Cartels and price fixing

23 Sep 2010 at 15:05

Trevor

Cartels and price fixing, Ethics, Trust

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Free markets ConDem-ed

Vince Cable tells the LibDem conference that “The government’s agenda is not one of laissez-faire” because “Markets are often irrational or rigged”, and that capitalism often “kills competition” rather than nurtures it, and he is instantly denounced by the CBI. His comments are “odd” and “emotional”, says CBI DG Richard Lambert.

But didn’t the financial crisis reveal rather obviously that ‘rigged’ and ‘irrational’ (not to mention ‘odd’ and ‘emotional’, come to think of it) are among the terms that describe rather well much of the banking behaviour that got us all where we are today, ConDem-ed to deep public spending cuts and staring down the barrel of a double-dip recession?

And must one assume that Mr Lambert – along with Mr Digby-Jones, and Mr Buik, and those ‘analysts’ at Capital Spreads, and Sir Moir Lockhead, and Mr Exley, and the spokesperson from the British Bankers Association – doesn’t read the press releases issued by the Office of Fair Trading (the what!?) and the EU competition commissioner?

Here’s a taste of what he’s been missing:

Last week the OFT announced that it has launched both criminal and civil investigations into suspected price-fixing by major lorry manufacturers in the UK. The companies include Mercedes-Benz, Scania, MAN, Iveco, Renault Trucks and Volvo Trucks.

Back in June the European Commission fined seventeen bathroom equipment makers a total of 622 million euros (£510 million) for price-fixing. The companies included Ideal Standard of the US (fined 326 million euros). The cartel operated for 12 years, covered sinks, baths and taps, and had rigged prices in Germany, Austria, Italy, Belgium, France and the Netherlands.

In May nine computer chip makers were fined 331 million euros (£283.1 million) by the EU for price fixing. The companies involved were Samsung, Hynix, Infineon, NEC, Hitachi, Mitsubishi, Toshiba, Elpida and Nanya.

This time last year a group of plastics companies was fined 173 million euros (£156 million) by the European Commission for price-fixing and organising a market-sharing cartel. The conspiracy included Akzo, Ciba and Elf Aquitaine.

At about the same time six makers of power transformers were fined a total of 67.6 million euros (£62.6 million) for artificially raising prices by agreeing not to sell in each other’s markets. ABB (Switzerland), Alstom and Areva T&D (France), and Fuji Electrics, Hitachi and Toshiba (Japan) were all fined; Siemens (Germany) took part but escaped a fine.

Earlier, in July 2009, energy giants E.On (Germany) and Gaz De France (GDF) Suez were each fined 553 million euros (£477 million) for carving up European gas markets (since 1975!).

And in the May computer chipmaker Intel was fined 1.06 billion euros (£948 million) for a five-year campaign (ended 2007) in which it paid PC manufacturers and a retailer to favour its chips over those of competitor Advanced Micro Devices (AMD).

The Intel fine dwarfed even the 899 million euros (£680.9m) penalty levied on Microsoft a year or so earlier when the company failed to comply with a 2004 ruling that it had abused its dominant market position by not providing key code to rival software makers. “Microsoft was the first company in 50 years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision,” said competition commissioner Neelie Kroes.

In November 2008 four automotive glass firms were fined a total of more than 1.3 billion euros (£1 billion) for rigging their market between 1998 and 2003. The four companies were France’s Saint-Gobain, the UK’s Pilkington, Japan’s Asahi and Belgium’s Soliver.

But of course it was all just bluster in the end, says Robert Peston at the BBC:

“I think it was when the business secretary attributed to Adam Smith – father of market economics – the notion that “capitalism takes no prisoners and kills competition where it can” that Richard Lambert, director general of the CBI, recognised that Mr Cable was in fact wielding a loaded olive branch rather than a Kalashnikov.”

If Peston is right, and Lambert did not recognise the allusion, we should not be too surprised. Adam Smith’s writings on moral philosophy are strangely neglected by many free-marketeers.

Financial capability

28 May 2010 at 10:52

Trevor

Financial capability, Mis-selling, Numeracy

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Sub-prime

New research by Professor Stephan Meier at Columbia Business School shows that sub-prime mortgage defaulters are also more likely than the rest of us to have low numeracy and financial planning skills. Borrowers with low scores in a basic, five-point financial capability test are twice as likely to be in trouble with their mortgage repayments (24% vs. 12% of respondents with the best scores), and three times as likely to be facing repossession (21% vs. 7%).

