13 years of overspending and borrowing

I was listening to Radio 4 this evening on the way home. They were interviewing a couple of council leaders about cuts to council tax benefits. It was all a little frustrating listening to it, but what was particularly annoying was the head of West Oxfordshire Council (which include David Cameron’s constituency) parroting the typical Tory phrase that cuts were unavoidable given the 13 years of Labour overspending and excessive borrowing.

I find this really frustrating because what we’re going through now is not a consequence of overspending by Labour from 1997 to 2010. It’s really because of excessive risk taking in the financial sector that required a taxpayer bailout in 2008 and has lead to increased unemployment, reduced tax revenues and increased spending to cover the resulting increase in benefit costs. Below is a figure from Economics.help. The data is from the HM Treasury and, although I haven’t checked it, appears to be the same as what I have found before. When Labour took over in 1997 UK debt was 40% of GDP. It dropped to about 30% over the next few years. They then increased it from 30% to about 37% from about 2000 to 2007. The big jump occurs in 2008, when the financial crisis started. It seems, to me at least, that Labour was spending quite sensibly for most of their 13 years. There were many other things that weren’t sensible (de-regulating the banks for example) but to claim that there was 13 years of overspending and excessive borrowing is just, in my opinion, wrong.

UK debt as a percentage of GDP.

UK debt as a percentage of GDP.

You can also look at the actual deficit (i.e., how much the government had to borrow). The figure below is from the Guardian and shows the annual deficit in pounds since 1980. For the first few years, Labour ran a surplus. They then ran a deficit that, until 2008, never exceeded 3% of GDP. If you add up the values, Labour borrowed about £180 billion between 1997 and 2007. Even so, in 2007 public debt as a percentage of GDP was still lower than when Labour took over from the Tories in 1997.

UK deficit since 1980

UK deficit since 1980

Now, I should make it clear that I don’t think the Labour years were particularly good. I think they moved too far to the right and probably had policies that would have been similar to those of a Conservative government. However, to claim that our current crisis is a consequence of 13 years of overspending and excessive borrowing by Labour is being extremely economical with the truth. I think we should be doing our best to not let people get away these kind of statements.

Extremes of the distribution

This could be a very boring post (even more so than normal) and could be complete nonsense, but anyway. I was watching the final of the Australian Open tennis on Sunday and it struck me that it was quite amazing that in many of these tournaments, it quite often goes to form. Typically those in the final and semi-finals are those who were ranked highest. This may seem obvious but naively one might imagine it to be quite different. These tournaments comprise 100 or so of the best tennis players in the world. Being so much better than everyone else, you might imagine that they would be similar and that a player ranked 30th could, quite often, beat a player in the top 10. You might expect the rankings to change quite regularly. It seems, however, that this isn’t really the case. When a player reaches the top 10 they can stay there for quite some time and that even though these are some of the best tennis players in the world, a player in the top 10 will typically beat a player ranked 30.

I wondered if this wasn’t quite a nice illustration of the properties of a normal distribution. Imagine we could plot a distribution of the abilities of all tennis players. We might expect it to have a normal distribution like that shown in the figure below. There will be a few really bad tennis players, most will be average, and there will be a few very good tennis. I don’t know if this is really what it would be like, but if the sample is sufficiently large, the central limit theorem suggests that it is likely to settle to a normal distribution.

Graph showing a typical Normal Distribution, taken from the Wikipedia article about the Standard Deviation.

Graph showing a typical Normal Distribution, taken from the Wikipedia article about the Standard Deviation.

The form of the Normal Distribution is

NormalDist
where N is the size of the sample and σ is the standard deviation (essentially how variable the distribution is). If the distribution is very narrow (i.e., everyone’s abilities are very similar) the standard deviation is small. If the distribution is wide (i.e., the abilities are quite varied) the standard deviation would be big.

