Timmy Elsewhere

At the GI.

Rational behaviour from all concerned can still lead to undesirable outcomes.

8 thoughts on “Timmy Elsewhere”

  1. There was a relating discussion on the BBCR4 programme this morning: Start the Week, about how individual pursuit of rational objectives can lead to suboptimal or malign consequences. One-off plays of the famous prisoners’ dilemma were mentioned as an example.

    The programme featured Tim Harford and also David Willetts. It repeats this (Monday) evening on BBCR4 at 9-30pm. Worth listening to IMO – especially the bit about co-operative behaviour between some species of vampire bats. We’ve been taught that Social Darwinism is “bad” and “fascistic” but in the case of vampire bats (and wolf packs?) the process of evolution has promoted co-operative behaviour.

    Note too that David Willetts is to give the Oakshott Memorial Lecture on 20 February at 6.30-8.30pm. This is a public lecture subject to the availability of seats. The lecture title is: The Ideas that are Changing Politics:

    See also the connection with this news report of proposals by the council of Kensington and Chelsea to remove traffic lights along Kensington high street:

    This is “part of an audacious campaign by the council to forge modern ‘shared streetscapes’ where eye contact between motorists and pedestrians and simple common sense replace a ‘clutter’ of bollards and barriers, traffic lights, street signs and speed cameras.” According to the report, so far traffic accidents have fallen. It seems that more regulations can get in the way of co-operative behaviour.

  2. Btw “The Tories have poached the former heads of the government’s red tape advisory watchdog and the Financial Services Authority to lead a new review of regulation, being launched on Monday.”

    There’s an observable but unfortunate tendency to jump to premature generalisations about the benefits of deregulation.

    Does anyone really suppose that it would be a good idea to remove the legal ban on motorists using their mobile phones while driving?

    Despite the law, when out and about I frequently observe motorists on their mobile phones while driving.

    Does anyone suppose that fewer banking regulations and less monitoring by the FSA would have prevented the Northern Wreck?

  3. Bob, very few Libertarians would deny that some regulation is necessary and useful. In fact, it is in precisely the area where individuals are trapped in a rational but sub-optimal situation that regulation is proposed. However, that is very far from our regulatory environment where one can go to prison for 6 months for playing a guitar in a pub without a licence, or for replacing one’s own windows without a certificate.

  4. Kay – I agree but then I’m certainly not in the business of defending all and every regulation to the last ditch regardless.

    What I’m trying to discourage is sweeping generalisations – like the absurd call for “free markets”, as though markets didn’t depend for their functioning on a framework of laws and regulations to define property rights and institutions to protect the rights. Without that, what we get is bandit capitalism. IMO the productive debate is about what infrastructures of laws and regulations and enforcement institutions are most conducive of general economic prosperity – we can then debate about how to equitably divide the spoils. That is an altogether more challenging and subtle task than just ripping up regulations.

    The reason why deregulation has proved to be such an intractable task in practice, I suspect, is because so many regulations mutually depend on other regulations. Removing a few is capable of bringing the whole edifice tumbling down. It took years for Russia to recover from the collapse of the Soviet Union.

    Economic pundits are now talking of the need to regulate rewards in banking not for reasons of equity but because some argue that the present reward system, coupled perhaps with deposit insurance schemes, generates instability in the financial system.

  5. “like the absurd call for “free markets”, as though markets didn’t depend for their functioning on a framework of laws and regulations to define property rights and institutions to protect the rights.”

    Free markets are supposed to be free of market-restricting things like cartels, guilds, Government monopolies, etc. To get a free market does require some regulation, hence anti-trust laws, etc. Bandit capitalism (such an evocative term!) does not result in free markets, since it relies in the end on restricted practices to perpetuate itself (e.g. all the evil things Standard Oil got up to, the dirty tricks of BA in the ’80s, and the filthy behaviour of Microsoft).

  6. Kay Tie:

    “supposed to be free of market-restrictive things like” etc.

    Yes, that’s one definition of “free market” but by no means the only; a significant slice of those supporting market freedom regard some or all of those mentioned constraints as not only unneccesary but contrary to purpose.

    Anti-trust is a good example. I’m not going to argue that it’s useless but merely that it is not uniformly beneficial; further, that in it’s broad scope, is particularly vulnerable to selective application based on perceptions of political alignment, etc. Insofar as is concerned Microsoft and its alleged infractions, it might be worthwhile to note that, prior to its indictment, Microsoft had no political alignment, made no contributions to candidates or parties, and seemed blithely unaware of the practice of
    war waged against competitors in DC corridors based on such compliance. What has happened since their prosecution is, as simply as it can be put, is that they’ve knuckled under and agreed to play by the rules henceforth, including the rule of making large political contributions and of employing high-priced, well-connected law firms in DC to watch out for their interests.

    I am in no position to comment on the essential fairness of their business techniques, whether in contractual matters of their merchandising and marketing relationships or their practice of “bundling” certain products for “free” (deemed to have been an unfair restraint). But it’s difficult to make the case that the consumer or the market as a whole has been or would be injured (but that’s just the theortetical case that continues to serve as the basis for the entire regulatory scheme). The same is true in the very case of Standard Oil, the “gran’pappy” of such cases. The very plain fact is that it was Rockefeller’s technologic and business practices that gave everyone on the planet cheap petroleum and an efficient, modern petrochemical industry. Though it is certain that some practices in which the man engaged (such as bribing legislators) are clearly immoral (as well as criminal offenses), there is at least a reasonable “excuse” in the observation that, at the time, all players in the game engaged in the same sort of practices. But less arguably criminal are other cartelizing efforts, especially those involving control of rail freight rates.

    Broad experience does not teach us that cartels are a certain violator of consumer interests, just as the existence of monopoly position does not guarantee that the monopolist aims at (or even could achieve) monopoly prices. OPEC has never seemed driven by an unreasonable greed but has seemed far more to have followed a strategy of limiting production just enough to maintain a certain level of PPP against its inexorable erosion by the (mainly) Western consumer nations and their inflationary policies. (I’ve not performed the exercise but my “take” is that the actual price of oil obtained by producers has not changed much in the past 80-90 years or so when measured in either PPP or gold with producers’ “take” actually diminishing over years except when “fed up” and retaliating with hikes as in the early ’70s and recently–just to get back to “par.”)

    There is a practice called “engrossing” in which an entrepreneur buys up outstanding inventory at its regular price in the hope of getting a better one from less agile consumers. “Ticket-scalping” could be seen as a modern example. Is it fair? It’s hard to tell about these things and even harder to assess what the generalized market effect is (or tends to be on a generalized basis). But the one generality that can be “taken to the bank” is that, if one sort of regulation is demanded and permitted, it’s difficult to prevent other (and more intrusive) forms.

  7. Regarding Microsoft:

    “But it’s difficult to make the case that the consumer or the market as a whole has been or would be injured (but that’s just the theortetical case that continues to serve as the basis for the entire regulatory scheme).”

    The headline stuff Microsoft got rapped for is very much “meh” in the industry. The real nastiness they get up to hardly ever hits the headlines. Such as deliberately preventing Opera’s browser from accessing MSN, or the wholesale theft of Stacker’s disk compression IPR, or the way they conspired to bring mobile phone maker Sendo to bankruptcy. To be sure, many of these issues were litigated successfully in the end, but by then the game had moved on and the strategic goals were met.

    Having companies like Opera, Sendo and Stacker (and literally hundreds more) killed off is very much not in the interests of consumers (fortunately, Opera evaded their Microsoft-intended fate).

Leave a Reply

Your email address will not be published. Required fields are marked *