Monday, August 21, 2017

What can be done about the "game of mates"?


What is wrong with looking after your mates? If you ask any Australian chosen at random the chances are that they will tell you that it is good to help friends and acquaintances. Yet, the same person would be likely to express disapproval of people who use powerful positions in politics, public service, business and unions to look after their mates at the expense of the broader public. That is a downside of the mateship culture.

In their book, The Game of Mates, How Favours Bleed the Nation, Cameron Murray and Paul Frijters explain that “the game of mates” also involves a strong element of self-interest. When people play that game, they look after their mates in the expectation that their mates will reciprocate. The game involves the exchange of “grey gifts” among groups of mates. Grey gifts arise from political and bureaucratic discretion in interpreting and enforcing regulation. The granting of such gifts differs from theft and bribery because it is difficult to identify as corrupt or illegal in any instance. Participants do not ask for direct trades and exchanges are spread out over time.

A typical example of the game of mates involves a politician or senior bureaucrat providing grey gifts to an industry or firm and then subsequently moving to take a well-remunerated position in that firm or industry. The most important attribute the appointee brings to the new position is his, or her, ability to reward the new employer by playing the game of mates with great expertise.

Murray and Frijters make the claim - exaggerated in my view - that the game of mates enables well-connected individuals to steal roughly half of “the real wealth” of the rest of the community – whom the authors refer to as the “champion Aussies”. They give the impression that the beneficiaries of the game are wealthy and the victims are relatively poor. However, they do admit that it is possible for an individual to benefit from the game with respect to some regulations and to be a victim with respect to others. Not much attention is given to the deadweight costs of the game of mates - everyone has less incentive to work, save and invest when a substantial part of the income produced ends up funding mates’ games.

Much of the book explains how the authors see the game of mates being played in different parts of the economy. In property development, there is a game involving rezoning of land for residential use. In transportation, the game involves negotiation of public private partnerships (PPPs) to fund infrastructure projects. There are also games involving granting of mining licenses, administration of superannuation funds, banking regulation, tax dodges, regulation of pharmacies, assistance to agriculture, undue restriction of taxi licences, dominant supermarkets influencing their regulatory environment, and even the control of public universities for the benefit of private interests.

Murray and Frijters offer some remedies to disrupt the game of mates. They show insight in their suggestion that the game can be tackled more effectively by reducing the value of grey gifts - by selling them or taxing them - rather than by adding additional layers of regulation. However, they don’t seem to recognise that the best way to reduce the value of grey gifts is to reduce the extent to which the economy is subject to government regulation, and the political and bureaucratic discretion associated with it.

Some of the authors’ proposed remedies seem bizarre. For example, they suggest that foreign experts be contracted to develop new laws and regulations for their specialist industries. I wonder how they would prevent the foreign experts from playing the game of mates to benefit their buddies and amigos at the expense of “champion Aussies”.

Another bizarre suggestion is to increase competition by creating public competitor companies in industries such as banking, land development and the universities. The fact that Australian universities are still largely government-owned might have caused the authors to think a little more about the likely effectiveness of that remedy. Political appointment of boards and chief executives, combined with vast discretion for allocation of grey gifts, make government-owned enterprises part of the problem rather than part of the solution.

In my view, the book’s ideologically blinkered approach favouring government enterprises is a major shortcoming. The authors ask:
“If governments believe that they are unable to efficiently construct school buildings, hospitals, roads, or powerlines, through their own departments or government-owned companies, what magical skills do they believe they possess in order to effectively negotiate with and regulate, the powerful private interests they are selling these assets to?”

Part of the answer to this question is that trade unions – major players in the game of mates whose role is barely recognised in this book – can exert more influence over government departments and government-owned companies, than over private enterprises. Public sector managers have a strong incentive to sacrifice productivity to maintain the appearance of industrial harmony because that is what their political masters expect of them in playing the game of mates.

