The integrity of universities

There’s a very interesting (in my opinion) article by George Monbiot in the Guardian today. The article is called Oxford University won’t take funding from tobacco companies, but Shell’s OK. The basic premise is that universities should be acting for the common good, or as George Monbiot puts it

the need for a disinterested class of intellectuals which acts as a counterweight to prevailing mores.

I have to say that I agree completely with this. It has always surprised me how disinterested UK academics can be. I had always assumed that university academics had a role to play in defining what is acceptable in our societies. They are meant to be the intellectual members of our society; the people who think. If academics are reluctant to be involved in this, then who else is going to do it? This isn’t to say that everyone should bow to the views of academics, simply that academics should feel free to question what is accepted in our societies.

There are probably many reasons why UK academics are reluctant to engage in discussions about our society. One may simply be that academics have become very focused. They see themselves as experts in quite specific areas and so don’t see it as appropriate to engage in areas outside their expertise. There is some merit to this, but it is a bit disappointing – in my opinion. Another may be that there is now quite a lot of pressure on academics. Universities have become very bureaucratic and there is quite a strong publish-or-perish attitude. Academics don’t have much spare time to contemplate the merits – or lack thereof – of our societal mores. Universities have also become much more like businesses. The goal is to maximise teaching and research income and, hence, academics are discouraged from doing anything that doesn’t enhance a university’s ability to generate income.

Personally, I think the latter is the main reason why universities (in the UK) are no longer hotbeds of dissent. We are publicly funded and hence need to do what is expected of us. I’m often very critical, for example, of the Research Excellence Framework (REF2014) and even though most seem to agree, the typical response is “we just have to do this”. Well, yes, but do we have to do it happily. If we think it is damaging what we regard as strengths of the UK Higher Education system, shouldn’t we be making it clear that we’re doing it under duress. There’s also this view that we have to do what is best for UK PLC (i.e., what will best help economic growth in the UK). In a sense, I agree with this. What I disagree with is how we’re influenced to do this. University research has, for many decades, had a very positive impact on economic growth. However, this didn’t happen because politicians told universities to do this. It’s because people recognised the significance of some piece of research and used it to develop something that had economic value. It’s also largely unpredictable. It’s certainly my view that telling us to start predicting the economic benefit of our research will do more harm than good.

The final thing I was going to say regards the main thrust of George Monbiot’s article. If there is increasing evidence that global warming is happening (as there is) and if there is evidence that such warming could lead to life-threatening climate change, shouldn’t the universities where this research is taking place act as though it’s important. Maybe universities shouldn’t be accepting funding from oil companies, if their own research indicates that we should significantly reduce our use of fossil fuels. I have heard some argue that we shouldn’t worry about the provenance of our funding as we’ll typically do good things with whatever money we can get. I think this is naive. The idea that one can take funding from oil companies without being influenced by the source of this funding seems highly unlikely.


Income inequality in the USA – A Bill Moyers Essay

Since today is Margaret Thatcher’s funeral, it seem appropriate to post this video, by Bill Moyers, about income inequality. Bill Moyers is an American TV host and commentator and this is what he is calling an essay on The United States of Inequality. I appreciate that this is about the US, but much of what is said – in my opinion – applies equally to the UK. It focuses primarily on Silicon Valley where there is apparently a huge – and growing – income divide. What I found interesting is that they included a number of senior business executives who seemed well aware of this issue and were more than willing to acknowledge that this is a big and growing problem. If business executives acknowledge the problem and accept that it is growing, it seems to me that this implies that we can’t rely on businesses to solve it alone. Their obligation is to their shareholders and investors, and maybe to their customers. They obviously have to treat their employees in a manner that is consistent with good labour practice, but they’re not obliged to pay them more than they need to and they’re not obliged to create jobs if they can get what they want more cheaply (and efficiently?) elsewhere. We need, in my opinion, labour policies that aim to address unemployment and income inequality as well as take into account best value for investors and shareholders. I accept that it is not easy, but I would hope that many would agree that the future stability of the UK economy may well depend on how we address the issue of rising income (and wealth) inequality.

The Green Agenda

There seems to be quite a lot of rhetoric about the cost of climate policies with many essentially suggesting that it will cost a lot of money and that it is some kind of government conspiracy. There is even a Fox Business News report titled The Green Tyranny which seems to be suggesting that government regulations have gone too far.

