Thursday 28 March 2013

Popular Stupidy

The New Scientist cover caught my eye: Stupidity: Why are humans so varied in their mental abilities? Finally, I thought, a popular treatment of an important question. It is not entirely fair to regard a popular science magazine as being likely to discuss the topic of intelligence in any depth. It is aimed at a general audience, and the best it can do is to act as an indicator of what the magazine thinks will play to their reader’s world view and capture their attention. The word Stupidity certainly did that, with all its negative, disparaging connotations.

So, as only an indicator of popular views about intelligence, here are a few quotations:

It turns out that our usual measures of intelligence – particularly IQ – have very little to do with the kind of irrational, illogical behaviours that so enraged Flaubert. You really can be highly intelligent, and at the same time very stupid.

Modern attempts to study variations in human ability tended to focus on IQ tests that put a single number on someone’s mental capacity. They are perhaps best recognised as a measure of abstract reasoning, says psychologist Richard Nesbitt….

Possibly a third of the variation in our intelligence is down to the environment. ….. Genes meanwhile contribute more than 40% of the differences between two people.
“I would probably soundly fail an intelligence test devised by an 18th century Sioux Indian” says Nisbett.


Intelligence does not guarantee good decision-making in all circumstances, simply better decision-making in more circumstances than a duller person.  Some problems forms are inherently difficult and ambiguous. For example, it is easier to understand natural frequencies than percentages with decimal point. Apart from intelligence, social pressures and emotional attachments influence decisions.

Modern IQ tests give one overall figure, and also figures for 3 to 4 component indices, usually verbal comprehension, perceptual organisation, working memory, plus processing speed. The single figure is usually the best predictor, but the others have their place in specific circumstances. The fact that one single number is the best predictor of human achievements is testimony to its power.

40% is the heritability estimate for children, but it rises to 60% plus for adults.  70/30 is not a bad estimate for wealthy countries, 50/50 for very poor ones.

Sioux Indians, for all their other skills, did not leave a written record of how they estimated intelligence. The point is misleading, and a poor match with cross-cultural test results. People from profoundly different cultures make the same sorts of errors on culture reduced tests, and the pattern suggests a largely universal problem-solving capacity. The predictive power of intelligence is similar in culturally different countries.

And just one more thing, if you want to find out about intelligence in a UK publication, why not talk to Ian Deary, who is doing much of the research, and has written an excellent short introduction to the topic. If you want an American, why not Earl Hunt, who has given a balanced view in a larger and more up to date volume? If you are interested primarily in the importance of intelligence for everyday life, why not talk to Linda Gottfredson?

Anyway, the rest of the article is about Keith Stanovich, who is “working on a rationality quotient”. This has yet to be released, and yet to be evaluated against intelligence tests. We do not know what it will add in the way of predictive accuracy to that already achieved by intelligence tests. Similarly, we lack proper large-scale comparative studies with: multiple intelligences, emotional intelligences, and practical intelligences. If the goal is wide open, why can’t one of these pioneers get the ball in the net? All they must do is develop a test, administer it to a representative sample (at least as good as a psychometric standardisation sample) alongside a validated intelligence test, and then compare the results when predicting some real life variables. After that, they can market the damn thing. Why the perpetual delay?

Interestingly, the one thing which shows up in this article is the difficulty people have in understanding that a strong correlation is not a perfect correlation.  It is possible for an IQ test to be the best predictor, and yet for it to be far short of a perfect predictor. The other difficulty which people have is distinguishing between variance that has been accounted for, and variance which cannot yet be accounted for. The unexplained variance is not owned by the next person with a fanciful hypothesis: it is merely up for grabs for anyone who can prove an additional power of prediction. As anyone who has fooled around with multiple regressions will know, (after looking at 50 or more regressions) getting a high R square in behavioural science research is very difficult. Once you have a couple of good predictors it is hard to shift the R-square up further, even when you add many putative predictors. Often, a couple of independent variables hoover up all the predictive variance.

In his Tractatus, Wittgenstein intoned: "Whereof one cannot speak, thereof one must be silent." With more verve and vernacular charm his friend Frank Ramsey quipped: "What we can't say we can't say, and we can't whistle it either."
If you can’t explain the variance, you can’t dog-whistle it either.

Monday 25 March 2013

Schizophrenia and Violence: Delusional numbers?

Empiricists study the world as it is. Reformers try to create the world as it should be. These Accountants and Missionaries do not always see eye to eye.

The history of the treatment of the mentally ill makes painful reading, at least to modern sensibilities. The mentally ill have been abused, ridiculed, stripped of dignity and legal rights, and shunned by the public, who feared their madness. The mad were seen as dangerous and a nuisance. In their madness they might strike out at you, subject you to abuse, to unpleasant sights and embarrassing outbursts, and at the very least would need help and compassion while not being able to give much in return. For example, when we are depressed we have less to offer our friends, and more need of their support, encouragement and tolerance for our lack of contribution.

