Thinking with a Hammer

The Inevitability of the Euro’s Demise

2011-12-19T03:55:00.000-08:00

I don’t know why David Cameron prevented any future accord on fiscal discipline being incorporated into a revised European Union treaty at the last European summit. Whether he saw something in its provisions that was potentially damaging to the United Kingdom, or whether he was simply trying avoid a potentially catastrophic split in his own party, he alone would be able to tell us. What I do know, however, is that this question is completely irrelevant.

Nor is this simply because those who are currently trying to make political capital out of his decision, arguing that Britain will now become isolated in Europe, are quite clearly being disingenuous. For not only do they know that there are bound to be other countries, outside the Eurozone, which will not sign up to the treaty – countries like Hungary, which has already stated that it will have nothing to do with any treaty that requires tax harmonisation – they are also aware – because they are made of the same stuff – that the vast majority of politicians who rise to be heads of governments are nothing if not pragmatic. They do what is in their interest. And if it is in their interest to continue doing business with Britain, they are not going to cut off their noses to spite their face. After all, the Eurozone exports more goods and services to the UK than to any other country in the world.

It is not primarily for this reason, however, that I say that all this politicking is irrelevant, but rather because, even if an intergovernmental agreement on fiscal union is eventually signed by the Eurozone members, I do not believe that it will not have any effect.

I say this for three reasons. Firstly, there is too little provision in what has so far been agreed to counter the immediate threat of member government insolvency. It is why yields on Eurozone bonds have continued to rise, and why the credit rating agencies are threatening a wholesale downgrading of Europe’s credit status. Secondly, although the new fiscal rules may prevent Europe ever getting into this mess again, it will be many years before some member states are able to reduce their annual deficit to just 3% of GDP and even longer before they are able to get their accumulated national debt down to 60%. In the case of Greece, for instance, it is unlikely to happen before 2025. Thirdly, and more importantly, however, is the fact that there is nothing in any of the drafts of the treaty so far put forward to tackle the Eurozone’s most serious underlying problem, which is not primarily a lack of fiscal disciple, or even the lack of competitiveness among some of its member states, but rather the variability in competitiveness across the monetary union.

One can see this variability most clearly in the per capita GDP of the member states, as shown in Table 1. The figures are those from in 2010.

Member States	GDP Euro Millions	Population Millions	GDP per Capita (PPP)	GDP per Capita (Nominal)	PPP as % of European Average
Luxembourg	41,597	0.48	69,990	87,450	246%
Netherlands	591,477	16.60	34,055	35,631	120%
Ireland	153,938	4.40	32,488	34,986	114%
Austria	284,410	8.40	32,174	33,858	113%
Belgium	352,941	10.80	30,294	32,680	107%
Germany	2,498,800	81.80	29,981	30,548	105%
Finland	180,253	5.30	29,563	34,010	104%
France	1,932,802	64.70	27,265	29,873	96%
Italy	1,548,816	60.30	25,593	25,685	90%
Spain	1,062,591	46.00	25,593	23,100	90%
Cyprus	17,465	0.80	24,862	21,831	87%
Greece	230,173	11.30	22,459	20,369	79%
Slovenia	35,974	2.00	21,833	17,987	77%
Malta	6,233	0.40	21,101	15,583	74%
Portugal	172,699	10.60	20,684	16,292	73%
Slovakia	65,905	5.40	18,908	12,205	67%
Estonia	14,501	1.30	16,401	11,155	58%
Eurozone Average	9,190,575	330.58	28,426	28,426	100%

Table 1: Per Capita GDP per Eurozone Member State in 2010

For those unfamiliar with this kind of analysis, you will notice that the table has two columns of ‘per capita’ data: one labelled ‘Nominal’, the other ‘PPP’. The first is simply the country's GDP divided by the population. GDP, however, is measured in terms of local pricing. In rich countries, where prices are high, GDP will therefore be exaggerated. In poor countries, where prices are low, GDP will appear to be lower than it actually is. To overcome this distortion, we therefore introduce PPP, 'Purchasing Power Parity', which uses average prices from across the entire sample to give us a more accurate comparison.

Unfortunately, this does not help us resolve inaccuracies in the underlying data, and most readers will have already spotted at least one rather glaring anomaly in the above figures, which appear to show Ireland as having the third largest per capita GDP in the Eurozone. This, however, is due to the fact that when the table was compiled, Ireland’s actual figures for 2010 were not yet available. The figures included are therefore the forecast figures from 2009, which even at that point were almost certainly over-optimistic. The important point, however, is that even if we mentally downgrade the Irish data, and ignore the figures for Luxembourg, which has a micro-economy all of its own, it is still absolutely clear that the Eurozone encompasses member states with wide variations in productivity and hence competitiveness.

Having accepted this, the question you still may be asking, however, is why this is a bad thing. The answer is that, within a monetary union, these variations have a polarising effect, exaggerating them over time and actually making them worse. This is because the value of a currency is indirectly related to the performance of the economy it represents. The factors determining this value may be vague, numerous and complex, ranging from market demand to speculators’ expectations, but in the end it all comes down to how well the economy is doing. In the case of a monetary union, however, the currency represents the aggregated economy of the union as a whole – both its strong parts and its weak parts. It represents, that is, the average performance across the entire community. As a result, the stronger parts will find themselves operating with a currency which is undervalued with respect to their own performance, while the weaker parts will be burdened with one that is overvalued. The strong parts, as a consequence, will find that their exports are that much more competitive in international markets, and will become even stronger as a result, while the weak parts will find that their exports are overpriced and will therefore become even weaker.

We can see this in the difference between Germany and Greece. While Germany has clearly benefited from an undervalued Euro, making its luxury cars even better value around the world, the only thing which Greece exports is overpriced olive oil. This is not to say, of course, that an undervalued currency is the only reason for Germany’s success. Its focus on high-end manufacturing and its long-term approach to investment have had a lot to do with it. But an undervalued currency has certainly been a factor, just as an overvalued currency has been a factor in Greece’s steady deterioration.

The problem is further exacerbated by the fact that once this polarisation has started, it is very hard to stop it, not least because other factors then kick in. With poor economic performance in the weaker parts of the union, unemployment inevitably rises, tax receipts drop, public expenditure increases, and a budgetary deficit develops. If the union also facilitates freedom of moment, the brightest and best young people from the poorer areas then start migrating to the richer ones. The richer areas thus reap the benefit of their talents while the poorer areas are further impoverished.

In fact, this is a phenomenon we can also see happening within national economies. In Britain, for instance, we have something called the north/south divide, which is the result of more than half a century of such polarisation. It primary cause was the loss of heavy industries and manufacturing from the north during the post-war years. The problem has been made much worse, however, by the fact that although its labour costs are generally much lower than in the south, the north-east, in particular, has had to try to rebuild its economy while operating with a currency which more accurately reflects the increasingly successful service based industries of London and the south-east. As a result, it has acquired an almost permanent disadvantage, which successive British governments have tried to overcome, largely by throwing tax-payers’ money at the problem through such institutions as regional development funds. All these palliative measures have actually achieved, however, is the creation of an economy which is almost totally dependent on government subsidies and hand-outs.

Indeed, in many ways, the European Union has done exactly the same thing, channelling grants and subsidies to its less advantaged member states, in order to try to overcome the disparities. Infrastructure projects, in particular, have been used a mechanism for redistribution. Drive down any major road in Spain or Portugal and you’ll see a signed telling you that it was financed by the EU. This, however, is no way to build a sustainable economy, which needs to grow organically from within itself. If you also lock these grant-assisted peripheral states into a monetary union, which then makes their goods and services permanently uncompetitive on international markets, you finally have a recipe for the kind of disaster that is now unfolding in Greece.

So what is to be done? For Greece, there is only one answer. It has to leave the Eurozone. It will, of course, be difficult. When they return to the Drachma, the Greeks will almost certainly see their currency fall in value by at least 30% against the Euro. This will mean that imports from other countries will be 30% more expensive. However, Greek exports will become 30% cheaper. So will Greek holidays. They will be able to start rebuilding their tourist industry. With lower labour costs, multinational companies will start investing there. It will take time, but eventually Greece will be able to rebuild its economy, and this time on a firmer foundation.

But what about the bigger picture? What happens to the Eurozone once Greece has left? The answer is, I’m afraid, ‘More of the same!’ For what applies to Greece today, will eventually apply to all those countries with per capita GDPs less than the Eurozone average. Once polarisation has set in, relative to Germany and the Benelux group, they will all steadily become less and less competitive.

It is why some economists believe that the Eurozone will eventually break into two, with a northern, richer grouping, and a southern, poorer grouping. This, however – or so I believe – is to misunderstand the inexorability of the polarisation to which variations in competitiveness across a monetary union give rise. For even though, with two monetary unions in play, the variations may be smaller, the same economic principles apply, and polarisation will still occur. In the northern grouping, for instance, the country that would be would most disadvantaged is France. By remaining in a monetary union with Germany and the Benelux countries, its economy would get weaker and weaker. It is almost certainly one of the reasons President Sarkozy is so desperate not have any of the Eurozone member states leave.

Not as desperate as Angela Merkel, however. For if all the weaker economies in the Eurozone were to return to their original currencies, leaving just Germany and the Benelux countries to form a Eurozone core, the value of the Euro against other currencies, would very probably rise by somewhere between 20% and 30%. This would mean that Mercedes and BMWs sold around the world would go up in price by between 20% and 30%, and the dent in sales would almost certainly be considerable. Factories throughout the motor supply industry in German would have to lay off workers; unemployment would rise; tax receipts would fall; a budgetary deficit would open up; and so on and so on.

The question you will be asking, of course, if Angela Merkel knows all this – as she surely must –why is she trying to sustain a situation which she must also know is unsustainable. As a politician, however, the question is really what else can she do? To preside over the demise of the Euro, and be responsible for the worst calamity to hit the German economy since the second world war, is simply unthinkable. She therefore has no choice but hang on and fight a rearguard action for as long as she can. The truth is, however, that eventually the whole house of cards must collapse. And there is nothings she or anyone else can do about it.

The Problem with UK Public Sector Pensions

2011-12-05T03:07:00.000-08:00

The problem with UK public sector pensions is that they are a Ponzi scheme, and were more or less identified as such in the report by the Public Sector Pensions Commission published in July 2010. The reason for this is that, unlike private or personal pension plans, where the contributions of employees and their employers are invested in individual, ring-fenced, and gradually accumulating pots of money, in the case of public sector pensions no such separate and identifiable funds are ever established or built up. Instead, the pensions of today’s public sector retirees are paid directly out of the contributions made by current public sector workers: a system or model which continually requires the recruitment of new contributors to underpin the pyramid, and which, when applied in a related financial sector, earned Bernie Madoff a sentence of life imprisonment.

