple were not meant to be successful in marriage. This is a post hoc rationalisation akin to the use of the term destiny.

But is there a good predictive method for choosing a partner of longevity?

In economics, the process of mate selection could be looked at as an imperfect information problem. Horoscope matching, family compatibility, cultural similarity and many other factors have been used to establish the suitability of a partner. Unfortunately, none of them have proved sufficiently reliable. In true rational spirit modern couples have experimented with living together for long periods of time to overcome the imperfect information problem. However, anecdotal evidence seems to reveal marriage dissolution even among such couples. The reason could be the inability to predict and cope with unforeseen future events that hit every marital boat.

Fortunately, I have no advice to give in this matter. All that I have noted is the failure to observe Christian marriage vows ‘for better or for worse’ by many separating couples. However, even such vows are put to the test among long surviving couples; as an aunt remarked when my uncle retired, ‘I married him for better or for worse but not for lunch’.

The making of an opioid epidemic

When high doses of painkillers led to widespread addiction, it was called one of the biggest mistakes in modern medicine. But this was no accident. By Chris McGreal in The Guardian 

Jane Ballantyne was, at one time, a true believer. The British-born doctor, who trained as an anaesthetist on the NHS before her appointment to head the pain department at Harvard and its associated hospital, drank up the promise of opioid painkillers – drugs such as morphine and methadone – in the late 1990s. Ballantyne listened to the evangelists among her colleagues who painted the drugs as magic bullets against the scourge of chronic pain blighting millions of American lives. Doctors such as Russell Portenoy at the Memorial Sloan Kettering Cancer Center in New York saw how effective morphine was in easing the pain of dying cancer patients thanks to the hospice movement that came out of the UK in the 1970s.

Why, the new thinking went, could the same opioids not be made to work for people grappling with the physical and mental toll of debilitating pain from arthritis, wrecked knees and bodies worn out by physically demanding jobs? As Portenoy saw it, opiates were effective painkillers through most of recorded history and it was only outdated fears about addiction that prevented the drugs still playing that role.

Opioids were languishing from the legacy of an earlier epidemic that prompted President Theodore Roosevelt to appoint the US’s first opium commissioner, Dr Hamilton Wright, in 1908. Portenoy wanted to liberate them from this taint. Wright described Americans as “the greatest drug fiends in the world”, and opium and morphine as a “national curse”. After that the medical profession treated opioid pain relief with what Portenoy and his colleagues regarded as unwarranted fear, stigmatising a valuable medicine.

These new evangelists painted a picture of a nation awash in chronic pain that could be relieved if only the medical profession would overcome its prejudices. They constructed a web of claims they said were rooted in science to back their case, including an assertion that the risk of addiction from narcotic painkillers was “less than 1%” and that dosages could be increased without limit until the pain was overcome. But the evidence was, at best, thin and in time would not stand up to detailed scrutiny. One theory, promoted by Dr David Haddox, was that patients genuinely experiencing pain could not become addicted to opioids because the pain neutralised the euphoria caused by the narcotic. He said that what looked to prescribing doctors like a patient hooked on the drug was “pseudo-addiction”.
Portenoy toured the country, describing opioids as a gift from nature and promoting access to narcotics as a moral argument. Being pain-free was a human right, he said. In 1993, he told the New York Times of a “growing literature showing that these drugs can be used for a long time, with few side-effects, and that addiction and abuse are not a problem”.

Long after the epidemic took hold, and the death toll rose into the hundreds of thousands in the US, Portenoy admitted that there was little basis for this claim and that he had been more interested in changing attitudes to opioids among doctors than in scientific rigour.

“In essence, this was education to destigmatise and because the primary goal was to destigmatise, we often left evidence behind,” he admitted years later as the scale of the epidemic unfolded.

Likewise, Haddox’s theory of pseudo-addiction was based on the study of a single cancer patient. At the time, though, the new thinking was a liberation for primary care doctors frustrated at the limited help they could offer patients begging to get a few hours’ sleep. Ballantyne was as enthusiastic as anyone and began teaching the gospel of pain relief at Harvard, and embracing opioids to treat her patients.

“Our message was a message of hope,” she said. “We were teaching that we shouldn’t withhold opiates from people suffering from chronic pain and that the risks of addiction were pretty low because that was the teaching we’d received.”

But then Ballantyne began to see signs in her patients that experience wasn’t matching theory. Doctors were told they could repeatedly ratchet up the dosage of narcotics and switch to a new and powerful drug, OxyContin, without endangering the patient, because the pain, in effect, cancelled out the risk of addiction. To her dismay, Ballantyne saw that many of her patients were not better off when taking the drugs and were showing signs of dependence.

Among those patients on high doses over months and years, Ballantyne heard from one after another that the more drugs they took, the worse their pain became. But if they tried to stop or cut back on the pills, their pain also worsened. They were trapped.

“You had never seen people in such agony as these people on high doses of opiates,” she told me. “And we thought it’s not just because of the underlying pain; it’s to do with the medication.”

As Ballantyne listened to relatives of her patients talk about how much the drugs had changed their loved ones, her misgivings grew. Husbands spoke of wives as if a part of them were lost. Mothers complained that children had become sullen and distant, their judgment gone, their personality warped, their character altered. None of this should have been happening. Pain relief was supposed to free the patients, not imprison them. It was all very far from the promise of a magic bullet.

As the evidence that opioids were not delivering as promised piled up, the Harvard specialist began to record her findings. By then, though, there were other powerful forces with a big financial stake in the wider prescribing of painkilling drugs. Pharmaceutical companies are not slow to spot an opportunity and the push for wider prescribing of opioids had not gone unnoticed by the drug-makers, including the manufacturer of OxyContin, Purdue Pharma, which rapidly came to play a central role in the epidemic.

As the influence of the opioid evangelists grew, and restraints on prescribing loosened, the pharmaceutical industry moved to the fore with a push to make opioids the default treatment for pain, and to take advantage of the huge profits to be made from mass prescribing of a drug that was cheap to produce.

 

Bottles of painkiller OxyContin, made by Purdue Pharma. Photograph: Reuters

The American Pain Society, a body partially funded by pharmaceutical companies, was pushing the concept of pain as the “fifth vital sign”, alongside other measures of health such as heart rate and blood pressure. “Vital signs are taken seriously,” said its president, James Campbell, in a 1996 speech to the society. “If pain were assessed with the same zeal as other vital signs are, it would have a much better chance of being treated properly. We need to train doctors and nurses to treat pain as a vital sign.”

The APS wanted the practice of checking pain as a vital sign as a matter of routine adopted in American hospitals. The key was to win over the Joint Commission for Accreditation of Healthcare Organizations, which certifies about 20,000 hospitals and clinics in the US. Its stamp of approval is the gateway for medical facilities to tap into the huge pot of federal money paying for healthcare for older, disabled and poor people. Hospitals are careful not to get on the wrong side of the joint commission’s “best practices” or to fail its regular performance reviews.

In response to what it called “the national outcry about the widespread problem of under-treatment” – an outcry in good part generated by drug manufacturers – the commission issued new standards for pain care in 2001. Hospital administrators picked over the document to ensure they understood exactly what was required.

