THE ABS: A VIEW FROM THE MEDIA

Talk to ABS seminar, Canberra
June 17, 2009

When Geoff Neideck invited me to talk to you he said you’d be interested in getting a perspective on the use of ABS data in the media, and I’m happy to oblige. I’m happy to be here talking to the bean counters because I’ve been a bean counter all my working life. I started as an accountant, then graduated to the economy. As that epithet implies, people concerned with the intricacies of counting things are not highly regarded. The glory goes to those who make the beans, or those who use the counts to draw interesting conclusions.

But years in the counting business have convinced me of an under-rated truth: what gets measured gets taken seriously, whereas things that aren’t measured tend to be ignored. The problem is that we tend to measure what’s easily measured, but many things difficult to measure are more important. The problem is compounded when we seize on a readily available measurement without bothering to inquire of the boring bean counters whether it measures what we think it does.

I want to talk about the media’s use and abuse of ABS statistics, but first I want to make a qualification. Among journalists there are two kinds of users of your statistics, the professionals and the amateurs. The most intensive users of ABS stats are the economic journalists, who are professional users. These are people such as me, Tim Colebatch, Alan Mitchell, Michael Stutchbury, Alan Wood, Peter Martin, David Uren and Stephen Long who, by both education and experience, can be expected to use and interpret your stats with care and accuracy. If you see us misinterpreting your data we’d be most grateful for a quiet phone call explaining where we went wrong. We have younger economic reporters working for us, often with less experience of the intricacies of economic statistics, but rest assured that we’re training them in those mysteries and drawing to their attention any misunderstandings we find in their copy, even if (as in my case) it’s after they appear in print.

That’s enough about the professional, specialist users of ABS data. You’re entitled to expect high standards from them and, for the most part, I think you get it. All the rest of what I’ve got to say about the media’s use and abuse of statistics applies to the amateur users: journalists whose use of your data is infrequent and quite unqualified. These users range from political journalists here in Canberra to reporters in the state capitals who occasionally get hold of social statistics, right up to the editors. The main thing I want to do is explain why the media so often use stats in ways you disapprove of. I want to give you an insight into how it is from our perspective. This will contribute little to reducing the misuse of statistics, but it will help you understand what you’re up against.

Many of the complaints about misuse of stats arise from the headlines on stories and the truth is that the headline on a story heavily influences a reader’s perception of what the story is saying. But headlines are written by sub-editors, not reporters, and sometimes there’s a gap between what the story actually says and what the headline says it says. If there is, most readers won’t notice it. Such gaps can occur for three reasons: because the hard-pressed sub doesn’t accurately comprehend what the story’s actually saying; because the reporter has left some ambiguity in his copy and the sub, who generally knows far less about the topic than the reporter, has jumped the wrong way; or because the sub knowingly writes a headline that makes the story sound more exciting than it actually is. The first two explanations - misunderstandings - are more likely to be the case on broadsheet newspapers; the third - misrepresentation - is more likely to be found in tabloid newspapers.

In one offending Herald story, the NSW Bureau of Crime Statistics issued a report and an accompanying press release saying that the prison terms for most offences had increased, whereas the headline on the story said they’d fallen. The interesting question is why the reporter wrote his story in a way that encouraged that error to be made - why he focused on unrepresentative falls rather than the representative rises. I’ll try to answer that when we get to the question of motive - why the media behave the way they do. Perhaps here I should remind you that journalists have to draw the essence from sometimes long and complex reports or events in just an hour or two - under pressure from bosses to make it quick and make it sexy - so it’s not surprising errors and misinterpretations occur.

Now let me give you some relevant background information. Much of the news the media publish comes to them in the form of press releases. The ABS’s releases have some of the characteristics of a press release, and sometimes they’re accompanied by an actual summarising press release. It’s often alleged that the media are so lazy they largely publish uncritically the press releases sent to them by powerful government, business and other interests. In my experience that’s usually not the case; quite the reverse. These days most interest groups seek to use the media to advance their own interests. They employ PR people to put their own spin on the information they release to the media. Most journalists aren’t lazy and they see it as their job to get past the spin, finding the news their audience would like to know about but which the powerful interest would like to conceal. When they receive a report or a press release they think: there’s probably an interesting story in here somewhere, but I’ll have to dig for it; certainly, it won’t be the one the people who put out the press release put at the top of the release. There’s so much spin in the world that many journalists come to the conclusion that everyone’s trying to pull the wool over their eyes. You may regard the ABS as a beacon of independent truth-seeking, but I guess many journalists would suspect it’s just another government agency pumping out bromide at the behest of its political masters. There’s a saying in journalism that news is anything somebody somewhere doesn’t want you to know. My guess is that the Herald journalist in question waded through the crime bureau’s report until he found the bit he thought the NSW Government wouldn’t want people to know: that in the case of five significant offences, rates of imprisonment are going down not up.