Of course, Bernie Madoff knew what he was doing; whereas it is possible that those who originally devised our public sector pension schemes may not have seen the dangers. For during the first few years, when there were yet very few public sector pensioners and a growing number of public sector workers, most of the schemes would have almost certainly been in surplus. From the point of view of the treasury, in fact, employee contributions would simply have been regarded as an additional form of tax: a helpful source of revenue which would have continued to grow throughout the 60s and 70s as health and education and other public services continued to expand. The trouble is that all those people who entered public service during this period of rapid public sector growth are now of pensionable age; and with us all living much longer, the pensions they are receiving far exceed the contributions being made by their successors. As a result, the bulk of these pensions are now having to be paid by the rest of us, out of general taxation.

How much we are actually paying can be seen in Figure 1, which is based on data provided in the above-mentioned 2010 report, and which can be found in PDF format at http://www.public-sector-pensions-commission.org.uk.

Figure 1: Growth in Public Sector Pension Deficit

In the report, the numbers are actually presented in a way that is slightly more complicated than this, in that part of the deficit is notionally deemed to be made up by the employer. This, however, is a polite fiction. For while the ‘employer contributions’ deducted from the NHS budget, for instance, may relate to the numbers of staff currently employed, they are actually used to pay the pensions of doctors and nurses who have already retired. This also explains why these notional ‘employer contributions’ have become so disproportionate. In the case of civil servants, for instance, the ‘employee’ contribution is just 3%, while the contributions of the various government departments to which they are assigned has risen to a massive 24%. This, however, is merely a way of disguising the current account deficit. And even then, additional monies are still having to be paid directly out of the treasury.

What is even more important, however, is the fact that, as one can see from the above graph, the deficit is steadily growing: from £11.4 billion in 2003/04 to an estimated £17.95 billion in 2010/11. That is an average annual increase of 4.6%. And the question we therefore have to ask is how big this funding gap is likely to get.

Unfortunately, there doesn’t seem to be anyone who actually knows the answer to this question. Or if they do, they’re not telling us. Nor is it all that easy to work it out. For the only figures available which even touch upon this issue are for the total public liability as it stood at the point at which the liability was measured. That is to say that they tell us how much we would be contractually obligated to pay present and future public sector pensioners if the schemes to which they belong were otherwise suspended, with no further contractual obligations being incurred. They do not tell how much these contractual obligations will continue to grow as the schemes themselves go forward. In this sense they are not forecasts; merely statements of account. They are also snapshots, taken at a single moment in time, which are almost immediately out of date. Indeed, the most recent such snapshot I have so far been able to find – included in the above mentioned report – is an estimate of what the total liability stood at as of 31^st March 2010, when it was believed to be £1.176 trillion. Since then, however, it will have already grown substantially.

Not that we are going to be asked to pay this off over night, of course. As in the case of treachery bonds – which, in the light of this £1.176 trillion, constitute only our second largest category of public debt – the pension liability is spread over a fairly large number of years. Unfortunately, the Public Sector Pensions Commission’s report doesn’t tell us how many. Nor does it give us a profile of how the liability will be discharged on an annual basis. All we can say for sure, therefore, is that it won’t be linear. For although the liability, as presented in the 2010 snapshot, takes into account not only current pensioners, but all those who are currently building up an entitlement – including those who have only just started on this process – as already stated, it measures their entitlement as it stands today, not as it will stand at the end of their working lives. If we were to create an annualised payment profile for the £1.176 trillion current liability, therefore, it would probably look something like Figure 2.

Figure 2: Annualised Public Sector Pension Liability as it stood on 31st March 2010

As you can see, this profile has a fairly long tail. This is because the people who will still be receiving pensions in the 2080s are those who would have only just started work when the snapshot was taken. It is their entitlement at that point, therefore, rather than the entitlement they will eventually build up, that the snapshot reflects. In reality, however, most of these people will go on to receive full pensions, and far from tailing off, the liability will therefore continue to grow. In fact, it is unlikely even to peek during this time frame. For even if the number of people retiring on public sector pensions were to remain constant – rather than continue to rise as is currently the case – the increase in life expectancy – and hence the number of years each pensioner draws a pension – would ensure that the cost continued to rise. In order for the liability merely to plateau, therefore, the number of people retiring on public sector pensions would have to fall. This, however, would mean that the number of people working in the public sector would also have to be reduced, which, of course, would have the further effect of reducing contributions. Like all pyramid selling schemes, in the end it is simply unsustainable.

Given the generous nature of public sector pensions, and the fact that they are being paid for by tax-payers who, for the most part, cannot afford such pensions for themselves, it is also indefensible.

Of course, apologists for the system will argue than rather than reducing public sector pensions or making them less generous, private sector pensions ought to be brought up to the level of the public sector. This, however, is economic fantasy. Most, if not all, companies which created final salary pension schemes during the 1950s, copying the public sector model, have now abandoned them, or have gone out of business, partly as a consequence. One of the reasons the previous government couldn’t save MG Rover, for instance, was that no one wanted to buy a company with such a huge pension liability. We therefore have to accept that the only way we can provide pensions for ourselves is by saving money into a pension fund, out of which an annuity can eventually be bought. The problem is that, even with contributions from one’s employer, there is a practical limit to how big a pension fund most of us can build.

Assuming an average return on investment of 7% per annum, for instance, someone on average pay, who had a pension plan in which both he and his employer had paid in 5% of his salary per year for the last thirty years, would now have a fund worth £167,000. If we take a fairly typical annuity purchase rate of £5,972 for every £100,000 invested, this would give the average retiree a pension of £9,973 per annum at the age of 65.

To demonstrate how unfair public sector pensions are, someone on an identical salary in the public sector would get a pension of more than double this, and at the age of 60 rather 65. To get an equivalent pension, in fact, the person in the private sector, together with his employer, would have to make a combined contribution of 21% of his salary per year. For the vest majority of people in this country, therefore, this is simply not possible. Yet it is this majority – the 22.9 million people who work in the private sector – who are paying for the public sector pensions of the privileged minority.

What is truly remarkable, however, is that when public sector workers went on strike last week to protest against the government’s proposed reforms, the majority of people – between 63% and 68% depending on which opinion poll you read – actually supported them. It is another example, in fact, of what I have referred to in the past as the strangely inverted political culture we have in this country: one which tacitly assumes that the Labour Party and the trade unions, like latter day Robin Hoods, are on the side of ordinary working people, while the Conservative Party, like the wicked Sheriff of Nottingham, is a bunch of callous, uncaring tyrants, determined to grind poor public sector workers into the dirt. What makes this perennial caricature even less apposite on this occasion, however, is how moderate the proposed reforms clearly are.

I say this because the one thing the government is certainly not proposing to do is put an end to the real underlying problem of public sector pensions: their fundamental pyramid structure. For that would mean placing the notional contributions of both employer and employee into real pension funds. While still having to meet the contractual obligations of existing pensions, this would mean that they would not be able offset current pension payments with these notional contributions, thus widening the pension deficit and further adding to overall borrowing. Over time, they would also have to augment or consolidate these new pension funds with the contributions that should have been paid into them in the past, along with the interest they would also have been earning. The cost would be astronomic. All the government is actually proposing, therefore, is to (a) bring the retirement age for public sector pensions into line with the state pension age – which, reducing the number of public sector pensioners at any one, would relieve some of the burden in the medium to long term – and (b) increase present employee contributions by 3%, thus reducing the current pension deficit.

The fact that it is this latter proposal which has caused the greatest resentment, however, is a clear indication of how entangled in deception and delusion the current situation has become. For most public sector workers almost certainly know that their so-called contributions are not actually contributing to their future pensions. They know that they are simply an additional tax, which they have every right to suspect the government is merely levying in order to reduce the overall fiscal deficit. On the other hand, they refuse to accept the corollary of this: that their pensions are entirely paid for out of taxation, most of which is collected from other people. The problem is that while both sides, for various reasons, continue to maintain these polite fictions, it is difficult to see how the dispute can be resolved.

There is also another reason why we need to stop deceiving ourselves and face up to the truth. For the world economic order which, for last thirty years, enabled the mature western democracies to consume more than they produced, spend more than they earned, and pay for it all on tick, is coming to an end. In 2008, the bubble finally burst. Public sector pensions were both a symptom and a contributor to what was wrong with our economy throughout this thirty year period. If we go on arguing about them from entrenched political positions which are no longer relevant, we are not going to solve the problems. The western democracies that will come through this crisis most intact will be those that stop deluding themselves, face up to the truth and start finding new ways to live, work, and structure their economies to meet the challenges of the 21^st century. Reliving the political battles of the post-war period will not do that. We need fresh thinking and a fresh approach, based on economic reality. For if we fail, our children and grandchildren will be paying the price for decades to come.

The Straightjacket of Economics & the Wriggle-room left for Politicians

2011-11-19T04:30:00.000-08:00

With Ed Miliband and Ed Balls constantly telling us that by cutting the budgetary deficit as hard and as fast as it is doing, the UK government is stifling growth and plunging the country back into a recession, I thought it might be worth looking at the actual numbers involved to see how much wriggle-room any new incoming Chancellor of the Exchequer might have to adjust the strategy. Unfortunately, the answer does is not particularly comforting.

Table 1 presents UK GDP, the annual deficit and the cumulative national debt for the last 25 years, as recorded and tabulated by www.ukpublicspending.co.uk, with a further five years projected forward in accordance with George Osborne’s 2010 budget.

