Mann, sind die dick, Mann

The title is the Berliner Kurier's  expression of appreciation for Britain's chip-eating habit (the link is from kevin writing at Understanding Uncertainty, as is the basic point of this post).  The BBC carried a similar story, based likewise on a Eurostat report comparing the proportions of obese people across the EU: "UK Women are fattest in Europe".

Certainly obesity has increased over the last few years in the UK, and I think that's a bad thing.  But the comparison with the rest of the EU is meaningless, because the statistics are collected in a way that's simply not comparable.  For the rest of the EU, data come from the EHIS survey in which the interviewer simply asks the participant how tall and heavy they are: question 21 here.  In England (the UK data in fact come from England only) data come from the Health Survey for England, in which the interviewer actually measures the participant's height and weight: section 3.1 here.  What proportion of obese people do you think will under-report their weight (or over-report their height) sufficiently to be classed as non-obese?  One in ten?  What about answers of "don't know" or refusals to answer - how far will they tend to reduce the observed obesity rate?

My guess is that genuinely comparable statistics would put England in the top quarter of the table, but not at the top.  But I'm just guessing.  And so is Eurostat.

Teaching children to program computers

My first two years of secondary schooling were spent at a large and mediocre comprehensive.  Its computing facilities consisted of a Teletype connected to a mainframe at a polytechnic six miles away (this was at about the time the first personal computers were being developed).  And at the age of 11 or 12 what was certainly not called the top maths set was encouraged to write programs for it in FORTRAN 66 (being a heartwarming nerd I taught it to play noughts and crosses).

Decades later, there is more than one computer for every four children in UK schools (the ratio will be better in secondary schools).  And ICT - Information and Communication Technologies - is part of the school syllabus.  So how can it be that children are not learning computer programming?  The recent "Next Gen" report has the answer:

...instead of building on the BBC’s Computer Literacy Project in the 1980s, schools turned away from programming in favour of ICT. Whilst useful in teaching various proprietary office software packages, ICT fails to inspire children to study computer programming. It is certainly not much help for a career in games. In a world where technology affects everything in our daily lives, so few children are taught such an essential STEM skill as programming. Bored by ICT, young people do not see the potential of the digital creative industries. It is hardly surprising that the games industry keeps complaining about the lack of industry-ready computer programmers and digital artists.

I had a look at the OCR's ICT GCSE examination - this is the exam 16-year-olds in most of the UK will take to certify their computing skills.  One optional "unit", making up 30% of the overall marks, concerns itself with coding.  Within that, at most 11 out of 60 marks are available for the actual code.  That's 5.5% of the overall marks.

It used to be the case that the nerds could be left to pick up programming skills for themselves.  But that's changed - why bother to write a noughts-and-crosses program when you can find a much better one on the internet in a few seconds?  We don't need everyone to be a programmer, but if we want to be a rich country we need enough programmers to support a thriving software industry.  The importance of literacy and numeracy is well recognized, but for most children learning how to use computers goes little further than the equivalent of learning how to take the cap off a biro.

There's been an understandable trend in education towards teaching the same subjects to children of all abilities, with the difference between abilities being in the level of attainment expected.  Appropriately enough, computer programming skills are more binary than that.  We have to take an elitist approach with the most able 10% or 20%, while doing everything we can to minimize the risk of leaving out the wrong children.

The government intends to publish its response to the Next Gen report today: I hope it takes the issue seriously.

Insurance for cyclists

The BBC has a story encouraging cyclists to purchase insurance, apparently based on a press release from the Association of British Insurers (but the press release is not yet on the ABI's website).  The ABI's spokesman says:

Some 230 cyclists a month are killed or seriously injured on the roads so there is a good chance you are going to be off work for weeks, if not months, so some sort of insurance to cover you for loss of income makes sense

The statistic is accurate - according to the Department of Transport  111 cyclists were killed in Great Britain in 2010 and 2,660 seriously injured in accidents reported to the police, which combined comes to just over 230 a month.  And it's not surprising that British Insurers are in favour of Britons buying insurance.

But why focus on cyclists in particular?  The DoT statistics for pedestrians are 405 deaths and 5,200 serious injuries - twice as many serious injuries and nearly four times as many deaths (I wonder why the ratio of deaths to serious injuries should be so different).  A plausible estimate is that 27% of the adult population are cyclists, and I'm confident that less than 100% of the adult population are pedestrians, so the risks seem not to be very different.

The ABI spokesman goes on to say that third-party liability insurance is essential.  Well, whether on a bicycle or not all of us are at risk of somehow causing someone an injury.  Few of us sue one another on account of it - I suspect that legal actions such as this one would be much rarer if personal liability insurance did not exist, partly because most of us don't have enough money to make bringing the action worth the lawyers' while - Jack of Kent has some interesting thoughts on the subject.  If you're not rich enough to be worth suing for your own money, you might think it your civic duty to carry liability insurance, but that should not be for cycling only.

It seems to me that there's something unnecessarily discouraging about attitudes to cycling in Britain.  I'm reminded of the debate about wearing cycling helmets.  Helmets provide some protection, and I often wear one when cycling, but they would protect pedestrians and car passengers too: no one tuts at people walking down the street without a helmet on their head.

Anthropogenic Global Warming and democracy

More hacked emails from the University of East Anglia's Climate Research Unit have been released, timed apparently for the COP17 conference starting in Durban on monday. There's nothing recent - apparently this is all material appropriated at the time of the original "Climategate" hack in 2009.  Nevertheless, high-profile disbelievers in AGW are besides themselves with excitement: here for example is James Delingpole in the Telegraph.  Just in case there's something in it I've looked at the first email Delingpole reproduces as an example of the revealed perfidy of UEA climate scientists, from Thorne/MetO (apparently Peter Thorne at the Met Office addressing Phil Jones at the CRU):

Observations do not show rising temperatures throughout the tropical troposphere unless you accept one single study and approach and discount a wealth of others. This is just downright dangerous. We need to communicate the uncertainty and be honest. Phil, hopefully we can find time to discuss these further if necessary [...]