In the face of these historical abuses, in 1796 the Quakers’ York Retreat offered humane and moral treatment, on the Christian assumption that, whatever the sufferer’s behavioural degradation; the inner light of humanity could never be extinguished. Since that time we have become kinder, and more liberal and generous about disordered comportment. We know that not all mental illness is terminal, irreversible and dangerous. Nowadays we want to reduce stigma, that badge of shame and disgrace which some in society attach to those with characteristics, behaviours or beliefs they find disturbing. Hence a missionary movement among mental healthcare professionals to normalise mental distress, to understand the perspective of even the oddest point of view, and to break down the shame of admitting a mental affliction.

I was always somewhat surprised when, even in the privacy of my office, beset with problems and worries, my patient’s first words after bursting into tears were always “I’m sorry”. I would mumble something about not needing to apologise for having emotions, but in the purely social sense, my tearful patients were right. They had sent out a very powerful distress signal, generally without meaning to, had broken the taboo of emotional restraint and now had to justify this dramatic call for assistance. They felt they were being a drag, and didn’t want to be.

So, if every right thinking person in the psycho-business should be de-stigmatising mental illness, how do we deal with the fact that some of the mentally ill are dangerous? Ideally, we would follow the empirical tradition, and give an accurate and balanced message: “Most people with mental illness are no more dangerous than anyone else, but a minority are more prone to violence. It is difficult to predict dangerousness. Here are the facts and you can judge for yourself”.

What are the facts? In the behavioural sciences, facts are always a work in progress, but the overall picture is now reasonably clear: schizophrenics are more violent as a category, something of the order of 4 times more violent, perhaps even 5 times higher. Given that most people are not very violent at all, being four times more violent is still not very dangerous, but it is an appreciable increase. Drug takers are 10 times more violent. Perhaps shunning some people is a prudent policy. It is certainly within the discretion of any citizen to judge that a fourfold increase in even a very small risk is something worth avoiding, particularly if it can be done without too much bother.

At this point we need to cover just a few technical issues. The best technique to determine violence rates is a prospective study in which you define a population sample and study them long term. Birth cohorts are the gold standard. Follow this large sample, find out who gets schizophrenia, and then take objective measures of violence (arrests, cautions, convictions, jail sentences for example) and then you have your rates of violence, both absolute and relative to those who do not have schizophrenia. Here are some findings, which I have drawn from a paper I will discuss later on:

Hodgins (1992), in a 30-year follow-up of an unselected Swedish birth cohort, found that compared with those with no mental disorder, males with major mental disorder had a 4-fold and women a 27.5-fold increased risk of violent offences. No separate data were provided for schizophrenia. A later study using the same methodology revealed similar findings (Hodgins et al, 1996).

The first cohort study to demonstrate the quantitative risk of violent behaviour for specific psychotic categories followed an unselected birth cohort of 12 058 individuals prospectively for 26 years (Tiihonen et al, 1997). The risk of violent offences among males with schizophrenia was 7-fold higher than controls without mental disorder.

Arseneault et al (2000) studied the past-year prevalence of violence in 961 young adults who constituted 94% of a total city birth cohort. Three Axis I disorders were uniquely associated with violence after controlling for demographic risk factors and all other comorbid disorders: alcohol dependence, marijuana dependence and schizophrenic spectrum disorder.

Probably the most important study in the violence literature to date is that of Swanson et al (1990). Using a sample of 10 059 adult residents from Epidemiologic Catchment Area (ECA) study sites (Eaton & Kessler, 1985), the authors examined the relationship between violence and psychiatric disorder. Eight per cent of those with schizophrenia alone were violent, compared with 2% of those without mental illness. Comorbidity with substance abuse increased this percentage to 30%.

Two factors appear to discriminate those with schizophrenia at increased risk of committing violent acts: comorbid substance abuse and acute psychotic symptoms.

It is important to note that because there is an increase in violence risk in those without comorbidity, substance abuse merely increases the level of risk rather than causing it (Arsenault et al, 2000; Brennan et al, 2000). Hence, the risk from substance abuse appears to be additive.

In Dunedin, New Zealand, 94% of a total city birth cohort were followed up at age 21 years. Without considering comorbidity, just over 10% of past-year violence committed by these young adults was attributable to schizophrenic spectrum disorders

So, how has psychiatry responded to this awkward junction of facts and missions? The Royal College of Psychiatrists currently gives the following statement as a key fact about schizophrenia: Many people think that schizophrenia makes people violent. This is the exception, not the rule. People with schizophrenia are more likely to be victims of violence by others.

Comment: Well, this presentation is not entirely balanced. Gang members are also likely to be victims of violence by others. They are also violent themselves. Schizophrenia makes people four times more violent. Their violence is an exception, but these exceptions happen four times more frequently.
So, what other exhibits should we look at?

