Daily Archives: August 16, 2010

Nudge, nudge, wink, wink: markets are ok, really

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One of the strangest things about the ConDem coalition is its claim to be pragmatic rather than ideological. In fact, it may turn out to be the most ideological administration we’ve seen since the middle period of Thatcher. Peter Wilby makes the point in a terrific column in today’s Guardian.

If we want a true picture of what Cameron’s government is about, we should look at another recent recruit to the tent: Richard Thaler, a Chicago University academic who is advising a ‘behavioural insight team’. This has been dressed up as another example of Tory de-Thatcherising, enlisting compassionate, interventionist approaches to social problems. Thaler claims to be what Americans call a ‘liberal’. Cass Sunstein, another Chicago man and Thaler’s co-author on a book called Nudge, which caused much excitement when it came out in 2008, works for President Obama. But Thaler is not quite what Cameron wants you to think he is.

Nudge provides Cameron with the academic cover that Anthony Giddens, the sociologist who wrote The Third Way, provided for Blair. It claims to set out ‘the real Third Way’, implying, conveniently for Cameron, that Labour chose a false path. Markets aren’t always right, the authors argue. Because humans don’t always make rational choices, markets sometimes operate inefficiently. From this (to anyone other than a Chicago professor) rather obvious premise, Nudge proceeds to outline a philosophy of “libertarian paternalism”. The state, without direct regulation or more than minimal costs to the advantaged, can gently persuade humans to act in their own and the wider community’s interests.

Wilby points out that this libertarian paternalism bears “the same theological relationship to Friedmanite economics (Milton Friedman was also a Chicago professor) as intelligent design does to creationism. It strips out the demonstrably false aspects of the doctrine and gives it a makeover.”

After the banking crisis, the belief that markets work perfectly was as unsustainable as the belief that God created the world in 4004BC. Nudge comes to the rescue, proposing ways to make markets work better without directly interfering with them, still less penalising those who grow rich from them. It discusses not the merits of privatising social security, but the best way of doing it. It considers why Americans aren’t saving more for their retirement, without mentioning that, for the majority, real wages haven’t risen in a decade. The premise is that if people act against their own best interests – by using drugs, eating junk, failing to save or taking out loans they can’t repay – it is because of their individual behavioural flaws, not because of poverty, inequality or lack of hope.

Nudge, though written before the worst effects of the credit crunch were evident, came at a convenient moment for free-market capitalism. It argues that there’s nothing wrong with markets, only with people, and the state’s role is to make people fit for markets, not the other way about.

Just to underscore the point, the Economist (from whose print cover the image above is taken) recently had a piece arguing that the ConDems are the most radical government in the Western world. ‘Radical’ in this sense means “hell-bent on shrinking the state”. That sounds pretty ideological to me.

What I read on holiday

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My friend Nicci has a lovely blog post with this title. It begins:

Every summer we travel to Sweden. Luckily, we go by ferry and car – luckily, because then we can take as many books as we want. And we take lots of them, dozens and dozens: books we know we’re going to read and books we think we're going to read and books we might possibly read or dip into and a few reference books, who knows why?, and some poetry books so we can learn poetry by heart, and then there are the books we want other people to read because we love them so much and the just-in-case books which we are pretty certain we won't have time to read, but what if a day suddenly has more hours in it, or if we break a leg and spend all our time lying in bed…. In fact, I blame it on Sean [Sean French, her husband and co-author of the Nicci French books]: usually only six or so of the books are my choice, and the rest are his. He is tremendously ambitious: he always takes several classics that are hundreds of densely-typed pages long. I remember that the first holiday we ever went on together was a walking week in the Provence, and he carried the new, heavy (unopened) translation of War and Peace in his rucksack, from hotel to hotel.

As it happens, the weight of books was much on my mind when we were heading for Provence this year. As usual, we agonised about whether this would be the year that we drove down to the South of France rather than enduring the indignities of RyanAir, but in the end decided that we had to fly because of various external deadlines and exigencies. Which meant that we were immediately faced with the fierce weight restrictions — 10 kg — imposed on cabin baggage by the world’s least-favourite but most-used airline.

Believe me, 10 kg doesn’t leave much leeway if you have to take a serious camera and a laptop, so I spent the week before we left avoiding bookshops. But one recently-published volume really intrigued me — Peter Mandelson’s memoirs. The problem was: it was big and heavy.

In the end, I hit on a solution: I have an iPod Touch for which there’s a Kindle App, so I bought the eBook version of the book from the Amazon Kindle store. This was a first for me, in that although I use eBooks a lot (I always carry an electronic copy of Ulysses with me, for example), they’re DRM-free, and in general I’m pretty hostile to the intellectual-property regimes implicit in the eBook business. But I thought that, in this particular case, the experiment was worth trying.

Mandelson’s memoirs are a revelation. Firstly, they’re surprisingly readable. Most politicians can’t write (which was one of the reasons Obama’s memoir came as such a lovely surprise). But Mandelson’s memoirs have an engaging, candid style in which he comes over as an interesting and rather engaging man: a political obsessive, of course, but an intriguing character — the kind who would make an excellent dinner-guest. The book also suggests a more sensitive and insecure person than his public carapace might indicate — which reminded me of a general principle that all journalists should have engraved on their hearts: whenever you encounter a media stereotype, it’s likely to be completely misleading.

Secondly, although — like all political memoirs — they are self-serving to a degree, my conclusion is the same as that reached by my former Observer colleague, Robert Harris, namely that Mandelson was very shabbily treated by Blair and Campbell. But the most striking thing of all is the picture that emerges of Gordon Brown as an emotionally crippled, obsessive, almost psychotic personality. People have always said that Brown should never have been Prime Minister. I’ve come away from Mandelson’s book thinking that he should never have been Chancellor either. All of which makes the final act of the story — in which the Brown who has for a decade been attacking and undermining Mandelson begs him to come back to help out — truly extraordinary.

The Kindle App is very neat btw. Once you buy a book, it becomes available on any Apple iDevice that you happen to own. And if you’re on a WiFi network, it checks to see if you’ve been reading the book on another device and, if you have, whether you want to jump to where you left off on the other machine.

When talking to Bill Thompson about this last Saturday, he made an interesting point, namely that the reading experience provided by the Kindle App is better than that provided by the actual Kindle device marketed by Amazon. The reason? With the device, you turn the page by pressing a button, whereas on the App you just stroke the page — so, as Bill put it, “you engage with the text and not with the device”. Not possessing a Kindle, I can’t attest to this, but it’s an intriguing thought.