Sunday, 21 October 2012

Magic 11


They say (though who they are is never clear; they can’t all be Malcolm Gladwell) that it takes 10,000 hours of practice to get good at something.  Which means, I think, that I should by now be quite good at sleeping, eating and walking.

It also means I should by now be quite good at this thing they call ‘economics’. I have an O level in economics, and an A level, and a degree in it. I’ve been doing things to earn money for about 25 years now and most of the things I’ve done have been either directly or indirectly concerned with economics. Not only that, but so obsessed am I that I happily spend many of the hours when I am not sleeping or earning money thinking about economics.

I haven’t just done 10,000 hours – I’ve done 10,000 days. And still I’ve got more questions than answers.

One of the things that began to intrigue me at a fairly early stage was the power of people’s desire to be an ‘individual’. Simply enormous numbers of people, irrespective of their age or class, seemed to put very considerable effort into a process of establishing and maintaining and signalling their individuality. Some did it through their choice of music or hobby, some through their reading or their writing, some through their sporting or sexual prowess.

And everybody, absolutely everybody, did it by means of buying stuff. They just couldn’t help themselves: furniture, knick knacks, clothes, cars, you name it, carefully or carelessly chosen as an expression of ‘me’.

This behaviour reached its oxymoronic acme in the marketing and consumption of a well-known branded shoe wear: demonstrate your individuality, it said – by wearing the same shoes as everyone else…

And the thought experiment this begs is: how much choice do you really need in order to feel, or be, unique? How many options give you the individuality you crave? Eleven. The answer is eleven. With eleven choices, the number of permutations is about 40 million – which is, roughly, the number of people in the UK aged between 18 and 65. You don’t need thousands and thousands of lines of clothing, and hundreds of brands, and millions of personalised options in order to be exclusively ‘you’; you can achieve it with just eleven.

In practice, of course, it’s not quite like this, but that’s not the point: the point is that the thought experiment suggests it might be possible massively to reduce the number of options with which we as consumers are confronted (and by which so many of us are overwhelmed) whilst still allowing us the subjective experience of ‘enough choice’.

(Why you might want to reduce choice on such a scale; and how you might do it, are for another time.)

Eleven also turns out (according to the back of my envelope…) to be the number of large social networks you would need to co-ordinate in order to give more or less everyone the sense that ‘a thing’ – a vibe, a mood, a fashion, a way of behaving, a lifestyle – is something that everyone else is doing. Social norms, as we know, are the most powerful determinant of social behaviours: and it may be that, rather than a thousand flowers blooming or a hundred government interventions, one could bring about dramatic shifts in lifestyles (and social and economic and environmental outcomes…) through working closely with just eleven carefully chosen entities.

But the detail behind that, too, will have to wait a little longer.

Did I say seven blogs? It should have been Magic 11.

Dismal


Number six, hitherto unused and unpublished...

I know that economics is having a bit of a rough time at the moment, what with having been utterly unable to predict the great crash of 2007/8, and having not the first clue about how to get us out of this mess, nor knowing when – if ever – we’ll get back to “normal”, and being in large part unable (or perhaps I’m thinking of economists now…) to have the humility to acknowledge that the entire notion of ‘normal’ needs overhauling anyway, and – now that I’m thinking about it – having hijacked the entire discipline of national management so that it’s probably possible to blame economics for the whole problem in the first place… but it has over the years got a few things right, including the basics of supply, demand, and price.

There are relatively few examples that illustrate the underlying principle to perfection, but here’s one I’ve just discovered. The chart below shows, for the five years 2004 to 2008 (it’s only just been published by DECC, but it’s the last year for which data were presented) the residential demand for gas (represented by the median gas consumption by households) and the price paid for gas (represented by the average household gas bill).



In theory, as the price of a good or service increases, the demand for that good or service, other things being equal (or, as we say in economics, ceteris paribus) declines. In this practical, real world example, with real data from a real government department, and as you can easily see from the chart, the price of gas (the red line) increased and the demand for gas (the blue bars) declined.

As you can’t see so easily from the chart, however, these two variables are negatively correlated with a coefficient of 0.995. 

Now it’s possible to quibble here: the consumption data are for England and the price data for England and Wales; and the consumption is a median figure and the price is a mean; and there are only five years’ worth of data; and there may be all sorts of other and important things going on for rich and poor households, or among high gas users and low gas users… but you’d be hard-pressed, looking at this, not to conclude that there is a near-perfect relationship between gas price and gas demand.