One of the better known papers in the field is Walsh, Buchanan, and Fahy (2002) Violence and schizophrenia: examining the evidence, from which I had drawn the above papers on violence rates.

They say: It is now accepted that people with schizophrenia are significantly more likely to be violent than other members of the general population. A less acknowledged fact is that the proportion of societal violence attributable to schizophrenia is small.

Comment: So, they are more violent, but make a small contribution to “societal” violence? How can that be so? Now you see it, now you don’t? Or is there some real reason why their increased violence does not have an impact on society?

Here is their argument, in the expanded form of a subsequent book chapter: Criminal and violent behaviour in schizophrenia by Walsh and Buchanan in (Eds) Murray, Jones, Susser, van Os and Cannon (2003) The Epidemiology of Schizophrenia, Cambridge University Press.

It is now generally accepted that people with schizophrenia, albeit by virtue of the activity of a small subgroup, are significantly more likely to be violent than members of the general
population, but the proportion of societal violence attributable to this group is small.

They continue thus:

To prevent unnecessary stigmatization of the seriously mentally ill, with all the attendant difficulties, it is the duty of researchers to present a balanced picture. By neglecting to report measures of both relative and absolute risk a skewed picture may emerge. An example of a balanced report found that men with schizophrenia were up to five times more likely to be convicted of serious violence than the general population (Wallace et al., 1998). Results also presented indicated that 99.97% of those with schizophrenia would not be convicted of serious violence in a given year and that the probability that any given patient with schizophrenia will commit homicide is tiny (approximate annual risk 1:3000 for men and 1:33000 for women).

Comment: Although intending to be balanced, this is another misleading presentation. Fahy did better in earlier papers in which he said that schizophrenics were about 4 times more violent than ordinary members of the public, but that the absolute rates were very low. Let us study some of the assertions:

“99.97% of those with schizophrenia would not be convicted of serious violence in a given year”.

Comment: Presumably this is intended to be reassuring. What does 99.97% mean? It sounds like 100%.  In his marvellous “Reckoning with Risk” (2003) Gerd Gigerenzer showed that percentages with decimal points were almost impossible for most people to understand. (I had to count the zeros, and got it wrong the first time round). The best way to make the numbers transparent is to convert them to natural frequencies, ordinary numbers without fractions or decimal points. Using this approach we can say that 9997 schizophrenics in 10,000 won’t be convicted of violence, but 3 will. So 3 in10,000 schizophrenics (10,000 minus 9997 = 3) will get convicted of serious violence. Using the usual yardstick for rare events, that means that 30 per 100,000 schizophrenics are convicted of serious violence each year.

What is the rate of convictions per thousand in the general public? It has not been given for comparative purposes, so the percentage figure is difficult to assess. However, it has been admitted that schizophrenics are 5 times more violent. Thus we can calculate that the rate for mentally well citizens would be roughly 6 per 100,000. One popular proposal to make statistics easier to understand is to place the frequency statistics in the context of villages, towns and cities. Therefore, if you spent a year in a town of 100,000 schizophrenics you might not be at too much risk yourself, but there would be about 30 violent crimes in that town. You might find this somewhat alarming. A neighbouring town of ordinary citizens would have 6 violent crimes to contend with. People will be people, you may say, but from a civilized point of view, every violent crime is unnecessary. It is likely that the reputations of these towns would differ significantly. Which town would you wish to live in, if you were free to choose?

(Paradoxically, the Press in the first town would never bother to report that the accused was a schizophrenic. It would be redundant, so in that town the media could not be accused of stigmatising mental illness.)

The other issue, never covered in these discussions, is that the overall risk rate is not a good predictor of the perceived personal risk rate. Violence is most likely to come from someone you know, with whom you are in a dispute, for whatever reason, usually because of tangled love affairs, business deals and, most of all, criminal activities. Most people know this, and know the sort of people they ought to avoid. The fear caused by schizophrenia is that it is associated with totally motiveless crimes. There is no way you can protect yourself by regulating your behaviour or your friendship patterns. You might be sitting on a bus, minding your own business, when a passing stranger stabs you to death in a matter of fact way, as happened recently to a school girl. It may seem odd to a statistician, but that sort of thing bothers us. In Kahneman and Tversky’s phrase, it has “salience”. To die at the hand of a jilted lover is bad enough, but to die because of a delusion is senseless, and gives us no chance of security. We fear more than statistics.

Now we go on to the murder statistics: The probability that a schizophrenic will commit murder each year is 1 in 3000.

Comment: Why so high? Can that be right? (I have checked the publication to make sure).That translates to a murder rate of 33 per 100,000. In Britain the annual murder rate is 1.2 to 1.4 per 100,000. Out of charity I will take the higher estimate of 1.4. (The more peaceable a society, the more it makes sense to give the figures per million, and 14 per million is the usual British estimate). This suggests that schizophrenics are 23 times more murderous. Something wrong here, I fear. Are these authors really arguing that 1:3000 is a low rate? It would be like moving from the UK to South Africa or Columbia, currently among the most murderous nations on the planet. I hope there is something wrong with their figures, because if they are accurate the implications are alarming. There must have been a miscalculation, because if the figures above are correct in showing that there are 30 violent crimes per 100,000 schizophrenics, then fewer of them will go on the whole way to murder, and the homicide figures should be much lower.