Thorne seems to be saying that a claim Jones has made in a draft paper or report about "rising temperatures throughout the tropical troposphere" is not supported by the evidence and should be deleted.  You might or might not detect a slight note of reproach.  But there's nothing scandalous about this.  If Thorne decided actually to publish the claim while still believing it to be unjustified then that would be scandalous.  But neither Delingpole nor anyone else seems to have any evidence of that.  Whereas Jocelyn Fong at Media Matters has  looked into it, and concludes that this email was part of a discussion in February 2005 of an IPCC report eventually released in 2007.  The section about the upper troposphere, which is the only section discussing the troposphere directly, makes no strong claims at all: "the uncertainties about long-term change are substantial".

So the news story seems to be "old emails reveal no scientific dishonesty by Climate Scientists, in agreement with the conclusions of several enquiries".

What I find remarkable is the underlying assumption in much of what's published in newspapers and online, by believers in AGW as well as by disbelievers, that these questions can be settled by debate among people who  are not experts in the scientific issues (I'd guess there are at most a few hundred experts qualified to give first-hand opinions).  There are five questions to be answered:
1) Is the climate getting warmer?
2) If it is, is the warming caused by human activity?
3) If it is, do we expect warming to continue if we carry on as before?
4) If we do, what can we change to reduce or halt the warming?
5) Is it worth changing the things we can change?

Only (5) is a matter suitable for political debate, ultimately to be decided by democratic vote.  If the climate is getting warmer, no lobby of Telegraph readers asserting that it isn't is going to stop it.  Yet it seems to be question (1) that climategate enthusiasts are most anxious to argue about.  This is a strange choice of argument in view of the story of Richard Muller.  In 2004, Muller, a professor of physics, came out in support of a paper (there's a version of it here) claiming that the famous "hockey stick" analysis, showing global temperatures rising sharply during the 20th century, was based on fatally flawed statistical methods.  This argument met with vigorous rebuttal, but eventually Muller set up the Berkeley Earth Surface Temperature project to analyse temperature data using statistical methods he was satisfied with.  A month ago, BEST released its first results, which it summarized here.  Its conclusion is that it agrees closely with the previous concensus among climate scientists.  To his credit, Muller acknowledged in a piece in the Wall Street Journal the accuracy of the work done by prior groups "We think that means that those groups had truly been very careful in their work, despite their inability to convince some skeptics of that".

How can one explain the extraordinary confidence of so many people who have no technical grasp of the issues that the scientific consensus on question (1) is wrong?  Perhaps it comes from a misapplication of libertarian thought: it's right that I should be allowed to do what I want, I want to burn fossil fuels, climate scientists are trying to stop me, so climate scientists must be wrong.  That is, they are confusing their self-entitling theory of justice with scientific fact.

Update: commentator Belette rightly points out that I have been unclear about what BEST's results so far actually say.   BEST has analysed temperature measurements dating back to 1800, but it has not yet reported on the proxy temperature data used to create the "hockey stick" graphs going back 600 and later 1000 years.  (This is an ice hockey stick: the graph is roughly horizontal (the shaft of the stick) until it starts rising during the 20th century (the blade).)  It's still entirely possible that BEST will produce a reconstruction of longer-term temperatures outside the currently accepted ranges: that would be a result to be evaluated on its own merits.

My point is that now that an avowed sceptic has independently confirmed the global warming trend, it is madness to allege that it's a fabrication or a mistake arising from a self-reinforcing scientific consensus.

The Financial Transactions Tax and volatility

The Institute of Economic Affairs has published a report by Tim Worstall setting out a case against the proposed FTT.  The article introducing the report asserts, among other things, that "it won't reduce volatility, a desired aim, it will increase it".  Richard Murphy, commenting on the report in the name of Tax Research UK, flatly contradicts this "If there was less liquidity in these markets there would, very obviously, be much less volatility than we are witnessing at present".  So who is right?

Neither writer troubles himself to say what he means by volatility.  When used by sombre-sounding financial news reporters, it tends to mean security prices going down a lot (prices going up a lot are just as volatile, but they don't evoke the same atmosphere of impending doom).  But as a term of art in finance, it means the standard deviation of the logarithm of price returns, scaled by the square root of the time interval over which each return occurs - Black and Scholes' seminal 1973 paper on option pricing uses the concept, describing it as the square root of the "variance rate".

In a simple model, security prices follow a geometric Brownian motion.  In this model, the observed volatility is expected to be same whatever time interval of returns is used.  This model is far from being an exact description of the real world - much published work on option theory is concerned with its flaws - but it is a useful approximation.  Under this model, what would be the effect on volatility of an FTT?  Assuming that trades become less frequent, but otherwise occur at the same prices, it would make no difference.  (The result is essentially the same if one introduces an additional drift to compensate investors for reduced liquidity.)

One minor flaw with the model is that if trading occurs at high frequency, prices may bounce between the bid and the offer, introducing additional volatility if the return periods used to observe it are very short.  An FTT would largely eliminate this effect.  But the effect does no one any harm, apart perhaps from causing some inconvenience to anyone engage in high-frequency analysis of market-price data.  Could this be what Richard Murphy means when he says less liquidity very obviously gives much less volatility?  I don't think so, I think he just means that traded prices don't move when no trades occur.  Which is true, but not to anyone's advantage.

There are other high-frequency noise effects which have been theoretically analysed.  The conclusion tends to be that some reduction in short-term volatility is possible, at least in theory, if some sorts of high-frequency trading can selectively be discouraged.  (More on this below.)

A more important flaw in the model is that in practice there are far more large price moves than it predicts, unless one allows very large process volatilities to prevail temporarily.  This effect can be modelled by introducing a jump diffusion term to the price process.  Although these large price moves may not be related to an underlying volatility process, they nevertheless contribute substantially to observed volatility whenever they occur.  So if the incidence of these large moves could be reduced, there could be a substantial reduction in volatility, of precisely the sort one would wish to see if concerned about market price instability.

