Europe and the black Earth

I finished reading "The Black Earth," by historian Timothy Snyder. Now I'm going to re-read it, or at least parts of it. As its subtitle says, "The Holocaust as History and Warning," this is not only a history book, but an essay about the possibility that crazy ideologies take advantage of the anxieties of populations in a globalized world with scarce resources. To avoid this, the author explores the Holocaust and the years of the second world war in Europe to claim that state institutions are key to constrain humans not to exploit our lowest instincts. In the 1940s, in those regions were state institutions basically vanished, the Nazis and their allies were able to perpetrate the worst of crimes against Jews. The final solution was much more effective in stateless zones of Eastern Europe under German invasion or influence rather than in Germany itself. Similar disasters are happening today in stateless zones in the Middle East or Africa. In Europe, what stops us from repeating history is the stability of public institutions provided by the always criticized European Union. Those who promote the unravelling of the common currency and the Schengen Treaty, even from the left, should think twice about stopping or reversing the momentum towards an ever-closer union. If climate change gets worse, and massive migrations and regional conflicts follow all over the world, it is better not to think what will be of us and the world without the European Union. Snyder (p. 333) writes that "Just as the purpose of alliance with Hitler in 1939 was supposed to turn the most radical force in Europe against Europe itself, so Russian support of the European Far Right is meant to disrupt and disentegrate the most peaceful and prosperous order of the early twenty-fist century -the European Union. In 2014 and 2015, Putin rehabilitated the Molotov-Ribbentrop pact, the agreement between Nazi Germany and the Soviet Union that began the Second World War and created some of the preconditions for the Holocaust."

The victory of the TV "expert"

The first chapter of the long-awaited new season of the "X-Files" tells the story of how the former agents of the FBI Scully and Mulder are pushed to get involved again into the investigation of para-normal phenomena involving alien beings, because of the interest of a mega-rich popular TV journalist. After more than a decade in the dark, this new episode reflects one of the trends of what has been happening on Planet Earth during the long pause of the famous FBI fictitious files. This trend is the increasing role played by supposed "experts" that base their popularity on the appeal of their theories and fantasies on TV. The victory of a popular TV pundit as president of the Portuguese Republic also shows that being famous on TV (or having chaired a famous soccer club, as in Argentina) is a big asset to become a successful politician. Unfortunately, as explained by the great expert in expertise, Philip Tetlock, in his books, having a high profile in the media, and especially on TV, is very poorly correlated with true expertise, measured for example by the ability to make accurate forecasts. Becoming famous because of a talk show on radio or TV does not guarantee any particular level of wisdom, although it may guarantee a substantial pay cheque. Depth of knowledge is not even correlated with having a column in a newspaper. Some individuals that write in newspapers and that can be seen on TV (from time to time) may be wise and their judgement may provide socially useful insights, but most of what's in the popular media is there to satisfy a demand for stories that most of the time have nothing to do with true explanations of social phenomena, or with plausible solutions to our social problems.

Referendum, "neverendum" and "preferendum"

That a binary sovereingty referendum is a bad idea in the globalized and multicultural XXI century is very well explained in the book by Peter Emerson "Designing an All-Inclusive Democracy." Since Quebec has lost the appetite for such referenda, only the United Kingdon remains addicted to it among developed democracies. Today in the BBC the leader of the Scottish nationalists has said that if the "in" vote wins in Scotland, and the "out" vote wins in the rest of the UK, in the soon to take place referendum on the participation of the country in the EU, then a new referendum on Scottish independence will become inevitable. My impression is that this "neverendum" dynamic will leave things more or less as they are now institutionally (whatever is the outcome of the votes), but that societies will end up more divided and pollarized, thus making the life easier for populists of the calibre of the Scottish nationalists and the UKIP. Referenda were tools adapted to the times of border instability between the two world wars in the XXth century. Even today, when they take place, they reflect disfunctional and desperate societies (the Balkans, Crimea), and are a symptom of a social illness rather than a remedy to heal the illness. Timothy Snyder explains in his book "Black Earth" (pp. 81-82) that when the Austrian government felt the pressure of Hitler just before the second world war, it called a referendum about the independence of Austria: "The days of March 9 and 10, 1938, were devoted to propaganda in favor of Austrian independence, over the radio, in the newspapers, and, following Austrian traditions, in signs painted on the streets of Vienna. The main propaganda slogan was simply Österreich -Austria." One day after, just before the referendum date, Austria had ceased to exist because the national government had decided not to resist Hitler's invasion. The next morning the "scrubbing parties" began. Members of the Austrian S.A. (one of Nazis' paramilitary bodies) "working from lists, from personal knowledge, and from the knowledge of passersby, identified Jews and forced them to kneel and clean the streets with brushes. (...) They were erasing a word that had been painted on Vienna's avenues only a few days before: "Austria." When the institutions of democracy are attacked, the attempt to restore them through sovereignty plebiscites is a symptom of weakness. Stable societies are the result of a basic consensus and international respect, of a mechanism that allows people to express their preferences through deliberative democracy: Emerson calls it "`preferendum".

