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Why electoral boundaries favour Labour and why electoral reform would favour the Liberal Democrats

Brief answers to three questions about elections in the United Kingdom:

  • Why do electoral boundaries favour Labour?
  • Why would moving to Proportional Representation favour the Liberal Democrats?
  • Why would moving to Alternative Vote/Instant Runoff/Preferential Voting favour the Liberal Democrats?

Why the current seat allocation is biased towards Labour
Two reasons:

Firstly, it’s because of demographics, migration and the timing of boundary changes.  There’s a long-term trend across most of the country (excluding London) for people to be moving away from inner city areas and towards suburban, semi-rural and rural areas.  On average, that represents a movement of Labour-party supporters into Conservative seats.  As a result, the inner city areas remain staunchly pro-Labour, but the suburban and semi-rural areas become contested.  Under British law, electoral boundaries are only updated very rarely.  Quoting ukpollingreport.co.uk:

Because the effect of boundary changes is one way, any delay in keeping the boundaries up to date with population movements tends to be to the advantage of the Labour party and the disadvantage of the Conservatives.Currently, Parliamentary boundary reviews are based on the electorates at the time the boundary review commences (unlike local authorities boundaries, which are based on projections of the future electorate). In the case of the boundaries which will be used for the next election, the review began in 2000, so by the time the boundaries are first used in 2009/10 they will already be a decade out of date. By the time they are replaced by the next boundary review, due to report between 2014 and 2018, they will be close to 20 years out of date.

Secondly, there are different rates of turnout across different seats.  The poor and poorly educated correlate positively with Labour support and negatively with turning out to vote.

To appreciate what this means, suppose that you had two seats with equal numbers of people living in them (contrary to the demographics mentioned above); one generally pro-Labour and the other generally pro-Tory.  Let’s say that they each win 60-40.  On election day only 25% of eligible voters turn up in the pro-Labour seat, but 75% of eligible voters turn up in the pro-Conservative seat.  That will produce one Labour MP and one Tory MP (50% each), but when combined, the Conservatives will have received 60%*75% + 40%*25% = 55% of all the votes cast.

When combined with the demographic changes, this adds up to a significant advantage for Labour.  Obviously the second distortion (but not the demographic one) vanishes if you introduce compulsory voting like we have in Australia.

How Proportional Representation would help the Lib Dems

This one is easy to explain:

  • In 1992, the Lib Dems received 17.8% of the total vote, but only 3.1% of the seats in parliament.
  • In 1997, the Lib Dems received 16.8% of the total vote, but only 7.0% of the seats in parliament.
  • In 2001, the Lib Dems received 18.3% of the total vote, but only 7.9% of the seats in parliament.
  • In 2005, the Lib Dems received 22.6% of the total vote, but only 9.5% of the seats in parliament.
  • According to the fivethirtyeight.com forecast, this week the Lib Dems will receive 28.7% of the total vote, but only 18.4% of the seats in parliament

How Alternative Vote/Instant Runoff/Preferential Voting would help the Lib Dems
Two reasons:

Firstly, with first-past-the-post, Lib Dem supporters have an incentive to vote for someone else so that their vote “counts”.  This effect is particularly strong in contests that are perceived to be close (so it’s less of a concern this time).

Secondly, the Lib Dems do well when you ask people to rank their preferences – they’re rarely 1st, but they’re frequently 2nd.  To really understand how this would affect things, have a look at the transition matrix fivethirtyeight.com uses in their prediction.  This is their matrix for how they believe people have changed relative to 2005 (e.g. of previous Labour voters, 62% remain with Labour, 9% have switched to the Tories, 13% to the Lib Dems, etc):

It is therefore not really a matrix of average preferences, but it gives an idea of what it might be.