Some large moves may be caused by speculative activity.  Holders of securities may be induced, or even compelled, to sell them if the price falls far enough.  For example, as I noted in another post, when sovereign debt yields get large enough margin requirements are made more onerous, making it still more unattractive to hold the bonds and leading to further selling.  This can give two distinct possible prices for the same instrument.  Speculators may be able to gain by pushing the price from one possible value to the other one.  An FTT would inhibit such speculation.  So there is at least a mechanism by which it could reduce volatility.  Whether this is significant could be determined only empirically.

Which brings us to Worstall's commentary.  Whereas his introductory article is emphatic that an FTT would increase volatility, his actual report is more measured: it quotes this from a report by the Institute of Development Studies at the University of Sussex:

The balance of evidence suggests that there is a positive relationship between transaction costs and volatility, although the size of this effect varies across different studies. Whether a Tobin Tax would affect volatility in the same way as underlying market transaction costs is not clear.

and concludes that "this suggests that a transaction tax would increase, not decrease volatility."  But the quotation seems to have been carefully selected to suit Worstall's position.  The discussion on volatility is much longer and more nuanced.  Ideally you should read the whole thing, but I'll offer a flavour of it by quoting the whole of the paragraph Worstall quotes from:

Nonetheless, the overall conclusion from the empirical evidence is more one sided than the theoretical work. The balance of evidence suggests that there is a positive relationship between transaction costs and volatility, although the size of this effect varies across different studies. Whether a Tobin Tax would affect volatility in the same way as underlying market transaction costs is not clear. The Swedish experience of imposing a tax on equity transactions may have increased volatility, but the size of the tax was large; there is no evidence that UK Stamp Duty had any effect on volatility, although it clearly affected returns on equity.

My summary is that the theoretical work tends to support the case that an FTT can reduce short-term volatility.  The empirical work suggests the opposite, but does not of course rule out the possibility that a carefully designed FTT could work as suggested by the theory.  But none of this matters very much because short-term volatility doesn't matter very much.

Importantly for my argument about jumps, the report notes that:

Unfortunately, to our knowledge, there are no papers which look at the impact of FTTs on the probability of a crash or adjustment taking place...We see this as a major gap in the literature.

To answer my original question, both Murphy and Worstall are wrong.  Murphy is completely wrong, except perhaps under some definition of volatility known only to himself.  Worstall is wrong in stating a definite answer to the question not supported by the evidence he cites.  The true answer is that we should not expect any great effect on short-term volatility, but that any small effect is somewhat more likely to be up than down. And that there is no way of knowing whether they would be a useful reduction in the risk of the occasional large moves that we really care about when we worry about volatility.

Median survival time from cancer diagnosis

The BBC has a story about median survival times from diagnosis for various cancers, and how they have changed in the last 40 years.  For some cancers there's been a big improvement, for others there isn't.  A spokeswoman for Cancer Research UK says that more research is urgently needed into cancers for which there has been little improvement.

The source is a research briefing paper by Macmillan Cancer Support.  Under the heading "Shocking Variation" the introduction says:

First the good news: overall median survival time for all cancer types 40 years ago was just one year, now it is predicted to be nearly six years. This improvement is testament to the improvements in surgery, diagnosis, radiotherapy, and new drugs. There have been particularly dramatic improvements in survival time for breast cancer, colon cancer and Non-Hodgkin’s Lymphoma – with many years added to median survival times.
But the good news is tempered by the woeful lack of improvement in other cancers. There has been almost no progress for cancers like lung and brain, where median survival times have risen by mere weeks. Shockingly pancreatic cancer median survival time has hardly risen at all. The NHS and cancer community must urgently look at why.

Apart from not being shocked, I don't disagree with that.  But there is something important left unsaid.  There are three ways to improve cancer survival time from diagnosis.
1) Better treatments
2) Earlier diagnosis, even if the treatment is ineffective
3) More effective treatment made possible by earlier diagnosis

Certainly treatments have got better for all cancers - medical science is a wonderful thing.  But there are few in which this has given us a really big increase in median survival time: Non-Hodgkin's Lymphoma is one.  I suspect that most of the improvement has been from much earlier diagnosis made possible by scanning technology invented in the early 70s, by endoscopy, and by testing for tumour markers such as PSA.  And it is hard to separate effects (2) and (3).

Screening programmes are likely to become widely deployed only if there is evidence that they decrease mortality: that suggests that treatment following early diagnosis reduces mortality even in asymptomatic patients, but it doesn't tell us by how much it increases median survival.  (There's a helpful discussion of how to evaluate screening programmes here.)

The Macmillan report notes that the prostate cancer should be treated with caution because of the increased "incidence" of low grade tumours following the introduction of PSA testing (they should say "diagnosis").  Similar caution should be applied to interpreting the data for all cancers.

A concocted quotation

Israel's first Prime Minister, David Ben-Gurion, wrote in 1937: " The Arabs will have to go, but one needs an opportune moment for making it happen, such as a war".

The quotation, from a 2008 column in The Independent by Johann Hari, gets "about 5,640" hits on Google.  Happily, after developments described below, the first few pages currently reported by Google are quoting it in order to point out that Ben-Gurion wrote no such thing.  But most of the pages using it treat it as authentic: it seems to be attractive to supporters of the Palestinian cause.

I was surprised when I read the column, because the quote seemed to contradict what I thought I knew about Ben-Gurion (not that I am an expert).  So I looked it up, and found that Hari had already used it, a year or so earlier, in a longer version "I support compulsory transfer. I do not see in it anything immoral ... The Arabs will have to go, but one needs an opportune moment for making it happen, such as a war."  At that time, Benny Morris, an Israeli historian generally sympathetic to non-Zionist perspectives on the founding of Israel, wrote to the Independent saying that whereas the first part of the quotation is genuine (more on that here), everything after the ellipsis - that is the quote at the head of this piece -  is an invention.  I left it at that.