Another part of the answer is that it is easier for governments to remove regulation protecting private firms from competition than to remove similar barriers protecting public enterprises. For example, it is unlikely that Australia Post’s monopoly on letter carriage would be maintained if that organisation was privatised and its community service obligations (more mates’ games) were converted into transparent subsidies for people living in remote areas.

I could go on for a few thousand more words discussing the shortcomings of this book – including its highly misleading claims about banks creating credit, and its view that sovereign risk is a “mysterious idea”. However, that might be boring.

The thought I want to leave you with is that despite its many shortcomings, this book raises disturbing issues that should not be lightly dismissed. The authors deserve to have their claims subjected to detailed scrutiny, but not by me! I could change my mind about that, of course, if one of my mates can come up with a sufficiently lucrative consultancy proposal to bring me out of retirement 😊

Friday, July 21, 2017

What caused the narcissism epidemic?


It seems obvious that there is a narcissism epidemic in many countries: people taking selfies everywhere we look; adolescents saying that their goal in life is to become famous; celebrities behaving like gods; people exploding in rage in response to imagined affronts; charlatans, shysters and jerks everywhere betraying trust. Psychologists have been written books about it: “The Narcissism Epidemic”, by Jean Twenge and Keith Campbell, tracked scores of U.S. college students on the Narcissistic Personality Inventory (NPI) across generations and found that there had been an increase in narcissism.

Claims based on the NPI have been disputed by Kari Trzensniewski, who conducted research using a slightly different data set and found no increase in NPI scores. In the face of ambiguous evidence, I wonder whether it might be narcissistic of me to continue to accept that there is a narcissism epidemic. Nevertheless, I will persist. A national survey conducted in the U.S. suggests that about 10 percent of people in their 20’s have experienced symptoms of Narcissistic Personality Disorder (NPD) at some time during their lives. So, even if narcissism hasn’t been increasing it might still be reasonable to view it as an epidemic.

NPD is a long-term pattern of abnormal behavior characterized by exaggerated feelings of self-importance, exaggeration of achievements and talents, an excessive need for admiration, and a lack of understanding of others' feelings. The Mayo Clinic has published a longer list of symptoms that are referred to in the DSMv. Narcissism exists on a spectrum, ranging from exhibiting a few traits to the full-blown personality disorder.

Anne Manne, an Australian journalist has provided an interesting discussion of the nature and causes of narcissism in her book, The Life of I, The new culture of narcissism, updated edition published 2015.

She notes that Twenge and Campbell have taken aim at myths regarding the relationship between narcissism and self-esteem. They point out that narcissism is not just high self-esteem, in the sense of a quiet and sturdy confidence in oneself. Narcissists feel superior; they are arrogant and unwilling to accept criticism.

Twenge and Campbell also suggest that it is a myth that narcissism is a mask for low self-esteem. They are opposed to the psychodynamic view that narcissists are flawed people who are ‘hurt deep down inside’. According to their view a narcissist is ‘just a jerk’.

However, Manne notes that Erin Myer and Virgil Zeigler Hill found that narcissistic people revealed lower self-esteem than non-narcissistic people when a bogus lie detector test was used in assessing self-esteem and narcissism. Narcissists don’t like to admit weakness or vulnerability.

Manne points to a corresponding division of views on the causes of narcissism. Twenge and Campbell argue that what makes a child into a narcissist is spoiling, indulgence, an absence of moral discipline in building character, and a culture of excessive praise, of telling children they are special. However, findings of research by Lorna Otway and Vivian Vignoles, using recollections of young adults to test a range of views of the role of parenting in development of narcissism, support a Freudian view. Apparently future narcissists receive constant praise from their caregivers that is accompanied by implicit messages of coldness and rejection rather than warmth and acceptance. This helps explain the combination of grandiosity and fragility exhibited by many narcissists.

Manne also discusses evidence that infants whose dependency needs are rebuffed by parents tend to become aggressive adults. Studies by Alan Sroufe suggest that preschoolers forced to self-reliance too early tended to bully others and engage in repeated acts of cruelty. Their early experiences at home made such behaviour seem natural.