When Labour supporters switch, they favour the Lib Dems over the Tories 13/9 = 1.44
When Tory supporters switch, they favour the Lib Dems over Labour 6.5/3 = 2.17
When Lib Dem supporters switch, they narrowly favour the Tories over Labour 5/4 = 1.25

So, with preferential voting and pretending that there are only the three parties contesting each seat:

If a Lib Dem candidate is in the top two after the first round of voting, they can be confident of receiving the majority of the preferences of the supporters of the 3rd ranked candidate, no matter who they were.

But that can’t be said for the other two parties.  If a Labour or Tory candidate is in the twop two after the first round, whether they get a majority of the 3rd-place candidate’s preferences crucially depends on the identity of that 3rd-place candidate.  If it was Lib Dem in 3rd place, it’s a flip of the dice.  If it was the other big party in 3rd place, they’ll typically get only a minority of the preferences.

On average — over many seats and over several elections — that skewing of preference ranking will act in the Lib Dems’ favour with preferential voting.

Alternative Vote/Instant Runoff/Preferential Voting would help the Lib Dems
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The future of civil society (I hope)

In the Netherlands:

Potholes, stray garbage, broken street lamps? Citizens of Eindhoven can now report local issues by iPhone, using the BuitenBeter app that was launched today. After spotting something that needs to be fixed, residents can use the app to take a picture, select an appropriate category and send their complaint directly through to the city council. A combination of GPS and maps lets users pinpoint the exact location of the problem, providing city workers with all the information they need to identify and resolve the problem.

The application covers a wide range of familiar nuisances, from broken sidewalks to loitering youth (who will hopefully respond favourably to having their picture taken by concerned citizens). Compared with lodging a complaint by phone or in writing, BuitenBeter creates a nearly frictionless experience and will no doubt prompt a wider group of people to become active reporters of issues that need the city’s attention.

Besides giving people an easy way to send through detailed reports, city officials also believe the concept will create shorter lines of communication, and will facilitate quicker feedback from local government to citizens. Developed by mobile solutions provider Yucat, the BuitenBeter app will soon be available for Android and Windows Mobile phones, too. Eindhoven has signed on for a twelve-month trial, and Yucat hopes to roll out the system to other cities in the near future.

This is brilliant.  More!

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America and health care

In the light of the recent passage by the U.S. House of Represenatives of the Senate’s version of healthcare reform and the ensuing wailing, gnashing of teeth and smearing of soot in the hair by opponents of said reform, let me give my view – as an outsider – on the matter:

It’s a question of morality.

It astounds me — and, frankly, every other non-American USA-watcher in the developed world — that the richest nation on earth, whose very constitution proclaims the pursuit of life, liberty and happiness to be it’s highest ideals, whose citizenry so loudly profess to live by Christian virtues, would not guarantee that some form of basic, minimum healthcare be available to all of its citizens independently of their ability to pay.  It utterly astounds me.  If I were American, it would disgust me that this had not happened 50 years ago.

If my income and my wealth is above average for my society, I have an ethical duty to subsidise the health care of those who are, for whatever reason, at the lower end of the spectrum.  Yes, there are issues of free riders and of personal responsibility, but they simply do not matter when answering the basic question.  The government of a country, acting on behalf of that country’s people, has a moral imperative to provide a minimum level of care to all of its citizens.

I am not saying this as a screaming socialist.  I freaking hate socialism.  I love the market (when it’s allowed to function properly with full transparancy).  I support (at least partially, and possibly fully) privitised social security.  I like the idea of small government.  I rage against the nanny-state in Australia and in the UK.  I worry about encouraging dependency and a sence of entitlement in those people assisted by the government.  But those concerns take a back seat on this issue.

So, yes, the second question (a two-for) is to ask what the minimum level should be and how to pay for it.  But first question should have been a no-brainer.

If all the country can afford is a polio shot and a packet of aspirin, then that’s what they should provide (hopefully a charity or two might help out, too).  But if the country is the richest in the history of the planet, they should be able to stump up for a bit more.

