The Guardian reports:
A US academic billed as David Cameron's new intellectual guru takes a Darwinian approach to economics and says it is wrong for the rich to pay higher taxes to help the less well-off.
Nassim Nicholas Taleb, a professor of risk engineering at New York University, attacked Barack Obama for increasing his tax bill as part of a series of anti-recessionary measures [during] …an appearance with Cameron at the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) on Tuesday.
In some of his most provocative remarks at his appearance with Cameron, the Lebanese-American academic criticised Obama for increasing his taxes as he harked back to Darwin's theory of evolution.
"I happen to do OK. I am paying more taxes," Taleb said. "How can you have evolution if those who do the right thing have to finance those who did the wrong thing? If you are making money in 2009 — that means you have a robust business in the cycle — you are paying more taxes. If you are losing money in 2009 you get a bigger tax break. It is the opposite of everything I believe in."
Worryingly:
Cameron praised Taleb and said his book had confirmed his own prejudices.
As worryingly, Cameron made clear he disagrees with Taleb on climate change, but not on tax.
So what do we infer? I suggest, first Taleb equates financial prosperity with fitness to survive i.e. wealth = talent, moral well being, good genes, etc. I find this notion utterly repulsive. I have also found not one iota of evidence to support it. It is pure accident of birth that most do, or do not have wealth. that accident of birth is locational e.g. if you are born in the UK you will almost always be richer than if born in Angola. This also utterly ignores the fact that many now wealthy got to that position entirely because of the creation of the post war welfare state.
Second I think we must infer he wishes the poor to be very, very poor — so that survival is in doubt. I presume he means that within and between countries. I call that callus indifference to the plight of humanity.
And Cameron seems to share it.
The signal is clear: he wants to cut benefits, he wants to increase the wealth gap in society, and he doesn’t care about the consequences for a great many in our society.
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Richard,
If you haven’t read Taleb you should do – he is very interesting and you would agree with many of his arguments. His background is that he grew up in Lebanon during the war and saw how unstable life was. He then observed that most people in the world of finance were mathematically illiterate. In particular, he noticed that there is a huge emphasis on “past performance” (and the myth of the “star manager”) without the realisation that if you have a large sample then some will always outperform but eventually everyone reverts to the mean. In other words, most “star managers” are simply lucky, but there is a huge self-intersted industry built around the myth of the star manager.
His basic philosophy is that most people discount risk in that they ignore the chance of something happening that wipes them out: one of his examples is that if you were a turkey that modelled your life on past performance you would believe that the farmer comes to feed you every day. That prediction is accurate every day until the one when you die.
So his view would be that while the events of 2007 may not have been specifically predictable, it is always likely that something will turn up that is largely unprecedented (or “a once in a lifetime event”) which destroys the years of gains that precede it. I think you would completely agree with that analysis: that the “finance industry” made returns between say 1997 and 2007 that were illusory, in that they were wiped out in 2007/8 and involved taking a degree of risk that people either ignored or were unaware of.
His philosophy – which I do not think any mainstream politician would have the guts to accept – is that the future is basically unknowable, and the sensible, pragmatic person invests almost entirely in low risk things like government debt because the rest is gambling. This is also why Taleb is sceptical on climate change: his basic view is that anybody who puts themselves forward as an “expert” is invariably a charlatan, and any prediction about what will happen in the future is likely to be wrong, because history shows that the unexpected always crops up.
I simply think you have drawn conclusions from Taleb that aren’t there. I suspect his point about taxation is that those who speculate on the markets and lose should not be rewarded by being given tax breaks, and those who have acted prudenly should not make up the shortfall caused by the former’s recklessness.
But read his books: he is a humane, literate guy that understands maths and literature and is simply sceptical about most things. The one he is not (though you may think Cameron is) is callously indifferent to the plight of humanity.
