So, what to do in light of the deepening crisis?

First, in a recent open letter published in “The Guardian“ more than 70 researchers have argued that scientific journals ought to allow pre-registered replications (and other studies). In fact, the journals “Attention, Perception & Psychophysics”, “Perspectives on Psychological Science”, and “Social Psychology” have already launched similar projects.  The experiences so far seem promising.

Second, in the [...]]]> Yesterday I stated my understanding of the problem.

So, what to do in light of the deepening crisis?

First, in a recent open letter published in “The Guardian“ more than 70 researchers have argued that scientific journals ought to allow pre-registered replications (and other studies). In fact, the journals “Attention, Perception & Psychophysics”, “Perspectives on Psychological Science”, and “Social Psychology” have already launched similar projects.  The experiences so far seem promising.

Second, in the discussion of Ed Yong’s “Nature” news feature it was suggested (see the Lieberman and Hardwicke comments) that undergraduates ought to be enticed – maybe through a special journal for replication studies – to conduct replication studies.  This seems an idea worth pursuing.

Third, all journals ought to insist that data for studies they publish ought to be posted. This is the conclusion that Simonsohn also has come to and it makes a lot of sense (“Just Post It: The Lesson from Two Cases of Fabricated Data Detected by Statistics Alone.”) Specifically, data sets ought to be posted with the journal in which the article is published. There is an interesting issue whether, and under what circumstances, the data ought to be made accessible to other researchers, especially if a study is on-going but that issue seems a minor and solvable one. Relying on the original authors to supply data, sometimes years after the fact, is bound to be a problem for a number of reasons (moves, deteriorating hard and software, crashes, theft) all of which lead to availability attrition of data when journals do not create depositories of data.

Fourth, and relatedly, in his discussion of the Smeesters and Geraerts affairs (here), Richard Gill provides on two slides “morals of the story”. He argues that data preparation and data analysis are integral part of the experiment and that “keeping proper log-books of all steps of data preparation, manipulation, selection/exclusion of cases, makes the experiment reproducible. “ Exploratory analyses and pilot studies ought to be fully reported, as should be the complete data collection design (which, of course, should be written down in advance in detail and followed carefully). He also argues against the wide-spread division of labor where younger co-authors do much of the data – analysis. (I doubt that this latter point is implementable at this point; it’s too entrenched a practice already. It seems better to identify who did what for a project.)

Fifth, replicability relies on detailed instructions and descriptions that allow everyone, everywhere to try to replicate. That in some cases (such as Dijksterhuis’s) sufficient protocols do not exist and have to be generated years after a study has been conducted seems highly problematic.

Sixth, Simmons, Nelson, and Simonsohn (following up on an earlier indictment of practices that facilitate false positives) have provided what they call a 21-word solution for the problem. Say they: “If you determined sample size in advance, say it. If you did not drop any variables, say it. If you did not drop any conditions, say it.“ It is an interesting question whether some such statement would indeed lead to full transparency but it seems a step in the right direction.

Seventh, meta-analyses ought to be conducted more often, in particular in economics where they are still relatively rare. As Ferguson & Heene make clear (here), meta-studies are no panacea but they force some discipline on evidence evaluation.  To the extent that they would also be subjected to the “Just-Post-It” requirement that are likely to help stabilized the evidence base.

Eighth, adversarial collaborations (e.g., http://www.youtube.com/watch?v=sW5sMgGo7dw; transcript provided under the video) is a way of getting away from the trench warfare that can be found in many areas of social sciences these days. Rather than  lobbing at each other ever confirming evidence for one’s own position, the protagonists could agree on writing a joint article – possibly with a third, mutually agreed-on party  moderating – that might help settle disputes. One of the nice aspects of some such way of collaborating is the much more likely balanced assessment of what previous literature had to say.

Ninth, tournaments  are a recent, and increasingly used, tool, as Leonidas Spiliopoulos and I have demonstrated here . In our most recent version of the paper (conditionally accepted at “Psychological Methods”), we argue that tournaments are much wider applicable than we have so far seen.

Tenth,  transparency indices. RetractionWatch has proposed some such index for journals (see here)

Eleventh,  Deborah Mayo – intrigued by one of the final recommendations of the committee that investigated the Stapel affair — has argued on her blog that “the relevant basic principles of philosophy of science, methodology, ethics and statistics that enable the responsible practice of science” may well be taught by philosophy departments.  Maybe so.  It seems for sure desirable that a course addressing these issues be taught everywhere.

Any other ideas? Comments?

Class, discuss !

The mainstream economic explanation is to simply take for granted that people are rationally choosing their risks of becoming mentally unhealthy later in [...]]]> In three previous parts, I posed the puzzle of the measured increase in mental health problems (depression, anxiety, and obesity) across the Western world since the 1950s and briefly discussed the pros and cons of the main cultural explanation doing the round. Here I want to discuss the mainstream ‘economic explanation’.

The mainstream economic explanation is to simply take for granted that people are rationally choosing their risks of becoming mentally unhealthy later in life and hence that the increase in mental health problems must reflect increased benefits of those risks and reduced costs. People are then obese because they want to be obese and they are depressed and anxious because they got unlucky in that they took decisions that entailed a high risk of these problems and lost.

There is a lot to be said for this kind of brutal cost-benefit rationale.

For one, the health system has become inclusive in that many of the costs of mental health problems are borne by the community.

In 2006 for instance, I already calculated that the average obese American cost 2000 dollars more in terms of health costs than non-obese Americans and that these costs primarily came at the expense of others, ie they were not borne by the obese themselves. Furthermore, the health effects of obesity and in particular reduced length of life has since the 80s been overcome, mainly by the widespread use of statins. Hence the obese now live about as long as everybody else, a clear reduction from the point of view of the individual in terms of the negative consequences of obesity.

Similar things can be said about anxiety and depression and other mental health problems: sufferers are no longer told they are crazy and locked up, but are now much more looked after with much more resources flowing towards them. They are still not pleasant conditions to suffer from, but the private costs have clearly come down, increasing the payoff for those who would rationally take risks that might lead to depression and anxiety. Prozac and other medical interventions have made these mental health problems more bearable, thus increasing the incentives to risk them.

If you think about the direct costs and benefits, the same story emerges. The actual food costs of becoming obese has of course declined, and so has the payoff to being physically fit since less jobs than before demand physical fitness. Similarly, labour laws now make it more difficult to fire people who are depressed or anxious, and generous government welfare programs take in millions of people in these categories, effectively reducing the monetary costs on individuals and their families from these mental health problems.

Within this approach, there are a variety of multipliers that create a long-run lag between changed monetary incentives and behaviour. One of those multipliers is for instance the marriage market, which would initially penalise the few who are mentally unhealthy (a thin market problem) but in the longer run adjusts as the market is flooded by the mentally unhealthy. Similarly, adjustments in terms of the design of buildings and consumer items to cater for the mentally unhealthy (such as clothing lines for the obese or convenience outlets for those too anxious to go out in the open) take time, again creating a lag between initial changes in monetary incentives and the behaviour of whole groups.

The policy prescriptions of this mainstream economic approach to mental health is basically the exact opposite of where policy is going: from the mainstream economic perspective, one would advocate a ‘tough love’ approach to all of these diseases: one would allow health insurers to charge the obese more for their insurance; one would reduce the monetary compensation flowing to sufferers from depression and anxiety; and one would encourage the use of fitness and mental health tests as a valid selection tool for employers. The policy reality is clearly in the exact opposite direction so from a mainstream economic perspective one should expect nothing but worsening mental health outcomes in decades to come as our societies reward the mentally unhealthy more and more.

The problems with this economic approach are again in terms of plausibility and policy prescription.

In terms of plausibility, the main problem is to find some benefit to these mental health problems that makes it rational to risk them. Which choices that lead to higher risks of depression, for instance, have a possible payoff making the risk worthwhile? I dont know of any such choices, since everything that is good for economic outcomes (education, savings, fitness, mental discipline) is usually associated with lower risks of mental health rather than higher risks.

Indeed, to depict obesity as a rational choice maintained for decades by individuals is rather odd. You see, whilst life is no longer shorter for the obese, it is not pleasant either. Obesity is still associated with reduced physical fitness, reduced libido, erectile dysfunctions (particularly if lots of medicines are involved), diabetes, and social stigma. In which weird world could that be a choice that a fully rational and calculating individual would take? Not the world we live in, and the same can be said for the other mental health problems; the model of rationality simply doesn’t fit them.

The economic approach also has great difficulty rationalising the cross-sectional variation; there is for instance little reason why mental health problems should be higher in the cities than in smaller communities, why the same change in economic incentives should have played out so differently over countries, etc.. Via ad-hoc trickery one might fill in the cross-sectional puzzles, but it’s a stretch.

In terms of policy, the basic prescript of course fails the democratic test: with large proportions of the population now suffering personally or indirectly (via family members) from mental health problems, the point where politicians can advocate a tough economic line on mental health sufferers has long since past. It’s a non-flier. So from a mainstream economic perspective one would not hold out much hope for reducing the mental health decline seen in recent decades. Indeed, one would expect worse to come.

Sanna resigned from the University of Michigan in May 2012 after a University of North Carolina investigation of concerns raised by University of Pennsylvania researcher Uri Simonsohn apparently found those concerns justified. (See here for the full story and [...]]]> This may be a crisis that you have not heard about. Or maybe you have heard about some of the more egregious recent exhibits such as Sanna or Smeesters or Stapel or, possibly, Geraerts and Dijksterhuis.