Every patient was to be asked about their pain levels, no matter what the reason they were seeing a doctor. Hospitals adopted a system of colour-coded smiley faces, to represent a rising scale of pain from 0-10. The commission ruled that anybody identifying as a five – a yellow neutral face described as “very distressing” – or above was to be was to be referred for a pain consultation.

The commission told hospitals they would be expected to meet the new standards for pain management at their next accreditation survey. Purdue Pharma was ready. The company offered to distribute materials to educate doctors in pain management for free. This amounted to exclusive rights to indoctrinate medical staff. A training video asserted that there is “no evidence that addiction is a significant issue when persons are given opioids for pain control”, and claimed that some clinicians had “inaccurate and exaggerated concerns about addiction, tolerance and risk of death”. Neither claim was true.

Some doctors questioned the value of patient self-assessment, but the commission’s regulations soon came to be viewed as a rigid standard. In time, pain as the fifth vital sign worked its way into hospital culture. New generations of nurses, steeped in the opioid orthodoxy, sometimes came to see pain as more important than other health indicators.

Dr Roger Chou, a pain specialist at Oregon Health and Science University who has made long-term studies of the effectiveness of opioid painkillers and helped shape the Centers for Disease Control and Prevention’s policy on the epidemic, said the focus on pain caused patients to give it greater weight than made sense.

“When you start asking people: ‘How much pain are you having?’ every time they come into the hospital, then people start thinking: ‘Well, maybe I shouldn’t be having this little ache I’ve been having. Maybe there’s something wrong.’ You’re medicalising what’s a normal part of life,” he said.

One consequence was that people with relatively minor pain were increasingly directed toward medicinal treatment while consideration of safer or more effective alternatives, such as physiotherapy, were marginalised. Another, said Chou, was the increased expectation that pain can be eliminated. Chasing the lowest score on the pain chart often came at the expense of quality of life as opioid doses increased. “It’s better to have a little bit of pain and be functional than to have no pain and be completely unfunctional,” said Chou.

Health insurance companies piled yet more pressure on doctors to follow the path of least resistance. This meant cutting consultation times and payments for more costly forms of pain treatment in favour of the direct approach: drugs.

The joint commission needed a way to judge whether its 2001 edict on pain was being adhered to and latched on to patient satisfaction surveys. It took a determined doctor to resist the pressure to prescribe. Physicians could spend half an hour pressing a person to take more responsibility for their own health – eat better, exercise more, drink less, find ways to deal with stress – only to watch an unhappy patient make their views known on the satisfaction survey and face a dressing down from hospital management. Or they could quickly do what the patient came in for: give them a pill and get full marks.

In Detroit, Dr Charles Lucas’s three decades of experience as a surgeon told him it was possible to what was easy and sign the prescription, or to do what was hard. Lucas grew up in the city and had been instrumental in establishing Detroit’s publicly owned hospital as the highest-level trauma centre in Michigan and one of the first top-tier centres in the country.

 

Activists in New York, during a protest denouncing the city’s ‘inadequate and wrongheaded response’ to the opioid overdose crisis. Photograph: Getty
Emergency departments became beacons for the opioid dependent, who quickly learned to game the system to get drugs on top of their prescriptions. They turned up feigning pain, knowing harassed medical staff under pressure of time and the commission’s standards were likely to prescribe narcotics and move on without too many questions.

“Some of the old-time nurses, they have that jaundiced look in their eye and say ‘So-and-so’s complaining of pain’. You can tell by the look in their eye that they don’t think it’s justified that they get any more medicine,” said Lucas. “The younger nurses, they say we have to treat this pain – because they’ve been indoctrinated – they’ve got to get rid of the pain. God forbid you don’t get rid of the pain. That would be like a mortal sin.”

But there was a price for resisting the pressure to prescribe ever higher doses of pain relief.

Lucas was knocked back in surprise, and then infuriated, to be summoned to appear before his hospital’s ethics committee after a nurse reported him for failing to provide adequate pain treatment.

The surgeon’s longstanding patients included Gail Purton, the wife of a well-known Michigan radio personality. Lucas operated on Purton a few times, and she was back for surgery after her ovarian cancer spread. “It was a big operation. Cut off all sorts of cancer.” The next day, a nurse asked Purton if she was in pain. Purton said she was. The nurse reported Lucas for failing to properly address a patient’s pain. “I got reported because I wasn’t giving her enough pain medicine. She had a big cut from here to here,” Lucas said, running his finger across the front of his shirt and scoffing at the idea that she could be pain-free after an operation like that.

The surgeon responded with a five-page letter to the ethics committee chairman, whom he happened to have trained, challenging the questioning of his professional judgment. Purton wrote her own letter, praising Lucas’s care and saying that she never expected not to have pain after a major operation.

The case was dropped, but it was not an isolated incident. Lucas has worked closely with another surgeon, Anna Ledgerwood, since 1972. She too was hauled before the ethics committee on more than one occasion, on the same charge. It cleared Ledgerwood, but Lucas said more junior surgeons buckled to the pressure to administer opioids just to stay out of trouble.

Lucas regarded the new pain orthodoxy as a growing tyranny. He also thought it was killing patients. He began to collect his own data.

As the joint commission was pushing out its new standards for pain treatment in the early 2000s, the industry was driving a parallel effort to influence the prescribing habits of doctors in small clinics and private practices across the country. Many were still hesitant to prescribe narcotics, in part because of fear of legal liability for overdose or addiction.

The American Pain Society and Haddox, who was by then working for Purdue Pharma, were instrumental in writing a policy document reassuring doctors they would not face disciplinary action for prescribing narcotics, even in large quantities. The industry latched on to the Federation of State Medical Boards because of its influence over health policy individual US states which regulate how doctors practise medicine.

In 2001, Purdue Pharma funded the distribution of new pain treatment guidelines drawn up by the FSMB that sounded many of the same themes as the standards written by the joint commission.

The document picked up on Haddox’s pseudo-addiction theory. “Physicians should recognise that tolerance and physical dependence are normal consequences of sustained use of opioid analgesics and are not synonymous with addiction,” it said.

The FSMB pressed state medical boards to adopt the guidelines and to reassure doctors that adhering to them would diminish the likelihood of disciplinary action.

Over the following decade, the FSMB took close to $2m (£1.52m) from the drug industry, which mostly went to promote the guidelines and to finance a book, Responsible Opioid Prescribing, written with the oversight and advice of a clutch of doctors who were strong advocates of wider use of prescription narcotics. The book was sold to state medical boards and health departments for distribution to physicians, clinics and hospitals. The drug industry paid for the publication but the FSMB kept the $270,000 profits from sales.

Within a few years, the model guidelines were adopted in full or in part by 35 states, and the floodgates were open to mass prescribing of what Drug Enforcement Administration agents came to call “heroin in a pill”. Opioids were soon the default treatment even for relatively minor pain. Dentists gave them to teenagers after pulling their wisdom teeth. Not just one or two days’ worth of pills, but a fortnight or a month’s worth, which, if they did not draw the intended recipient in, frequently sat in the medicine cabinet waiting to be discovered by someone else in the family. The lack of caution in prescribing left an impression among the users that the drugs were harmless, and some people shared them with others as easily as they might an aspirin. Prescribing escalated year on year. So did profits. OxyContin sales passed $1bn a year in 2000. Three years later they were twice that. Other opioid makers were pulling in huge profits too.

