It won’t convince anyone who believes passionately in slippery slopes, or of course, anyone who doesn’t accept the research in the first place.

Fuller review later.

Sounds like a socially responsible thing to do right? Children don’t have to experience the sight of their parents getting bladdered, or risking being driven home by over the limit Mum or Dad. And though some may complain that the rights of parents are denied well quite frankly, a pub is private property and the landlord is free to refuse anyone entry, let alone serve them a drink.

But JD Weaterhspoon is a private enterprise and it wouldn’t be undertaking such an initiative if it didn’t think it was profit maximising in some way. How could this be?

• It sends a positive signal to a group of actual and potential pub goers that JD Weatherspoon attempts to create a nice environment for all
• Parents with children drink less and more slowly; children don’t drink at all and their place could be taken by faster drinking adults
• The presence of families deters drinkers who would prefer to enjoy their drinks without being reminded they have their own families at home to look after

To me, the second explanation seems to most plausible. It seems Weatherspoons would actually like to ban all slow drinkers, unless their companions are able to make up for the lost revenue by drinking above average amounts. The friends of a designated driver on a night out will almost certainly do so; the father of two children will find it more of a challenge. The third explanation shouldn’t be entirely discounted though. I can imagine adults being deterred at the sight of children in a bar area.

What the story illustrates though is that Weatherspoons, by following its own natural inclination to boost profits has, in this case at least, created a socially beneficial outcome.*

As an aside, it’s interesting to think why such a policy isn’t enforced in France, where the sight of children in bars is not as common as some would have you think, but certainly not a rarity. Perhaps the French can drink a lot and drink it responsibly, and there isn’t the same mystique with alcohol over there compared to the UK. And perhaps if children were effectively banned, then unlike the UK, there may not be faster and heavier drinkers taking their place. The number of drinkers may in fact decrease if people can’t idle away an hour or two with a bottle of wine with their children. Again, a logical outcome of profit maximisation.

Both good examples of what this guy would call, ‘The logic of life’.
*Of course, I’ve assumed that those parents don’t carry on drinking at home in front of their children. If this were the case, it’s not clear to me what’s worse (for the children): parents getting drunk in private, or in pubs.

But I wonder if the main reason people object to competition in the schools sector is because they perceive markets to be destructive places rather than constructive.

The myth of markets as an anonymous process imposing random order like a faceless grim-reaping accountant endures because of phrases like ‘creative destruction’, and simple analogies with Darwinian evolution. That may be inconsequential if all it means is we have to walk somewhere else for our shopping, but when faced with the images of uneducated, dislocated children; coughing masses wheeling themselves from one crumbling hospital to another, then naturally we question the motives of the Reaper.

But why do people forget that markets’ main goal is to build things, as evolutions main goal is to build life. The competitive process (by and large) by rooting out bad ideas, necessarily constructs the best ones. The simple Darwinian analogy is misunderstood; yes species do go extinct, but evolution is all about relative survival, not total annihilation. Perhaps it’s better that a local school with pretensions of grandeur is reduced to supplying more restricted but better quality education services to adults. Or perhaps its teachers are better suited to working in charity. The point is that the competitive process is inherently constructive, not destructive.

It is possible, fantastic thought it sounds, for two schools, to be in competition for evermore, spurring each other to even greater heights of excellence, and even better, dragging in others who fancy a piece of the action. Naturally some schools may go very bad and fail, but why is it a good thing for a bad thing to succeed, no matter how intense and generous the spirit behind the transaction?

I find this more baffling when the actual transaction occurs free at the point of use, but competition remains anyway because of customer choice, as in this example.

A valid criticism may be that with competition, there will be low quality schools, but at least with public provision, the bar is set high enough. That is the wrong way round though. The key advantage of the market is that parents effectively set the bar, not some education bureaucrat

My (unchanged) is that Bryan is too optimistic about humans. In many instances we are simply ignorant rather than irrational. We just don’t know the salient fact or theory at the heart of the debate. Ricardian trade theory or the concept of opportunity cost may come to me naturally but why should I assume that others are so well versed? Furthermore, why would I assume that we can all make the distinction between Ricardian and Heckscher-Ohlin models of trade? Can you even imagine an expert panel on trade consisting of Dani Rodrik, Paul Krugman and Don Boudreaux? As Dani has pointed out, the debate is hardly about whether trade is good any more, but about the detail: whether more bilateral agreements are preferred; should competition policy be incorporated into WTO rules etc. Similarly when Bryan chides irrational individuals for blaming foreigners for taking their jobs I’m inclined to ask, why? Again, As Dani has pointed out, there is no presumption, even in a simple Ricardian model, that all or most people will be better off with free trade; the median voter may see and feel things that can’t be represented in an objective function but that matter nonetheless.

