Friday, October 19, 2007

Extremism in the LSE Students' Union

The Jewish Chronicle report an absolute scandal that I've been following at the London School of Economics Students' Union. The following letter from the Students' Union General Secretary, Fadhil Bakeer Markar, and Mature & Part Time Students Officer, Ziyaad Lunat, was sent to every fresher:

The rhetoric is deeply inflammatory and partisan. From the statement that "800 Palestinian children have been killed by the Israeli Occupation Force" to "our fellow Palestinians", to the idea that Israel denies the right to education and "Israeli policies of segregation, isolation and persecution of the Palestinian population" the letter would be more at home in some Islamist newsletter than being sent to every LSE fresher.

This is particularly shocking as the letterhead suggests it has been paid for with students' union resources which means that it has been funded largely through the university's block grant and, therefore, partly by the taxpayer.

Also, the LSE is a very international university and, although I can't find statistics, I know that Israeli students do attend. This kind of massively biased language coming from Students' Union officers who are supposed to be looking after students' interests could contribute to creating a real climate of fear. We've all grown accustomed to students saying crazy things but the manner in which this extremism was expressed makes it worrying in the way a lone crank sounding off is not.

I hope and believe that the extremists in charge of the Students' Union are not representative of the broad community of students. Unfortunately all of us with a connection to the school are demeaned by the hatred of a few.

Why first-time buyers have felt the increase in stamp duty

Sometimes an important step in understanding the social impacts of a tax is to understand what it is best compared to. Council tax is a classic as it doesn't look nearly as painful when compared with average incomes as it does with pensioner incomes. Stamp duty is another. In politics it is easy to understand stamp duty as 1 per cent or 3 per cent of the value of a home which makes it sound relatively mild. However, far more relevant is the comparison with the deposit which shows how painful the tax can be for first time buyers.

The average first time buyer pays a deposit of £28130 and stamp duty of £1500. That means that stamp duty is fully 5 per cent of the average first time buyers deposit. It gets worse in London where an average first time buyer deposit of £53136 is accompanied by a £7500 stamp duty bill. In London stamp duty is on average 14 per cent of the deposit thanks to the average home qualifying for the 3 per cent slab rate. Those numbers, now looking quite significant, reflect the actual comparison people make when buying a new home and illustrate why Stamp Duty can make difficult purchases much harder.

(data here)

Wednesday, October 17, 2007

Primary school democracy

Last night's Panorama dissapointed me. They showed the Why Democracy? film that was so excellent after newsnight last week, my initial thoughts are in this post, during the programme but in a massively cut-down form that lost a lot of the spirit of the original film. To see the entire thing in its full glory go here.

Tuesday, October 16, 2007

Power, Productivity and Office Linebackers

Learning by doing, the idea that people get better at a job after they've done it for longer, is somewhat of a conundrum in that it is both useful to theory and almost self-evidently exists but has proven so empirically challenging that it has not gone far in the literature without running into trouble.

The scale of learning by doing is important because it can, theoretically, provide a competitive advantage to incumbent firms that have more experienced and learned employees. If learning by doing provides a competititive advantage for some firms then it can create a path dependency which would form a barrier to entry and be anti-competitive. If, on the other hand, it exists but not on a scale sufficient to provide a significant competitive advantage or is impossible for firms to capture by holding onto more experienced employees then all it will do is act as a slight and rather inconsequential delay to the introduction of new technologies.

The problem for economists and economic historians seeking to answer this question is that it is fiendishly difficult to do so. A classic example of how this has been studied in the past is a study by David in 1973 which examined improvements in productivity in the Lawrence Mill, no.2 in 1830s Massachusetts. This mill managed a superb increase in productivity without commensurate changes in capital or labour and David attributes this to learning by doing. However, Lazonick and Brush responded in 1985 suggesting that the most important factor driving productivity increases and decreases may really have been changes in the amount of effort put into production as companies became more or less powerful with new, more or less transient, workers and, hence, more or less able to squeeze harder work out of their employees.