A few months ago, I saw these screenshots from the 2010 film With God on Our Side, which speaks against Christian Zionism, and decided to find out the truth of the quotation.

As I write this piece, I find that I've been overtaken by events.  CAMERA, a media-monitoring organization sympathetic to Israel, has done its own investigation and has persuaded the director of the film to issue a correction.  Nevertheless, the quotation is still widely used, and I'm going to try here to convince any believers that it's a dud.

The source of the quotation is a 2006 book by Ilan Pappé, The Ethnic Cleansing of Palestine, on page 23:

Ben-Gurion himself, writing to his son in 1937, appeared convinced that this was the only course of action open to Zionism: 'The Arabs will have to go', but one needs an opportune moment for making it happen, such as a war [40].

Reference [40] is given on page 266:

40. Ben-Gurion's Diary,12 July 1937, and in New Judea, August-September 1937, p.220

This is already strange.  How can there be two sources for the quotation, neither of them the letter mentioned in the text?  And what's going on with the quotation marks around the first six words only?  Pappé used the quotation again, in an essay titled "State of Denial: Israel 1948-2008"; you can find it on page 6 here:

This link between purpose and timing had been elucidated very clearly in a letter David Ben-Gurion had sent to his son Amos in July, 1937: “The Arabs will have to go, but one needs an opportune moment for making it happen, such as war.”

 Pappé seems to have tidied up his earlier version.

David Ben-Gurion's diary is in the Ben-Gurion archive at the University of the Negev.  I asked them for a facsimile of the 12th July 1937 entry and they kindly sent it to me.  It's nearly four pages of unpointed typewritten Hebrew, and not easy to make out.  But I needn't trouble you with my own attempts at translation, because in checking for alternative readings I found that Benny Morris published one already, in his contribution to The War for Palestine, first published in 2001, on pages 41-43.  Morris doesn't say so, but, with minor elisions, this is all but the last half page (which is about what Ben-Gurion did that day) of the diary entry.

Morris is writing about Zionist interest in the idea of forced transfers of the Arab population of Palestine, and cannot reasonably be suspected of suppressing evidence favouring his argument.  Ben-Gurion discusses with some enthusiasm the proposals of the Peel Commission, including forced transfers, but he does not write the words Pappé quotes.  (Nor does he mention a letter to his son.)

The other source Pappé gives is "New Judea, August-September 1937, p.220".  The publication in fact calls itself "The New Judaea", and is available in Copyright Libraries.  I have a copy of page 220 in front of me; it contains a minute of Ben-Gurion's speech to the Twentieth Zionist Congress in August that year.  He is reported as saying "[Jews] would never dispute the rights of the Arabs in Palestine, and there was no contradiction between this and the principle that as many Jews as wished should come into Palestine".  There is nothing remotely like Pappé's quotation.

I am in no doubt that Pappé simply invented sources for his quotation.  I assume that he did so because no genuine source exists.  The quotation is a fabrication by Pappé.

(If you want to know more about Ben-Gurion's thinking on population  transfers, including in his letters to his son, Chaim Simons has some useful pointers.)

Does this matter?  Well, if you think you can advance your argument by quoting Ben-Gurion, you should quote Ben-Gurion.  If you make a documentary film your facts should be factual - a later statement of correction doesn't change the film.  If you base an argument in a serious newspaper on something somebody is supposed to have said, you should take care that they have really said it (Hari has since got into a lot of trouble over his freedom with quotations).  If a university cares about its academic reputation, it should make sure that its employees' "incisive thought" on the "methodology of historical enquiry" does not extend to making stuff up.  And if you're a historian, you should write about what people said, not what you would have liked them to say.

But I don't think the truth of this has got anything to say about what should happen now in Israel.  Whatever Ben-Gurion's private thoughts, the events of 1948 - the Nakba that befell the Arabs of Palestine - are as much in the past as the building of the Dome on the Rock on the site of the Second Temple.  The writings of Ben-Gurion, any more than the histories of the Caliphate or the Kingdom of Israel, are not going to help in finding a compromise for the future.

Value for money

Northern Rock plc is being sold to Virgin Money for £747m, plus a potential future £280m.  Whereas it cost the taxpayer £1,400m to get it into its current state.  George Osborne says that this "represents value for money".

I don't know whether or not this is a good trade for the British Government.  But "value for money" means you spent money on something and got something at least as valuable to you in return.  I think that £1,027m or less is not as valuable as £1,400m.

Let's hope that it's Osborne's English rather than his arithmetic that's failed him.

Statistical Translation

I saw an interesting painting on my mother-in-law's wall, signed (in Cyrillic) "A. Lozhkin".  So I looked him up, and here he is - Александр Егорович Ложкин, which transliterates to Alexandr Egorovich Lozhkin.  My browser - Google Chrome - offered to translate the page, so I let it, and the translated name is "Alexander Zhukovsky Lozhkin".  How did that happen?  I'm aware that Google Translate (which gives the same result) uses a statistical approach to translation rather than applying any rules, so it makes mistakes like not realising that Ложкина is the genitive of Ложкин, but what inspired it to make up a completely new name for him?

You might be more interested in how a painting by a People's Artist of Udmurtia ended up in a terraced house in Cullercoats.  There was a story about a sailor relative docking in Leningrad that I didn't quite grasp: I'll try harder next time.

What next for Italy?

A week ago I wrote about what might happen next in Greece, and suggested that Italy had similar problems.  That was hardly an original view then, and in the seven days since it's become the consensus, as Italian government bond yield spreads have widened.

It seems to me that the consensus view is reading too much into what has in fact been a quite small market move.  Have a look at this chart of German and Italian government bond yields (data from Bloomberg):

Italian government yields have widened to the extent that if Italy has to roll its maturing debt at these rates over the next year it will not be able to afford the interest payments.    But this is by no means game over.  Because if the market were convinced that Italian was going to default, yields would be much higher already.  Rather, the market yields are a weighted average of the default scenario and scenarios in which Italy gets rescued and yields come in.