Perhaps he really believes that archaic theory and calculus-ridden models rain down from an ivory perch onto humanity to be absorbed by osmosis but as he correctly notices, most people don’t give a damn, but this is NOT because it doesn’t affect them or because ignorance is cheap as Bryan thinks, but because his supposed academic concensus is a mirage, at least on the substantive issues which are at the heart of the policy debate; economists do indeed have two hands.

Which brings me to another related issue doing the rounds in the blogosphere at the moment: Chris Hayes essay on the neoclassical mafia. Chris surely over does it a little but he’s on the right track. The neoclassical hegemony and its claim to rightness, is largely an accident of history. Walras’ application of concepts from physics to economics was based on a simple presumption that concepts like conservation of energy translated from one environment to the other. This is blatantly false but a more accurate model was simply too intractable at the time. By the time techniques of evolutionary modelling became available, the neoclassical Citadel had solid foundations and a well established network of journals and insiders, and accepted theories to propogate itself, and not because those theories were right. Presumably, Bryan’s economic experts would be chosen from this neoclassical world because the heterodox experts are ‘unproven’. But in the eyes of the heterodox economists, Bryan is just as irrational because he surely knows that, for example complexity theory is a better model of the stock market than the efficient markets hypothesis, but he must just choose to ignore it.

Bryan’s view is a vindication of the curse of knowledge: the idea that when you know something, it’s very difficult to not only ignore that thing, but to project your own knowledge onto someone else. But this isn’t his biggest mistake. In order to conclude that humans are irrational is to apply the normative standard of homo economicus as the benchmark. This means not only that we all know the relevant theory, but act (ordinarily) in a way consistent with it. But if we have altrusitic motives, let our emotions override our cold calculating minds or are apparently inconsistent in our choices over the long and short-term, then Bryan is apt to conclude that somebody should make our choices for us.

As a long-time advocate of behavioural economists, I’m sympathetic to the first part of his argument, but not even Richard Thaler would conclude that our irrationality requires the heavy paternalism Bryan appears to favour. And what about his other recommendations. If irrationality in democracies results in individuals forcing bad policies onto the rest of us, perhaps the market can correct that? Except that markets also have a habit of foisting their sometimes poor outcomes onto the rest of us (if food wasn’t labelled, many of us economists would probably seek out the right information, but surely poor quality food would result and many people would eat it). Remember that markets, like democracies rely not only on their outcomes to justify their superiority over other methods, but because from a process perspective, they tick the right boxes, in spite of their occasional blips.

And finally, what incentives to experts have to be ‘right’? What happens, after all, to those members of the MPC who, ex post, turned out to have got it ‘wrong’? Professional standing perhaps? But would you trust an expert who only has to face the snide remarks in the JCR and retreat to the cold comfort of a tenured faculty position? I rest my case.

British people have been infected with the welcome American attitude to competition and customer service. If something isn’t good enough, they complain. In Europe and especially France, people still meekly put up with being sold bad food and bad consumer products and services.

Despite France’s claim to one of the best healthcare services in the world, the only appreciable difference with the NHS appeared to be cleanliness. Instead of the mute mop-draggers, there were armies of cheery diligent cleaners everywhere.

It is not too ridiculous to suggest that while French hospital managers could certainly teach their NHS counterparts about managing a cleaning service, healthcare managers here could teach them a thing or two about concepts of consumer rights. It might help them to treat all their patients with a bit more humanity.

The thurst of the article relates the author’s personal experience of French healthcare. I don’t know how representative it is, but I can imagine the muted  and indifferent approach to patient service being true. The author may not have been happy, but what of the French themselves? The system seems to ‘work’ in the sense of delivering good outcomes in aggregate. Do the French focus more on preventative medicine, meaning that less attention is given to the hospital part of the treatment? Do the French take a particularly existential and fatalistic point of view when it comes to health, at the same time reasoning that plush carpets, soft music and an army of nurses wearning synchronised swimmers’ smiles, is unceccessary.