How should the faculty's language skills be evaluated?

When I started studying economics as an undergraduate (I had studied history before), I was surprised by the bad language skills of economics professors (in Spanish and Catalan). Some of the best teachers in my centre had translated into Spanish a then famous economics textbook, and the translation was very bad. Both in writing in the blackboard and in speaking, I found that they made constant grammar and other mistakes. However, they were good in many other aspects: they were well organized, communicated efficiently the important concepts, and kept the tension of the students with well structured courses. Yesterday, now myself as an economics faculty member, I attended a meeting with representatives of our evaluating agency. This agency's representatives were accompanied by two foreign professors that were recruited to have an external point of view in the evaluation of the degree of internationalization of our offer. The controversy started when one of these foreign professors asked our opinion about the possibility that we, the faculty, should have our knowledge of the English language tested in a formal exam. The point is that we were trying to demonstrate that we are very internationalized because we now have students coming from all over the world and we teach many courses and entire degrees in English. Our departments now recruit internationally and one of the criteria to recruit new faculty members of course is having published and studied in English and being able to make presentations in this language. Our knowledge of English is also evaluated by the students, who are asked specific questions about this in the questionnaires they have to answer about their courses. A colleague of mine told the anecdote in this meeting that when she was studying her PhD at a famous US university, some of her colleague students complained because they had difficulties understanding an Asian professor speaking in English because his accent was unfamiliar. The direction of the centre told them to adapt to the level (or specific characteristics) of English of this professor, because he was top in the profession. What I mean by this is that yes, I believe that our knowledge of English should be evaluated (by giving a seminar in English when we are initially recruited, by students tests, supervisors' observation or other means), but that we have to be aware that language is not the only important input in good teaching. And that the priority should be to have good teachers in general, which is something multidimensional and with some difficult to measure dimensions (most of them in general positively correlated with a good command of English). I am afraid that many potentially very good faculty members would not feel very attracted by a job offer that included the obligation of passing a formal English test, after having completed a PhD in English, having written in English journal articles and coming from a professional market were basically everything today is in English, which basically is the language with the largest number of bad speakers in the world.

A muscular progressive realism that pushes outward the politics of the possible

I found a review of economists' recent contributions to the debate on inequality. The title of this post is at the end of the review article, and I though it reflects very well what many (or just some?) of us would like to see. I would like to select these few pieces, but please read the whole thing: "In the usual economic model, markets are mostly efficient. Power is not relevant, because competition will generally thwart attempts to place a thumb on the market scale. Thus if the society is becoming more unequal it must be (a favorite verb form) because skills are receiving greater rewards, and the less-skilled are necessarily left behind; or because technology is appropriately displacing workers; or because in a global market, lower-wage nations can out-compete Americans; or because deregulation makes markets more efficient, with greater rewards to winners; or because new financial instruments add such efficiency to the economy that they justify billion-dollar paydays for their inventors.

Increasingly, however, influential orthodox economists are having serious second thoughts. What if market outcomes and the very rules of the market game reflect political power, not market efficiency? Indeed, what if gross inequality is not efficient, and there is a broad zone of indeterminate income distributions consistent with strong economic performance? What if greater liberalization of financial markets produced tens of trillions of costs to the economy, benefits that are hard to discern, and billion-dollar paydays for traders that don’t comport with their contributions to general economic welfare? Evidence like this is piling up, and hard to ignore. (...) I suppose you might say we need both. The AEI-Brookings effort seems more rooted in the near-term politics of the possible, though, as noted, the several members whom I interviewed don’t believe that the current Republican Congress will touch even these toned-down ideas. The Atkinson analysis reflects a deeper understanding of the economic realities. Possibly, the AEI-Brookings effort will serve as a role model to a post–Tea Party generation of Republicans picking up the pieces from what could be a 2016 blowout, though if Trump self-destructs and Marco Rubio is the nominee, it’s a whole other story. One must also hope that the work of Atkinson, Reich, Stiglitz, Solow, and others will energize a muscular progressive realism that pushes outward the politics of the possible."