Something that has always confused me about this is that providing energy is always going to cost money. Extracting fossil fuels is not free and so that it will cost money to provide alternative energy sources is obvious. The real questions should be is it more expensive than using fossil fuels, what is the long-term cost compared to fossil fuels, and how does it compare – environmentally – to fossil fuels (or, what are the additional costs). Of course, I think that increasing CO2 levels in our atmosphere is leading to climate change and that we should be acting to mitigate this as soon as possible. However, even if you disagree, fossil fuels will eventually run out or become extremely expensive to extract, and so developing alternative technologies seems to make sense. The question is, should we start now, or can we wait. I think we should be starting now, but I’d be happy to hear arguments as to why we should be waiting.

There is another factor though – in my view at least – and that is whether or not you need to import oil and gas in order to provide your energy needs. I found the two figures below on the Energy Administration Information website. The top shows the UK’s natural gas production and consumption from 2000 to 2011 and the bottom shows the same for oil. What is clear is that until about 2004, the UK was producing more natural gas and oil than it was consuming. Today we only produce about 60 – 70 % of what we use and the fraction appears to be dropping quite dramatically.

Natural gas production and consumption.

Natural gas production and consumption.

Oil consumption and production.

Oil consumption and production.

This clearly means that we must be importing a significant fraction of the natural gas and oil that we use. What does this cost? I found the figure below on a website called The Oil Drum. It shows the UK’s trade balance in energy products and shows that until 2004, there was an oil and gas trade surplus. Today there is a deficit. We’re spending about £5 billion per year to import oil and gas. What’s more, in 2000 there was a trade surplus in energy products. Today it makes up 15 – 20% of the total trade deficit and – as far as I can tell – will continue to increase as we import more and more of our oil and gas.

What I’m suggesting is that even if you don’t feel that we should be worried about climate change, surely you should be concerned about the UK’s increasing need to import oil and gas. We’re currently spending about £5 billion a year importing oil and gas and it seems (given that the fraction we can produce is decreasing quickly) that this is likely to increase. Wouldn’t it be better if we could spend this money paying people in the UK to develop and maintain alternative energy sources? I think it would, but feel free to let me know if you disagree.

Iceland’s president at Davos

Thanks to the Liberal Conspiracy I’ve come across the video that I’ve posted below of the Icelandic President (Olafur Ragnar Grimsson) being interviewed at Davos. He claims that Iceland’s recovery was largely due to their allowing banks to go bankrupt and by not following the standard orthodoxies of austerity, but instead providing support for the poor and unemployed. Their economy is now growing at about 3% and unemployment is low.

I’ve never heard of him before, but based on this video he seems to be a good example of what I think a politician should be. He seems to think in terms of what would be best for his country and its people, rather than simply thinking of how to protect big businesses and the wealthy. Admittedly, some of those who act to protect businesses and the wealthy believe that this will help everyone. The evidence for this is, however, slim. Anyway, I think the video is worth a watch and I wish more of our politicians were as sensible as he seems to be. Iceland is a small country with a small population, so maybe what worked for them wouldn’t work for us. However, our current policies don’t seem to be working either so trying something that has been proven to work makes more sense (to me at least) than sticking with something that is almost certainly not working.

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.

Owen Jones and the “supposed” fantasy economics of the left

I encountered an article titled Owen Jones and the Left’s Fantasy economics. It seems that Owen Jones really gets under the skin of some on the right, which makes me think that at least some of what he says must have merit or they’d just ignore him. The article was based on a report from the Office of National Statistics that looked at the change in real wages since 1986.

The article is factually correct, in the sense that it correctly presents the results of the report. Most of what the article says is based on the figure below. Basically, the ONS report looked at hourly wages in 1986, adjusted them for inflation, and then compared them with hourly wages in 2011. The result is that, in 2011, every income band has seen a significant percentage increase in hourly wage. The conclusion is, therefore, that everyone is better off (compared to what they were in 1986) and the Left should stop complaining and should really start analysing and interpreting the data properly. There are, however, a number of issues with this interpretation.

