Tag Archives: institutions

Private government?

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I’d previously read about Elizabeth Anderson’s Private Government, but hadn’t actually read it until this weekend. The book consists of her two 2014 Tanner Lectures and the four responses, so is quite old. The lectures draw an analogy between public government – “the people free under the state” – and the private government workers experience when their bosses boss them in unaccountable ways. In other words, the state’s exercise of power in a democracy is justified whereas employer’s exercise of power is not. Along the way, the lectures trace the evolution of the idea of a free market as a means of exercising freedom (in the 17th century with the Levellers and the 18th with Adam Smith) to the 21st century ideology of ‘free markets’ as essentially a means of exercising corporate power.

As respondent Niko Kolodny asks, though, what’s wrong with being governed, even at work? And Tyler Cowen argues that the costs of exiting a job are relatively low – Anderson compares leaving a job as a path to freedom is like saying Italians under Mussolini were free because they could leave the country (until they couldn’t, of course). This is surely hyperbole. There are without question abusive employers of marginalised workers and it behoves those of us with good jobs to appreciate this. But an argument about employer abuses is an argument about the need for the state (public government) to do a better job with legal protections and their enforcement. For instance, governments (and the legal profession) are finally bearing down on the extensive use of NDAs; good. It is harder than it was even 10 years ago to fire an employee over their sexual preferences. People can be fired for expressing some views on social media – when these are illegal or just vile and damaging to their employer’s reputation, also good.

Anderson – whose Value in Ethics and Economics is a terrific book* – doesn’t bring in to the argument two issues that seem relevant. One is the Hirschman triptych of exit, voice and loyalty, which is a useful way of thinking about power in economic relationships and could have shed light on this context. The other is Elinor Ostrom,** whose private governance model by definition takes a form that is not arbitrary and abusive but consensual – it would have been interesting to see her design principles discussed in the context of the worker-employer relationship. The master key to governance design seems to be information asymmetries and the possibility of monitoring – I think this is why in the context of modern digital technologies we see on the one hand increased surveillance of workers in some jobs and firms, and on the other hand increased autonomy in decision-making for workers in different jobs and firms. The latter are high-trust and more productive organisations.

So I have every sympathy with Anderson’s criticism of bad workplace relationships, and the value of worker autonomy. But the lectures aren’t all that persuasive.

*I have an old copy – not sure why it’s so expensive even 2nd hand now.

**Also weirdly priced at £226.84 for the paperback on Amazon today – maybe the algorithm doesn’t like the heat?

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The Treasury View?

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Former prime minister (briefly) Liz Truss might not have been the biggest economic brain, but was she right to argue that there is such as thing as ‘the Treasury View’ and further that it hasn’t served the country well? Many people across the political spectrum would agree. I briefly worked in the Treasury many years ago and was certainly quickly socialized into certain rule-of-thumb beliefs – free trade is good, hypothecating taxes is bad, etc. I have some thoughts about how to test the Treasury View hypothesis, particularly the claim about the short-termism it imposes on economic policy. Meanwhile I’ve been reading a few books. One was Sam Beer’s old overview of how the Treasury operated in the 1950s. Another is a new book, Bankruptcy, Bubbles and Bailouts: the inside history of the Treasury since 1976, by Aeron Davis.

It was both an interesting and an incredibly frustrating read. The book draws on a series of over 50 interviews which included some absolutely key insiders – ministers and officials – and a few experienced external commentators. It would be hard to draw up a better list. However, the author has his own strong views and does not distinguish clearly between his commentary and his interviewees’ perspectives. Indeed, some of his commentary on interviewees I know strikes me as just wrong, failing to distinguish between their actions as principled civil servants serving the government of the day and their personal views about privatization or deregulation. I found myself wishing I could just read the interview transcripts instead.

It isn’t that there are no good authorial observations; on the contrary, he points out the inconsistency of globalising and deregulating the financial markets at the same time as trying to control the growth of the money supply (that was happening in my era); or that the hit to manufacturing from exchange rate appreciation in the early 80s coincided with deliberate policy actions that harmed industry and helped finance. Indeed, the main theme of the book is the financialization of the economy – although it seems to me this had as much to do with political choices as Treasury dogma. There is a particularly interesting chapter about the financial crisis and the reorganisation of financial supervision.

However, former Perm Sec Nick Macpherson is one believer in the idea of a Treasury view, setting out its key elements in a speech he gave in 2014, all centred around the asserted limits to what government can accomplish in economic policy. I think there’s still something to pursue in documenting not so much what it is as why it is, and how it lasts despite the huge changes in the economy and rapid turnover in personnel, and what the implications are for better economic management. The book is well worth reading but it is a view through a particular lens.

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UK policy co-ordination: saying no and having lunch

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I’ve been reading up about His Majesty’s Treasury, with a view to a piece of research, and this week finished Samuel Beer’s short 1956 book, Treasury Control. There’s much in it for those who believe in the existence of an age-old ‘Treasury View’. Gladstone is quoted as saying ‘the saving of candle ends’ was “very much the measure of a good Secretary of the Treasury.” Winston Churchill’s view in 1929 was that the State can as a general rule never creat additional employment was a ‘steadfast’ “orthodox Treasury view.” Beer argues the Treasury’s role is not to co-ordinate across departments, but simply to say No, and comments, “Is it not a little odd that so Gladstonian an institution as the Treasury should become the agency for guiding and controlling state intervention in the economy?” Economic policy co-ordination at that time, he reckoned, came about through Oxbridge networks and “lunch tables of the clubs of Pall Mall.”

