Taming Monopolies

Editorial in The Hindu

It is usually not easy for laymen to appreciate the work that fetches the Nobel Prize in Economics or, for that matter, the relevance of such work in everyday life. It is not so this time, with the award going to French economist Jean Tirole, the second Frenchman to win a Nobel this year — the other being Patrick Modiano who got the Literature Nobel. Mr. Tirole’s body of work deals with the interesting and complex subject of regulating monopolies or, as a Nobel official put it so well, it is “about taming powerful firms”. The subject has immediate resonance in today’s world where government monopolies in areas such as electricity and transport are being dismantled and privatised and new monopolies are establishing themselves in sectors such as information technology and the Internet. Before Mr. Tirole came up with research using game theory and contract theory that aid regulation in situations of asymmetric information between regulators and the regulated, simple methods were used to regulate monopolies. Capping prices and prohibiting cooperation between competitors in the same market were two such methods used, but Mr. Tirole proved that they were not always effective and in some instances caused more harm than good. Price caps, for instance, can force dominant firms to cut costs, which is good but they could in the process lead to excessive profits for the firm, which is not so good.

Mr. Tirole published a paper in 2006 jointly with Jean-Charles Rochet that dealt with the interesting subject of “two-sided” markets that has direct relevance to today’s buzzing world of e-commerce. These markets bring together buyers and sellers on a platform they own, enable interaction between the two and charge both sides. Amazon and Flipkart are good examples. Or for that matter, taxi aggregator firms such as Ola Cabs or Uber. Mr. Tirole’s work showed that the platforms often favour one side to attract the other. For instance, deep discounts on e-commerce platforms are used to drag in buyers and in the process bring in more vendors who pay the platform for its services. Regulators often do not understand the practices due to asymmetry of information. Mr. Tirole’s work is also important in the context of today’s “Google-world” where the Internet giant strides like a colossus in the search domain and regulators are struggling to understand Google’s strategies and then figure out ways and means to regulate it. This year’s Economics Nobel is remarkable not just because it is the first time since 1999 that an American does not figure in it but also because the Committee has picked a work that has practical value.

Oxford University tutors finally open up about admissions interviews

Oxford marks undergraduate application deadline by publishing selection of interview questions including ‘How much of the past can you count?’

• Richard Adams, education editor 
• 
  
• The Guardian, Wednesday 15 October 2014 18.48 BST

The questions published by Oxford confirm the stereotype of the contrary and offbeat, satirised by The History Boys. Photograph: Robert Harding World Imagery/Alamy

The mysteries of the Oxford admissions interview have been laid bare by the university, in an effort to explain the questions at the core of the fraught 20 minutes in an office that can change the course of a life.

To mark the deadline for 2015 undergraduate admissions, the university asked admissions tutors to open up about the interviews that all UK undergraduate applicants are subjected to – and what the admissions officers are looking for.

But rather than shine a spotlight on a process criticised for admitting a disproportionate number from independent schools, the questions published by Oxford instead confirm the stereotype of the contrary and offbeat, satirised by the Oxbridge applicants of Alan Bennett’s play The History Boys.

A question from Nick Yeung, an admissions tutor for psychology at University College, asks: Why are Welsh speakers worse at remembering phone numbers than English speakers?

“This question is meant to be deliberately provocative, in that I hope that it engages candidates’ intuitions that Welsh people aren’t simply less clever than English people,” Yeung said.

“The key point is that numbers are spelled differently and are longer in Welsh than in English, and it turns out that memory and arithmetic depend on how easily pronounced the words are. I would hope the student would pick out this connection between memory and how easy to spell or pronounce a word is.”

Other questions published by Oxford included: How much of the past can you count? “In this case, the question gets at all sorts of issues relating to historical evidence,” said Stephen Tuck, a fellow at Pembroke College.

“Of course, much of the interview would be taken up with discussing in depth the history courses the students have studied – the interview is not all about unusual questions.”

Samina Khan, Oxford’s acting director of undergraduate admissions, said for many students the interview is the most daunting part.

“We know there are still lots of myths about the Oxford interview, so we put as much information as possible out there to allow students to see behind the hype to the reality of the process,” Khan said.

But a former admissions tutor at a Russell Group university said that while the questions were reasonable, Oxford’s over-reliance on interviews to select undergraduates was part of its problem.

“It seems to me though that by revealing the mysteries of the interview, Oxford is continuing the fetishisation. It is Oxford, not interviews, that is weird,” he said.

The university interviews more than 10,000 applicants over two weeks in December, for around 3,200 undergraduate places.

Applicants to read biology might be asked ‘Why do some habitats support higher biodiversity than others?’ while prospective art history students are shown a painting and asked if they recognise it. “It is the only question for which there is a single, correct answer, which is ‘no’,” said Geraldine Johnson of Christ Church, explaining that she wants applicants to discuss works they haven’t seen before.