Year	UK GDP (£billion)	Annual % Growth in GDP	Public Debt (£billion)	Debt as % GDP	Annual Increase in Debt	Annual Increase in %Debt
1985	361.76		157.20	43.45%
1986	389.15	7.57%	162.70	41.81%	5.50	-1.65%
1987	428.67	10.15%	167.80	39.14%	5.10	-2.66%
1988	478.51	11.63%	167.40	34.98%	-0.40	-4.16%
1989	525.27	9.77%	153.90	29.30%	-13.50	-5.68%
1990	570.28	8.57%	152.20	26.69%	-1.70	-2.61%
1991	598.66	4.98%	151.30	25.27%	-0.90	-1.42%
1992	622.08	3.91%	166.10	26.70%	14.80	1.43%
1993	654.20	5.16%	202.60	30.97%	36.50	4.27%
1994	692.99	5.93%	249.80	36.05%	47.20	5.08%
1995	733.27	5.81%	290.00	39.55%	40.20	3.50%
1996	781.73	6.61%	322.10	41.20%	32.10	1.65%
1997	830.09	6.19%	348.00	41.92%	25.90	0.72%
1998	879.10	5.90%	352.90	40.14%	4.90	-1.78%
1999	928.73	5.65%	351.60	37.86%	-1.30	-2.29%
2000	976.53	5.15%	345.40	35.37%	-6.20	-2.49%
2001	1,021.83	4.64%	312.40	30.57%	-33.00	-4.80%
2002	1,075.56	5.26%	315.50	29.33%	3.10	-1.24%
2003	1,139.75	5.97%	347.10	30.45%	31.60	1.12%
2004	1,202.96	5.55%	382.80	31.82%	35.70	1.37%
2005	1,254.06	4.25%	424.00	33.81%	41.20	1.99%
2006	1,325.80	5.72%	463.00	34.92%	39.00	1.11%
2007	1,398.88	5.51%	500.00	35.74%	37.00	0.82%
2008	1,448.39	3.54%	525.00	36.25%	25.00	0.50%
2009	1,395.87	-3.63%	616.90	44.19%	91.90	7.95%
2010	1,453.62	4.14%	759.50	52.25%	142.60	8.05%
2011	1,526.50	5.01%	909.20	59.56%	149.70	7.31%
2012	1,602.80	5.00%	1,046.00	65.26%	136.80	5.70%
2013	1,693.70	5.67%	1,164.00	68.73%	118.00	3.46%
2014	1,789.00	5.63%	1,251.00	69.93%	87.00	1.20%
2015	1,889.10	5.60%	1,314.00	69.56%	63.00	-0.37%

Table 1: National Debt in Relation to GDP

The good news is that at £1,314 billion the total national debt – in terms of issued treasury bonds – is only expected to be 69.56% of GDP by the end of 2015, which is nowhere near the 186% which Greece was thought likely to experience some time next year, or even the 120% currently burdening Italy. Government ministers will also probably point out that it is also significantly lower than the slightly worrying 98.91% that would have been the case had Labour won the last election and chosen to implement Alistair Darling’s less draconian deficit reductions plan.

The bad news is that George Osborne’s forecast is based on a projected annual rate of growth of over 5%. If we replace these figures with the Bank of England most recent forecast of only 1% for both this year and next, rising slowly to perhaps 2.5% in 2015, the picture, as shown in Table 2, is nowhere near as rosy.

Year	UK GDP (£billion)	Annual % Growth in GDP	Public Debt (£billion)	Debt as % GDP	Annual Increase in Debt	Annual Increase in %Debt
2010	1,453.62	4.14%	759.50	52.25%	142.60	8.05%
2011	1,526.50	1.00%	909.20	59.56%	149.70	7.31%
2012	1,541.77	1.00%	1,046.00	67.84%	136.80	8.28%
2013	1,564.89	1.50%	1,164.00	74.38%	118.00	6.54%
2014	1,596.19	2.00%	1,251.00	78.37%	87.00	3.99%
2015	1,636.09	2.50%	1,314.00	80.31%	63.00	1.94%

Table 2: Nation Debt as a Percentage of GDP given Revised Growth Forecast

Of course, Government ministers will say that a national debt of 80.31% of GDP in 2015 is still considerably less than the figure of 98.91% under the Darling plan. They might also point out that, under the Darling plan, with this new projected rate of growth, the figure would actually reach 114.20%, which would take us into Italian territory. Ed Miliband and Ed Balls, however, would say that by not cutting public expenditure so fast, growth would be higher, and the cumulative national debt as a percentage of GDP would therefore be lower. So who is right?

Part of the problem in answering this question, of course, is that it is impossible to say now what things would be like today if decisions taken in 2010 had been different. All we can therefore look at are the options available to any Chancellor as things currently stand. To do this, however, we need to bring two further factors into the equation: public expenditure and taxation. In particular, we need to see how public expenditure is paid for out of mixture of taxation and borrowing. This is therefore presented in Table 3. Again the last five years are in accordance with George Osborne’s 2010 budget.

Year	UK GDP (£billion)	UK Public Expenditure (£billion)	Annual % increase in Public Expenditure	UK Public Expenditure as % of GDP	Expenditure paid for by taxation	Expenditure paid for by borrowing	Taxation as % of GDP
1985	361.76	150.89		41.71%
1986	389.15	158.62	5.12%	40.76%	153.12	5.50	39.35%
1987	428.67	164.61	3.78%	38.40%	159.51	5.10	37.21%
1988	478.51	173.60	5.47%	36.28%	174.00	-0.40	36.36%
1989	525.27	179.91	3.63%	34.25%	193.41	-13.50	36.82%
1990	570.28	200.91	11.68%	35.23%	202.61	-1.70	35.53%
1991	598.66	218.21	8.61%	36.45%	219.11	-0.90	36.60%
1992	622.08	236.20	8.24%	37.97%	221.40	14.80	35.59%
1993	654.20	259.72	9.95%	39.70%	223.22	36.50	34.12%
1994	692.99	266.66	2.67%	38.48%	219.46	47.20	31.67%
1995	733.27	283.99	6.50%	38.73%	243.79	40.20	33.25%
1996	781.73	304.33	7.16%	38.93%	272.23	32.10	34.82%
1997	830.09	312.36	2.64%	37.63%	286.46	25.90	34.51%
1998	879.10	318.41	1.94%	36.22%	313.51	4.90	35.66%
1999	928.73	328.12	3.05%	35.33%	329.42	-1.30	35.47%
2000	976.53	338.08	3.03%	34.62%	344.28	-6.20	35.25%
2001	1,021.83	362.55	7.24%	35.48%	395.55	-33.00	38.71%
2002	1,075.56	384.94	6.18%	35.79%	381.84	3.10	35.50%
2003	1,139.75	415.21	7.86%	36.43%	383.61	31.60	33.66%
2004	1,202.96	451.47	8.73%	37.53%	415.77	35.70	34.56%
2005	1,254.06	488.33	8.16%	38.94%	447.13	41.20	35.65%
2006	1,325.80	502.61	2.92%	37.91%	463.61	39.00	34.97%
2007	1,398.88	544.02	8.24%	38.89%	507.02	37.00	36.25%
2008	1,448.39	575.74	5.83%	39.75%	550.74	25.00	38.02%
2009	1,395.87	621.58	7.96%	44.53%	529.68	91.90	37.95%
2010	1,453.62	660.67	6.29%	45.45%	518.07	142.60	35.64%
2011	1,526.50	683.41	3.44%	44.77%	533.71	149.70	34.96%
2012	1,602.80	703.31	2.91%	43.88%	566.51	136.80	35.34%
2013	1,693.70	722.19	2.69%	42.64%	604.19	118.00	35.67%
2014	1,789.00	740.29	2.51%	41.38%	653.29	87.00	36.52%
2015	1,889.10	760.55	2.74%	40.26%	697.55	63.00	36.93%

Table 3: Public Expenditure as paid for by Taxation & Borrowing

The first thing one ought to notice from the above figures is that far from being cut, public expenditure is actually set to rise throughout the period of this government, albeit by a smaller percentage than in recent years. This is something on which I commented in a previous blog, The Decline of the BBC and the Deception of Modern Poilitics, where I pointed out that the current government’s cuts in public expenditure, are cuts to the previous government’s planned expenditure rather than to expenditure itself.

That is not to say, of course, that the cuts being implemented are not real. The number of policemen on the street is clearly being reduced; local authorities are receiving small grants; and some government departments are certainly having their budgets pared down. Other departments, however, are still growing, principally the Departments of Health and Work and Pensions. Nor, in the case of the latter, is this purely down to the expected rise in unemployment, which the opposition will claim is a self-inflicted wound brought about by the government’s rush to cut the deficit. The biggest increase, in fact, is due to pensions. In 2011, the first of the post war baby-boomers turned 65, and with more and more of us retiring over the next two decades, and all of us living longer, the cost of pensions is set to rise quite steeply.

This is particularly alarming with respect to public sector pensions. After the war, the public sector grew faster than any other part of the economy, particularly in the area of health, with the founding of the National Health Service. There are now 6.27 million people working in the public sector, 21.5% of the working population, and our collective liability with respect to their pensions currently stands at £1.13 trillion, for which no provision has been made, and which will therefore have to come out of general taxation. Indeed, it could be said that this is actually a far bigger problem for the country than the official national debt, measured purely in terms of treasury bonds. What it also means is that, even having made all the high profile cuts to public services it thought it could get away with – without causing the kind of riots we have seen in Greece and are soon, I believe, to see in Italy – the government still hasn’t solved the underlying structural problem. Indeed, it has hardly scratched the surface, and with lower than expected growth, it is now going to have real problems achieving its deficit reductions targets. In fact, Labour are currently saying that due to the lower rate of growth, the government is going to have borrow an extra £100 billion parliament. If my calculations are correct, however, this estimate may even be optimistic. For if we assume that public expenditure and taxation remain the same, the borrowing requirement could actually be as high as shown in Table 4.

Year	UK GDP (£billion)	UK Public Expenditure (£billion)	Annual % increase in Public Expenditure	UK Public Expenditure as % of GDP	Expenditure paid for by taxation	Expenditure paid for by borrowing	Taxation as % of GDP
2010	1,453.62	660.67	6.29%	45.45%	518.07	142.60	35.64%
2011	1,526.50	683.41	3.44%	44.77%	533.71	149.70	34.96%
2012	1,541.77	703.31	2.91%	45.62%	544.94	158.37	35.34%
2013	1,564.89	722.19	2.69%	46.15%	558.24	163.95	35.67%
2014	1,596.19	740.29	2.51%	46.38%	582.88	157.41	36.52%
2015	1,636.09	760.55	2.74%	46.49%	604.13	156.42	36.93%

Table 4: Increased Borrowing Required as a Result of Lower Growth

Over five years this would amount to a total increase in borrowing of £231 billion, with the result that the deficit would remain virtually constant.

Not, of course, that this could actually happen. For if the government failed to meet its deficit reduction targets, the bond markets would almost certainly respond by increasing the cost of the £12 billion we currently have to borrow each month. Indeed, yields would very quickly reach Italian levels and the whole house of cards would then come crashing down.