Sanna resigned from the University of Michigan in May 2012 after a University of North Carolina investigation of concerns raised by University of Pennsylvania researcher Uri Simonsohn apparently found those concerns justified. (See here for the full story and here for the article describing the statistical methods that led Simonsohn to his concerns.) While the investigation results, as often in such cases, were not made public, as of today Sanna has had retracted 8 of his publications [see here for most recent RetractionWatch update on Sanna], presumably because of the odd data patterns that Simonsohn had ferreted out. (The reason for Sanna’s resignation were not made public.) Smeesters was a marketing professor at the Rotterdam School of Management. The investigation committee of Erasmus University Rotterdam found enough problems in his studies for the university to ask in June 2012 for the retraction of two of his articles [see here for the most recent RetractionWatch update on Smeesters; see also this excellent ScienceInsider article on this case].  Also in 2012, after more than a decade of outright invention of data for literally dozens of paper, Diederik Stapel (recently profiled in a lengthy piece in the New York Times) finally had his overdue downfall.  [See here for most recent RetractionWatch update on Stapel]. Geraerts (see here a good discussion of that case) has denied that she faked data but two of her co-authors have asked the editors of “Memory” to retract their names from the joint paper. The Dijksterhuis situation (for a somewhat sensationalist write-up see this newsbit in “Nature”] is different from the Stapel and Sanna cases (and possibly the Smeeters and Geraerts situations) in that Dijksterhuis has not been accused of misconduct and none of his papers had to be withdrawn although several have come under heavy attack [see a prominent example here: Shanks et al. on the priming of intelligent behaviour being an elusive phenomenon; that article triggered a sometimes vitriolic debate in the wake of a news bit in "Nature"]

Fraud and misconduct in the social sciences are hardly a novel phenomenon; just google names like Karen Ruggiero and Marc Hauser, formerly of Harvard University. As in other walks of life, it is hard to guard against the deviance evidenced in the behaviour of Ruggiero, Hauser, Sanna, Stapel, Lichtenthaler, and the likes. It is good news that people like them get ferreted out seemingly at an increasing rate. (Of course, we do not know how many like cases are out there and what the growth rate is of new cases .)

Fraud and misconduct, however, are just the tip of the proverbial iceberg that the social sciences ship seems destined to collide with. Hiding the true dimension of the underwater parts of the iceberg is what the committee investigating the Stapel affair called a culture of verification bias. To wit,

“One of the most fundamental rules of scientific research is that an investigation must be designed in such a way that facts that might refute the research hypotheses are given at least an equal chance of emerging as do facts that confirm the research hypotheses. Violations of this fundamental rule, such as continuing to repeat an experiment until it works as desired, or excluding unwelcome experimental subjects or results, inevitably tend to confirm the researcher’s research hypotheses, and essentially render the hypotheses immune to the facts. Procedures had been used in the great majority of the investigated publications that lead to what is referred to here as verification bias.” (p. 48)

The culture of verification bias leads to publication of spurious positive results that often go unchallenged because editors and journal publishers are rarely open to replications (and negative results). Ed Yong’s excellent recent news feature for Nature  reviews some of the relevant literature detailing this “pervasive bias” and quotes Ioannidis as saying that “most published research findings are false” and that across the sciences although the problem seem more severe in the softer sciences.  Fanelli (“PLoS ONE” 2010, abstract) concluded

“the odds of reporting a positive result were around 5 times higher among papers in the disciplines of Psychology and Psychiatry and Economics and Business compared to Space Science, 2.3 times higher in the domain of social sciences compared to the physical sciences, and 3.4 times higher in studies applying behavioural and social methodologies on people compared to physical and chemical studies on non-biological material.”

See also Fanelli’s related 2012 “Scientometrics” article in which he documents that negative results are disappearing from most disciplines and countries. (I will revisit this article in due course since Fanelli also has interesting things to say about the institutional drivers of these developments.)

Small studies with low power is one of the key issues feeding into these findings, as argued in a highly readable piece by Kate Button in “The Guardian” [the piece contains a link to an article by herself and others including Ioannidis], and as argued in an important Ferguson & Heene contribution to  “Perspectives on Psychological Science”.  These authors argue that small sample size undermines the reliability of neuroscience and that of psychology. The situation is likely to be similar in (experimental) economics where the median power of dictator studies (according to work in progress by one of my Ph.D. students, Le Zhang) seems to be less than 25 percent, meaning that if there are 100 true effects to be discovered studies with 25 percent power on average can be expected to discover only 25 of them. (The flipside side of this is that those small, low-powered studies that discover a true effect, are more likely to overstate the effect.)  Of course there are many other ways, some of them more consciously practiced than others, that lead to the irreproducibility of results. This is true for all laboratory social sciences.

One thing that is particularly troubling about the current controversy swirling around Dijksterhuis (and earlier the controversial studies  by Bargh and Bem discussed in Yong’s already mentioned piece) is that experimental protocols are often severely underspecified. “The scientific enterprise rests on the ability of other researchers to replicate findings,” says Joel Cooper reflecting on fraud, deceit and ethics in one of the victimized journals, and it is troublesome to find, in the discussion that followed Ed Yong’s news item in Nature, that many experimenters seem to have trouble with that concept .

The one good development is that these problems are now being discussed. Unfortunately, the fact that they are being discussed does not, as Gary Marcus seems to argue in his recent “New Yorker” piece, guarantee that effective solutions will be found; see also Bobbie Spellman’s optimistic assessment of the situation.  The game called “stabilization of the evidence base” has many players with often diverging interests  and the institutional arrangements are not engineered  by an omniscient social planner.  It is quite questionable whether in light of the ever increasing competition among researchers for grant money, recognition, and even fame,  or research-only positions science will be able to self-correct.

I shall summarize almost a dozen proposals in a sequel to this problem description.

For now, I am happy to hear comments on it.

Class, discuss !

One of the reactions (by Andrew Norton in particular) was on the important clue that we cannot see the mental health decline in happiness data. Indeed, we can hardly see any trend [...]]]> Last week, I posed the puzzle of the decline in mental health from around 1950 till now in most Western countries (with some countries showing a plateau since the 90s). I was talking in particular about the increase in depression, anxiety, and obesity.

One of the reactions (by Andrew Norton in particular) was on the important clue that we cannot see the mental health decline in happiness data. Indeed, we can hardly see any trend in longitudinal happiness within rich countries: some small ups and downs around recession times, but a basic flat line since the 1950s.

It gets worse: we dont really see any change in the distribution of happiness either. This is not what one would expect from the data on mental health decline: with perhaps 30% of the population in some form of serious mental health problem in any given year, one would expect 30% of the population to be unhappy, perhaps counter-balanced by a deliriously happy 70%. This is not true either: happiness in rich countries looks pretty much like a Bell-Curve whenever it was measured. No elongating ‘left-tail’ as far as I know.

Yet, at the individual level, those with mental problems are a lot less happy than others. Indeed, health in general is the most important of all demographic variables one normally sees in a happiness regression.

Let us first discuss the possible ‘data’ explanations which make sense of this all, many of which are yet to be empirically tested:

There is something wrong with the happiness data because of selection. We can for instance suspect that the mentally unhealthy are under-represented in happiness data and that, over time, the number of people not in the data has increasingly been made up of people too depressed to answer surveys. The problem with the suspicion is that it is probably the other way round: as far as we know, misery loves company in that people who stay in a panel for a long time tend to answer more miserably. Indeed, the prevalence of mental health problems in general surveys is large.
There is something wrong with the happiness data because people lie about their happiness. For this, we can appeal to the same ‘time in panel’ finding as above: people who answer years in a row tend to answer more miserly as time goes by, perchance because they get comfortable with the surveyor and are thus becoming more honest about their unhappiness. This possibility would of course be quite devastating for the happiness literature as it would cast doubt on the many cross-sectional surveys. One would then still need to find a reason though for why this ‘keeping up happiness appearances’ has gone up over time rather than stay constant.
There is something wrong with the health data because of exaggeration. The clear front-runner along these lines is the hypothesis that everyone with a bit of a problem nowadays gets given a label. That would rationalise why the mentally unhealthy are indeed less happy and why we get a measured increase in mental health problems. The problem with this one is both the clinical literature which purports a true increase in the number of people with serious anxiety and depression (of which there are many variants, of course), as well as the undoubted increase in obesity rates which indicate an increased inability to withstand temptations and keep up healthy food and exercise habits (aka willpower), which in turn might be caused by all kinds of factors (including increased temptation and social norms that have lessened the taboo on particular behaviour).
There is something wrong the health data because of changed expression. Here, one can think of a change in the manifestation of unhappiness and mental health problems: it would not be the case that in previous eras people were mentally healthier, but rather they were more actively hiding their mental health problems and these got channelled in different ways, perhaps more destructive ways. The person who would have been a paranoid bully in previous decades would now simply be at home on prozac, equally mentally unhealthy and unhappy but displaying that unhealthiness differently. This one is very hard to refute or verify because it relies on the possibility of any particular mental health problem being a mere ‘expression’ of underlying factors. It is not clear that is mechanically possible or plausible.
There is nothing wrong with the health and happiness data, but something else is causing both the increased mental health problems as well as some compensating factor that keeps the level of happiness constant. Stories in this direction include the notion that Western societies have seen an explosion in ‘entitlements’ and ‘optimism’. At one level both entitlements and optimism bring happiness because they reduce uncertainty and give people a warm glow in terms of happy beliefs about themselves. On the other hand, there is a sleight of hand involved in both of them in that cashing in on entitlement comes with a knock to self-esteem (sometimes it even comes with the duty to be unhealthy), and optimism comes with the mental cost of having to self-delude constantly. Both can be psychologically draining and thus lead to the bottom of the distribution succumbing to serious mental health problems more often than before. Variations on this theme include the literature on reduce ‘resilience’, the literature on increased ‘temptation’ (thank you Andreas Ortmann), the literature on reduced ‘connectedness’ (which is, after all, for many people a choice), etc. From an economic point of view, one could term all of these in the form of the availability of more psychological choices early in life, with expected value close to zero but a higher probability of derailing. With more psychological risk-taking comes a larger number of people in problems. The mental health industry then keeps the bottom of the distribution up by means of medication and therapy.