The age of loneliness is killing us

For the most social of creatures, the mammalian bee, there’s no such thing now as society. This will be our downfall

• 
• • George Monbiot
  • The Guardian, Tuesday 14 October 2014 19.49 BST

‘Social isolation is as potent a cause of early death as smoking 15 cigarettes a day. Loneliness is twice as deadly as obesity.’ Photograph: Feri Lukas/Rex

What do we call this time? It’s not the information age: the collapse of popular education movements left a void filled by marketing and conspiracy theories. Like the stone age, iron age and space age, the digital age says plenty about our artefacts but little about society. The anthropocene, in which humans exert a major impact on the biosphere, fails to distinguish this century from the previous 20. What clear social change marks out our time from those that precede it? To me it’s obvious. This is the Age of Loneliness.

When Thomas Hobbes claimed that in the state of nature, before authority arose to keep us in check, we were engaged in a war “of every man against every man”, he could not have been more wrong. We were social creatures from the start, mammalian bees, who depended entirely on each other. The hominins of east Africa could not have survived one night alone. We are shaped, to a greater extent than almost any other species, by contact with others. The age we are entering, in which we exist apart, is unlike any that has gone before.

Three months ago we read that loneliness has become an epidemic among young adults. Now we learn that it is just as great an affliction of older people. A study by Independent Age shows that severe loneliness in England blights the lives of 700,000 men and 1.1m women over 50, and is rising with astonishing speed.

Ebola is unlikely ever to kill as many people as this disease strikes down. Social isolation is as potent a cause of early death as smoking 15 cigarettes a day; loneliness, research suggests, is twice as deadly as obesity. Dementia, high blood pressure, alcoholism and accidents – all these, like depression, paranoia, anxiety and suicide, become more prevalent when connections are cut. We cannot cope alone.

Yes, factories have closed, people travel by car instead of buses, use YouTube rather than the cinema. But these shifts alone fail to explain the speed of our social collapse. These structural changes have been accompanied by a life-denying ideology, which enforces and celebrates our social isolation. The war of every man against every man – competition and individualism, in other words – is the religion of our time, justified by a mythology of lone rangers, sole traders, self-starters, self-made men and women, going it alone. For the most social of creatures, who cannot prosper without love, there is no such thing as society, only heroic individualism. What counts is to win. The rest is collateral damage.

British children no longer aspire to be train drivers or nurses – more than a fifth say they “just want to be rich”: wealth and fame are the sole ambitions of 40% of those surveyed. A government study in June revealed that Britain is the loneliness capital of Europe. We are less likely than other Europeans to have close friends or to know our neighbours. Who can be surprised, when everywhere we are urged to fight like stray dogs over a dustbin?

We have changed our language to reflect this shift. Our most cutting insult is loser. We no longer talk about people. Now we call them individuals. So pervasive has this alienating, atomising term become that even the charities fighting loneliness use it to describe the bipedal entities formerly known as human beings. We can scarcely complete a sentence without getting personal. Personally speaking (to distinguish myself from a ventriloquist’s dummy), I prefer personal friends to the impersonal variety and personal belongings to the kind that don’t belong to me. Though that’s just my personal preference, otherwise known as my preference.

One of the tragic outcomes of loneliness is that people turn to their televisions for consolation: two-fifths of older people report that the one-eyed god is their principal company. This self-medication aggravates the disease. Research by economists at the University of Milan suggests that television helps to drive competitive aspiration. It strongly reinforces the income-happiness paradox: the fact that, as national incomes rise, happiness does not rise with them.

Aspiration, which increases with income, ensures that the point of arrival, of sustained satisfaction, retreats before us. The researchers found that those who watch a lot of TV derive less satisfaction from a given level of income than those who watch only a little. TV speeds up the hedonic treadmill, forcing us to strive even harder to sustain the same level of satisfaction. You have only to think of the wall-to-wall auctions on daytime TV, Dragon’s Den, the Apprentice and the myriad forms of career-making competition the medium celebrates, the generalised obsession with fame and wealth, the pervasive sense, in watching it, that life is somewhere other than where you are, to see why this might be.

So what’s the point? What do we gain from this war of all against all? Competition drives growth, but growth no longer makes us wealthier. Figures published this week show that, while the income of company directors has risen by more than a fifth, wages for the workforce as a whole have fallen in real terms over the past year. The bosses earn – sorry, I mean take – 120 times more than the average full-time worker. (In 2000, it was 47 times). And even if competition did make us richer, it would make us no happier, as the satisfaction derived from a rise in income would be undermined by the aspirational impacts of competition.

The top 1% own 48% of global wealth, but even they aren’t happy. A survey by Boston College of people with an average net worth of $78m found that they too were assailed by anxiety, dissatisfaction and loneliness. Many of them reported feeling financially insecure: to reach safe ground, they believed, they would need, on average, about 25% more money. (And if they got it? They’d doubtless need another 25%). One respondent said he wouldn’t get there until he had $1bn in the bank.