By the time the FSMB guidelines were landing in doctors’ inboxes in the early 2000s, Ballantyne had reached her own conclusions about the impact of escalating opioid prescribing. In 2003, she co-authored an article in the New England Journal of Medicine highlighting the dearth of comprehensive trials and saying that two important questions remained unanswered even as mass prescribing of opioids took off. Do they work long term? Are higher doses safe to take year after year? The drug industry and opioid evangelists said yes, but where was the evidence for it?

Ballantyne wrote that there was evidence that putting some patients on serial prescriptions of strong opioids has the opposite of the intended effect. High doses not only build up a tolerance to the drug, but cause increased sensitivity to pain. The drugs were defeating themselves.

Her assessment seemed to warn that if there was an epidemic of pain, it was partly driven by the cure. On top of that, there was evidence that the drugs were toxic. Then came the conclusion that stuck a dagger into the heart of the campaign for wider opioid prescribing. “Whereas it was previously thought that unlimited dose escalation was at least safe, evidence now suggests that prolonged, high-dose opioid therapy may be neither safe nor effective,” she wrote.

Ballantyne was also increasingly aware that the claim that pain neutralised the risk of addiction was false. Quantifying addiction, and who may be vulnerable, is notoriously difficult. Ballantyne, like a lot of doctors, estimated that between 10 and 15% of the population is vulnerable, but that it depends on the substance and circumstances. What she was certain of was that Purdue’s high-strength pill, OxyContin, had been a game changer. “The long-acting opiates suddenly put much higher doses into people’s hands and much more of it, and taking it around the clock made them dependent on it.”

From her research, Ballantyne concluded that OxyContin supercharged what was already widespread dependence on weaker opioid pills by drawing a new group of people into the category at risk of addiction and death. The danger was compounded by OxyContin’s failure to live up to its promise of holding pain at bay for 12 hours. For some patients, it wore off after eight, causing them to take three pills a day instead of two, greatly increasing their overall dose of narcotic and with it the risk of addiction.

Ballantyne thought the article would at least cause her profession and the drug industry to take stock of the impact of mass prescribing. By the time the article appeared, the documented death toll from prescription opioids was running at around 8,000 a year.

“When the 2003 New England journal article came out, I thought it was going to make the medical community sit up and say: ‘Wow. These drugs that we’ve been thinking are helping people are not. We have a real problem.’ But the medical community didn’t at all say: ‘Wow,’” Ballantyne said with half a laugh, 15 years later.

“People in my field who had been, like me, taught we have to do this – people who’d been lobbying to try and increase opiate use, like the palliative care physicians – said: ‘What are you doing? We worked so hard to get to this point, and now you’re going to turn it all around. They become so rattled when you suggest you shouldn’t give the opiates – it’s partly people in the pain field and especially people in pharma – because it’s big business.”

Lucas and Ledgerwood had their own study on the impact of opioids in the works. They came to believe the tyranny of the colour-coded smiley faces was costing lives. Years of surgery have given Lucas a healthy respect for pain as a tool for recovery. To suppress it was dangerous. But as large doses of opioids became the norm, the surgeon noted an increasing number of incidents of patients struggling to breathe after routine operations and being moved to intensive care.

Lucas and Ledgerwood visited trauma centres to collect data on deaths before and after the joint commission standards on pain treatment. In 2007, the two doctors published their findings. Before the commission’s dictum, 0.7% of trauma centre patients died from “excess administration of pain medicines”. The death toll rose to 3.6% after the commission’s policies kicked in.

“In each case, administration of sedation led to a change in vital signs or a deterioration in the respiratory status requiring some type of intervention which, in turn, led to a cascade of events resulting in death,” the paper said. Those were only the deaths in which there was little doubt opioids were responsible, and the real toll was almost certainly higher. “Overmedication with sedatives/narcotics … clearly contributed to deaths,” the study concluded.

A memorial in Washington DC, consisting of 22,000 engraved white pills representing the face of someone lost to a prescription opioid overdose in 2015. Photograph: Mark Wilson/Getty

“I’m convinced that because of the pressures brought to bear by the joint commission, we are killing people,” Lucas told me. The study said the medical staff lived in fear of the joint commission standards which created “great psychological pressure on caregivers” to use narcotics.

In a damning critique, the paper said that the commission’s reliance on pain scales to guide treatment had created an “excessive emphasis on undermedication at the same time ignoring overmedication”. The obsession with ensuring people were not in pain came at the expense of ignoring the dangers of giving large amounts of opioids to people recovering from surgery or serious injury. The drugs may kill the pain but they also risked killing the patient.

The two doctors made no secret of who they blamed for “this preventable cause of death and disability”. “It’s about money. Money has influence, and it influenced the joint commission,” said Lucas.

The surgeon presented the paper to a meeting of the Central Surgical Association and saw it published by the Journal of the American College of Surgeons under the headline “Kindness Kills: The Negative Impact of Pain as the Fifth Vital Sign.”

Afterwards, Lucas got a stream of letters and emails from doctors who recognised the problem. But, unlike Ballantyne, he wasn’t surprised when the policy remained the same. “Did I expect a change? No. It is too ingrained into the medical profession. It’s become financial just like the drug industry is financial. It’s nothing to do with right or wrong. It’s about how the money flows,” he said. “When you write a paper you want there to be unemotional data out there. You want that unemotional data to be analysed and interpreted in one way or the other, but you don’t expect the Renaissance.”

In 2012, nine years after Ballantyne’s cautioning against the mass prescribing of opioids as a quick fix for pain was published in the New England Journal of Medicine, a renowned British pain specialist, Cathy Stannard, called the doctor’s paper “a distant warning bell”, challenging the opening of the floodgates to strong opioids.

Ballantyne continued to collect data and publish ever more detailed insights into the impact of painkillers. A less rapacious drug industry might have paused in its headlong charge to sell opioids, and less blinkered and compliant regulators might have determined that this was the moment to weigh the claims made in favour of permitting such widespread prescribing.

Instead the pharmaceutical companies took the warnings as a challenge to their business interests. Through the 2000s, industry poured money into a political strategy to keep the drugs flowing. It funded front groups and studies to claim that there was indeed an epidemic – but it was of untreated pain. The millions coping with chronic pain were the real victims, the industry said, not the “abusers” hooked on opioids they often bought on the black market or obtained from crooked doctors. That one frequently became the other was conveniently overlooked.

Pharma’s lobbyists worked to persuade Congress and the regulators that to curb opioid prescribing would be to punish the real victims because of the sins of the “abusers”, and it worked. As a result, the devastation ran unchecked for another decade and more. By 2010, doctors in the US were writing more than 200m opioid prescriptions a year. As the prescribing rose, so did the death toll. Last year, more than 72,000 Americans died of drug overdoses, the vast majority from opioids, nearly 10 times the number at the time Ballantyne published her warning.