My own inclination is to think in terms of option 5: the cross-country data does appear convincing to me, particular the fact that Japan and Korea have fairly low levels of happiness but also low levels of mental health problems compared to the West. Having visited Japan, I basically believe the data on this: the Japanese are neither unhappy nor mentally unhappy. Their happiness levels are just medium but levels of real problems are low. In the West the distribution in that sense is more extreme, but the bottom is kept up by means of the health industry. This of course does still beg the question where changes in these cultural traits of ‘optimism’, ‘temptation’, ‘resilience’, ‘connectedness’, etc. come from and why you get the distribution over countries in these traits.

Which mental health problems again? Depression, anxiety, and obesity are the big growth areas. And, yes, I view obesity as a mental health problem, ie the result of a lack of willpower.

Let me give you the quick stylised facts on these arising from [...]]]> Here’s a true modern puzzle for you: why is the rate of mental health problems, including depression, anxiety, and obesity, increasing in the US, Australia, urban China, and most Western countries?

Which mental health problems again? Depression, anxiety, and obesity are the big growth areas. And, yes, I view obesity as a mental health problem, ie the result of a lack of willpower.

Let me give you the quick stylised facts on these arising from the literature.

An authoritative paper on depression in 1989 said on the increase since WWII that

“Several recent, large epidemiologic and family studies suggest important temporal changes in the rates of major depression: an increase in the rates in the cohorts born after World War II; a decrease in the age of onset with an increase in the late teenaged and early adult years; an increase between 1960 and 1975 in the rates of depression for all ages; a persistent gender effect, with the risk of depression consistently two to three times higher among women than men across all adult ages; a persistent family effect, with the risk about two to three times higher in first-degree relatives as compared with controls; and the suggestion of a narrowing of the differential risk to men and women due to a greater increase in risk of depression among young men. These trends, drawn from studies using comparable methods and modern diagnostic criteria, are evident in the United States, Sweden, Germany, Canada, and New Zealand, but not in comparable studies conducted in Korea and Puerto Rico and of Mexican Americans living in the United States. These cohort changes cannot be fully attributed to artifacts of reporting, recall, mortality, or labeling and have implications for understanding the etiology of depression and for clinical practice.”

A recent 2011 paper on the US summarises the available evidence thus:

“Almost all of the available evidence suggests a sharp rise in anxiety, depression, and mental health issues among Western youth between the early 20th century and the early 1990s. Between the early 1990s and the present, more serious problems such as suicide and depression have receded in some data sets, whereas feeling overwhelmed and reporting psychosomatic complaints have continued to increase. Other indicators, such as anxiety, have remained at historically high levels but not continued to increase. This mixed pattern of results may be rooted in the increasing use of antidepressants and therapy and the improvement in some cultural indicators. However, the incidence of youth mental health problems remains unacceptably high.

Just a few generations ago, depression and suicide were considered afflictions of middle age. However, throughout the 1960s, 1970s, and 1980s, the average age of onset for depression moved downward (Klerman & Weissman, 1989), and the suicide rate for young people (aged 15–24, per 100,000 population) skyrocketed from 5.2 in 1960 to 13.3 in 1995 (U.S. Bureau of the Census, 2011). Numerous studies reported sharp increases in the lifetime prevalence of depression, including among adolescents and young adults (e.g., Lewinsohn, Rohde, Seeley, & Fischer, 1993). Only 1%–2% of Americans born before 1915 experienced a major depressive episode during their lifetimes, even though they lived through the Great Depression and two world wars. By the 1990s, the lifetime rate of major depression was 10 times higher—between 15% and 20%. Some studies put the figure closer to 50%. (Kessler et al., 1994; Wickramaratne, Weissman, Leaf, & Holford, 1989).”

So for depression in the US, we are talking about up to 50% of the population who will experience a bout of it, a ten-fold increase from the generation born in WWI. For anxiety, studies say that some 30-50% of the current generations in the US and Europe will be affected by some anxiety disorder or another in their life, again orders of magnitude higher than two generations ago.

For obesity, the same can be said: from being a problem that afflicted a couple of percent in 1900, we are fast approaching a situation where the majority of the population in the US is obese. This is already true for the 50 to 60 years of age population and rates in other western countries are on the rise too, showing no sign of a slow-down.

The role of medicine is interesting here: the effects of anxiety and depression seem to be kept manageable by medicines preventing the sufferers from committing suicide or becoming psychotic. The effects of obesity are similarly countered by medicines, through blood thinners, bypass operations, and the like. So whilst rates of mental health problems are at an all-time historical high, medicine is successful at reducing the impact on people’s lives.

Here is the puzzle: what on earth is going on here? On any objective measure, life is better now for the vast majority of the population than ever before. People are richer, live longer, run fewer risks, are surrounded by less violence and large shocks, and essentially have less to fear and be depressed about. Indeed, people are as happy now as ever, reflecting the fact that these are good times. Why then the increase in mental health problems in societies like the US, Australia and most of Europe?

Take just the obesity puzzle: One can basically out of hand reject the excuses most individuals give for their problems as being the reason. The rate of increase rules out any reasonable role for genetics. The fact that the poor suffer more from obesity, whilst it is cheaper to eat less and whilst food has always been cheap for the rich, rules out any obvious effect of the lower price of food or the availability of fast-food. The sustained increase over a long time rules out any story depending on some major current crisis. Like it or loath it, but it is clear that one must look at ‘cultural factors’ to have a hope of understanding what is going on.

A big hint comes from cross-national differences amongst rich countries, where things like wealth and food affordability dont differ much. As you can see here, the Anglo-Saxon countries, and then particularly the US, stands out. Whilst a third of adults in the US are now obese (with about 25% of Australian adults), only 4% of Koreans and Japanese are such, and in the more egalitarian Northern European countries (Sweden, Norway, Holland) rates are below 10%. The same holds for Italy and France, though rates in those countries too are quite a bit up from what they were 50 years ago. So your one major clue is that there are major unexplained differences over countries. Similar things hold for the other mental health problems.

Which cultural factors though and what underlies changes in these cultural factors? This is a wide-open and currently empty field in health economics. Your suggestions are thus greatly appreciated in the comment boxes!

Of course, Waterhouse was just competing. [...]]]> So advertising live odds in sporting events is now banned on television. This censorship (to use the term from Crikey) was largely driven by Tom Waterhouse going over-the-top to compete. Some numbers are provided by the Australian. And while the gambling industry is also blamed by Crikey, the fact is that Waterhouse pushed the issue over the edge with his aggressive marketing.

Of course, Waterhouse was just competing. But what he “appears” to have misjudged is the public reaction to his wall-to-wall gambling promotion. Normally, his type of aggressive competition is good for customers. But gambling is an emotive area and some of his customers are ‘gambling addicts’. So the gambling industry needs to be careful in how it promotes itself. Otherwise, it is opening itself up to government intervention.

In the case of Waterhouse, the signs were there. The opposition had agreed to act:

Earlier this month, The Sunday Telegraph revealed Tony Abbott’s pledge to ban advertising promoting live betting during live sporting events if the TV industry failed to act.

And his competitors could see it coming.

So how do we analyse Waterhouse’s behaviour?

One approach is that he was playing a version of the prisoners’ dilemma. This is a simple one-shot game where each player has two strategies. One is a dominant strategy but, if all players play that strategy, they all end up worse off than if they had played the alternative strategy. The dominant strategy in the case of Waterhouse was ‘compete hard’. He did that. And now both he and his competitors are facing new restrictions on their activities.

Why didn’t Waterhouse’s rivals also compete hard? Probably because they realised that the gambling game is not one-shot. If they push the market too hard today, not only do they all undercut each others’ profit margin but they also risk the type of intervention that has now been introduced. So Waterhouse’s rivals were playing a repeated prisoners’ dilemma and avoiding ‘excessive’ competition. And when Waterhouse became a threat they immediately agreed to voluntarily limit his (and their) activities.

Michael Sullivan, chief executive of Sportingbet, said he would support a full ban for the good of the industry, and accused Tom Waterhouse of ”acting irresponsibly”.

So on this reading of the events, Waterhouse has been an over zealous youngster who has brought the wrath of government down on the gambling industry.

Perhaps.

But let’s face it; who even knew of Tom Waterhouse six months ago? Now he is front page news, and the only people who do not know about his on-line betting company live in caves. The last six months have been a masterclass in self-promotion from Mr Waterhouse. So while all the other gambling companies have been playing ‘softly softly’ to avoid government intervention, Waterhouse has played hardball. Yes, the industry is now constrained. But Waterhouse is a winner. He has taken his business from zero to a profile that his competitors can only dream of.