The question one has to ask, however, is whether Ed Miliband’s plan is any more credible. For with the bond markets forcing ever more severe austerity measures on Italy and Greece, do we really believe that under similar circumstances they would allow the UK to borrow additional money in order to provide a fiscal stimulus? Dream on!

So what is the alternative. One option, of course, would be to increase taxation. The result of this, however, is shown in Table 5.

Year	UK GDP (£billion)	UK Public Expenditure (£billion)	Annual % increase in Public Expenditure	UK Public Expenditure as % of GDP	Expenditure paid for by taxation	Expenditure paid for by borrowing	Taxation as % of GDP
2010	1,453.62	660.67	6.29%	45.45%	518.07	142.60	35.64%
2011	1,526.50	683.41	3.44%	44.77%	533.71	149.70	34.96%
2012	1,541.77	703.31	2.91%	45.62%	566.51	136.80	36.74%
2013	1,564.89	722.19	2.69%	46.15%	604.19	118.00	38.61%
2014	1,596.19	740.29	2.51%	46.38%	653.29	87.00	40.93%
2015	1,636.09	760.55	2.74%	46.49%	697.55	63.00	42.64%

Table 5: Increased Taxation Required to Avoid Further Borrowing

At first glance, this may not seem an unworkable solution. But if one looks more closely, one will see that to make up the entire additional deficit through taxation would require an overall rise of more than 20% in tax rates. This would mean an extra 5p on the basic rate of income tax, another 4% on VAT, and equivalent rises to all other taxes. Not only would this have even more depressing effect on the economy, however, it is also likely to be counter-productive in terms of tax revenues. For as is well known, the relationship between tax rates and tax revenues is a bell curve. As the rate goes up, revenues also initially rise until a certain tipping point is reached. Then they start to decline. If one examines Table 3, one will see that the normal range of overall taxation in the UK is between 34% and 37%. One of the reason for this is that anything significantly above this has such a depressing effect upon the economy that less revenues are produced. To raise overall taxation to 42%, therefore, would be economic suicide.

If we cannot plug the additional deficit either with additional borrowing or additional taxation, this means, therefore, that if George Osborne cannot find alternative, non-fiscal ways to stimulate growth, such as his much trailed ‘credit easing’, he will have no choice but to cut public expenditure even further, as shown in Table 6.

Year	UK GDP (£billion)	UK Public Expenditure (£billion)	Annual % increase in Public Expenditure	UK Public Expenditure as % of GDP	Expenditure paid for by taxation	Expenditure paid for by borrowing	Taxation as % of GDP
2010	1,453.62	660.67	6.29%	45.45%	518.07	142.60	35.64%
2011	1,526.50	683.41	3.44%	44.77%	533.71	149.70	34.96%
2012	1,541.77	681.74	-0.25%	44.22%	544.94	136.80	35.34%
2013	1,564.89	676.24	-0.81%	43.21%	558.24	118.00	35.67%
2014	1,596.19	669.88	-0.94%	41.97%	582.88	87.00	36.52%
2015	1,636.09	667.13	-0.41%	40.78%	604.13	63.00	36.93%

Table 6: Required Additional Cuts in Public Expenditure

Of course, this will be enormously unpopular; and the opposition is bound to make a lot of political capital out of it. They will say that this is all the fault of the government, for rashly attempting to cut the deficit so fast. The fact that it was they who, when in government, arguably got us into this situation in the first place, will of course be conveniently over looked, as will the even more important fact that any government in this position would have to do exactly the same thing. For if we kept on spending money at the same rate, while unable borrow more or raise more in taxation, the unavoidable truth is that one day the treasury would simply run out of money, the country would be bankrupt, and all hell would break loose.

Not that it would ever actually come to that of course. Before then, the government would naturally ask the IMF for a help. As a condition of any loan, however, the IMF would impose a strict austerity programme. One way or the other, therefore, public expenditure would be cut. The only real question is whether we would be forced into, like Italy and Greece, or would do it of our own accord.

Of course, George Osborne’s non-fiscal stimulus, which he is going to announce on 29^th November, may yet work. Moreover, the government will almost certainly take other steps to close the gap such as selling off assets, like Northern Rock. At £0.75 billion, however, it will take a lot of Northern Rocks to make up the addition £50 billion per year the government is likely to need. This is not to say, that one way or the other, it still might not be able to muddle through. After all, we are nowhere near as close to the brink as Greece. The one thing that is certain, however, is that for the present 2012 is going to a difficult year.

The Decline of the BBC & the Deception of Modern Politics

2011-03-03T05:02:00.000-08:00

Apart from last year’s expenses scandal, one of the things which most brings British politicians into disrepute, I believe, is their general refusal to answer a direct question, and to launch instead into clearly rehearsed collections of loosely bolted together phrases and slogans, which are virtually meaningless in their generality and ambiguity, and have already been used ad infinitum by most of their party colleagues. Not only do they consequently present themselves as evasive dissemblers, who would thus appear to have something to hide, it also makes them seem like mere mouthpieces for their party machines, without the wit to maintain a conversation on their own. As a result, it always takes me slightly by surprise when, once out of office, promoting their memoirs on late night culture shows, the same politicians suddenly start talking freely, candidly, and with a great deal of both intelligence and humour on a whole range of subjects about which I would never have imagined them to have been interested. Why, I always want to ask, if they were real human beings all along, didn’t they reveal this to us when, as a consequence, I might actually have voted for them?

The answer, of course, is that it is fairly hard to speak one’s mind or say anything even remotely original while staying ‘on-message’, and that while, in attempting to do so, a more naïve politician – if such a things exists – might have entertained us for a while, eventually, of course, he would have put his foot in it, not by saying anything inherently objectionable, but by voicing a view sufficiently different from his party’s official policy for some predatory interviewer to have immediately pounced on the error, picking away at the exposed seam, until what was initially just a slip of the tongue had become a ‘Rift in the Party’, for which the errant individual would ultimately have been required to fall on his sword. Indeed, picking up on the careless phrase, and continually returning to it until the interviewee has either said something else he is going to regret, or has thoroughly tied himself up in knots trying to escape his entanglement, would now seem to be one of the most common tactics employed by TV journalists on most news and current affairs programmes. Moreover, the communications departments of all the main political parties are well aware of it, and make sure that all their spokesmen and women are well rehearsed before they appear in front of the cameras. In a very real sense, therefore, we get the politicians we allow our media to create for us.

Nor is dogged adherence to the pre-prepared answer, regardless of the question, the only way in which the media and our politicians have colluded to render both politics and the media’s current affairs offerings progressively more empty. For not wanting to answer any real questions also means, of course, not wanting to get into any real debate. One can trade satirical jibes, point fingers at the government for going back on its promises, or accuse the opposition of having no answers of its own; but carefully reasoned arguments on the specifics of particular policies would not only bore the average viewer – or so the TV companies seem to believe – it would also require both the politicians and the TV presenters to have some grasp of the detail one suspects they now largely leave to their backroom staff.

Even this wouldn’t be so bad if those backroom staff – or at least those working for the media – were occasionally allowed to produce and broadcast some in-depth analyses of their own. But this too seems to be a thing of the past. Even the BBC’s flagship current affairs programme, Newsnight, now clearly devotes more time to politicians talking at each other across a table than it does to the analysis presented beforehand by one of its own staff.

This, I suspect, is largely due to the BBC’s twenty-four hour news coverage, which requires even some of the corporation’s most senior journalists to do their daily two-hour stint in front of the cameras, continuously reading from a looped autocue, when they could be far better employed properly preparing the evening’s broadcasts. More importantly, the need to fill these endless hours with something – usually by going across to the network’s correspondent at Heathrow airport, who is standing in front of an empty stretch of tarmac, still awaiting the arrival of some important person’s plane and hasn’t had anything interesting to say for the full three and a half hours he has already been there – has clearly been responsible for a steady erosion of even the most basic journalistic standards. Assembling a fifteen or thirty minute news bulletin requires clarity and concision, a disciplined approach which both hones a journalist’s analytical skills and forces him or her to focus on what is really important. Filling twenty-four hours with the same material requires only a flare for the inane and the kind of visceral terror of ‘dead air’ which can drive even seasoned broadcasters to ask people ‘what it’s like’ to be stranded at an airport terminal for four days due to snow, strikes or volcanic ash.

The worst of it is that most of the latest generation of news broadcasters actually seem to believe that being photogenic and maintaining continuity between items is not only all that the job requires of them, but that fulfilling this gruelling task is more than enough to merit their sizable salaries. As a result, the news just wafts past them, without it seeming to occur to them that, just for once, they might look below the surface or open up the story to further scrutiny.

To take some recent examples, consider, for instance, the current regulations with regard to control orders for suspected terrorists, which, at the last election, both parties now in government promised to address, and which the Liberal Democrats promised to scrap altogether, introducing instead the use of intercept evidence in court, so that terror suspects could be charged and put on trial, instead of simply being detained under house arrest. It was to the dismay of many, therefore, that in January this year the government announced that although it was relaxing some of the rules, for reasons of security, control orders would certainly not be abolished in anything like the near future.

Of course, the opposition were delighted. They immediately accused the Liberal Democrats, in particular, of abandoning their principles in favour of their ministerial positions, a jibe which, for a while at least, threatened to undermine the collation, and which naturally became the one part of the story which the news media therefore covered. No one asked whether control orders actually achieved anything other than tarnishing Britain’s reputation for upholding civil liberties. No one asked what the threat to national security might be in using intercept evidence in court, or how it was that other countries managed to do this without it undermining ongoing security operations. No one even hinted that it might be because the production of such evidence would alert people to how routinely MI5 listen to our telephone conversations and read our emails without even the pretence of justification. Indeed, were I a conspiracy theorist, I might regard this silence as suspicious. As it is, I merely think it symptomatic of a fourth estate which now regards itself more a part of the entertainment industry than a seeker of truth and guardian of our freedoms.