The author also draws attention to research suggesting that affluent families are not immune to problems arising from parents being emotionally distant from their children. While insisting on high levels of achievement, such parents are often indulgent towards bad behaviour.

Manne sees the problems of parenting as linked to limited government support for parental leave. After a brief discussion of this topic she concludes:

This brave new world is a whole lot larger than its symptoms – the self-esteem movement or the college kids with unrealistic ambitions or the helicopter parents rushing in to rescue a child whose grades are poor. Another way of looking at narcissism is that it is a quality required for survival in the hyper-competitive paradise of the new capitalism”.

That is indeed another way to look at the issue. Manne attempts to support that view in the second part of her book, holding Ayn Rand responsible for the “new capitalism”. She refers to Rand as “a monstrously narcissistic character” and suggests that “she practiced what she preached” in her philosophy of selfishness.

The main problem I have with that claim is that some of Rand’s behaviour seems to me to have been more selfish – showing less regard for other people - than that of the heroes of her novels. The behaviour of the heroes of her novels was presumably intended to illustrate the selfishness that she saw as a virtue, but I have difficulty, as previously noted, in recognising these fictitious characters as being particularly selfish

At one point Manne states that Rand’s “heroes are all young, male, wealthy … “. That left me wondering whether Manne had ever taken the trouble to read Atlas Shrugged. If she had done so, or even if she had looked up the list of characters on the internet, she would have been aware that Dagny Taggart was female.

Manne’s claim that Rand promoted “an ideology of narcissism” can be much better answered by an Objectivist, than by a reader of Rand’s novels like myself.  John Galt said:

“Happiness is not to be achieved at the command of emotional whims. Happiness is not the satisfaction of whatever irrational wishes you might blindly attempt to indulge. Happiness is a state of non-contradictory joy – a joy without penalty or guilt, a joy that does not clash with any of your values and does not work for your own destruction, not the joy of escaping from your mind, but of using your mind’s fullest power, not the joy of faking reality, but of achieving values that are real, not the joy of a drunkard, but of a producer”. (Atlas Shrugged, p 1022)

Manne raves on about what she refers to as “the neoliberal revolution” as creating an ideological framework for narcissism to flourish at an individual level. Yet she doesn’t specify the nature of the incentives that could have caused that to occur. If “neoliberalism” means free markets, how do free markets provide an incentive for appointment of narcissistic business leaders? Under normal circumstances the last thing individual investors want is to have their wealth depend on the actions of a narcissistic chief executive.

Some investors might think it makes sense to take a punt on a narcissistic entrepreneur in highly regulated industries where there may be something to be gained by hoodwinking politicians and voters. Otherwise, why take the risk that the narcissist might run off with your money or spend it to enhance his own image?

It is disappointing that Manne has not considered whether narcissism might be a problem in occupations other than business. Markets expose private sector narcissists to financial disciplines for failure to deliver on their promises unless they can use their skills to persuade governments to bail them out. Casual observation suggests that some other occupations - such as politics and some parts of the media - provide a breeding ground for narcissism and a sanctuary for narcissists.

Anne Manne has not, in my view, made a persuasive case that Ayn Rand’s philosophy played a large role in the partial return to classical liberalism in the U.S., the U.K, and a few other countries including New Zealand and Australia, during the 1980s and 90s. And she certainly hasn’t made a persuasive case that free markets promote narcissism.

Nevertheless, I enjoyed reading The Life of I. I particularly enjoyed reading her explanation of the behaviour of Anders Breivik and Lance Armstrong. The book seems to provide a good introduction to psychological research on the nature of narcissism and parenting styles that lead to narcissism.

Wednesday, July 12, 2017

Will individualism destroy Western Civilization?


