Economics & Marginalia: January 2022

Hi all,

Can 2022 really only be two weeks old? I can’t really tell if the problem is that it feels old or that I feel old, but either way it seems like January has been a couple of months long already. Perhaps it’s the steady drip of stories—each more lurid than the last; I fully expect to find out that there was a stag do featuring a bouncy castle, a cabaret and whisky tasting in No. 10 when Neil Ferguson was being sacked for seeing his girlfriend—about how casually those strict lockdown rules were cast aside by those in power, indeed even those who wrote them; and the evident lack of contrition of at least some of them. Perhaps its losing Bob Saget, who basically invented YouTube. But the year already feels long; and there’s a lot left to run through. Let’s hope it’s better than 2021, though it did have some positives.

1. The first link of the year has to go to the blogging return of Chris Blattman, whose hiatus has been keenly felt. This one cut close to the bone, too: should you work for a Government you disagree with? Every civil servant faces this problem to a greater or lesser extent over their career (indeed, it’s rare that you agree with everything a Government does), and I know many people who feel it keenly today. In my first week as a civil servant way back in 2003, I asked a colleague how she dealt with this problem. I still think of what she said regularly: if you don’t like it, you need to make your voice heard, and the only question is where it’s heard most loudly. On the outside you can scream, maybe be ignored but at least you don’t have to contribute to it happening. On the inside, you can’t scream (at least, not for the outside world to hear), but you can’t be ignored quite so easily. The trade-off is that you might have to work on the things you hate. I study how Governments make decisions, precisely because I think these dynamics are incredibly complex, and important.
2. Speaking of how Governments make decisions, Tim Harford has a piece on the discontents of cost-benefit analysis. I love CBA—in fact part of me is a little worried I linked to think when it was published in the FT, but I’m happy to repeat my defence of it. He’s right that CBAs suffer from optimism bias, that we’re hopeless at estimating costs, and that we miss many out, as we do with benefits. But these aren’t problems with cost-benefit analyses. They’re problems with humans. We cannot aspire to perfectly rational decision-making because we cannot achieve it. The knowledge of that imperfection impels us to give structure to our decision-making processes. These structures may not do much—I have a paper in draft which finds that they sometimes don’t—but the absence of a structure doesn’t make the decisions better or less costly. It’s often hard to find the effect of things like CBA because the alternative isn’t chaos, it’s another structure to organise our thinking, even if informal. The structures help us revisit decisions, and (perhaps) learn; they provide accountability and lay bare logic. They’re all imperfect, because the common denominator is that we’re in them all.
3. Alongside cost-benefit analysis I sometimes teach public procurement. I can’t wait for the next time: the last 12 months has furnished me with so many examples of how it can go wrong. Procurement in a crisis creates the temptation to loosen the rules: that rarely goes well, and it didn’t in the UK response to Covid. And I learnt today that McDonald’s of all companies has fallen prey to a variation on the hold-up problem: they hired a company to create an ice-cream machine for them that only that company can fix (mainly due to dodgy practices in data management). The upshot? They make 25% of their revenues from maintenance fees. Who’d have thought it? (Transcript).
4. Migration is good, and it’s good to be good to migrants, part 2,290,182,193,002 of a continuing series: Sandra Rozo summarises her work with Ana Maria Ibanez, Dany Bahar, Andres Moya and others which finds that not only does giving refugees access to the labour market have no discernable negative effect on local workers, it massively improves refugee well-being. When the economic case for being minimally decent is overwhelming, and yet the policy set chosen by almost every rich country in the world is chosen to be as dehumanising as they can get away with, it tells you a great deal about who we are.
5. Andrew Gelman on behavioural science (this is basically a horror story in five words). Gelman savages a meta-analysis (not the excellent Milkman et. al. paper, which is a mega-experiment) for essentially taking a lot of small piles of garbage and turning it into an epic, 200-metre-tall monument of garbage, a kind of Angel of the North for bad research. Worth reading. I often worry about meta analyses for the same reason; there are only maybe five authors who I trust to synthesise evidence well in this fashion (including, of course, our own Dave Evans, whose work in aggregating research is phenomenal).
6. Branko on whether some countries should cease to exist. Does anyone mourn the Vandals (not the punk band)?
7. Lastly, in news that explains why so many people have been smiling at me on the street recently, the Gruaniad reports that research has found that wearing a face mask makes one more attractive (yes, I know, this is almost certainly garbage that was tested only on mice, but it’s link seven and we need the frivolity). I have a model for this: humans are lazy. In low-stakes situations we use the easiest vaguely plausible rule-of-thumb to navigate decisions. Thus, when people are wearing masks, we extrapolate how attractive the uncovered part is to the covered part… and we all know about Brits and their teeth. Me covering up my Shane MacGown grin is a definite upgrade. Unless people are really smiling at my incredibly charming toddler when we walk together… which is perhaps a bit more realistic than my model...

Have a great weekend, everyone!

R