I do agree with a lot of what he says
But humane people do not reach his conclusions from the available evidence
So he’s clever, and very, very unwise
A bit like many on the Right
Richard,
I think his conclusion is that tax should reward sustainable activity and those that are given tax breaks now because they made huge losses last year are basically being given a reward for their profligacy.
As someone who believes that tax should be used to engineer socially desrable results I don’t think you can object to this principle. After all, you have said yourself that the banks should have been nationalised and while I don’t know if Taleb would agree with that (he may have said they should have been left to go bust, who knows), it would have had the effect of making the banks suffer the effects of their behaviour, which is what Taleb is saying should have happened.
I don’t think the Guardian understands him, but then, that is predictable, because, like Cameron and – with respect – yourself – they have a fixed world view. Taleb, on the other hands, basically argues that we know nothing and anybody who says anything with any certainty is likely to be wrong. After all, on his website (fooledbyrandomness.com) he says his first mission is “activism against those who fragilize (sic) society (bankers, economists etc)”. Not left or right wing economists – he thinks you are all charlatans.
He does not distinguish between the “left” and the “right”, because all political argument really boils down to “if we do X then in the future Y will happen”.
He does not believe that you can foresee the future in his way, and so is interested in developing a way of acting when you do not understand he consequences of what you do.
But ultimately, he is a philosopher, and what he offers is a way of thinking rather than a coherent set of political ideas.
Sorry to bang on but this is important.
NNT said “How can you have evolution if those who do the right thing have to finance those who did the wrong thing”.
This got interpreted by The Guardian as [NNT] “says it is wrong for the rich to pay higher taxes to help the less well-off”.
That is not the same thing, but it shows how The Guardian is conceptually unable to deal with NNT, because he does not argue in terms of left/right or rich/poor.
He is simply saying that if you have somebody who gambles every year, why should you give him tax breaks when he loses, which you pay for by increasing the taxes charged on those who don’t gamble. I don’t think that is contentious at all.
And where I think it accords completely with your philosophy, Richard, is that he would say (as you do) that most of what passes for investment these days is simply gambling.
To comment 3 above: @mad foetus
If you think the Left have a fixed point of view you show how little you know
If you think that nihilism is a philosophy, you’re mad
If you think expertise counts for nothing – you’re crazy
I agree with him – we can’t know the future
Does that mean we don’t plan?
Does that mean we don’t think?
And isn’t he, like logical positivists, hoisted by his own petard i.e the absolute tautology in what he says – that there are no experts, but he is one we should listen to?
Sorry – I persist – he is unwise, if clever
re 4 – of course the Guardian can handle a person who says resitribution is wrong – they can say quite competently that they threaten the poor 0- as it seems is his intention – and Cameron’s
And I don’t say investment is gambling – investment is creating future wealth by creating real assets for future us
I say saving is gambling – please get your terminology right
Hi Richard, I too thought that you had probably misinterpreted NNT, but since I have only read reviews of his work not the real thing, didn’t want to intervene. However, I read about the Cameron debate with NNT yesterday which was really funny. Cameron was trying to muscle in on NNT’s current status as a serious commentator on the financial crisis. Apparently it didn’t go well….
But Richard (at 4), he isn’t saying that redistribution from rich to poor is wrong: he is saying that redistribution from prudent to reckless is wrong.
And I didn’t say that investment is gambling: I said “most of what passes for investment these days is gambling”. And if you weren’t so committed to being argumentitative, I think you would agree with that.
But funnily enough, NNT has updated his website with musings on how he has been misunderstood: I don’t think he could believe how simplistic the british press is:
” I had my first taste of UK politics on August 18, 2009, when in a discussion with David Cameron head of the Tories I said:
“I’m a hyper-conservative ecologically. I don’t want to mess with Mother Nature. I don’t believe that carbon thing is necessarily anthropogenic (derived from human activities).”