The head of the FDA at the time OxyContin was approved for distribution two decades ago, Dr David Kessler, later described the opioid crisis as an “epidemic we failed to foresee”. “It has proved to be one of the biggest mistakes in modern medicine,” he said.

Kessler was wrong. It wasn’t a mistake. It was a betrayal.

How to get away with financial fraud

Dan Davies in The Guardian


Guys, you’ve got to hear this,” I said. I was sitting in front of my computer one day in July 2012, with one eye on a screen of share prices and the other on a live stream of the House of Commons Treasury select committee hearings. As the Barclays share price took a graceful swan dive, I pulled my headphones out of the socket and turned up the volume so everyone could hear. My colleagues left their terminals and came around to watch BBC Parliament with me.

It didn’t take long to realise what was happening. “Bob’s getting murdered,” someone said.

Bob Diamond, the swashbuckling chief executive of Barclays, had been called before the committee to explain exactly what his bank had been playing at in regards to the Libor rate-fixing scandal. The day before his appearance, he had made things very much worse by seeming to accuse the deputy governor of the Bank of England of ordering him to fiddle an important benchmark, then walking back the accusation as soon as it was challenged. He was trying to turn on his legendary charm in front of a committee of angry MPs, and it wasn’t working. On our trading floor, in Mayfair, calls were coming in from all over the City. Investors needed to know what was happening and whether the damage was reparable.

A couple of weeks later, the damage was done. The money was gone, Diamond was out of a job and the market, as it always does, had moved on. We were left asking ourselves: How did we get it so wrong?

At the time I was working for a French stockbroking firm, on the team responsible for the banking sector. I was the team’s regulation specialist. I had been aware of “the Libor affair”, and had written about it on several occasions during the previous months. My colleagues and I had assumed that it would be the typical kind of regulatory risk for the banks – a slap on the wrist, a few hundred million dollars of fines, no more than that.

The first puzzle was that, to start with, it looked like we were right. By the time it caught the attention of the mainstream media, the Libor scandal had reached what would usually be the end of the story – the announcement, on 27 June 2012, of a regulatory sanction. Barclays had admitted a set of facts, made undertakings not to do anything similar again, and agreed to pay finesof £59.5m to the UK’s Financial Services Authority, $200m to the US Commodity Futures Trading Commission and a further $160m to the US Department of Justice. That’s how these things are usually dealt with. If anything, it was considered quite a tough penalty.

But the Libor case marked the beginning of a new process for the regulators. As well as publishing their judgment, they gave a long summary of the evidence and reasoning that led to their decision. In the case of the Libor fines, the majority of that evidence took the form of transcripts of emails and Bloomberg chat. Bloomberg’s trading terminals – the $50,000-a-year news and financial-data servers that every trader uses – have an instant-messaging function in addition to supplying prices and transmitting news. Financial market professionals are vastly more addicted to this chat than teen girls are to Instagram, and many of them failed to realise that if you discussed illegal activity on this medium, you were making things easy for the authorities.

The transcripts left no room for doubt.

Trader C: “The big day [has] arrived … My NYK are screaming at me about an unchanged 3m libor. As always, any help wd be greatly appreciated. What do you think you’ll go for 3m?”

Submitter: “I am going 90 altho 91 is what I should be posting.”

Trader C: “[…] when I retire and write a book about this business your name will be written in golden letters […]”.

Submitter: “I would prefer this [to] not be in any book!”

Perhaps it’s unfair to judge the Libor conspirators on their chat records; few of the journalists who covered the story would like to see their own Twitter direct-message history paraded in front of an angry public. Trading, for all its bluster, is basically a service industry, and there is no service industry anywhere in the world whose employees don’t blow off steam by acting out or insulting the customers behind their backs. But traders tend to have more than the usual level of self-confidence, bordering on arrogance. And in a general climate in which the public was both unhappy with the banking industry and unimpressed with casual banter about ostentatious displays of wealth, the Libor transcripts appeared crass beyond belief. Every single popular stereotype about traders was confirmed. An abstruse and technical set of regulatory breaches suddenly became a morality play, a story of swaggering villains who fixed the market as if it was a horse race. The politicians could hardly have failed to get involved.

It is not a pleasant thing to see your industry subjected to criticism that is at once overheated, ill-informed and entirely justified. In 2012, the financial sector finally got the kind of enemies it deserved. The popular version of events might have been oversimplified and wrong in lots of technical detail, but in the broad sweep, it was right. The nuanced and technical version of events which the specialists obsessed over might have been right on the detail, but it missed one utterly crucial point: a massive crime of dishonesty had taken place. There was a word for what had happened, and that word was fraud. For a period of months, it seemed to me as if the more you knew about the Libor scandal, the less you understood it.

That’s how we got it so wrong. We were looking for incidental breaches of technical regulations, not systematic crime. And the thing is, that’s normal. The nature of fraud is that it works outside your field of vision, subverting the normal checks and balances so that the world changes while the picture stays the same. People in financial markets have been missing the wood for the trees for as long as there have been markets.

Some places in the world are what they call “low-trust societies”. The political institutions are fragile and corrupt, business practices are dodgy, debts are rarely repaid and people rightly fear being ripped off on any transaction. In the “high-trust societies”, conversely, businesses are honest, laws are fair and consistently enforced, and the majority of people can go about their day in the knowledge that the overall level of integrity in economic life is very high. With that in mind, and given what we know about the following two countries, why is it that the Canadian financial sector is so fraud-ridden that Joe Queenan, writing in Forbes magazine in 1989, nicknamed Vancouver the “Scam Capital of the World”, while shipowners in Greece will regularly do multimillion-dollar deals on a handshake?

We might call this the “Canadian paradox”. There are different kinds of dishonesty in the world. The most profitable kind is commercial fraud, and commercial fraud is parasitical on the overall health of the business sector on which it preys. It is much more difficult to be a fraudster in a society in which people only do business with relatives, or where commerce is based on family networks going back centuries. It is much easier to carry out a securities fraud in a market where dishonesty is the rare exception rather than the everyday rule.

 

Traders at Bloomberg terminals on the floor of the New York stock exchange, 2013. Photograph: Brendan McDermid / Reuters/REUTERS

The existence of the Canadian paradox suggests that there is a specifically economic dimension to a certain kind of crime of dishonesty. Trust – particularly between complete strangers, with no interactions beside relatively anonymous market transactions – is the basis of the modern industrial economy. And the story of the development of the modern economy is in large part the story of the invention and improvement of technologies and institutions for managing that trust.

And as industrial society develops, it becomes easier to be a victim. In The Wealth of Nations, Adam Smith described how prosperity derived from the division of labour – the 18 distinct operations that went into the manufacture of a pin, for example. While this was going on, the modern world also saw a growing division of trust. The more a society benefits from the division of labour in checking up on things, the further you can go into a con game before you realise that you’re in one. In the case of several dealers in the Libor market, by the time anyone realised something was crooked, they were several billions of dollars in over their heads.

