What are the costs of economic atomisation?

'Public Policy and the Past' usually shies away from the theoretical. Who's going to read a column about the history of mathematics and accounting? About the way macroeconomic statistics are assembled? Visions of the firm and competitiveness? Concepts of other countries' economic success and failure? Quite a few, perhaps - as evidenced by the day job - but not as many as want to know who will win the next General Election based on past experience.

But here's some theory, front and centre: the chief public policy challenge before us to glue back together our frame of vision. To reassemble the ways in which we can see politics, society and economic behaviour as one set of relationships. Now, this may sound pretentious (it is, by the way). But stop. Don't hit that 'close' button! Let us explain.

The death of macroeconomics has proclaimed for longer than we care to remember. Chaos theory challenges how much we can discern about what causes anything, let alone the performance of an entire society. Postmodern ideas focus on discourse - what we know, and how we speak about it. Fast-moving economies seem to defy any concept of 'equilibrium' - the key building block of classical economics-as-a-discipline itself. Small state neoliberals don't want governments meddling in as much as they used to. Thinking about an entire nation-state as a mechanical machine, pouring out goods and services along the lines of what we put in and how we manipulate it all? It's dead - official.

Now there might be some advantages to this. As free market economists never hesitate to point out, policymakers (both 'Keynesian' and 'monetarist') have pretty poor records in managing all these macroeconomic levers. They always think that we're in a boom when the heat's all coming out of it; and they usually think that we're still in recession long after the economic motors have begun to purr again. They know little, necessarily - and make unsurprisingly bad decisions on the back of their ignorance.

But consider the deleterious consequences of going too far the other way. We've ended up in an age where every fault in your stars is in yourself - where every economic misfortune that might befall you is because you didn't buy a house quickly enough, because you invested in the wrong human capital skills, because you bought the wrong shares, because you joined the wrong company, because you didn't work hard enough. And so on. The policy consequences are obvious: education becomes the only way to raise productivity (by 'increasing the quality of inputs'); and nations' budgetary stances cease to matter in the determination of economic growth itself. Because if everything that happens to you is your fault (or reward), then the economy must logically become the sum of such choices and payoffs.

Now, forgive us, but this is economic and logical nonsense. Spanish, Italian and Greek under-25 can educate themselves all they want, but most of them are unlikely to secure well-paid, satisfying jobs any time soon (if ever). Key economists even at the dawn of the neo-liberal counter-revolution accepted eagerly that the very reason companies existed at all was to share information, to reduce transaction costs, and to protect economic activity against excessive risk. That's why even free market luminaries such as Ronald Coase didn't always oppose government regulation: they took it on a case-by-case basis.

Today? We're afflicted by the idea that everything has to earn its way. Every arm of the company must break even. Every research unit must justify its existence. Each research project must demonstrate 'impact'. Welfare recipients are a 'drain'. Poorer regions require 'reform' to secure 'convergence'. Too much more of this, and we're going to be asking ourselves the poisonous questions - why should we support our wives or husbands when they want to re-train or stay at home looking after our children? Come to that, why should we support our children when they are at school? We exaggerate, but you get the point. Logic-chopping like this makes every company, every team, every office and every research lab vulnerable to their bottom line - unless they are powerful enough to exert social influence on their fate, one type of 'economic' transaction that always seems to get left out of these judgements of excessive smallthink.

The costs of this sort of atomisation are clear. It drains away all of our ability to think strategically, to pool risk (opens as PDF), to reduce uncertainty, to accelerate local and global growth via intellectual and physical economies of scale. And it does something else, much more invidious and in the end much more damaging: it allows us to think as if profit, or at least the absence of losses, equals economic virtue. Which it doesn't. Ask anyone about all those bank balance sheets full of positive returns in the early 2000s. Do we think that they were a good idea?

No, we don't. Because they weren't - instances of an atomised, individualistic, microeconomic and above all cramped, small and over-segmented view of the economy that should long ago have been cast to the winds.

Whatever happened to evidence-based policy?

The idea of 'evidence-based policy' was one of the most apparently unobjectionable elements of New Labour's time in office. Now it was often a completely disingenuous cover for what the Blair administration in particular wanted to do anyway. But there was at least a nod to looking before you leaped; to testing; to some pilot projects. It was a bit like those much-vaunted 'one stop shops' of welfare lore: honoured perhaps more in the breach than the observance, but a virtuous aim, and something that at least held back Whitehall and Westminster's worst instincts.

