Saturday, November 18, 2017

Academics or activists

Academics are professionals whose job is teaching and doing research. Their teaching and their research is evaluated ideally using objective high standards. Of course, academics, as well as citizens in other professions or without a clear profession, are entitled to their political opinions, like the author of this blog. However, academics in the field of social sciences are often in demand to produce opinions that are sold as scientific truths. There are some problems with this. Quite often, the same individual that uses very qualified and careful terms in a scholarly article on some topic, exudes self-confidence and even arrogance when addressing the same topic in some format addressed to the political arena. Probably the most well-known case in history, at least in economics, is the support of many members of the Chicago School to the Pinochet military dictatorship in Chile. Authors who had top scientific articles on macroeconomics and microeconomics gave their full support to a bloody regime that violated all basic human rights. Of course, they could not publish any article defending the Pinochet regime with the same clarity as they supported it in real life. The problem arises when academic institutions create debate platforms where they encourage academics to express their political opinions. This has been made easier with the Internet and social networks. For example, a few days ago, an on-line platform of a well known higher education international institution contained an opinion piece by a Catalan pro-independence academic where he defended the argument that the current problems in Catalonia and Spain where caused by the "failure of Spanish federalism". Of course, the very imperfect quasi-federal system of Spain has many problems. Actually, many people like myself defend reforming it not to become less, but more federal. But it seems difficult to attribute responsibility for the current constitutional crisis to federalism, when the instability and aggressivity of the attack to the democratic rule of law by a pro-secession regional government has triggered the decision of more than 2000 large firms to move their headquarters, the opposition of all European leaders and institutions, and a serious threat to social cohesion. The period of quasi-federalism and decentralization between 1980 and at least 2006, although it could have been managed much better, has been the period of higher freedom, welfare and self-government in the history of Catalonia. It is impossible that the same author would have published a similar article in a scholarly journal. This is his opinion, which he holds not because he has reached it by using the scientific method, but just because his identity politics and ideology determines that he has this opinion. The same mechanism affects academics, sports players, clowns and anyone else.

Wednesday, November 15, 2017

Thomas Piketty and Simon Kuper write about Catalonia

Two authors I follow have recently written interesting pieces about Catalonia. Simon Kuper, the sports (and more) journalist of the Financial Times, writes about "Us and them: Catalonia and the problem with separatism." I am afraid it is not always easy to access an article at the FT, so here it goes an extensive quote (I hope this is not illegal...): "I’m a fan of Catalonia but Catalan separatists are separating people. Their slogans say, “Spain steals from us!” or “Catalonia is not Spain”. Rhetoric like this divides people into opposite groups, each with a single identity: us (Catalans) and them (Spaniards). You must be one thing or the other. The government in Madrid unintentionally sharpens this divide by imposing direct rule on Catalonia.Someone else who thinks in terms of single identity is Donald Trump. As he tells it, you’re American or Muslim; you’re a real American or a liberal elitist. There’s an uncomplicated joy to single identity: find your essence, then taunt an enemy who doesn’t share it. And along with your identity comes a free set of opinions that you never need to test against reality (...)." After arguing in favour of the diversity of identities promoted by economist Amartya Sen in his book on this topic, Kuper finishes his article like this: "If you want to persuade people who don’t share your one particular identity, you need to appeal to some of our shared identities. Lilla writes: “I am not a black male motorist . . . All the more reason, then, that I need some way to identify with one if I am going to be affected by his experience . . . The more the differences between us are emphasised, the less likely I will be to feel outrage at his mistreatment.”The economist Branko Milanovic recently described what he learnt from the bloody break-up of his native Yugoslavia: “Be considerate. Think of people as persons. And do not impute to them opinions just because of their nationality.” It’s handy advice for today’s fragile societies such as India, the US and Spain." Thomas Piketty has a blog post where he brilliantly addresses the taxation implications of separatism in the context of the process of European integration: "Europe also bears a great deal of responsibility in this crisis. Apart from the catastrophic management of the crisis in the Euro zone, in particular at the expense of Spain, for decades now Europe has been promoting a model of civilisation based on the idea that it is possible to have everything at the same time: integration in a large European and world market, without any real obligation for ensuring fiscal solidarity and the financing of the public good. In these circumstances, why not try one’s luck by making Catalonia a tax haven along the lines of Luxembourg? To be sure, there is a federal European budget but it is very small. Above all, it should logically be based on those who benefit most from economic integration, with a common European tax on corporate profits and the highest incomes, as is the case in the United States (one could also endeavour to do better, but we are far from this). It is only by ensuring that solidarity and fiscal justice are at long last central to its practices that Europe will successfully tackle separatisms."