Which makes you wonder: if you wanted to decrease gas consumption (for the purposes, say, of reducing CO2 emissions, or because you just didn’t like relying on Johnny foreigner) then all you’d need to do would be to increase the price; and since (if you’re a government) you don’t want to have to take the blame for something like that, it would be better if, oh I don’t know, there was some sort of oligopolistic market that could do the dirty work for you. Then all you’d have to do (for your side of the bargain, as it were) would be to pronounce fervently in public that you were doing something to sort it out by passing a law or something, and apart from a few million people on middling incomes and a few million more on low incomes and a few million more on top of that who are surviving on amounts of money that you simply cannot believe is really true, everyone would be happy.

But I've headed back into the politics of it again.  Oops.



So, that picture you posted earlier



There’s an old story, I’ve no idea how old, and I can’t be bothered to check, but it’s the one where a bunch of blind people encounter an elephant. One of them grasps the trunk, and explains to his or her fellows that the elephant (a creature hitherto unknown) is very like a snake; another encounters the belly, and explains instead that the beast is very like a whale; a third holds a leg, and the elephant is very like a tree.

And so on.

And the gist of the story is to remind us that we may each only grasp a small part of what is going on, so we should be careful about rushing to conclusions.

I found myself wondering: what if, rather than asserting to one’s fellow blindfolk that you are right and they are wrong, you attempted – instead – a little teamwork. Collaboration, after all, has emerged under exactly the same evolutionary conditions as naked self-interest, so there’s no reason, in principle at least, why the various protagonists in the story shouldn’t gather together and conclude that the elephant is, in fact, the sum (perhaps more!) of its parts.

As a result, the blind people in my story assemble the whole from the parts – but still get it wrong, because they put the parts together in the wrong order. Such a beast, so evidently based on ‘E-L-E-P-H-A-N-T’ must therefore be a L-E-A-N P-E-T-H, as you can see in the picture.

I’ve no idea what this means: so I shall wait until, as a story, it is old enough to tell me; or until I am old enough to hear.

A review of “Affluence & Influence”

This one, blog four in the weekend series, is a book review I did for the Journal of the Society of Business Economists.  I'm being a little naughty, in that I'm posting it here shortly before it appears in the Journal, but I figure the overlap in readership is small, and I'm sure Diane Coyle, who edits the reviews section, won't mind.


A review of "Affluence & Influence", Martin Gilens (2012)

Concluding her 1962 classic “Economic Philosophy”, Joan Robinson - having, in the preceding pages, said much that could throw useful light on many of the contortions currently convulsing economics - writes:

“The first essential for economists, arguing among themselves, is to ‘try very seriously’, as Professor Popper says that natural scientists do, ‘to avoid talking at cross purposes’ and, addressing the world, reading their own doctrines aright, to combat, not foster, the ideology which pretends that values which can be measured in terms of money are the only ones that ought to count.”

Given the manifest political, social and environmental difficulties with which the world is now grappling, in large part as a result of the failure of a very particular economic ideology, Robinson’s entreaty is surely now more important than ever. In one key respect, however, she is in error: it is not solely among economists that there should be argument. Indeed, one might go so far as to say that unless economists – both orthodox and heterodox - very deliberately engage others in the argument, then there is every chance we shall merely replace one unsustainable ideology with another.

It is thus hugely important that figures such as Daniel Kahneman (psychologist), Richard Wilkinson & Kate Pickett (epidemiologists) and Michael Sandel (political and legal philosopher) are making contributions. These heavyweight academics are not merely bridging the divide between academia and the general public; they are intruding into the arguments of economics using its very own tools of hard-arsed data, precision analysis and confident assertion.

It is surely into this argument that Martin Gilens, professor of politics at Princeton University, hopes to venture with his book “Affluence and Influence”. With its cleverly assonant title and its commercially populist cover graphics, there seems little doubt that the book is being positioned in a very particular way.

The book’s content is straightforwardly signalled by its sub-title “Economic Inequality and Political Power in America” and Gilens asserts from the beginning that his work has not merely reached but has proven a profound and important conclusion: that wealthy people in the United States of America are dramatically and consistently more likely than anyone else to see their preferences reflected in actual policy decisions by government.

Such a conclusion is hardly a surprise and, to his credit, Galens acknowledges this at an early stage. However, in developing his ‘proof’, he subjects the reader to what is, in effect, a very long academic paper disguised as a generalist book. Hoping for an action-packed opening chapter of key findings and insight? No no. Try, instead, pages and pages of detailed and defensive caveats for the analysis that follows. Hoping for relief in chapter two? No no – have a thick dose of “Data and methods”.

Perhaps I’m being unfair. Perhaps SBE members would like nothing more than pages of “policy responsiveness” statistics. Perhaps there are readers only too keen to know the minutiae of Congressional voting patterns and the precise implications of ‘gridlock’ for the extent to which different types of American see their wishes, on different types of issue, reflected in policy outcomes, under different Presidents. Perhaps there are economists who wish to argue that power and money are not, in fact, correlated and need to see the ‘evidence’ before they are persuaded.