Nor is this the only example of a political news story flashing across our television screens to be instantly forgotten without even the most basic questions being asked. In fact, I could cite almost any of the initiatives introduced by the present government since it came to power, and the same pattern would apply. To take just one more example, consider the recently announced reforms of the National Health Service, which centre on the abolition of Strategic Health Authorities and Primary Care Trusts, thus reducing NHS bureaucracy by 24,000 posts. Naturally, the opposition declared that such an upheaval would lead to chaos, cost more money, worsen the service, and result in people needlessly dying. The government then defended the measures by pointing out that expenditure on the NHS is one of the few areas that is not being cut in the general effort to reduce the budgetary deficit, and that the main aim of the reforms is to put more decision-making powers into the hands of GPs, to whom many of the responsibilities of the abolished bodies will now be effectively reallocated. And that was it. End of discussion. Not only did no one think it worthwhile rehearsing the reasons why reform of the NHS might be a good idea, or look again at the problems in order to consider whether the proposed measures stood any chance of being a success, they didn’t even bother to note that, superficially at least, something very like this was tried by Mrs. Thatcher in 1990, when she introduced the ‘internal market’ into the NHS by having GPs ‘purchase’ services on behalf of their patients, an initiative, which, if I remember correctly, failed quite miserably. Once again, therefore, the trivial political sniping was headlined, while the real issues of substance were completely ignored.

The problem, however, is not simply that in constantly trying to catch politicians out on the little things, while at the same time allowing them to get away with empty rhetoric on anything of substance, the media are failing to provide the kind of news and current affairs service a modern democracy needs. In reducing political debate to the trading of emotive sound bites, and in thus allowing politicians to appeal to the audience’s prejudices rather than its reason, they also encourage one of politics’ very worst aspects, its irrational tribalism. Anyone who has watched Prime Minister’s Questions, broadcast each Wednesday from the House of Commons, for instance, will be aware of what a gladiatorial circus it is, with each side of the house baying for their man. This is not about political debate; it is about the alpha males of two opposing clans going head to head and rousing their supporters in the process. Indeed, there is now a slot on the BBC’s programme which accompanies PMQs, in which viewers’ emails and text messages are read out giving their opinions as to which of the two party leaders, David Cameron or Ed Miliband, won that particular round.

Of course, it can be argued that it was ever thus. Since the Glorious Revolution of 1689, when parliament effectively became sovereign, the House of Commons has seen a good many robust and highly personal battles. But few, I suspect, were ever as hollow or as meaningless as today’s stage-managed confrontations. One of the reasons for this, I believe, is that, in a very important sense, politics in Britain – or, at least, politics as we knew it in the 20^th century – actually came to an end in November 1990, when Margaret Thatcher finally resigned, exactly one year after the fall of the Berlin wall. Even the Iron Lady’s eleven years in office, however were more of a postscript to the political century than the main event, which probably occurred some time during the Attlee government of 1945 to 1951, when the Labour Party actually fulfilled its original purpose and, in doing so, effectively made itself obsolete.

The idea that a political party might only have one purpose, and that it could accomplish that purpose to such extent that it was no longer required, may, of course, sound slightly odd. But created to secure a fairer slice of the national cake for ordinary working men and women, it can be argued that with state pensions and universal suffrage having already been secured, in creating both the National Health Service and a universal social security system, and in providing a better system of state education and more affordable social housing, the Attlee government did all it needed to do in order to fulfil the Labour Party’s mission. It certainly seemed that way to many who witnessed the post-war transformation. I know because I, myself, was brought up on a local council estate in the 1950s. What it is important to realise, however, is that a 1950s council estate was nothing like the high-rise ghettos subsequent Labour governments built in the 1960s. Nor was it even remotely comparable to the ‘sink’ estates one now finds in most inner cities, where over two million people live on social security benefits without ever having a job. In the 1950s there was very little unemployment; Britain was actually recruiting workers from the Commonwealth; and the affordable homes which local authorities were building to house this workforce – or, at least, the indigenous part of it – consisted very largely of three-bedroom, semi-detached houses, which now retail at a price somewhere around the national average. A highly significant characteristic of the estate on which I grew up, for instance, was that the houses all came with what would now be regarded as enormous gardens, which were all, for the most part, lovingly and sometimes quite competitively maintained, with fruit trees, vegetable plots and immaculately mown lawns, fringed with flower beds. Being social housing, most of the occupants, of course, were married couples with two or three children. Most of the men had served in the war, and were then in their mid-thirties. They were hard-working, neighbourly and quietly aspirational. They had lived through the hard times, fought in North Africa, Italy, France and Burma, and were now enjoying the good life. Some families even owned cars. They still voted Labour, of course – the party that had made all this possible – but there was nothing ideological in their stance. If anything, they were apolitical and were generally suspicious of anyone who wasn’t.

They were certainly different from the new wave of Labour MPs who entered parliament in 1945 and who went on to lead the Labour Party in the 1960s and 70s: men like Michael Foot and Tony Benn, who saw the end of the war as the beginning of a new international era of social justice, and who regarded the centrally planned economy, which had won Britain the war – or so Tony Benn often claimed – as an appropriate model for helping us ‘win the peace’. What followed in the Wilson and Callaghan governments of the 1960s and 70s was consequently far more of an ideologically inspired attempt to change the social and economic structure of Britain than it was a programme of measures directly intended to improve the lot of working people. Indeed, in the latter regard, it was a complete and utter failure. For as I pointed out in my essay, ‘Economic Misunderstanding: The Keynesian Legacy’, Labour’s economic and industrial policies during those two decades twice took the country to the brink of economic collapse, from which working people certainly didn’t benefit, and were probably the most to suffer. Its programme of nationalisation led to a steady decline in blue-collar jobs, for instance – particularly in manufacturing – while its increases in public expenditure, paid for out of borrowing and printing money, led to devaluation, spiralling inflation, and financial hardship for those with the least reserves to fall back on. It was only when the economy was in ruins and the working class couldn’t stand it any more, in fact, that the insanity of this country’s fifteen year experiment with state socialism was finally brought to an end.

With this in mind, the claim that in returning the country to economic prosperity, and thus demonstrating that a free market economy was of greater benefit to working people, Margaret Thatcher also brought an end to politics as we had known it, should now, I hope, seem a little less fanciful. After all, it is clearly something which Tony Blair also recognised. In re-branding the Labour Party as New Labour, and changing the wording of Clause IV of the party’s constitution, so that future Labour governments would no longer be bound to a policy of ‘public ownership’ of ‘the means of production, distribution and exchange’, he clearly understood that the old fashioned socialism which had defined so much of the politics of the 20^th century was now an anachronism which had no place in modern Britain. It also explains why Ed Miliband, in particular, should have so little of substance to add to the current debate. For with the Labour having fulfilled its original mission in the 1940s, experimented with state socialism in the 60s and 70s, and repackaged itself as a slightly more caring version of the Conservative Party in the 90s, the question its new leader now has to ask is where he takes the party from here. It is little wonder, therefore, that, while he ponders this, he should prefer to simply repeat such pithy observations as that the government is gambling with the country’s future, than that he should launch a whole raft of new policies without first establishing an overall direction.

What is far more significant, therefore, is the fact that he is not the only one who currently prefers rhetoric to substance. For, at present, the government seems equally determined to gloss over reality while it diverts our attention with political slapstick. Take, for instance, the main ongoing argument over the budgetary deficit, which the government wants us to believe it is tackling with a rigour necessitated by the previous administration’s fiscal indiscipline, and which the opposition naturally claims is rash, doctrinaire and potentially ruinous. With so much vehemence on both sides, the one thing one would imagine was certain, therefore, is that the cuts to public expenditure, which the government is currently implementing, have got to be fairly substantial. It may take some readers by surprise, therefore, to discover that according to the government’s own figures, published in its comprehensive spending review of 2010, public expenditure is actually budgeted to rise over the next five years, from £662 billion in 2010 to £740 billion in 2015, a total percentage increase of 11.95%, at an average annual growth rate of 2.39% as shown in Table 1.

Table 1: Forecast Public Expenditure 2010 - 2015

How is this possible, you ask. After all, in September, we all listened in hushed expectation while George Osborne listed a whole raft of expenditure reductions to the House of Commons. The announced cuts, however, were not cuts to actual expenditure, but cuts to the planned or projected expenditure of the previous government, forecast at a time when it believed that the property boom which was then driving growth would go on forever. All the present government has done, therefore, is restore some sense of reality. Far from taking radical action to reverse the policies of the previous government, in fact, its 2015 target for public expenditure as a percentage of GDP – 40% – is exactly what it was in 2008, before the recession: a long way from the 33% rigorously maintained by Ken Clarke, Chancellor of the Exchequer during the last Conservative government. Indeed, given the sluggishness of current growth – nowhere near 2.39% per annum – it is unlikely that it will even achieve this very modest target.

What this means, therefore, is that both the government and the opposition have been claiming that current measures aimed at reducing public expenditure are far more radical than is actually the case. Why? Quite honestly, I don’t know. The opposition, of course, would have claimed that any cuts were too severe and potentially disastrous no matter how small they were. The government, on the other hand, needed to send a message to the credit rating agencies, and possibly thought it better to oversell the bad news at the beginning, when it was expected, so as to deliver better news later on, when things don’t actually turn out to be as painful as people are now fearing. Too cynical? Maybe. But it is typical of the smoke and mirrors which characterises much of modern politics, and which results, in part, I believe, from career politicians having less of a personal – and more of a professional – relationship with the policies they espouse.

In this regard, they are a bit like lawyers who could, theoretically, argue either side of a case. They don’t need to believe that what they are saying is true; they are paid to convince others that it is, or, at the very least, to cast doubt on the case being presented by the other side. It is thus a professional skill in which most of our politicians are now trained from a fairly early age. Indeed, it is actually quite illuminating to compare the educational backgrounds and early careers of politicians on both sides of the house, which in many cases, are remarkably similar. Take for example the Prime Minister and the Chancellor of the Exchequer on the one hand, and the Leader of the Opposition and Shadow Chancellor on the other. David Cameron, as is well known, went to Eton, and then to Brasenose College Oxford, where he studied Philosophy, Politics and Economics or PPE, a course only offered by Oxford University and designed specifically for future politicians. George Osborne, the Chancellor of the Exchequer, also went to Eton, and then to Magdelen College Oxford, where he studied Modern History. Admittedly, Ed Miliband went to a far less famous and fairly unremarkable state school; but he also went to Oxford – Corpus Christi – where he also studied PPE. Finally, to round out the front bench pairings, there is Ed Balls, the Shadow Chancellor, who after attending a rather exclusive private school in Nottingham, went to Keble College Oxford, where he also studied – yes, you guessed it – PPE. What is even more significant is the fact that all four of them went fairly quickly from Oxford into party political jobs in or around Westminster: David Cameron and George Osborne at the Conservative Research Department, Ed Miliband and Ed Balls at the Treasury, under Gordon Brown. None of them, that is, had much of a career outside politics before joining the Westminster village. They are all simply career politicians, as, indeed, are nearly all the rest of the front bench teams on both sides of the house.