And, yes, for the next criticism, this particular reform by the U.S. Congress is nominally promising more than it will reallly provide when it comes to the fiscal deficit.  Yes, again, given America’s political structure, U.S. government spending won’t be truely corrected until there is a real crisis approaching (as opposed to the make-believe crises being proclaimed by people opposed to the bailouts and stimulus package(s)).

I don’t care.  The child of an unemployed, drug-taking high-school dropout should not be deprived of basic access to a doctor just because we’re angry at their parents.  Nor should their parents, come to that.

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Political comic strips around the Mississippi Bubble of the 1710s

I wish that I had time to read this paper by David Levy and Sandra Peart.

It’s about political comics (cartoons) drawn to depict John Law and the Mississippi Bubble of the early 1700s.  It also speaks to subtlely different meanings of the words “alchemy” and “occult” than we are used to today. Here is an early paragraph in the paper:

Non-transparency induces a hierarchy of knowledge. The most extreme form of that sort of hierarchy might be called the cult of expertise in which expertise is said to be accompanied by godlike powers, the ability to unbind scarcity of matter and time. The earliest debates over hierarchy focused on whether such claims are credible or not.

Here is the abstract:

Economists have occasionally noticed the appearance of economists in cartoons produced for public amusement during crises. Yet the message behind such images has been less than fully appreciated. This paper provides evidence of such inattention in the context of the eighteenth century speculation known as the Mississippi Bubble. A cartoon in The Great Mirror of Folly imagines John Law in a cart that flies through the air drawn by a pair of beasts, reportedly chickens. The cart is not drawn by chickens, however, but by a Biblical beast whose forefather spoke to Eve about the consequences of eating from the tree of the knowledge. The religious image signifies the danger associated with knowledge. The paper thus demonstrates how images of the Mississippi Bubble focused on the hierarchy of knowledge induced by non-transparency. Many of the images show madness caused by alchemy, the hidden or “occult.”

Hat tip: Tyler Cowen.

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Note to self: holidaying in Greece will soon be cheap

Megan McArdle directs the world to this piece in the FT.  From the FT article:

The European Commission said on Tuesday it would endorse Athens’ plan to bring back under control the public sector deficit, which last year reached almost 13 per cent of gross domestic product.
…
Under a three-year plan, the Greek government seeks to cut the national budget deficit to less than 3 per cent of GDP by the end of 2012.

and:

In response to criticism that earlier plans had not included sufficient spending cuts, Mr Papandreou also announced an across-the-board freeze in public sector wages which, together with cuts in allowances, would reduce the public sector wage bill by 4 per cent. The government has also pledged to raise the retirement age.

If the Greek government can achieve this without massive, nation-wide strikes, I’ll be terrifically impressed.  Megan’s comments:

Everyone is expressing optimism. But while this sort of belt-tightening is necessary for Greece to stay in the EU, it’s going to come at a huge cost. Greece is already in recession–that’s why its budget problems loom so large–and the fiscal contraction will only make them deeper. Meanwhile, the EU will be setting its interest rates to meet the needs of larger, healthier members (and inflation-hawk bondholders). Tight fiscal and monetary policy means a long, painful period ahead for the Greeks.

This is the dilemma that faced Argentina with its monetary peg to the dollar; ultimately, it led to devaluation and default. We will see if Greece can whether [sic] it better.

I don’t think that this sort of belt-tightening is strictly necessary in the near term.  Germany will, again, fund a bail-out if it really comes down to it because, if nothing else, the loss to Germany of a member of the EU dropping the currency is greater than the loss to Germany of paying for Greece’s debt.

It’s clearly necessary in the long term that Greece get it’s fiscal house in order, but since they’re in such a severe recession, this isn’t really the time to do it (financial market pressure aside).  This is, in essence, the same debate that is gripping America, although there the pressure to address the deficit is coming from a successful political strategy of the opposition rather than, much as that same opposition might like, pressure from the markets.