Original thinkers need breathing space

Simon Kuper, a Financial Times columnist, is among other things a sports journalist. But he also writes about other topics and interviews all sorts of personalities. In his last piece, he describes common traits of what he calls "original thinkers." Among the examples he gives, he mentions a football manager and an economics Nobel prize winner. The manager is Arsenal' Arsène Wenger, and the economist is Jean Tirole. They have in common not only that they are cosmopolitan French, but also that they value more having autonomy to work and breathe rather than money or new appointments: "As manager of Arsenal, Arsène Wenger has built a zone of autonomy unmatched in modern football. Last spring, when he was again getting hammered for not winning prizes, I spent a morning with him and realised to my surprise that he thinks he has the best job in football. Wenger would love to win but he cares more about shaping players and developing new methods. Arsenal has let him do that almost undisturbed since 1996.(...) Wenger has repeatedly turned down richer clubs. Similarly, Billy Beane, who pioneered the statistical revolution in sport, has remained general manager of the little Oakland A’s baseball club since 1997. Beane learnt his lesson as a teenager, when he accepted $125,000 to play baseball instead of going to Stanford University. He soon regretted the choice, and decided never to let money guide his decisions again. (...) Beane and Wenger (the two most interesting people I’ve met in sport) have run their clubs longer than almost any of their peers. That’s because other good performers move in pursuit of money and trophies — that is, in the hope of becoming “winners”.  And in a previous interview with Jean Tirole: "Tirole, 62, has an unusual vantage point: almost uniquely among the French elite, he isn’t in central Paris. He asks: “You know the expression ‘monter à Paris’ [broadly, ‘going up to Paris’]? For many people, Paris is what you can best do in your career.” Instead, in 1991, he left his professorship at MIT in Boston for the delightful backwater of Toulouse because his friend, the late economist Jean-Jacques Laffont, persuaded him they could make a French university department world-class. (...) But if the far-right leader Marine Le Pen becomes president in 2017, would that ruin his hopes for France? “Yes,” sighs Tirole. “It ruins the country’s image but also the country’s economics. Leaving the euro, nationalising firms, pouring more money into civil-service jobs, and stopping migrants and imports will make markets even more inefficient, will increase the public deficit, and we will lose the discipline of the euro."

Behavioral regulatory agencies

I gave a presentation on bounded rationality in policy making and how it affects regulatory agencies at the University of Paris-Dauphine on Monday. I included this in the conclusions of the draft paper (I will upload it when I have a cleaner version...):

"Regulatory agencies as institutions and the policies they implement are fragile, and their structure and powers are the outcome of a changing political game. The degree of regulatory independence and the horizontal (such as the number of agencies) and vertical (such as the allocation of responsibilities at federal or state level) structure of agencies is far from stable. They change with technology and demand (in product or in related markets, such as capital markets) and with the outcome of games played between governments, legislatures and the relevant interest groups. Non-optimizing behavior by these agents, expert biases and related de-biasing strategies, and a concern for fairness and process, modify the traditional regulatory game. The main result/message after looking at independent regulation with a behavioral lens is that on the one hand independent regulators are seen as part of a potentially more robust regulatory system, and on the other hand their contribution to this system can be based on a wider range of instruments.

Agencies need feedback, review and interaction, but they may have an advantage as a commitment device and an ongoing repository of knowledge  with an identity of public service. Delegating into an independent potentially biased regulatory agency some aspects of the policy vector must be compared to the behavioral issues raised by the alternatives to delegation to alleviate the commitment problem (for example, popular capitalism and rigid legislation may raise significant problems from the point of view of behavioral political economy).

The analysis should be directed at how to make regulation more robust. Levin and Lo look at the natural world for inspiration on the properties of regulatory systems that are the result of evolution and that reduce the fragility of organisms and their interaction in ecological systems. The analysis of the evolution of complex systems could help in suggesting traits of individuals and interactions that facilitate regulatory stability. Reform proposals should consider a limited and accountable role for experts, perhaps in the context of more realistic models of the behavior of expert technocrats and how they interact with society. The pretence of knowledge was mentioned by Hayek  as the key limitation of planning systems. After the cold war, a similar argument could be made for the limits of expert technocracies.

In a complex increasingly interconnected society, globalization and federalism should be taken into account in attempts to build more robust regulatory systems. Glaeser argues that “small scale experimentation is helpful, and federalism continues to have value in allowing for laboratories of democracy.” Aspects of regulatory governance that have little to do with technology or demand, but with perceptions, saliency and stability, may determine which is the ideal locus of regulatory authority."

