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Book review – “My Turn” by Doug Henwood

by Daniel on December 2, 2015

Below, I review, in usual rather semi-detached style, the book by friend-of-the-blog Doug Henwood on Hillary Clinton’s candidature for President. A capsule summary might be: he’s against it. I’ve posted the cover image below because it’s so fantastic.

The meaning of the image is discussed in the book
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Up and down, left and right

by Daniel on August 12, 2015

A really interesting chart, via Tom Forth on that Twitter. It plots inequality in the UK against the income of the poorest 10%, as a time series.


This is a perfect application of interocular trauma econometrics – it hits you right between the eyes. It’s all up-and-down or left-and-right. The sort of thing that generates the difficult cases for liberal political philosophy – increases in inequality which nevertheless benefited the worst-off, which would have showed up as a southwest-to-northeast upward slope – never happened.

After Chris and John’s posts, a lot of which I agree with, I thought it made sense to look at the third member in the three-cornered disaster in Euroland …

When you look at this series, two things strike the eye. One, good God what a long and deep recession. And two, it was coming to an end. Even the worst policy mistakes don’t last forever and a combination of time, human resilience and the Pigou Effect will usually prevail. Greece had two quarters of consecutive growth at the beginning of 2014. Unemployment also began to fall. They were issuing bonds on the open market and had some hopes of completing the second bailout program with a degree of success.

Then, Syriza happened.
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LIBOR for the universities?

by Daniel on May 26, 2015

This is a post I’ve been planning to write for a while, with various other CT members alternately encouraging me to do so, and sternly reminding me that the consequences will be entirely on my own head ;-). It’s based on a point I’ve been making over the last few years to all sorts of friends when they’ve been trying to bait me on the subject of LIBOR, forex and the various scandals of the financial profession.

The point is quite simple. Bankers have had their day under scrutiny. But so have Members of Parliament (expenses scandal). So have journalists (phone hacking). So has the Church (paedophilia cover-ups). So has the BBC (ditto). This isn’t a specific issue about financial sector corruption. It’s a general trend, one of gradual social re-assessment of whether the fiddles and skeletons of the past are going to be tolerated in the future. It’s not that these sectors are especially dirty and the rest are especially clean – it’s just that politics, finance, religion, journalism and broadcasting have, so far, had their day under the microscope. One day, it’s going to point somewhere else. Particularly (because a lot of my friends are academics), one day it’s going to point at the universities. How confident are we that when it does, that they’ll be found pure?

At this point I tend to get either nervous laughter or outrage. Comments boxes don’t do nervous laughter very well, so readers of a ragey disposition might as well skip the details…
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Is the UK benefits system a CDO?

by Daniel on May 16, 2015

Almost as an illustration of the sort of thing John’s looking at in terms of misplaced opportunity costs, I have a piece up at on forthcoming changes to the UK benefit cap system, and how they could have fairly serious consequences for housing benefit tenants. I probably don’t emphasise it enough in the piece, but these knock on effects destroy the cost economics of the policy – once tenants are evicted because they can’t pay the rent, they become emergency cases and have to be accomodated by the council in short-term accomodation, which is one of the most wasteful and expensive things you can do in housing policy. As I said in discussion of the piece, if you don’t like subsidising these guys as buy-to-let landlords, you’re unlikely to love them when they come back as bed-and-breakfast proprietors, at twice the price.

Hello once more! This episode of my travelogue takes in Tahiti/Moorea and Easter Island. I’m writing this from Chile, where the next episode might be quite dramatic

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Hullo again … delayed by a frankly inexcusable three weeks, this episode brings together some of the things I noticed and wrote notes on while in New Zealand. It’s the longest one so far, and might have been a lot longer if I hadn’t just despaired of ever doing it justice. I don’t think I’m ever going to fall for a country as hard as I fell for Greece, but man, New Zealand is very nice. Next episode will cover Polynesia …

(PS: Attentive readers may note that the word “Maori” is consistently misspelt. This is because I don’t know how to do the flat line accent over the a. Sorry)

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How to keep your dignity at bonus time

by Daniel on February 27, 2015

I have an article in today’s Weekend FT! The theme is on how to handle bonus season with a modicum of grace, and preferably while maximising the amount of money that one extracts from Global Finance Capital’s wallet and into your own. To be honest, you lot are probably going to hate it; at least I can promise that it’s protected by the FT paywall, so anyone who is offended or outraged by it can’t say that they didn’t read it on purpose.

The landslide winner’s curse?

by Daniel on February 11, 2015

In the light of current events in Greece, I have a lazyweb request for the political science bods among our readers. Is there a word for the following stylised set of facts:

a) A country has a proportional and multi-party electoral system, which often delivers coalition governments.

b) Because it anticipates a coalition, a party puts together an electoral platform designed as a basis for negotiation.

c) This package, as one would expect, includes genuine “red line” priorities. It also includes some less essential policies which might be expected to be negotiated away. It might even include some policies which are borderline undesirable – ideas which have been included intentionally to be bargained away.

d) Against its expectations, the party wins an absolute majority which is taken as a mandate for its entire platform

e) And thus it is saddled with a political imperative to implement a manifesto which is considerably more radical than it had ever really anticipated putting into practice.