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Models and Morals

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This has been a busy term so I’m behind on my reading, but have recently finished a fine biography, Jan Tinbergen and the Rise of Economic Expertise by Erwin Dekker. I knew little about Tinbergen so was bound to learn a lot from any biography, and this one is genuinely interesting. It has some personal detail but is much more an intellectual history, locating Tinbergen in his historical context. That was not a happy one: the Depression and the Second World War occurred in his early adulthood. The intellectual currents were, of course, fascinating. I had never realised how much Tinbergen was engaged in policy throughout his career. As well as being the founding director of the CPB (which gave me as a thank you gift for a talk a fine bronze bust of Tinbergen earlier this year now in prominent position on my shelves),  he had previously worked at the League of Nations, and continued throughout his career to be heavily engaged in policy. This followed a youth involved in idealistic progressive political movements.

To the extent economists now know anything about Tinbergen, we think of the econometric models for which his Nobel Prize was awarded. The book prompted me to read the Prize Lecture, which is very interesting: “Models constitute a framework or a skeleton and the flesh and blood will have to be added by a lot of common sense and knowledge of details.” He went on to suggest using models to compare different social orderings – communism and capitalism – on a scientific basis; it seems a forlorn hope now but evidently not in 1969. And think about the literary illustration of the equivalance of perfect markets and perfect planning in Francis Spufford’s wonderful book Red Plenty.

Dekker comments that Tinbergen found it irritating that this work from the 1930s was remembered rather than his later thinking about the institutional framework within which economies operate – the ‘Ordnung’ (the book uses the German word). I found particularly interesting a chapter titled ‘The Expert in the Model, the Economist outside the Model’, portraying Tinbergen’s effort to reconcile the fact that he had put policymakers inside his model of the how the economy operates with his simultaneous view that economists could nevertheless analyse from above  – ‘the view from nowhere’ – how the system then changes and can be controlled. The chapter uses the Lucas critique to analyse this in a macro context. It’s one of the themes of my Cogs & Monsters.

I also greatly enjoyed the chapter ‘Measuring the Unmeasurable: Welfare and Justice’. Dekker writes: “Tinbergen was mostly silent on philosophical matters. …. One of the very few exceptions are his reflections on ‘measurement in the human sciences.” He saw measurements as a vector for changing behaviour, and in addition saw the purpose of economic measurement as measurement of economic welfare. His was not a positivist view, but rather a moral one: economic policy had a deep societal purpose.

The book is quite long but the 400 pages zipped by. Tinbergen was clearly a fascinating person and deserves to be better appreciated by the Anglophone dominated economics profession. This biography serves him well.

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Discord and David Hume

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October has been whizzing past, with travel to conferences (hooray), the start of term, and a new grandson. I’ve been reading a lot of non-economics books on trains and planes, including Ai Weiwei’s compelling memoir 1000 Days of Joys and Sorrows, Red Dust by Ma Jian, and also a chunky hardback, Orhan Pamuk’s latest novel, Nights of Plague.

Another chunky hardback has been Paul Tucker’s latest, wide-ranging and erudite, book, Global Discord: Values and Power in a Fractured World Order. I must admit it took me some time to get into it, perhaps due to my general October distraction, but I’m with the programme: his aim is to bring a mash-up of David Hume and Bernard Williams to the current fraught state of geopolitics and global crises. The book uses the Humean dual of incentives and norms to think about international economic institutions in place of more traditional International Relations perspectives (realism, constructivism…). As long-time readers of this blog will know, I’m a big Hume fan (although confess to not having read Bernard WIlliams since my student days).

The motivating question is whether a legitimate international order can exist in a world transitioning out of the European/Atlantic order and facing complex existential challenges. Specifically, what international economic arrangements can co-exist with current geopolitics and shifts in power? The book starts with a historical overview of how the current arrangements and structures developed and why the growing power of China has challenged them. The second section looks at what form institutions for international co-operation can take and when/whether they can be stable and self-enforcing – Humean norms and conventions as a lens on international relations feature strongly here. Part three focuses on current tensions within and between China and the US – neither seeming particularly stable internally at the moment, never mind in terms of their mutual relations.

Part four is really the heart of the book: what does the Hume-Williams framework – what will be stable and self-enforcing in its norms, and what will be normatively right – imply for how democracies can legitimately delegate to international organisations, and how such organisations can legitimately constrain individual countries and governments? What are the principles for participation and delegation? How can practical problem solving encourage and sustain norms of behaviour (Hume)? What is its moral basis and hence legitimacy particularly in our still liberal(ish) democracies (Williams)?

The final part moves on to how to apply the framework in the current context, in terms of different more and less opti/pessi-mistic scenarios:lingering status quo, superpower struggle,  new Cold War, reshaped world order. Chapters consider different organisations – the IMF, WTO, BIS etc – getting in to how these might evolve. And the book ends with a vote for cautious optimism. (I find it hard to share that view as Brexit continues to destroy British democracy and prosperity, courtesy of the Conservative Party, I must say.)

The breadth of the research (and length of bibliography) across different disciplines is impressive. The book isn’t a light read, but worth while – and there are actually plenty of online events where Paul Tucker himself will give a better summary than I can here. For any day’s news headlines make it clear there could hardly be a more important set of questions to be resolved.

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