Why the Liberal Agenda Lacks Authority

Innate trading behaviour informs us why narratives matter and non-violent protest is most effective. It's time to take The Sniff Test.

Scratch a Liberal

Culture wars are caused by shifts in societal opinion that gain critical mass without being widely adopted. Yesterday’s progressives become today’s conservatives and find themselves under attack for views that were acceptable a short while before.

Harvard political scientist, Erica Chenoweth, reckons once 3.5% of a population is active in non-violent protests then serious political change ensues. That would be 2.4 million people in the UK and 11.7 million in the US.

The challenge for liberals is legitimising change. When the word of a monarch or a holy book is law, there is justification for action. Once these are overthrown there is no source of authority. The only human rights are those argued into existence.

Most western democracies address this through a constitution and a bill of rights. As a preamble to this, the second paragraph of the US Declaration of Independence begins,

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

If there are enough of you and you exercise authority, anything can be self-evident. This is why my history teacher said, “Scratch a liberal find a fascist underneath.”

He meant that if you asked why too often, you’d be told that “the government says”. That must appeal to “Two Tier Keir”, as Elon Musk labels the Prime Minister, as he seeks to enforce approved behaviour.

Cancel culture is one step beyond. It enforces new norms through no other justification than we don’t like the old ones. It is no different to book burning as practised in Nazi Germany and Mao’s China. The loss of perspective through failure to understand the past is terminal for free thinking.

There are three sides to the argument over climate change. There are the deniers, the adapters and the degrowth lobby. Only one of them aligns with human nature.

What’s It All For?

Newsletter doyen Byron Gilliam calls into question the amount of money in cryptocurrency relative to the value it provides. It seems we’re acting like monkeys.

The total size of cryptocurrencies is just under $2 trillion.

The chart shows the total size of the crypto market around lunchtime on Wednesday, when it was just shy of $2 trillion. By contrast, what Jared Dillian calls The Big Short 2.0, is the expected meltdown of the $8 trillion private equity industry.

For all the shortcomings of private equity, it supports 12 million jobs and 6.5% of the US economy. In Europe, the industry backs 5.5 million jobs, or 5% of the workforce.

By comparison, cryptocurrencies valued at 25% of the private equity market appear expensive. A lot rides on a few people figuring out why they exist.

A simple reason for being may be that people like to trade. In fact, the desire to trade for profit may be hard coded into our genes.

Monkey Business

Byron highlights a study of tufted capuchin monkeys by researchers from Yale. These are close cousins of humans, adept at problem solving and skilled in using tools.

The researchers devised three experiments to test if traits such as revealed preference and loss aversion are more ancient than we thought. The monkeys were given a number of tokens and taught that they could exchange them for food. They were well fed and watered, so the results were not driven by hunger.

In the first experiment, the monkeys chose between two options. They either traded one token for a single piece of apple with one researcher, or one token for either one or two pieces with another. 87% of the time the monkeys chose to trade with the person who might deliver more.

In experiment two there was a 50:50 chance of one or two pieces of apple from both trades. The first researcher showed the monkeys two apple pieces, but half the time removed one before payment. The second researcher always started with a single piece, but half the time added a second before paying.

There was an equal chance of getting two pieces from either trade. Despite this, 71% of the time the monkeys traded with the person who increased the payment. There is an inherent preference for trades with a possible gain over those with potential loss.

In the final experiment, the trade was always one token for one piece of apple. One researcher always displayed two pieces before paying one, while the other offered and paid one. The monkeys traded with the honest broker four times out of five.

Revealed preference is a clear behaviour demonstrated by purchasing habits. The monkeys have it.

Loss aversion is a stronger desire to avoid defeat than to seek victory. Neither home owners or stock market investors will sell below their purchase price if they can possibly help it. This is the case even when there is a clear superior use for the money.

The endowment effect is a related behaviour. You may not consider paying £150 to stand and watch Oasis worth it. But when given a ticket, you’d likely not sell it for less than £300. A bird in the hand is worth two in the bush.

The primary purpose of Bitcoin is to be a volatile asset that is sensitive to oscillations in money supply. Smaller coins offer increased volatility for ever higher risk. There is a signalling value in the price moves, because they lead the stock market and other assets by several months.

The crypto market attracts a lot of punters and a few professionals who understand the demand. The professionals influence the price at any given time, while the Federal Reserve and other monetary authorities determine the direction of travel. Arthur Hayes expects an accommodating Fed in the run up to the election, but only once US interest rates fall.

