Vot Fraud ?

It's 31 July. You are a managing director. Your company has no cash on hand, but in your confident opinion that is a temporary situation. In October, €5m will definitely come in.

The company owes a lot of money, including

€300k to Revenue for VAT collected. Due today.
€100k to employees for wages. Due today.
€400k to suppliers. €200k overdue (60 days+)
€1.7m to Bank A (current account overdraft)
€40m to Bank B. (€2 m overdue)

So, what do you do ? Why, you pay €300k to the Revenue with a cheque using the last €300k of your overdraft facility from Bank A, of course. What else ? After all, it was never your money.

When your employees come to you for their pay, and hear about your choice of how to use your last €300k, they call you a thief. You took their services for the month, but used the money which could have been paid to them to pay some-one else.

The suppliers of goods to you say the same and try to seize your stocks.

Bank B says: that was our money, never yours. You had the use of it on strict condition that you would repay in accordance with a schedule. You didn't. You are a thief.

How do you answer them ?

Models

(This is not a post about the fashion business. Nor, despite deriving inspiration from discussions of an economic character, is it directed at such discussions exclusively).

We use models all the time. We have no choice: it is the principal way we humans have of putting order on, making sense of, the world of experience. No-one decides to do it, and it is pretty much impossible to decide not to do it. In the current jargon, we are "hard-wired" to be modellers.

Some of the models that we use were designed by others, but when a perfectly suitable one is not to hand, we will design our own. This is very rarely done entirely "from scratch": we usually adapt models we receive from others. (In this latter way, we can all be slaves to the ideas of some long-dead philosopher in Keynes' memorable phrase, especially if we fail to notice).

Models are not always so-called. Another word for the same thing, albeit not usually as formalised, is "narrative", or even less formally as in Tyler Cowen's talk in this TED presentation, which I strongly commend to you, as "stories". "Framing" is a cognate activity. "Paradigm" is yet another word for a model of this type.

Less benign or neutral words are "stereotyping" and "stigmatising", "labelling" - all of these are also consequences of a modelling process.

Whatever name is used, the process is similar. I am going to call it modelling.

The point that I want to make about modelling is that it is both inevitable, and yet inevitably is just as fallible as all human cognitive activity is. Only the simplest models remain useful for long; one that lasts even one normal human life-span is unusual. It is prudent to be sceptical of all models, not in a negative or destructive way (because all models have some useful function for someone at some time) but to avoid falling into error through over-attachment to them.

Why ? Because a model incorporates beliefs about how things are. Many of these beliefs will turn out to be incorrect. (In some formal models, the truth of the beliefs is explicitly a mere assumption.In less formal models, mere assumptions are unfortunately rife, and, worse, unacknowledged. Worse again, this is fairly common even in formal models).

Dangerously, a model may continue to work well for a long period even though it incorporates assumptions which no longer correspond as closely to reality as they may once have done.

Of course, this is a counsel of perfection: no-one can avoid this trap entirely. Even Socrates, who, as far I know, first formulated the radical scepticism which I am advocating, was, after a fashion, killed by his refusal to abandon a fatally flawed model.

So-called "scientific method" is a powerful tool in the service of this Socratic endeavour. It is not fashionable or popular in certain quarters to say so, but science, as we now understand the word, is not primarily a constructive activity: most of the time of scientists is spent discovering flaws in the models, sometimes their own, used to describe reality.

On Emigration #3

Unemployment is, in absolute terms, at an all-time high just now in the Republic of Ireland. While we have experienced higher rates of unemployment in the 1980s, the current number of nearly half a million is a new record.

I am confident that it will come down again, but the descent will be slower than the upward surge was.

Does anyone think that even 300,000 jobs will be "created" within, say, 5 years ? There is no sign that even the most optimistic left-wing politician believes that this can be achieved.

This means that an awful lot of people are facing a long period of unemployment if they restrict themselves to the opportunities afforded by the Irish labour market. It is a sobering thought. It is not less sobering to note that the opportunities in the traditional English-speaking destinations for Irish job-seekers are perhaps not going to be as good as in the past. And, as noted above, our current temporary labour surplus has never been higher.