But these days even that mask has been thrown aside, and 'evidence-based policy' abandoned in favour of some mid-level policy disasters that have failed even in their own terms.

Let's have a look at just two such debacles, shall we?

The badger cull. Now if you wanted to trap and kill badgers to stop the spread of bovine TB, what would you want to know? Yes, that's right, you'd ask the following: first: do badgers actually assist the spread of the disease? Secondly, would killing them stop the little black-and-white stripeyheads trundling around the country? And, third and last, what is the best and most humane way of killing them? Unfortunately, as we've noted before, the present administration did none of these things. It launched out on a couple of pilot projects in the West Country designed only to look at the humane killing question, ignoring much veterinary evidence that this would be an expensive and unnecessary waste of time. When they failed to kill anything like the number of badgers that they thought they might, the Government then abruptly announced that it wouldn't go any further with the programme - without any apology at all about all those wild animals that had been needlessly slaughtered.

Personal Independence Payments. Now if you feel angry about that one (and lots of animal-loving Britons probably will), the pain and heartache caused by the Department of Work and Pension's serial blundering will probably cause you something closer to rage. Look away now if you're of a nervous disposition. Right this minute, as you're reading this, hundreds of thousands of people are either waiting for decisions about how, when and why they'll be moved over from Disability Living Allowance to the new 'system', or are wondering how on earth they're going to cope when their long-standing health difficulties have just been completely ignored or denied by disaster-prone assessement firm Atos. MPs have just called the programme a 'fiasco', and you should ask yourself this: if you had a terminal illness, and you were in a great deal of pain, how would you feel about being told that you had to wait a month for payment? Yes, you'd feel that your society - your friends and neighbours - had just delivered you a great big smack in the face. Welcome to the United Kingdom.

By the way, we're not including Universal Credit, the Big McGuffin of all catastophes that is presently limping towards an early, inglorious death. To be honest, it's now so far gone that there's no point even criticising it. It's basically now attained mythical status. It doesn't exist, despite Iain Duncan Smith's continual assertions that it does. As soon as he leaves his post in May (whoever wins the General Election) it will quietly be forgotten about - after billions of your money has been frittered away on absolutely nothing.

So what do these depressing policy car crashes have in common? They were rushed through in the first phases of the 'breakneck coalition', partly to show that a government led by two parties and not one could work really quickly and purposively. And they were just too big to steer properly. Ministers, and perhaps even officials, never thought to include really large-scale trials in the rollout of these 'policies' (for want of a better word). And they refused to pull out of their plans when they were patently going badly awry.

All because we turned our back on what incision, evidence, analysis, detail, differentiation and good old-fashioned common sense told us in the first place.

Should historians feel emotions?

The revelation that nearly 800 Irish children had been 'dumped in a septic tank' at a home for unwed mothers triggered off all the usual feelings about the Irish state and the Catholic church.

It was a state too small, too stunted and at one and the same time too powerful to cleanly manage its moral and economic affairs until light started to be shed into the Republic's nasty, murky corners in the 1980s and 1990s. It was a state far too reliant on the support of that self-same church, which won in return favours of protection and immunity that corrupted each of the people's protectors and representatives in their turn. This much we know - as this blog has shown again and again.

And now this. Irish people everywhere - including members of those ex-pat Irish communities that span the globe - hung their heads a little deeper in shame, or got even more red-faced with anger than they had been already. Industrial schools, Magdalen asylums - haven't we been here far too many times before?

But the way this story was being presented always sounded wrong, somehow - a dissonance that got worse the further one travelled from the original sources. And here's where journalism and history come in. Our first reaction is, quite naturally, one of fury mixed with resignation. Nothing else seems to meet the case when considering this further confirmation of the sins of Irish officialdom in the years when a twisted view of public 'morality' was supposed to be more important than straightforward human decency and humanity.

But with a bit of digging, some of the revelations became a little more complex. The researcher who'd uncovered each and every death certificate objected to the word 'dumped'. And it turns out that what we were talking about here were hundreds of unmarked graves on a site that had previously housed a water tank. 'Dumped in a septic tank' was a sensationalist firework with which to launch a tragic tale of shame, neglect and probably downright abuse. Other details in the reporting were also embroidered, as the Associated Press later admitted.