Maybe this explanation is too technical. This viral ad I found via 18DoughtyStreet explains it very well:

In my experience, this is one of the most pleasant results of an academic education. I saw the ad on 18DoughtyStreet and it set me thinking about the broader implications of the process of control the programme was satirising. The great joy I have taken from my academic training is that constant stream of thoughts and ideas provoked by everyday experiences and stories. I love it and hope it isn't a habit I lose over time.

Anyway, back to learning by doing: Whether it is power that explains gains in productivity isn't really what is crucial to the learning by doing debate. There could be a host of reasons why productivity growth was more or less than that expected by a simple analysis of the amount of capital and labour in the plant. There are a thousand factors that David might not have thought of that might be the 'real' explanation of the productivity gains in the No. 2 Mill. Thompson, in 2001, examined another classic case of learning by doing, the Liberty Ship programme during the Second World War when the US rapidly expanded production of merchant ships. He includes measures for capital deepening and changes in quality but still accepts that there may be other factors he has not thought of in the residual that he wishes to identify as caused by learning by doing.

The only study that might get around this is one by Leunig, an academic from the LSE who authored a housing policy misunderstood by Iain Dale. He found data sufficiently detailed that it would allow him to study the production of individual workers as they gained more experience and, hence, avoid using a big, aggregate "everything else" residual as his measure of learning by doing. Unfortunately he has studied an industry, cotton spinning, with high labour turnover and piece rates that mean firms could not take a competitive advantage from learning by doing. We live in hope that a similar study can be attempted on an industry, like British shipbuilding up to the First World War, that does appear to have suceeded through learning by doing.

I think the difficulty robustly empirically answering this simple question should give us all pause when we are tempted to make too definitive statements about the lessons of history. There are thousands of similarly complicated questions (Was market irrationality the cause of the 1920s crash? Are patents crucial to innovation?) that people like to assume are settled. History is so complex and controversial that it should rarely be used to end debate (the "look what happened when..." argument is used too confidently, too often). One example of why the argument from historical analogy can be wrong is highlighted by the Lucas Critique. Only when we combine experience with coherent logic as to why that experience came to pass can we really claim to have a decent understanding of what is going on in the world and what might happen in the future if we change policy.

Show some respect!

This really angers me:

First, these statues are really old, I don't think that a non-expert can really have a good idea of what will damage them. For the Terracotta warriors to have survived two thousand two hundred years only to be damaged in a self-righteous berk's publicity stunt would be a real tragedy.

Fortunately, it appears Martin Wyness, serial eco-protestor, hasn't damaged them but he has still shown a massive disrespect to these artefacts by using them for his stupid little demonstration. Relics of earlier ages like these should be shown respect as they represent a vanishingly rare link to the past. Particularly in China where so much was destroyed in the great cultural tragedy of the Cultural Revolution. I also think that, when the pictures of this reaches China, the resemblance of the masks placed on the warriors to Asians during the SARS crisis will be considered rather offensive. I feel embarassed to belong to the same nationality as Martin Wyness the eco-idiot.

The last time I felt a similar anger was when the May Day protestors defaced the Cenotaph. Giving Churchill a mohican is one thing, he'd have seen the funny side. Defacing a war memorial to more honourable men who died in the defence of our nation is something else entirely. Both the Terracotta Warriors and the Cenotaph have such meaning that any infringement upon them for political purposes requires a person to be utterly small-minded, crass and self-obsessed. Protesting against Chinese CO2 emissions is, I think, misguided but is definitely entirely legitimate. Doing so in this way is disgusting.

Monday, October 15, 2007

Menzies Campbell

I didn't and don't agree with Menzies Campbell a lot. However, you can still feel for someone facing the sad fate of a political career ending not just in failure but in humiliation.

The closest comparison I can see is Iain Duncan Smith. Both of them fell as quiet men who just couldn't make it as leaders in the brash game of modern politics. That could be a reason to be optimistic for Menzies personally: It would be impressive if he can engineer a similar renaissance as a powerful advancer of a particular cause.

A lot of people are talking about his age. I don't think it was his age itself that did it. Michael Howard never faced the same ridicule and would not today (watch him arguing on TV) despite them both having been born in 1941. The problem was the same one faced by IDS. He just didn't have the charisma to lead. People will rationalise that charisma in many ways: Menzies it too old, IDS was too bald. Neither flaw was really the fatal one.