Here are the questions Prof. Meier asked:

“1. In a sale, a shop is selling all items at half price. Before the sale, a sofa costs $300. How much will it cost in the sale?

2. If the chance of getting a disease is 10 per cent, how many people out of 1,000 would be expected to get the disease?

3. A second hand car dealer is selling a car for $6,000. This is two-thirds of what it cost new. How much did the car cost new?

4. If 5 people all have the winning numbers in the lottery and the prize is $2 million, how much will each of them get?

5. Let’s say you have $200 in a savings account. The account earns ten per cent interest per year. How much will you have in the account at the end of two years?”

This is not simply a matter of poor people with limited educations getting in over their heads. When Maier’s study corrected for factors like social class, education and type of loan agreement it made very little difference: poor budgeting skills still predicted higher rates of default. As he says on the Columbia web site: “Yes, there’s a much lower probability that a person with a college degree can’t divide 300 by two … But even people with college degrees can have difficulty dealing with numbers.”

BBC Radio 4 presenter Winifred Robinson illustrated this point charmingly on air when she nervously tried to answer Maier’s five questions on Wednesday’s (26 May) edition of You and Yours . All went well until number four – 20% of two million? “I need a piece of paper” she wailed (before coming up with the right answer). Bless.

The gap between the economic and financial understanding of even a well-educated person like Winifred Robinson and the demands of informed citizenship in the modern world – and perhaps especially, but by no means exclusively, participation in the personal financial market – is larger than public policy has so far found the courage to admit. That surely hands a crucial advantage to those who actively seek to defraud us or to profit from our confusion.

Financial capability

13 Apr 2010 at 19:32

Trevor

Financial capability, Numeracy

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It’s all “some beans” to me

In his new book, Adventurez  Alex Bellos sheds fascinating light on the gap between our natural mathematical skills and what’s demanded of us in the modern world; a matter very dear to my heart and which should be occupying governments and financial regulators too.

Field research in the Amazon rainforest, performed by French linguist and anthropologist Pierre Pica, has found that our ‘natural’, instinctive grasp of quantity (ie, size, volume, distance) can differ greatly from what modern formal arithmetic requires of us.

By studying the remote Munduruku, Pica has sought to isolate whatever instinctive grasp of number humans might have before we begin to learn and assimilate the huge edifice of modern arithmetic and mathematics.

And what did he find?; that when we think quantitatively we naturally think in ratios. When asked to place the numbers one to ten along a line, most of us space them at even intervals. Not the Munduruku. They think that the intervals start large and become progressively smaller as the numbers increase. In other words, and to use the language of modern maths, they naturally visualise quantities along a logarithmic scale rather than the linear one most of us are used to. This also happens to be what kids do before we get them trained (according to Robert Siegler and Julie Booth at Carnegie Mellon University).

How come? The Munduruku (and kids) seem to be making decisions about where the numbers should lie by estimating ratios between the amounts. This makes it perfectly logical (whatever that means) for the distance from one to five (which is a five-fold increase) to be much longer than the distance from five to ten (which is only a doubling). Pica thinks this way of understanding quantities, using ‘guesstimated’ ratios, is a universal human intuition evolved as part of our basic cognitive toolkit. After all, in the time before accountants what mattered was not precisely how big, fast, long, numerous or high something was, but approximately which was the biggest, fastest, highest, longest or most numerous. In a sense, then, our ancestors lived (and the Munduruku still do live) in a binary world of more/less, bigger/smaller, longer/shorter, higher/lower, and since those societies lasted eons, but modern numbers are no more than 10,000 years old, we all carry that logarithmic instinct with us to this day.

Not convinced? Bellos provides us with a neat example involving perspective …

… if we see a tree 100 metres away and another 100 metres behind it, the second 100 metres looks shorter. To a Munduruku, the idea that every 100 metres represents an equal distance is a distortion of how he perceives the environment.

… and another one which better illustrates the potential consequences for how we apprehend quantities and make decisions in a world dominated by big, big numbers …

… we can all understand the difference between one and 10. It is unlikely we would confuse one pint of beer and 10 pints of beer. Yet what about the difference between a billion gallons of water and 10 billion gallons of water? Even though the difference is enormous, we tend to see both quantities as quite similar – very large amounts of water. Likewise, the terms millionaire and billionaire are thrown around almost as synonyms – as if there is not so much difference between being very rich and very, very rich.