What the figure above also shows is the percentage of the sample in each standard deviation interval. For example 34.1% of the sample lie between 0 and 1σ and 13.6% lie between 1σ and 2σ. The table below shows the percentage for each interval up to 6σ
StandardDeviationIntervals
In the above I’ve only considered the intervals above the mean. If one was presenting some data analysis with errors, the error would normally be some number of standard deviations and would tell you how significant the result is. For example 1σ errors would tell you that there was a 68.2% chance that the result lies in the reported range (i.e., 34.1% times 2 since you’re considering the region on either side of the most likely value). If you report a 5σ error (as for the Higgs Boson result) this means that there is a 99.99994% chance of the actual value lying within the reported range (i.e., 100 – 0.00003×2) – although in this case it may actually be that there is a 99.99994% chance that the signal is real, rather than an extremely unlikely noise spike.

Where am I going with this? There appear to be a few tennis players in the world who will typically beat almost anyone else almost all the time. If I assume that there are 10 million active tennis players in the world (I have no idea if this is a reasonable number or not) then the table above would suggest that only 0.00003% of them would have abilities 5-6σ better than the average. This means that there would only typically be 3 players who have this level of ability (i.e., 0.00003/100×10000000). Essentially, if tennis ability is normally distributed you would actually expect there to be only a few players in the world who are significantly better than the average. So, maybe this makes perfect sense. As you consider the extremes, there are fewer and fewer players and if you have a big enough sample (and given that many play tennis, the sample is probably quite large) you have a chance of finding a small number who are so much better than the rest that they would typically beat almost anyone else. Alternatively, this is all nonsense and I have no idea what I’m talking about.

Research spending

I was at a meeting recently about a European project with which I’m involved. The project officer from the European Commission was also present. Over lunch we were chatting about research funding and he commented that the UK seems to be very successful at getting European funding and that we clearly had lots of financial support in the UK. I pointed out that, in fact, research spending in the UK – as a fraction of GDP – was lower than most other comparable countries. He seemed surprised, so I looked up the numbers and showed him it was indeed the case. I thought I would reproduce some of the data here. I got the numbers from the World Bank and the table below shows research spending for 13 countries that would be regarded as doing world-leading research (I have clearly missed some, so don’t be offended if your country isn’t included). The data is for 2008 which is the last year for which all the countries had data.

GDPonResearch
It’s clear that, with a few exceptions, the UK spends less (as a fraction of GDP) than many other comparable countries. In some cases (USA, Switzerland, Japan, Sweden, Germany, Denmark) it is substantially less. Despite this, the UK is still generally regarded – in many areas – as second only to the USA. I should be a little careful, as the data represents total research spending (public and private) so, maybe, the UK spends more than most on publicly funded research. I have, however, once seen a figure that suggests that there is a link between public and private research spending. The more government invests in research, the more private industry is willing to invest, which might suggest that those who have higher research spending overall, also have higher public spending. Given this, it is remarkable that the UK does so well. It does suggest that somehow the UK’s research spending is very efficient, although it might suggest that we’re just very good at scoring well on research league tables.

The other thing I thought I would comment on is that – in physics at least – there seem to be very few people in the UK who are in long-term/permanent positions that are research only. Most seem to be in academic positions that require both research and teaching. There seem to be many in other European countries (Germany, France, Italy) and in the USA who are employed in what are effectively permanent positions that allow them to focus almost exclusively on research. So, not only does the UK spend less on research than many other nations, many of the UK’s researchers get to spend less of their time on research than their peers in some of these other nations. Quite how we still seem to do so well is beyond me. Maybe we actually aren’t doing as well as we think we are and, if we are, it wouldn’t surprise me if – in the medium- to long-term – we are unable to maintain this high level of research success.

This is a little like a double reblog. This post links to another that argues that brilliants students should seriously consider not doing a PhD. Personally, my experiences are not as extreme as illustrated in this post, but I think there is quite a lot of merit in what this post is saying. It does seem that we do need to think long and hard about our PhD programmes and how we treat PhD students. I would go further and suggest that we need to consider the full academic career structure. It seems, to me at least, that the pressure at all stages is increasing and that the aspects of an academic career that made it attractive are being eroded to the point where I’m not sure that I would recommend an academic careers to others.

Disturbing the Universe

Excellent post by a friend on why not to do a PhD:

Dear Brilliant Students: Please Consider not Doing a PhD

Liv says a lot of good things here so that even if you do still want to do a PhD after reading this, you will be going into the process with eyes more open than I did.