Much of the misrepresentation of ABS data arises from statistical misinterpretation. You can misrepresent a time series in a host of obvious ways: by choosing a convenient time period for your comparison, by ignoring random variation (ie failing to ignore outliers), by ignoring seasonal variation, by ignoring base effects (eg saying some rate has doubled when it’s gone from 2 a year to 4 a year) and by ignoring the effect of government policy.

The question is whether the journos who commit these statistical crimes are knaves or fools. I couldn’t deny there’s a lot of knavery - journos who know they’re distorting the statistics’ message, but don’t care - but there are more fools than you may imagine. Most journalists are arts-degree types with a very weak grasp on maths and little clue about how to interpret statistical information. If they did understand those things they’d be an economics editor by now. But the question goes deeper: many journalists wouldn’t be sure the diligent performance of their job required them to take account of those statistical niceties. The rules of statistical interpretation aim to ensure the user draws from the stats an accurate or representative picture of the aspect of the world the stats relate to. But that’s simply not the objective of journalism. Journalism pays no heed to the scientific method.

So let’s turn to the question of why the media sometimes misuse statistics and misrepresent their message. Let’s look at motive. Much of the criticism of the media rests on the unspoken assumption that the media’s role is to give us an accurate picture of the world around us. We don’t have first hand experience of much of what’s happening around us and we need the media to inform us.

If that’s the role you think the media play - or should play - I have shocking news. The news media are on about news. What is news worthy? Anything happening out there that our audience will find interesting or important, although the interesting will always trump the important. Paris Hilton is interesting but of no importance; the latest change in the superannuation rules is important but deadly dull - guess which one gets more media overage?

Maybe 99 per cent of what happens in the world is of little interest: 99 per cent of the motorists who crossed the Sydney Harbour Bridge today made it without incident; someone you’ve never heard of went to work as usual and sold a new ring to someone you don’t know; Australia didn’t declare war on New Zealand . . . the list of uninteresting things that happen is endless. Journalists sort through all the things that happen looking for things they believe their audience will find interesting: the 10-car pile-up on the Bridge, Brad Pitt bought a ring for Angelina Jolie to make up after a fight, the Dutch withdrew their troops from Afghanistan.

When social scientists take a random sample they may examine the sample and discard any outliers that could distort their survey, throwing them on the floor. A journalist is someone who comes along, finds them on the floor and says, ‘these would make a great story’. I happened to be in the Herald’s daily news conference last February on the day Kevin Rudd’s $42 billion stimulus package was announced, with all its (then) $950 cash handouts. We discussed searching for a farmer who’d get $950 because he was in exceptional circumstances, $950 because he paid tax last year, $950 because his wife also works, $4750 because he has five school-age kids, and maybe another $950 because one of the kids is doing a training course. And, of course, he’d have a big mortgage, meaning he’d also save $250 a month because of the 1 per cent cut in interest rates announced the same day. Had we found such a person and taken a good photo of him he’d have been all over our front page. The point is that we were search for the most unrepresentative person we could find. Why? Because our readers would have been fascinated to read about him. It’s reasonable to expect the media to be accurate in the facts they report but, even if they are, it’s idle to expect them to give us a representative picture of the world.

And that takes me to an even more shocking thought: if the media aren’t on about giving us a representative picture of the world around us, why would journalists bother adhering to the rules of statistical interpretation? Why not highlight a quite unrepresentative statistical comparison if it happens to be the most interesting comparison?

It’s often claimed that the media focus heavily on bad news, often ignoring good news. Guilty as charged. But we do so for a simple reason: we know our audience finds bad news a lot more interesting than good news. So I’m not particularly apologetic for this state of affairs: our failings are the failings of our audience, which are the failings of human nature. Why do people find bad news more interesting than good news? As I’ve written elsewhere (SMH 12.4.2006), I believe the explanation can be found in our evolutionary history. Our brains are hardwired to perpetually scan our environment for threats, and now the chances of our being eaten by a lion have diminished we’re left with a strong appetite for bad news about, for instance, the threat of crime.