Having chosen to study PPE, in fact, many of them will have actually chosen a career in politics even before they left school. What this also means, therefore, is that unlike the men and women who entered the House of Commons in 1945, desperate to change the world, few of those going into politics today can realistically be said to do so out of any burning conviction. I do not say this to impugn anyone’s character. Indeed, it might have been better if some of the 1945 intake had had a little less conviction. But it is clear that, for many of today’s politicians, it is a career in politics, rather than the substance of politics, that is the main attraction. What’s more, the political establishment seems quite happy to embrace this, eagerly taking those with talent and ambition under its wing and preparing them for their later roles. The problem is that this easy graduation from Oxford to Westminster, without tasting much of real life on the way, seems almost to make the latter an extension of the former. It is why one sometimes gets the impression that both David Cameron and Ed Miliband are merely playing at politics, and why, too, I believe, David Cameron was never going to be as radical and unflinching as Margaret Thatcher in facing our current economic problems. For it not only takes considerable courage – or considerable foolhardiness – for a career politician to adopt a position well outside the margins of the prevailing consensus, it also requires a sense that this is about something more than just politics, a sense which I do not believe that either David Cameron or Ed Miliband have yet grasped.

My worry is that, in the case of David Cameron, having failed to face this greater reality from the outset of his government, reality may yet come back and bite not just him, but the rest of us as well. For with the current instability in North Africa and the Middle East forcing up commodity prices, and the effect this is likely to have on the world-wide economic recovery, there is a real chance, I believe, of another recession this year, not because, as Ed Miliband keeps telling us, the government is cutting public expenditure too much and too quickly, but because it is not cutting enough, and is not doing what Margaret Thatcher did when she came to power in a similar situation, which was to also cut taxation. For as I pointed out in ‘Economic Misunderstanding: The Keynesian Legacy’, there is an inverse correlation between public expenditure and taxation on the one hand, and private sector employment on the other. That is to say that by raising public expenditure, and raising taxation to pay for it, one effectively destroys jobs in industry. Equally, however, by cutting public expenditure, one can also stimulate jobs in the private sector. But only if one cuts taxes at the same time, thus reducing the public sector overhead on businesses and, in particular, the cost of employing people. Just as importantly, if one cuts income tax, one also takes the pressure off wage inflation. Indeed, had the government implemented the Liberal Democrat’s plan of raising the income tax threshold to £10,000, all lower paid workers would now be £600 per annum better off, which, for those on a salary of £15,000, would have been an effective pay rise of 4%, which is currently, more or less, the annual rate of inflation. This, therefore, would have allowed all employers to keep pay rises to a minimum, thus maintaining and even increasing employment in the private sector. As it is, instead of cutting taxes, the government has actually increased them by putting up VAT, effectively adding to inflation. With domestic demand still flat and an export-led recovery still a far-off dream, if the Bank of England raises interest rates in the near future, as is expected, in order stop inflation getting out of hand, another recession is, therefore, a distinct possibility.

What will make it worse is the fact that, with Ed Miliband saying ‘I told you so,’ and no one there to contradict him, least of all the media, it is going to be very difficult for the government to do what it should have done in the first place by making real cuts to public expenditure and cutting taxation in order to boost growth. Margaret Thatcher would do so. But then she didn’t seem to mind the visceral hatred taking tough decisions earned her in some quarters. For her it was more important to do the right thing than be liked. I’m not so sure, however, that David Cameron feels the same way. Nor will the media help him. Indeed, they will love the circus created by another crisis. Nor, during the political slanging match that will ensue, will anyone attempt to analyse the real structural problems in our economy which have brought us to this point. Even less will they realise that we now have a political system, which, designed for a two dimensional clash of ideologies, left and right, is no longer fit for purpose, and is probably incapable of solving the problems. For with both sides playing to the crowd, and the media simply egging them on, no one will see past the ratings, or care that it is you an I that are going to have to pay the price.

Human Frailty & The Structure of Scientific Revolutions, with an Introduction to the Philosophy of Immanuel Kant

2011-02-06T05:45:00.000-08:00

Since my article on The Provisional Nature of Mathematical Models, some people have inevitably asked me whether I really mean to say that the computer models of climatologists are as cavalierly designed and populated as the Drake equation. The answer, of course, is ‘No’. Given the funding that has gone into climate science over the last thirty years, and the hundreds if not thousands of researchers it employs, I am as sure as it is possible to be in such matters that every variable that is included in these models has been meticulously considered, the relations between them painstakingly calculated, and the values assigned to them drawn from reliable and statistically meaningful datasets. If I have any doubt at all, it is simply that I do not know this for a fact.

This, in itself, however, is one of the great problems with respect to the whole climate change debate. For few of us, I suspect, other those directly involved in the climate science industry, have any detailed knowledge of any of the mathematical models upon which the debate is based. We don’t actually know what variables these models comprise, we are not privy to how they relate to each other, and we have little or no idea where the data to populate them comes from. For the most part, therefore, we are simply asked to take all this on trust. And this is something which I, personally, always find somewhat difficult. I am reminded, in fact, of the motto of the Royal Society, ‘Nullius in verba’, ‘By nobody else’s word’, which was chosen to express the Society’s rejection of any claim to knowledge based on ‘authority’, particularly the authority of the church. Science, it believed, had to be transparent and open to scrutiny. Otherwise it would be yet another form of dogma, ministered to by another unaccountable and unchallengeable elite. And although I have no reason to suspect any member of the climate science community of actually harbouring such authoritarian impulses, the principle remains.

Of course, it will be pointed out that, in 1660, when the Royal Society was founded, it would have been possible for someone to have read every scientific treatise ever written. Now, in stark contrast, with hundreds of thousands of scientific papers published every year, even men like Robert Boyle, Christopher Wren and Robert Hooke would be hard pressed to read and digest them all. Indeed, with ever increasing specialisation, particularly at post-doctoral level, when scientists are probably at their most productive, it is possible that, even within a particular field, some researchers today may have only a partial view of what others, around them, are working on. We have no choice, therefore, but to accept the work of others on trust. Otherwise science would grind to a halt. It is for this reason that we have such rigorous standards of documentation and peer review, critical parts of an extensive system of independently operating checks and balances, which, like the human immune system, has evolved to keep the body of science both whole and healthy.

Strange as it may seem, however, it is precisely this which is part of my concern. For the collective and distributed management of science as an institution gives it what could be described as an intelligence of its own, with emergent properties which greatly amplify some of the latent attributes of the individuals that make up its collective body. In this regard, it is a bit like one those massive flocks of starlings, which gather at dusk in early autumn, and which, for a while each evening, soar and swirl in the gathering twilight, their movements determined by deep undercurrents in the collective psyche of the swarm, none of which may be discernable in any of the individual birds. In fact, taken on their own, none of the individual members of the flock ever exhibit this kind of behaviour. It is only as a member of the collective that it is induced, and it is only at the level of the collective that the pattern emerges. And the same is true within science.

Crucially, for instance, it is what gives scientific revolutions, as described by Thomas Kuhn, their characteristically cyclical structure, in which periods of slow accretion are followed by moments of sudden and catastrophic change, often without adequate reason or cause. This is due to the fact that where scientific theories are later discovered to be incorrect, counter-evidence usually accumulates over time. At first, as a consequence, the problems tend to be regarded as slight. When inconsistencies occur the typical response is to introduce additional subsidiary theories to explain the exceptions to the rule. But the main theory remains intact. Eventually, however, one of two things invariably happens. Either some anomalous fact is discovered which just cannot be explained away – as in the case of the orbit of the planet Mercury with respect to Newtonian physics, for instance – or the sheer weight of additional ad hoc theories begins to make the main theory unworkable. The model simply becomes too complicated. And it is at this point that, historically, someone has generally come along to turn the whole model upside down and make us look at the problem in a different way. It is what Kuhn calls a ‘paradigm shift’, the most obvious example of which, of course, is the Copernican revolution of the 16^th century, which replaced the former terracentric model of the universe with the heliocentric model of our solar system. From Lavoisier to Einstein, Darwin to Stephen Hawking, however, paradigm shifts of this kind have gone on at every level in science right up to the present.

Of course, most scientists today – or those, at least, who have read Thomas Kuhn, which is probably very few – like to believe that this process has now come to an end and that, in their particular science at least, they have finally reached the truth. In this, however, they are exhibiting just the kind of behaviour that gives scientific revolutions their sudden or catastrophic aspect. For, historically, scientists have tended to be very conservative. In most cases, as a result, proposed paradigm shifts have usually been met with stiff resistance, the majority of scientists refusing to accept that everything they have believed for most of their working life could have been fundamentally wrong. The early adopters, as a consequence, have tended to be the exceptions, mavericks whom the establishment has often shunned, particularly as, at the beginning at least, most new theories have little supporting evidence. The change, when it comes, therefore, has often been as irrational as the resistance to it.

Probably the best example of this fundamental opposition between scientists of vastly different character on the cusp of revolutionary change is that demonstrated by Antoine Lavoisier and Joseph Priestley, who, in 1774, prior to Lavoisier, almost certainly discovered oxygen. By focusing the sun's rays on a sample of mercuric oxide, he produced a gas which he described in a paper to the Royal Society as being ‘five or six times better than common air for the purpose of respiration, inflammation, and, I believe, every other use of common atmospherical air.’ The only problem was that he didn’t call it oxygen. Indeed, he refused to call it oxygen for the next thirty years, even though, by the time of his death in 1804, that was what everyone else was calling it. Instead he called it ‘dephlogisticated air’.

Since 1667, when the physician Johann Joachim Becher first postulated its existence, phlogiston had been generally accepted as the element within all combustible materials, which both accounted for that combustibility and explained why these materials lost mass when burned, the phlogiston in them being given off as a gas. The one anomalous fact the theory couldn’t explain was why some materials, mostly metals, actually gained weight when heated; and it was this that Lavoisier seized upon in propounding his own new theory, which, using some of Priestley’s own data, placed this highly reactive new gas at the centre of a whole new chemical paradigm, one which, today, we recognise as modern chemistry. Nor did it take very long for the rest of the world to see the coherence and simplicity of this revolutionary new insight. By 1789, when it was translated into English, Lavoisier’s Traité Élémentaire de Chimie (Elementary Treatise on Chemistry) was regarded worldwide as the primary textbook on this new analytical science. Right up to the bitter end, however, Priestley refused to accept it, and went on producing papers and giving lectures on phlogistic chemistry almost to the day he died.