What I do take from this anecdotal story is that you can’t just look at healthcare (at least in the developed world) as a purely economic system that can be exported and bolted on to the infrastructure of another country. Cultural expectations, the prevailing attitude to preventative care, family and other social structures etc. are not independent of the ‘official’ healthcare system in determining outcomes.

I’m not convinced. The slippery slope argument can be summed up the following way:

Man: Will you sleep with me for a million dollars?

Woman: OK

Man: Actually, how about 10 dollars

Woman: get outta here!

Man: well, you’ve expressed your preferences, now we’re just arguing over price.

In the case of libertarian paternalism, it’s also often forgotten that something as benign as changing the default on a 401(k) is welfare improving, even though I’m sure Richard Thaler would concede that it’s not the optimal policy, in any normative sense. As one commenter at the economist blog points out, perhaps opting out is optimal, if the (absolute) returns are enhanced, but when you’re turning down employer contributions, and returns follow a random walk, that’s a difficult argument to maintain.
Finally, would Professor Rizzo have a problem if the choices under soft paternalism were made through market mechanisms, as in the case of Swedish social security*?

The simple fact is that our brains and psychology are largely wired to prefer short-term pleasure to pleasure in the long-run. But that’s not to say that all short-term choices are poor. I’ve had great fun blowing money on an expensive meal; then regretting it some days later, but still, actually, thinking that “it was worth it”. But at other times, I really do regret it.

That’s the challenge for any sort of paternalistic policy, whether implemented by Government or induced by the market. There are some short term pleasures that we want, but don’t want, but actually, we really do, probably. How do you differentiate these from pleasures that you think you want, but probably don’t?

addendum: confusion over policy may also arise because of the term ‘preference’. In the Samuelson sense, preference equates with choices, but much literature interprets preference as a value, desire, or thought. This needn’t be a problem, in fact multiple interpretations of the word highlight that there may be a wide range of applicable ‘preference’ based approaches, invoking different characteristics of the individual, depending on context. Time may be one such consideration, in combination of irreversability of choices (e.g. at 65, you just can’t decide to get a pension) where we may want to have a different approach to say, choosing the wrong sort of milk.
* Design choices in privatized social security systems: learning from the Swedish experience, Cronqvist, H, Thaler, R. H (2004) AER, Vol 94 (2) pp424-428

I’m even more confused by the thousands who’d queue overnight just to get their hands on this tat. However, it’s their preference, so I can’t complain, unlike the kind of opinion that I’ve been hearing and reading; it goes something like this:

Those people should be ashamed, paying money to an already rich retailer and supermodel. They would do better to give it to the poor of the world.

Or the alternative

What has Kate Moss ever done?

The first point belies a whole lotta confusion. Because most of the money is going to already wealthy people, then that can’t be good. But look, the clothes are probably made in Vietnam or India, so some wages must be flowing back there. If those people hadn’t queued to send money back to poor workers in Asia, then that mone would have found its way into the pockets of Blackpool hoteliers, Croydon barstaff or villa owners in Tuscany. Of course, the bulk of the money is going to Philip Green and Kate Moss but they have talents that can’t be easily replicated.

In fact, the size of the queues should have factory owners in Hyderabad rubbing their hands because it suggests a new trend, especially following Madonna’s foray into fashion with H&M. Other superstars may be tempted, resulting in more work. Now it is true that the returns to madonna and her ilk will increase much faster that those to the garmet-makers, because there’s a limited supply of superstars but presumably quite a lot of slack in the labour markets where these clothes are made. But is that widening inequality such a problem if it lifts more people out of poverty?

As to what Kate Moss has done? Well, amongst other things, she’s proven to be a hugely effective channel for diverting funds to Asia. There’s a great experiment that could;ve been done with the topshop queue. Let’s say that total revenue raised is £1m and let’s assume that £1000 goes back to the Indian workers (that’s 0.1%). Now, how much would’ve been raised if somebody had rattled a charity tin in the face of those eager consumers? Yet Miss Moss magically convinced people to do exactly that. And even better, the workers get the benefit of having a job, rather than receiving charity.

The point being, concealing your preferences harms your utility, or in more common terms, removing nose from face just to spite said face is a tad illogical. So what do you make of this from the FT?

Black activist websites are debating whether he is really “black” and they are not joking. His mother was white, they complain, and he is not descended from slaves. According to the polls, black voters still prefer Mrs Clinton.

Would black voters really not vote for Obama when it came to the crunch? Perhaps Bryan Caplan is right.