For this, we have ripped the natural world apart, degraded our conditions of life, surrendered our freedoms and prospects of contentment to a compulsive, atomising, joyless hedonism, in which, having consumed all else, we start to prey upon ourselves. For this, we have destroyed the essence of humanity: our connectedness.

Yes, there are palliatives, clever and delightful schemes like Men in Sheds and Walking Football developed by charities for isolated older people. But if we are to break this cycle and come together once more, we must confront the world-eating, flesh-eating system into which we have been forced.

Hobbes’s pre-social condition was a myth. But we are entering a post-social condition our ancestors would have believed impossible. Our lives are becoming nasty, brutish and long.

Evo Morales has proved that socialism doesn’t damage economies

Bolivia’s re-elected president has dumbfounded critics in Washington, the World Bank and the IMF. There are lessons for Britain’s left here

• 
• • Ellie Mae O'Hagan
  • theguardian.com, Tuesday 14 October 2014 14.00 BST

Evo Morales in the runup for the vote at the inauguration of a thermo-electric plant in Yacuiba in September 2014. Photograph: Aizar Raldes/AFP/Getty

The socialist Evo Morales, who yesterday was re-elected to serve a third term as president of Bolivia, has long been cast as a figure of fun by the media in the global north. Much like the now deceased Hugo Chávez, Morales is often depicted as a buffoonish populist whose flamboyant denouncements of the United States belie his incompetence. And so, reports of his landslide win inevitably focused on his announcement that it was “a victory for anti-imperialism”, as though anti-US sentiment is the only thing Morales has given to Bolivia in his eight years in government.

More likely, Morales’s enduring popularity is a result of his extraordinary socio-economic reforms, which – according to the New York Times – have transformed Bolivia from an “economic basket case” into a country that receives praise from such unlikely contenders as the World Bank and the IMF – an irony considering the country’s success is the result of the socialist administration casting off the recommendations of the IMF in the first place.

According to a report by the Centre for Economic and Policy Research (CEPR) in Washington, “Bolivia has grown much faster over the last eight years than in any period over the past three and a half decades.” The benefits of such growth have been felt by the Bolivian people: under Morales, poverty has declined by 25% and extreme poverty has declined by 43%; social spending has increased by more than 45%; the real minimum wage has increased by 87.7%; and, perhaps unsurprisingly, the Economic Commission on Latin America and the Caribbean has praised Bolivia for being “one of the few countries that has reduced inequality”. In this respect, the re-election of Morales is really very simple: people like to be economically secure – so if you reduce poverty, they’ll probably vote for you.

It’s true that Morales has made enemies in the White House, but this is probably less to do with rhetoric than the fact that he consistently calls for the international legalisation of the coca leaf, which is chewed as part of Bolivian culture but can also be refined into cocaine (via a truly disgusting chemical process). Before Morales was first elected, the Telegraph reported: “Decriminalisation would probably increase supply of the leaf, which is processed into cocaine, providing drug traffickers with more of the profitable illicit substance.” In fact the opposite has happened – in the past two years, coca cultivation has been falling in Bolivia. This inconvenient fact is a source of great consternation to the US government, which has poured billions of dollars into its totally ineffective and highly militaristic war on drugs in Latin America. Morales has – accurately in my view – previously implied that the war on drugs is used by the US as an excuse to meddle in the region’s politics.

Having said this, it would be dishonest to argue that Morales’s tenure has been perfect. Earlier this year the Bolivian government drew criticism from human rights groups for reducing the legal working age to 10. But what most news outlets neglected to mention is that the government was responding to a campaign from the children’s trade union, Unatsbo, which sees the change in legislation as a first step to protecting Bolivia’s 850,000 working children from the exploitation that comes with clandestine employment. Although Bolivia has made massive strides in reducing poverty, more than a million of its citizens still live on 75p a day – a legacy of the excruciating poverty of Bolivia before Morales took office.

Nevertheless, Morales must make reducing the number of child workers a priority during his third term. Not doing so will be a serious failure of his progressive project. In terms of social reforms, Morales should heed recent calls from the public advocate of Bolivia, Rolando Villena, to legalise same-sex civil unions and pave the way for equal marriage. He should also follow the lead of Uruguay’s president, José Mujica, and completely liberalise abortion, which would be a good first step to tackling the country’s high rates of maternal mortality. And Morales must also address the criticism of indigenous leaders who accuse him of failing to honour his commitments to protect indigenous people and the environment.

But however Morales uses his third term, it’s clear that what he’s done already has been remarkable. He has defied the conventional wisdom that says leftwing policies damage economic growth, that working-class people can’t run successful economies, and that politics can’t be transformative – and he’s done all of this in the face of enormous political pressure from the IMF, the international business community and the US government. In the success of Morales, important political lessons can be found – and perhaps we could all do with learning them.