Tuesday, October 28, 2014

Perception of Reality vs. Objective Reality

A recent article in the New York Times cast a seemingly jealous eye upon the Dutch pension system. Why? By comparison with the US, the Dutch system appears scrupulous, fair, but most of all typically Dutch in the brutal honesty with which they objectively deconstruct and tackle contentious issues. In America, by contrast, even after bi-partisan commissions comprised of eminent panel members try to get to the bottom of something, we seem no more enlightened as to where truth lies (no pun intended) or how to tackle it for the greater good of the public's interest.    

Pensions speak volumes about contrasting national characters. Sober-minded Danes and Dutch have transparent and logical approaches that attempt to maximize reality in actuarial analysis, funding and benefit requirements, while minimizing the fantasy of projecting above-market returns, and limiting the ability of pigs to feed at the trough. Canadians, too, have well-run, transparent systems that reflect their earnest, solutions-minded national character. Germans's rely almost wholly on pay-as-go reflecting their confidence to make tough fiscal choices when required, while the UK institutionalizes the rape and theft of savers and beneficiaries for the advantage of the City and her Managers, a legacy microcosm of UK class-based inequity. America's system reflects her faith in hope and fantasy over preparation and analysis, and plagued by the same byzantine structure incrementally etched by lobbyists and interest groups, that makes America's healthcare system The Very Best In The World. The New York Times is of course to polite, and would appear too partisan were it to represent the image of the US system as such.  

I, must admit that I, too, am jealous of the Danes and The Dutch. So much acrimony over public policy would be disarmed if more peoples were capable of similar detached objectivity. So much angst would veritably disappear from our broadsheets and evening news. The energy could then be rightfully focused upon coping with what might often be a painful solution requiring shift and behavioral change, rather than exhausting oneself in an attempt to avoid confronting the problem itself.
A striking analogy springs to mind from the realm of industrial sociology, that is worthy of recounting, for it was a vivid attempt to objectively measure our national perceptions against a benchmark of some objective reality. Some three decades ago, researchers used driveshaft manufacturing within the auto-parts industry, as a baseline. If memory serves me correctly, the german conglomerate Bosch had plants manufacturing more or less the identical piece in four different countries - Holland, Spain, the UK and USA. Each of the plants, similarly equipped, had precise data on their quality as measured by their defect rates. The consultants set out to measure the workers attitudes towards the quality and effectiveness of their work, by asking them questions that measured their perception of the quality of their work. This might have value to firm when faced with wage demands, or consolidation decisions. The results, were striking, though not  unsurprising.     

The Dutch workers had a high opinion of the quality of their work. This was set against a low defect rate, giving the Dutch perception of reality a characteristically close approximation to objective reality (as measured by the defect rates). The British workers had a low opinion of the quality of their work. This was exemplified by high defect rates, making their perception of reality reasonably-close to the  objective reality of their work. Workers at the Spanish plant had a reasonably low opinion of their work  , which was at odds with the high quality of their efforts evidenced by a low defect rate. This was an interesting result - probably one there company would prefer to keep hidden from their Spanish workers.  Perhaps @Ibexsalad can verify whether self-deprecation is endemic to the Spanish national character.  At the American plant, survey results showed workers had a very high opinion of the quality of their work, completely at odds with the relatively high objective defect rates of the output of the plant. And it is precisely this gulf - between perceived reality and objective reality - which has proven problematical to overcome whether in politics, public policy, or, as in this topic, pensions. To be entirely fair, it is the stuff that helps put men on the moon, and cure cancer, but it also is the stuff that gives us Enron, 'AAA' sub-prime securitisations, Detroit, Puerto Rico, and ant-fuckingly irrelevant public-policy obsessions with creationism, same-sex marriage, and abortion while proverbial Rome burns and decays.  


vlade said...

As you say in the last sentence, it's both a blessing and a curse.

I tend to say that if Man was not an optimist, we would never climb down from the trees.

As a corrolary, one of my friends described these attitudes as how to give EoY report.
- North European (including most of old Eastern Bloc). You give only the bad stuff. Any hint of a praise is deemed bulsh*tting. Idealised attitude: I know what I do well, tell me what I do badly (alternately: I need some guilt, I feel guilty w/o it).
- US. You give only the good stuff. Idealised attitude: I'm great and you're here to confirm it.
- UK. Sh*it sandwich. You give good stuff, put the bad stuff in a middle, and then a good stuff again. Idealised attitude: I'm unsecure but can deal with some bad stuff if you also tell me that I'm ok somewhere else.

Buzz said...

Ha ha ha Cassandra. A post some of us little people can relate to. You say, "...And it is precisely this gulf...." Precisely? Really? Face it, we live in a 'Matrix" like world. Economics driven by the relentless and engulfing mind fuck.

From Seng-ts'an: "The struggle between good and evil is the primal disease of the mind."

Replace good and bad with any polar opposites you like.

I'm hiking to the mountain top now.

Haruhiko Draghi said...

great post and thanks for teaching me a new word. ant-fuckingly. I going to try to use this in conversation (here in the US) as soon as possible. I understand it to be somewhat widely used in Europe?

Mercury said...

Relax. Just shorten the duration in the portfolio and the liabilities don’t look so bad.

The architect of Obamacare on why it might be a good idea to die at <=75: http://www.theatlantic.com/features/archive/2014/09/why-i-hope-to-die-at-75/379329/

Who thinks Medicare’s definition of ‘terminally ill isn’t about to get a lot looser?

Anonymous said...

"ant-fuckingly irrelevant"

you should copyright that!

Mercury said...

But seriously folks: Central banks’ persistent ZIRP and risk markets diddling begs the question as to exactly where THEY are on the perception/objective reality spectrum. Keynesian state ideology rather frowns on saving for a rainy day and even the Dutch will eventually lose enthusiasm for thrift at negative real rates of return.

Anonymous said...

And yes, self-deprecation is part of the Spanish national character. It's incredibly low the self esteem of the Spaniards, to rates that migth be unhealthy for the country.