Our fourteen year old entered the labour market as a newspaper boy today. Welcome to the land of wage slaves son.
The first advert targeting dogs will be aired soon, why not if children can be manipulated then why not pets?
The first British sex change male delivered a child. Bravo. Now all women can undergo a sex change, have children, and compete in the labor market as males.
Greek politicians agree to austerity measures while the country is burning. The voice of the people has been heard.
Congrats to Zambia for winning the African cup.
Reading 'Maximum City' by Suketu Mehta. I am surprised at the ignorance of Bal Thackeray. I thought he was a fact knowing but fact twisting ideologue. The guy is unaware of the geography of Maharashtra. Sad!
Monday 13 February 2012
The true value of money – or why you can't fart a crashing plane back into the sky
Banknotes aren't worth the paper they're printed on. The entire economy relies on the suspension of disbelief
I'm no financial expert. I scarcely know what a coin is. Ask me to explain what a credit default swap is and I'll emit an unbroken 10-minute "um" through the clueless face of a broken puppet. You might as well ask a pantomime horse. But even an idiot such as me can see that money, as a whole, doesn't really seem to be working any more.
Money is broken, and until we admit that, any attempts to fix the economy seem doomed to fail. We're like passengers on a nosediving plane thinking if we all fart hard enough, we can lift it back into the sky. So should we be storming the cockpit or hunting for parachutes instead? I don't know: I ran out of metaphor after the fart gag. You're on your own from hereon in.
Banknotes aren't worth the paper they're printed on. If they were, they'd all have identical value. Money's only worth what the City thinks it's worth. Or, perhaps more accurately, hopes it's worth. Coins should really be called "wish-discs" instead. That name alone would give a truer sense of their value than the speculative number embossed on them.
The entire economy relies on the suspension of disbelief. So does a fairy story, or an animated cartoon. This means that no matter how soberly the financial experts dress, no matter how dry their language, the economy they worship can only ever be as plausible as an episode of SpongeBob SquarePants. It's certainly nowhere near as well thought-out and executed.
No one really understands how it all works: if they did, we wouldn't be in this mess. Banking, as far as I can tell, seems to be almost as precise a science as using a slot machine. You either blindly hope for the best, delude yourself into thinking you've worked out a system, or open it up when no one's looking and rig the settings so it'll pay out illegally.
The chief difference is that slot machines are more familiar and graspable to most of us. When you hear a jackpot being paid out to a gambler, the robotic clunk-clunk-clunk of coin-on-tray, you're aware that he had to go to some kind of effort to get his reward. You know he stood there pushing buttons for hours. You can picture that.
The recent outrage over City bonuses stems from a combination of two factors: the sheer size of the numbers involved coupled with a lack of respect for the work involved in earning them. Like bankers, top footballers are massively overpaid, but at least you comprehend what they're doing for the money. If Wayne Rooney was paid millions to play lacrosse in a closed room in pitch darkness, people would begrudge him his millions far more than they already do. Instead there he is, on live television: he's skilled, no doubt about it.
Similarly, it may be tasteless when a rapper pops up on MTV wearing so much bling he might as well have dipped himself in glue and jumped into a treasure chest full of vajazzling crystals, but at least you understand how he earned it.
RBS boss Stephen Hester, meanwhile, earns more than a million pounds for performing enigmatic actions behind the scenes at a publicly owned bank. And on top of his huge wage, he was in line for a massive bonus. To most people, that's downright cheeky: like a man getting a blowjob from your spouse while asking you to make him a cup of tea.
But Hester earned his wage, we're told, because he does an incredibly difficult job. And maybe he does. Trouble is, no one outside the City understands what his job actually consists of. I find it almost impossible to picture a day in Hester's life, and I once wrote a short story about a pint-sized toy Womble that ran around killing dogs with its dick, so I know I don't lack imagination. Class, yes: imagination, no. If I strain my mind's eye, I can just about picture Hester arriving at work, picture him thanking his driver, picture the receptionist saying "Hello, Mr Hester", and picture him striding confidently into his office – but the moment the door shuts, my feed breaks up and goes fuzzy. What does he do in there? Pull levers? Chase numbers round the room with a broom? God knows.