It is the case, regrettably, that economics has reached a condition where it does indeed seem to require evidence that carefully and comprehensively explains exactly what it is that bears do in the woods. That being so, we probably need material from the likes of Martin Gilens. It would be best, however, if that material was presented in a more digestible format; and that books are used strictly for bigger parts of the argument.



Saturday, 20 October 2012

Blogrush - third of seven

So this one is, um, a sketch.  That's it.







Our skills with food have been stolen by the supermarkets; so they should pay for us to get them back


Blog two of the weekend's seven is a piece I wrote for Natan Doron, who did the heavy lifting for the Fabian Society's conference season special on food waste "Revaluing Food: Shifting the narrative on food waste". 



Over the course of the past six or seven years, Brook Lyndhurst has been researching the whys and wherefores of British food behaviours. For organisations such as WRAP, Oxfam, the Greater London Authority, WWF and Defra we’ve looked at people buying food, storing food, cooking food, eating food – and throwing food away.

A common theme through this work has been the issue of skills. At each stage of the process, it seems that many people do not know quite what to do: they don’t know what their food is or where it comes from; they don’t know how to store it properly, or what the dates on the food mean; they don’t know how to cook it properly, and they don’t know how to use leftovers.

This ‘de-skilling’ has been underway for a long time, and has many inter-locking causes. Lifestyles have changed over the past few decades, and busy people want both their cooking and their shopping done as fast as possible, so ready meals and instant solutions that require no skills have become more popular. The teaching of food skills in schools has declined: ‘fast food’ is ubiquitous and cheap; and, at home, we’re now into a second, possibly even a third generation of young people who have not learned to cook by watching their parents.

Given the scale of food wastage in this country, an urgent solution is required.

I propose that each large supermarket in the UK should have a Food Skills Advisor. Most large supermarkets already have butchers and bakers in store: this individual would have a similar status. They would offer advice and guidance to shoppers on recipe ideas, on how to cook unfamiliar vegetables, on how to store the additional items purchased when shoppers are lured by ‘three for two’ offers, on how the leftovers from a piece of meat might be used, how to make creative use of items in the discounted section that appears in the late afternoon, and so on.

To ensure a broad and fair provision, these FSAs would need their own identity, distinct from the individual store or retailer. I therefore propose that they should be provided by retailers in partnership with one another; and that they should be funded by a levy on turnover. The levy would operate a little like the Tobin Tax. Each store above 25,000 square feet would pay a charge that was related to its annual turnover. The monies collected would be hypothecated and used to fund the FSAs.

According to the IGD, the major retailers have, between them, close to 5,500 stores of this size. Assuming that the FSAs work part-time, and are on salaries commensurate with in-store butchers and the like, the total annual cost of the programme could be in the region of ~£130mn. On the basis of IGD data, this would be the equivalent of just 0.1% of large-store turnover. (It is also helpful to recall that the four large supermarkets – Tesco, Asda, Sainsbury and Morrisons – between them made profits of more than £5bn in 2011.)

As well as being affordable, the proposed FSA programme addresses two key factors that underpin our food, and food waste, behaviours.

The first is that, whilst not everyone in Britain wastes food, most of us do – and we’re embarrassed to admit it. Deep down we know that it’s a shameful thing to throw away good food, but we look the other way. The second factor is that it’s almost as embarrassing to admit that we don’t know what to do, particularly with something as ‘obvious’ as food: so it can be hard to ask for help.

The FSAs, available in every large food superstore in the land, would overcome both these barriers. On the one hand, they would be a neutral, friendly and trustworthy source of information, available to everyone, thereby making it easy for people to ask for advice; and, on the other, they would be advising on positive issues – how to shop smart, how to cook smart – rather than castigating us on negative issues. We all prefer to be helped rather than told off.

The figures on food waste in this country are, indeed, shaming; but the programme outlined could provide a fast, effective and affordable solution.

The City of the Sick

Last week I gave a 'provocation' at an event organised by Cap Gemini, the London Sustainability Exchange and the Greater London Authority designed to consider the London of 2020.  This is the text upon which I (loosely) based my remarks.  The original paper had footnotes, but I can't figure out how to do that sort of thing in Blogger, so I've listed them at the end and you have to guess which bit of the text they refer to...
 