Still not convinced?  Remember when Blackadder tried to teach Baldrick to count using dried beans?

I rest my case. What do you think?

Serious Fraud Office

07 Apr 2010 at 16:42

Trevor

Ethics, Fraud, Serious Fraud Office, Trust

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Has staff morale collapsed at the SFO?

It was a nasty case of déjà vu in WC2 this time last week. Another big leaving do at the Serious Fraud Office packed the ground floor of the Apple Tree pub in Farringdon, barely 100 yards from the fraud prosecutor’s Elm House headquarters. Among the leavers this time was senior financial investigator and former acting assistant director Paige Rumble. That there is no place for Paige in the new and improved SFO is very much a sign of the times, and a worrying one.

This time last year we were all in the basement of the Bung Hole Cellars on High Holborn. The bunker-like subterranean gloom suited the occasion perfectly. Very nearly the whole SFO board had been summarily dismissed; people like Helen Garlick, the prickly but brilliant head of the BAE investigation, and Graham More, who had given up a doubtless lucrative career in private practice to lead the division responsible for all three of the SFO’s huge, ‘blockbuster’ cases.

That night the fear, anger and confusion was palpable. Almost no-one had a good word to say about the new management team or its ‘vision’. The exception, I recall, was Paige. She’d already met the soon-to-be appointed chief operating officer and been impressed by her. Certainly there had been big mistakes, but the SFO needed a shake-up and it was too soon to reject the new director’s ideas. I’m still hopeful, said Paige.

That’s vintage Paige. Clear-headed, professional, measured. With a law degree from Trinity College, Oxford and chartered accountancy training with Grant Thornton, she used to be considered the very personification of the SFO model; expert legal and accounting skills brought together in a single, fearsome, fraud-fighting force. Her outstanding casework and trial testimony played a key role in putting Virendra Rastogi, leader of the £350 million Allied Deals conspiracy, behind bars for almost a decade.

When I interviewed Paige for the SFO’s 2005-06 annual report she told me about her original job interview. The panel wondered if she had any questions of her own. Most candidates take the opportunity to ask when they’ll know the outcome. Not Paige. “Do you get much political interference?” she asked. The question provoked gales of laughter from the three panel members and an assurance that “even if we did, we’d ignore it”. (Those were the days.) For Paige it was exactly the right answer. She was hooked for a decade.

She briefly found favour with the new regime and was elevated to acting AD, a position commensurate with her great skill and experience. But Paige is a woman of principle who takes her role as a public servant very seriously indeed, and I am told that there is little room for the independent-minded in Elm House these days. By the time the AD’s job was to be filled permanently, earlier this year, Paige wasn’t even interviewed.

In December 2009 the Cabinet Office published its baseline assessment capability review of the SFO. It found the organisation “well placed” in just two of the ten assessment points. In another four it was classified as in need of “urgent development”. After almost two years of upheaval the review team still found that: “… staff are not engaged in the new change programme and do not feel valued by the organisation.”

I wonder why? In the Apple Tree pub – with perhaps half the SFO’s staff squeezed into the downstairs – the talk was not of ‘engagement’ but of sackings by email, case controllers learning that their cases have been closed only when the news flashes up on the office intranet, teams working pointlessly for weeks because no-one told them their case had been plea-bargained away to a trifling fine, and unproven probationers promoted over the heads of their expert lawyer/managers.

All gossip you say? Let’s hope so. For ten years I worked with these people, interviewing them in detail about their work and their motivations. I found them to be talented, highly motivated and utterly committed to the mission of the SFO. But now? I cannot recall the last time I saw so much resentment and despondency among the past and present professional staff of so important an organisation. And what if the gossip is true? Just as fraud, deception, greed and wilful corporate mismanagement reach epidemic proportions – all but crippling the UK economy and undermining public services – we are gifted an under-funded, under-staffed fraud prosecutor, demoralised from within by a callous management seemingly more interested in chasing cash than convictions?

Say it ain’t so.