Communications research tells us we read much more for reinforcement than enlightenment. While there’s a niche market for columns that challenge the conventional wisdom, and news about some new and unexpected twist in a standard story will be found interesting, journalists know the news that goes down best is the news that confirms people prejudices. Perhaps thanks to the efforts of the media themselves, most people know as a self-evident truth that crime is increasing. Most stories about crime are intended to reinforce that belief.

The media’s defence against criticism is that their failings are those of their audience; they do what they do because their audience demands it of them. But shouldn’t we hold the media to a higher standard than we hold ourselves? Yes we should. We can expect less crass commercialism and more professionalism. Doctors, for instance, don’t ask patients what disease they want to be told they have and don’t let patients pick the medicine they want prescribed.

And there’s a limit of inaccuracy and sensationalism below which market punishment sets in. Mediums that play too lightly with the truth eventually lose their credibility and their audience’s respect. This means there are checks and balances. Mediums that value their credibility - in commercial as well as ethical terms - often employ commentators who set a high store on making sure their audience isn’t misled, even when those commentators spend a fair bit of time highlighting the media’s own failings and trying to beat down some of the things that get beaten up on the front page. My guess is that, as information overload and infotainment continue to grow, at least the better-educated audience will gravitate to those journalists and journals they perceive to be committed to the search for truth. What’s more, it is possible to be truthful and interesting at the same time.

Turning to the question of community expectations and perceptions of the ABS, from where I sit the community knows little about the role and functions of the ABS and spends very little time thinking about it. In particular, people have no understanding of the bureau’s independence and see it as just another government department doing what the government tells it to do.

Some years ago someone from the bureau came to the Herald’s office to give a few of our senior people a little seminar on the virtues of the trend estimates over the seasonal adjusted figures. After it was over the editor at the time said to me: ‘Well, we won’t be using trend figures - they’re only estimates.’ He was quite surprised when I explained that almost all the bureau’s figures were estimates. When I was an economic reporter in Canberra 34 years ago, the chief sub-editor told me not to use seasonally adjusted figures because the Herald only reported the real figures, not figures some statistician had played around with. These days, of course, we use the seasonally adjusted figures as a matter of course without even bothering to say we’re doing so.

But you will have noted that, notwithstanding all the bureau’s efforts to give greater prominence to the trend figures, the media - like the business economists - largely ignores them and continues to highlight the seasonally adjusted estimates. We do this mainly because, like the financial markets, we have a vested interest in volatility. The more the figures bounce around, the more interesting the stories we can write - and the more exciting the markets’ betting games. But the econocrats prefer the seasonally adjusted figures, too. And whatever our true motives, we all have a good statistical excuse: our interest is in the figure for the most recent month or quarter, and here the trend estimate runs into the ‘end-point problem’ - the inability to centre the moving average.

You probably know that many people - maybe most - regard the CPI as something that’s made up in a government department somewhere with the intention of understating the true inflation rate. That’s because their own mental estimate of price increase is so much higher than the bureau’s. The question of why that’s the case is one to which I’ve given much thought over the years. You can say that, were I to carefully calculate a personal CPI it would differ from the official figure because the weights in my basket would differ from the eight-capital average. You can say that I may not adequately distinguish between quality improvements and pure price increases.

That’s true, but it doesn’t get to the heart of the disparity. A bigger problem is that people don’t weight the price changes they encounter. An even bigger problem is what psychologists call the ‘availability heuristic’. Large prices rises stick in our mind more than small increases and price rises are easier to remember than price falls. And get this: in most people’s mental CPI, prices that don’t change would get a weighting of zero.

There’s probably not a lot the bureau can do about that, but there’s one key economic indicator whose low credibility with the public it can act to improve - the measure of unemployment - and now it has. A large number of people believe the official unemployment figures are a fraud and have been manipulated by the Government to understate the true position. They have a vague but firm memory of the Howard government changing the definition of unemployment. They get muddled between being unemployed and being on the dole. They have no perception of the bureau’s independence and no notion of international conventions that haven’t changed in decades.

