22 February 2009

weekend notes #4

• People may find it galling that the directors of banks at the heart of the garbage-finance crisis are still receiving eye-watering bonuses. But trying to tinker with the bonus culture, or calling it “disgusting”, seems a poor strategy if the point is to prevent a recurrence of the stupidity that led to a global meltdown.
If bankers operate in an environment in which it pays to act first and think later, to cut corners, to abandon the harshness of old-fashioned standards in favour of the ‘kindness’ of fuzzy egalitarianism, and to surrender independent critical thought in favour of the collective wisdom of trained experts, then the precise method whereby this behaviour is rewarded is likely to be a side issue.
It may not even be a case of it ‘paying’ to behave in such ways; it may simply be that people no longer find it possible to behave otherwise. In a mediocracy, the culture has been altered so profoundly that most have difficulty even imagining a world view different from the prevailing one, according to which nothing matters much except being like everyone else.*
Incidentally, I see that another scapegoat has already appeared on the horizon: lack of ‘training’. Never mind that bankers, like all professional staff, have for many years been attending an increasing number of courses and conferences, and that the industry is informed by theories and models which have become ever more technically sophisticated and subject to ‘expert’ input. No, the solution must be that all directors of banks should have labels to prove they have endured a multi-month programme of lectures, exercises and exams vaguely related to their areas of activity. Just like accountants already do. You know, those folk who receive extensive training on key concepts such as prudence and verifiability, and who took bankers’ word that the objects appearing on balance sheets were indeed assets as described, and not liabilities.
The suggestion that banks should have resident ‘fools’ to bring staff down to earth is slightly more sound, though what is really needed is not a deflating humorist, but someone free from the requirement to buy into the prevailing crazy philosophy, both the local (firm-specific) and the global (industry-wide) varieties. The idea is unrealistic, however, in view of human nature and office politics. I was once hired by a top-ranking professional firm in the capacity of resident independent expert. Were my senior colleagues anxious to discover how their well-established practices might benefit from an independent viewpoint, or whether their methodologies might have potential flaws? No, they just wanted to be in a position to say to outsiders “we have a trained expert on our team”.

• Tangential thought. The insides of blue chip financial institutions are now exposed as having been riddled with ineptitude, nonsense and pretentiousness for many years. Eighteen months ago they seemed like the most glamorous and prestigious organisations in the world. Ask yourself: what is really going on behind the scenes with other prestigious institutions, both private and public? Was the mediocracy endemic in global finance a phenomenon unique to banks? Or was it merely an example of a general trend, exposed because banking is so crucial to the economy that when its follies eventually come home to roost, the effects are impossible to conceal?

• Mike Edwards of CAFOD has written** to the Telegraph to argue for a pragmatist perspective on the question of whether the establishment view on climate change is correct. In other words, we may as well assume it is correct, because the consequences of doing so are the ‘right’ ones.

The longer I work on climate change, the less important I think it is whether or not the warmists or the sceptics are right ...
... imagine a world where we had listened to the climate scientists and started to change our resource-consuming behaviour and address the inequities of the global economic system. Although the warming still didn't materialise, we would have addressed a host of environmental issues and be living a largely pollution-free existence. We may even be saying thank you to the climate scientists who, although they got it wrong, provided us the opportunity to create a cleaner, brighter and fairer world.
Unfortunately, it is easy to imagine that Dr Edwards is not unusual in believing that the preferred effects of particular research conclusions should influence those conclusions. The vast majority of ‘researchers’ seem to share a leftist ideological outlook these days, and also seem to share the belief that this perspective is indubitably the morally correct one, providing them with a spurious legitimacy for actions which would be considered questionable in other contexts.
In some cases, this ideological bias — wanting research to support the creation of a 'fairer' world — may have effects only at the margin. For example, when a result is ambiguous, the choice of how to present it is made in the direction that is most supportive of the preferred belief system. Though individually small in effect, an accumulation of such minor biases at the margin can easily add up to something significant. In other cases, the bias is more blatant. Research results can often be guessed in advance, and those which would undermine the consensus can be avoided by the simple method of withholding financial support.
This is quite apart from the question of whether research goes on that deliberately falsifies its results in the direction most likely to be approved of. I have little doubt myself that this also happens; the only question is the extent to which it does.

• I see that the child 'protection' industry is suffering from a labour shortage. It is claimed this will cause an increase in tragedies. But surely that depends on whether, on balance, the industry does more good than harm — an assumption which deserves at least a healthy dose of scepticism. If in fact it does more harm than good, as I suspect, then a decrease in the number of employees could be expected to produce a rise in the sum of human happiness, and is therefore to be welcomed. (More comments on would-be child protection by the state here, here and here.)

* with variations in income and status
** via The Week