I have a couple of observations. People love to trade and they prefer trades with potential upside to those with a loss. This sounds obvious, but the capuchin experiment shows that the same trade presented different ways changes behaviour. That is to say the narrative matters.

Second, we value what we have, much more than what we don’t. Again obvious, until we spell out that objects double in value to us once they come into our possession. This is of critical political significance.

Defund Oil

The financial press kickstarted this week with a kicking for ESG. That’s investing on environmental, social and governance grounds. Hedge fund manager Kyle Bass became the latest financial figure to highlight the naivety of sustainability champions.

Bass notes that energy transitions take at least 40 years. Business leaders would take ESG champions seriously if they weren’t calling for the immediate replacement of fossil fuels. Remember, we put a high value on what we have today and taking it away is going to cost you. Money, blood, or both.

The evidence for climate change is compelling. The latest knowledge is that pumping carbon into the atmosphere exacerbates the change. The extent to which it is a problem is debatable. For instance, this chart of deaths from hot and cold weather in India is pause for thought.

There is a scene in the book Casino Royale where Bond is whipped repeatedly on his testicles. I don’t recall it making the film versions. After a while he becomes inured to the pain and even begins to enjoy it. Torturers know to take a break once in a while. The fear of resumption is harder to handle than the beating.

When every hot day, storm, flood and fire is blamed on selfish people driving petrol cars, the majority stops listening. The harpies shriek louder but are heard less and less. Bass’ point is that a good argument has been lost because it was taken to extremes.

Politicians and business leaders want answers not questions. “What are you going to do about fossil fuels?” is not an answer. Stopping supplying them is not an option.

There is a continuous geopolitical struggle for supremacy between nations and one side is not going to tie both hands behind its back. The EU has a funny way of showing this, but it is not a great power and there is a disconnect between what it says and what gets done.

The problem for those wanting a faster transition to clean technology is that they are grouped in with the de-growthers. These are people calling for shrinking economies and populations. While not offering to exit stage left themselves, they will help out by not having children. By their own numbers, the climate crisis will have killed us before this has an effect on carbon emissions.

Every country in the world has slower population growth than in the 1950s. Two-thirds of countries are below replacement birth rate. In time this may mean the earth’s population shrinks. This is regardless of virtue signalling stances on having children.

Artificial intelligence and anti-ageing may offset the negative economic consequences of fewer new workers. AI requires a lot of energy and much of it is fossil fuelled. Yet AI may be the breakthrough that delivers the answer to climate change.

The Definition of Progress

Solving problems is what humans do. The solutions create new problems and we set about solving those. Progress means nothing more than solving the next challenge.

For this reason progress is not a straight line on a chart. What would that chart show? Economic growth or life expectancy? Liberty and happiness, assuming we had meaningful measures of either.

Modelling the world shrinks it with limiting assumptions. Pursuing political goals has a similar consequence. Focus on one thing at the expense of others and in time you’ll be thrown out for not paying attention. A small shift in public opinion is enough to make that happen.

This is one reason why the Conservatives have been in government far more often than Labour. One is the pragmatic party, trimming its sails to meet the wind. The other is steeped in ideology. Right now, the Tories are putting this theory to the test.

The Blair administration escaped this trap before becoming evangelical about Middle Eastern wars. Hubris is the downfall of the powerful. Starmer appeared to wear Blair’s mantle, but his reaction to the riots revealed an authoritarian bent. His net approval rating is down 16 points since the election.

US campaigners have long used the law to further agendas. Constitutional amendments have a high hurdle, but judicial interpretation of existing laws is an acceptable substitute. This makes for a vicious battle over Supreme Court appointments.

The cancel culture crowd in the UK have a government that is sympathetic to their demands. British politics makes it far easier to pass new laws than in the US and the political system imposes few constraints on what those laws may say.

Cancelling is about taking something away. It’s hard wired into capuchin monkeys to resist this, and to refuse a fair trade with a negative narrative. Humans behave the same way.

It’s a slogan of the gun lobby that it’ll give you its weapons from its cold, dead hands. While deliberately menacing, it highlights that violent protest is much less effective than non-violent, as Chenoweth’s work reveals. Tearing down statues and hounding professors from office is violence.

I expect there to be violent resistance to any attempts to prevent use of fossil fuels. We’ve already seen there are other touchpoints that trigger street protests. Many of them are part of the so-called liberal agenda that seeks to enforce new behaviours on the population.

The role of government is to suppress anger. When it becomes a source of anger it loses its legitimacy.