It's possible to convert the Italian yield spread over Germany into an implied default probability, subject to various caveats.  Here's the chart:

The caveats are:
- these probabilities assume the bonds are worth zero if Italy defaults.  In practice, the recovery rate might be 50%.  If so, the default probabilities are doubled.
- to do this properly, I should have stripped the discounted coupon value out of the bond prices to get zero-coupon yields.  But you're not paying me enough.  It won't make a huge difference.
- I've interpreted the spread as being entirely due to default risk.  But some of it is a liquidity premium.  In so far as the spread represents liquidity premium not default risk, the true default probability is reduced.  Because of the default risk, LCH.Clearnet, the bond and repo clearing house, has increased its margin requirments for Italian bonds, as it did previously for Greek, Irish and Portuguese bonds.  These margin requirements make it less attractive to hold the bonds, so prices are lower and yields are higher.  The margin rules for LCH.Clearnet Ltd are fairly clear, so this was a foreseeable risk which will already have been affecting bond yields to some extent a week ago.  LCH.Clearnet SA follows its own procedures: no one is surprised that it too has increased its margins, albeit by less.
- I've assumed zero default risk for German government bonds.  It may be that their default risk is in a sense slightly negative, in that there's a faint possibility that Germany will leave the Euro in favour of a new Deutschmark, which would presumably appreciate against the Euro.  (The 3-month Bubill yield in the first chart is very slightly negative: something odd is being priced in.)

Despite the caveats, the probabilities are not meaningless.  The bond markets think it possible but rather unlikely that Italy will default in the next year or so.

So why is default unlikely?  What could happen to save Italy?

One possibility is an emergency move towards financial integration in the Eurozone.  Merkel and Sarkozy have spoken before about the desirability of such integration, but in terms that suggest that they see this as something to be developed over the next few years.  What would be needed would be the creation within a few months of a mechanism which in effect meant that Germany ran the economies of the southern Eurozone countries, in exchange for paying their debts.  This would be a logical development of the EU and Euro projects, but politically it seems highly unlikely to be achievable.

A more plausible suggestion is that the ECB could buy enough Italian bonds to reduce yields to the point that the market decides that Italy can afford the interest payments.  It's already been doing this to some extent: it keeps the details confidential but it may be holding €100bn of Italian bonds.  It would need to buy several times as much to keep Italy's problems under control.  Since Germany is not going to pay for it, the only way I can see to fund that would be by Quantitative Easing - the electronic creation of the money required.  The obvious obstacle to doing this is the ECB's charter, established by EU treaty, which stipulates that its Primary Objective is to maintain price stability.  The ECB has interpreted this objective as meaning that consumer prices should not be allowed to rise by more than 2% per year, whereas the rate of increase of the HICP (Harmonized Index of Consumer Prices) in the Eurozone is currently approaching 3%.  The treaty agreement can't quickly be changed, but the inflation objective can perhaps be tacitly overlooked.  This would have to be done quietly enough for German public opinion not to be outraged, while the bond purchase scheme would have to be overt enough to reassure the markets.  Despite the difficulties, I think this is the horse the bond markets are cautiously backing.  And they are not afraid that the implied QE would be inflationary, judging by the falling yields on German debt.

There's also a hope that China might help: the EFSF has already asked.  The truth is that China doesn't like Europe enough to do this just to oblige.  But if an ECB buying programme appears to be reassuring the markets, the Chinese might well join in, in the hope of both earning themselves favours and making a profitable investment.


Since I mentioned my earlier post about the problems of Greece, I should acknowledge that my prediction about the referendum was wrong: I didn't know enough about Greek politics to foresee the possibility that Evangelos Venizelos would recover from his conveniently timed illness and kibosh the whole thing.  Still, I was right that Greece would reluctantly accept the bail-out plan.

Is the NHS a world leader in cancer care?

The Guardian is pleased to report that "The prime minister and health secretary have criticised the NHS on cancer, but new figures suggest the service is a world leader".  This is based on a study published in the British Journal of Cancer, which says that "the NHS in England and Wales has helped achieve the biggest drop in cancer deaths and displayed the most efficient use of resources among 10 leading countries worldwide."

The Guardian doesn't link to the paper, and its report is a masterpiece of unclarity.  "While six countries saw falls of at least 20%, England and Wales – which in 1979-81 had the third highest rate with 4,156 deaths per million men – improved the most, achieving the fifth lowest rate among the 10 countries by 2004-06 with 2,869 deaths per million."  Which is to say that England and Wales improved from eighth to fifth out out of ten countries.

The actual paper, by Colin Pritchard and Tamas Hickish, is here.  It finds that England and Wales has had the largest reduction in male cancer deaths out of the ten countries over the 25-year period, and that England and Wales has the highest ratio of improvement in cancer mortality to percentage of GDP spent on cancer care.

The relative improvement for women is much less impressive.  I've tried averaging to get a rate for the sexes combined (the calculation ought to be more elaborate than a crude average, but this is useful estimate) and the result is that England and Wales has had the largest reduction by this measure too.

The data don't cover exactly the same dates in all ten countries, so I've calculated an annualized rate of improvement.  England and Wales is easily the best, at 1.2% per year (Germany is second at 0.99%).

Are these good measures of performance?  Tim Worstall pungently comments that "What [the figures] show is that the NHS used to be shite at cancer and now it’s only middle ranking".  He's right that England and Wales ranked in the middle of the ten countries for cancer mortality at the end of the period studied.  It had almost exactly the same cancer mortality rate as the USA (the USA data are from one year earlier).  The lowest mortality was in Japan and the highest in The Netherlands.  I don't believe this tells us anything about the relative merits of various healthcare systems, as Worstall might like it to.  Regarding the figures relative to GDP he adds "...a system which spends less to cure less cancer is going to be more efficient in its use of money to cure cases of cancer. Because it’s only curing the easy cases."  That's a fair point in theory.  But if the USA with all its extra spending is curing lots of hard cases, the effects aren't showing in the mortality data.