In hindsight, the Libor system was always a shoddy piece of work. Some not-very-well-paid clerks from the British Bankers’ Association would call up a few dozen banks and ask: “If you were to borrow, say, a million dollars in [a given currency] for a 30-day deposit, what would you expect to pay?” A deposit, in this context, is a short-term loan from one bank to another. Due to customers’ inconvenient habit of borrowing from one bank and putting the money in an account at another, banks are constantly left with either surplus customer deposits, or a shortage of funds. The “London inter-bank offered-rate” (Libor) market is where they sort this out by borrowing from and lending to each other, at the “offered rate” of interest.

Once they had their answers, the clerks would throw away the highest and lowest outliers and calculate the average of the rest, which would be recorded as “30-day Libor” for that currency. The process would be repeated for three-month loans, six-month loans and any other periods of interest, and the rates would be published. You would then have a little table recording the state of the market on that day – you could decide which currency you wanted to borrow in, and how long you wanted the use of the money, and the Libor panel would give you a good sense of what high-quality banks were paying to do the same.

Compared with the amount of time and effort that goes into the systems for nearly everything else that banks do, not very much trouble was taken over this process. Other markets rose and fell, stock exchanges mutated and were taken over by super-fast robots, but the Libor rate for the day was still determined by a process that could be termed “a quick ring-around”. Nobody noticed until it was too late that hundreds of trillions of dollars of the world economy rested on a number compiled by the few dozen people in the world with the greatest incentive to fiddle it.

It started to fall apart with the onset of the global financial crisis in 2007, and all the more so after the collapse of Lehman Brothers in 2008, when banks were so scared that they effectively stopped lending to each other. Although the market was completely frozen, the daily Libor ring-around still took place, and banks still gave, almost entirely speculatively, answers to the question “If you were to borrow a reasonable sum, what would you expect to pay?”

But the daily quotes were published, and that meant everyone could see what everyone else was saying about their funding costs. And one of the telltale signs that a bank in trouble is when its funding costs start to rise. If your Libor submission is taken as an indicator of whether you’re in trouble or not, you really don’t want to be the highest number on the daily list. Naturally, then, quite a few banks started using the Libor submission process as a form of false advertising, putting in a lowballed quote in order to make it look like they were still obtaining money easily when, in fact, they could hardly borrow at all. And so it came to pass that several banks created internal message trails saying, in effect, “Dear Lowly Employee, for the benefit of the bank and its shareholders, please start submitting a lower Libor quote, signed Senior Executive”. This turned out to be a silly thing to do.

All this was known at the time. There was an article in the Wall Street Journal about it. I used to prepare PowerPoint slides with charts on them that had gaps for the year 2008 because the data was “somewhat hypothetical”. Even earlier, in late 2007, the Bank of England held a “liaison group” meeting so that representatives from the banks could discuss the issue of Libor reporting. What nobody seemed to realise is that an ongoing fraud was being committed. There was a conspiracy to tell a lie (to the Libor phone panel, about a bank’s true cost of funding) in order to induce someone to enter into a bargain at a disadvantage to themselves. The general public caught on to all this a lot quicker than the experts did, which put the last nail in the coffin of the already weakened trust in the financial system. You could make a case that a lot of the populist politics of the subsequent decade can be traced back to the Libor affair.

Libor teaches us a valuable lesson about commercial fraud – that unlike other crimes, it has a problem of denial as well as one of detection. There are very few other criminal acts where the victim not only consents to the criminal act, but voluntarily transfers the money or valuable goods to the criminal. And the hierarchies, status distinctions and networks that make up a modern economy also create powerful psychological barriers against seeing fraud when it is happening. White-collar crime is partly defined by the kind of person who commits it: a person of high status in the community, the kind of person who is always given the benefit of the doubt.

In popular culture, the fraudster is the “confidence man”, somewhere between a stage magician and the trickster gods of mythology. In films such as The Sting and Dirty Rotten Scoundrels, they are master psychologists, exploiting the greed and myopia of their victims, and creating a world of illusion. People like this do exist (albeit rarely). But they are not typical of white-collar criminals.

The interesting questions are never about individual psychology. There are plenty of larger-than-life characters. But there are also plenty of people like Enron’s Jeff Skilling and Baring’s Nick Leeson: aggressively dull clerks and managers whose only interest derives from the disasters they caused. And even for the real craftsmen, the actual work is, of necessity, incredibly prosaic.

The way most white-collar crime works is by manipulating institutional psychology. That means creating something that looks as much as possible like a normal set of transactions. The drama comes later, when it all unwinds.

Fraudsters don’t play on moral weaknesses, greed or fear; they play on weaknesses in the system of checks and balances – the audit processes that are meant to supplement an overall environment of trust. One point that comes up again and again when looking at famous and large-scale frauds is that, in many cases, everything could have been brought to a halt at a very early stage if anyone had taken care to confirm all the facts. But nobody does confirm all the facts. There are just too bloody many of them. Even after the financial rubble has settled and the arrests been made, this is a huge problem.

 

Jeffrey Skilling and Sherron Watkins of Enron at a Senate commerce committee hearing in 2002. Photograph: Ron Edmonds/AP

It is a commonplace of law enforcement that commercial frauds are difficult to prosecute. In many countries, proposals have been made, and sometimes passed into law, to remove juries from complex fraud trials, or to move the task of dealing with them out of the criminal justice system and into regulatory or other non-judicial processes. Such moves are understandable. There is a need to be seen to get prosecutions and to maintain confidence in the whole system. However, taking the opinions of the general public out of the question seems to me to be a counsel of despair.

When analysed properly, there isn’t much that is truly difficult about the proverbial “complex fraud trial”. The underlying crime is often surprisingly crude: someone did something dishonest and enriched themselves at the expense of others. What makes white-collar trials so arduous for jurors is really their length, and the amount of detail that needs to be brought for a successful conviction. Such trials are not long and detailed because there is anything difficult to understand. They are long and difficult because so many liars are involved, and when a case has a lot of liars, it takes time and evidence to establish that they are lying.

This state of affairs is actually quite uncommon in the criminal justice system. Most trials only have a couple of liars in the witness box, and the question is a simple one of whether the accused did it or not. In a fraud trial, rather than denying responsibility for the actions involved, the defendant is often insisting that no crime was committed at all, that there is an innocent interpretation for everything.

In January this year, the construction giant Carillion collapsed. Although they had issued a profits warning last summer, they continued to land government contracts. It was assumed that, since they had been audited by KPMG, one of the big-four accounting firms, any serious problems would have been spotted.
At the time of writing, nobody has been prosecuted over the collapse of Carillion. Maybe nobody will and maybe nobody should. It’s possible, after all, for a big firm to go bust, even really suddenly, without it being a result of anything culpable. But the accounting looks weird – at the very least, they seem to have recognised revenue a long time before it actually arrived. It’s not surprising that the accounting standards bodies are asking some questions. So are the Treasury select committee: one MP told a partner at KPMG that “I would not hire you to do an audit of the contents of my fridge.”

In general, cases of major fraud should have been prevented by auditors, whose specific job it is to review every set of accounts as a neutral outside party, and certify that they are a true and fair view of the business. But they don’t always do this. Why not? The answer is simple: some auditors are willing to bend the rules, and some are too easily fooled. And whatever reforms are made to the accounting standards and to the rules governing the profession, the same problems have cropped up again and again.