If there is, I’m obviously most interested in the special case of

f) Where key parts of the platform involve negotiations with foreign parties, leaving the party subject to “landslide winner’s curse” having to take a negotiating position in international issues which it had been expecting to have diluted in domestic coalition-formation.

I’m not saying this is definitely something that’s happened in the case of Syriza. But if it’s been studied and is in the literature, it feels to me like that part of the literature is worth digging up right now.

Greece – surplus, stimulus & strategy

by Daniel on February 3, 2015

I have a post up at, outlining some further thoughts about how Greece might go about negotiating. This post was rendered sightly obsolete by the FT headline this morning, but since the plan described corresponds pretty closely to “Program 1” in my article (spoiler: Program 1 is the bad one), I think it’s still relevant. Because Medium restricts comments to 200 characters and requires login, I tend to only get reasonable, concise comments there from people who have thought about the issues. So I thought I’d throw it open here to get plenty of the other kind …

Only kidding. Comments are open on this thread, but I only really want to hear from Greek people. By “Greek people”, I mean a) ethnic Greeks and b) people living in Greece. I have no means of establishing this, other than that regular Mr Angry type commenters whose names are known to me but who have never mentioned any Greek ancestry in the past are not going to get the benefit of the doubt. Everyone else – short questions relating to technical points or asking for clarification will be replied to, but otherwise please don’t. I might make a partial exception for really substantive points made by Spanish, Portuguese or Irish people if there’s a link between the Greek program and the outlook for their own country.

Greek games and scenarios

by Daniel on January 25, 2015

Early news reports seem to be pretty clear that Syriza has won the Greek elections, so I thought CT readers might be interested in the following note, which I sent to my professionals’ mailing list a few weeks ago. Since I wrote it, there has been a lot of rather contradictory comment on what the party’s negotiation strategy might actually be, but nevertheless, it certainly seems that the “ultimatum” approach to debt reduction is very much on the table, and in any case, a dogmatic refusal to continue with past agreements on structural measures would end up having the same effect.

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Happy new year, all. This episode of my ongoing travelogue finds me and the family slowing the pace down significantly and spending six weeks in Bali. Due to an excess of comfort and indulgence, it’s being posted roughly a month late – I am now in New Zealand. Thanks as always for everyone’s kind comments on this series.

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The World Is Squared: Episode 4 – In Hot Places

by Daniel on November 18, 2014

And the travelogue continues – this chapter covers my family’s visits to Jordan and to Sri Lanka. The next episode will take us to a seaside cottage in Bali …

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I’m just in the middle of writing an article on the technicalities of the foreign exchange market, and what went wrong, and this example came up. I think the fair solution is pretty intuitive, but maybe others will differ. Presume below that this is a one-time interaction, so nothing to do with reputations, repeat business etc.

“You are on your way to the fruit market, because you want to buy five oranges. Someone you’ve never met before accosts you on your way and says “Hey, you! Could you buy me five oranges please? I’ll give you the money when you come back and I’ll pay you ten pence for doing it”. You think what the hell, and say yes. You ask what’s the maximum he’s prepared to pay for them and he says “Don’t care – whatever the market price is”.

Down at the market, there is one stall which has five oranges for sale at 50p each, and another stall with five oranges for sale but charging 55p each. You buy five oranges from each stall and head back home.

Your customer is waiting back at your gate. He gives you your ten pence, and asks “How much did my oranges cost?” What do you tell him?

You have three choices really (I’d be interested to know if anyone could justify any other price).

a) Tell him “50p each” – ie, you filled his order first and then your own
b) Tell him “55p each” – ie, you bought yours first, and then his
c) Tell him “52 and a half pence” – ie, you give him the weighted average of what you managed to pick up

In case a) your good turn has cost you a pretty penny – you paid £2.75 for your oranges when you could have got them for £2.50, and your 10p wages doesn’t cover the difference. Even in case c) you are down on the deal – paying £2.625 for your oranges, less 10p for an “all in” cost of oranges of £2.525 which is 2.5p more expensive than if you’d never met the guy. A lot of people would say case b) is perfectly fair – this guy clearly doesn’t really care all that much about how much he pays for oranges, or he would have gone to market himself rather than grabbing a complete stranger to do so. It’s also the point at which your profit from the overall transaction (10p) equals the wage that he said he would pay you.

Why should you subsidise him? But on the other hand, isn’t there something a bit hinky about deciding that all the best-priced oranges were for you, and all the worst deals were for your client?

Of course, I think people’s intuitions about fairness might change if your customer was paying you £10 to go to market for him, or if you had explicitly promised him that you would get him the best price possible. But in the simplest case (and this does match up pretty well to the actual structure and pricing of the FX market), I think it’s not obvious at all that the most intuitive concept of fair dealing corresponds at all to the regulatory concept of “duty of best execution”. Anyway, what do you think?

Update the longer post is now up.

My travelogue continues … By the way, check out friend-o-the-blog Sam Bikinoraion’s blog – he is also going round the world this year, and seems to be visiting a load of my favourite places, which I didn’t fancy taking the kids to. This episode takes me through Greece, and is posted a bit in arrears, as I headed off to the desert after the events described herein …

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