The government has a strategy document which proclaims that "we aim to save an additional 5,000 lives every year by 2014/15".  Cancer Research UK tells us that in 2009 there were 156,090 deaths from cancer, so that would be an improvement of about 3.2%, or about 1.06% per year over three years.  It seems the government's aim is to slow down the rate of improvement.  (The Pritchard and Hickish analysis is for ages 15-74 in England and Wales, so the comparison is not exact.)

It's genuinely hard to compare one health service with another.  If you compare mortality data, you are looking at different populations with different lifestyles and different methods of compiling statistics - differences in healthcare may be a minor factor.  By looking at improvements in mortality, Pritchard and Hickish eliminate some of these effects but have the problem that the quality of healthcare at the start date may differ markedly between the various countries.  The government analysis prefers to refer to survival times from diagnosis: the problem with this is that it's as much a measure of how early you diagnose as of how effectively you treat.

EU FTT

George Osborne has responded robustly to a proposal at the meeting of EU Finance Ministers to introduce a Financial Transactions Tax, as advocated by the European Commission, to raise money directly for the EU.  For once, I agree with him.  It's extraordinary chutzpah to use a Eurozone crisis meeting to propose raising funding with a tax on business conducted largely in one country, the UK, which isn't even in the Euro zone.  I suggest instead an ecotax on luxury cars of the sort made by BMW, Porsche, and Daimler.

The European Commission's argument, as stated by José Manuel Barroso, is the EU countries have spent a lot of money bailing out the banks, and it's only fair that the banks should pay it back by means of a tax on their activities.  But much of the banking activity in London is conducted by banks based outside the EU - in the USA, Switzerland, and Japan.  And the sort of trading that would be prevented by the proposed tax - high-frequency arbitrage - is conducted mainly by hedge funds, which were not bailed out at all.

Is the FTT a good idea?  Usually anything that reduces market liquidity disadvantages market participants generally, including the pension funds that many EU citizens depend on.  A study by the European Commission estimated that the tax would raise revenue of between 0.13% and 0.35% of EU GDP, while reducing that GDP typically by 1.76%, or perhaps by 0.5% with some restrictions on the application of the tax and using favourable assumptions about the effect of the restrictions.  So the expectation is that the tax would depress GDP and hence reduce total tax take.  The one advantage from the point of view of the EU is that the reduced tax income would affect national governments, especially in the UK, while the smaller increase would go directly to the EU.

I agree with George.

Update: Here's Kenneth Rogoff against an EU FTT.  "...Another possibility is the Europeans concluded that an FTT’s political advantages outweigh its economic flaws...."

Racial abuse in sports

It seems there's been an outbreak of racial abuse in the sporting world.  First, Luis Suarez, a Uruguayan playing for Liverpool FC, was accused by his opponent Patrice Evra, a Frenchman born in Senegal and playing for Manchester United, of "saying a certain word to him at least ten times".  Unlike me, the Guardian was willing to put the word in writing.  Suarez denies it, saying "I go to the field with the maximum illusion of a little child who enjoys what he does, not to create conflicts".  There seems to be no supporting evidence for the allegation from all the cameras, microphones, players and officials at the match, so it may not be true.

Second, John Terry, a white Englishman playing for Chelsea FC, was accused on the basis of video evidence of having racially abused his opponent, Anton Ferdinand, an Englishman whose mother is Irish and whose father is from Santa Lucia.  Again the Guardian's report is frank as to the words allegedly used, and includes a video of the incident which seems to bear out the allegation.  (It seems to me that Terry follows up with another insult, obscene but not racial,)  Terry's defence is that he did use the words, but only in order to deny having used them.  If you call that a defence.

Third, Steve Williams, a white golf caddie from New Zealand, speaking at an (off-the-record) awards ceremony for caddies, used a racial epithet in speaking disrespectfully of his former employer Tiger Woods, an American golfer of impressively mixed race.  Williams, whose cut of Woods' winnings made him one of New Zealand's highest-earning 'sportsmen', quickly apologized.

All three alleged culprits have been defended with statements that they are not racists.  I see no reason to doubt that, except in so far as we are all a bit racist.  It doesn't matter, the issue is not what they thought, but what they said.

I'm thinking about how bad all this is, and what should be done about it.  Provided that there's no threat to public order, I don't want to censor what jokes people can tell, so whereas I shan't be hiring him as a public speaker, Williams should escape formal sanction.  But using a person's membership of an oppressed ethnic group as an insult really is nasty in a way that's difficult for white people to understand, unless perhaps they're Jewish.  Sportsmen should not have to put up with this sort of abuse on the field of play.  The Football Association has a Disciplinary Handbook which includes in its list of offences "use of abusive words" and stipulates that an offence aggravated by reference to race or colour incurs double the punishment.  That should cover it.  But Terry has been selected in the England squad for international matches on Saturday and the following Tuesday.  "He is innocent until proven guilty", says the manager.  So are prisoners on remand, but that doesn't mean they go free until a verdict is reached.

Meanwhile, the Metropolitan Police say they are formally investigating the allegation against Terry (and thereby delaying the FA inquiry).  It would be helpful if they'd specify what crime they think he may have committed.  It can't be a racially aggravated offence under Part II of the Crime and Disorder Act 1998, because no one thinks it's a crime for footballers to swear at each other non-racially.  It can't be the use of abusive language intended or likely to stir up racial hatred, under Part III of the Public Order Act 1986 because no one seems to have been listening to what Terry said.  Perhaps it's inciting the Met to waste police time.

Incidentally, I agree with the Guardian's policy of reproducing the exact words when reporting on these incidents.  I don't see what's gained by writing in asterisks (the Guardian quotes Charlotte Brontë's preface to Wuthering Heights on this).  But since they've published what was allegedly said, I needn't.

Why pick on the BBC?