I have to tell you, however, that I’ve tired of trying to dispel the public’s misconceptions on this issue and my sympathy for the bureau has run out. The unvarnished truth is that, for whatever reason, the official unemployment figures are misleading, they do significantly understate the true extent of the problem, and the bureau could publish less misleading figures if it wanted to. The fact is that the international rule that doing an hour’s work a week means you’re not unemployed may have made sense once and may still make sense in some countries, but it makes no sense in a country like ours where part-time employment accounts for 28 per cent of total employment. And if the bureau can publish estimates of underemployment once a year it’s hard to see why it can’t publish broader estimates of labour underutilisation every month. I’m here to tell you I can’t think of an issue that has done greater damage to the bureau’s credibility with the public, so I’m delighted to see your latest decision to publish the underutilisation rate monthly.

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ECONOMICS AFTER THE GLOBAL FINANCIAL CRISIS

Talk to The New Institute, Merewether
July 14, 2009

I want to deal briefly with the origins of what we’ve come to call the global financial crisis and its consequences for economies around the world before I focus on the underlying causes of the crisis and the role of economics. Then I’ll look at what needs to be done to avoid another such monumental failure of economic management. I’ll be talking mainly about the global scene - particular the scene in America, where the crisis had its origins - and much of what I say won’t apply to Australia, though I will talk about how Australia managed to escape the worst of the madness.

The origins of the crisis can be found in America’s huge housing boom, in which house prices rose greatly, many hundreds of thousands of new homes were built and the rate of home-ownership rose significantly. One factor that made the boom so big was the issuing of loans to sub-prime borrowers - people with bad credit histories who had no hope of servicing their loans. This irresponsible lending was encouraged by the securitisation of loans - that is, because the banks that made these dubious loans didn’t retain them but converted them into mortgage-backed securities, which they then sold to investment banks, hedge funds and pension funds, not just in America but in Europe and even to some Australian local councils. Inevitably, the housing bubble burst and it was suddenly realised that many of the sub-prime loans would never be repaid. House prices fell dramatically - because the Americans had built far more houses than they actually needed - and a lot of big investment banks and other institutions found themselves holding possibly worthless mortgage-backed securities. But it wasn’t clear which banks were holding large amounts these securities and were thus in trouble. This uncertainly generated a great deal of fear and reluctance among the banks to continue dealing with each other.

This wouldn’t have been so bad - it would have led just to a housing-led recession in the US - were it not for the fact that it brought unstuck a huge and long-running expansion in the financial sectors of all the developed countries. The financial markets had been inventing complicated new financial contracts known as derivatives that supposedly shifted various forms of risk on to the shoulders of people more able and willing to bear that risk. Because this trading of risk was believed to have reduced the risks financial institutions were facing, they were emboldened to borrow heavily to buy more of these derivatives that were proving so profitable. As part of the globalisation of financial markets, financial institutions in Britain and Europe - and Australia to some extent - participated fully in this decade or two of frenzied trading and expansion.

The sub-prime problem acted as the bump that caused this whole house of cards to collapse. The crisis reached its culmination in mid-September last year, when the US authorities decided to allow one of America’s five big investment banks, Lehman Brothers, to collapse under the weight of its debts. This caused a wave of panic among financial institutions on both sides of the Atlantic. They refused to deal with each other, financial markets temporarily stopped functioning, and banks and insurance companies started falling over. For a period of several weeks governments had to step in to prop up these institutions, all of them granting government guarantees of their banks’ deposits and wholesale borrowings. The global financial system came perilously close to collapse. The whole world watched these frightening events unfolding on television every night, resulting in a synchronised blow to the confidence of consumers and business people in almost all the developed economies. The considerable losses faced by banks in the US and Europe greatly reduced their ability and willingness to continue lending to ordinary businesses. From that point it became clear that the world had entered its most severe recession since the Great Depression. Deep recessions in the US, Britain, Europe and Japan, plus sharp slowdowns in China and the other major developing economies, have seen a marked decline in world trade. Despite optimistic talk of ‘green shoots’, the likelihood is that unemployment in these economies will continue rising for some time before it begins a very slow fall.

Who’s to blame for all this? Well, you can blame it on the greed of bankers and other participants in the financial markets, but that doesn’t get us far. I’d prefer to say that the crisis was caused by the failures of human nature, compounded by the economic managers’ reliance on a model of human behaviour that fails to take account of many aspects of that human nature.