So Waterhouse has played the prisoners’ dilemma. He has gone from nowhere to having a viable business, riding on the fact that his rivals couldn’t afford to copy his aggressive conduct. Unlike them, Waterhouse had nothing to lose. But now he has a business. He now has an incentive to join his rivals and play ‘softly softly’ going forward. So if he knows what he is doing, expect to see a muted and responsible Tom Waterhouse in the future. But Waterhouse has played the prisoners’ dilemma over the past six months. And he won – at least until the next aggressive young entrant pulls the same stunt and draws the regulatory constraints even tighter over the gambling industry.

The easy solution—which in fact is not ruled out by the quoted policy announcement—would be for all existing baby bonus payments to stop on March 1, 2014. Rather than creating a payment cliff of $3,000 on that date, this would create an (almost) smooth gradient over 6 months starting in Sept. 2013, since the baby bonus is paid in 13 [...]]]> In the comments on my post last week about the baby bonus removal implementation, Sven Feldmann writes:

The easy solution—which in fact is not ruled out by the quoted policy announcement—would be for all existing baby bonus payments to stop on March 1, 2014. Rather than creating a payment cliff of $3,000 on that date, this would create an (almost) smooth gradient over 6 months starting in Sept. 2013, since the baby bonus is paid in 13 fortnightly instalments. Problem solved.

It is a great solution and also politically viable too as the impact of the baby bonus payments stopping would only be felt after the election. This is what a broad imagination buys with economic policy.

Blood shortages remain a large global public health concern with shortages worldwide, often severe in developing countries, and seasonal shortages remain common in many developed countries. With less than 10 percent of the population donating in developing countries, and much less in less wealthy countries, the need for increasing the blood supply remains an important public policy concern.

Institutions such as the World Health Organization [...]]]> By Robert Slonim, Professor, University of Sydney School of Economics

Blood shortages remain a large global public health concern with shortages worldwide, often severe in developing countries, and seasonal shortages remain common in many developed countries. With less than 10 percent of the population donating in developing countries, and much less in less wealthy countries, the need for increasing the blood supply remains an important public policy concern.

Institutions such as the World Health Organization and many national blood agencies have for 40 years promoted policy guidelines that oppose the use of economic incentives to attract blood donors. In an article that appears in the May 24, 2013, issue of Science, Nicola Lacetera, Mario Macis and I argue that such opposition should be reconsidered based on new evidence.

The opposition has been based in part on two empirically testable notions.  First, paying donors could undermine altruistic motivation for blood donations and result in fewer donations than a purely volunteer blood donation supply.  Second, economic incentives may attract donors with less safe blood supply, such as those with a higher incidence of Hepatitis or HIV.  Over the past 40 years many surveys and laboratory studies have found evidence that in general support these concerns.  In our paper we note, however, that this evidence comes mainly from uncontrolled studies using non-random samples, and surveys and artificial scenarios using hypothetical questions. Along with other researchers, we have been investigating whether this evidence would hold up in actual blood donation situations.

In our Science paper, we review a large body of very recent field-based evidence from large, representative samples on actual donations, and the results clearly refute the previous findings: economic rewards have a positive effect on donations, without negative consequences on the safety of the blood.  This evidence comes from the work of other researchers along with our own extensive work.  The evidence comes from studies examining the effects of actual incentives for actual blood donors in the United States, Argentina, Switzerland and Italy.  Of the 19 incentive items examined using field-based methods, 18 had a positive effect and only one (a free cholesterol test) had no effect. The incentives ranged from mostly small valued items such as t-shirts and $5 gift cards to a paid day off work. We also note that in every study that was able to observe the quality of the donation, as measured by whether donors were deferred or the blood was later rejected during safety tests, none found any significant changes in the usability of the blood. Thus, in contrast to the earlier evidence, the field-based evidence clearly indicates that economic incentives can increase the blood supply without any negative consequences for the safety of the supply.

There are many differences between the earlier approaches and the new evidence that can explain the radically different results.  For instance, in the field studies donors do not feel scrutinized by the researcher and thus might be less concerned about their image and more excited about the rewards.  Moreover, the past research often focused on getting paid cash to donate, whereas offering “gifts” such as t-shirts may be seen as a token of appreciation which can reinforce rather than undermine donors’ intrinsic motivation. Also, the rewards are typically provided for presenting at the blood drives, not for donating blood, which should reduce the risk that an ineligible donor might misrepresent health or other information.

There is a wide gulf between “paying donors,” which has been opposed by the WHO and national blood banks, and a purely voluntary donation system. Offering small gifts falls within this gap, but many other policies are also possible. We conclude in our article that “In addition to economic incentives, policy-makers should consider non-pecuniary rewards (e.g., symbolic and with social recognition) and various appeals. Debates on ethical issues around giving rewards for donations should be encouraged. But there should be little debate that the most relevant empirical evidence shows positive effects of offering economic rewards on donations.

You can read the abstract here: http://www.sciencemag.org/content/340/6135/927.summary.

To understand what really goes on at these summits, imagine yourself to be the PM of a small country that makes a lot of money by the tax avoidance activities of big companies [...]]]> As I said a few months ago, tax evasion is the big cliff in terms of the future of the EU project. It was thus fascinating to see the tax evasion games played out at the latest ‘summit’ In Brussels yesterday.

To understand what really goes on at these summits, imagine yourself to be the PM of a small country that makes a lot of money by the tax avoidance activities of big companies operating in much bigger countries. You could be the PM of Ireland, Austria, Switzerland, Luxemburg, London, Monaco, or even the Netherlands. Depending on which small country you are, the particular way you make money from tax evasion differs. The Dutch for instance make money by allowing ‘post-office’ firms which essentially make it particularly easy for foreign firms (Italian, Spanish, and Greek in particular) to be ‘international’ and to nominally park all the activities in the Netherlands that are taxed lower there (profits). London makes money by intermediating the setting up of all those ‘head offices’ in the Virgin Islands and a hundred and one other schemes. Ireland makes money by complicated off-sets to capital taxation, which is why large US companies (Google and others) have their head offices there. Switzerland and Luxemburg make money by having rich tax evaders simply hide their money in their banks. Etc.: the particular way in which your country makes money by under-cutting the big boys depends on the small country involved.

Now, of course the big boys (US, Germany, Japan, France, Italy, the European Commission, etc.) want to tax the activities of the rich individuals and companies operating on their shores. Without that taxation their governments would collapse so they are really serious about trying to reduce the degree to which their companies and rich individuals avoid national taxation. The big boys are hampered by the fact that they do want their companies to be international and sophisticated because that is needed for them to be so successful, and so the big boys can’t really do without complicated international tax arrangements, which invariably will lead to loop-holes and fudges in definitions. One should not think of this as a once-and-for-all kind of ‘finding the solutions’ problem. Rather, it is a perennial race between closing down the loop-holes and new ones opening up. To minimize the tax evasion one needs to have fast and central tax decision making to close the new loopholes. So it was, unsurprisingly, the European Council President, Van Rompuy, who dedicated the summit to tax evasion on behest of the bigger powers.

As one of the bottom-feeders of the tax avoidance inside big countries, what do you do? Well, you lie, you stall, you create confusion, and you generally try to be as uncooperative as possible without openly picking a fight with the bigger countries. Every week you delay is worth several billions. Normally speaking, stalling works beautifully. Just 5 years ago, for instance, the G20 promised the end of banking secrecy and transparency in financial arrangements, which lead to absolutely nothing in the ensuing 5 years as discussions in ‘working parties’ came to nothing. So, the tactic of bending a little on the rhetoric whilst being quietly obstructionist when it really matters has worked for you in the past.

Yesterday’s summit in Brussels showed some perfect examples of just that behaviour. For one, there was the usual tradeoff between symbolism and content: the summit produced a well-meaning declaration of intent which gave the big boys everything they wanted in terms of the things their own population wanted to hear (Merkel has to fight an election soon), but no concrete agreements on anything. Indeed, all that was decided was another meeting in December at which, maybe, things are going to be decided. Maybe GST-fraud will get tackled. Maybe the EU Commission will get involved in ousting tax evasion. Maybe, maybe, maybe. In the meantime of course, whilst the politicians of the big countries can pretend to have achieved something in their own media, you just keep cashing in. If one believes the numbers championed by the EU commissioner José Manuel Barroso, then 6 months of delay is worth 75 billion more tax evaded dollars. Not bad for an afternoon’s obfuscation, Ka-ching!

Moreover of course, the small countries all pointed to how much they wanted to cooperate if only there was agreement with everyone else on all the loopholes they benefit from. The favoured trick is to promise cooperation if people who are not in the room can be made to cooperate. Luxemburg thus said it will only cooperate if Switzerland cooperated, whilst Switzerland only wants to cooperate after Austria and all the others in the EU already cooperate (and have thus fallen away as competitors for the ‘tax haven’ position!).

So Switzerland agreed to nothing (because it wasn’t there), Ireland and the other small ones pushed for ‘agreements’ by the G20 or, better still, all the countries in the whole world, knowing full well that is not going to happen anytime soon. Indeed, Ireland’s defence against the accusation that it is being used as a tax loophole country is that its legislation (and hence its loopholes) have not changed for a long time! The Netherlands kept quiet, but silently happy that the issue of post-box companies wasn’t even conspicuously raised.

Yet, the key thing a student of politics should pick up about yesterday’s meeting was the duplicity of the UK prime-minister David Cameron. Somewhat cleverly, he is protecting the tax haven that is the city of London by seemingly being a stalwart advocate of clamping down on the kind of tax evasion you see elsewhere. A bit like a pirate of the Caribbean railing against piracy elsewhere, meanwhile giving up small stuff to protect the big stuff.