Maybe if all bankers were forced to work in public, on the pavement, it would help us understand what they actually do. Of course, you'd have to encase them in a Perspex box so they wouldn't be attacked. In fact, if the experience of David Blaine is anything to go by, you'd have to quickly move that Perspex box to somewhere impossibly high up, where people can't pelt it with golf balls and tangerines. On top of the Gherkin, say. If Hester did his job inside a Perspex box on top of the Gherkin for a year, this entire argument might never have happened.
The row over bonuses has led some to mutter darkly about mob rule and the rise of anti-business sentiment. Complain about mobs all you like, but you can't control gut reactions, and you can't dictate the mood. And when you try to fart a crashing plane back into the sky, you only succeed in making the atmosphere unpleasant for everyone. And spoiling the in-flight movie. And making the stewardess cry. Looks like I'm all out of metaphor again. Time to end the article. Article ends.
Sunday 12 February 2012
The mathematical equation that caused the banks to crash
Ian Stewart in The Observer 21-02-12
It was the holy grail of investors. The Black-Scholes equation, brainchild of economists Fischer Black and Myron Scholes, provided a rational way to price a financial contract when it still had time to run. It was like buying or selling a bet on a horse, halfway through the race. It opened up a new world of ever more complex investments, blossoming into a gigantic global industry. But when the sub-prime mortgage market turned sour, the darling of the financial markets became the Black Hole equation, sucking money out of the universe in an unending stream.
Anyone who has followed the crisis will understand that the real economy of businesses and commodities is being upstaged by complicated financial instruments known as derivatives. These are not money or goods. They are investments in investments, bets about bets. Derivatives created a booming global economy, but they also led to turbulent markets, the credit crunch, the near collapse of the banking system and the economic slump. And it was the Black-Scholes equation that opened up the world of derivatives.
The equation itself wasn't the real problem. It was useful, it was precise, and its limitations were clearly stated. It provided an industry-standard method to assess the likely value of a financial derivative. So derivatives could be traded before they matured. The formula was fine if you used it sensibly and abandoned it when market conditions weren't appropriate. The trouble was its potential for abuse. It allowed derivatives to become commodities that could be traded in their own right. The financial sector called it the Midas Formula and saw it as a recipe for making everything turn to gold. But the markets forgot how the story of King Midas ended.
Black-Scholes underpinned massive economic growth. By 2007, the international financial system was trading derivatives valued at one quadrillion dollars per year. This is 10 times the total worth, adjusted for inflation, of all products made by the world's manufacturing industries over the last century. The downside was the invention of ever-more complex financial instruments whose value and risk were increasingly opaque. So companies hired mathematically talented analysts to develop similar formulas, telling them how much those new instruments were worth and how risky they were. Then, disastrously, they forgot to ask how reliable the answers would be if market conditions changed.
Black and Scholes invented their equation in 1973; Robert Merton supplied extra justification soon after. It applies to the simplest and oldest derivatives: options. There are two main kinds. A put option gives its buyer the right to sell a commodity at a specified time for an agreed price. A call option is similar, but it confers the right to buy instead of sell. The equation provides a systematic way to calculate the value of an option before it matures. Then the option can be sold at any time. The equation was so effective that it won Merton and Scholes the 1997 Nobel prize in economics. (Black had died by then, so he was ineligible.)
If everyone knows the correct value of a derivative and they all agree, how can anyone make money? The formula requires the user to estimate several numerical quantities. But the main way to make money on derivatives is to win your bet – to buy a derivative that can later be sold at a higher price, or matures with a higher value than predicted. The winners get their profit from the losers. In any given year, between 75% and 90% of all options traders lose money. The world's banks lost hundreds of billions when the sub-prime mortgage bubble burst. In the ensuing panic, taxpayers were forced to pick up the bill, but that was politics, not mathematical economics.
The Black-Scholes equation relates the recommended price of the option to four other quantities. Three can be measured directly: time, the price of the asset upon which the option is secured and the risk-free interest rate. This is the theoretical interest that could be earned by an investment with zero risk, such as government bonds. The fourth quantity is the volatility of the asset. This is a measure of how erratically its market value changes. The equation assumes that the asset's volatility remains the same for the lifetime of the option, which need not be correct. Volatility can be estimated by statistical analysis of price movements but it can't be measured in a precise, foolproof way, and estimates may not match reality.