First, there is the problem that the vast majority of auditors are both honest and competent. This is a good thing, of course, but the bad thing about it is that it means that most people have never met a crooked or incompetent auditor, and therefore have no real understanding that such people exist.

To find a really bad guy at a big-four accountancy firm, you have to be quite unlucky (or quite lucky if that was what you were looking for). But as a crooked manager of a company, churning around your auditors until you find a bad ’un is exactly what you do – and when you find one, you hang on to them. This means that the bad auditors are gravitationally drawn into auditing the bad companies, while the majority of the profession has an unrepresentative view of how likely that could be.

Second, there is the problem that even if an auditor is both honest and competent, he has to have a spine, or he might as well not be. Fraudsters can be both persistent and overbearing, and not all the people who went into accountancy firms out of university did so because they were commanding, alpha-type personalities.

Added to this, fraudsters are really keen on going over auditors’ heads and complaining to their bosses at the accounting firm, claiming that the auditor is being unhelpful and bureaucratic, not allowing the CEO to use his legitimate judgment in presenting the results of his own business.

Partly because auditors are often awful stick-in-the-muds and arse-coverers, and partly because auditing is a surprisingly competitive and unprofitable business that is typically used as a loss-leader to sell more remunerative consulting and IT work, you can’t assume that the auditor’s boss will support their employee, even though the employee is the one placing their signature (and the reputation of the whole practice) on the set of accounts. As with several other patterns of behaviour that tend to generate frauds, the dynamic by which a difficult audit partner gets overruled or removed happens so often, and reproduces itself so exactly, that it must reflect a fairly deep and ubiquitous incentive problem that will be very difficult to remove.

By way of a second line of defence, investors and brokerage firms often employ their own “analysts” to critically read sets of published accounts. The analyst is meant to be an industry expert, with enough financial training to read company accounts and to carry out valuations of companies and other assets. Although their primary job is to identify profitable opportunities in securities trading – shares or bonds that are either very undervalued or very overvalued – it would surely seem to be the case that part of this job would involve the identification of companies that are very overvalued because they are frauds.

Well, sometimes it works. A set of fraudulent accounts will often generate “tells”. In particular, fraudsters in a hurry, or with limited ability to browbeat the auditors, will not be able to fake the balance sheet to match the way they have faked the profits. Inflated sales might show up as having been carried out without need for inventories, and without any trace of the cash they should have generated. Analysts are also often good at spotting practices such as “channel stuffing”, when a company (usually one with a highly motivated and target-oriented sales force) sells a lot of product to wholesalers and intermediaries towards the end of the quarter, booking sales and moving inventory off its books. This makes growth look good in the short term, at the expense of future sales.

Often, an honest auditor who has buckled under pressure will include a cryptic-looking passage of legalese, buried in the notes to the accounts, explaining what accounting treatment has been used, and hoping that someone will read it and understand that the significance of this note is that all of the headline numbers are fake. Nearly all of the fraudulent accounting policies adopted by Enron could have been deduced from its public filings if you knew where to look.

More common is the situation that prevailed in the period immediately preceding the global financial crisis.Analysts occasionally noticed that some things didn’t add up, and said so, and one or two of them wrote reports that, if taken seriously, could have been seen as prescient warnings. The problem is that spotting frauds is difficult and, for the majority of investors, not worth expending the effort on. That means it is not worth it for most analysts, either. Frauds are rare. Frauds that can be spotted by careful analysis are even rarer. And frauds that are also large enough to offer serious rewards for betting against them come along roughly once every business cycle, in waves.

Analysts are also subject to very similar pressures to those that cause auditors to compromise their principles. Anyone accusing a company publicly of being a fraud is taking a big risk, and can expect significant retaliation. It is well to remember that frauds generally look like very successful companies, and there are sound accounting reasons for this. It is not just that once you have decided to fiddle the accounts you might as well make them look great rather than mediocre.

If you are extracting cash fraudulently, you usually need to be growing the fake earnings at a higher rate. So people who are correctly identifying frauds can often look like they are jealously attacking success. Frauds also tend to carry out lots of financial transactions and pay large commissions to investment banks, all the while making investors believe they are rich. The psychological barriers against questioning a successful CEO are not quite as powerful as those against questioning the honesty of a doctor or lawyer, but they are substantial.

And finally, most analysts’ opinions are not read. A fraudster does not have to fool everyone; he just needs to fool enough people to get his money.

If you are looking to the financial system to protect investors, you are going to end up being disappointed. But this is inevitable. Investors don’t want to be protected from fraud; they want to invest. Since the invention of stock markets, there has been surprisingly little correlation between the amount of fraud in a market and the return to investors. It’s been credibly estimated that in the Victorian era, one in six companies floated on the London Stock Exchange was a fraud. But people got rich. It’s the Canadian paradox. Although in the short term, you save your money by checking everything out, in the long term, success goes to those who trust.

Democratising the knowledge of Economics - What happens when ordinary people learn economics?

Aditya Chakrabortty in The Guardian

In a makeshift classroom, nine lay people are battling some of the greatest economists of all time – and they appear to be winning. Just watch what happens to David Ricardo, the 18th-century father of our free-trade system. In best BBC voice, one of the group reads out Ricardo’s words: “Economics studies how the produce of the Earth is distributed.”

Not good enough, says another, Brigitte Lechner. Shouldn’t economists study how to meet basic needs? “We all need a roof over our heads, we all need to survive.” Nor does the Earth belong solely to humans. Her judgment is brisk. “Ricardo was talking tosh.”

So much laughter rings out of this room that the folk outside must wonder what’s going on. They’ve been told this is an economics course – and participants on those don’t normally dissolve into giggles.

Inside, Pat Bhatt chimes in: “Everything you see around you comes from nature. That’s the basis of everything. Economics is the wrong word. It should be … ecolo-mics.”

Ooohs and aaahs. “Very clever!” beams the facilitator Nicola Headlam and scribbles it down on the flipboard.

“I invented it,” says Bhatt.

“My work here is done,” replies Headlam. “I’ll get my coat.”

Some days, democracy looks like a bashed-up ballot box. Some days, it looks like a furious demo. But on this sun-splashed weekday morning, democracy looks like this low-ceilinged meeting room in a converted church, slap bang in the middle of the road that runs from Manchester to Stockport.

None of the “students” have ever picked up an economics textbook. At a guess, most would be either stumped or sedated by the Financial Times. Yet here they are, starting a crash course in something that to them is a mystery. The majority are retired, having worked their entire lives. But when asked how many of them feel some control over the economy, not one raises a hand. So who is in charge?

“Journalists – who are paid by rich people.”

Amid all the humour pokes a truth. For this group, economics is something that’s done to them, by people sitting far away in Westminster or the City. They bear the brunt of spending cuts; they struggle with the rottenness of Northern Rail and they see neighbours sinking into debt – and they have no decent account as to why. They have been bashed over the head again and again, and not even been shown the offending shovel.

Over in the corner sits Sue O’Connor, who today comes “sponsored by Visa!” Another gentle joke that masks the debtor’s panic of having her disability benefit hacked back. Cancer meant she lost all her income and wound up in sheltered housing. Now 64, she suffers severe arthritis, yet her Motability caris about to be taken away.

