Today’s Billy Blog is another must read, on the state of austerity-age Britain. In it he includes his ‘parable of 100 dogs and 92 bones’. I’ve used this before on this blog, but this is a better version of it, so it’s worth recounting, as it’s a perfect allusion to Governments’ obsession with ‘back-to-work’ schemes and why they can never succeed on their own. The Coalition’s failing Work Programme is a perfect example of this.
“Case study: the parable of 100 dogs and 92 bones
Imagine a small community comprising 100 dogs. Each morning they set off into the field to dig for bones. If there enough bones for all buried in the field then all the dogs would succeed in their search no matter how fast or dexterous they were.
Now imagine that one day the 100 dogs set off for the field as usual but this time they find there are only 92 bones buried.
Some dogs who were always very sharp dig up two bones as usual and others dig up the usual one bone. But, as a matter of accounting, at least 8 dogs will return home bone-less.
Now imagine that the government decides that this is unsustainable and decides that it is the skills and motivation of the bone-less dogs that is the problem. They are not skilled enough. They are idlers, bludgers and “bone-shy”.
So a range of dog psychologists and dog-trainers are called into to work on the attitudes and skills of the bone-less dogs. The dogs undergo assessment and are assigned case managers. They are told that unless they train they will miss out on their nightly bowl of food that the government provides to them while bone-less. They feel despondent.
Anyway, after running and digging skills are imparted to the bone-less dogs things start to change. Each day as the 100 dogs go in search of 92 bones, we start to observe different dogs coming back bone-less. The bone-less queue seems to become shuffled by the training programs.
However, on any particular day, there are still 100 dogs running into the field and only 92 bones are buried there!”Bill concludes with:
“In the UK there are about 92 bones for every 100 dogs and in Spain 72 bones for every 100 dogs!
The point is that fallacies of composition* are rife in mainstream macroeconomics reasoning and have led to very poor policy decisions in the past.* Fallacies of composition are very common in discussions of economics. It basically means – what’s true for an individual isn’t always true for a whole group of individuals. An example of this would be the argument that cutting the minimum wage will increase the number of jobs available. While for a single firm, if wages could be cut, that might enable the firm to hire more people, if they are cut across all firms, then workers will be able to buy less stuff, so less will be produced, meaning less workers are needed. David Cameron saying everyone should pay off their credit card bills is another example. Good for the individual, bad if everyone does it at the same time.
There are simply not enough jobs.”