On the brighter side, the richer countries are pretty short of the kind of people of whom we now have a surplus, and also, over the last quarter-century it has been noticeable that Irish people have found opportunities all over the world, and not just in the traditional comfort-zones.

The traditional cultural inclination, however, has been for Irish workers to wait and wait and .... Emigration was slow to resume in the 1980s and only really got going after 1986. This was bad for the individuals, and for society in general.It would be tragic if we let the same thing happen again.

I am not suggesting that everyone should, like our forbears, "take the boat" and join the Cricklewood navvy gangs, (even if there are any left), but we should, I suggest, shake off at least a little of our instinctive emigration-averse acculturation and treat the world Global Village as our oyster (which it is). It does not provide an easy option for any but a lucky few, but for many others opportunities will present themselves if they decide, starting right now, to be open to them.

The rest of us, I would urge, should stop bewailing "the return of the spectre of emigration".

And remember: VOIP is a great thing, and medium/long-distance travel has never been quicker, easier or cheaper.

Update on Monday, June 6, 2011 at 10:24AM by Fergus O'Rourke

This entry and the preceding two on Emigration have now been published as an article here, where there has been some interesting reaction.

La Trahison du...peuple?

I am prompted to write this by a recent post by Professor Eoin O'Dell, for whom I have considerable respect.

Notwithstanding that respect, we have many disagreements. For our latest, see the comment I made to the said recent post.

The issue is linked to the on-going discussion about how we in Ireland got ourselves into our current economic mess. Many commentators believe that a)there are identifiable culprits (many of whom are criminally liable), and b)all are members of the property developer, political, higher civil servant, financial regulator, banker or estate agent classes. (I propose to restrict myself in this post to the domestic targets - I may discuss the foreign scapegoats another time). I have even heard bankers, property developers and estate agents express the view that their own excesses should have been prevented by one or more of the other groups.

The link I see is this: both narratives posit that Irish adults cannot discover value or its absence without top-down guidance.

Supposedly, property buyers cannot divine, unassisted, that properties selling at 30 times annual rental value - the multiple reached much crazier levels in the supposedly more sophisticated areas - are over-priced and/or that there are times in every market when the market price is a signal not to buy. Similarly, clients of lawyers are allegedly incapable of understanding that a charge of €300 per hour to handle a straightforward probate matter is an offer which should be refused.

It is not that I don't see a real problem. There is a thorough-going failure of society here. Even property investors with millions at stake and bankers with billions at risk, to my personal knowledge, still resist the notion, ignorance of which has cost all of us so dear, that capital values of property relate to other variables such as market rent levels and trends.

And, though it is sometimes exaggerated, there is considerable reluctance among end-users of legal services - even ones who are otherwise sophisticated - to adopt a rational approach to selecting and paying their lawyers.

I suppose that another variety of the same thing is the commonplace reaction to reports that petrol station A is charging 10 cents per litre less than petrol station B: "B is a price-gouger", it will be said. The next day, or sooner, the same people will say of a report that stations C and D charge exactly the same price that it is clear evidence of illegal collusion.

Along the same lines, one constantly encounters people who bitterly complain that Tesco will not reduce their prices - all of them - to the same level as Lidl or Aldi, but who will not actually switch their custom from the former to the latter. (Yes, I know that for some, it is not an available option. And, one must exclude those who will not patronise Aldi or Lidl because they are "full of immigrants".)

How to characterise this ? "Irrational" seems too mild. Is "juvenile" too harsh ?

Whatever, it seems to me that the answer cannot be for government to attempt to put "crutches" in place so that adults are protected from their refusal/failure to use their brains when buying legal or financial services. Apart from anything else, recent experience has confirmed that the people who will be implementing such measures are no better at using their brains than the rest of us.

(None of that means that I oppose all regulation of the financial or legal services markets, and I do not.)