Sunday, November 12, 2017

The British federalists deserve more attention

While the UK is slowly declining and under the risk of isolation after a hard Brexit, many realise that they should have paid more attention to their own federalist tradition. One of the heirs of this tradition, Brendan Donnelly, recently published an article arguing that Brexit will be an absolute disaster. Here's what he says:
"It would be a bold person who would predict with certainty whether Brexit will occur on its appointed date in March 2019. Much has been made of issues relating to the revocability or otherwise of the Article 50 notification, to the desirability or otherwise of a second British referendum on the terms of Brexit and to possible reconfiguration of the British party political system. Whether Brexit occurs or not resolves itself in the last analysis into a simple question. As the negative consequences of Brexit unfold and become more manifest, will there be enough MPs from a range of parties with the courage and conviction to stop it?
So far, this is emphatically not the case. Despite its spectacular incompetence and bad faith, the present Conservative government still determines the Brexit discussion in the UK. It is however entirely possible that changing public opinion will interact over the coming months with latent (and not so latent) concerns among many MPs to produce a substantial majority hostile to the only kind of Brexit which can realistically be achieved. If that is so, questions about the revocation of Article 50, a second referendum and new political parties will fall into their as yet unpredictable place. It would be a stupendous but entirely conceivable irony if next year’s robust assertion of British Parliamentary sovereignty was not to embrace Brexit as a resumption of “control” but rather roundly to reject the whole Brexit chimaera."
Brendan Donnelly belongs to the Think Tank The Federal Trust and to a tradition that was pioneered decades ago by Lionel Robbins, William Beveridge and other great British personalities of different ideologies. This British tradition is unfortunately not known enough, but it was very influential in European federalism, for example through the Italian communist Altiero Spinelli. Their ideas are today being promoted among others by Will Hutton, Timothy Garton Ash and many centrist and labour individuals that believe that citizen control can only be exercised when it is effectively shared with others.

Saturday, November 11, 2017

A taxonomy of "good and bad" regulatory biases

In the context of the holdup problem in regulation (the regulator facing incentives to hold up the sunk assets of the firm), I can see from my current research that potential departures from the traditional assumption of rationality in regulators of network industries (or other similar) can be classified in three categories:
-Satisficing behavior or similar departures from standard preference or social welfare maximization: regulators have been observed to try to avoid problems and keep a low profile (minimal sqwak behavior, omission bias). Similarly, their behavior seems to differ depending on age or professional background. There is also a literature on the impact on decision-makers of apparently irrelevant factors such as mood, hunger or similar.
-Expert Bias: regulators are not immune from some psychological biases like availability bias or confirmation bias or herd behavior (for example, in sports referees). There is a corresponding literature on de-biasing mechanisms or factors that contribute to diminish the influence of behavioral anomalies (like technology or monetary incentives).
-Process: one of the findings of behavioral economics is that individuals care not only about outcomes, but also about processes. That opens up a new set of policy tools for regulators and regulatory institutions. Reforms or policies are better accepted when they are “owned” by citizens, rather than imposed from external forces, as shown in experiments. The Acceptability/Legitimacy of regulatory decisions that may be vulnerable to populist pressure depends then on narratives or “stories,” as argued by Akerlof. The endogeneity of preferences and social norms matters for the success of efficient reforms and policies.
Knowing better and taking into account these phenomena may help design or nudge institutions to make them more effective and robust.

Sunday, November 5, 2017

The illusion of control

The pro-business center-right Catalan leader who started the current drive for independence, Artur Mas, expected to extract an electoral gain from a snap election in 2012 just by hinting at a possible and ambiguous call for an independent state. He did not obtain as many gains as expected in that snap election, but five years from then, the campaign he started has created instability in a European democracy, which now has even been exported to another one, Belgium. In the meantime, more than 2000 companies have moved their legal headquarters out of Catalonia, and the region has lost temporarily its institutions of self-government. What better exemple of the illusion of control can we find? This illusion is frequent when we believe we can choose outcomes, instead of strategies or actions, and when we neglect the influence of chance events and the decisions taken by others on our own decisions. National-populists accompany their illusion of control with the claim that they want to take back control, only to realize that in a globalized world this is not completely in their hands. In nationalist conflicts, what initially seems nice and even fun, can very soon follow a slippery slope. A video by Stephen Colbert in a US TV network has shown to many the potential for simplification of nationalist controversies. I wonder if Colbert had so much fun with the problems of the former Yugslavia before the eruption of the Balkan wars. The video repeats many of the post-truths (taking part of the truth and manipulating it) of nationalism:
-It is true that an elected government is partly in jail, but that is because a judge has ruled that before a trial where they will be judged for breaking the law there is a risk of evasion (the president has gone to Belgium) and they may destroy evidence. I would have preferred that they were not arrested, but I guess that if Trump or a state governor in the US breaks the law something will have to be done with them.
-Actually Catalonia is not overtaxed as Colbert says, any more than California is overtaxed (they are rich societies that contribute into an improvable progressive tax system).
-Comparing Catalonia in 2017 with the US in the late XVIII century...
-Franco did suppress the Catalan language, but also many other things in the whole Spain, like other languages and freedoms. Many Catalans, like my grandfather, fought with Franco. The Civil War and Francoism were not Spain vs Catalonia, but fascists Spaniards and Catalans against democratic Spaniards and Catalans.
-Catalans do not pronounce Barcelona in one way and Spaniards in another, but more than half of Catalans have Spanish as first language (not my case) and pronounce Barcelona the same way as people in Madrid.
As you reader can see, things are more complex than TV talk shows would like, and we Catalan federalists have a very hard battle...
I know that some people in the US know much better than this, like Roger Cohen of the New York Times. It is not me, it is American historian Timothy Snyder who says that post-truth is pre-fascism.