A few years ago the President of the Royal College of Psychiatrists was reported as having said that schizophrenics caused only about 10% of the violence. Given that schizophrenics are at most 1% of the population (and probably only 0.7%) this was tantamount to saying they were at least 10 times more dangerous than normal. Four or five times are the more accurate figures.

Looking at the more recent Royal College of Psychiatry report: Rethinking risk to others in mental health services Final report of a scoping group (June 2008) provides us with fresh estimates of dangerousness.

It is estimated that 5% of homicides are committed by people with a diagnosis of schizophrenia. (page 18)

Comment: A truthful statement. That is exactly what one would expect, if schizophrenics were 1% of the public and committed 5 times more violent crimes. Their greater rate of violence translates directly into a proportionately greater share of “societal” violence.

The incidence of mental illness among those remanded for acts of violence is relatively high: Taylor & Gunn (1984) found psychosis in 11% of those remanded for homicide and 9% of those remanded for other acts of violence. Similarly, violence in mental health services is not infrequent. The UK700 study (Walsh et al, 2001) found physical assaults had been committed by 20% of patients over a 2-year period and 60% had behaved violently over the same period. Taking the figure of 1 homicide per 20 000 patients with schizophrenia per annum, over the 20 years of a typical patient ‘lifetime’ (assuming active disease from the age of 20 to 40 years) the risk per patient is 1 in 1000 (Maden, 2007). The occurrence of a homicide by a patient with a mental disorder also has potentially devastating implications for the professionals involved. (page 20).

Comment: The homicide would have devastating implications for the victim and the victims’ family and friends. It would have serious implications for the professionals, whose careers can be damaged, but they would not face capital punishment. Having had friends in this category, I can testify that it is an awful process for them, but most of their colleagues know it could happen to any of them doing front line psychiatric work:  “There but for the grace of God go I”.  

The next point that this report gives the homicide risk as 1 per 20,000 patients per annum, not the 1 in 3000 each year given by Walsh and Buchanan. Taking these new figures, they suggest that the lifetime risk of homicide over 20 years is: the addition of 1 in 20,000 risks per annum for 20 years of active exposure, namely 20 in 20,000, or 1 in 1000. In comparison, the risk of being murdered by an ordinary member of the public is 1.4 per 100,000. Over 20 years that comes to 28 per 100,000 or 1 per 3,571. Thus, these figures suggest schizophrenics are 3.5 times more violent, which is within the published range. These figures look reasonable.

So, can we detect and prevent violent events?

For example, it has been calculated – using the average of all the tests assessed by Buchanan & Leese (2001) – that if 5% of the patient population were within a high-risk category, use of the tests would correctly identify 8 people out of every 100 in the group who would go on to commit acts of violence but misidentify as violent the other 92. In fact, fewer than 1% of community patients will commit serious violence over a period of a year, which means that the tests would correctly identify only 3 patients out of 100.  Homicides occur at a rate of 1 in 10 000 patients suffering from a psychosis, per annum, which makes prediction impossible (Shergill & Szmukler, 1998; Dolan & Doyle, 2000). (page 23)

Comment: Two problems here. First, this is significantly different risk estimate: in that on page 20 it was 1 homicide per 20 000 patients with schizophrenia per annum and on page 23 it is 1 in 10 000 patients suffering from a psychosis, per annum. This is confusing, but presumably it refers to the symptom of psychosis, rather than the diagnosis of schizophrenia, and other conditions can induce psychotic behaviour, so we should probably put this estimate aside for the moment, though it is twice as high as the former figure.

Second, low base rates do not necessarily make prediction impossible, but simply very difficult in the absence of valid indicators. Phenylketonuria occurs in 1 in 10,000 to 15,000 newborns (higher in the US) and most cases are detected by screening.  Tandem mass spectrometry is claimed to be 100% sensitive and 98% specific, which means that virtually all cases are picked up and the test rarely misclassifies other conditions as being phenylketonuria. Treatment is started promptly, and as a result, the severe signs and symptoms of the classic condition are rarely seen.

Have pity on Psychiatry. As the quotation above reveals, current tests do have the sensitivity and specificity requires to usefully predict violence, let alone murder.  The best test that forensic professionals have is a detailed interview leading to a risk assessment, though there is still debate about precisely what this risk assessment should contain. There must also be checking of records, and good links with social services and the Police. Often, this still defeats the current organisation of services. Resource constraints make the problem more difficulty. Poorly trained or poorly motivated ward staff sometimes do not follow risk protocols, even when they are written in to the patient notes.

