Monday, 11 November 2013

Getting it wrong - and getting it right


Show your workings. That's what we tell students, in pretty much every discipline that we academics teach. And why? Because if they don't, neither the student nor the teacher knows where the calculations have gone wrong - or where the arguments have gone awry.

And when you can see where you went wrong, you should be able to pinpoint where you could go right next time. So welcome, then, to four times that 'Public Policy and the Past' got it wrong. Forget getting it completely right about Universal Credit: sometimes a mess-up is just as instructive.

1. President Obama's re-election might be a very, very narrow one. A relatively left-wing president (above). A listless and only slowly-recovering economy. A fired-up opposition, with a candidate tacking towards the electoral centre just as fast as he dared. A recipe for a close one, right? Er, no. Sorry about that. In the end, when all the fuss had died down, President Obama was re-elected pretty easily, dropping only one state that he had won in 2008. The lesson? He got out his voters. His team used all the numbers and techniques available from quantitative social and economic sciences - and all the grass-roots force of community activism - to reach every single voter they could. And they damned the Republicans and their candidate for being a throwback to the bad old days. Ed Miliband's Labour Party has taken the former lesson to heart; the Conservatives will try to utilise the second in 2015. It's going to be a close run thing between them.

2. Tuition fees at English universities would put off large numbers of poor students, who would look askance at the huge sums involved. Well, no, not really - or not yet, anyway, at least among full timers. If fees rise successively to £20,000 or more, then overall numbers might fall. The real underlying problem with the new tuition fees scheme in England has always been that it's completely financially sustainable, will land the taxpayer with nearly as many costs as the old one while lumping debt onto the younger generation, and doesn't provide universities with more money even while it charges everyone more. But 'Public Policy and the Past' also thought that £9,000 a year would sound like a lot. It hasn't sounded like enough to put large numbers off. The conclusion? Younger people know what a good investment Higher Education is; but even more clearly, we are still going through a cultural revolution, familiar throughout the developed world, which is making post-18 education an assumed norm, rather than an exception. That's a powerful reminder of how much things have changed since the 1960s, when only a small slice of younger people went to universities.

3. Greece would exit the Eurozone. Greece is still in a mess. It's still getting worse, out in the real economy where jobs, cash and even basic drugs are scarce - even if the Government's borrowing is now beginning to come down. It will go on for years. The crisis may even threaten the existence of Greek democracy. The answer? Well, normally you'd go for the three 'Ds' - default, devalue, deflate) - or at least a mix of them. Iceland has bounced back pretty quickly from its brush with economic death. Argentina came back strongly from its early 2000s crash. This blog has always thought that's what will happen in the end. But Greece can't go down that line. Its Eurozone partners won't let it. And, after last night's failed vote of no confidence in the Athens Parliament, it's clear that her politicians won't force the issue - at least for now. The lesson here is simple: political commitment to the Eurozone, the fear of chaos if bits of it start to break off, and the power of northern Europe's creditors (particularly Germany) are all more clearly intact than we had thought. The European Union and the Eurozone are staying together - for now.

4. The 'Help to Buy' scheme turned out to be a mouse. Banks were quite happy to take taxpayers' money to subsiside mortgages - at a price. The price was very high interest rates on 'Help to Buy' deals, which involve the Government standing behind the deposits of buyers who can't reach the 20 to 25 per cent of houses' value that risk-averse banks want you to slap down on the table these days. This seemed to mean that the scheme would be a bit of a damp squib. Why borrow at between four and five per cent, when you could wait for a year, save more, and borrow at two per cent? Well, the quite rapid takeup of this scheme provides the answer: the many twenty- and thirty-somethings fear that, if they do nothing for a year or two, house price inflation is now such that the door to a homeowning future might close on them forever. So they're rushing in. The lesson here is that the virus of desperate whirlygig househunting, that only way to make any money in the UK, is back - if it ever went away. It's another disaster in the making, akin to the abolition of dual Mortgage Income Tax Relief in the late 1980s, or the secondary banking crash of the early 1970s. No-one cares for now. If this turkey of a policy isn't put out of its misery quite soon, in two or three years voters are going to wake up and realise that they're on the hook for many tens of billions in private debt - while at the same time holding a student loan book that no-one wants. Reducing the deficit? Don't make me laugh.

So that's four valuable lessons in four mistakes - a four-for-four record. We don't recommend getting everything wrong all the time, mind, but a healthy dose of humility - and a good old dollop of analytical revision on the side - can help us see where our assumptions and prejudices end, and where reality begins. What's why we blog: to work things out as we go along; to play around with our ideas as they emerge; and to keep an honest record, in our case, of what we thought history (and History) might tell us about public policy.

In an age that's seeing many sound the death knell of the independent blog, it's not a bad set of aims. Stay tuned for more predictions - and more mistakes.

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