While at a secondary modern, her class was judged too thick to learn any maths. Partly because the teenager wasn’t taught to count, the grey-haired woman still feels she doesn’t count. “Information is power,” she tells the group. “If I can learn in this class, maybe others will listen to me.”

More confident is 70-year-old “raging feminist” Lechner. “The economy is a system, right?” she says. “I understand systems like patriarchy and how it’s set so certain people get hurt … and I want to know how the rules of the economy are set.”

Headlam nods: “Somehow, someone, somewhere made these rules up. They aren’t laws of nature.” And they determine “who’s got what and where and why”.

‘Short of paying nine grand a year for a degree, how else are laypeople meant to find out about the most potent social science of all?’ A flyer for the course. Photograph: Christopher Thomond for the Guardian

That tearing sound you can hear is the veil that normally partitions economics from society and politics.

Up till 2008, someone like O’Connor would have been told over and over that if she’d failed to get ahead it was her fault, not the system’s. She’d just not followed the rules. Then came the financial crisis, which turned into a crisis of economics.

When the Queen famously asked why no economist saw the crash coming, she cut to the heart of the matter: perhaps those who wrote the economy’s laws and policed their observance weren’t so qualified after all. And while some practitioners claim that theirs is a semi-science, all prescriptions to revive the economy – from George Osborne’s historic austerity to the hundreds of billions doled out to asset-owners by the Bank of England – underline how it’s fundamentally political. By the time Michael Gove remarked in the Brexit campaign that “people in this country have had enough of experts”, he was picking a squelchy-soft target.

One of the biggest battles over economics kicked off just up the road from this community centre. At the University of Manchester in 2013, economics undergraduates – tired of memorising abstract models while the eurozone burned – linked up with students from around the world to demand their economics curriculum be changed. Nothing beyond the orthodoxy of free-market economics was being taught; no conflicting global developments, nothing of its critics such as Keynes or Marx, despite their contemporary relevance. Thus began an epic, and epically imbalanced, fight of a bunch of teenagers taking on the very professors marking their exam papers.

Student passions usually fizzle out faster than you can say “snakebite and black”, yet a half decade on, the struggle to prise open economics has got broader. Those ardent undergraduates propping up the union bar are now civil servants pushing for change in government economics; or they’re directing charities such as Economy, which is putting on this crash course in Levenshulme. The aim is to nail the format, then do 15 courses next year, partnering with housing associations, local authorities and others across the UK.

As you might expect from the first session of the first course, this morning’s proceedings betray some nerves. In an ordinary jacket and denim skirt, Headlam tells the class: “We had no idea if you would come.” Unlike the brogue-wearing professoriat, she and her co-facilitator Anne Hines give no sense that they come from a distant planet. Tomorrow morning, former pharmacist Hines sits her own economics exam for an Open University degree course while Headlam, even with her doctorate, describes her academic career as making “target practice for the elite institutions”.

‘Levenshulme is supposed to be gentrifying.’ Photograph: Christopher Thomond for the Guardian

The pair are giving their time for free, and attendees don’t pay a penny. Economy’s Clare Birkett put together the course and organised the pilots on a part-time wage. All five courses, each lasting up to two months and educating anywhere between 50 and 80 people, will together cost little more than the tuition fees for one solitary economics degree.

A few academic economists will ask what authority a bunch of amateurs have, but Birkett has prepared her fighting talk: “If they say, ‘How dare you talk about this?’, I’ll say, ‘Why shouldn’t I? I’ve put in the work, I’ve studied these things. This stuff belongs to all of us.’”

Short of paying nine grand a year for a degree, how else are lay people meant to find out about the most potent social science of all? The internet is full of blind alleys, while even public lectures within universities typically assume some prior knowledge. Given how some economists rage that they’re not listened to enough on issues such as Brexit, it’s notable how little they actually engage with the public (one excellent exception is the annual Bristol Festival of Economics).

Not so long ago, a Levenshulme resident could learn economics – or any number of other subjects – through the adult evening classes offered by the University of Manchester. The extramural programme stretched as far afield as Wigan and Burnley, and by the 1970s employed more than 30 academic staff. Then followed decades of cuts, until the entire department was shut down in 2006.

Which makes economics the humpty-dumpty subject: trust in it is thoroughly broken, yet the public lack the basic tools to put the discipline back together again in a form that reflects their needs. A YouGov survey in 2015 found that more than 60% of respondents did not even know the definition of GDP (gross domestic product) – that staple of BBC bulletins and Westminster debates.

To make the economy more democratic, as everyone from Theresa May to Jeremy Corbyn proposes, we need to democratise knowledge of economics. That’s a truth now cottoned on to by organisations as disparate as the Bank of England and Momentum.

‘Everyone here brings their own lived experience of economics.’ Photograph: Christopher Thomond for the Guardian

Those doing the Levenshulme crash course don’t look like your typical seminar room attendees. Not only are they decades older; all but one is a women. The average undergraduate economics course, according to the Royal Economic Society, is about 67% male and 25% privately educated(compared with 7% of the population). After the class, a charity van pulls up outside, offering three bags of short-dated food for £6. Several “students” collect their groceries for the week.

Everyone here brings their own lived experience of economics. In her motorised wheelchair, Joanne Wilcock notes how “everything is much more expensive when you’re disabled”. Bang on, yet you hardly ever read that in an article on the latest inflation figures. Bhatt knows that Levenshulme is supposed to be gentrifying – “fancy cars, flash weddings” – but notices his neighbours can’t afford to do up their own houses. “All fur coat and no knickers!” he concludes, and the room cracks up.

And if you’re expecting them to trot out the usual left-itudes about fixing the economy, you’re wrong. A discussion about Northern Rail does produce calls for nationalisation – but also arguments as to how it should be turned into a co-op, or run by an arms-length organisation of technocrats.Q&A
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Lechner starts on about “citizen scientists” – amateurs who conduct their own experiments – and casts an eye around the room. “Why can’t we be citizen economists?”

That may be the most radical suggestion of the day, because it cuts directly against how both right and left usually do their business. In 1894, the year before cofounding the London School of Economics, Fabian Beatrice Webb confided to her diary: “We have little faith in the ‘average sensual man’. We do not believe that he can do more than describe his grievances, we do not think he can prescribe his remedies … we wish to introduce into politics the professional expert.”

That impulse may now be dressed up in polite euphemism – but it lives on. “So many thinktanks and MPs come up with good ideas to change our economy, but they’re all stuck in their political bubble,” says the head of Economy, Joe Earle. “Ordinary people barely get a say in the thing that rules their lives.”

Contrast that with this class and its polite horizontalism, where no one is presumed to be a total expert and everyone is treated as if they have something valuable to say. It is the seeds of that ferment described by Hilary Wainwright in her recent book, A New Politics from the Left.

‘Aklima Akhter only came to this country in 2013.’ Photograph: Christopher Thomond for the Guardian

Drawing on her experience of feminist and workers’ self-organisation, she writes: “Rebel movements shared and developed their own kinds of knowledge, via practice and through debate and deliberation, and on to producing new ideas and the basis of new institutions. Authority, once it has been confidently questioned by those on whose obedience it depends, crumbles in ways that make it difficult to put back together again.”