Human beings aren’t rational as the economists’ basic, neo-classical model assumes, but are highly emotional. Even economists themselves are more driven by their emotions than many of them realise. Particularly because people are so influenced by the behaviour of those around them, the people who make up an economy are prone to an alternating cycle of optimism and pessimism. So much so that this is now - and probably always has been - the main factor driving the business cycle of boom and bust. During the optimistic phase people happily take on ever-increasing risks and obligations. They spend rather than save, expanding their possessions and activities, pursuing status symbols, piling into the markets for property and shares, forcing prices up, then piling in some more just because prices are rising.

They do all this confident in the belief that the good times will roll on forever and prices will only go higher. But, of course, as we all know but keep forgetting, some event inevitably causes the boom to end and, when it does, the prevailing mood flicks from optimism to pessimism. People become afraid, they worry about all the commitments they’ve taken on, they abandon their plans for expansion and tighten their belts. In many asset markets (but probably not our housing market) prices go from being unrealistically high to being unrealistically low. The result is business failures, lay-offs and rapidly rising unemployment. This causes the fear to deepen into a pessimism which assumes the world will stay bad forever.

My first point is that, though economists know full well that the economy moves in cycles of optimism and pessimism, boom and bust, and a large branch of economics is devoted to studying the management of the business cycle - macro-economics - economists don’t have much of a handle on the factors that drive the cycle, especially those that derive from human psychology. They accept that ‘confidence’ is a major influence on the cycle, but they can’t get confidence into their mathematical equations, so they end up underrating its importance. A big part of the problem is that conventional micro-economics has no place for psychology or the business cycle, assuming the economy is always at full employment because it is self-equilibrating, self-correcting. Alan Greenspan admitted he’d made a mistake in believing the banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. He had too much faith in the economy’s self-correcting powers because he assumed we’d behave rationally, not emotionally.

My second point is that this chronic underestimation of human failings tempted economists and regulators to run a partially deregulated financial system and not to worry about weaknesses in the remaining regulatory system, such as the US’s multiple regulatory agencies sharing responsibility for the system, and the operation of the hedge funds completely outside the regulatory regime. Here we have a fatal combination of model-blinded thinking on the part of the economics profession and blatant self-interest on the part of powerful vested interests in the financial markets. When they’re in optimism mode, business people always want to be completely free to do as they please in their push for profits.

But because the big banks and other players in the financial markets aren’t rational and are capable of getting carried away in a boom and doing stupid things they later come to regret, they do need fairly close supervision to protect them from themselves and to protect us from them. In the absence of that supervision it was inevitable the episode would end in disaster.

In Australia, our econocrats - particularly those at the Reserve Bank - have been an honourable exception to this naivety. They’ve been a lot more worldly wise, always being very conscious of the problem of asset bubbles. The former governor, Ian Macfarlane, was highly conscious of the risks involved in our long housing boom. He devoted much effort to studying and trying to talk down the boom, with some success. So we avoided making the same errors with our banking system, partly also because of two accidents: first, the four-pillars policy banned mergers between the big four banks because politicians fear the displeasure of the electorate more than the displeasure of the banks and, second, our Australian Prudential Regulation Authority was riding herd on the banks because it was still smarting from the caning it got over its inadequate supervision of the HIH insurance company.

In their drive for profits, people in the financial markets invented these ever more sophisticated and artificial - weird and wonderful - financial contracts known as derivatives. In theory, these synthetic contracts were about ‘risk management’ - spreading and shifting risk to those most able to bear it. In practice, the risk was spread to those least able to understand it. Even the inventors of these derivatives didn’t fully understand how they worked and the circumstances under which they could come unstuck. Individual financial institutions didn’t understand the extent of the risks they were taking on and no one - neither other institutions nor the regulators - knew where the risk was accumulating. So my third point is that derivatives were a case of the market being too smart by half and not nearly as smart as it imagined itself to be.

The story of the origins of the global financial crisis is littered with references to excessive gearing or leverage or plain old excessive borrowing. The reason booms go on for so long and get so big is that they’re fed by excessive borrowing. While everything is on the up and up, borrowing is a very easy way to magnify your gains from investment. Trouble is, once prices start falling, being highly geared is a way to magnify your losses and risk your own survival.

