Author: axdouglas

I’ve spent the last day trying to think of ways to express my response to the death of my colleague Katherine Hawley. What I say here will be inadequate, but I feel I that I owe it to Katherine to say something, and a Tweet or Facebook post doesn’t seem quite enough.

Katherine really was the rarest sort of person. She was the most intelligent person I’ve ever met, but she had something even rarer – maybe you could call it a sort of moral genius. Her kindness was nearly beyond comprehension. She was more generous than I thought it possible to be.

The next dispute over the UK Universities Superannuation Scheme is in full swing (the documents for the ongoing consultation with the universities are available here). I’m not keen to involve myself in what has turned into a pretty dysfunctional conversation. But it prompted me to share a few philosophical thoughts I’ve had on pension funds.

The USS dispute is, again, over a valuation. It largely reduces to a dispute over the discount rate. The level of current contributions required to pay future pensions – pension liabilities – depends on the rate at which you discount those liabilities. The scheme’s actuary, under pressure from the regulator, benchmarks the discount rate to the yield on long-term government bonds, gilts, which remains historically low. The fund is tested for its ability to fund its pensions promises off very low-risk assets. In fact, however, it holds a portion of higher-risk ‘growth’ assets – equities that earn a higher rate. Neither the schedule nor the risk of those growth assets matches those of the pensions liabilities. The extent to which the discount rate can be set higher to take account of the growth assets depends on the strength of the covenant – members’ willingness to pay the difference if returns are worse than expected.

I was sent a link to this article by a colleague, who was concerned with the boldness of the central claim – that standard economic theory explains nothing about market behaviour. I thought I might as well share the outline of my response here.

I’m far from being a defender of the foundations of mainstream microeconomics. But this attack goes much too quickly, in my view. I find myself in the odd position of defending something I don’t believe in from an attack I think is unfair – indeed counterproductive.

Dr. Steven Klein, Lecturer in Political Theory at Kings College London, very kindly invited me to speak to his class about my 2016 book, The Philosophy of Debt. The class read the book as part of a module on the political economy of finance.

Since writing that book, I have had a few opportunities to rethink the topic, in dialogue with highly intelligent and critical readers. This latest experience was the culmination of this process – a process of transformation, almost akin to an out-of-body experience. I now see my book entirely from the outside. I can look at it, but I can no longer speak from inside of it.

Medieval philosophers spoke of words being ‘imposed’ for things, either directly or by way of the ideas of things. When we acquire language, we learn which words are imposed for which things. It is as if we begin by encountering the things and then wonder what they are called. Or perhaps we learn the names and then wonder what they name (Alfred North Whitehead wrote that whereas Adam saw the animals in the Garden and named them, modern children name the animals and then see them).