On Bastards

In more official news from economists, it has been confirmed that rich people and big companies are bastards.

When Annette Alstadsaeter and her colleagues looked deeply at tax evasion in rich countries they found that “tax evasion rises sharply with wealth”.

The good news is that Alstadsaeter and her team made wonderful use of the bounty provided by the massive Swiss leaks and the Panama Papers.  These data have the considerable advantage of being evidence of what is actually the case rather than what people decided to report to the authorities.

The satisfying news (from the point of view of having one’s hypothesis or prejudice confirmed) is that really really rich people cheat much much more than even mildly rich people.  (“On average about 3% of personal taxes are evaded in Scandinavia, but this figure rises to close to 30% [among] households with more than $45 million in net wealth”).

The depressing news is that the conclusion reached by the researchers is of the woods/bears variety:

"The result suggests that fighting tax evasion can be an effective way to collect more tax revenue from the very wealthy."

Hmm.

Meanwhile, in another part of the forest but not too far away, Roy Shapira and Luigi Zingales say this:

“DuPont, one of the most respectable U.S. companies, caused environmental damage that ended up costing the company around a billion dollars.  By using internal company documents disclosed in trials we rule out the possibilities that this bad outcome was due to ignorance, an unexpected realization, or a problem of bad governance.

The documents rather suggest that the polluting was a rational decision:  under reasonable probabilities of detection, polluting was ex-ante optimal from the company's perspective, even if the cost of preventing pollution was lower than the cost of the health damages produced.  We then examine why different mechanisms of control - legal liability, regulation, and reputation - all failed to deter a behavior that was inefficient from a social point of view.  One common reason for the failures of deterrence mechanisms is that the company controls most of the information and its release.  We then sketch potential ways to mitigate this problem.”

If you haven’t already done so, I encourage you to read that little bit again.  It really is quite remarkable.  It is saying that a major company deliberately allowed large scale damage to take place for the simple reason that they decided it was the less risky option; and that they did so by deliberately controlling the release of information.

The academics don’t say it quite like that of course: effort is required to translate “a behaviour that was inefficient from a social point of view” into “caused lots of people, animals and plants to suffer all sorts of horrible things”, for example.

But this blogpost isn’t an academic paper or a piece of journalism: it is an essay; so I have little more room for manoeuvre.

And in this essay, and with that room, I say: that is the behaviour of bastards.

Bastards when they’re in groups; bastards when they’re own.  Bastards.

We’ve known for a long time, of course, that we mustn’t let the bastards grind us down.  But we haven't, perhaps, done quite enough to stop them.

Now, a widespread behaviour – being a bastard - that has been colloquially familiar for so long is finally being analysed – and it's being analysed by people from inside the citadel.

I think we should rub our hands, both with glee and to warm them for the work ahead.