By the “not necessarily” I meant that I don’t need expert models and proof hat we are harming it to STOP POLLUTING the planet. This is part of my idea that one does not need rationalization to the edict: DO NOT DISTURB A COMPLEX SYSTEM since we do not know the consequences of our actions owing to complicated causal webs. I also said “leave the planet the way we got it”. So my “super Green” position or hyperecologist was somehow lost in translation: they probably thought “conservative” meant loves to pollute or something like that.
Reaction: the “not necessarily anthropogenic” became a headline and from hyper-ecologist I became a “climate change denier”.
The Scotsman: The contentious remarks were seized on by Mr Cameron’s opponents. Liberal Democrat MP Willie Rennie said: “David Cameron can get pulled around by huskies all he wants, but by cosying up to climate change deniers, he shows his true colours.”
Another statement made backwards concerns my position on “robustness”. I said that free markets generate fads, crashes, massive movements. Attempts to control the cycle proved futile —what we need is citizens to become ROBUST to them, to be immune to their impact. My point is that we cannot predict Black Swans, but we KNOW their impact and can be prepared for them. Again taken backwards: “Taleb loves crashes”.
This is incompetent journalism in its most insidious form. They owe to the public to represent what they are discussing. How can I trust that what I read is real, not some quoting selected for maximal distortion?
Culprits: Guardian (Nicholas Watt & Larry Eliott), Scotsman (Gerri Peev), even (to a lesser extent, in a more benign way) the FT. How can I ever believe what they write about some other thinker I have never read? How? How?
Perhaps the worst of this story is the fan mail I’ve been getting from right-wing anti-environmentalists.”
He really is alright, NNT.
I’m listening to the debate now
So far I can see nothing that lets me support your view
Richard,
My view on NNT is that he is an interesting thinker who was misrepresented in the article you quoted above and that misrepresentation was amplified still further in your interpretation of that article. No more than that.
I’ve listened to the piece on the RSA web site
Cameron was the loser!
Taleb is right about mathematical economics
He is wholly wrong on debt right now – very badly wrong
He’s also wrong on the risk of hyper-inflation – and for someone who says all forecasters are wrong I note his enthusiasm for offering them
But, I think the interpretation of what he said on tax is fair – albeit an extrapolation
Richard
MF
I reflected whilst walking the dog this evening on what Taleb said
One thing kept jumping out – that for many years he was, he kept saying, derivative dealer
Pretty much says it all about screwed up values, don’t you think?
Richard
Richard,
You should read his books – he is a very funny guy and not interested in money at all. His real interest is in mathematics and literature and in human behaviour, and he just happens to have noticed that the financial markets are a good way of illuminating the madness of people.
On debt, he may be wrong at a national level, but I suspect his view is aimed more at an individual level: that if you live in an uncertain world, the best approach is to minimise debt and live within your means. For most people, that is good advice. But as your man Keynes noted, what works for people doesn’t work for countries.
He is of the Austrian School of course economically, so we really can’t expect Richard and him to agree on terribly much in that sphere. Did you, for example, Richard, listen to his explanation of derivatives and how he intensely disliked the pseudo-scientific “MIT” invested derivatives but that the sort of derivative about which knowledge could be passed from Brooklyn trader to Brooklyn trader were an important part of any market price discovery system – and so traded options and futures are (these are the sort of derivatives he likes and traded in) – absolutely essential in all sorts of ways. You don’t seem to recognise the distinction, Richard.
He is not, by the way, forecasting hyper-inflation either – the whole thesis of “Black Swan” thinking is that such things are low likelihood but high impact possibilities and that the pain of the impact means that however remote a likelihood it pays to have half a mind on it when you are developing tactics for getting out of the current situation.
Jock
Yes I heard all that
And if he said (and he did) he thought there was a high risk of hyper inflation I think that’s a forecast
The man is hoisted by his own petard
There are some similarities in our positions – such as the dangers of some forms of derivative – but not all – but candidly, the man is an intellectual fraud – precisely because he uses his model for a purpose he says is not possible
Richard