Paul Kelly’s article ‘Blessed be the egoistic individuals’, a gated article published in The Weekend Australian (July 8-9, 2017) asserts that the decline in professed Christianity in Australia from 88 per cent of the population in 1966 to 52 per cent in the most recent census is an epic change that “has profound consequences for society”. I agree with him, although I suspect that the change might be exaggerated by greater honesty in the responses in recent censuses. I also agree with Kelly’s claim that there is a link between decline of Christianity and the emergence of a situation where “politics is being asked to assume a role and burden utterly beyond its capacity and guaranteed to leave community-wide unhappiness”

In my view, the linkage between the decline of Christianity and inflated expectations of politics arises from the growth of the welfare state. As people have come to rely more heavily on government, faith in government has tended to replace faith in God. Increased dependence on government for education, support for the elderly, health care etc. has been associated with a decline in family responsibilities, a decline in support provided by civil society, and a decline in individual responsibility.

However, Kelly takes a different view. He identifies individualism as the culprit. In taking that view he overlooks the contribution of Christianity to recognition of the worth of the individual human.

To explain I will first sketch out Kelly’s line of argument:

  1. There is an “obsession about individual autonomy in every aspect of life: love, work, race, sex, culture and death”. This “is narcissism presented as self-realisation and human rights”
  2. Narcissism has become an epidemic and is the central problem of our times. The new terror is to be invisible. Many people now have “a distorted idea of the human person and human aspiration”.
  3. The narcissistic attitudes now prevalent contrast starkly with the modesty, humility and forbearance of the generation who lived through the Depression and World War II. It is impossible to separate those virtues from the Christian norms that were so pervasive at the time
  4. The rise of “progressive values in the name of freedom and justice” during the 1960s marched in parallel with the decline in religious faith. They were “different sides of the same coin”
  5. Eventually, the revolution took judicial and legal form. In 1992, the U.S. Supreme Court, led by Justice Anthony Kennedy asserted: “At the heart of liberty is the right to define one’s own concept of existence, of meaning, of the universe and the mystery of life”. Kelly claims that at this point: “The idea of freedom was separated from a higher order moral duty and tied to personal self-realisation and self-esteem. Narcissism was legitimised.
  6. As the moral status of the church declines, the moral status of progressive ideology grows. Pivotal to this transition is the progressive attack on the Aristotelian framework that made the West a success. This concept envisages three “necessary” elements for human happiness: domestic society (marriage and family), faith and church and, finally political society. Progressive doctrine denies any preferred model for family structure “since that would be prejudicial and discriminatory” and seeks to drive religion from the public square.
  7. “As the society of family and marriage becomes mired in confusion, as the society of church and religion is the target of assault, so the society of politics is being asked to assume a role and burden utterly beyond its capacity …”

Interestingly, what Kelly refers to as “obsession about individual autonomy in every aspect of life” corresponds fairly closely to “emancipative values”, as measured on the vertical axis of the chart shown below. Emancipative values reflect concern about such matters as personal autonomy, respect for the choices people make in their personal lives, having a say in community decisions, and equality of opportunity. As well as supporting gender equality, people who have emancipative values tend to consider independence and imagination as more desirable child qualities than obedience, and to be tolerant of divorce, abortion and homosexuality.


"The New Cultural Map of the World”, from Christian Welzel, Freedom Rising: Human Empowerment and the Quest for Emancipation, Figure 2.3, 2013.



The countries in which emancipative values are most common are also characterised by strong secular values, but a high score on secular values is obviously not a particularly good predictor of strong emancipative values.  As the chart shows, the dominance of secular values is most noticeable in former communist countries, but is also more evident in the welfare states of western Europe than in the United States and Australia. 

In equating self-realisation with narcissism, Kelly is casting his net very broadly indeed. His net not only catches the self-esteem advocates - who deserve criticism, in my view, for leading people into narcissism – but also all those who have followed in the footsteps of Abraham Maslow and Carl Rogers.

