The Former Prime Minister and the Wrong Degree

The former Prime Minister Tony Blair read ‘Jurisprudence’ (Law for posh people) at university. There is much to be said however for the alternative multidisciplinary degree of Philosophy, Politics and Economics. If he had chosen that degree he may not have brushed aside all his legal advisors on the Iraq war with the view that ‘the law is grey and never clear’ but instead have reflected that the politician often falls foul of what behavioural economists call ‘biases’ …and the rest of us call ‘being a closed minded damn fool’.

First there is confirmation bias. This the desire to seek confirmation and resist disconfirmation of one’s beliefs. Economics experiments suggest those that do best in life are the ones who resist confirmation bias by interpreting news dispassionately without a tendency merely to confirm what they already believe. Instead they maintain more of an open mind to a contrary view than their peers. Hmmm…that would mean you don’t marginalise your cabinet colleagues by making decisions at meetings where they are not invited, forcing them to resign.

Second is optimism bias. It is the tendency to believe one is better than average. A cycnic might say you have the ‘god complex’ that you were only following ‘holy orders’.  For instance studies reveal 95% of drivers believe they are better than average. Over-optimists tend to underperform. This bias leads to overconfidence in predictions in particular. For instance that you will remove a dictator in a week and be loved by all and leave the country you invaded on a bed of roses a fortnight later.

Experts are particularly prone to this; again economists show the way. Expert predictions about financial markets, especially about interest and exchange rates have been shown in experiments to be generally quite inaccurate and often less accurate than lay views. In one study dustmen were better inflation and GDP predictors than finance ministers. (Yes, that’s why we had a credit crunch, but that’s another story). Which is a damn good reason to be careful of intelligence reports and your own belief that newly installed as a Prime Minister, with previous foreign policy expertise limited to time spent on wealthy persons yachts off the Italian coast, about the same as Sarah Palin claiming Soviet expertise as she can see Russia from Alaska, that you are the sudden incarnation of Kissinger.

Third is risk aversion bias. People tend to be risk averse when facing a profit and risk loving when facing a loss. Consequently they let their losses run and take their profits prematurely. In the language of politics, they hate cutting their losses and getting out of a costly war. Indeed they claim their success prematurely in press spin and glory and neglect to plan for ‘the endgame’ of what to do now that you’ve removed the only government that existed in the invaded country.

Fourth the economists point to herding. People tend to behave riskier in a crowd than they would outside of it. It’s why solicitors are sometimes football hooligans or riots and looting breaks out when the lights fail in New York and why Prime Ministers with big American allies and a ‘coalition of the willing’ are more likely to sweep aside the United Nations resolutions because regardless of right they have might.

Finally, like Mr Blair, speaking as a barrister, yes the law is grey and always open to interpretation. Which is precisely why when your entire senior legal team tells you that something is black and white, it’s one of those rare occasions when you should not overrule them with the ‘grey’ argument. So if your child tells you they want to read law and go into politics, for the sake of humanity, have them read philosophy, politics, economics instead…oh and a copy of the UN charter. You never know brave soldiers may one day thank you.

The columnist hails from Karamsad and is a Board Member of the United Nations Association(UK). He is a former Visiting Fellow at Corpus Christi College, Oxford. He read Philosophy, Politics, Economics at St Anne’s College, Oxford when he also interned in the US Congress during the Clinton administration, read Law at King’s College, London, qualifying as a barrister. He is a former Bloomberg TV presenter and Financial Times columnist with 250+ columns published in the FT and author of 13 books on the markets. Alpesh.patel@tradermind.com

About Alpesh B Patel

www.alpeshpatel.com

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