What did David do? Just look at the outcomes and storylines he managed to secure! No mention in the final communiqué about Tobin taxes, which would really hurt London. No mention of a list of ‘financial piracy countries’ such as the havens that London makes money from. And a final declaration full of intentions that wouldn’t hurt London even if they happen. Just reflect on this beauty: “At the international level, the EU will play a key role in supporting and promoting the automatic exchange of information as the new international standard”. London has little to fear from exchange of information, so that one is fine. Indeed, ousting the banking secrecy of the small countries would help London, since it has no banking secrecy laws, which means that truly axing banking secrecy would take out the competitors to London! Here’s the other clincher: the summit advocates “ongoing efforts made in the G8, G20 and OECD to develop a global standard”. How nice, the G20 again, we know how useful declarations from that one will be….

What would really hurt London is fast decision making on closing down loopholes. So the real worry for London is that tax rules would be decided centrally for all EU members, which is of course what the commission wants. On that point of course, ‘sovereignty’ is the key excuse and impassable barrier.

So well done, David Cameron! London might now almost forgive you for that referendum on EU membership that would truly threaten its position. Or was that merely a higher-order ruse to be able to keep the issue of tax sovereignty off the EU agenda? That would truly be political brilliance.

One can see the main learning challenges in Australian schools as related to the quality of what is taught, [...]]]> With the Gonski reforms expected to be rolled out across Australia in the coming 5 years, it is handy to reflect on what actually are the basic challenges for school reform in Australia. A view of the underlying issues helps one to judge the likely outcomes of the current reforms and others one might think of.

One can see the main learning challenges in Australian schools as related to the quality of what is taught, the quality of who is teaching, and the quality of the school as a whole. Three main issues then come to mind:

1. The curriculum is often too influenced by political concerns and of low quality.
2. Teachers are relatively low paid, and have seen their relative wages drop over many decades, leading to the newer cohorts of teachers to be less good as the old ones.
3. Failing schools are kept going rather than replaced, effectively leading to whole neighbourhoods being bereft of good educational opportunities.

On top of this, the sector has governance issues, like a large education bureaucracy both inside schools and outside of them, but since we are here ultimately interested in the transmission of knowledge, let us focus on the problems at the coal-face and talk about the governance issues when they arise.

Now, on point 1, I am optimistic about the role of the National Curriculum that was recently introduced. It will make it visible what the educational problems are in parts of the country, most likely will lead to a set curriculum and thus a set textbook and teaching aids for all subjects, and should hence significantly raise the bottom of the education distribution (though I don’t think it will matter for the top). Whilst one cannot really see this dynamic yet on the ground, in which schools and states are just getting used to the idea of a national curriculum, one can argue that other countries that have a national curriculum have indeed gone the way of raising the floor (NZ in particular). Given the competitive mindset of the Australians and the fact that you now get frequent international comparisons, I do expect the political pressures to accumulate to use the national curriculum to improve what is taught and how it is taught. In short, I think the signs are good in terms of addressing problem number 1.

Point 2 is a very tricky one because of the fact that we have a large stock of teachers who accept the current wages and hence would not change their behaviour if you increased their wages. This means education authorities, school principals, and ministers have a strong incentive not to raise teacher wages except for the new entrants. However, if you would cheat the stock of existing teachers and only increase wages for the new teachers, you quite understandably run into opposition from the union on equity grounds. Similarly, having schools compete for teachers by letting the good schools offer better teachers higher salaries needs active competition and would probably only happen if the private schools expand and become more academically focused (rather than focused on local networks or particular religions). In short, the pressures from within the sector don’t look like leading to higher teacher pay at all, even though it is well-recognised that better teachers are the main thing that leads to improved education.

Whilst the federal government could explicitly raise teacher wages, the current reforms do exactly the opposite: to partially fund the Gonski reforms, the government is discontinuing the current policies of paying some teachers extra, and the policies under which principals can reward good teachers (and many commentators seem not to realise that the main benefit of paying teachers more is that you attract better people into the profession). In exchange for this effective lowering of teacher pay, it seems likely that it is the already overly large education bureaucracies that will get discretion over how to spend more money, and only non-economists could believe that they are going to spend most of the money on improving education by attracting better teachers into the profession by means of higher wages, rather than to predominantly use the money to hire more and better paid bureaucrats. Indeed, even if the local education bureaucracies were far-sighted and truly interested in teaching outcomes, it makes no sense for them to individually increase teacher pay because aspiring teachers do not know where they will work and hence base their entry decision on the average pay in the whole sector, implying that it needs a central push to increase teacher pay across the board. Given that Gonski seems to imply local authorities get discretion, we are talking about a clear missed opportunity in terms of teacher pay.

The third problem is the trickiest of all and has bedeviled most education reforms and flummoxed many economists too.

The essential problem with failing schools is twofold: their initial failure leads to lock-in effects such that they become hopeless in nearly all dimensions (teaching, parents, pupils), whilst there are enormous political transaction costs in actually closing down a school. Let me expand on both.

Schools can fail for many reasons, just as a marriage can go sour for many reasons. Schools might have a particularly bad principal, have particular drug-prone and aggressive students, might suffer from parents who see the dominant culture as something to be actively resisted, have open warfare between clubs of teachers, etc.

Like a failing marriage, once a school starts to fail, the problems tend to get worse and worse. Good teachers will leave a failing school and try their luck elsewhere. Good pupils will leave to go to other schools. Active parents will similarly take their children elsewhere. So over time, a failing school gets stuck with the most demoralised and least skilled teachers, the most disruptive and dumb pupils, the least interested and least active parents, and a run-down building to boot.

Now, economists know exactly what should happen in such a case: you basically want the whole school to be disbanded. You don’t merely want new management, because new management would still inherit the disruptive culture amongst students and parents. Similarly, a small influx of better pupils or parents wouldnt help much either. No, what you want is for all the teachers, parents and pupils to have to find a better school elsewhere, cap in hand. That’s what happens in a market: what is efficient and productive survives, what is not disbands such that the individual elements can become part of successful entities elsewhere.

Why do you want to destroy the old school rather than reform it? Basically because you want to force the disruptive parents and the dispirited teachers to enter a different culture in which they are the small minority: you want the disruptive kid to go to a school where the disruptive behaviour is not merely frowned upon by teachers, but actively discouraged by the peers in the class. You want the dispirited teacher to go to a school where the other teachers are optimistic and things are run well, so that that teacher rediscovers the good parts about teaching. Etc. Effectively, you want teachers, parents, and pupils to get away from cultural lock-in effects (called peer spill-overs in the jargon of this literature).

Now, here is the rub: destroying an existing school comes with huge initial transaction costs. You force individuals to go to schools further away (a big no-no in policy land, particularly when pertaining to Aboriginal kids); you are stuck with a large expensive property unsuited for anything else; and you would have to pay out redundancy packages for the teachers and actively find places for the pupils.

It should be clear that this disruption is politically very unappealing and a nightmare administratively. So the local politicians and education bureaucrats would usually prefer to have the next generation of local children get no decent education than go through the pain of this disruption. This selfishness on the part of politicians and bureaucrats, by the way, is normal since it is the usual tradeoff between visible short-run pain versus uncertain long-term benefit. It is exactly the same when it comes to bankruptcy of large corporations: politicians don’t want to be seen to be responsible for those forms of short-run pain either.

Now, it is in this realm that the Gonski reforms will succeed or fail. The headline promise is that funding will follow students (a voucher system), which in principle means that good schools can outbid bad schools, that new schools can come in, and that bad schools can thus go bankrupt, to be replaced (potentially in the same location some time later) by good schools.

Will this really happen though, and in particular, will local education authorities allow bad schools to disappear and be displaced by (Christian) private schools or more successful public schools, as many commentators seem to hope? I have my doubts: I find it hard to imagine that local politicians and bureaucrats will not actively sabotage or try to undo any existential threat to bad schools. They simply have too much to lose politically not to engage in ‘emergency loans’, ‘visitation committees’, ‘additional resources’, etc.

I find the following quote by the teacher union ominous as to what will really happen with the Gonski reforms: ‘‘What Gonski proposed to do is not pay teachers but instead direct resources into schools to allow students who are disadvantaged, by a whole range of circumstances, to get better outcomes for education’’. My my, that sounds pretty bad, doesn’t it? The unions clearly don’t think the additional resources will go either to improve teacher pay nor to the disbanding of failing schools. They seem to hope it goes into the bottomless sink of administrators ‘helping’ failing schools.

In this respect, the post-Gonski environment will probably offer a lot of scope for fudge and for rewarding failing schools rather than killing them off. For instance, local education authorities can then easily discover a whole set of mental learning difficulties amongst the pupils of a failing school, thus allowing them to send in an army of monitors who will set ‘performance criteria’. Similarly, they can engage in the ‘let us try new management’ trick, thus ensuring not much changes in the medium run. In short, I fear that the potentially positive aspects of the Gonski reforms are easily sabotaged and that we will end up with more education administrators.

My hope is that the National Curriculum will break the political dead-lock over failing schools: that open league tables will start to make it so clear which schools are really bad, that education authorities will bite the bullet and truly let some schools go under, replaced by better ones. But I am not holding my breath on this.

In the short run however, the resources for Gonski seem partially to come from reducing teacher pay (via the axing of bonuses), which is a clear turn for the worse in terms of attracting good new teachers. Australian education just got a little dumber again.

But when will it be over?

“Outlining a plan to deliver a tiny surplus of less than $1 billion in the third year of the [...]]]> Sigh. Heavy sigh. Sometimes you have to wonder whether anyone is listening. The baby bonus will finally be scrapped with the $5000 payment (already changed to means tested and paid over time) being replaced essentially by its predecessor. The 10 year policy is over.