The idea behind many financial models goes back to Louis Bachelier in 1900, who suggested that fluctuations of the stock market can be modelled by a random process known as Brownian motion. At each instant, the price of a stock either increases or decreases, and the model assumes fixed probabilities for these events. They may be equally likely, or one may be more probable than the other. It's like someone standing on a street and repeatedly tossing a coin to decide whether to move a small step forwards or backwards, so they zigzag back and forth erratically. Their position corresponds to the price of the stock, moving up or down at random. The most important statistical features of Brownian motion are its mean and its standard deviation. The mean is the short-term average price, which typically drifts in a specific direction, up or down depending on where the market thinks the stock is going. The standard deviation can be thought of as the average amount by which the price differs from the mean, calculated using a standard statistical formula. For stock prices this is called volatility, and it measures how erratically the price fluctuates. On a graph of price against time, volatility corresponds to how jagged the zigzag movements look.
Black-Scholes implements Bachelier's vision. It does not give the value of the option (the price at which it should be sold or bought) directly. It is what mathematicians call a partial differential equation, expressing the rate of change of the price in terms of the rates at which various other quantities are changing. Fortunately, the equation can be solved to provide a specific formula for the value of a put option, with a similar formula for call options.
The early success of Black-Scholes encouraged the financial sector to develop a host of related equations aimed at different financial instruments. Conventional banks could use these equations to justify loans and trades and assess the likely profits, always keeping an eye open for potential trouble. But less conventional businesses weren't so cautious. Soon, the banks followed them into increasingly speculative ventures.
Any mathematical model of reality relies on simplifications and assumptions. The Black-Scholes equation was based on arbitrage pricing theory, in which both drift and volatility are constant. This assumption is common in financial theory, but it is often false for real markets. The equation also assumes that there are no transaction costs, no limits on short-selling and that money can always be lent and borrowed at a known, fixed, risk-free interest rate. Again, reality is often very different.
When these assumptions are valid, risk is usually low, because large stock market fluctuations should be extremely rare. But on 19 October 1987, Black Monday, the world's stock markets lost more than 20% of their value within a few hours. An event this extreme is virtually impossible under the model's assumptions. In his bestseller The Black Swan, Nassim Nicholas Taleb, an expert in mathematical finance, calls extreme events of this kind black swans. In ancient times, all known swans were white and "black swan" was widely used in the same way we now refer to a flying pig. But in 1697, the Dutch explorer Willem de Vlamingh found masses of black swans on what became known as the Swan River in Australia. So the phrase now refers to an assumption that appears to be grounded in fact, but might at any moment turn out to be wildly mistaken.
Large fluctuations in the stock market are far more common than Brownian motion predicts. The reason is unrealistic assumptions – ignoring potential black swans. But usually the model performed very well, so as time passed and confidence grew, many bankers and traders forgot the model had limitations. They used the equation as a kind of talisman, a bit of mathematical magic to protect them against criticism if anything went wrong.
Banks, hedge funds, and other speculators were soon trading complicated derivatives such as credit default swaps – likened to insuring your neighbour's house against fire – in eye-watering quantities. They were priced and considered to be assets in their own right. That meant they could be used as security for other purchases. As everything got more complicated, the models used to assess value and risk deviated ever further from reality. Somewhere underneath it all was real property, and the markets assumed that property values would keep rising for ever, making these investments risk-free.
The Black-Scholes equation has its roots in mathematical physics, where quantities are infinitely divisible, time flows continuously and variables change smoothly. Such models may not be appropriate to the world of finance. Traditional mathematical economics doesn't always match reality, either, and when it fails, it fails badly. Physicists, mathematicians and economists are therefore looking for better models.
At the forefront of these efforts is complexity science, a new branch of mathematics that models the market as a collection of individuals interacting according to specified rules. These models reveal the damaging effects of the herd instinct: market traders copy other market traders. Virtually every financial crisis in the last century has been pushed over the edge by the herd instinct. It makes everything go belly-up at the same time. If engineers took that attitude, and one bridge in the world fell down, so would all the others.
By studying ecological systems, it can be shown that instability is common in economic models, mainly because of the poor design of the financial system. The facility to transfer billions at the click of a mouse may allow ever-quicker profits, but it also makes shocks propagate faster.
