The politicization of the boxes

Imagine that an expert in public health will want to convince you that quitting smoking is an excellent decision. For this reason, this expert explains that app

The politicization of the boxes

Imagine that an expert in public health will want to convince you that quitting smoking is an excellent decision. For this reason, this expert explains that approximately 20% of smokers end up with lung cancer, but that only 0.5% of non-smokers develop this disease (the exact figures are more complex because they depend on factors such as the strength of the habit of smoking). You, however, is not convinced. Simply it is not believed smoking to be important: his uncle Pepe smoked all his life and died with 98 years of a disease not related to smoking and her cousin Ana, who never smoked even a cigarette, died of lung cancer last year with only 56 years. In particular, you respond to the expert in public health that "the problems of smoking on health have been uneven... let Me point out that until well into age, and even today, some smokers have maintained health indicators significantly better than the average of the non-smoking rooms, maintaining the habits of consumption of tobacco singulares2.

How do you think they will react to the expert in health to this argument? Or, for that matter, any sensible person? What is more likely is that the expert, motivated by his desire to improve his health, I will try to explain almost any behavior has a sure result. Smoking is dangerous because it multiplies your risk of cancer 40 times, not because smoking is a death sentence without appeal. And even the most careful can have a negative result product of bad luck. And who says smoking says driving with excess alcohol, being obese, or abusing of fats. Not all people with excess weight suffer a heart attack, and not all people with diet exquisite live to be 100 years old. That is why we have to complete statistical studies, sometimes complex and laborious: to distinguish the signal (20% of cancer versus 0.5%) of the noise (his uncle Pepe in front of her cousin Ana). In fact, this example of lung cancer what is understood almost all over the world and there is no controversy whatsoever in the universal recommendation to stop smoking. Its argument in quotation marks in the previous paragraph is, simply, a fallacy, a product of not understanding probability theory.

Change, therefore, the example a little bit. Instead of speaking of smoking, let's talk about the political influence in the composition of the organs of governments in the savings banks. And instead of lung cancer, let's talk about the need for a bailout of the financial institution. Exactly as occurs with smoking, nor all the boxes politicized collapse, or all of the institutions do not politizas will survive. Those economists who, based on evidence almost as overwhelming as the one that relates the lung cancer with smoking, have studied the experience of the cajas in Spain since the adoption of the Law of Governing Bodies of the Cajas Savings in 1985 argue that the probability of a case to be politicized to fail is much higher than that of an institution is not politicised, but never a sure outcome, as other factors (such as the regional economic standing, the mere randomness in the loan portfolio, etc) they also play a role. Thus, if one takes the argument that enunciábamos before, and rewritten slightly as: "The problems of governance of the savings banks and political influence in the composition of their bodies has been uneven... let Me point out that until well into the crisis, and even today, some boxes have been maintained indicators significantly better than the average of the banks, keeping a number of governing bodies, and relations, between property and control unique", you will continue taking, a fallacy, perhaps less obvious than the previous but no less inexcusable. It is not that the above argument contradicts the empirical evidence: is that its logical structure is inconsistent.

The serious thing is that the quote above is not my invention. It is a part of the intervention of Emilio Ontiveros, president of Afi (Financial Analysts), before the recently concluded commission of the Congress of Deputies on the investigation of the financial crisis. Even more serious is that the ill-fated final report of such a commission (about which there is much more to criticize) uses this argument as support for the self-exoneration of the political mortal sins, and venial: "But if the preparation and ability of the members of the organs of government may be relevant to the good running of the entities, since they are the key decision-makers in the control tasks, this relationship does not imply that the authority of certain public institutions in the direct appointment of councillors to be negative in and of itself, although it out in concrete cases, what comes to refute the theory that the problem of the boxes was its politicization".

Clear that there has been a range of variation in the results of the politicization of the boxes. Unlikely it would have been otherwise. But when one puts it in a column, the boxes sunk by its politicization (Bankia and its predecessors, Caixa Catalunya, Caja Castilla-La Mancha, Caja de Ahorros del Mediterráneo, NovaCaixaGalicia and so many others) and other financial institutions that sunk not politicized (Banco Popular) is with a result very similar to the 20% of lung cancers among smokers and 0.5% among non-smokers. The difference in frequencies is so large that the weight of evidence is overwhelming. Citing the case of one of the few savings banks not broken is exactly the same as to mention to my uncle Pepe who did not die of lung cancer, and cite the case of Banco Popular, is exactly the same as speaking of my cousin Ana who himself died of cancer (although, in this case, it is perhaps most similar to my niece Maria who picked up a cancer with having radon gas in the home; in the case of the Popular, poor corporate governance).

In other words: the PP and the PSOE, the two parties that have been voted on the report of the commission, have been employed as a fundamental element of the report an argument that would take the suspense of an examination to any student of a degree in economics. Although, of course, we should not be surprising that for our two main political parties, the logic is optional. Neither the PP nor the PSOE (or UI, in its current structure with We abstained in the vote on the report) have done penance for any of the massive politicization that violated to the savings banks. By much that, to journal, PP and PSOE act out their "deep" differences, these are nothing more than the movements carefully choreographed Kabuki Theater: a drama, stylized for the audience without any real content. But when it really matters, as in keep hidden the shame of the boxes, PP and PSOE are as Isabel and Fernando: both mounts and mounted both.

Jesus Fernandez-Villaverdand professor of Economics at the University of Pennsylvania.

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Date Of Update: 17 December 2018, 08:00

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