Smarties, fat tails and British politics

Does anyone you know passionately support any of the contenders in the UK general election? My own anecdotal impression is that there are strong views about who people don’t like and that the preferred candidate or party is only as a result of hating the other choices more.

As to the policies, there is tinkering around which part of the electorate is being bribed by each party, but no dramatic contrasts in views or opinions. On the economy no one challenges the neo Keynesian monetarist orthodoxy that explicitly believes state intervention can help the economy. On health the orthodoxy of free at the point of use NHS is uncontested. On politicians themselves they all present the same variation of cloned leaders to chose from, educated at the school of career politics.

All in all it’s like choosing between different coloured Smarties.

So in what circumstances will the political menu change? I have recently been delving into the works of the economist Nassim Taleb, writer of The Black Swan and Fooled by Randomness. In this interview on the podcast EconTalk he expands on one of his favourite topics, that of the ‘fat tail risk’ or the events that, although at the extreme of the probability distribution, are more likely than widely supposed from observation of past events, and that have a much higher ‘risk of ruin’ than widely considered.

When applied to our current debt ponzi scheme one can question what the political landscape would be if the current rosy low inflation, rising GDP, economy implodes. From history it can be seen that economic collapse and hardship leads to polarisation of politics. In such confusion it is understandable that the populace blame free markets and capitalism when they find themselves in poverty due to the collapse of finance and banking. Extreme socialism, nationalism and fascism have been the historical outcomes of such disasters.

So for those who hold liberty dear, and believe in markets as a force for good, perhaps we can never compete as just another colour of Smarties. Perhaps some of our energies should be in preparing for when the Black Swan events occurs and we need to demonstrate to others the benefits of individual choices and interactions in markets. For as history and Nassim Taleb teach us, if we spin the roulette wheel enough times, we should not be surprised when zero comes up.

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