Was an equation to blame for the financial crash, then? Yes and no. Black-Scholes may have contributed to the crash, but only because it was abused. In any case, the equation was just one ingredient in a rich stew of financial irresponsibility, political ineptitude, perverse incentives and lax regulation.
Despite its supposed expertise, the financial sector performs no better than random guesswork. The stock market has spent 20 years going nowhere. The system is too complex to be run on error-strewn hunches and gut feelings, but current mathematical models don't represent reality adequately. The entire system is poorly understood and dangerously unstable. The world economy desperately needs a radical overhaul and that requires more mathematics, not less. It may be rocket science, but magic it's not.
Ian Stewart is emeritus professor of mathematics at the University of Warwick.
It was the holy grail of investors. The Black-Scholes equation, brainchild of economists Fischer Black and Myron Scholes, provided a rational way to price a financial contract when it still had time to run. It was like buying or selling a bet on a horse, halfway through the race. It opened up a new world of ever more complex investments, blossoming into a gigantic global industry. But when the sub-prime mortgage market turned sour, the darling of the financial markets became the Black Hole equation, sucking money out of the universe in an unending stream.
Anyone who has followed the crisis will understand that the real economy of businesses and commodities is being upstaged by complicated financial instruments known as derivatives. These are not money or goods. They are investments in investments, bets about bets. Derivatives created a booming global economy, but they also led to turbulent markets, the credit crunch, the near collapse of the banking system and the economic slump. And it was the Black-Scholes equation that opened up the world of derivatives.
The equation itself wasn't the real problem. It was useful, it was precise, and its limitations were clearly stated. It provided an industry-standard method to assess the likely value of a financial derivative. So derivatives could be traded before they matured. The formula was fine if you used it sensibly and abandoned it when market conditions weren't appropriate. The trouble was its potential for abuse. It allowed derivatives to become commodities that could be traded in their own right. The financial sector called it the Midas Formula and saw it as a recipe for making everything turn to gold. But the markets forgot how the story of King Midas ended.
Black-Scholes underpinned massive economic growth. By 2007, the international financial system was trading derivatives valued at one quadrillion dollars per year. This is 10 times the total worth, adjusted for inflation, of all products made by the world's manufacturing industries over the last century. The downside was the invention of ever-more complex financial instruments whose value and risk were increasingly opaque. So companies hired mathematically talented analysts to develop similar formulas, telling them how much those new instruments were worth and how risky they were. Then, disastrously, they forgot to ask how reliable the answers would be if market conditions changed.
Black and Scholes invented their equation in 1973; Robert Merton supplied extra justification soon after. It applies to the simplest and oldest derivatives: options. There are two main kinds. A put option gives its buyer the right to sell a commodity at a specified time for an agreed price. A call option is similar, but it confers the right to buy instead of sell. The equation provides a systematic way to calculate the value of an option before it matures. Then the option can be sold at any time. The equation was so effective that it won Merton and Scholes the 1997 Nobel prize in economics. (Black had died by then, so he was ineligible.)
If everyone knows the correct value of a derivative and they all agree, how can anyone make money? The formula requires the user to estimate several numerical quantities. But the main way to make money on derivatives is to win your bet – to buy a derivative that can later be sold at a higher price, or matures with a higher value than predicted. The winners get their profit from the losers. In any given year, between 75% and 90% of all options traders lose money. The world's banks lost hundreds of billions when the sub-prime mortgage bubble burst. In the ensuing panic, taxpayers were forced to pick up the bill, but that was politics, not mathematical economics.
The Black-Scholes equation relates the recommended price of the option to four other quantities. Three can be measured directly: time, the price of the asset upon which the option is secured and the risk-free interest rate. This is the theoretical interest that could be earned by an investment with zero risk, such as government bonds. The fourth quantity is the volatility of the asset. This is a measure of how erratically its market value changes. The equation assumes that the asset's volatility remains the same for the lifetime of the option, which need not be correct. Volatility can be estimated by statistical analysis of price movements but it can't be measured in a precise, foolproof way, and estimates may not match reality.