A modest proposal to eradicate racism from sports stadiums

A sequence of three games between local rivals FC Barcelona and RCD Espanyol (the last of the sequence has still to take place) has triggered a variety of episodes related to violence and tribalism, to which soccer players and club officials have openly contributed. One of these episodes was fans yelling monkey noises at Neymar, the Brazilian Barça star. Neymar's team mate Gerard Piqué was quick to ask for the authorities sanctioning the fans who did that, and Espanyol club officials replied that Piqué was exagerating. As a Barça fan, some years ago I visited Barça's stadium with a French friend of mine on occasion of a game between Barcelona and Real Madrid (a "clásico"). In that game, I was very embarrassed to listen to many Barça fans yelling monkey noises to Roberto Carlos, then a Brazilian R. Madrid player. I did not know what to say to my friend. Since racism is one of the dark sides of soccer/football, and one that apparently seems difficult to eradicate, proposals to fight it should take into account the risk of hypocrisy, that is, denouncing it only when it is practiced by the rivals. I have a proposal that addresses this "blind spot:" players' associations in each country and at the international level should reach an ex-ante agreement by which local team captains will ask their team mates to abandon the pitch when they hear monkey noises against any rival team's player. Of course, the problem of the "blind spot" goes beyond racism and sports, but it is very frequent in any controversy where tribalism is involved. Some sports journalists are aware of the problem, but others (typically those that are members of some tribe) much less. For example, I have in front of me a page of a local sports newspaper I came across randomly two days ago. In it, a journalist of the public Catalan television, Xavi Torres, writes an article where he starts lecturing about "the general stupidity that invades society", referring to the danger of the Barça-Espanyol sequence contributing to it. The rest of the article is about how ethical education could contribute to reducing tensions between soccer fans and players. Surprisingly, at the end of it (an article in a local sports newspaper) the sports journalist, in a final paragraph unrelated to sports but related to the crisis of the Catalan independence movement, which he must find compatible with fighting general stupidity, he writes: (Catalan) "independence deserves any efforts that are required. No step back. We are in a hurry," The blind spot is thus a general phenomenon. I know that my proposal to eradicate racism in soccer and sports stadiums will not have much of an impact, but just in case I'll send it to one of my favourite sports journalists, and I'll discuss it with my (luckily, foreign) students in the new edition of my course on the economics of soccer that will start in little more than one week in Barcelona.

If you want to be heard, blame politicians, economists and Europe

One of the interesting aspects of the critique of Steven Durlauf and a colleague to Thomas Piketty was that the French economist jumped into the bandwagon of criticizing his own profession. Economists are one of the most impopular jobs these days, so it makes you popular to say something against them generically. There is little doubt that many economists are incompetent, but it is also true that many others are excellent scholars and that many of them try to push a social science that is more robust than other disciplines that enjoy much more popularity. A debate on how to make economics better as a scientific discipline is more than welcome, but this does not justify the kind of econo-phobia that we sometimes observe. Another variant of the same trend is to blame politicians for any bad thing. This is an old tradition; the Spanish dictator Franmcisco Franco used to say to people visiting him: "do like me, don't get involved in politics" (as my grandmother once told me). Recently, I came across an author (paradoxically, an economist) who criticized experts in general for their many mistakes, and that in a front page interview for a magazine she said that she didn't have any trust in politicians. That did not prevent her from appearing in photographs with former US president Bill Clinton or the Irish U2 singer Bono, a frequent company of some of the most powerful politicians on earth. Another sure route to fame these days in Europe is to criticize Europe itself, to dwell into the inability of the European Union to show a common strategy on a variety of things. Of course, the European Union is lacking in many aspects, but the solution to many of the current problems surely has to do with more and not less Europe. I cannot thing of a better world without good economists, good politicians and a more united Europe.

Use common sense with care

Many essays and journalistic opinion pieces are based on common sense. For example, common sense dicates that in most situations more of something good should always be positive. However, human societies are complex adaptive systems where non-linearities are pervasive, so that more of some good behaviour by individuals does not necessarily translate into a better aggregate. More use of majority rule (generally something good) may be desirable in some contexts but not in others, where more consensual or unanimous decision making processes may be desirable because of their robustness. Emerging macro behaviour is difficult to predict from individual behaviour, which is a reason why exporting institutions or policies that have worked in some context is not always a good idea. The difficulties of predicting aggregate behaviour are compounded by the fact that human individuals have several selves, that is, we behave differently depending on our mood, or depending on our time perspective, or on our role. For example, we have a set of preferences for the short run and another set of preferences for the long run (ask compulsive eaters). Or we behave with different degrees of rationality when we take decisions as consumers, as investors, as voters or... as researchers. I know of researchers who have done very serious work on social identities pointing out that narrow national identities are bad for redistributive preferences, and then I have seen the same researchers defending nationalist positions politically. In our complex reality, several selves combined with uncertainty make aggregate behaviour very difficult to predict. Another problem with common sense is the abundance of circular arguments. For example, by claiming that one country is not developing fast enough because it has "bad" institutions, is attributing causality to something that is just part of the description of the problem. Most probably, the country is not developing well AND does not have good institutions for similar underlying and difficult to observe reasons. To dig deeper into these reasons, probably we need more than common sense. We need science.