Note that this unsatisfactory state of affairs does not have to continue for ever. One good indicator seems to be patients trying to re-admit themselves to hospital. Failure to take medication, and over-indulgence in alcohol and drugs is another indicator. It is very hard to detect the signal from among the noise, but we have to keep trying. Perhaps if we could monitor electronically, as if the person had diabetes, we could eventually predict with less error. What would we monitor? Thoughts? Arguments? Drugs in the bloodstream?  

So, how can one argue that schizophrenia makes people more violent, but that this does not cause much “societal violence”? This boils down to a particular statistical technique, the calculation of population-attributable risk per cent (PAR%): the percentage of violence in the population that can be ascribed to schizophrenia and thus could be eliminated if schizophrenia was eliminated from the population. Stand back from any calculations, and you already know the answer. If 1% of the population has schizophrenia, and they account for 5% of the violence, then curing them of the condition (or just the violent aspects) would reduce societal violence by 5%. It is a matter of perspective whether you think that this accounts for relatively little societal violence. To me, this line of argument seems like trying to wish away a finding by changing the currency of account. I think it is better for researchers to publish their results on the risks of violence in schizophrenia, which is higher in relative terms but low in absolute terms, without excursions into concepts of “societal violence” as a false comparator. It is a bit like saying that someone who drives a gas-guzzling Hummer has little societal impact because they contribute only a very tiny fraction of the world’s pollution. Don’t move from one metric to the other for rhetorical purposes.

So, to summarise what psychiatrists are telling us about schizophrenia and the risks of violence: there is general agreement that schizophrenic men are four to five times more violent than the rest of the population, but the absolute rates of all violence are mercifully low. The public should make up their own minds how they wish to respond.

Friday 15 March 2013

Letting loose the dogs of war

 To Sky News early this morning, to talk about whether soldiers returning from Iraq and Afghanistan are more violent than members of the general public, with whom they must now live in society. The MacManus et al. (2013) paper came out of embargo today, and it has an interesting story to tell, as well as raising an issue about what we mean when we “control for” correlated variables.

MacManus et al. did a proper study, taking 13,856 randomly selected soldiers and checking their Police records on the national computer database.

In brief, the key thing about male violence is that it drops sharply by age, probably in line with orgasm frequency, testosterone and muscle strength. Young males fight, older males reminisce.
Being deployed into the theatre of war did not make them more violent later on (2.4%), but serving in a combat role did (6.3%). Being exposed to traumatic events increased later offending, in a linear trend (1.6% with one trauma, 4.1% with up to 4 traumas, 5.1% for up to 16 traumas). Violent offending was strongly linked with alcohol intake (9% for heavy drinkers, 2.2% for the rest). Those with post-traumatic stress disorder were more violent (8.6%) than those without the disorder (3%). For those with the disorder, those with the hyper-arousal cluster of symptoms (an extreme sensitivity to signals of danger) were the most violent. In an interesting validation of self-reported aggressive behaviour, those with high scores on an aggression questionnaire were more violent (6.7%) than those with zero scores (2.5%).

If you look at what predicts post-service violent offending, it is rank and pre-service violent offending. In a meritocratic army, rank is strongly associated with intelligence. Those with A levels were half as likely to offend (30.8%) than those with only GCSE’s or less (69.2%).  A standard theory of violence is that it represents a severe lack of negotiating skills. It is a high cost way of achieving a personal benefit. Few mutual benefits are obtained by fighting.

The authors have followed the entirely proper technique when they look at the effects of deployment and combat, which is to correct for predisposing variables. For example, if the most aggressive soldiers are put into front line combat, which makes sense from a military point of view, then they are likely to show more violence in later civilian life, even if combat itself had no effect on them. So, you have to correct for their predisposition to violence. In fact, their tables show adjusted hazard ratios which have been adjusted for age, education level, pre-service violent offending, rank, service, engagement status, and serving status. Of course, in real life you cannot “adjust” for education levels. Those with less education and lower intelligence have fewer skills and achieve less powerful solutions to problems. The authors, correctly, have adjusted so as to make a point about the impact of combat (their adjustments reduce the real effect).

Other authors tend to go overboard with adjustments. For example, they “adjust” life achievements to take into account levels of education, and then find that intelligence does not predict much. They neglect to mention that levels of education are strongly influenced by prior intelligence: those of low abilities drop out sooner. 

What do we do about the dogs of war, who have been sent out to kill on our behalf? I think they are owed a duty of care. The UK does not have a dedicated, stand-alone Veteran’s Service. At the very least ex-service personnel hey need to be tagged by the Health Service and associated services so that their problems can be seen in the context of their military service.

What can we do about the deleterious effects of alcohol? Currently we are in the midst of a debate about alcohol pricing, and it looks like the plan to introduce a minimum floor price will be dropped.  From a libertarian point of view you should be free to intoxicate yourself as you chose. From a social point of view the costs of alcohol and drug induced violence are far too high, and restrictions are prudent. Increase cost, restrict access.

