A lesson from Sid...

Last weekend, I was told about Sid. I wasn't introduced as Sid wasn't there, he'd stayed back in Saudi Arabia.

Code Arabic name for black-market alcohol distilled from fermented sugar water. Often fermented in stills made from used propane cylinders according to specifications given on the "Blue Flame" - the authoritative document on alcohol manufacture from Saudi Arabia. Life-blood of expats in Saudi Arabia. Normally distilled to 90%+ alcohol content and bottled in used water bottles to avoid detection. Colorless, relatively tasteless, good with tonic and lime. Also means "friend" in Arabic. Also shortened to "Sid".

There, in a country where alcohol is completely banned, it is made in the kitchen. Almost everywhere. Despite the prospect of punishment:

Sentences for alcohol offences range from a few weeks or months imprisonment for consumption to several years for smuggling, manufacturing or distributing alcohol.  Lashes can also be part of the sentence; and a hefty Customs fine if smuggled alcohol is involved.  The authorities also hand out stiff penalties to people found in possession of equipment for making alcohol.

And the lesson from our friend Sid? Banning booze, making booze too expensive, limiting where it can be bought, indeed "denormalising" drink will result in smuggling and illegal production. And - as Sid shows us - making booze is really easy (apparently soaking Jack Daniels barbecue chips in the sugar water is good for flavour!).  And would we rather have good quality drink produced in a clean environment or moonshine made from heaven knows what and making us blind?

Dale bought a bottle of Drop Vodka from an off-licence in Bradford, West Yorkshire. He said: “I’d never heard of the brand before but it was £4 cheaper than the others. The rest of my family are all beer and lager drinkers so I was the only one drinking it.”

After downing a quarter of the bottle, Dale began to feel more drunk than usual and his vision began to blur. But by the next morning he could not see at all and was suffering excruciating pains in the lower half of his body.

“As soon as I woke I knew there was something wrong,” he said. "I was in agony and my sight was almost completely gone.”

 Or blowing up the neighbourhood:

Five men died and one was seriously injured after a huge explosion at an industrial estate last night. The blast ripped through what locals claim was an illegal vodka distillery and was heard from up to five miles away.

The tighter our controls get on drink and drinking the more it will go underground. And the more it will be controlled by the same sort of vicious criminals who supply illegal drugs and, in doing so, terrorise neighbourhoods.

The lesson from Sid is that the Church of Public Health will lose the war on booze just as surely as we are losing the war on drugs and, if we're honest about it, the long war on fags. But they will, in conducting that war, in denormalising drink, hand a currently licensed, regulated business over to criminal gangs.

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Nudge, nudge, wink, wink - behavioural economics as a tool of social control

The matter of behavioural economics came to the front of my mind with reading this excellent blog post – in a roundabout way a review of “Nudge. Now the term “behavioural economics” has always seemed to me an oddly oxymoronic description since, if it is concerned with anything, economics is concerned with individual behaviour.

So let’s start at the beginning:

“The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.” (‘Smith, An Enquiry into the Causes of the Wealth of Nations)

The core premise on which all economics is based rests on the view that – taken in the round – each individual seeks “to better his condition”. And this has been taken to mean that decisions taken by individuals are ‘rational’ – hence the idea of ‘economic man’. Yet Smith – nor the other classical economists – never said that every decision taken by an individual is rational given full information and knowledge. We need to consider that, in aggregate, the decisions of individuals tend to be rational (i.e. directed to the betterment of that individual’s condition) or have a rational intent.

Now, since classical economic models allow for the effect of decision-making in circumstances where an individual has incomplete information, we would be disposing of the child as well as the dirty water simply to dismiss classical models (or for that matter neo-classical models) because of bounded rationality, incomplete self-control and (alleged) lack of self-interest. What we need to appreciate is that our issue relates less to information than to perceptions of incentive. Hence ‘nudge’.

Which brings us to advertising – after all the persistence and success of advertising is living proof of the bounded nature of human decision-making. Advertising does not limit itself to putting across information about the product, where you can buy it and its price. The marketer seeks to appeal to heuristics, to create short-cuts and to reduce the decision-making process to a sub-pavlovian reflex when presented with a brand message.

All this is true but for one sneaking little problem – the advertiser has to live up to his brand promise. It really is that simple – businesses that do not do what they say in their advertising (and I’m talking about brand here not deliberate mis-selling) do not develop good brands. McDonalds presents an image of good fun, tasty food and good value – all things to which people aspire and the availability of which they consider betterment. And (for many people) the company lives up to its brand promise. A promise that does not extend to nutritional value, not being fat or even saving the planet.

We (says he trying to put himself into the mind of the health nudgers) want to believe that the McDonalds consumer is some kind of victim. And here the behavioural economists step away from the snug amoral world of economics and into moral judgment:

“Incomplete self-control refers to the tendency of economic agents to make decisions that are in conflict with their long-term interest. Self-control problems may lead to addictive behaviour, undersaving or procrastination. As opposed to the neo-classical view, restricting the choice set can be beneficial for an agent with bounded willpower.”(from Diamond & Vartianen, ‘Behavioural Economics & its applications’)

It is too short a step from noticing that some folk make stupid decisions to intervening to direct their decision-making in some way (i.e. altering the ‘choice architecture’). This is a moral judgement since in the aggregate (as ever ceteris paribus) the typical human decision is rational – it responds to incentives and is directed to betterment. It is as daft to run a model based on a pre-judged moral position as it is to say that every human makes a rational decision every time.

The problem – as our behavioural economists have found – is that those pesky humans just won’t co-operate. They carry on drinking, smoking, scoffing fatty, salt-laden goodies and indulging in a whole panoply of high risk activities. And the only response is – as we have seen, for example, with smoking and begin to seen with booze and food – ever more insistent ‘nudges’. And some of these nudges aren’t even that they’re outright bans, huge financial blunt weapons and armies of enforcers of the behaviouralists’ moral assumptions.

All economics is about behaviour but the economics that says behaviour can or should be controlled or directed is immoral, inconsistent, judgemental and wrong. We may wish to understand human behaviour better – that is a proper course of human enquiry. But only if this is done for reasons of understanding – sadly the behavioural economics we see too often is designed solely with the intention of control. We have returned to an age before the enlightenment that Locke, Hume, Smith and other brought. Back to the brutal, controlling leviathan and the moral control of the puritan.

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