Beware of simple ideas

Tom McCallum
Oct 27 · 5 min read

Regular readers will know I love to distil to simplicity, with ideas such as Ockham’s Razor, the Da Vinci quote “simplicity is the ultimate sophistication”, as well as the idea that “if I’d had more time I would have written something shorter”.

What I don’t tend to write about, though, is that before seeking to distil (including distilling to these relatively short daily blog posts), I often read and research in-depth to understand the background (and I’ve just linked to five earliest posts as background).

As an example, yes I posted strong opinions quite a while ago about the lack of viability of the WeWork model, but prior to doing so, I read everything I could find about their numbers and business model. Mind you, as soon as I read about “community adjusted EBITDA” my bullshit detector went into overdrive!

Today, then, I’m curating a terrific post from Tim Harford of “Undercover Economist” fame. In this, he warns of the danger of simple ideas. In a UK context, I very much agree with his assessment of Labour party ideas and even policies around such things as nationalisation, shares in companies to the public etc. Depending on your politics, the ideas may well be both simple and really positive. However, read into the detail (and yes, I have done), their policies stack up about as poorly as WeWork’s initial IPO valuation.

So, for more on the idea of being wary of simple ideas, over to Tim Harford.

Beware of simple ideas that become serious pains

by Tim Harford

“An act of economic vandalism,” said the trade union Unite. What did they have in mind? There are all too many candidates. Apparently the vandalism was a failure to prop up a package holiday company, which suggests the bored kids in my neighbourhood are missing a trick.

The collapse of the UK tour operator Thomas Cook is a big blow: 150,000 British residents have been stranded overseas, others have seen long-anticipated holidays evaporate and many thousands of jobs are at risk. The prospect of well-paid executives strolling off into the sunset adds to the stink.

Something must be done! But what? Unite has called for the government to “stand behind” Thomas Cook, which doesn’t sound like a big ask — until you realise that even the temporary survival of the tour operator would cost £100m or more. I often stand behind things — yellow lines, pot plants, the kitchen sink. I hadn’t realised it could be such an expensive business.

Whenever something goes awry — and Thomas Cook is not the only thing going awry in the world — it is tempting to believe that government should roll up one sleeve and plunge its arm in up to the elbow. That is not inevitably a bad idea, but one must always reflect on whether the effort will do more to harm than to help.

The Labour party has no patience for such reflection. For example, rightly worried that houses are too expensive, they propose that anyone who rents a property would gain the right to buy it at a price set by the government. John McDonnell, the shadow chancellor, described this idea to the FT, adding: “I don’t think it’s complicated.”

He should think harder. Who would be a landlord, if the act of letting out a house incurred the obligation to sell it? The entire private rental market would collapse. Some landlords would reject tenants to sell at a price of their own choosing; others would grit their teeth and keep the house empty. Just because the idea would hurt landlords does not mean it would help tenants.

The grand plans don’t stop there. A fringe meeting of the Labour party conference — attended by Mr McDonnell — was even joking about nationalising Greggs, supplier of Cornish pasties and steak bakes to a hungry public. This hilarity aside, there is a slippery slope in action here: the more a government feels it needs to take action when anything in a complex modern economy goes wrong, the closer we are to appointing a Minister for Sausage Rolls.

The left is particularly susceptible to this sort of foolishness, but the right is not immune. One Twitter troll complained to me that an interview with equal pay campaigner Carrie Gracie was “fake news” because unequal pay was illegal — so of course it could not exist. I’m sure Mr McDonnell would find that view as absurd as I do — and yet he and the troll do seem to share a touching faith that when you change the law, problems simply vanish.

Meanwhile, US president Donald Trump has found his government buying dairy products to shield farmers from his own trade war. We’ve been here before, and the story ended with the US administration renting vast underground caves and filling them with government cheese. A simple idea turns into a serious headache.

Then there is “take back control”, the Brexit slogan that sounds good until you think about it. Who exactly is going to get this much-vaunted control, and how do they propose to use it? British citizens already had control over some valuable things — notably the right to travel to, work in or trade with any part the EU. Exactly what sort of “control” will replace those freedoms remains unclear. Instead, Prime Minister Boris Johnson announces “let’s get Brexit done”, as though he were planning to mow the lawn.

It is, of course, possible for governments to develop well-designed interventions. But a £2tn economy with 67m unruly residents is not a toy. The actions of both those in power in the UK, and those who wish to be in power, show no understanding of this. Both sides want radical change but have no deep interest in what it is they would like to change.

The government’s response to the risks of a no-deal Brexit are a good example: after being warned of severe disruption, the minister in charge, Michael Gove, announced that preparations had been stepped up over the previous few weeks — as though protecting the UK’s fragile supply lines from being shredded by the government’s own recklessness was no more complex a task than writing an essay overnight before an Oxford tutorial.

The worst thing about foolish ideas is that draconian policies are needed to make them stick. Theresa May’s policy when home secretary of creating a “hostile environment” for immigrants sounded brutally simple, but turned into the national disgrace of the Windrush scandal. Those on the left who rightly deplore the policy should reflect on how many of the things on their economic wishlist will also require heavy-handed policing if they are to be delivered.

“I don’t think it’s complicated,” says Mr McDonnell. But it is. It really is.


Originally published at Tom McCallum.

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