The Filter^

Corporate Manslaughter

When negligence on the part of private sector companies leads to deaths, we tend to see prosecutions. So surely the same should apply in the public sector? Consider the case of Hatfield, where senior executives were cleared, but note that they were charged.

Under existing law, a company can only be convicted of corporate manslaughter if a senior individual in that company is guilty of "gross negligence manslaughter".

This Radio 4 show reveals:

Over three hundred people are killed each year as a result of corporate negligence, yet only three company directors have ever been successfully prosecuted for corporate manslaughter.

Here's Labour MP Peter Dismore:

Mr Dismore told the BBC: "It is only by putting the senior people in court that they will take safety seriously.

"They should have imprisonment and heavy fines and the courts must have the power to make companies put right the failings that caused the accident in the first place, again backed by very severe penalties if they don't."

The BBC is hot on this, see here and here for other stories. But how many politicians have even been charged (let alone prosecuted) for manslaughter?

The state of manufacturing in the UK

Further to my recent article on the state of manufacturing, Tim Leung's "Economy class" column in Prospect makes a similar point. First off the crude facts:

The number of manufacturing workers has fallen from 6.5m to 2.5m over this period [1980-2010]

But hang on a minute...

overall manufacturing output is around 70 per cent higher than it was in 1980

What explains this? Well, economic growth and productivity. Leung points out that we reach satiation for manufactured goods quicker than for services (e.g. as we get wealthier having another washing machine is less important than having another holiday). He claims that:

Just as agriculture falls as a share of the economy when nations progress from being underdeveloped to developed, so manufacturing's share of the eocnomy falls as a nation moves from being developed to being affluent

Ignoring the methodologial individualism concerns, it's a point well made. He points out that Britain is the sixth larget global manufacturer, with around the same level as France or the US (relative to GDP). But he goes on to suggest the downside risks of being dependent on manufacturing:

1. The rise of China as a serious competitor
2. The fact that most value is passed on as consumer, not producer surplus
3. The fact that it's more volatile than service output in the wake of recessions

Well worth a read.

Ending the "big four"?

I've just seen that Lisa Buckingham has written about the "big four" accountancy firms. In the policy report that I submitted to the FRC in May 2006(.pdf), I said:

the notion of a “Big Four” is a mirage; and ... the audit market is
competitive (regardless of concentration or switching rates). Despite this the paper
suggests broad institutional reforms that could make the market function more
smoothly: permit cross-ownership; reduce the geographical basis of regulation;
relocate the burden of large-scale risk; and pursue measures to get company
information into the public realm.

Don't forget, it wasn't long since people thought the Premiership had a "big four". Look how that's turned out...

MTV Cribs

Back when I was a grad student I wanted to film an "MTV Cribs" mockup of my apartment. I wrote out some of the script, imaginning how hilarious it would be to talk about the "rims" of my 5 speed bicycle, show my collection of Mises books, and open my fridge to reveal a cache of Nat Ice.

Well, I never got round to it. But Bob Frank did:

 

More on Comparative Advantage

I'm enamoured with Matt Ridley's exposition, but consider an alternative:

-- It takes Og 3 hours to catch a fish and would take 4 hours for him to gather some fruit,

-- While it only takes Iga 1 hour to catch a fish, and 2 hours to gather some fruit

Q1: Who has a comparative advantage in fish, who has a comparative advantage in fruit?
Q2: Are there any gains from trade?
Q3: Does this example disprove the Ricardian model?

Smoking ban - tracing the unintended consequences

See the Boston Globe, (via Tyler Cowen)

A rigorous statistical examination has found that smoking bans increase drunken-driving fatalities... jurisdictions with smoking bans often border jurisdictions without bans, and some bars may skirt the ban, so that smokers can bypass the ban with extra driving... The authors estimate that smoking bans increase fatal drunken-driving accidents by about 13 percent, or about 2.5 such accidents per year for a typical county.

Scenario training

As part of one of my courses I lead a workshop on "scenario building" - an established management technique that has immense parallels with Austrian economics. Here's an interesting post by Bryan Caplan describing Tetlock's use of scenarios with politicians. The problem is that scenarios are not a method for assigning probabilities - they're a tool for imagining and preparing for radically (i.e. "Knightian") uncertain events. I can't tell if the problem lies in Tetlock's study or Caplan's interpratation, but is a classic example of ships passing in the night.

See also The Economist, here and here.

Bertha

Bertha was definately one of my favourite TV shows growing up. I've been trying to rationalise that, and I'll make two points

1. Was this the first Indian as a regular character on a TV show? (i.e. even before Apu?)
2. Bertha presents the neoclasical view of capital equipment - that is is homogenous. Each week the factory produces a different product, and all they need to do is reprogram "Bertha" for it to produce it. In reality - ans even as a small child - I understood that this isn't realistic. The raw materials used by Bertha would change depending on what it was producing. It glossed over the main entrepreneurial challenge of finding combinations of heterogenous capital resources. As a metaphor for crude capital theory though, it's jolly useful

The subsistence fund visualised

I've just found the documentary version of "Guns Germs and Steel" (they're all on YouTube). Note the answer to the question: "How was there enough grain to fill a granary?"

• Stayed close to water sources
• Planted fields of wheat and barley around them
• They brought the resources *to* the village (including domesticated animals)

Here's the rub:

• Because the farmers could store grains, they could devote some of their time to making tools
• Their "savings" provided a subsistence fund to permit investment
• This lengthens the structure of production (you can't consume a knife - the only purpose it serves is to make it easier to produce consumer goods)

Part 5/18 6 min 52 sec - a growing population can support specialists to develop new skills/technologies (e.g. plaster from limestone - and using fire enabled people to subsequently to make steel)
"New Guinea never developed advanced technology" - still using stone tools. They couldn't develop metal tools because they didn't have sufficient farming capability to generate enough surplus to provide for the specialists that would develop new technologies.

Here's an article from The Economist:

To settle down in one place requires a reliable food supply, so the discovery of granaries is no surprise. Pits that might (or might not) have held grain have already been found, but the latest discovery is on a far grander scale. It helps confirm what had previously been suspected—that it was a technological change to the gathering half of the hunting-and-gathering lifestyle that propelled the domestication and cultivation of crops

This is the basics of economic specialisation and trade - and it's fascinating to see emerging anthropoligical evidence.

I don't know the answer (but not in the same way that you don't know the answer)

“Sometimes the only honest response to a question is “I don’t know.” In recognizing that, one may rely just as much on imagination, because one needs it to determine that several competing hypotheses are equally compatible with one’s evidence.”

Four cultures

Saying that you don't know something does not mean that you are ignorant. It might mean that you can see many plausible answers, and this knowledge prevents you from forming conclusions with certainty. I don't often meet new people, but the last few weeks I've engaged in a lot of small talk with strangers. I sometimes find myself with non-economists saying that "I don't know" in answer to a question, to which they might respond "me neither". My urge is to say, "well hang on, I don't know, but but in the same way that you don't know".