The thing about debt - or ‘credit’ as economists prefer to call it - is that it’s like fire: a wonderfully useful and beneficial thing, but also something that, if not understood and carefully controlled, can do immense harm. Yet economic theory focuses almost solely on the benefits of credit, hardly acknowledging how dangerous it can be if allowed to get out of hand. Why such a cavalier attitude towards debt? Because of the assumption that we’re all rational; because of the economic model’s unrealistic assumptions about human nature.

So my fourth point is that a primary cause of the crisis was the failure of regulators to understand the need to impose constraints against excessive gearing. The sudden discovery of all the trouble derivatives had got us into wouldn’t have caused nearly so much devastation had not the institutions that found themselves holding the parcel when the music stopped been so precariously geared. Indeed, some of the derivatives were themselves aimed at helping people gear up.

In the past 15 or 20 years, central banks have become proficient at controlling the former scourge of inflation by means of inflation targeting. What they have not managed is to find a way to prevent the build-up of speculative asset price bubbles. That’s because the instrument they use to fight inflation - the manipulation of interest rates - can’t simultaneously be used to fight asset bubbles. But all this means is that, as part of the move back to a more carefully regulated financial system, we need to revert to direct controls over borrowing levels.

It’s overly dramatic to imagine we’re facing the death of capitalism. We’re not because there is simply no practical alternative to the use of markets to coordinate the production and consumption of goods and services. Similarly, it’s a crude caricature to imagine that in the past 20 or 30 years we moved to ‘free markets’. No market has remotely approached the position of being entirely free of government intervention and regulation. What’s true is that - particularly in the case of the financial markets, and particularly in the US - we greatly reduced the degree of regulation and allowed much of the regulation that remained to be ineffective.

So the choice we face is the degree to which we regulate markets and the activities of businesses. And there’s little reason to doubt that the pendulum will now swing back in favour of more regulation of markets, particularly the financial markets. We’ll need to do more to limit excessive borrowing, more to regulate the use of derivatives, more to make their use more transparent to regulators and to other players in the financial markets, more to include hedge funds within the regulated framework. We need tax reform to eliminate the tax advantages of debt funding over equity funding, including the tax advantages of negatively geared property investments.

It’s important to remember, however, that regulation offers no easy answers. The very reason we dismantled regulation and gave up public ownership of businesses in the 1980s and 90s was that they weren’t working well, partly because they were being widely circumvented. It’s now clear we went too far in that direction, but the answer isn’t to go to the opposite extreme. Rather, it’s to find a mid-way position where carefully judged regulation can keep things under better control. And here, in the example of Australia, the world does have proof that sensible, less-than-onerous regulation can keep the banks out of trouble, to their own benefit as well as ours.

I think it’s a mistake, however, to see the curbing of excessive executive salaries as central to the need for reform. To some extent it’s true that these salary packages were structured in a way that encouraged executives to take excessive risks with other people’s money. Something needs to be done about that. But the fact that these obscene salaries were grossly unfair - that they greatly overestimated the value of those executives’ contribution to their company’s success; that they were the product of market failure rather than market forces - shouldn’t cause us to overestimate their importance in the scheme of things. Say we were able to magically reduce all executive salaries to quite modest levels. When that saving was distributed between all the company’s many customers, the reduction in the prices they were paying would be fairly minor.

I believe we’ve been living through an era of heightened materialism where a revival of faith in the near infallibility of markets - the benefits of deregulation - has contributed to a breakdown in the norms of acceptable business behaviour. Business leaders now feel free to behave in self-aggrandising ways - the ruthless treatment of employees, customers and shareholders - that formerly were regarded as beyond the pale.

I believe it’s possible for us to return to a period of less self-seeking, more principled, ethical behaviour by our business leaders. This not an area that economists know much about - it requires an understanding of the drivers of human behaviour that’s outside their field of study. But social attitudes aren’t fixed; if they can change for the worse they can also change for the better. The economic and social devastation wrought by the global financial crisis - of which we’ve so far seen only the start - may be sufficient to motivate such a change of direction. And carefully judged reregulation may have a valuable part to play in that change.

Economists’ faith in rationality leads them to believe that to change people’s behaviour you must first change their attitudes. But psychology teaches that, in reality, the process works the other way: if by changing regulation you can oblige business people to change their behaviour, they will adjust their attitudes to fit their behaviour.

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