Ultimately, what the EU needs is individual states to be long-term fiscally stable and to have pan-Europe automatic stabilisers so that areas with low unemployment essentially subsidise those with high unemployment.  Ideally it would avoid straight inter-government transfers and instead take the form of either encouraging businesses to locate themselves in the areas with high unemployment, or encouraging individuals to move to areas of low unemployment.  The latter is difficult in Europe with it’s multitude of languages, but not impossible.

In a perfect world where all regions of the EU currency zone were equally developed, this would simply replace the EU development grants.  But this isn’t a perfectly world …

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Party discipline in the Republican Party

Inspired by this post by Cam Riley … Any observer of U.S. politics could not have failed to notice the incredible level of party discipline that the Republicans, particularly in the Senate, have achieved over the last year or six.  This may be something new to Americans, but it’s rather common to Britons and Australians, who generally get more excited when somebody — anybody! — breaks the party line.  The party discipline of the Australian Labor Party, in particular, is phenomenal.

I understand that the generally accepted explanation for the differences between the USA and Australia in this regard focuses on the sources of funding for campaigns.  In Australia, all campaign funds come from the party — individual candidates cannot raise money directly — where as in the US, there’s a combination of party-supplied and individually-raised funding.

That then suggests two possible reasons for the new-found Republican discipline:

  • Republican congressional candidates have started to take a larger fraction of their total campaign funding from the party itself; and/or
  • Advocacy groups that support policies we stereotypically associate with the Democratic Party have not been giving any money to Republicans.

If it is the second reason, then that is a tactical error, and a foolish one, on the part of those advocacy groups.

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Obama’s (i.e. The Volcker) bank plan

Those of us who aren’t American but still follow U.S. politics were quietly giggling (okay, openly guffawing) into our latte’s last week when Scott Brown won the special election to replace the late Ted Kennedy.  The Daily Show’s take on the whole affair (I think it was broadcast the night before the election day) was spot on and I urge anyone with the capability to hunt down that episode.  In short, the Democrat’s handling of the event is a classic example of why the word clusterfuck was invented. What in blazes they now intend to do in passing any reasonable kind of reform in health-care (and the ideas on the table weren’t really all that reasonable to start with) is beyond me.

Anyway.  I tip my hat to the newest federal Senator in the United States for an expertly handled campaign.

I was then surprised to (finally) see some equally smart politics from the White House in the form of Obama publically supporting the banking regulation ideas of former Fed chair and octogenarian, Paul Volcker.

The White House had already been making noises about imposing a fee on financial institutions to recoup any losses in TARP.  TARP, if you remember, is the US$700 billion officially set aside under president Bush Jr. to help the finance industry weather the storm.  Of course, a large fraction of TARP was diverted to help the car (that’s “auto” for any Americans in the audience) industry and not all assistance to the financial industry was included in TARP.  Still, it’s the closest thing to an easy target with a pronounceable name.  If you care, you can read my incredibly brief thoughts on the levy here and, more importantly, here.

But the Volcker plan is an entirely different kettle of fish and can be boiled down to a simple and beautiful phrase:  “Too big to fail is just too big.”

It calls for constraints on the scope and the size of US banks.  It seeks to ban proprietary trading at institutions that hold retail deposits.  It’s an armchair commentator’s wet dream come true!  It’s also, unfortunately, staggeringly unlikely to ever become reality.  There are two reasons for this.

First, as expertly described by the Economics of Contempt, the White House has no intention of pushing this through anyway.  Instead, it was …

… a fairly transparent political stunt — the White House needed to do something to take the media’s focus off of health care 24/7, so they flew in Volcker and announced some proposals that sound good to the media. The two Senate staffers I talk to regularly both said their offices were basically ignoring Obama’s proposals, because even if the White House fights for them (which they won’t), Chris Dodd has no intention of inserting them into his committee’s bill. I like how some people think Obama’s proposals represent a fundamental turning point on financial reform, because….well, clearly this is their first rodeo. (Hence the uber-quixotic language they use to describe financial reform.)