What actually happened? We don't know. We're not sure what happened at the Tuam home run by the Bon Secours nuns. The records are fragmentary or (apparently) non-existent, though the cause of death usually suggests that our nastier intuitions might one day be proved correct - yet another opportunity for historians to contribute to the public policy process. Barring a full public inquiry (which is just about the least the Irish state could promise), an unedifying period of suspicion, finger-pointing and archive checking probably lies ahead. There was probably terrible mistreatment, ignorance, fear and loathing. But the historian's initial instinct - to look more closely, and more deeply - seems to have been the right one, and the one that motivated local historians' searches in the first place. It's still the right one if we're to do justice to all those children's short lives.

Rage, anger, shame and fury are all parts of human life - as are empathy, hope and (dare we say it?) love. To understand them, you have to feel them. So they must be part of any historian's arsenal - and we feel them in this case more than most. But the first and most important emotion if we want to find out what happened, and then do it justice in law and commemoration? Curiosity. The wish and the urge to find out more, more competently, more accurately, and more precisely.

Big data is only relatively 'big'

These days everyone's talking about 'big data'. What they mean is this: by capturing the trillions of interactions that computers can capture and analyse, experts can have a good old look at anything from traffic flows to the spread of diseases - either in each victim's body, or in society at large. And then look at what's gumming up any of those systems.

The problem? They're getting carried away in a numbers-heavy, but theory-light, game that's as old as state-based numbers themselves. As Radio Four's admirable More or Less programme has recently pointed out, it's not the sheer amount of data that matters, so much as what you do with it. In 1936, a massive, millions-strong opinion poll run by the Literary Digest got the outcome of the US Presidential race spectacularly wrong - because it send out poll cards using phone numbers and the like, massively over-sampling richer Americans more likely to vote for President Roosevelt's Republican challenger, Alf Landlon. Opinion polling has in fact surprised us again and again - as anyone who remembers the UK's 1992 General Election will remember - as the best way to take samples and ensure a balanced survey change all the time.

Consider Google's flu indicators, most recently one of the data industry's Great White Hopes. The idea was that you'd look at flu's spread by registering what people searched for online - but the relationship between searches and the spread of the virus has gone way off kilter in recent years. Statisticians had no model, no theory of how one set of numbers related to the other. And the point about two moving points is that their relationship is dynamic, and subject to change - probably change under constraint, change subject to rules, but potentially rapid alteration all the same.

We've been here so many times that a historian doesn't really know where to start. Florence Nightingale's use of graphs and charts. The visualisation breakthrough that allowed nineteenth-century doctors to trace the dirty water source of cholera outbreaks. Census data and migration figures. The last two hundred years are absolutely full of eureka moments when experts proclaimed that they'd made the big data breakthrough. Consider the late Tony Benn's words, as Minister of Technology and computer enthusiast, in the late 1960s: 'communism is going to score heavily over capitalism with the advent of computers because the Communists got centralised control early but didn’t know what to do with it… [but] computers now gave them a tool for management’. Not a great prophecy as things turned out, but a precise and revealing indicator of just how long decision-makers have assumed computers' power to relate one thing to another would change the world. And when we look bag, IBM's tape-to-tape data reels didn't do much to predict or rapidly tackle oil shocks or the threat of the HIV virus. The world turned out to be more complicated than we thought - though our desperate clutching at anything that might give us certainty in a world of chaos is as instructive as Benn's hopes for big data technology all those years ago.

No doubt our data will look pitifully small in years to come. That's why it's useful to take a historical and a long view of such hopes and fears. Remember that the next time you hear someone claiming they can 'solve' anything with numbers, won't you?

The big question: university or housing?

Property expert Kirstie Allsopp's recent controversial outburst about young people's life choices is as unsurprising as it is depressing. Put briefly, she said that young women might be better off leaving school, getting a job, saving up a deposit, buying a flat and meeting a man with whom they want to have a child. Welcome to Amazing Surreyworld, everyone. Or, in Allsopp's case, perhaps amazing Kensingstonworld would be more like it.

Let's leave aside the sexism involved (did she say this about men? Er, no - though she wasn't asked about them, to be fair). Let's set to one side the false claims (that fertility 'falls off a cliff' when you're over 35, which is a huge exaggeration). Let's not get embroiled into the actual reasons why we go to university in the first place - not because we want to earn more (though graduates usually will), but because it can be a mind-expanding, consciousness-forming, helter-skelter ride and an intellectual game-changer.

