Wow! A scheme that will allow more people to benefit from the spoils of ever increasing gains in the housing market, even where they would ordinarily lack the capital to get financing to buy the asset.

WHAT COULD POSSIBLY GO WRONG?

The press release announcing the NewBuy Guarantee proudly boasts that it is “a scheme that will enable an estimated 100,000 prospective and existing homeowners to buy their dream home with much smaller deposits than currently required”, which could easily have been part of subprime mortgage lending literature six years ago.

Obviously Housing Minister Grant Shapps has been studying at the Allen Stanford and Bernie Madoff school of Ponzi.

It’s at times like this you need a strong opposition to point out the error of the Government’s ways. And Labour opposes the scheme… for not going far enough to make home ownership affordable. Oh, crap.

Some assorted thoughts on why yesterday’s NewBuy Guarantee announcement is a terrible idea:

• Encouraging people to over-leverage themselves is not desirable* and may actually reduce consumer expenditure (to the extent mortgage repayments crowd out current spending**).
• Certainly, it’s not clear that the scheme is unambiguously a good thing for the UK economy. I don’t know if anyone has noticed, but the housing sector is an unreliable way of boosting economic output and generating tax receipts. So much for rebalancing.
• Given the lag in home building, encouraging demand for limited housing stock will tend to increase house prices making them more unaffordable.*** And can potentially push people with 95% mortgages underwater when refinancing after fixed-rate deals end. So the policy may fail on its own terms.
• Interest rates are historically low. The impact of even modest increases in interest rates could make mortgage interest payments unaffordable for many, resulting in increased defaults and repossessions. An increase in bad debts will also put the banking sector under further strain. I can’t think what the consequences of that might be.

But obviously the government is content to use tax money to subsidise subprime lending.

Thank God they’re not also giving large, unjustifiable subsidies to social housing tenants, thereby encouraging housing market speculation and selling off housing stock at below replacement value…

*As an aside, this is inconsistent with the way the government likes to talk about the national finances where debt reduction is pursued at any cost.

** Obviously there are a lot of assumptions behind this statement, for instance the mortgage payments exceed current rental payments and savings.

*** Also, previous experience of such schemes suggests that home builders set prices of houses in the schemes artificially high.

Yet Bayesian inference suggests Radcliffe’s reasoning is flawed. The probability of a politician behaving differently when in power compared to when not isn’t decreased by his assessment of Nick Clegg’s performance. Rather the opposite. Ed Miliband may prove no better than Nick Clegg in power based on Radcliffe’s criterion.

Radcliffe also provides evidence for something I believe self-evidently true: that we shouldn’t give a toss about the political views of celebrities. That he has rubbished his own record of backing politicians does little to inspire confidence in his assessment of Ed Miliband. On the basis he is a bit crap at backing the right horse, the probability of Ed Miliband doing a good job if he wins the next election is – if anything – smaller.

Like Alan Strang in Equus, Radcliffe may just have a pathological obsession with deifying the wrong horses.

That research found that in years where there was a major football tournament which coincided with the GCSE exam period (every other year, typically) the overall exam performance dropped and this was particularly marked for males from disadvantaged backgrounds – the group most likely to be football fanatics.

The authors argue that in years where there is no tournament, the cost of leisure is lower and therefore more effort is put into revising for the exams. In turn, this raises educational attainment.

So incentives matter. Policy makers ought to give more consideration to lowering the costs to students of leisure time (or raising the benefits of studying) as a means of influencing a variable within students’ control. Effort is easier to change than cognitive ability in the short term.

The research also demonstrates our tendency to myopia: the long-run benefits of an extra couple of hours’ revision are not obvious, whereas the costs of missing a football match appear more tangible. There is a reasonable body of research which suggests that educational attainment and lifetime earnings are correlated. So to the extent being a football fan aged 16 affects exam performance, the consequences may persist throughout for a lifetime, thereby helping to sustain income inequality.

Finally, policy makers are too often focused on within-system levers. This research is a useful reminder of the importance of thinking more broadly. While persuading UEFA and FIFA to shift their multi-billion pound tournaments a few weeks may be unrealistic, it is not inconceivable that exam timetables could be constructed to avoid major sporting events. Not only would this allow 16 year old boys to enjoy the football without exams to interfere, it may also provide them with longer-lasting benefits.

The jury is out on whether improving the attainment of the England football team is quite so easy.

A 2008 paper by Dan Ariely provides another possible explanation.

First, it is not immediately clear why theft is irrational. People may shoplift because an assessment of the relative benefits and costs, which may take into account the likely punishment, and the probability of being caught, suggests there is more to gain than lose. Recent trends in items stolen during burglaries provide some evidence that burglars may be rational economic agents (just not moral ones).