[Update: Just to clarify, when I said Obama’s announcement was a “fairly transparent political stunt,” I wasn’t criticizing the Obama administration. We live in a political world, and political stunts are often useful. If I were Rahm Emanuel, I’d be a dick have done the same thing. I think it was probably a savvy move, and if health care reform ends up passing, then it was worth it.]

Second, the U.S. Supreme Court, in the second move in the space of a week to leave the America-watchers of the world chuckling, decided to reverse decades of precedent and assert that when it came to political speech, corporations, unions and other groups of individuals have more power than individuals.  Not only can corporations, unions and the like directly fund political campaigns, but unlike individuals, they are subject to no limit on their donations.  It’s great.  You’re going to end up seeing major political events sponsored by Pepsi.  You’re going to have unlimited funding available to opponents of any politician that does anything that runs contrary to a company that employs people in his or her district or state.  In short, you will never, ever again see anything serious passed in an election year in the United States unless it has not just bipartisan, but unanimous support.

So, no, as much as I like what Obama said, I don’t think it’ll ever become law.  It certainly won’t in 2010.

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The US bank tax

Via Felix Salmon, I see the basic idea for the US bank tax has emerged:

The official declined to name the firms that would be subject to the tax aside from A.I.G. But the 50-odd firms, which include 10 to 15 American subsidiaries of foreign institutions, would include Goldman Sachs, JPMorgan Chase, General Electric’s GE Capital unit, HSBC, Deutsche Bank, Morgan Stanley, Citigroup and Bank of America.

The tax, which would be collected by the Internal Revenue Service, would amount to about $1.5 million for every $1 billion in bank assets subject to the fee.

According to the official, the taxable assets would exclude what is known as a bank’s tier one capital — its core finances, which include common and preferred stock, disclosed reserves and retained earnings. The tax also would not apply to a bank’s insured deposits from savers, for which banks already pay a fee to the Federal Deposit Insurance Corporation.

i.e. 0.15%.  It’s certainly simple and that counts for a lot.  It’s difficult to argue against something like this.

I would still have liked to see it as a convex function so that, for example, it might be 0.1% for the first 50 billion of qualifying assets, 0.2% for the next 50 billion and 0.3% thereafter.

Better yet, pick a size that represents too big to fail (yes, it would be somewhat arbitrary), then set it at 0% below, and increasing convexly above, that limit.

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What were Hoon and Hewitt thinking?

I don’t understand the (failed) attempt by Patricia Hewitt and Geoff Hoon to inspire a leadership challenge in the Labour Party here in the UK.  Any serious contender for the job (i.e. Milliband) would surely recognise that the chance of a Labour victory in this year’s general election is miniscule, no matter who leads the party, and to lose an election three or four months into your leadership would hardly make for a sterling start.

If one takes a Tory victory as given, it would be far better to let Brown take the full hit for the loss.  Keep him on as a figurehead to take all the bile, spit, rage and blame for the state of the country as a whole and the state of the government’s finances and the electoral loss in particular.  Let the voting public gorge themselves in a cathartic spasm of kicking the Blair/Brown pairing and then shuffle Brown off, declare that there will be no return to Old Labour and start observing loudly at every opportunity that now it’s the Tories that are all about spin.

Brown’s job at this point is not so much to put out the fire — that can no longer be done — but to save the furniture.  So why did Hewitt and Hoon do this?  It was never going to work and it only serves to further lessen the probability of Labour retaining some of their seats.

The obvious answer is that they don’t consider a Tory victory to be a foregone conclusion and somehow think that simply getting rid of Brown will help the broader party separate itself from the Blair/Brown brand.  The first part of that sentence may indeed be true (afterall, the Tories need an average swing of 7% to win), but the second is utterly false.  Labour will not escape the Blair/Brown brand until they’ve spent some time in opposition for the simple reason that the public needs to kill it before they will forget about it.