But when will it be over?

“Outlining a plan to deliver a tiny surplus of less than $1 billion in the third year of the budget cycle, after a larger than expected deficit nearing $20 billion for 2012/13, the Treasurer has revealed the $5000 baby bonus will be scrapped from March 1, 2014, to be replaced by a lower $2000 supplement payable only to recipients of Family Tax Benefit (A).”

In other words, if your kid is born on the 28th February 2014, you get $5000 and, if it is born one day later, you either get $2000 or nothing depending on your income. What this means is that, to the extent that scheduling birth timing is possible, parents will have a huge incentive to move their deliveries forward. You don’t want to play around with health outcomes just to implement a policy but there you go.

Is birth timing manipulable? Yes, you can plan an inducement or a caesarian although some have denied it. When there are economic incentives do parents react by changing birth timing? Yes. How do we know? Well, when the baby bonus was introduced on the 1st July 2004, the same carrot was dangled in front of parents: that time to delay births. That lead to that date having the largest number of births in recorded Australian history (which probably means, Australian history). And then again on the 1st July 2006, we saw a similar surge. This was all carefully studied, and written up in accessible form. It is literally the textbook case now of bad policy implementation. At the time, I criticised the Coalition government who continually did this of poor economic management, a term which here means doing something that you know in the face of overwhelming evidence that will create bad incentives. Sadly, in countries around the world governments have continued to implement policies that change birth timing and economists have studied their continual bad impact.

So now we have the same thing coming. It isn’t hard to imagine why. The Government knows it will impact on people’s birth timing decisions. So why is this not scrapped today? Well, there is an election coming up is the cynical response. But the real cynical timing date would be the 7th June 2014 which would mean everyone pregnant by 14th September would still be eligible for the baby bonus. As it is, you can still get the baby bonus if you conceive by the 8th June or so this year. In other words, Wayne Swan would need to be some sort of aphrodisiac because you may need to get started right away.

That aside, this is poor economic management. As I wrote 7 years ago:

Burying your head in the sand on the reality of this is not going to make good fiscal management or health economics.

I have no issues of getting rid of the baby bonus although I will note that it was claimed to be Australia’s current parental leave policy. But how you implement these things tells you about what sort of economic managers you are dealing with.

[Update: when births were delayed, birth weights went up so it was unclear that the health outcomes were necessarily poor. This time around the reverse could happen and low birth weight is not generally considered good in the short- or long-term for babies. To be sure, doctors will caution parents on this but they shouldn't be put into the position of having to tell parents why they might miss out on a significant amount of cash.]

What was memorable about the Canberra and Melbourne launches were that the hosts had read the book and [...]]]> The book launch tour of Australia ended last week with a visit to the Melbourne Institute, where Deborah Cobb-Clark kindly hosted the last in our marathon-series of 5 launches. They all were a great success, with the publisher actually running out of books for the last one and thus having to scramble for extra copies.

What was memorable about the Canberra and Melbourne launches were that the hosts had read the book and prepared lengthy speeches on it, which of course was very flattering. Andrew Leigh, who hosted the Canberra launch, already put his verdict on his own website and Adrian Pagan, co-hosting in Melbourne, kindly gave me permission to let you see what he made of it in the pdf attached (Adrian Pagan on frijters book).

Of course, neither of these two eminent economists are uncritical praisers of the book I wrote with Gigi Foster, and both speeches draw attention to elements that raised their interest and doubts. Andrew Leigh, a politician now, notes how often we make the kind of strong statements that he can no longer make! Adrian Pagan likes the importance in our work of economic linkages in the explanation of recessions, but he is not quite yet ready to accept our theory of love without a bit more humming-and-ahing. Yet, both are very supportive and complementing, whilst giving their own unique view on the endeavour. Thank you both. We hope to get similar responses in our tour of the US and Europe later this year!

Tony Abbott’s paid parental leave scheme is widely regarded as a boon for women. But will it do anything to address the larger problem of gender discrimination in the workplace? Joshua Gans says it likely will make matters worse.

Parental leave policy is back in the news. The [...]]]> Over at ABC’s The Drum today, I write about the Coalition’s parental leave plan.

Abbott’s leave scheme is a step backwards for women

Tony Abbott’s paid parental leave scheme is widely regarded as a boon for women. But will it do anything to address the larger problem of gender discrimination in the workplace? Joshua Gans says it likely will make matters worse.

Parental leave policy is back in the news. The Coalition is intending to spend billions of dollars a year on a so-called ‘generous’ parental leave scheme.

There have been debates over whether it is too much, but ultimately the issues are deeper than that. What no politician – of either side – seems to be willing to touch on is that the whole scheme likely is a massive step backwards with regard to the position of women in the workplace.

To understand this, we should remind ourselves of what the public policy issues really are here. One of the stated reasons for parental leave is to make it easier for parents to choose to take career pauses to care for children. That is, in fact, why many companies, especially larger ones, actually offer parental leave.

The rationale for government intervention in the labour market is to extend that worker’s right universally. Why? Because there is a desire to make workplaces today more family accepting and friendly. Without intervention, we get stuck in a competitive situation in which being family-friendly is costly for employers, and in a competitive market place, they can’t afford it. However, make it a regulation, and the competitive pressure goes away.

The Coalition’s plan, on the surface, is dressed up to look like it will tackle this. It will give a mother’s replacement wage to families for six months at up to $75,000 or, if the mother isn’t employed, the minimum wage. It seems hard to argue that that is bad for families who will receive that benefit. But it isn’t hard to see a problem if you look at the bigger picture of gender discrimination in the labour market.

Despite massive strides, women still fare worse than men. While starting from the same educational attainment (if not better), women’s pay is lower and they do not progress up the corporate and government hierarchies at the rate of man. It isn’t hard to think of why: women are still far, far more likely to take leave from work – paid or otherwise – when children come along. That shouldn’t harm their career prospects, but it does precisely because employer’s face costs when workers take six month or longer pauses. Those costs are real and what it means is that, at the margin, employers are more likely to hire and promote men than women. So differences persist.

Now, consider what happens when into this mix you plop the Coalition’s big incentive for women to take maternity leave. And I say it is an incentive for women because it is women who can get their replacement wage for six months. Just look at the Coalition’s policy document. This isn’t parental leave, it is maternity leave.

To be sure, somewhat grudgingly, the Coalition will allow a man to be a primary carer but he is only going to get his spouse’s replacement wage. Why? Because the Coalition throws in the breastfeeding card – something I’ll return to in a moment.

Under the Coalition’s scheme, women are more likely to take maternity leave than before; after all, that is the stated intention of the scheme. But it blasts the household bargain as to who stays home with the baby back to the 1950s. All of the incentive is for women to take six months off to get the advantage of the scheme. Employers will know this and so when they are evaluating equally qualified men and women for good jobs, it isn’t hard to see that they will have more reason to choose the man. To be sure, it isn’t as bad as some proposals that mandated employers paying for that leave, but the incentives are still there.

What we really need is parental leave. In Sweden, both parents are eligible and both can opt to take leave at the same time. And they do. There are still costs to employers, but the balance over whether it is a man or a woman going to impose those costs is dramatically shifted, reducing pressures for gender discrimination. What is more, as any parent knows, it matters to have more than one adult around with the baby. This makes it easier for everyone to cope. To be sure, both parties now advocate a couple of weeks off for daddy, but let’s face it, daddy was likely sleep deprived anyway so this is just a straight out gift to employers. The point is that you need to be stringent in ensuring that parental leave encourages just that without entrenching discriminatory roles.

And what of the breastfeeding card? Only women can do that, right? Breastfeeding can be good for children; there is evidence for that. So we want parents to have the choice. But it is at best a second-order issue and there is no evidence whatsoever that when women stay home they are more likely to breastfeed. Indeed, in my experience, breastfeeding is made much easier when both parents are around. Mummy is going to find it much easier to sit down a feed the baby when Daddy is around to take care of the dishes and laundry.

So let’s not presume that throwing money a family’s way is decisive in that equation. And, by the way, let’s calculate what that money is. If you get $75,000 from the government and feed your baby on average six times a day, that is $68 a feed. Now that is some special milk.

There are ways to overcome all of this and change the workplace culture of Australia. A few years ago I proposed that governments give businesses who have workers who take parental leave and successfully bring them back to the workplace a tax rebate on that worker’s wage. This will give businesses an incentive to change workplace practices to accommodate parents and lower labour costs rather than precisely the opposite. You can read more about that here or watch my (slightly wonkish) video exposition. It is amazing to me that the so-called employer-friendly Coalition would rather choose an expensive labour market regulation than a market-oriented policy to tackle this policy.

The essential problem is political. Politicians, especially male ones, are falling over themselves to sympathise and be seen as sensitive to issues facing mothers, but are not at all willing to lead change. Ultimately, that is what is required here.

You cannot just throw money at an issue and think you have it covered and you are being a ‘good guy.’ Instead, you have to change the attitudes entrenched in our workplace culture that makes it difficult to have families and difficult to deal with families at work. That means you have to provide leadership and as near as I can tell there is virtually none of it on this issue in Australian politics.

Joshua Gans holds the Skoll Chair in Innovation and Entrepreneurship at the University of Toronto and is a Research Fellow at the Center for Digital Business at MIT. View his full profile here.

So here are the activities that are compared:

The biggest public expenditure in Australia’s recent history is going to this. [...]]]> There is a new site doing the rounds on Facebook: howfastisthenbn.com.au. It comes the ALP and Coalition’s NBN plans and surprise-surprise, the ALP’s one is much faster.