The idea behind many financial models goes back to Louis Bachelier in 1900, who suggested that fluctuations of the stock market can be modelled by a random process known as Brownian motion. At each instant, the price of a stock either increases or decreases, and the model assumes fixed probabilities for these events. They may be equally likely, or one may be more probable than the other. It's like someone standing on a street and repeatedly tossing a coin to decide whether to move a small step forwards or backwards, so they zigzag back and forth erratically. Their position corresponds to the price of the stock, moving up or down at random. The most important statistical features of Brownian motion are its mean and its standard deviation. The mean is the short-term average price, which typically drifts in a specific direction, up or down depending on where the market thinks the stock is going. The standard deviation can be thought of as the average amount by which the price differs from the mean, calculated using a standard statistical formula. For stock prices this is called volatility, and it measures how erratically the price fluctuates. On a graph of price against time, volatility corresponds to how jagged the zigzag movements look.
Black-Scholes implements Bachelier's vision. It does not give the value of the option (the price at which it should be sold or bought) directly. It is what mathematicians call a partial differential equation, expressing the rate of change of the price in terms of the rates at which various other quantities are changing. Fortunately, the equation can be solved to provide a specific formula for the value of a put option, with a similar formula for call options.
The early success of Black-Scholes encouraged the financial sector to develop a host of related equations aimed at different financial instruments. Conventional banks could use these equations to justify loans and trades and assess the likely profits, always keeping an eye open for potential trouble. But less conventional businesses weren't so cautious. Soon, the banks followed them into increasingly speculative ventures.
Any mathematical model of reality relies on simplifications and assumptions. The Black-Scholes equation was based on arbitrage pricing theory, in which both drift and volatility are constant. This assumption is common in financial theory, but it is often false for real markets. The equation also assumes that there are no transaction costs, no limits on short-selling and that money can always be lent and borrowed at a known, fixed, risk-free interest rate. Again, reality is often very different.
When these assumptions are valid, risk is usually low, because large stock market fluctuations should be extremely rare. But on 19 October 1987, Black Monday, the world's stock markets lost more than 20% of their value within a few hours. An event this extreme is virtually impossible under the model's assumptions. In his bestseller The Black Swan, Nassim Nicholas Taleb, an expert in mathematical finance, calls extreme events of this kind black swans. In ancient times, all known swans were white and "black swan" was widely used in the same way we now refer to a flying pig. But in 1697, the Dutch explorer Willem de Vlamingh found masses of black swans on what became known as the Swan River in Australia. So the phrase now refers to an assumption that appears to be grounded in fact, but might at any moment turn out to be wildly mistaken.
Large fluctuations in the stock market are far more common than Brownian motion predicts. The reason is unrealistic assumptions – ignoring potential black swans. But usually the model performed very well, so as time passed and confidence grew, many bankers and traders forgot the model had limitations. They used the equation as a kind of talisman, a bit of mathematical magic to protect them against criticism if anything went wrong.
Banks, hedge funds, and other speculators were soon trading complicated derivatives such as credit default swaps – likened to insuring your neighbour's house against fire – in eye-watering quantities. They were priced and considered to be assets in their own right. That meant they could be used as security for other purchases. As everything got more complicated, the models used to assess value and risk deviated ever further from reality. Somewhere underneath it all was real property, and the markets assumed that property values would keep rising for ever, making these investments risk-free.
The Black-Scholes equation has its roots in mathematical physics, where quantities are infinitely divisible, time flows continuously and variables change smoothly. Such models may not be appropriate to the world of finance. Traditional mathematical economics doesn't always match reality, either, and when it fails, it fails badly. Physicists, mathematicians and economists are therefore looking for better models.
At the forefront of these efforts is complexity science, a new branch of mathematics that models the market as a collection of individuals interacting according to specified rules. These models reveal the damaging effects of the herd instinct: market traders copy other market traders. Virtually every financial crisis in the last century has been pushed over the edge by the herd instinct. It makes everything go belly-up at the same time. If engineers took that attitude, and one bridge in the world fell down, so would all the others.
By studying ecological systems, it can be shown that instability is common in economic models, mainly because of the poor design of the financial system. The facility to transfer billions at the click of a mouse may allow ever-quicker profits, but it also makes shocks propagate faster.
Was an equation to blame for the financial crash, then? Yes and no. Black-Scholes may have contributed to the crash, but only because it was abused. In any case, the equation was just one ingredient in a rich stew of financial irresponsibility, political ineptitude, perverse incentives and lax regulation.
