Back in the 1980s I was instructed in the pendulum theory (reality) of corporate governance. Control was weakened until things went wrong, then it was tightened until nothing happened, then it was weakened again.
As long as people were aware of the cycle, it was sort of reasonable - a drunk man successfully finding his way home..
On industrial policy more specifically, I'd also argue that the notion governments shouldn't pick winners is an example of the nirvana fallacy. Even when they don't have big, dirigiste industrial policies, modern states pick winners all the time. Sometimes they do that intentionally, for well-founded reasons e.g., the UK's CfDs for offshore wind and nuclear. Other times, it's a by-product of other decisions. One recent example that comes to mind relates to the FT Alphaville piece on how the UK is, as Dan Davies put it, the Saudi Arabia of 'doing miscellaneous stuff' (https://www.ft.com/content/8d3ed4d7-6ab3-487d-81ee-3fd337b68538). Someone in the comments pointed out that the UK's planning restrictions and low public investment are what you would put in place if you wanted to craft an industrial policy to produce more small consultancies at the expense of everything else.
Having an industrial policy, or if you don't like the word "policy", industrial strategy, is important because this will happen no matter what a government's intentions are. Modern states directly account for a large chunk of economic activity, and via regulation they indirectly influence almost everything that happens in the economy. Because of this, it's important to take the implications for different sectors of government decision-making into account in a joined-up way. Otherwise, you just end up with an accidental industrial policy that may not be to your liking.
A separate (tired but true) comment on Whitehall is that the traditional inclination towards highly educated generalists leads to persistent failures in technical/engineering policy-making.
This has particular relevance when some sectors are undergoing rapid technological changes. (This is a moment when strategic government investment can reap dividends).
Apologies for sounding like a mad cross between Mazzucato and Dominic Cummings!
Your piece brought to mind the wonderful 5 part series Chernobyl. Of course there the disaster was a catastrophic failure that was predictable but hidden. “We can never have enough knowledge to allow us to base all our decisions on knowledge” always assume there are bad actors whatever the policy seeks to achieve . A very thought provoking piece. Thank you.
There's also the problem of path dependence. You may realise half-way in that your fertile idea has been stretched into a fallacy, but by that time you've made promises and staked your reputation, and vested interests have formed around its perpetuation. All you can do, if you're not willing to admit defeat, is to keep going and hope to quietly nudge the supertanker round.
There's room for discourse here about the "Golden Key" - a single-factor policy which offers to magically unlock a complex problem without the need to own up to painful political realities.
It sounds as if "education reduces inequality" has turned out to be one of these. The one I know best (mostly funded by Soros FWIW) was promoting financial transparency in the oil and mining industries to counter corruption and misuse of the revenues. It was an intuitively persuasive idea and its application has had some good effects around the world, but not remotely what we had hoped for.
Yes - the trouble with so many 'fertile fallacies' is that they quickly become comfortable and over familiar and this increases their 'bedrock' status!
You know what also really contributes to fertile fallacies? A two-party system which is about drawing dividing lines rather than seeking common ground with the other lot.
One might apply the aproach to Soros himself and his Open Society, but leaving that aside, the NHS is a very large meeting place for policy and reality. The notions of cost and benefit, and, incidentally the doctrine of economic growth also meet here?
The trend of better treatment - e.g. cardiovascular treatment - reducing the time in hospital, bumped up against the reality that every patient is an individual decision not a policy, with the result that an increasing proportion of patients do not need hospital treatment, but can not live 'outside' without a great deal of personal care. These same patients are vulnerable of course to institutionally amplified infections and other troubles including transferring unquantified costs outside of the NHS budget. With this case in mind, more generally, exponential (sudden) feedback of dis-benefits can bring any institution and its policies (fallacies) to its knees?
The mechanism to split the fertile idea from the fallacy.... is the rub. Healthcare is a good example where the belief in the fallacy drives harm in provision of safe services and all the solutions are simply reinforcing the fallacy. Good example is bed closure to release funds for alternatives that can improve outcomes by reduced stay and better local care at home. Up to a point there is benefit in a system where capacity can be used effectively- freeing resources can improve flow and us clinically supported. The idea then spreads everywhere or is seen as a way to free resources to manage reductions in funding not clinical need. This has the effect of reducing the beds and the alternative to beds by funding cuts. This drives up clinical acuity in the cases in the remaining beds, and placement issues for long term needs due to reduction in social care or alternative placements. This causes those remaining beds to be blocked. The result is the chaos we have now.
I don't disagree with the broad points made, but on education the long term impact of improving the state system is surely important in that it is essential to improving productivity and if we can improve productivity by even small amounts over a long period then the resources for other programmes will grow greater. On the motor industry, the Thatcher/Tebbit achievement of getting Nissan and other Japanese manufacturers to invest here should not be underrated.
For sure, but Sam is specifically talking about the idea that education is conducive to social mobility. Even if we're talking about productivity, I think education can sometimes be overemphasised in the debate compared to, say, public investment or macroeconomic stability.
Pay attention to the realities, don't make assumptions and keep your hand on the tiller so you can correct course by small movements whenever necesssary - perhaps everyone should learn to sail?