Most people internalise societal norms and use these norms as a benchmark against which to judge their behaviour. In general, we’re typically averse to negatively updating our own self-image. What stops most people from following through with an otherwise rational act is a desire to preserve their self-image as an honest person – i.e. how we might be perceived as a consequence of certain actions becomes a relevant cost.

Yet, as Worrall Thompson proves, otherwise honest people still thieve.

Ariely explains this with the ‘theory of self-concept maintenance’. Ariely argues that there is a ‘magnitude-range’ of dishonesty which allows people to resolve the internal dilemma between a rational act (in this case thieving) and the impact of that act on one’s own self-image. Put simply, we’re more inclined to commit small acts of dishonesty as these don’t usually impact negatively on our self-image.

What Ariely terms ‘categorisation malleability’ also matters – we’re more likely to steal a pencil worth 50p from a friend than steal 50p from their wallet to buy a pencil. Similarly, Worrall Thompson is (arguably) more likely to steal cheese and wine than stuff his hand in the till and take money to the equivalent amount.

How can we reduce the likelihood of low-level dishonesty, such as Worrall Thompson’s?

In Ariely’s experiments, forcing students to recite as many of the Ten Commandments as they could remember prior to an exam had a statistically significant impact on the level of cheating compared to a control group.

So reminding people about their moral code is sufficient to nudge them into better behaviour. The antidote to the Worrall Thompsons of the world may be to amend self-service machine announcements so they recite the Ten Commandments, rather than telling you repeatedly that there is “an unexpected item in the bagging area”.

Perhaps a more interesting conclusion from Ariely’s work is that we should be neither surprised nor scathing about Worrall Thompson’s behaviour on the basis that (a) it is, economically speaking, rational and (b) we’ve probably done similarly dishonest things before too, but perhaps we’re just better at not being caught.*

*Of course, I’m not in any way condoning theft. Nor should this be construed as an admission of guilt.

But does displaying calorie information on menus result in more healthy meal choices? Not according to recent research from Sweden.

The results of that research, based on a field experiment in a Swedish factory restaurant, found that easily accessible nutritional information on menus does not lead to statistically significant changes in meal choice, or in average calorie consumption.

Far more important was the location of the meal on the menu – meals at the bottom of the menu were 118 times less likely to be selected than those at the top. The authors concluded that the ingredients mattered more than labelling – chicken and turkey sold more than red meat dishes or vegetarian dishes.

Yet there were limitations to the study – the restaurant chosen disproportionately served men and blue-collar workers, whose behaviour may not be representative.

Other research on food product labelling suggests nutrition information does lead to healthier meal choices. In a laboratory experiment in Switzerland, participants in the study – regular shoppers – were asked to select products from an online food catalogue for their family for a week. They were then given nutrition education and asked to reselect products from another catalogue, this time containing products with nutritional information on the front of the packaging. The labelling varied in terms of its content and style.

In that study, all labelling lead to a nutritional improvement in the shoppers’ baskets. The study found that simple information, such as red or green dots, was better than complex information, like calorie numbers.

Yet the Swiss study lacks a suitable control group: shoppers without nutritional education. More nutritional baskets may be the result of education, rather than the labelling.

More healthy people may respond more positively to signals about the nutritional content of food, because of the type of person they are or the level of health education they have received, rather than the introduction of the labelling.

What are the implications for policy makers?

First, food labelling alone is unlikely to significantly alter consumer behaviour. So don’t expect a collapse in sales of Praline Mocha with Whipped Cream.

Second, not all food labelling has the same effect. Mandatory schemes using simple cues are likely to work better than voluntary schemes where complex or confusing information is presented. Simply listing calories may therefore be pointless.

Third, health education is important. Otherwise the labelling is unlikely to be interpreted correctly.

Finally, governments may want to take menu regulation further and force restaurants to put the healthiest choices first. Of course, it’s all relative: the menu may only contain a Big Mac and a Bacon Double Cheeseburger. Don’t expect adzuki bean sprouts at McDonalds any time soon.

Reflections on the film are below, but a couple of other thoughts before that.

First, I’m upset with myself that I haven’t visited the Tricycle before, despite having lived in the area for the best part of a year. It’s a lovely space, with a smattering of kooky features (for example, the motorised washing line in the hall) and reasonable ticket prices. I understand it has been severely affected by reductions in the arts budget, which is a shame. I’m certainly intending to go more often.

Second, I was at university with Harry Lloyd, who plays a young Dennis Thatcher in the film. More than that, I worked on a production with him whilst there – a version of David Mamet’s American Buffalo (he was out front, I was doing sound design). Of all the people involved in acting whilst I was at university whom I met, he is the only one to have made a success of it since. It is rather weird seeing him on the big screen, or even on TV (he recently starred in the BBC adaptation of Great Expectations). Nonetheless, I’m pleased for him – I remember him being a thoroughly nice chap.