Why he remained so intransigent for so long has long been a subject for speculation. Pride? Jealousy? An embittered hatred of what he called ‘French principles’? In the end we’ll probably never know. The more important point, however, is that the history of science is littered with such personal and emotional conflicts. Nor are the human traits which produce them in any way diminished when institutionalised and made global. They are merely channelled in different ways, in which the system, itself, has come to play an important part. Indeed, anyone who has ever worked in a university will know that there are no politics more mean-spirited and vicious than university politics. In the battle for honours, the struggle for funding, and the competition to secure the services of the best doctoral and post-doctoral researchers, the tense, ego-driven dynamic of science is played out annually throughout the academic world, with most of the rewards, of course, going to those whose reputations are already established and who, through the allocation of resources and the bestowal of preferment, are ideally placed to protect and perpetuate their own positions. In his book Against Method, Paul Feyerabend even suggested that vested interests had already become so entrenched in most sciences by the last quarter of the 20^th century that any further paradigm shifts were simply impossible. In physics in particular, it was his view that even though many of the main theoretical building blocks had become so riddled with inconsistencies as to have brought the whole subject to an intractable impasse, the majority of physicists were either unaware of this – focused as they were on resolving the problems in their own narrowly defined areas – or had too much at stake to admit it.

Whether this was actually true in the 70’s and 80’s I don’t know. Much of the physics about which Feyerabend wrote was prior to Steven Hawking, who has, himself, of course, been responsible for more than one paradigm shift since then. It is possible, therefore, that Feyerabend simply despaired too early, and that things inevitably have to get pretty bad before a paradigm shift can occur. Moreover, I’m inclined to believe that no matter how institutionally moribund a science becomes, genius will always shine through and find willing supporters. It is just that the bigger the science, the harder it is to turn the juggernaut around.

Nor is this simply a matter of vested interests and institutional conservatism. For at the heart of the matter there is also a fundamental philosophical issue: one that is driven by the fact that, ontologically, the majority of scientists implicitly espouse a common sense realism, which assumes the existence of an objective universe which it is the role of science to describe. It is for this reason that scientists, for the most part, don’t like the idea of scientific revolutions, and why, if they countenance them at all, they place them firmly in the past, where an unfortunate detour down a blind alley may once have required a major change of direction. The idea that this could still yet happen again, however, is almost unthinkable. For given the objective reality of the universe, mistakes apart, our scientific description of it should be an ever more accurate approximation, converging on the truth. Once achieved, moreover, this ought to make further fundamental changes impossible.

Reasonable as this may sound, however, there is something fundamentally wrong with this whole ontological paradigm. In particular, it fails to take into account the very profound implications of the fact that not everything we know about the universe is learnt from it. Indeed, as Immanuel Kant pointed out more than two hundred years ago, not only do we know the truth of certain axiomatic or ‘categorial’ concepts a priori – that is, prior to experience – but it is only through the possession of these concepts that any experience is possible at all. To use a more modern way of talking about these things, this is because they constitute something like our fundamental operating system, a small core of basic expressions and key functions, without which our minds would remain unformatted hard-drives incapable of receiving information.

First among these ‘laws of thought’, as they are commonly called, are the basic rules of logic. These include the law of non-contradiction and excluded middle, which states that a proposition is either true or not true – that it cannot be both and cannot be neither – and is thus an expression of the same fundamental binary principle which is the basis of all computing. In addition to the rules of logic we then have the concept of quantity or number, from which, in conjunction with the rules of logic, all of mathematics can be derived, as Bertrand Russell demonstrated in Principia Mathematica. Add the concept of causality, or more particularly our unshakable belief in its necessity – that everything that happens must have a cause – and, again in conjunction with the laws of logic, one gets inductive reasoning and the whole of science. If we finally add our spatial and temporal awareness, from which we derive our concepts of space and time, we then have a infinite three dimensional universe, with an infinite, unidirectional temporal dimension, in which maths and science can come out to play.

Of course, one can always argue over any of the individual concepts which Kant postulated as categorial in this way. One can argue, for instance, that our concept of causality could be arrived at through induction: that by observing that everything that has happened in the past has always had a cause, one might conclude that everything that will happen in the future will also have a cause. One only gets to take this step, however, if one already has the certainty that a change in this pattern would, itself, have to have a cause. Inductive reasoning only works, that is, because we believe in causality. The more important point, however, is that regardless of any particular argument over potential or candidate categorial concepts, the basic principle – that in order to experience anything at all, one needs to have some way of processing, ordering and making sense of that experience, and that some core cognitive functionality has therefore got to be in place from the moment we gain consciousness – would seem to be irrefutable. It is certainly the case that no one over the last two hundred years has yet managed to refute it.

It is epistemological and ontological implications of all this, however, which most strongly conspire to undermine the common sense realism which science so insouciantly takes for granted. The first of these is the fact that if everything we ever experience – our entire phenomenal reality – is shaped by or channelled through these categorial concepts or laws of thought, it follows that nothing we could ever experience – or ever experience as real – could ever conflict with them. The possibility of discovering some region in the universe where two plus two equalled five, for instance, is quite literally unimaginable, not simply because we all already know, a priori, that it is impossible, but also because, as Wittgenstein pointed in Remarks on the Foundations of Mathematics, it is not at all clear how this discovery could be made, or what sort of evidence would actually lead us to this conclusion.

Independently of this – although it follows from it as well – the possession of these hard-wired concepts also accords us the kind of absolute certainty about certain of aspects of our phenomenal reality which inductive reasoning, alone, could never provide. So confident are we, for instance, that things won’t simply pop into existence ex nihilo, that even those who do occasionally experience a world in which such things occur are more inclined to conclude that they are either dreaming, drugged or insane, than that the world is really like this. The question they more commonly ask is not ‘What is happening to the world?’ but ‘What is happening to me?’ The irony is that although we put this down to the existence of an objective universe, governed by constant and immutable laws, the only thing that could actually give us this level of confidence is the inbuilt nature of the concepts on which those immutable laws are based and which we are therefore incapable of doubting.

Indeed, it is this basis in the way our own minds our constituted that ultimately gives us the confidence that whatever scientific description of the universe we develop by applying the rules of logic, mathematics and inductive reasoning to observed regularities in that universe, this description will not be undermined by random and inexplicable changes in those regularities. By turning the ontological paradigm of common sense realism on it head, Kant was thus the first philosopher ever to provide a basis in certainty, not for individual scientific theories, of course, which can always go astray for a number of entirely explicable and often entirely human reasons, but for the practice of science as a human activity.

Not, of course, that many scientists have ever been particularly grateful for this. I doubt that many have ever regarded a philosopher’s endorsement as necessary. And in this case they would have almost certainly regarded it as two-edged sword. For if we accept that the ordering principles which govern our phenomenal reality originate in ourselves, the $64,000 ontological question to which this inevitably gives rise, of course, is whether we have any reason to believe that these same ordering principles also apply to the noumenal reality of the universe as it is in itself, outside of our experience of it. And the answer, of course, is once again ‘No’.

Not that this means that they don’t. For we don’t have any reason to believe that either. The point is rather that we can only know what we are constituted to know by the laws of thought: that is to say, the phenomenal universe as we experience it. Anything outside of this is, by definition, unknowable. It is also, therefore, quite pointless to talk about it, a fact which Kant frequently stressed and which Wittgenstein later reiterated at the end of the Tractatus, in his now famous remark that ‘What we cannot speak about we must pass over in silence’.

Not, of course, that this has ever prevented scientists from both attempting and seeming to enter this unknowable realm where the laws governing our phenomenal universe may or may not hold. There are aspects of quantum mechanics, for instance, or, more specifically, Heisenberg’s uncertainty principle, which appear to if not contravene the law of non-contradiction exactly, then certainly to suspend it. More generally, in positing multiple dimensions in space/time, and in defining a point in time at which time, itself, began, we are certainly talking about things outside of our phenomenal experience. To do this, moreover, science has invented an interrelated set of formal languages to express, in a rule-governed way, what we are constitutionally incapable of imagining and to thereby circumvent this limitation. One may not be able to think, for instance, that Schrödinger's cat is both alive and dead at one and the same time, but in the form of

Δx Δp ≥ ħ/2

which is Heisenberg’s mathematical expression of the uncertainty principle, one appears to be able to write it.

The trouble with all such formal languages, however, or more particularly with their denotation – the way they are often translated back into something we can understand in phenomenal terms – is that they have a tendency, as the above example demonstrates, to come adrift from phenomenal reality in ways which then appear to allow them to do things which are clearly specious.

To illustrate this more clearly and make it more accessible, take, for example, the analogous way in which, for hundreds of years, theologians have attempted to attribute properties to God. Importantly, let me first say that within Kantian cosmology, there is nothing to preclude God’s existence, or to make faith in Him irrational. It is just that, if God does exist, He does so outside of our phenomenal universe and is therefore neumenal, unknowable and, as the hymn says, utterly ineffable, an entity about whom we can say literally nothing. Headless of Kant’s warnings, however, theologians have spent innumerable hours inventing their own technical, if not formal language to describe Him, a language which includes such concepts as omnipotence, omniscience and sempiternity. Ungrounded in phenomenal reality, however, all of these terms have internal contradictions which invariably lead to paradoxes when pursued at any length. The most famous of these, for example, is the omnipotence paradox, which after establishing that there cannot be two omnipotent beings in the universe, then concludes that one omnipotent being cannot therefore create another, and cannot therefore be omnipotent.

When I was a young Ph.D. student, I actually attended a lecture on this very subject, given by someone who, in all seriousness, thought he had found a way around the problem, not realising that the whole issue was based on a linguistic mistake. For not describing anything that can be found in our phenomenal universe, languages which are based on logical constructs of this type, no matter how reasonable they may seem, are simply word games, linguistic slights of hand. One may appear to be saying something meaningful and even intelligent, but it is simply a bubble of language which has floated free of reality and relates to nothing at all.

