Of badgers, business, budgets and the evils of expediency

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The British government has just approved the selective killing of badgers. The decision has delighted farmers – who believe that endemic tuberculosis among badgers spreads the disease in cattle – and infuriated animal campaigners. The farmers think they know more about animal disease, and on that they are right. Yet the policy is wrong.

The advocates of the cull make the same mistake as people who think that protectionism stimulates the economy, that labour-saving technology destroys jobs and that new risk management tools in the financial sector reduce the severity of business cycles. They wrongly believe that what is true of a small part of a complex system is true of the system as a whole.

Britain’s government previously sponsored a study of the effects of culling badgers. The work, which spanned almost a decade, was directed by distinguished and disinterested scholars. Involving extensive randomised trials, it is a model of empirical research. And its conclusions rejected the policy.

Badgers are social, territorial animals. When their communities are disturbed, they roam, spreading the disease into previously less affected areas. Although there was some reduction in the incidence of the disease in areas of cull, this effect was outweighed by the wider spread.

Many business people think that business should be well represented on the UK’s Monetary Policy Committee. They know from their own experience that lower interest rates are good for business. But lower interest rates have a range of macroeconomic effects, some good, some bad, depending on other aspects of the global economy. What is true of the individual firm is not necessarily true in aggregate, even though the economy is simply the sum of individual firms.

When Margaret Thatcher claimed that her knowledge of balancing a household budget equipped her to manage a national economy, she was wrong. The qualities of character needed to balance a household budget may have equipped her to manage a national economy, but that is a different proposition. A similar argument might provide a basis for business representation on the MPC – and could be the only one.

The economists who are well represented on the MPC often fall victim to a different version of the same error. They make generalisations based on a model of the behaviour of a representative agent, and thus neglect the role of convergent beliefs – herd behaviour – and divergent beliefs – imperfect information – in financial crises.

The neuropsychologist Michael Gazzaniga put it nicely: “We can study cars and their physical relationships and know exactly how they work. It in no way prepares us to understand traffic.” We can even acquire personal skill in navigating traffic – a capability quite different from knowledge of how a car is put together – and still lack the capabilities of the traffic engineer. Knowledge of the parts does not convey understanding of the whole.

Such erroneous generalisation is the fallacy of composition. Advocates of protectionism make such a mistake: they fail to recognise that since trade balances over the long run, one worker’s gain from import substitution is another – anonymous – worker’s loss from export displacement. The lower prices and higher profits that follow from labour-saving innovation stimulate demand and hence employment. And measures that reduce the costs of risk make it seem more attractive to engage in risky behaviour.

Although it is essential that they do, policymakers and business people have difficulty thinking in terms of systems. The common sense of everyday observation has an appeal that analytic, evidential reasoning can never match. We “know” that the sun revolves around the earth. Only from the perspective of the planets as a solar system do we realise that our interpretation of what we see is wrong.

But heretics had to die to establish the ascendancy of science over assertion rooted in experience. Matters have improved, but not enough. Professor Bourne, chairman of the group of scientists responsible for the evaluation of badger culling, wrote of the political overseers of his work in some of the most scathing language I have read in a dry official report. And political expediency continues to override scientific analysis. We no longer kill heretics to placate vested interests. But we do kill badgers for that reason.

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