Wednesday, November 1, 2017

The problems of national-populism with justice

It has been a coincidence that more or less the same days that the Mueller's investigation gets closer to Donald Trump's inner circle, the Spanish justice has called former Catalan president Puigdemont for interrogation. In normal times, with normal political leaders, politicians do not have problems with justice, except perhaps for sexual scandals or corruption allegations. But the problems of Trump and Puigdemont are of a different nature, they have to do with the lack of respect of these leaders for the regular democratic process. A characteristic they share with other national-populists is their institutional relativism. They seem uncomfortable with the division of powers between the judiciary, the executive and the legislative branches of government. They do not seem to understand that democracy requires rules, constraints, checks and balances. The Catalan secessionist movement had planned to declare independence after a referendum organized by themselves, without bothering first to reform the Spanish Constitution that prohibits it (as these things are prohibited in almost all democracies in the world). In the pretend legislation that accompanied their fake self-determination attempt, they had passed a provisional Constitution (with the votes of half of the members of a regional Parliament representing less than half of the regional voters) that subordinated the judicial branch to the executive branch, in practice trying to eliminate the independence of justice. As the circus of Mr. Puigdemont has moved to Brussels (let's leave the word exile for those who really suffered it under tragic circumstances), the international media have now a clearer idea of the conception of justice of the Catalan national-populists. As an expert has told The Guardian in a useful article, “you have two competing visions of democracy that we see replicated across the west. One is a so-called plebiscite, people’s will democracy against a pluralistic, institutional and rule of law democracy. The current leaders of the secessionist camp have been arguing that they represent the people of Catalonia but they only represent a part of it.”

Sunday, October 29, 2017

Federalism by mistake?

Political scientist Daniel Tresiman argues in a new academic article that in transitions to democracy "influential theories contend that incumbents deliberately choose to share or surrender power. They do so to prevent revolution, motivate citizens to fight wars, incentivize governments to provide public goods, outbid elite rivals, or limit factional violence." Examining the history of all democratizations since 1800, however, he shows that such deliberate choice arguments may help explain only up to one third of cases. "In about two thirds, democratization occurred not because incumbent elites chose it but because, in trying to prevent it, they made mistakes that weakened their hold on power. Common mistakes include: calling elections or starting military conflicts, only to lose them; ignoring popular unrest and being overthrown; initiating limited reforms that get out of hand; and selecting a covert democrat as leader. These mistakes reflect well-known cognitive biases such as overconfidence and the illusion of control." Although the methodology used by Treisman is open to discussion (trying to put into conceptual boxes more than one hundred stories), the conclusions are suggestive and surely at least part of the explanation. The same explanations might be applied to attempts to change the course of history through sovereignty conflicts. Both in the Brexit process and in the Catalan independence movement we have seen a lot of hubrys from leaders. Overconfidence and the illusion of control from David Cameron or Artur Mas have led their societies to be guided by movements that escaped from their hands. They called referenda or elections that went not as expected. Other leaders or the same ones made overoptimistic claims (from their perspective) that were not confirmed by experience. Nationalist leaders claimed that they would take back control (what better example of the "illusion of control"). The book "The Ostrich Paradox" explains how badly we are prepared for disasters due to among other psychological biases, overoptimism. Many that are not nationalists (myself included) have also behaved like ostriches, by not acknowledging the seriousness of what was happening around us. However, the world, or at least Europe, will evolve with all our mistakes in a reality that is globalized and interconnected. This world will select those governing institutions that are fitter for survival. Will we stumble into federalism?