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Obama on climate change

In his inauguration speech Barack Obama has unequivocally stated that the US should act to combat climate change; that failing to do so would be a betrayal of future generations. It’s a great speech and what he says (in my view at least) makes perfect sense. Acting to reduce man’s influence on the climate is both necessary, if we want to avoid catastrophe, and also makes economic sense. I just hope he sticks to this pledge. It will be difficult given the political climate in the US, but it could leave an amazing legacy if he is succeeds.

Global inequality

I’ve written a number of times about income inequality in the UK. As I’ve mentioned before, since 1980 the top 1% have increased their share of the income from 8% to 15%, while the top 10% have increased their share from 25% to 31%. There has clearly been a significant increase in income inequality in the last 30 years or so and I find it amazing that, given the current financial crisis, noone seriously suggests that we should be trying to drive income levels back to what they were in the 1980s. I appreciate that this is not easy, but it would allow most to earn a living wage, probably increase employment, and reduce the benefits bill (since fewer would require benefits). Instead, we’re trying to solve the UK’s current financial problems by cutting benefits for those on low incomes.

Anyway, the reason I decided to write about this was that I noticed today an interesting report by Oxfam claiming that the Annual income of richest 100 people enough to end global poverty four times over. The report claims that in the last 20 years, globally, the top 1% have increased their income by 60%. The top 0.01% by an ever larger amount. In 2012, alone, the richest 100 people in the world increased their wealth by £240 billion. This increase is, according to the CIA world factbook, about the same as the GDP of Portugal. I find this staggering. At a time of financial crisis, the wealthiest 100 people can increase their wealth – in a single year – by the GDP of a Western European country with a population of 11 million.

One problem, I find, with this type of issue is that it is often perceived as some kind of debate about capitalism versus socialism. It is not. It is really a debate about how best to distribute income in a modern society. I have no issue with those who are creative, hard-working, and who contribute most to economic growth being rewarded more than others. I do think, however, that there needs to be some balance. I understand that global wealth can increase, but it doesn’t appear to be doing so fast enough to accommodate the rise in income of the top 1% – at least not without a corresponding loss of income for those on the bottom. Is it morally defensible for the top few percent to take an ever increasing faction of the global income while millions are living in poverty. Noone’s asking the top few percent to become poor. All that is needed is a recognition that increasing their wealth by an amount comparable to the GDP of a major nation might be questionable during these difficult financial times.

I don’t know how to do anything about this. I think the problem is our governments. The wealthy clearly have an influence on government policy. In some sense this is natural. As their wealth increases, it seem clear that this influence will increase and they will do their utmost to dissuade governments from doing anything that might inhibit their ability to further increase their wealth. This seems like a horrible feedback loop that could be extremely dangerous and damaging to world stability (as suggested by Oxfam). To me, governments should be aiming to have a damping influence on this feedback loop, and they seem very reluctant to do this. It seems amazing to me that, in what are regarded as democracies, we have governments that seem to be following a path that will increase the wealth of a tiny fraction of the world’s population at the expense of the wealth of the majority that they are meant to be representing. I don’t really know what else to say, but I do think that this could become a very big issue in the not too distant future if we don’t start acting to redistribute wealth in a more equitable way.

Searching for Sugar Man

I watched Searching for Sugar Man last night. It was very good. It’s essentially a documentary about Sizto Rodriguez, an American musician who released a couple of albums back in the early 1970s. They appeared to be complete flops despite very good reviews and so he went back to work as a labourer in Detroit. They were, however (unbeknownst to Rodriguez), extremely popular in South Africa and Australia, where his fans thought he had died in some kind of macabre on-stage suicide. Without wanting to give too much away, the documentary is essentially about two of his fans who are trying to find out more about him and about how he died. Amazing story and really well done. It’s only after I finished watching that I discovered that it has been nominated in the best documentary category in this year’s Academy awards.

A while ago, I posted a link to one of his songs called Inner City Blues. Below is the song – Sugar Man – that inspired the title of the documentary.