No. Let's look at the economics.You knew that we were going to say that, didn't you?

What Allsopp's advice in fact reflects is the irrationality of our economy. If we think in purely monetary and quantitative terms, the pressure is indeed all on buying property as fast as you can - seizing the Monopoly board, not investing in your skills or your intellect and career. For, like it or not, and in the South East of England at least, your lifetime income is just as likely to be determined by how much property you can afford to grab hold of as it is by how much you can earn. Sad, but true. Britain's runaway housing boom means that prices in London have doubled since the years immediately preceding the crash. And it's here that Allsopp has a point - like it or not. It means that, yes, economically at least, men and women in their late teens should recently have bought a flat as quickly as possible. Oh, it could you 'only' £200,000 in 2006 or 2007? That'll be £400,000 these days, mate. Now that's £200,000 in your pocket, straight away, so you can move out of London and pretty much set up home where you like - as more and more Londoners with young families (or those seeking a second home) actually are. Instead of £40,000 or so in student debt. Each. It's an incontrovertible balance sheet gain of £280,000 or more - fun for those with money to play, as long as the boom lasts.

The most recent, and chilling, news for those self-same young people is that their student debt is indeed, under the Mortgage Market Review now straining to hold back the breaking dam, to be counted on the debit side of their personal balances by mortgage lenders. That means it's going to get even harder for young people to 'get on the housing ladder', as no doubt Allsopp would have it - or 'live somewhere decent', as those who speak in actual English might say. All the more reason for them to stampede estate agents now, just like they did in the late 1980s when they heard about the end of Mortgage Income Tax Relief for couples. That turned out well, didn't it?

It's all built on sand, of course. The London bubble can't last, and it's already showing signs of slowing. It'll end in tears, just as it did in the mid-1960s, the mid-1970s, the late 1980s and the crisis of 2007-2008. But for now, there's plenty of steam in the speculative pump-up-the-volume boosterism that passes for economic comment in any era dominated by property speculation. You could call it life-affirming advice to youngsters, if you really prefer.

But we know in our hearts the reality that really lurks behind these words: the same grotesque parody of an 'economy' that Allsopp (above) herself both reflects, and has helped to construct. Thanks, Kirstie.

Why can't we think big any more?

 

Britain has become a rather conservative place. Want to build some houses? It might take you five to ten years. Believe in better infrastructure? You'll have to wait in line behind all the other Private Finance Initative consultants. It's a strange phenomenon, because we as individuals are also getting more and more likely to start up our own businesses.

But there's no doubt it's there. Governments talk of 'new garden cities'. What they mean is a few housing estates in some muddy fields near London, with little imagination so far on display about transport links and amenities: this at a time when we need actual new cities, across the south of England, right now. They announce their total commitment to the controversial HS2 high-speed rail line from London to Birmingham and Manchester, only to be faced with a well-financed and highly-organised campaign against it. Sure, there are some points of light: Great Western rail electrification and Crossrail will really open the capital up on its western flank.

But overall it's a rather depressing picture. The United Kingdom has lost the innovative spark of an Isambard Kingdom Brunel (above) - the very image of a confident, bombastic, take-no-prisoners engineer who combined the art, craft and expertise of truly visionary engineering with a tough-minded commitment to punch through all the inevitable problems at all costs. He didn't always have it his own way. Sometimes he insisted on too much innovation, as with the ill-fated Exeter to Newton Abbot 'atmospheric railway'. But we don't remember those disasters, do we? We marvel at Bristol Suspension Bridge and the Great Western Railway themselves - legacies that we use today, and cost us very little, because we sunk all the capital so long, long ago. Our children will only thank us if we go ahead on similar lines right now. At least it'll be some sort of payback for the debt-laden and insecure economic lives we're building for them as we speak.

Here's some ideas, pleasingly packaged up for you by the BBC: a bridge across the Irish Sea; an east-to-west, Liverpool-to-Hull rail line; a Severn Barrage; trams for Liverpool, Leeds and Bristol; a bridge to the Isle of Wight; full motorway upgrading for the M1 and M11. And so on.

It could be done. At a time when interest rates are very, very low - and when there is a massive infrastructure deficit across a crawling, grinding, angrier-and-angrier transport network - it should make sense on every level. It tells us something very important about ourselves that none of it will probably ever happen. It tells us that the Brunel within each of us is asleep.