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Food stamps in America

Here is a NY Times article doing what the NY Times does well, this time looking at the use of food stamps across America.  Here are the basic details (emphasis is all mine):

With food stamp use at record highs and climbing every month, a program once scorned as a failed welfare scheme now helps feed one in eight Americans and one in four children.

It has grown so rapidly in places so diverse that it is becoming nearly as ordinary as the groceries it buys. More than 36 million people use inconspicuous plastic cards for staples like milk, bread and cheese
[…]
the program is now expanding at a pace of about 20,000 people a day. There are 239 counties in the United States where at least a quarter of the population receives food stamps
[…]
Nationwide, food stamps reach about two-thirds of those eligible, with rates ranging from an estimated 50 percent in California to 98 percent in Missouri. Mr. Concannon urged lagging states to do more to enroll the needy, citing a recent government report that found a sharp rise in Americans with inconsistent access to adequate food.
[…]
Unemployment insurance, despite rapid growth, reaches about only half the jobless (and replaces about half their income), making food stamps the only aid many people can get — the safety net’s safety net.

Support for the food stamp program reached a nadir in the mid-1990s when critics, likening the benefit to cash welfare, won significant restrictions and sought even more. But after use plunged for several years, President Bill Clinton began promoting the program, in part as a way to help the working poor. President George W. Bush expanded that effort, a strategy Mr. Obama has embraced.

The revival was crowned last year with an upbeat change of name. What most people still call food stamps is technically the Supplemental Nutrition Assistance Program, or SNAP.
[…]
Now nearly 12 percent of Americans receive aid — 28 percent of blacks, 15 percent of Latinos and 8 percent of whites. Benefits average about $130 a month for each person in the household, but vary with shelter and child care costs.
[…]
Use among children is especially high. A third of the children in Louisiana, Missouri and Tennessee receive food aid. In the Bronx, the rate is 46 percent. In East Carroll Parish, La., three-quarters of the children receive food stamps.

A recent study by Mark R. Rank, a professor at Washington University in St. Louis, startled some policy makers in finding that half of Americans receive food stamps, at least briefly, by the time they turn 20. Among black children, the figure was 90 percent.

I’m not sure how I feel about food stamps.  The classically-trained economist in me wants to point out that money is fungible, so that:

  • for people that, if they were given the equivalent amount of cash, would have bought the same amount of food,  the program largely serves to impose unnecessary administrative costs over a simple cash transfer and places a stigma on the recipients; and
  • for people that, if they were given the equivalent amount of cash, would have bought less food, the program (arguably) willfully deprives them of welfare in addition to the administrative costs and stigma.

On the other hand, we have that:

  • for the (presumed) minority of recipients that have problems with drug or alcohol abuse or have a family member that has problems, receiving aid in the form of food stamps helps ensure that there’s still food on the table (although I do assume that there is a secondary market in food stamps, not to mention in food itself);
  • for the recipients living in high-crime areas, the incentive to steal food stamps is lower than that to steal cash (even if there is a secondary market, it’ll be annoying to deal with and won’t give 100 cents on the dollar), so receiving food stamps is safer;
  • by giving people food stamps instead of cash, you reduce the possibility of a sense of entitlement emerging (one of the major problems in countries, like Britain, with comprehensive welfare systems is that recipients can come to consider the aid they receive as their right and not just (hopefully temporary) assistance); and
  • America, for some reason that is mostly beyond me, has always had trouble facing up to the moral imperative to assist those in genuine need and presenting that assistance as food stamps seems to have granted it some political cover.

Anyway, the NY Times piece comes with some more fantastic graphics.  Here are two snapshots (click-through on either of them to get to the good stuff on the NY Times website):

NYTimes_Foodstamps

NYTimes_Foodstamps_Change