Not that I’m saying that the formal language in which the latest theoretical physics is expressed is guilty of or even susceptible to this kind of error. To be honest, like most of us, I simply do not know enough to make this judgement. As is so often the case, institutionalised science has again put us in this position. Moreover, I tend to believe that, on balance, formal languages, in which the functional operators are all taken from mathematics or formal logic, are intrinsically less likely to lead one down this road than a natural language in which technical terms are merely introduced. It is why, after all, such mathematically based formal languages are used. I am also fairly convinced that Heisenberg’s uncertainty principle only appears paradoxical when translated into natural language and illustrated in the form of Schrödinger's cat. Despite the fact that it was intended to make the subject more accessible, quantum physics has therefore been done a great disservice by this misleading and rather silly analogy. Sometimes, one has to say, scientists are their own worst enemies. From what I know of more recent physics, however, centred on providing science with a unified theory, one has reason to be more cautious.

Since its inception in 1995, for instance, not only have the number of variables encompassed by M-Theory increased with almost every revision, as additional particles have had to be incorporated into the model to make the maths work, but the number of dimensions in which these particles are thought to move has also increased and now stands at a mind-boggling eleven, making both the model and the maths so complicated that there are probably only a handful of people in the world who can truly claim to understand them, with each of the members of this exclusive club therefore peer-reviewing each other. What worries me most about this situation, however, is not that we seem to have brought about the very state of affairs which the Royal Society most fervently strove to banish – the authority of an unchallengeable elite, who are only able to explain what they are doing in terms of specious and often paradoxical analogies – but that we, as a culture, have somehow come to accept their own characterisation of these activities as of cosmic importance in answering some primordial question, when, on the basis of Kant, we have very little reason to believe this, and every reason to doubt it. For even if M-Theory, or whatever theory may eventually succeed it, were to find a coherent phenomenal denotation, or, better still, were to be cashed in the form of some real world application – as one might say that Einstein’s relativity theories were cashed in terms of nuclear power – thus demonstrating its truth in terms other than the soundness of the mathematical model – we still wouldn’t know, and would still have every reason to doubt whether it described the universe as it exists in itself. The only thing we could say with any certainty is that physics would have gained for a new paradigm which would then provide us with a more coherent description of our phenomenal universe than was provided severally by relativity theory and quantum mechanics.

Even if a unified theory were forthcoming in this way, moreover, this would still not necessarily mean the end of pure science, or that science, thereafter, would merely become a matter of filling in the gaps, as the convergence theorists like to suppose. For given that this theory would have to describe or otherwise be applicable to our phenomenal reality not only to be considered true but even to be thought meaningful, and given that the universe as it exists in itself could, for all we know, be governed by laws which we could never comprehend even if we could know them, it is quite possible that the universe might continue to throw up anomalies, requiring new paradigms to describe it on an infinite and ongoing basis. It is quite consistent with Kant’s epistemology, in fact, that scientists could be employed forever, continually opening up more interesting windows upon reality, which, in turn, might lead to more interesting technology options, without, of course, ever being able to open the one window they most fervently desire to look through: the one which reveals the universe as it is in itself, the way a noumenal being, without our phenomenal limitations might see it – if only we could comprehend the first thing about such a being.

The really sad thing about this desire, however, is not only how few scientists seem to realise how naïve and, indeed, childish it is, but how few seem to understand its hopelessness. For even if science were to see back through the Big Bang to the point zero at which our universe, both temporally and spatially, popped into existence, and even if we agreed not to ask what things were like half an hour earlier – which, for us, is always a meaningful question – would this actually answer the question that scientists seem to think it would, or, indeed, any question at all? For no matter how far one pushes the frontiers of knowledge, eventually one comes up against the bounds of sense, the point at which our understanding can penetrate no further. Call it the noumenon, or point zero or, indeed, God, these are simply the labels we use to denote our intrinsic limitations, the signs we plant in the ground to say ‘Beyond here be dragons!’ What we should also consider, however, is that it is precisely these intrinsic limitations, as Kant pointed out, that make all our knowledge and understanding possible, and it is to the possible that we should keep our faces turned.

The Provisional Nature of Mathematical Models

2011-01-15T02:31:00.000-08:00

Since my Blog on the unusual weather in Northern Europe at the end of last year and its possible implications for the climate change debate (see ‘Freak Weather? Or Something Someone’s not Telling Us?’), a number of readers have accused me of accusing climatologists of dishonesty. If I gave this impression, I apologise. It was not my intention. If I thought I was accusing them of anything, it was simply of being human – about which I shall write more in my next article on this subject. My more central point, however, concerned the very nature of climate science, itself, and the rather obvious truth – to which I wished to draw people’s attention – that where a science doesn’t lend itself to testing its hypotheses by experimentation, the output of mathematical or computer models, used to forecast future events, should not in any sense be seen as ‘proving’ the hypotheses upon which these models are built, but should rather be regarded as strictly provisional, pending the outcome of the events themselves.

To illustrate this more clearly, consider, for example, another well known if somewhat simpler mathematical model: the Drake Equation. Devised in 1960 by Frank Drake to estimate the number of technologically advanced civilizations likely to be found in our galaxy, it has seven variables and states that:

N = R* · f_p · n_e · f_l · f_i · f_c · L

where:

R* is the number of stars formed in the galaxy each year.

f_pis the percentage of those stars with planets.

n_eis the number of planets in each of those planetary systems capable of supporting life.

f_lis the percentage of those planets on which life actually develops.

f_iis the percentage of those planets on which intelligent life then evolves.

f_cis the percentage of those planets on which advanced communications technology then develops.

L is the length of time such technological civilizations then endure.

There is another version of the equation in which R* is replaced by N*, the number of stars in the galaxy, and L is replace by L/T_g, where T_g is the age of the galaxy. The results, however, are exactly the same, and I have here therefore retained the original formulation. Of far greater consequence are the values one chooses to assign to each of the variables; and while the model, itself, has become more or less universally accepted, it is in this regard – as one would expect – that the debate has ebbed and flowed over the last fifty years, with the resulting calculated values of N ranging from a possibly apocryphal 50,000 to less than 1.

I say ‘possibly apocryphal 50,000’, because, for a long time it was generally believed that this was the figure that Frank Drake and his team originally arrived at when they first devised the model. Indeed, Frank Drake, himself, quoted this figure in a television programme made for the BBC last year. It is also thought to be what led NASA to fund the SETI project – the Search for Extra-Terrestrial Intelligence – which Frank Drake founded. Officially, however, it is now said that the original value assignments were as shown in Table 1, producing a value for N of just 10, which while certainly a lot closer to what one might now consider realistic, given the fifty years that SETI has so far spent searching the heavens without result, would probably not have won it the funding to undertake this search in the first place.

Table 1: Drake Equation with Original Values Assigned

If one looks at some of these value assignments more closely, however, and especially at the rough and ready way many of them were arrived at, even this much-reduced figure lacks a certain credibility. The original assessment of 2, for the number of planets thought to be capable of supporting life in the average planetary system, for instance, was based solely on our own solar system, the only planetary system that was known at that time. Understandable, though this may therefore have been, it was still, however, a statistically rather unreliable sample of just one. Moreover, the inclusion of Mars as well as the Earth in this category, seems to fly in the face of reason. For although it was thought at the time that, in principle, Mars could have supported life; the plain fact is that it doesn’t, which rather seems to contradict the team’s next assumption that all planets capable of supporting life would inevitably do so.

In fact, we now know that Mars actually falls a long way short of fulfilling either of the two primary conditions for a planet to be life-supporting. The first of these is that it should maintain a temperature range in which water is liquid for at least part of the time. It cannot therefore be too close to the sun or too far away from it. It also has to have an atmosphere and therefore a molten iron core. For without the latter it wouldn’t have a magnetic field; and being so close to the sun, without a magnetic field, its atmosphere would simply be blown away by the solar wind. In order to keep its core molten, however, a planet also has to be of a certain size. Mars, for instance, has an iron core, but being smaller than the Earth, it doesn’t generate enough gravitational pressure to keep the core molten. If it ever met the requirements for supporting life, therefore, it did so only until its core solidified, which was probably only a relatively short time, a fact which the model, quite significantly, is incapable of actually representing.

Time, however, is not the only issue to be factored into the equation as to whether a planet, theoretically capable of supporting life, will eventually do so. One also has to take into account the conditions required to transform inorganic compounds into a single celled organism. In May 2010, researchers at the J. Craig Venter Institute in the United States inserted artificial genetic material – chemically printed, synthesized and assembled – into cells that were then able to grow naturally. This they then described as creating life from scratch. But even they would admit, I think, that designing DNA on a computer, and then manufacturing it, using carefully selected chemicals, is a long way from having it spontaneously emerge from a random chemical soup. The fact that this extraordinarily unlikely event did in fact happen here on earth means, of course, that, given the right conditions and enough time, it could in principle happen on any planet in the life supporting category. On the other hand, it is far from certain that all such planets will have either the right conditions or enough time. More realistic estimates, therefore, place the probability of it happening at around 13% rather than a 100%. If we also reduce the estimates for some of the other variables, including the number of planets capable of supporting life in each planetary system, one of the more plausible calculations of N now comes out at just 0.000065, as shown in Table 2. This would not only mean that we are, without doubt, alone in our galaxy, it might even mean that we are alone in the universe, an idea which almost doesn’t bear thinking about.

Table 2: Drake Equation with Pessimistic Values Assigned

Regardless of the implications of all this for man’s place in the cosmos, however, the more immediately relevant point is that since 1960, when those who devised the Drake equation were young, idealistic and excited by the prospect of life on other planets, the forecasts it has generated have gone first 50,000 to just 10, and now from 10 to a number so infinitesimally small that it casts the existence of life on earth in wholly new light. Of course, part of this transformation in our expectations is almost certainly due to the fact that, for all our efforts over the last fifty years, no sign of intelligent extra-terrestrial life has yet been found. Youthful enthusiasm has thus been tempered by disappointment and, and this respect, one might say that the money spent on SETI has not been wasted. It also, to some extent, justifies the exercise of both formulating the model in the first place and assigning some provisional values to it. For it gave us something against which we could measure reality. Not only does the failure of SETI’s mission emphasise the provisional nature of all such exercises, however, reminding us how often reality fails to conform even to those expectations in which we have the highest confidence, it also demonstrates the extent to which emotional states, like optimism and enthusiasm or, indeed, dread foreboding, can colour and inform scientific judgement, particularly when combined with the need to secure funding. Scientists may not like it, but science is a human activity and is subject to all the usual human frailties. Ironically, it is also when it seeks to deny this that it is at its most human and most dangerous… particularly when the rest of us start to believe it, as I shall explore in my next Blog.