So here are the activities that are compared:

• uploading wedding photos to Facebook
• Downloading Game of Thrones
• Uploading a new puppy video to YouTube
• Syncing engineering designs with Dropbox

The biggest public expenditure in Australia’s recent history is going to this. Please explain how any of these are remotely a public good. And yes I am including the engineering designs here. Go with the Coalition and your business is set back 8 minutes!

For the Game of Thrones one it isn’t even a private good. With ALP you can download the whole thing in 16 seconds (actually, I’m pretty sure you can’t) but with the Coalition, it takes 10 minutes. But here is the point, if you download from iTunes you can start watching right away. In other words you get NO BENEFIT from the ALP NBN. Is it no wonder we can’t find people to privately pay for this.

And on the uploading ones that can be cured tomorrow by not limiting upload limits over DSL; that is, removing the A. The whole limited upload deal demonstrates why the current proposals remain in the dark ages.

But the whole exercise is enough to convince ourselves that neither plan is worth it. Now, I don’t quite think that but I do think that the focus on speed is ludicrous.

For those who haven’t been following it, this plan which harks back to 2010 is to give mother’s six months leave at their replacement wage up to a total of $75,000. [...]]]> I just did an interview for ABC radio on the Coalition’s maternity leave plans. Yes, maternity, not parental leave. You can’t call something parental leave unless it involves both parents and two weeks token leave for Daddy doesn’t cut it.

For those who haven’t been following it, this plan which harks back to 2010 is to give mother’s six months leave at their replacement wage up to a total of $75,000. That sounds good on the surface until you think for just two seconds as to what such leave is supposed to bring: it is supposed to make the lives of women easier. To be sure, more money when you have a baby does that but what is the cost?

The cost is to blast the household bargain back decades. In the time-old decision of who gets to stay home with the baby, this plan strengthens the incentive for that to be the mother. And if it is the mother, employers know that when they employ women they are just that more likely to take time off. Yes, I know, employers ought to be a good about things but it is also true that 6 month leave intervals are disruptive to workplaces as they currently are. So unless there is some massive shift in workplace culture, this plan will entrench gender discrimination and that is not a good outcome. Read the Coalition’s policy document and you get the feeling that is precisely what they are after.

There are other options. One is to have parental leave where either parent has the right to leave. Another is to move to a situation as they have in Sweden that requires both parents to take leave. That will start to change norms but I suspect the country isn’t ready for that.

Instead, if the Coalition were really the economically responsible party, it would engage in something thoughtful, market-based and business friendly such as my plan for years ago for tax rebates for returning workers. I won’t go into details here but if you want to read more, here is my plan. And here are some video treatments.

And this doesn’t get on to the cost of the thing. It is a regressive subsidy — favouring higher income households — and it also asks those who aren’t having children or who have already had them to essentially foot the bill.

Professor Withers told the HES the main advantage would be that the government “gets the money now”. Rather than waiting for graduates to pay off some $26 billion in HECS debt — with the proceeds conservatively estimated at about $15bn, once forgone interest and non-payments had been taken into account — the government could immediately recoup $15bn in [...]]]> The ANU’s Glenn Withers has a plan to securitise HECS debt.

Professor Withers told the HES the main advantage would be that the government “gets the money now”. Rather than waiting for graduates to pay off some $26 billion in HECS debt — with the proceeds conservatively estimated at about $15bn, once forgone interest and non-payments had been taken into account — the government could immediately recoup $15bn in bonds.

The Oz asked both Stephen and myself independently what we thought and, as it turns out, much the same thing.

However, Monash University economist Stephen King said the proposal was just another form of government borrowing.

“All you’re doing is playing around with government cashflows,” he said. “It doesn’t matter where the money comes from when it’s time to pay it off.”

Professor King said the government could just as reasonably issue bonds against expected tax receipts. “You can run the argument for more funding of higher education, but accounting tricks are just accounting tricks,” he said.

The Chinese emperors hit upon this truth when they started to surround themselves with eunuchs, despised by the [...]]]> Imagine yourself to be in the mythical Land of Beyond where you need minions to do a dirty job that men with honour would refuse to do. A classic trick in this situation is to pick people despised by the rest of society who are thus dependent on protection and will simply do what is asked for.

The Chinese emperors hit upon this truth when they started to surround themselves with eunuchs, despised by the rest of Chinese society and thus fiercely loyal to their protector, the Emperor. The roman emperors, similarly, made a habit of surrounding themselves with freed slaved who were despised by other Romans, as well as by a dedicated palace guard (the Praetorians) who were the only militia allowed in the vicinity of Rome.

The European colonialists too used this basic ‘dirty dozen’ technique when it came to keeping a large population in check with minimal own presence, particularly in Africa, by elevating some small despised group (ethnic or religious minorities) as the preferred club from whom the senior administrators came. This small favoured group would get personal benefits (riches and influence) but in return they would do whatever the colonizers wanted.

To see the relevance of this for university cuts in the Land of Beyond, you first need to step back a level and imagine yourself to be the Vice Chancellor of a second-rate university that brings in, say, a billion ‘Beyond’ dollars a year out of which some 300 million is money you dont really need to generate that 1 billion. It is ‘potential profit’ if you like.

Now, your first thought will of course be to give as much of this money to yourself as you can. That is not so easy though: in Beyond, universities are non-profit organisations nominally run by senates and full of academics who like to monitor and criticise you. You would never get away with giving yourself multi-million dollar salaries and huge offices if academics are really watching your every step.

So in order to get more of the profit, you need to subdue two groups, the academics and the senate. You subdue the academics by keeping them busy with ‘compliance’ and having a lot of systems in place to punish them if they become pesky. You thus include in your rules that anything that harms the reputation of the university is a sacking offence. You put yourself at the top of the committees that decide on professorial promotions and academic bonuses so that you are their direct boss. You appoint hundreds of administrators to monitor the media, teaching, and student-related activities of the academics with the purpose of keeping them quiet and punishing them when they get out of line.
You subdue the senate by overloading them with information (for which you need again more administrators) and by keeping them happy with luxuries and gifts. Over time, you attempt to get control of the mechanism via which new members get to be in these senates.

Now, the essential problem you face in this as a VC is how to ensure that the people helping you with your take-over plans are somewhat loyal to you rather than to something as silly as the goals of the university or academia or even to the needs of Beyond. It is loyalty to yourself that you need in order to eventually be able to get away with giving yourself huge amounts of money.

You remember your history lessons and realise that what you need is a set of eunuchs: people despised by the academics in your organisation who will thus have the same incentive as you have to subdue the academics and grab as much of the university resources as possible.

What are the equivalent of eunuchs in universities? Why, non-academics of course! Better still, non-academics whom you give academic titles for they will be even more despised! Hence you pick the most efficient bullies you can find, call them all professor and put them in charge of the divisions that subdue the academics and that send mountains of information to the university senate to ensure they will just go along with whatever you happen to ask of them at the end of some sumptuous occasion.

Due to your brilliance and foresight, the trick works like a charm and you find yourself earning well over a million, with several huge offices, and in a position to bargain for even more kick-backs from outsiders who want to use parts of the university for their own end (property developers and the like).

Now imagine yourself in the layer yet higher: you are now an ambitious paymaster in the Capital of Beyond, someone who nurtures a reputation for being able to get things done even if they might not really be in Beyond’s best interests. You too have a control problem for you want all kinds of things from universities. You would like the universities to keep the population happy by churning out cheap degrees to domestics. You also want universities to sell visas to smart oversees students by means of high fees for almost no education (cross-subsidising those domestics). Basically, you want universities to abide by whatever fancy drifts into the head of your current minister.

The control problem you have as a ‘wheeling and dealing’ senior civil servant in Beyond is again those pesky academics: they are self-righteous, not all that interested in your opinion or even your money, and wouldn’t easily go along with these plans. They might well flatly refuse to sell visas to foreigners because they would baulk at short-changing the education given to those foreigners. Indeed, they would probably laugh in your face if you suggested that universities should fall in line with, say, your wish to have a campus in the middle of nowhere just because it is a marginal constituency.

Just imagine what confident academics would do if you told them to cut their budget by 900 million! Why, they might do something as bold and brash as to honestly tell their students that there are no funds to properly educate them. Imagine the political fallout of such honesty by a bunch of self-righteous academics who won’t simply do your bidding! No no, it is quite clear to you that the last people you want leading universities are academics. You want leaders who know what you really mean when you talk about ‘university accountability’, ‘stakeholder management’, ‘strategic visions’ and ‘preparing for the future’.

So the senior Beyond bureaucrat too finds herself in the situation of needing eunuchs in charge of universities. You don’t mind if they get some private benefits out of the arrangement as long as they do your bidding and not rock the boat politically.

Now think a step higher again and consider why Beyond might have fixers at the top of the ministries …..

So, who did this study that concluded that Australia would need 50 years and 114 billion dollars to build a high-speed rail line that would make travel slightly longer and more expensive than just going by air?

The report was [...]]]> In the terms of reference to the recent study into the non-viability of high-speed rail from Brisbane to Melbourne it is promised that “It will draw on expertise from the public and private sectors”.

So, who did this study that concluded that Australia would need 50 years and 114 billion dollars to build a high-speed rail line that would make travel slightly longer and more expensive than just going by air?

The report was compiled by a gravy-train made up by AECOM and its sub-consultants (Grimshaw, KPMG, SKM, ACIL Tasman, Booz & Co and Hyder), all highly-paid private consultancies. There was no noticeable involvement of the public sector at all.