Despite its supposed expertise, the financial sector performs no better than random guesswork. The stock market has spent 20 years going nowhere. The system is too complex to be run on error-strewn hunches and gut feelings, but current mathematical models don't represent reality adequately. The entire system is poorly understood and dangerously unstable. The world economy desperately needs a radical overhaul and that requires more mathematics, not less. It may be rocket science, but magic it's not.
Ian Stewart is emeritus professor of mathematics at the University of Warwick.
Saturday 11 February 2012
Liberal Constipation
George Monbiot
Self-deprecating, too liberal for their own good, today’s progressives stand back and watch, hands over their mouths, as the social vivisectionists of the right slice up a living society to see if its component parts can survive in isolation. Tied up in knots of reticence and self-doubt, they will not shout stop. Doing so requires an act of interruption, of presumption, for which they no longer possess a vocabulary.
Perhaps it is in the same spirit of liberal constipation that, with the exception of Charlie Brooker(1), we have been too polite to mention the study published last month in the journal Psychological Science, which revealed that people with conservative beliefs are likely to be of low intelligence(2). Paradoxically it was the Daily Mail which brought it to the attention of British readers last week(3). It feels crude, illiberal to point out that the other side is, on average, more stupid than our own. But this, the study suggests, is not unfounded generalisation but empirical fact.
It is by no means the first such paper. There is plenty of research showing that low general intelligence in childhood predicts greater prejudice towards people of different ethnicity or sexuality in adulthood(4). Open-mindedness, flexibility, trust in other people: all these require certain cognitive abilities. Understanding and accepting others—particularly “different” others—requires an enhanced capacity for abstract thinking.
But, drawing on a sample size of several thousand, correcting for both education and socioeconomic status, the new study looks embarrassingly robust. Importantly, it shows that prejudice tends not to arise directly from low intelligence, but from the conservative ideologies to which people of low intelligence are drawn. Conservative ideology is the “critical pathway” from low intelligence to racism. Those with low cognitive abilities are attracted to “right-wing ideologies that promote coherence and order” and “emphasize the maintenance of the status quo”(5). Even for someone not yet renowned for liberal reticence, this feels hard to write.
This is not to suggest that all conservatives are stupid. There are some very clever people in government, advising politicians, running thinktanks, writing for newspapers, who have acquired power and influence by promoting rightwing ideologies.
But what we now see among their parties—however intelligent their guiding spirits may be—is the abandonment of any pretence of high-minded conservatism. On both sides of the Atlantic, conservative strategists have discovered that there is no pool so shallow that several million people won’t drown in it. Whether they are promoting the idea that Barack Obama was not born in the US, that manmade climate change is an eco-fascist-communist-anarchist conspiracy or that the deficit results from the greed of the poor, they now appeal to the basest, stupidest impulses, and find that it does them no harm in the polls.
Don’t take my word for it. Listen to what two former Republican ideologues, David Frum and Mike Lofgren, have been saying. Frum warns that “conservatives have built a whole alternative knowledge system, with its own facts, its own history, its own laws of economics.”(6) The result is a “shift to ever more extreme, ever more fantasy-based ideology” which has “ominous real-world consequences for American society.”
Lofgren complains that “the crackpot outliers of two decades ago have become the vital center today”(7). The Republican party, with its “prevailing anti-intellectualism and hostility to science” is appealing to what he calls the “low-information voter” or the “misinformation voter.” While most office holders probably don’t believe the “reactionary and paranoid claptrap” they peddle, “they cynically feed the worst instincts of their fearful and angry low-information political base”.
The madness hasn’t gone as far in the UK, but the effects of the Conservative appeal to stupidity are already making themselves felt. Yesterday the Guardian reported that recipients of disability benefits, scapegoated by the government as scroungers, blamed for the deficit, now find themselves subject to a new level of hostility and threats from other people(8).
These are the perfect conditions for a billionaires’ feeding frenzy. Any party elected by misinformed, suggestible voters becomes a vehicle for undisclosed interests. A tax break for the 1% is dressed up as freedom for the 99%. The regulation that prevents big banks and corporations from exploiting us becomes an assault on the working man and woman. Those of us who discuss manmade climate change are cast as elitists by people who happily embrace the claims of Lord Monckton, Lord Lawson or thinktanks funded by ExxonMobil or the Koch brothers: now the authentic voices of the working class.