Back in the 1980s I was instructed in the pendulum theory (reality) of corporate governance. Control was weakened until things went wrong, then it was tightened until nothing happened, then it was weakened again.
As long as people were aware of the cycle, it was sort of reasonable - a drunk man successfully finding his way home..
On industrial policy more specifically, I'd also argue that the notion governments shouldn't pick winners is an example of the nirvana fallacy. Even when they don't have big, dirigiste industrial policies, modern states pick winners all the time. Sometimes they do that intentionally, for well-founded reasons e.g., the UK's CfDs for offshore wind and nuclear. Other times, it's a by-product of other decisions. One recent example that comes to mind relates to the FT Alphaville piece on how the UK is, as Dan Davies put it, the Saudi Arabia of 'doing miscellaneous stuff' (https://www.ft.com/content/8d3ed4d7-6ab3-487d-81ee-3fd337b68538). Someone in the comments pointed out that the UK's planning restrictions and low public investment are what you would put in place if you wanted to craft an industrial policy to produce more small consultancies at the expense of everything else.
Having an industrial policy, or if you don't like the word "policy", industrial strategy, is important because this will happen no matter what a government's intentions are. Modern states directly account for a large chunk of economic activity, and via regulation they indirectly influence almost everything that happens in the economy. Because of this, it's important to take the implications for different sectors of government decision-making into account in a joined-up way. Otherwise, you just end up with an accidental industrial policy that may not be to your liking.
Good point.
This is a great post.
A separate (tired but true) comment on Whitehall is that the traditional inclination towards highly educated generalists leads to persistent failures in technical/engineering policy-making.
This has particular relevance when some sectors are undergoing rapid technological changes. (This is a moment when strategic government investment can reap dividends).
Apologies for sounding like a mad cross between Mazzucato and Dominic Cummings!
Your piece brought to mind the wonderful 5 part series Chernobyl. Of course there the disaster was a catastrophic failure that was predictable but hidden. “We can never have enough knowledge to allow us to base all our decisions on knowledge” always assume there are bad actors whatever the policy seeks to achieve . A very thought provoking piece. Thank you.
There's also the problem of path dependence. You may realise half-way in that your fertile idea has been stretched into a fallacy, but by that time you've made promises and staked your reputation, and vested interests have formed around its perpetuation. All you can do, if you're not willing to admit defeat, is to keep going and hope to quietly nudge the supertanker round.
There's room for discourse here about the "Golden Key" - a single-factor policy which offers to magically unlock a complex problem without the need to own up to painful political realities.
It sounds as if "education reduces inequality" has turned out to be one of these. The one I know best (mostly funded by Soros FWIW) was promoting financial transparency in the oil and mining industries to counter corruption and misuse of the revenues. It was an intuitively persuasive idea and its application has had some good effects around the world, but not remotely what we had hoped for.
Yes - the trouble with so many 'fertile fallacies' is that they quickly become comfortable and over familiar and this increases their 'bedrock' status!
You know what also really contributes to fertile fallacies? A two-party system which is about drawing dividing lines rather than seeking common ground with the other lot.
One might apply the aproach to Soros himself and his Open Society, but leaving that aside, the NHS is a very large meeting place for policy and reality. The notions of cost and benefit, and, incidentally the doctrine of economic growth also meet here?
The trend of better treatment - e.g. cardiovascular treatment - reducing the time in hospital, bumped up against the reality that every patient is an individual decision not a policy, with the result that an increasing proportion of patients do not need hospital treatment, but can not live 'outside' without a great deal of personal care. These same patients are vulnerable of course to institutionally amplified infections and other troubles including transferring unquantified costs outside of the NHS budget. With this case in mind, more generally, exponential (sudden) feedback of dis-benefits can bring any institution and its policies (fallacies) to its knees?
Nice. At the moment we are on the upswing, but I fully expect the "fertile fallacy" idea to stretch into fallacious territory if it catches on...
The mechanism to split the fertile idea from the fallacy.... is the rub. Healthcare is a good example where the belief in the fallacy drives harm in provision of safe services and all the solutions are simply reinforcing the fallacy. Good example is bed closure to release funds for alternatives that can improve outcomes by reduced stay and better local care at home. Up to a point there is benefit in a system where capacity can be used effectively- freeing resources can improve flow and us clinically supported. The idea then spreads everywhere or is seen as a way to free resources to manage reductions in funding not clinical need. This has the effect of reducing the beds and the alternative to beds by funding cuts. This drives up clinical acuity in the cases in the remaining beds, and placement issues for long term needs due to reduction in social care or alternative placements. This causes those remaining beds to be blocked. The result is the chaos we have now.
I don't disagree with the broad points made, but on education the long term impact of improving the state system is surely important in that it is essential to improving productivity and if we can improve productivity by even small amounts over a long period then the resources for other programmes will grow greater. On the motor industry, the Thatcher/Tebbit achievement of getting Nissan and other Japanese manufacturers to invest here should not be underrated.
For sure, but Sam is specifically talking about the idea that education is conducive to social mobility. Even if we're talking about productivity, I think education can sometimes be overemphasised in the debate compared to, say, public investment or macroeconomic stability.
Pay attention to the realities, don't make assumptions and keep your hand on the tiller so you can correct course by small movements whenever necesssary - perhaps everyone should learn to sail?