At the end of the class, each participant tells the rest the best thing they have learned. There’s a pause when it gets to Aklima Akhter, who only came to this country in 2013 and has been sitting so benignly quiet in her white headscarf. She starts haltingly: “It is difficult for me, you know … the subject, the language.”

All around her are faces pursed in little moues of encouragement, but then Akhter speeds up with fluency. “But my favourite word was ‘nationalisation’. Because when things are privatised it is the rich who get all the benefit.” And for once in this room, no one is laughing.

Should the Big Four accountancy firms be split up?

Natasha Landell-Mills and Jim Peterson in The Financial Times

Yes - Separating audit from consulting would prevent conflicts of interest.

Auditors are failing investors. The situation has become so dire that last week the head of the UK’s accounting watchdog said it was time to consider forcing audit firms to divest their substantial and lucrative consulting work, writes Natasha Landell-Mills. 

This shift from the Financial Reporting Council, which opposed the idea six years ago, is welcome. But breaking up the Big Four accountancy firms — PwC, KPMG, EY and Deloitte — can only be a first step. Lasting reform depends on auditors working for shareholders, not management. 

Auditors are supposed to underpin trust in financial markets. Major stock markets require listed companies to hire auditors to verify their accounts, providing reassurance to shareholders that material matters have been inspected and their capital is protected. In the UK, auditors must certify that the published numbers give a “true and fair view” of circumstances and income; that they have been prepared in accordance with accounting standards; and that they comply with company law. 

But audit is failing to meet investors’ expectations. The failure of Carillion, linked to aggressive accounting, is just the latest high profile example. And this is not just a UK phenomenon. The International Forum of Independent Audit Regulators found that 40 per cent of the audits it inspected were sub-standard. 

Multiple market failures need to be addressed. The most obvious problem is that audit quality is invisible to those whom it is intended to benefit: the shareholders. It is difficult to differentiate good and bad audits. Even with the introduction of extended auditor reports in the UK (and starting in 2019 in the US), formulaic notes about audit risks often hide more than they convey. 

Even when questions are raised about the quality of audits, shareholders almost always vote to retain auditors, with most receiving at least 95 per cent support. Last year, 97 per cent of Carillion shareholders voted to re-appoint KPMG. Lack of scrutiny creates space for conflicts of interest. Auditors who feel accountable to company executives rather than shareholders will be less likely to challenge them. These conflicts are exacerbated when audit firms also sell other services to management teams, particularly if that consultancy work is more profitable. 

The dominance of the Big Four in large company audits is another concern: when large and powerful firms are able to crowd out high quality competitors, the damage is lasting. 

Taken together, these failures have resulted in a dysfunctional audit market that needs a broad revamp. Splitting audit from consulting would prevent the most insidious conflict of interest. When non-audit work makes up around 80 per cent of fee income for the Big Four (and just over half of income from audit clients), the influence of this part of the business is huge. 

Current limits on consulting work have not eliminated this problem. They are often set too high or can be gamed, while auditors can still be influenced by the hope of winning non-audit work after they relinquish the audit mandate. 

There is quite simply no compelling reason why shareholders should accept these conflicts and the resulting risks to audit quality introduced by non-audit work. But other reforms are necessary. 

Auditors should provide meaningful disclosures about the risks they uncover. They need to verify that company accounts do not overstate performance and capital and that unrealised profits are disclosed. 

Engagement between shareholders and audit committees and auditors should become the norm, not the exception. Shareholders need to scrutinise accounting and audit performance, and use their votes to remove auditors or audit committee directors where performance is substandard. 

Finally, the accounting watchdogs must be far more robust on audit quality and impose meaningful sanctions. Even the best intentioned will struggle against a broken system. 


No — Lopping off advisory services would hurt performance 

The recent spate of large-scale corporate accounting scandals is deeply worrying and raises a familiar question: “Where were the auditors?” But the correct answer does not involve breaking up the four professional services firms that dominate auditing, writes Jim Peterson. 

Forcing Deloitte, EY, KPMG and PwC to shed their non-audit businesses would neither add competition nor boost smaller competitors. Lopping off the Big Four’s consulting and advisory services would degrade their performance, weaken them financially, and hamper their ability to meet the needs of their clients and the capital markets. 

Although the UK regulator is raising competition concerns, the root problem is global. The growth of the Big Four, operating in more than 100 countries, reflects their multinational clients’ needs for breadth of geographic presence and specialised industry expertise. 

 The yawning gap in size between the Big Four and their smaller peers has long since grown beyond closure: even the smallest, KPMG, took in $26.4bn in 2017, three times as much as BDO, its next nearest competitor. If pressed, risk managers of the smaller firms admit to lacking the skills and the risk tolerance even to consider bidding to audit a far-flung multinational. 

The suggestion that competition and choice would be increased by splitting up the Big Four is doubly unrealistic. Forcing them to spin off their non-auditing business would not create any new auditors. We would continue to see dilemmas like the one faced by BT last year when it set out to replace PwC after a £530m discrepancy was uncovered in the accounts of its Italian division. The UK telecoms group ended up picking KPMG for want of alternatives, even though BT’s chairman had previously been global chairman of KPMG. 

Similarly, Japan’s Toshiba tossed EY in favour of PwC in 2016, only to suffer disagreements with the second firm — this led to delays in its financial statements and an eventual qualified audit report. Wish as it might, Toshiba has no further choices, because of business-based conflicts on the part of Deloitte and KPMG. 

A split by industry sector — say, assigning auditing of banking and technology to Firm A-1, while manufacturing and energy go to new Firm A-2 — would be no better. Each sector would still be served by just four big firms. If each firm were split in half, the two smaller firms would struggle to amass the expertise, personnel and capital necessary to provide the level of service that big companies expect. 

Splitting auditing from advisory work is a solution in search of a problem. Many jurisdictions, including the UK, EU and US, restrict the ability of firms to cross-sell other services to their audit clients. Concerns about inherent conflicts of interest are overblown. 

The enthusiasm for cutting up the Big Four also fails to recognise how the world is changing. The rise of artificial intelligence, blockchain and robotics is reshaping the way information is gathered and verified. Auditors will need more — rather than less — expertise. 

Warehouse inventories, crop yields and wind farms will soon be surveyed rapidly and comprehensively in ways that could easily displace the tedious and partial sampling done for decades by squadrons of young audit staff. But to take advantage of these advances, auditors need to have the scale, the financial strength and the technical skills to develop and offer them. 

These tools will also deliver data that management needs for operational and strategic decision making. If auditors are to be barred from providing this kind of advisory work, the legitimacy of methods that have prevailed since the Victorian era is under threat. Investors will require some sort of audit function, but who would provide it? Splitting up the Big Four will achieve nothing if they fail and are replaced by arms of Amazon and Google. 

Auditors should be held accountable for their mistakes, but these issues are too complex for simplistic solutions. Rather than a quick amputation, we need a full-scale re-engineering of the current model with all of its parts.