Finally, how do reduce the overall rate of post-service violence? We are having another debate about reducing expenditure on the military, as part of a general round of cuts. (Most of these do not turn out to be cuts at all. They are noble statements that at some time in the future the rate of increase of public spending will be brought down somewhat).

We must make a virtue of necessity. Here is a chance to make a real cut. Forget about recruiting thousands of soldiers. Just recruit a few well educated, clever, abstemious, officers.  That will impress the enemy.

Tuesday 12 March 2013

Forgery Most Foul

To the Finborough Theatre, to see “Laburnum Grove” in a room not much larger than the sitting room the play depicted, such that when the daughter of the house accidentally dropped her napkin at my feet I had to restrain myself from picking it up and handing it back to her.

J.B.Priestley’s 1933 play has the dramatic construction and simplicity of text that he was to hone to perfection in “An Inspector Calls”, which in part this play prefigures. It supposedly tells a simple tale of humdrum suburban fraud, in which the mild head of the household, in the temporary absence of his loving wife, confesses to his daughter, her pushy boyfriend, and his wife’s sister and husband who are staying with them, that after his wholesale paper business came near to bankruptcy four years before, he used his knowledge of high quality paper to become a forger of banknotes.  As you may imagine, this confession has a considerable impact. The daughter regrets complaining about her father being boring, the boyfriend withdraws, fearing trouble, and the sponging sister and unemployed husband decide that they too must get out before they are implicated as accessories to crime. Inevitably, the wife finds out about the prank, and shows the gullible household how they have fallen for the story taken from a recent crime thriller. She is therefore perfectly at ease when an Inspector Calls from Scotland Yard, investigating a counterfeiting gang.

Robert Goodale shines in the lead role, with Lynette Edwards, Timothy Speyer, Georgia Maguire and Karen Ascoe very close behind. The props also deserve mention: everything becomes particularly believable when it takes place in the granny’s house of nostalgia. Those old sticks of furniture are still knocking about somewhere in our own houses.

The rest of the play revolves on the themes of whether, sometimes, an illegal act can have positive consequences. In his supposed confession about being a forger, our hero explains that the counterfeit notes serve the social purpose of boosting the economy, a notion then being made popular, at least in some circles, by Keynes in his famous comment  "If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of repercussions, the real income of the community, and its capital wealth, would probably become a good deal greater than it actually is." 

Of course, one must note that Keynes did not propose forgery, but the implications are clear: there are circumstances in which, the argument goes, printing more money helps the real economy, by oiling the wheels and boosting confidence. As a point of pedantry, Keynes did not write this until 3 years after the play came out in The General Theory of Employment, Interest and Money (London: Macmillan, 1936) p. 129, but as fellows of the Left, or as Victorian liberals, they knew and influenced each other.

So, a thirties interior is the perfect setting for contemplating the morality of quantitative easing, and the ways in which tainted money can be laundered when it suits personal needs.  The Great Depression still casts its distorted shadow on the present day.

Friday 8 March 2013

The Voysey Inheritance

And so, down Bride Lane, just off Fleet Street, just past The Old Bell Tavern, where we stopped for a drink in a convivial scene that would have been familiar to Samuel Johnson, who lived but paces away; then further down the narrow lane that follows the footsteps of centuries, past the soaring purity of Wren’s St Bride’s Church whose colonnaded tower became the icon of wedding cakes, and where we commemorated the life of a friend only a few months ago; crowds going to a private party of beautiful young things where we were served champagne without asking for it (we demurred) and then finally in to the Bridewell Theatre to see the Voysey Inheritance.

It is a contemporary story. The Senior Solicitor of a City firm has arranged for his younger partner and son to work through two particular files he normally keeps in his safe. The son, a dutiful and somewhat emotional young man finds that these show massive fraud on his father’s part. With some elegance the father, when confronted, explains that he inherited the fraud from his own father, quite against his will, and has worked all his life to cover it up, thus protecting the family name. He admits that he has dipped in to client’s capital himself, but explains that no-one has really been harmed, because clients only want their annual dividend, which he has always managed to provide without fail. The young and inadequate son is presented with a moral dilemma: why blow the whistle on something which has not yet hurt anyone, and which might, with his fresh management, eventually be brought back onto an even keel? This is not a case of right and wrong, but merely a case of legal and illegal.

This play rings many bells, and is a fable for our times. The Bernie Madoff scandal comes most easily to mind, but it also has the DNA of quantitative easing, in which expert opinion agrees that the full confession of national bankruptcy must be denied for the good of the public, and that a Ponzi scheme is not immoral if it is done in good faith, and solely for the protection of the common folk, who are easily dispirited and must be fed uplifting lies.