What is wrong with that? Everything. Private consultancies get paid for their answers, not their honesty. Just take AECOM’s strategic vision: “Our purpose is to create, enhance and sustain the world’s built, natural and social environments”. Lovely. Its a bit cheeky of course to have entirely contradictory elements (build and natural) in your mission statement as if they are not contradictory at all, but what do you expect from consultants? Honesty?

KPMG Australia then, what about their reputation for honesty? Its stated values are of course beautiful, full of words like ‘respect’, ‘honest’, ‘community’, ‘integrity’.  But what about its history in this kind of area? Well, its 2010 report into the mining tax was a great example of being paid-for-an-answer. It was selective, made false comparisons, and uninformative. My conclusion at the time was that “The report, and in particular the summary, is indeed not an objective appraisal but a piece of propaganda that was bought for a reason.”

So, it is a bunch of paid consultants that now tell us that it would take 50 years to build a high-speed rail line (whilst the Chinese took 4 years to build a longer one between Beijing and Shanghai). And how serious are its pronouncements? Well, if you use their own disclaimer, not very much for they say in their own disclaimer “The Study Team has not verified information provided by the Information Providers (unless specifically noted otherwise) and it assumes no responsibility nor makes any representations with respect to the adequacy, accuracy or completeness of such information. ”

So, it was given a set of assumptions and information by others and takes no responsibility for checking those, meaning that its conclusions could have been pre-cooked by those ‘information providers’, including the controlling ministry. How handy! How convenient to have such non-inquisitive consultants! So much for integrity!

It is basically ridiculous to have national debates on the basis of the words of hired guns. The Australian civil service should have something like its own independent budget office with the ability to calculate the effects of major infrastructural projects, as well as major tax plans.

We now in fact have a parliamentary budget office and I hope it grows into a substantial independent body that can get us out of these consultancy-lead shadow debates.

I am here to talk about Paul’s contributions to applied theory. While Susan and Yeon-Koo have talked about theoretical contributions that so many in this room associate with Paul, to the wider profession, his main contribution is somewhat different.

Take a look My PhD advisor turns 65 today and here, at Stanford, we are having a conference in his honor. I made some remarks that I thought I’d post here.

I am here to talk about Paul’s contributions to applied theory. While Susan and Yeon-Koo have talked about theoretical contributions that so many in this room associate with Paul, to the wider profession, his main contribution is somewhat different.

Take a look here at his most highly cited work. With just a couple of exceptions, it is all applied theory. And moreover, when you look at where those citations are coming from it is not economics. It is management, strategy and finance. In other words, Paul is the most significant theorist in business and management, today, and possibly ever.

How did this happen? To give some context, there is really a schism in economics and social science in general. It surrounds the issue of complexity. There are many social scientists who think the world is too complex to make simplified theory useful. When you use specific assumptions — like rationality or expected utility or equilibrium — or more commonly in applied work, functional forms — they argue that you miss so much that what remains is useless.

Paul’s view of the world, it seems to me, is that complexity must be respected but our tools of economic theory can guide us as to their own appropriateness. In that respect, simplicity is a virtue and is manageable so long as the tools and methodology applied is understood.

Take the famous result in agency theory of Bengt and Paul’s that simple wage functions can be optimal. Everyone knew those functions were employed in practice but the ‘informal’ reaction was that it was a response to difficult of doing more, or a saving of cognitive costs or a lack of skill. Paul said no, it can’t be that. There will always be a smart agent who would improve it and then we would see heterogeneity. Instead, the complexity of the world itself would give rise to a simple response.

That is one way to read all of Paul’s work. Simplicity must be a response to the complex environment. And simple theoretical treatments can be immediately generalised if those treatments capture key trade-offs. Paul taught us where to look.

What I learned from this is that in applied theory there is a symbiotic relationship between the real world phenomenon, the formal model and its intuition. And there are feedbacks between all three in the exploration that is economic theory. I had the pleasure of observing Paul, and John, during the hey-day of their foray into organisational economics. Time and time again, they would take an individual transaction (Paul contracting with a builder, say; Paul thinking about spectrum packets; observations of a Toyota factory in Japan) and realise why existing theory just couldn’t apply. In that process, they would identify and relax the key assumption and draw new implications (the job design should change; you have to us computer technology to deal with substitutes and complements in packages; that change will be hard) and discover it in the real world. They would leave behind a framework for empirical researchers to follow and that is where all those citations come from. They seep through MBA curriculum. It is a tremendous legacy.

Not only that, Paul appears to yearn for ‘beauty’ in his theories. If it is a mess, you must be missing something. You haven’t identified the key trade-offs. These papers are beautiful. I have taken this to my own applied work. Avoid contrivance. Understand intuition. And above all, become a useful theorist. That will make theory useful.

Now for we mortals this is a challenge. Paul lights the path because it comes easily to him. I remember him lamenting to me that it took him a whole day — a whole day — to get the model right for a paper. But that doesn’t mean that we should not aspire for the same.

Applied theory is an area that continues to have issues finding its place in economic research. But Paul has, in many respects, allowed good applied theory to flourish and rise to a new standard.

In conjunction with the conference, everyone involved contributed to his Wikipedia page as a birthday gift. Suffice it to say, this was greeted with enthusiasm and it produced one of the most comprehensive entries of any economist (and perhaps the longest, in the terms of bytes, of them all). Several Nobel prize winners contributed so I think it is safe to say that quality is high. Here is Al Roth’s account.

“The average person who does regular internet activities is probably not going to notice much difference today,” Professor Tucker said. ”Where I think it will make a difference is in small businesses.”

Independent telecommunications analyst Paul Budde said right now only about 5 per cent of people, mainly small businesses, would be able to make use of [...]]]> From The Age, the NBN will be getting to 1Gbps. That’s good but …

“The average person who does regular internet activities is probably not going to notice much difference today,” Professor Tucker said. ”Where I think it will make a difference is in small businesses.”

Independent telecommunications analyst Paul Budde said right now only about 5 per cent of people, mainly small businesses, would be able to make use of the increased speed.

This from top supporters of the current NBN.

So why not just do FTTH for small businesses? Why does it have to be rolled out at public cost to everyone?

In the year Margaret Thatcher became PM, The mythology is that Thatcher came, saw, and conquered. Her enemies credit her with destroying the public sector by privatizations. Her friends credit her with the same, but also say she championed frugal spending and was fierce when it came to British independence. She supposedly single-handed turned England around from the brink of disaster and the Winter of Discontent. The reality? Well, the reality is somewhat different….

In the year Margaret Thatcher became PM, government revenue was around 34% of GDP. When the conservatives finally left office at the end of the 1990s it was a bit higher at 36% and today it is… again, about 36%. Government spending at the peak of the recession of the early 80s was 47% of GDP and  …. so it was again in 2009 at the peak of the current recession.

Real GDP growth per person from the first quarter in 1970 to the first in 1980 was around 25%. From the first quarter in 1980 to 1990 it was around 32% (and the next decade 26%). Not so different from Germany.

In terms of major events that politicians can truly influence that came up in her time, the first one that comes to mind is the housing bubble that the UK government allowed to build up and that burst at the end of the 1980s, leaving households in negative equity and devastating the country as much as any Winter ever did. The second one that comes to mind is the Single European Act of 1986, proposed by Lord Cockfield (British) and helped through parliament by Thatcher’s massive conservative majority, giving European laws reached by qualified majority precedence over those of the UK. This greatly expanded the powers of the EU and diminished those of Britain. It was one of the biggest reductions in UK’s parliamentary powers in its history. No wonder Thatcher tried to disown it later when ex-post rationalizing her reign to fit her image, essentially by pretending to have been too stupid to see what she was pushing through parliament. A weird defense from an ‘Iron Lady’!

And if you believe her favourite minister’s autobiography (John Major, who went on himself to be PM for 7 years), then Thatcher was pushed by her cabinet to declare war on the Argentineans, changed her mind frequently on important issues, and had gone control-freak to the point of paranoia by the time of her demise.

So the overall legacy of Margaret Thatcher has been to make no basic difference to the spending or revenue of the state, to have bankrupted many small house owners by having too low interest rates for too long, and to have signed over a lot of powers to Europe. So she neither destroyed the public sector, nor was she truly frugal, nor was she immovable, nor did she protect British powers.

Summing up her time, she resided over an average economic period, made serious mistakes, and essentially went with the flow of her party and the times. A normal reign. What was truly unusual about her was her style: people were and are passionately for her or against her.

So the reality simply does not measure up to either the picture that her enemies paint nor that of her supporters. The consumers of Thatcherism are the consumers of exaggerations.

But what about her facing down of the unions, I hear you ask? The halving of union membership, the demise of Arthur Scargill and the return to mass private share ownership? Was that not a real change in the destiny of the UK?

I am glad you ask about that one. Yes, the unions lost a lot of influence during Thatcher’s time. But what filled the void of these public sector and manufacturing-based unions? The small entrepreneurs she so admired and that were part of her own family history? Fat chance! In effect, what replaced the manufacturing unions were the financial unions: with the demise of the role and power of industry came the rise of London as a financial capital, fueled by foreign money and foreign workers, making manufacturing uncompetitive and greatly increasing the power and influence of the financial executives.

So yes, sandwiches at number 10 by hairy smelly men with strong regional accents were no more after Thatcher. They have been replaced by well-coifed corporate men smelling of roses, with impeccable French and German English accents, coming for caviar on toast. To paraphrase the Italians: everything had to change so that nothing would change!