In fact, every program for self-improvement that draws inspiration from Aristotle is caught in Kelly’s net. All such programs are based on the potential for self-realisation – the idea that humans have a natural orientation toward pursuit of their own ultimate good and that it is desirable for individuals to realise the potential of their character or personality. While I can claim little knowledge of the writings of Thomas Aquinas, I understand that he expressed similar sentiments.  I also have the impression – based on distant childhood memories - that acceptance of personal responsibility for character development was one of the messages of the Parable of the Talents.

In staging such a broad attack on individualism, Kelly overlooks the contribution of Christianity to recognition of the intrinsic worth of the individual human. He might find Larry Siedentop’s book, Inventing the Individual, discussed here, to provide a useful reminder of the historical role played by Christianity in liberating individuals from constraining perceptions of their personal identities as defined by social roles, and in encouraging recognition that individuals have consciences that deserve to be respected.

I agree with Kelly’s comments about the epidemic of narcissism and most of the other points he makes. However, I am concerned about his claim that the U.S. Supreme Court legitimised narcissism by separating the idea of freedom from moral duty, and tying it to personal self-realisation and self-esteem.

Who knows what the U.S. Supreme Court was claiming? It is certainly not clear to me that it was claiming that the concepts of “the mystery of life” that individuals “have the right to define” for themselves have the status of “moral truths”. Kelly’s comments left me wondering what role he sees for legislators and courts in enforcing compliance with “moral truths”. Does he really think that freedom should only be about being free to do the things that one has a moral duty to do?

I have read and commented on Paul Kelly’s views on individualism only because many of his other contributions to Australian journalism have been excellent. A few years ago I expressed the view that, over several decades, he had developed a formidable reputation as Australia’s leading ‘big picture’ journalist. More recently I described him as Australia’s most widely respected journalist.  I stand by those views. I don’t think anyone else has been more successful in identifying the defining elements of the changing political landscape in Australia.

Saturday, July 1, 2017

Where does the money come from to pay for education in PNG?


I didn’t have any intention of thinking about economics a few weeks ago when I was on a cruise ship, the Sun Princess, visiting Papua New Guinea and the Solomon Islands. It just happened.

 If you spend a lot of your life thinking about anything you find interesting you don’t necessarily stop doing that just because you are enjoying a holiday. That is what I tell myself anyhow.

One of the reasons people go on cruises, like the one I recently enjoyed, is to see something of the culture of the people in the countries they visit. That isn’t important to everyone. Some people are more interested in scenery, bush walking, swimming, diving etc. Others just want to enjoy the amenities offered by a floating hotel.

 A substantial proportion of people on our cruise were interested in local culture and history. That judgement is based largely on attendance at the lectures offered on those topics. There were not many spare seats available in the theatre seating a few hundred people – my guess is about a quarter of passengers attended the lectures. In addition, videos of the lectures were also available for viewing in passenger cabins.

Of course, when cruise ship passengers visit any small community they don’t get to observe people going about their normal daily activities. The arrival of the cruise ship disrupts normal activities. People who usually spend their time gardening, fishing or making handicrafts become merchants, guides and entertainers. Inevitably, the role of tourists as consumers and potential benefactors influences the culture they observe.

I don’t wish to imply that the cultural experiences we were offered were not authentic. The cultural festival staged for our benefit in Alotau provided a sample of traditional singing and dancing. The houses we saw on Kiriwina Island were places where people lived; the gardens provided food that people relied on for subsistence; the canoes we saw were normally used for fishing. I didn’t get the feeling of visiting a theme park that I had at times a few years ago on an Alaskan cruise (that was nevertheless enjoyable).

Some houses on Kiriwina Island

Of the places we visited, on Kiriwina lives of the people have been least affected by western influences. Even there, however, a group of village children, who were dressed traditionally, were raising money from the tourists by singing “Twinkle, Twinkle Little Star”. When I suggested to my guide, a year 10 student at the local school, that this song was part of a universal culture, he expounded eloquently on the importance of preserving local culture. I agree with him and hope tourism will help to preserve local culture. For my guide and most locals, however, the highest priority in obtaining money from tourists was to help fund education.