Does one mend the problem, or postpone it? Postponement may be the best option, because something may always turn up. Perhaps this is a very pure survival instinct. Never say die.  The play’s theme also resonates with whistle-blowing about bad services in hospitals and care homes, when covering up may allow the institution to repair the damage and improve matters without causing widespread and unnecessary public concern. Written by Harley Granville Barker in 1905 this masterful play was an exploration of the Noble Lie, the seductive argument that some evasions have their purposes, and create their own moral benefits.

My usual opinion is: why bother to go to the London theatre at all? There is often better drama on television, and much of the usual West End fare is a disappointment, with gaudy vacuity in the popular offerings, and ponderous, creaking, pretentious scripts in the self-consciously serious new drama. Even worse, it is hard to find a parking place or a drink of any sort during the interval.

I got my answer tonight, in a small theatre where I was a few yards from the actors, the highly accomplished Tower Theatre company, with an assured John Morton as the senior Voysey, and an adept Alex Buckley as the son who inherited the moral dilemma.

It is an altogether excellent production, but for me the highlights were the changes of scene. Rather than the usual furtive interlude of black-clad stage hands there was a robing scene which was a play in its own right: the senior partner changing from his City day clothes to the white tie and tails of a formal country house dinner, paying exquisite attention to the creation of the knotted bow whilst behind him the cast changed the office into a dining room, exactly in the time it took him to change his clothes.

A grand evening, talking to friends and by chance to what turned out to be the first of six men in London with a particular surname whom I rang at random twenty years ago, searching for a long lost university friend of the same name, and thus found his number in one call. Something about these tangled City lanes invites coincidence.

Then back home, past the Black Friars in their imaginary sombre cowls, and along the swollen misty river, the ancient and now floodlit buildings looming up above the cat-like London fog.

And so to bed.

Wednesday 6 March 2013

Are central bankers intelligent?

I have had many fantasy careers but, so far as I can recall, I have never wanted to be a central banker. Well, not until recently. In my youth I could see the advantages of being a film star, a pop star, a racing car driver, even a kindly mediator preventing world wars and, failing that, the wise leader of a suitably large country. In all these pursuits I thought I would be able to impress girls. The thrill of banking passed me by. Riches I could understand, but setting interest rates never excited me.
Why now, at a time of supposed maturity, should I be idly thinking of the remote possibility of becoming a central banker? It fails the fundamental test of drawing in girls, or I presume it does. 
At this particular moment (midday Greenwich Mean Time) the Dow Jones is at an all-time high, and Associated Press reports:
 “Investors are cheered by major central banks' commitments to keep supporting growth in the world biggest economies — the U.S., China, the 17-country eurozone, Japan and Britain”.
After some cautionary words from an investment advisor that markets could go down as fast as they go up, they continue:
Federal Reserve chairman Ben Bernanke has recently suggested that the central bank would continue its campaign of massive bond-buying, known as "quantitative easing," to support the world's biggest economy. The issuance of bonds has pushed their prices down, steering investors toward stocks”.
"The lesson is clear. Don't bet on Capitol Hill. Bet on Fed Chairman Ben Bernanke instead. To be sure, it was Bernanke's reassurance, as last week's congressional testimonies on monetary policy, to keep QE3 on its present course that turned a worried stock market into a record high," said analysts at DBS Bank Ltd. in Singapore.

My interest lies in trying to understand what central bankers do. The job apparently requires a very high level of intelligence, with a concomitant capacity to deal with highly abstract concepts, yet with considerable impact on practical matters. Running a central bank is a highly complex task with massive impact on society. Perhaps the mostly male practitioners do attract the fair sex after all. This moment of glory will be prime time for them in the mating game, if one gives any credence to evolutionary psychology.

To understand central banker’s craft it is necessary to understand money, economic theory and, though they might deny this, politics. Central bankers always claim to be independent, but they are dependent on the state for their function, their salary and their pensions. Nonetheless, most of them are judged to be well-qualified for their roles. Their pronouncements show, at the very least, the vocabulary one expects of an intelligent person, and a command of jargon which inspires admiration, if not always confidence. By the standards of our tribe, they have high status, and deserve the attention paid to them. They ought to know what they are doing.

How can we judge whether they are making intelligent decisions?  This is a particular form of the general question, which is how we judge the intellectual demands of a role or profession. One approach, combining biography with clever statistical analyses, is to look through all the major encyclopedias and reference books, and simply measure how much space is allocated to each person. To avoid the immense bias of our focus on the present time we exclude recent developments. For example, in Human Accomplishment Charles Murray (2003) looked at the period 800 BC to 1950. Understandably, he concentrated on subjects like Mathematics and Physics where it was possible to achieve a consensus. He made no such attempt for Economics, and left politics well alone.

We cannot look at the long historical track record of central bankers, because they are a relatively recent job creation. By common consent the first national central bank was established on 27 July 1694, and served as a template for all others. Created purely to raise money for William III so that he could continue a war against France, it was called The Bank of England.  Modesty is no part of central banking. The US Federal Reserve was not established until December 1913, and Brazil had no central bank until 1945. It is possible to function without them. It may be better. Scholarly debate continues as to whether bank failures and business cycles have been altered for the better by these governmental agencies.