So what of the movie?

I made the mistake of reading a couple of reviews before I went which suggested the plot was thin (as the movie is a biopic, such criticism is slightly absurd). However, while not quite what I was expecting, I thought the screenplay was rather effective in weaving together a disparate group of events throughout Thatcher’s life: her formulative experiences in her father’s grocery shop in Grantham; selection in Dartford (and meeting Dennis); becoming an MP in Finchley; as Education Secretary in Heath’s Cabinet; battling to become leader of the Conservatives; as Prime Minister battling Trade Unions, being attacked by the IRA, going to war in the Falklands; and, ultimately, being forced from office.

Interestingly, all the reviews I read which criticised the (absence of) plot were written by men. For me, one of the strongest themes of the movie relates to feminism and the struggle of a woman against an establishment set up to frustrate her aspiration and zeal. The movie grounds Thatcher’s ambition firmly in her father’s political beliefs – that it is up to those who can do better for themselves to do so. “I’ve fought many battles” she says when discussing the Falklands war with the US Secretary of State.

Yet this ambition and drive – the very thing which propels Thatcher to Downing Street – is also her undoing. In the scenes towards the end of her tenure as Prime Minister, Streep portrays a rather manic, obsessed and aloof Thatcher, oblivious to the fact she is powerless to prevent her term as Prime Minister from ending. It is up to her husband, Denis (played by the remarkable Jim Broadbent), to let her know that the game is up.

That contrast, between a young ambitious Thatcher and one battling with the shackles of age, is also reflected in Thatcher’s relationship to her mother. A young Thatcher, on getting a telegram informing her of a place at Oxford, fails to impress her mother, whose hands are wet from washing dishes (and to which she soon returns). Later, Thatcher accepts Dennis’ marriage proposal only on the basis that he doesn’t expect her to stay at home doing the housework and rearing the children. “Life must be about more than that” says Thatcher, adding, “I don’t want to die washing the dishes”. And yet, in the very final scene of the movie, an aged, lonely Thatcher washes up her own teacup, rejecting an offer from one of her assistants to do so. She fought hard against what her mother became, but ultimately – despite everything that she achieved – couldn’t escape it completely. “I don’t recognise myself” she says at one point watching television footage of her as an old woman.

Age, and in particular the battle with dementia, is the strongest theme of the movie, and the one around which the screenplay revolves. Throughout  Thatcher battles against hallucinations of her dead husband Denis, trying to convince those around her that there is nothing wrong with her (including an amusing scene with her doctor). Yet Thatcher’s memories occupy her far more fully than her otherwise mundane existence. Her main struggle as an elderly woman is living in the present, rather than the comfort of the past.

I imagine fully that many of those going to see the movie may dislike it for one of either two reasons. Firstly, their political priors reject the portrayal of Thatcher. I found the character rather human, allowing us to understand why she fought the battles – even those well documented and about which there is much resentment – in the way she did. Secondly, releasing a biopic about a woman who is still aliv, and focusing so heavily on her most recent years makes the dementia and drinking slightly uncomfortable viewing. David Cameron may be right in saying the movie came too soon.

But if nothing else, then I’m sure the one thing which those seeing the film will likely agree on is that Meryl Streep’s portrayal of Thatcher is astonishing (amongst an incredibly talented supporting ensemble). It is worth seeing for that alone.

All three are linked to the extent they demonstrate the complexities of issues relating to race and immigration, and the fact that, collectively, we’re not fully at ease with such issues.

Bagehot used his column to contrast the differing analyses of what the Lawrence convictions meant about British society:

“…each side is talking about a different thing. Mrs Lawrence is offering an answer to the question: is race still a problem in Britain? She says, accurately, that it is. In contrast, those heaping praise on the Lawrences are addressing separate, if related questions: have public attitudes to race changed, and did the Lawrence case play a part? The answer is yes, twice over.

Caution is needed. Britons have not become swooning converts to internationalism. Transatlantic Trends, a big annual opinion poll, found the British unusually hostile to immigration in its latest survey, with 68% of Britons seeing it as more of a problem than an opportunity, far exceeding the gloom found in France, Spain, Germany, Italy or America.”

Dorian Lynskey deftly deconstructs the opportunistic outrage against Diane Abbott about her tweets this week:

“What this absurd flap demonstrates is the desperate longing of some privileged people to wear the rags of victimhood. Any whiff of black-on-white racism, like misandry and heterophobia, is an excuse for these delicate souls to downplay the dominant prejudice and argue that there is a level playing field of bigotry or, on the crazier fringes, that there is a “war” on white people/men/straight people/motorists, etc. Coming so soon after the Lawrence verdict, Abbottgate is a nasty attempt to pretend that, hey, there’s racism on both sides now. A black man gets knifed to death by a white mob; a black MP writes a carelessly worded tweet about white people. It all evens out.”

