The Conservative Manifesto: Care Fees as a Percentage of Initial Wealth

The Conservative Party have announced their manifesto for the 2017 General Election.  Included in this (on page 64-65) is proposed

We will introduce a single capital floor, set at £100,000, more than four times the current means test threshold. This will ensure that, no matter how large the cost of care turns out to be, people will always retain at least £100,000 of their savings and assets, including value in the family home.

A quick calculation on the effective ‘Tax’ (Care Fees as a Percentage of Initial Wealth) shows the following distribution of Tax Rates.  On the x axis is initial wealth (the value of your house plus any savings), and on the y axis is the Tax Rate.  The Conservative Party have since augmented this plan with a proposed cap (consultation to come).

Values used for Care Fees: £20,000, £40,000, £60,000, £80,000; £100,000.  Values used for Initial Wealth: £0, £100,000, …, £1,000,000.  The trend continues downwards after this figure.

As many have pointed out, this affects individuals with initial wealth just over £100,000 proportionately far more than those with higher initial wealth.  More detail on policy options for funding social care can be found in the Dilnot Commission report and a summary of their proposals is shown below:

 

Eight Mile and the Emergence of Segregation

Eight Mile, epitomized by Eminem in the film of the same name, is a street in Detroit that marks the boundary between the majority white northern suburbs and the majority black neighborhoods closer to the inner city.

But what causes this segregation in the first place?

Hypothesis 1: The Central Planner

Zoning Map, 1930s, showing HOLC zoning, source: http://www.urbanoasis.org/projects/holc-fha/digital-holc-maps/

In Detroit’s case, as with many cities across the USA, it was, in part, due to the zoning of the city by the federal Home Owners’ Loan Corporation, which zoned the city into areas of risk, meaning that banks were indirectly encouraged to develop outer suburbs while not offering mortgages to inner city properties.  This lead to wealthier, generally white, residents moving to the suburbs.

Indeed, physical barriers, such at the Detroit Wall, also known as the Eight Mile Wall, were built to separate majority black and majority white neighborhoods.

Detroit Today

The legacy of these zones live on today, as seen in the map below from the 2010 US Census.  The dividing line between the green (black) areas and the blue (white) areas is Eight Mile Road.

DotMap http://demographics.virginia.edu/DotMap/ based on 2010 US Census

 

 

So, segregation exists, and is caused by a central actor. But is there an alternative explanation?

Alternative Hypothesis: Emergence

In 1971, Thomas Schelling set out to model the phenomenon, not by assuming a central planner, but by modelling the interactions of individuals.

Thomas Schelling’s model was this.  Assume individuals are placed in a grid, similar to being located on a chess board.  Allow individuals who are in a local minority to move.  In the example below, the blue circle is in a minority (with 5 out of its 6 neighbors being a different color), and according to the rules of the model, is unhappy.  It could decide to move to the vacant square to the north-west, but it would still be in a local minority (with 4 out of 6 neighbors being a different color) and would remain unhappy.  So instead, it chooses the space to the south west where 3 out of its 6 neighbors are of the same color, and not being in a minority, it settles there.

Agent Movement © Duncan Robertson after Thomas Schelling (1971)

Schelling, perhaps without knowing it, introduced agent-based modelling, where, instead of modelling the system as a whole, the modelling of individual agents enables us to see the emergence of macro-level properties, in this case segregation, via the modelling of micro-level (local) interactions.

We can see the effect of micro-level interactions causing macro-level segregation in the model below (developed by Duncan Robertson after Wilensky after Schelling). Each individual, or agent, decides whether they are unhappy or happy; if they are unhappy, they search until they find a vacant location where they will become happy.  This continues until all individuals attain happiness.

Three Class Segregation Model © Duncan Robertson after Wilensky after Schelling

So, perhaps segregation is not imposed, but is down to us.  Or maybe, in reality, it’s a little bit of both.

Please do get in touch if you would like to discuss building or working with agent-based models.

 

 

The Brexit Paradox: This is not Representative Democracy

In the UK, voters elect a Member of Parliament who is there to represent the views of their constituents.  This is representative democracy, and the UK has survived pretty well with this form of government.  It is one of the many things that the Romans Have Done For Us.

Members of Parliament are supposed to do what their constituents tell them to do.  They may have loyalty to the political party to which they belong, but they should, at least in theory, represent the views of their constituents.

The recent referendum on whether the UK remains a part of, or leaves, the European Union, has caused a great deal of uncertainty, and it is clear, when you think of it, why this is so.

Consider the stylized map of the UK below, where the country is split into three constituencies.  Each constituency has 1 million electors, who all vote.

Constituency A votes 800,000 Leave : 200,000 Remain;
Constituency B votes 400,000 Leave : 600,000 Remain; and
Constituency C votes 400,000 Leave : 600,000 Remain.

This means that there is a total of 800,000 + 400,000 + 400,000 = 1,600,000 voting for Leave; and 200,000 + 600,000 + 600,000 = 1,400,000 voting for Remain.

ReferendumCounting

This is democratic.  The will of the people is that, by a sizeable majority, Leave wins.

However, when this is ratified in Parliament*, by the representatives of the people, the consituents’ MPs, the following happens:

The MP for Consituency A votes Leave;
The MP for Consitutency B votes Remain;
The MP for Consituency C votes Remain.

We are then left in the paradoxical position that a referendum result‡ cannot – under a representative democracy system – be implemented by the MPs.

This is a key constitutional question, and one that cannot be solved by Parliament or the Judiciary†.  This is a fundamental issue for British (and European) democracy.  And its importance cannot be overstated.


* there is a fierce debate on which body needs to invoke Article 50(2) of the Treaty of European Union, but let us assume that Parliament would make this decision ‘in accordance with its own constitutional requirements’ under Article 50(1).
† it is clear that the decision will be the subject of Judicial review, right up to the Supreme court, but this will merely be a judicial rather than a democratic decision.
‡ this is not quite the situation in the actual Brexit referendum result (although there is no way of telling, as MPs’ constituencies are different from referendum counting districts), but the fact remains that the result of a referendum can be inconsistent with implementation under representative democracy.

 

Update 3 November 2016: The High Court (subject to appeal to the Supreme Court) has confirmed that Parliament should decide how to implement withdrawal, as the powers of Royal Perogative would have an impact on Statute, which is not normally the case when treaties are made or revoked.  Brexit is a special case, as it would overturn Statute in a way that was not envisaged in the European Communities Act 1972.  The full judgment is here).