But when I survey this wreckage I wonder who the real idiots are. Confronted with mass discontent, the once-progressive major parties, as Thomas Frank laments in his latest book Pity the Billionaire, triangulate and accommodate, hesitate and prevaricate, muzzled by what he calls “terminal niceness”(9). They fail to produce a coherent analysis of what has gone wrong and why, or to make an uncluttered case for social justice, redistribution and regulation. The conceptual stupidities of conservatism are matched by the strategic stupidities of liberalism.
Yes, conservatism thrives on low intelligence and poor information. But the liberals in politics on both sides of the Atlantic continue to back off, yielding to the supremacy of the stupid. It’s turkeys all the way down.
Self-deprecating, too liberal for their own good, today’s progressives stand back and watch, hands over their mouths, as the social vivisectionists of the right slice up a living society to see if its component parts can survive in isolation. Tied up in knots of reticence and self-doubt, they will not shout stop. Doing so requires an act of interruption, of presumption, for which they no longer possess a vocabulary.
Perhaps it is in the same spirit of liberal constipation that, with the exception of Charlie Brooker(1), we have been too polite to mention the study published last month in the journal Psychological Science, which revealed that people with conservative beliefs are likely to be of low intelligence(2). Paradoxically it was the Daily Mail which brought it to the attention of British readers last week(3). It feels crude, illiberal to point out that the other side is, on average, more stupid than our own. But this, the study suggests, is not unfounded generalisation but empirical fact.
It is by no means the first such paper. There is plenty of research showing that low general intelligence in childhood predicts greater prejudice towards people of different ethnicity or sexuality in adulthood(4). Open-mindedness, flexibility, trust in other people: all these require certain cognitive abilities. Understanding and accepting others—particularly “different” others—requires an enhanced capacity for abstract thinking.
But, drawing on a sample size of several thousand, correcting for both education and socioeconomic status, the new study looks embarrassingly robust. Importantly, it shows that prejudice tends not to arise directly from low intelligence, but from the conservative ideologies to which people of low intelligence are drawn. Conservative ideology is the “critical pathway” from low intelligence to racism. Those with low cognitive abilities are attracted to “right-wing ideologies that promote coherence and order” and “emphasize the maintenance of the status quo”(5). Even for someone not yet renowned for liberal reticence, this feels hard to write.
This is not to suggest that all conservatives are stupid. There are some very clever people in government, advising politicians, running thinktanks, writing for newspapers, who have acquired power and influence by promoting rightwing ideologies.
But what we now see among their parties—however intelligent their guiding spirits may be—is the abandonment of any pretence of high-minded conservatism. On both sides of the Atlantic, conservative strategists have discovered that there is no pool so shallow that several million people won’t drown in it. Whether they are promoting the idea that Barack Obama was not born in the US, that manmade climate change is an eco-fascist-communist-anarchist conspiracy or that the deficit results from the greed of the poor, they now appeal to the basest, stupidest impulses, and find that it does them no harm in the polls.
Don’t take my word for it. Listen to what two former Republican ideologues, David Frum and Mike Lofgren, have been saying. Frum warns that “conservatives have built a whole alternative knowledge system, with its own facts, its own history, its own laws of economics.”(6) The result is a “shift to ever more extreme, ever more fantasy-based ideology” which has “ominous real-world consequences for American society.”
Lofgren complains that “the crackpot outliers of two decades ago have become the vital center today”(7). The Republican party, with its “prevailing anti-intellectualism and hostility to science” is appealing to what he calls the “low-information voter” or the “misinformation voter.” While most office holders probably don’t believe the “reactionary and paranoid claptrap” they peddle, “they cynically feed the worst instincts of their fearful and angry low-information political base”.
The madness hasn’t gone as far in the UK, but the effects of the Conservative appeal to stupidity are already making themselves felt. Yesterday the Guardian reported that recipients of disability benefits, scapegoated by the government as scroungers, blamed for the deficit, now find themselves subject to a new level of hostility and threats from other people(8).
These are the perfect conditions for a billionaires’ feeding frenzy. Any party elected by misinformed, suggestible voters becomes a vehicle for undisclosed interests. A tax break for the 1% is dressed up as freedom for the 99%. The regulation that prevents big banks and corporations from exploiting us becomes an assault on the working man and woman. Those of us who discuss manmade climate change are cast as elitists by people who happily embrace the claims of Lord Monckton, Lord Lawson or thinktanks funded by ExxonMobil or the Koch brothers: now the authentic voices of the working class.