The financial experts seem to know what they want in a central banker. Usually they choose academics or bankers who feel confident that they can find ways of controlling money for the public good, by means of interest rates, printing new money, and by the way in which they operate the relationship between the central bank and the major clearing banks, buying up some debt and then selling it back again years later. Setting interest rates is probably the central task and the easiest to understand. The rest is clothed in jargon and requires specialist knowledge.

However, to the lay observer their actions seem rather odd. After all, currently central bankers are dealing with a debt crisis by making it cheaper to borrow money. In contrast, citizens are usually asked to pay off their debts. Central bankers are withdrawing “bad” debts and putting them into “bad” banks, as if someone had broken wind and it was impolite to mention the fact. In contrast, citizens are not allowed such tricky accounting. Central bankers are relaxed about creating money (and inflation). Citizens are put in jail if they print their own money. Central bankers do not mind distorting prices by manipulating interest rates. Usually, citizens must pay the rate the lender offers, unless they can find a more favourable provider of funds. Citizens are in the market, not manipulating the market.

So, on this day of all days, when central bankers have most cause to celebrate, I still want to ask whether they are behaving intelligently. However, the question needs to be sharpened up a bit, because intelligent people can often behave unintelligently. They do it less often than less intelligent persons, but can sometimes cause more trouble. Clever sillies can be dangerous.

A typical setting in which even clever people end up making unintelligent decisions is a social trap.  In my view all central bankers are in the position beautifully described by Martin Shubik (1971) "The Dollar Auction: a paradox in non-cooperative behaviour and escalation" The Journal of Conflict Resolution, 15, 1, 109-11. (

In this auction it appears to all participants that they can get a dollar for 5 cents. However, if they enter the auction they must agree to pay the highest bid they have made, whether they win the auction or not. It looks great to begin with, because the dollar looks very cheap. However, once committed, the participants find they are trapped, and try to minimize their inevitable losses by bidding even higher. I used to conduct such auctions with students, and found it easy to drive them higher than a dollar, though I never collected any money from them.

In all social traps there is a short-term individual gain which in the long run leads to a loss for the whole group. For example, fish are free in the sea for anyone with a big enough net, but if we fish out the sea we will have lost a good source of food for ever. Similarly, I benefited from an hour of central heating today, but if we all keep burning fossil fuels we might deplete our resources or, conceivably, over-heat our planet.

However, we cannot be sure that world-wide quantitative easing is a social trap. It may be a brilliant, well-coordinated strategy to pump liquidity into a timorous public, a public who have now, finally, got the message.

Gold is $1574 at the moment. In dollar terms this is a 30 year high. In inflation adjusted dollars, so long as one ignores a brief spike in 1980, it is also very near a 30 year high.

The National Consequences of Intelligence

In two previous posts (The Wealth of Nations, Cognitive Capitalism) I had mused on the contribution of human intelligence to the creation of wealth

Last week I belatedly came across Earl Hunt’s (2012) “What makes nations intelligent?Perspectives on Psychological Science 7 (3) 284-306. In this piece he sets out some of the evidence for intelligence making people and nations rich. 

One strong example is that intelligence predicts job success at r= 0.4 for low complexity jobs, r= 0.52 for medium complexity jobs and r=0.58 for high complexity jobs.  These complex jobs make the biggest difference because they increase the rate of productivity gains. Societies had few such permanent jobs before the industrial revolution, and the increasing complexity of the emerging industrial economy depended on such occupations.  Bright people were needed to fill these demanding posts, which led to the emergence of a middle class of skilled workers. 

Another strong example is that in our own age the very, very brightest in adolescence (top 99.75th percentile) go on by age 40 to be three to five times more productive than even the very bright (99.25th percentile) and at least 12 times more productive than the rest of the population (in terms of patents, which is a good predictor of economic innovation and wealth creation). Intelligence matters.

But my eye was drawn to a simple summary of the causes of wealth, based on Rindermann’s 2008 work on 17 nations for which he had data for cognitive data.  So, in the hope of getting comments, I leave you with a single table showing some of the desirable national consequences of intelligence, and some undesirable consequences of the lack of it.

Table 4. Correlations of National Levels of Cognitive Ability with selected desirable and undesirable attributes of the country 1960-1996

Desirable                                 Undesirable
Attribute      Correl          Attribute      Correl

Rule of law            .64     Fertility rate          -.73
Quality govt          .64     Gini inequality      -.51
GDP per capita      .63     HIV infection rate -.48
Economic freedom .52     Govt spend %        -.47
Economic growth  .44     Homicide rate        -.23
Solved homicides   .32     War: freq & impact -.22

Rindermann, H. (2008) Relevance of education and intelligence at the national level for the economic welfare of people. Intelligence, 36, 127-142.