The BBC's news editor has written to the Guardian in response to Ben Goldacre's article last week about my bowel cancer data analysis.  The points his letter makes are roughly:

1. There is too a three-fold variation
2. It's not our fault, we copied it off Beating Bowel Cancer
3.  It's not fair to pick on us because...
4. ...lots of other people published the same story, including the Guardian.

(the links are mine)

There's nothing factually incorrect in that.  But point 2 is feeble.  It's tantamount to say that the BBC will reproduce any plausible-looking press release so long as it offers a sufficiently eye-catching headline (I suppose "regional variation in bowel cancer mortality easily explained by randomness" wouldn't do).

I can't speak for Ben Goldacre, but I picked on the BBC for the same reason that I link to it wherever possible for news stories - because it's an impartial organization that "exists to serve the public interest".  Charities and newspapers have their own axes to grind, but the BBC ought to be a reliable source of information.

Overseas readers may not be aware that the BBC is funded through a "television licence".  It's obligatory in the UK, on pain of a fine of up to £1000, to have such a licence if you "watch or record TV as it's being broadcast".  This applies even if you never watch BBC programmes.  Collecting income under legal duress imposes on the BBC a special obligation to get things right.

It's common among experts in technical fields to bemoan the poor standard of reporting on the things they know about.  "If they'd rung me up I would have told them what's what for free."  Perhaps something could be done.  It might be difficult to get this sort of report analysed in a few hours, but what does it matter if your news story on data from three years ago is a day or two behind the press release?

Unhealthy Celts

The BBC reports that 4000 lives a year could be saved if only the Scots, Welsh, and Irish would eat like the English.  Their source is this paper, from the British Heart Foundation Health Promotion Research Group.

A sidebar in the report tells us about the data:

The data showed people in Scotland and Northern Ireland ate more saturated fat and salt, and fewer fruit and vegetables, every day than people in England, while differences between England and Wales were smaller.

and:

Changing the diet to a typical English one would save about 11,000 of these lives - or just under 4,000 a year - with the biggest impact in Wales and Northern Ireland.

That's odd, how can the biggest impact be in Wales if that's where the smallest dietary differences are?  The answer is in Table 2 of the paper: it calculates that 53% of the "mortality gap" would be closed in 2009, 43% in 2007, and 120% in 2008.  It's not obvious that these numbers should be quoted as a percentage of the mortality gap in that year, since presumably there's a time lag between eating imprudently and dying from it, but the big difference in 2008 is not in mortality but in the diet data, shown in Table 1, which shows the Welsh eating more of everything in 2008 than in the other two years.

The Table 1 data seem to come from this spreadsheet giving household nutrient intake and this spreadsheet for eating out.  It's the household intake that has the anomalous data in 2008.  I suppose that the nutrient data will have been calculated from the food purchasing data given here, which show that the Welsh bought more carcase meat (especially), cheese, fruit and vegetables, and biscuits in 2008 than in any other year from 2001 to 2009.  I am deeply sceptical that that represents a genuine change in consumption rather than a data-gathering glitch.

I'm putting this one tentatively in the GIGO pile, pending some enquiries into DEFRA's data gathering.

Update: DEFRA does give some information about its methodology.  This pdf is about sampling: the data for 2009 come from surveying 5825 households across the UK.  I wonder if one of the Welsh households in 2008 held a barbecue for the whole village the week they got asked.

Greek cunning?

Greek opposition leader Antonis Samaras now says he will support the bailout deal, having opposed it up to now.  Was the referendum just a trick by Papandreou to force the opposition to support him?

Understanding the EC

The European Community is easier to understand as a deal between Germany and France to give each what it wants: Germany gets to run Europe and France gets to act important and have its agriculture subsidized.  It's much better to do this by treaty than to have another round of the terrible wars of 1870, 1914 and 1939.

But according to Romano Prodi, speaking in February this year, this wasn't originally the case.  “It used to be that France was the political driver and Germany the economic one. Now it is the lady [Merkel] that decides and Sarkozy that holds a press conference to explain her decisions."

Run on the banks

If you've got money in a Greek bank, and you think there's a significant chance that Greece will leave the Euro and switch your holding into rapidly depreciating Drachmas, the prudent thing to do is to take the money out now and stash it away somewhere the Greek government can't get at it.  The seriously rich will have got their money out already, but there must be a lot of ordinary people with savings.  So why wouldn't there be a run on the Greek banks before the referendum?

Greek people power

The Greeks invented δημοκρατια, so it would be presumptuous of me to tell them they shouldn't have a referendum on the bail-out package.  Papandreou's unexpected (notwithstanding this story from September) decision to hold the vote is very bad news for the rest of the Eurozone, at least in the short term, but perhaps he's trying to do what's best for Greece.  It's not hard to see advantages.

First, imposing further austerity without a referendum might well result in a complete breakdown of social order, whereas if the Greeks decide reluctantly to endorse the bailout plan it's much more likely that they will co-operate in rebuilding the economy.  And if the vote looks close (no one is expecting a resounding 'yes') perhaps Merkel will find a way to sweeten the package a little.

Second, it's not clear that default is not the better option.  The package doesn't do that much to reduce Greek debt - only private banks are accepting a haircut.  And Greece's interest burden is going to increase as it rolls maturing debt into new, higher interest borrowing.  This chart (using IMF data) of governments' annual deficit as a percentage of GDP is interesting:

(The 2011 numbers are projected by the IMF: I've trusted those but ignored the projections it offers out to 2016.)

Greece's large deficit is now almost entirely due to paying debt interest.  If it defaulted it would be not very far off balancing its budget.

However, defaulting would be a painful business.  After a default, Greece would have no choice but to run a balanced budget at once, because no one would lend it anything.  And since a reported 30% of Greek government debt is held by Greek banks, the Greek banking system would fail catastrophically unless the government chose to bail it out, using money it hasn't got.  The only way I can see to save the banks would be to leave the euro and use electronically created drachmas.  This shouldn't in itself be inflationary since this money is not going to circulate, but the drachma would quickly depreciate and imported goods would get very expensive.