But when I survey this wreckage I wonder who the real idiots are. Confronted with mass discontent, the once-progressive major parties, as Thomas Frank laments in his latest book Pity the Billionaire, triangulate and accommodate, hesitate and prevaricate, muzzled by what he calls “terminal niceness”(9). They fail to produce a coherent analysis of what has gone wrong and why, or to make an uncluttered case for social justice, redistribution and regulation. The conceptual stupidities of conservatism are matched by the strategic stupidities of liberalism.
Yes, conservatism thrives on low intelligence and poor information. But the liberals in politics on both sides of the Atlantic continue to back off, yielding to the supremacy of the stupid. It’s turkeys all the way down.
My Weltanschhaung - 11/2/2012
I am glad that atleast now a few Greek politicos have called the bail out terms extortionate. I think Greeks should default on their loans. Else, where is the risk for the lender who seems to get his money back in all circumstances and even by hurting innocent victims in a society.
A more disturbing news is that Chinese imports (of raw materials, I presume) fell in January. This will worry all export led growth oriented countries, unless they are beating China at their own game. Unlikely though since Chinese firms enjoy state subsidised capitalism.
Harry Redknapp seems to be inching towards the England managership. I suppose every man rises to a level of failure, but it won't be Harry's fault as there appears to be a shortage of talent in England.
Argentina accuses the UK of storing nuclear weapons near the Falklands. At the same time the UK tries to prevent Iran and others from getting nuclear weapons.
The global outlook for oil appears gloomy, so will the energy suppliers lower retail prices?
A more disturbing news is that Chinese imports (of raw materials, I presume) fell in January. This will worry all export led growth oriented countries, unless they are beating China at their own game. Unlikely though since Chinese firms enjoy state subsidised capitalism.
Harry Redknapp seems to be inching towards the England managership. I suppose every man rises to a level of failure, but it won't be Harry's fault as there appears to be a shortage of talent in England.
Argentina accuses the UK of storing nuclear weapons near the Falklands. At the same time the UK tries to prevent Iran and others from getting nuclear weapons.
The global outlook for oil appears gloomy, so will the energy suppliers lower retail prices?
Friday 10 February 2012
My Weltanschhaung - 10/2/2012
I am pleased at the new Cameron proposal, - 'Elderly people should be encouraged to go back to work and move into smaller
homes'. Thats one more supply side policy. The principle behind it: the purpose of every human being is to contribute to society until death and the Cameron policy exemplifies it. So retirement will only be for the rich, this policy is a third world policy indeed. But who will hire them, I ask? Also, had Britain become a third world country?
I am also pleased that tax breaks are planned for those who employ cooks and cleaners. This is a good way to boost GDP, after all the cooking and cleaning services provided by stay at home parents are free and are not included in the GDP figures.
Its funny the interesting stories seem to appear only in the Daily Telegraph.
I am also pleased that tax breaks are planned for those who employ cooks and cleaners. This is a good way to boost GDP, after all the cooking and cleaning services provided by stay at home parents are free and are not included in the GDP figures.
Its funny the interesting stories seem to appear only in the Daily Telegraph.
Thursday 9 February 2012
My Weltanschhaung - 9/2/2012
I loved the news, eating fried and sugary stuff for breakfast is the best way to stay trim. Who do I sue if it does not work?
Microchips for dogs is a great idea indeed. But more than that owners should be punished if their dogs are not on leads in a public place.
No one will mourn Capello's departure. I think Capello used Terry's removal as captain as an exceuse to bail out.
Cable v Cameron on the appointment of Fair Access tsar to universities is an interesting idea. Power to you Cable.
England cannot blame Ajmal's bent arm any longer.
Microchips for dogs is a great idea indeed. But more than that owners should be punished if their dogs are not on leads in a public place.
No one will mourn Capello's departure. I think Capello used Terry's removal as captain as an exceuse to bail out.
Cable v Cameron on the appointment of Fair Access tsar to universities is an interesting idea. Power to you Cable.
England cannot blame Ajmal's bent arm any longer.
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