 
When asked to identify the things that are most important to them, the people of both London and the rest of Britain consistently identify the same issues. A typical survey result is:
  • Being able to spend time with friends and family     44 %
  • Health                                                               31 %
  • Personal relationships                                          23 %
  • Work life, study and/or day-to-day activities           20 %
  • Standard of living or money                                  13 %


As policy makers or others responsible for endeavouring to manage the circumstances in which Londoners live their lives, it is salutary to consider these priorities. The prevailing orthodoxy, of attending to economic growth and job creation, seems to address the lower-ranked items. A policy regime more attuned to public preference would concern itself with enabling citizens to spend more time with their friends and family (perhaps by looking to reduce commuting times, or reducing working hours or promoting the development of convivial community spaces) and with improving the health of Londoners.
 
Considering health, we ought, as policy makers, to focus on these "principal social determinants of health":
 
  • Early childhood development
  • Having access to (high quality) health services
  • How much education a person obtains
  • Housing status
  • Being able to get and keep a job
  • How much money a person earns
  • What kind of work a person does
  • Discrimination and social support
  • Having food or being able to get food
 
Broadly speaking, if these determinants are improving, then so too is health; and vice versa. Cumulatively, they (largely) determine the prevalence of Non-Communicable Diseases, themselves the leading cause of premature death in the UK . The dominant NCDs, such as cancer, chronic respiratory disease and diabetes are principally driven by just three risk factors: poor diet (including the harmful use of alcohol), tobacco use and lack of physical activity . In addition, “mental ill health is the largest single cause of disability in the UK, contributing almost 23% of the overall burden of disease compared to about 16% each for cancer and cardiovascular disease.” The direct costs of this disability, and the indirect costs (through reduced productivity and/or lost working days) are substantial.
 
Considering London from such a perspective, we can ask: is the London of 2020 likely to be a sick city or a well city?



The outlook is not good. Cuts in government spending are likely to reduce social support, access to high quality health services and provision for early childhood development in London. The general state of the economy is such that significant employment growth is unlikely over the next few years; and such growth as does occur may well increase levels of stress-related mental ill-health among Londoners. Real incomes have been falling in the capital and, again, leading commentators and politicians are progressively extending the horizon for a genuine recovery in incomes. New housing development continues at a level far below that required to accommodate London’s growing population, and a combination of public sector funding constraints and private sector uncertainty seems set to limit any large scale investment in upgrading London’s housing stock.
 
On top of that, and despite recent increases in the levels of cycling, Londoners remain overwhelmingly dependent on modes of transport that do not require any physical exertion, do jobs that require no physical exertion and show only marginal increases in participating in active sport. Smoking rates have reached a plateau, alcohol consumption remains dangerously high and the consumption of high-calorie, highly-processed, high profit margin and low nutrient food dwarfs the attention sometimes secured by more wholesome, headline-grabbing diets.


In short, London is already pretty unwell; and virtually every determinant of health is heading in the wrong direction.
 
Although there are some London policies that are fighting the tide – current action on alcohol is a good example – they are not only woefully inadequate and uncoordinated, they are in some cases making things worse. Urgent and radical action is required if we are not to be a very sick city indeed by 2020. We can not only save money and lives; we can actually give people something that they want.
 
 
Notes & sources

Figures show, when asked what were the most important things affecting their lives, without prompting, the most common responses people gave and the proportion mentioning them. Source: “Life satisfaction and other measures of wellbeing in England, 2007-2011, from the Survey of Public Attitudes and Behaviour towards the Environment”, National Statistics/Defra, 2012. See also, for further evidence reinforcing this list and a helpful summary of the ONS work on well-being indicators etc, Houses of Parliament POST Note #421, Sept 2012
 
See, for example, “21 hours: Why a shorter working week can help us all to flourish in the 21st century”, New Economics Foundation, 2012 http://www.neweconomics.org/publications/21-hours
 
Marmot, M.G. and R.G. Wilkinson, Social determinants of health. 2nd ed. 2006, Oxford ; New York: Oxford University Press
 
Center for Disease Control and Prevention, http://www.cdc.gov/socialdeterminants/FAQ.html
 
“Non-communicable diseases in the UK, A briefing paper prepared for the UK Parliament (House of Lords)”, C3Health, September 2011
 
World Health Organization, Preventing Chronic Disease: A Vital Investment (2005)
 
Department of Health, Mental Health Promotion and Mental Illness Prevention: the Economic Case (April 2011): http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_126085
 
“Healthy, wealthy & wise”, Fell D., TCPA Journal, 2006
 
House Building: June Quarter 2012, England, National Statistics/Department for Communities
 
Source: Wikipedia http://en.wikipedia.org/wiki/Cycling_in_London accessed 5/10/12
 
Sport England, Active People Surveys 1 to 6
 
Cancer UK, Smoking Statistics, http://www.cancerresearchuk.org/cancer-info/cancerstats/types/lung/smoking/lung-cancer-and-smoking-statistics#geog
 
Statistics on Alcohol 2011, NHS