Which raises the question of whether default and leaving the euro are effectively the same thing, as the French in particular are saying.  There's no mechanism in the Maastricht Treaty for Greece to secede from the Eurozone or to be expelled from it, but Greece remains a sovereign state and can do what it wants within its own borders.  Since Greece needs control of its currency to handle the results of a default, and since the rest of the Eurozone doesn't seem to want it if it defaults, it seems certain that a way would be found for Greece to leave.

It's not even clear that Greece can avoid default for long enough to hold a referendum, since the Eurogroup is threatening not to deliver bailout money until the Greeks have made their minds up.  I suppose that once a referendum date is set, for the earliest possible date, enough money will be reluctantly trickled in to meet interest payments, if absolutely necessary.

How do the other PIGS compare?  None is in as much trouble, but Italy is the most similar - it would have no Government deficit at all if it didn't have to pay interest.  What's more, it has a lot of debt maturing in 2012.  And its debt in Euros is about five times what Greece owes: Germany is not going to put its hand in its pocket to sort it out.  It's not surprising the markets are scared.  Spain on the other hand has a deficit problem not a debt problem: there's no good reason for it to default.  But Portugal might be tempted.  Ireland is in a class of its own: since it got itself into trouble with its quixotic determination to honour its banks' debts, it's not likely to try to get itself out of trouble by reneging on its own debts.

My guess is that the Greeks will be scared into voting yes.  Papandreou has submitted to a serious ear-bashing from the French, so he must think that's a possible outcome.  But I'm not at all confident.

Skilled workers

The Institute for Public Policy Research has a report out today responding to the UK government's consultation paper on economic migration.  The report is unenthusiastic, and rightly so.

If you're going to have a social security system that's generous by world standards, you can't allow unrestricted immigration.  We have to have restrictions, but we owe people who want to live here a system that is decent, and, if we wish to promote relative prosperity in the UK, we need a system that works to Britain's economic advantage.

If you want to enjoy living standards well above the world average, you need a big competitive advantage.  Having sound infrastructure, little corruption, and a good supply of quite well educated labour is not going to be enough - the asian economies can supply that much cheaper than we can.  One thing we can and should do is to have a lot of technically brilliant people.  We can't grow them at a much faster rate than the rest of the world, we have to persuade them to come here.  So a major aim of our immigration policy should be to welcome the brightest and the best from around the world.

What provision does the government's consultation paper make for that?  Amost none.  If you're a wealthy investor or entrepreneur then you'll be welcome.  If you're an internationally recognized world leader in science, arts, or the humanities then you can come (there's a limit of 1000 places in the first year, to stop the country being swamped with internationally recognized world leaders).  If you're needed to fill a graduate-level vacancy here that can't be filled by an EU citizen then you can have a visa (there's a limit of 20,700 places a year).   And if you're a highly skilled migrant who wishes to work or become self-employed in the UK then you can bog off.

My policy would be to offer right of settlement in the UK to anyone in sound mind with a good degree in mathematics, science or engineering from a leading university (or equivalent) anywhere in the world (the BRIC countries all have institutions that would qualify).  I'd have a committee of academics and employers to nail that down.  How can this be a bad idea?

Balancing the budget

I like Chris Dillow's economics blog, and I largely agree with this piece on the causes of the crisis.  But his point (4), which he has made several times before, is based on an circular argument, and it's wrong to boot:

The fact that the government was running a fiscal deficit before the crisis was not its fault. It was instead a simple accounting identity. If foreigners and companies are net savers, then other sectors must be net borrowers. This was partly the household sector, but also the government.

But there's no magic economic equation that makes it impossible for governments to reduce their debt in times of  economic prosperity.  Their tax take rises and their social security spending falls, so they have a surplus.  The surplus can be used to cut taxes, or to increase spending, or to reduce the national debt.  The mechanics of reducing debt are not difficult: the government redeems bonds as they mature without issuing new ones.  Or if there aren't enough bonds maturing, it can buy them back in the market.  And if government debt reduction makes it unattractive for companies to save domestically, then they will make investments overseas.

Dillow expands his argument thus:

My chart shows the story. It shows that the public sector’s financial balance is very largely the mirror image of the corporate sector’s one. This shouldn’t be surprising, because for every borrower there must be a lender, and so across all sectors of the economy (which includes foreigners) net borrowing must be zero. The fiscal deficits of the mid-00s were, then, counterparts of a corporate surplus.

So argument is:

1. net government borrowing + net corporate borrowing + net foreign borrowing = 0
2. the chart shows that net government borrowing + net corporate borrowing ~= 0
3. which is to say that net foreign borrowing = 0
4. so net government borrowing has to be the mirror image of net corporate borrowing

ho hum.  Net foreign borrowing is net lending to foreigners by corporates minus net lending by foreigners by the government.  If this number is otherwise zero, then reduction of the government's debt will make it positive.  The only way that could not happen is if all the money previously lend to the government were lent to the household sector instead.  Dillow does not attempt to make the case that that would happen.

So the argument amounts to little more than saying that the government did not reduce its debt, therefore it could not have done so.

It is true, as Dillow says, that reducing debt would have made the UK economy less prosperous.  That's the intention of a Keynesian stabilization policy - you spend money in bad times to encourage economic activity, and save money in good times, in the expectation that you will dampen growth. 

Gordon Brown's "golden rule" was that he would balance the budget over a six-year cycle.  Of course, there's no rule of economics to say that growth has to follow a six-year cycle.  In practice as chancellor he was a net saver from 1988 to 1991, having taken office in 1987, and a net borrower for all eight years in office thereafter as chancellor and prime minister (not including the massive borrowing of 2010, for which the current coalition government can hardly be held responsible).

The true reason why democratic governments seldom run balanced budgets is not economic but political.  Repaying debt might be the right thing to do, but it's taking money away from electors to give it to foreigners.  The electorate may well react by voting in the opposition, who will inherit a healthy government balance they can use to get themselves re-elected.