And the Economist argued against net migration caps:

“…the City can compete successfully with other financial centres only if Britain has the right policies on regulation, tax and immigration…

The British government’s own policies on tax and immigration are … doing a lot of damage.…

Tight limits on talented immigrants damage the City’s prospects—and indeed the prospects of every bit of British business.”

The government’s bizarre net migration cap policy appears unworkable*, and also does little to prevent what Amartya Sen terms ‘plural monoculturalism’:

“This government has fallen into the same trap as the previous one – it is making policies based on negative perceptions and fears rather than addressing immigration as a neutral social phenomenon that can be as beneficial or as damaging as we make it. Sadly our government has a fantasy that if it can prevent people from coming and staying here, it will solve all our social problems.”

Issues of race and immigration are vexed and this week’s events have served only to underline that fact.

What remains unclear is whether the UK will ever reach a truly settled position on race and immigration, or whether – as seems more likely – we’re fated to muddle along with the appearance of a multicultural society, but with deep-rooted racial tension simmering under its surface.

*Read Cameron’s ‘good immgration, not mass immigration’ speech to see how confused the policy is.

Should we be concerned?

As a childless single working man, I’m (unsurprisingly) less sympathetic to the plight of families squeezed by the coalition’s policy changes. While the IFS analysis may well be right in its assessment of the relative impact on incomes as a consequence of the tax and welfare changes, it completely ignores the absolute starting point. This is a presentational sleight of hand.

The reason childless single people and couples are relatively less affected by the tax and welfare changes is because, at present, they do not qualify for a range of tax credits and benefits payments available to families – for example, working child tax credit and child benefit. Childless workers face a higher effective tax rate than workers with children because they do not receive such benefits. Non-workers only pay indirect taxes. Therefore, other things equal, there is a net transfer from childless workers to families and non-workers.

This absolute disadvantage is something the IFS explicitly recognised in its initial assessment of the impact of the introduction of Universal Credit.

But by framing the impact of the policies relative to pre-change income levels, the Family and Parenting Institute can use rhetoric such as it has.

Aside from parochial considerations, the incidence of austerity measures is only interesting insomuch as it engenders a debate about the underlying priorities of the tax and welfare system. For example, is it desirable for the state to reward those who make a choice to have a child? Or, what level should such support be set at?

The answers to those sorts of questions depend on the ultimate public policy goals. For instance, if the goal is to normalise effective standards of living for all people, then maybe childless workers aren’t paying enough tax.

But I’m largely unsympathetic to the whinging of The Family and Parenting Institute (a vested interest) on the basis that I’m not clear why austerity measures should unambiguously fall on childless people. A search on its website doesn’t reveal a justification for its mission; families, apparently, are unquestionably a good thing.

According to the ‘inverted pyramid’ rule, the first paragraph of a written news story should always contain the most important, newsworthy information.

And the most important, newsworthy information about Rupert Murdoch joining a social media network?

“Twitter has added media mogul Rupert Murdoch to its ranks.”

And… that’s it.

Describing how it will meet its Public Purpose of sustaining citizenship and civil society, the BBC says it will:

“…aim to produce high-quality and distinctive journalism that meets the highest standards of accuracy, fairness and impartiality.”

Apparently that commitment to high quality and distinctive journalism is to write a ‘he says, she says’ story about a media mogul signing up for a website.

It’s a piss-poor article.

And not worthy of an organisation with the BBC’s rich journalistic heritage or £3.5bn annual revenue.

(Incidentally, the story is symptomatic of how obsessed the Beeb is with social media. What was it that David Cameron once said about too many tweets…)

For a start, our resolutions may be wrong. That is, we may make resolutions that actually reduce our happiness or be unaware of resolutions which would, if chosen, make our lives better (i.e. Rumsfeld’s unknown unknowns).

Success is hard to measure and may be binary. If our resolutions lack specificity, then how can you tell if you’ve met your resolution (what’s the KPI for “I want to be a better person”?). Equally, over-specified resolutions may become trivial.

And if we fail then it’s a whole year before we get an opportunity to try again. It’s perhaps better to make resolutions where there can be step-wise progress towards some ultimate end.

There’s also a problem of incentives. If we could rely on free will alone to deliver the resolution, then it’s not clear why you need to go through the charade of setting new year’s resolutions. Many people need harder incentives to achieve their resolutions. For example, tying the resolution to something with material value or creating credible reward/punishment mechanisms (Dan Ariely offers some thoughts on this in Predictably Irrational).

Yet, notwithstanding the practical issues, the process of appraising what we think we’d like to change about ourselves or our lives has some merit. And new year is as good a catalyst as any to get us thinking.