Wherever we went, people were raising money to fund local schools and pay school fees. From what I have heard when I was working in PNG a few years ago, the funds raised from tourists do not all end up being used for the purpose for which funds were donated. However, there is no doubt that education is widely seen by parents as a way for their children to obtain a better future. The children in some of the groups performing for tourists on Doini Island seemed to be doing a good job of raising money by entertaining tourists whilst also helping to preserve local culture.

Children on Doini Island raising funds to build a new classroom

The main reason why the government does not do more to fund education and health services is because PNG is a low-income country, lacking the tax revenue base that would be required to fully fund schools and basic health services. Politicians have promised to increase funding but have not delivered on those promises. If taxes were raised that would have an adverse impact on incentives - including incentives for village people to become involved in the market economy - and be unlikely to raise much additional revenue. Misuse of public funds is a serious problem, but it is unrealistic to expect that a huge pool of public funds would appear to fund education and health services if corruption could be eliminated.

During our visit to Rabaul I witnessed a discussion of education funding that left me feeling frustrated. The participants were an Australian tourist and a local tour guide. The discussion occurred on a small bus taking a group of tourists to see the area that had been devastated by the eruption of Mount Tavurvur in 1994.

Visiting a volcano at Rabaul

When our guide told us that she felt fortunate to be able to take on casual work as a tourist guide to help pay for the education of her children, the Australian tourist expressed the view that the PNG government should be paying for education. She went on to tell everyone how incredibly lucky we were in Australia to have a government that paid for education, health services and pensions.

Other passengers remained silent, but a man sitting in the front seat next to the driver looked over his shoulder to see who the woman was who was doing all the talking. Unfortunately, I didn’t have the presence of mind to ask the vocal tourist how she thought our government funded education, health services and pensions.

As the cargo cult dies out in PNG, the magic pudding cult has continued to grow in Australia, apparently now even seeking converts in PNG. 

Virgin Coconut Oil Rabaul

The same tourist bus provided us with an opportunity to see a small manufacturing plant making Virgin Coconut Oil. I don’t know whether the product has the health benefits that are claimed for it, but the process by which the oil is extracted from fresh coconut meat looks as though it should produce a better product than the oil manufactured from copra exports.

 Preparing coconuts for oil extraction

Manufacturing plants like this one may have potential to generate more income for local communities than is possible by exporting copra.

Copra awaiting export at Rabaul

If I let my imagination run wild it even seems possible that the manufacture of virgin coconut oil in Rabaul could be an example of the kind of development that could play an important role in enabling more widespread economic opportunities to emerge in PNG in the years ahead. If that can happen it might even be possible for village people to purchase better and more secure access to education, health services and the other things they want. 

Coming back to earth, the manager of Virgin Coconut Oil Rabaul mentioned that the business had obtained assistance from a government agency serving grower interests, the Kokonas Indastri Koporesen (KIK). A question that raises is why such assistance is necessary if the venture has potential to be profitable and provide more attractive remuneration for labour than is otherwise available. I don’t know what services the KIK provided in this instance, but I am sure that in a more normal market economy those services could have been provided by commercial enterprises with relevant technical knowhow, marketing links and other relevant resources. So, what prevents potential commercial partners, including foreign firms, from linking up with local firms to undertake ventures of this kind?

The underlying problem, as I see it, is that the profit motive doesn’t work very well in an economic environment where investors have reason to fear that profits are not safe from potential predators, including some within government. The assistance provided by KIK to processing enterprises is valuable in demonstrating the potential for value adding activities, but does not address the underlying problem.
It is difficult to see how the underlying problem can be solved in the near future. It will take a lot more than just announcement of economic policy reforms. Meanwhile, perhaps greater economic opportunities could be generated if the KIK and other commodity boards were given a more explicit role to facilitate additional investment in agriculture and related processing activities.