Of Bedrooms and Defunct Economists

It was thirty years ago that I opted for the Economic and Social Thought paper at Oxford and studied, with, I hope, historians’ scepticism, the works of Marx, Ricardo, Keynes et al. Fascinating reading it was too and I can recommend Keynes as a writer of wonderful English prose. During one tutorial my tutor, Ross McKibbin at St. John’s, talked about the French neoclassical economist Leon Walras (1834-1910) who had attempted to express all of human economic activity in a series of complex mathematical equations. The intellectual architecture of Walras system was impressive and way beyond my mathematical capacity but, as McKibbin drily observed, ‘You need a degree of detachment from the real world to come up with something like that.’ I was reminded of this as I read about yesterday’s nationwide protests against the so-called Bedroom Tax.

The thinking behind the ‘Bedroom Tax’ is simple. There are many families living in accommodation that is apparently larger than they need whilst other families are unable to find housing adequate for their needs. By docking a portion of their Housing Benefit families occupying accommodation larger than they need are encouraged to move to smaller accommodation, this freeing up much needed housing for larger families. No doubt the logic looks impeccable on the spreadsheet and the numbers stack up. I can imagine pages and pages of ‘What If’ analysis calculating to the nearest brick how many oversized properties will be freed up.

Unfortunately for its supporters the ‘Bedroom Tax’ is looking more and more likely to fail the real world test. But why would families, given a clear financial incentive to move, not do so? There are many reasons but here are three.

Firstly there is no suitable smaller accommodation in their area for many of them to move to. It is estimated that some 660,000 families are in this position. The Bedroom Tax is, for them, not a ‘nudge’ to use a currently modish policy wonk phrase – but a cut in their income they can do nothing about.

Secondly many people are reluctant to move because doing so will take them out of neighbourhoods where they have lived for many years, away from family and friends, away from established social networks which are particularly important for people whose lives are a daily struggle to make ends meet.

Thirdly there are families who actually need the ‘surplus’ rooms they have. Consider the case of couples where one partner has a chronic illness or disability such that they are unable to share a bedroom, or need a spare room to store disability aids.

There are also unintended consequences. Nottingham City Council quickly realised that the Tax would make already hard to let high rise flats even harder to let and so redesignated two bedroom flats as one bedroom. This also highlights a potential difficulty with applying the policy in practice. Like many apparently simple concepts, that of ‘bedroom’ may turn out to be more slippery than supposed. It is also argued by some commentators that by forcing many families into smaller accommodation in the private rented sector where rents are higher, there may actually be an INCREASE in the Housing Benefit bill. Finally the policy does nothing to address the main issue which is an overall shortage of affordable housing.

The conclusion from all this is that human behaviour and motivations are complex, sometimes seemingly irrational and not reducible to assumptions on spreadsheet models. This is a policy based on theory, a policy devised by people with limited exposure to the real world, with all its contradictions and grey areas, a policy designed by people in intellectual thrall to the likes of Leon Walras. The Bedroom Tax is not the only example of such policy making. There was the plan to sell off the Forestry Commission in pieces tom local community groups, there was most worryingly the upheaval in the NHS. Somewhere a policy wonk’s spreadsheet says it will all work. I wish I could be so sure.

Where do these policies originate? The answer is in think tanks with links to the major political parties. These are staffed by so-called policy wonks. The wonks are generally young, and not long out of university. They are generally academically bright, they are ambitious and getting noticed is a first step on the ladder of a political career. They have, inevitably, little experience of the real world, being young and having spent too much time in the bubble of professional politics. An example of the type is Planning Minister Nicholas Boles, formerly of the Policy Exchange think tank, a man who thinks we should protect the countryside by building houses all over it, a man, too, who advocated handing public services over to local people to run saying that it may result in chaos but that chaos was a good thing, a version of Schumpeter’s ‘creative destruction.’ Schumpeter, by the way, was a big admirer of Leon Walras.

It is surely the job of ministers to apply the cold shower of common sense to some of the nonsense the wonks come up with it. But in the case of the Bedroom Tax we are talking about Iain Duncan Smith, the Conservative party’s most ineffectual leader ever, a man who is leading the race to be the most incompetent minister in Britain’s most incompetent government since the Second World War.

As for the wonks, they can’t help being young. But they could put down the likes of Cass Sunstein’s Nudge and find time to read literature, read the Bible (or the Koran for that matter), to listen to Beethoven’s late string quartets as they work. Then they might understand the key message of today, Easter Sunday, that ‘man does not live by bread alone.’ Once they have grasped that they might understand why human beings don’t always do what spreadsheets say they ought to and we might just have a chance of getting policies that make peoples’ lives better rather than worse.

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