Firstly, it’s clear that the top earners have seen a bigger percentage increase than the bottom (apart from the bottom few percent). This is consistent with numerous other indicators (Gini, 90/10 ratio) that show that the UK has become more unequal over the last few decades. What’s more, the figure somewhat under-represents the change as a big shift happened around – and just before – 1986 (see an earlier post). The interpretation in the article is that poverty is absolute not relative, so as long as everyone’s salary increases relative to inflation, everything’s fine. There may, in a sense, be some merit to this. One could imagine a society that was very unequal, but in which everyone could afford the basics and, to some extent (compared some other parts of the world) this is true of the UK, but it certainly appears to be getting harder for those on low incomes to cope. Also, the Poverty Site suggests that, today, the top 50% of earners take more than 75% of all the income. Imagine this continued to increase to the, admittedly, extreme case of the top 50% taking more than 90% of all the income. It’s hard to imagine that any industry would bother catering for the bottom 50% of earners. They would only be taking home 5% of all the income, so what’s the point. I can’t see how, in such an extreme situation, poverty would not be relative, despite what any indicators may imply.

The above is, in some sense, my opinion and I can’t really think of a good way to quantify the impact of increasing inequality (although Kate Pickett and Richard Wilkinson make some convincing arguments in their book “The Spirit Level”). There are, however, some fairly straightforward criticisms of the article. The report used the Consumer Price Index (CPI) when determining how to correct for inflation. CPI does not include housing costs. The Retail Price Index (RPI), however, does and is typically about 1% higher than CPI. I downloaded the data from the report and recalculated the changes based on RPI, rather than CPI, assuming the average RPI was 1% higher than the average CPI used to determine the figure shown above. The resulting figure is below, with the blue line showing the original data and the red line showing my new data. This shows that, including housing costs, the increase is less significant than initially indicated.
The other issue I have is that it only considered full-time employees. I’m yet to find a decent definition of full-time employment but there appears to be a large number of people in the UK who are underemployed. They are working fewer hours than they would like and presumably are not included in this report. I always feel that annual income is more of an indicator than hourly wage. The report is, therefore, presumably underestimating the increase in wages for those on low incomes (since it is ignoring all those who have been, and who currently are, underemployed).

There was one final thing about the article that somewhat irritated me. It referred to a report by the Resolution Foundation called Low Pay Britain. What the article referred to was that, according to the Resolution Foundation, only 3.8% of workers in the UK earn below the minimum wage. What it failed to mention was that a further 20% earn below what is regarded as a Living Wage. One could debate what the living wage actually should be, but it seems that many people in the UK are on salaries that make it difficult to live. Maybe in some absolute sense they can still survive, but it seems clear that inequality has increased in the last few decades and I would still like to hear a solid argument for why our society is benefiting from this increasing inequality.

The problem with Libertarians!

I ended up in a debate with someone who was clearly a Libertarian (debate is a rather positive interpretation; it was more like a monologue as I didn’t really get a chance to say much). The basic point that was being made was that government interference (regulation) gives advantages to (for example) the big banks and distorts the market. In some sense there is some merit in this and I certainly feel that governments have been unduly influenced by the banking sector so that the system now benefits the banks (and their investors) rather than society, I’m just not convinced that the solution is to reduce government involvement.

The Libertarian view seems to be that if we reduce regulation we will have a level playing field and the markets can reach some kind of equilibrium. In some sense they are probably completely correct; with no external influences the markets would reach some kind of equilibrium, it’s just not clear that the equilibrium would be one that would benefit society as a whole. There is nothing to say that the system couldn’t evolve into one in which a small minority have all the wealth and all (or most) of the income. There’s no guarantee that healthcare will be available to all (look at healthcare in the US). There’s no reason to think the system would evolve to one in which all children could attend a suitable school.

The role of government, in my view at least, is to provide some kind of feedback that attempts to shift the equilibrium back to one that is of maximal benefit to society, rather than to one that benefits a minority. It’s my view that governments do need to regulate the markets but should do so in a way that is optimal. Too much regulation is clearly bad, but too little can lead to a system that benefits the few rather than the many. In some sense it seems like it should be constantly evolving. Regulations should be adapted to optimise the markets. If it seems like regulations are hampering growth, reduce the regulation. If it seems like a minority are benefiting at the expense of the rest of society, increase or change the regulations. I just don’t see how you can have no regulations.

A similar argument is made by climate change deniers. They argue that the Earth will settle into some kind of equilibrium. Clearly correct but, again, there is no guarantee that the equilibrium will be one in which we can survive. Venus is in equilibrium, but the surface temperature is about 500 K. It seems like these people say something that has an element of truth and then use that to justify their worldview. I don’t know if it is because they really believe it or because they just can’t see the big picture. Probably a combination of the two.