Plea bargains

29 Mar 2010 at 09:46

Trevor

Corruption, Ethics, Serious Fraud Office

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SFO has no power to do BAE-style plea bargains

The broader legal implications of the Innospec plea bargain (see below) so troubled the original trial judge, Judge Rivlin, that Lord Justice Thomas had to be called in to sort matters out. The primary concern was whether or not the SFO’s current director, Richard Alderman, had been acting beyond his legal powers in negotiating the deal. The SFO is uniquely constituted as both investigator and prosecutor rolled into one. Now, in deciding what is, and is not, a suitable penalty for corruption, Mr Alderman seems to have  taken on an additional role, and one normally reserved for the judiciary.

When a clearly discomfited Lord Justice Thomas accepted Innospec’s guilty plea on 18th March at Southwark Crown Court, we were promised a full clarification of the legal position in a week or so. Now we have it, and evidence of Lord Thomas’s continuing discomfort  punctuate its 14 pages.

On the key issue, he finds that “the Director of the SFO had no power to enter into the arrangements made” and that “no such arrangements should be made again”. Sentencing must remain a matter for the judiciary so that the basis of any plea can be rigorously scrutinised in open court – “in the interests of transparency and good governance” – to ensure that it truly reflects the public interest.

Lord Justice Thomas shares the popular feeling that $12.7 million is a paltry fine given the severity of the offending. He describes it as “wholly inadequate”, agreeing to it only with “considerable reluctance”. Whilst accepting the SFO’s submission that the company can afford no more, he describes it as “a small fraction of the penalties that properly could be imposed”. Something closer to $100 million (the US minimum for these crimes) would have been his starting point, and even that would have been “quite separate from and in addition to depriving Innospec Ltd of the benefits it had obtained through its criminality” which “may have been as high as $160 million”.

Indeed, Lord Justice Thomas makes it clear that had he not been convinced that Innospec’s new management had put their predecessors’ corrupt ways behind them, he would have had no compunction in levying a fine that might have driven the company out of business.

The consequences for the SFO’s thorny BAE prosecution, which has yet to be put before a judge, are obvious. The BAE ‘deal’ (capitulation might be a more accurate term) reduced BAE’s fine to just £30 million* for “accounting irregularities”, from the £300-£500 million the SFO was reported to be seeking. Now if BAE gets off so lightly, the world will want to know what happened to Lord Justice Thomas’s injunction “never again”.

It would be nice to think that if corrupt corporate elites thought that they could just ‘draw a line and move on’ (cost-effectively) with a perfunctory mea culpa and a risible fine, they must now think again. That said, if the SFO’s promises of leniency are seen to be legally shaky, and given the limited threat offered by the fraud prosecutor’s dwindling resource base, the supply of ‘co-operators’ would soon dry up as corrupt companies preferred to gamble on their day in an English court, a day which, as BAE can tell them, will probably never come.

So, what next? The Court of Appeal, presumably. Or a change to the prosecution rules. Perhaps BAE can call in one more favour from Number 10.

Plea bargains

23 Mar 2010 at 16:26

Trevor

Corruption, Ethics, Serious Fraud Office

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SFO breaks poisonous      new ground

The Innospec judgement breaks new legal ground; the first worldwide corruption settlement with a company that has agreed to cooperate in exchange for leniency. Well perhaps some ground should never be broken. This case reads like an insult to our common humanity and another encouragement to those in business who prefer to play the game amorally and keep their fingers crossed.

For those who have missed it, the case involves sales to Indonesia of a lead-based petrol additive (tetraethyl lead or TEL) long banned in Europe and the US because of the terrible damage it does to children’s brains. Innospec has pleaded guilty to paying $12 million to agents who then bribed Indonesian officials. But this is no run-of-the-mill commercial bribery case. The money was paid not merely to secure sales of this poison – $277 million of them – but to persuade Indonesian lawmakers to shelve their ‘Blue Sky’ programme and so delay the introduction of lead-free petrol by six years.

Nor are events in Indonesia necessarily the limit of the company’s corruption. The SFO says this: “… during the course of the internal investigation, indicators have emerged to the effect that corruption may have been practised in other jurisdictions.” Saudi Arabia, Venezuela and South Africa are the other major markets for tetraethyl lead.

Innospec is thought to be the last company to manufacture this evil stuff and because its use is banned in most countries it has to be made in an obscure, unregulated corner of the world. Sorry. My mistake. I meant Ellesmere Port.

So, a British company manufactures known pollutants in the north of England, then pays corrupt foreign elites  to systematically harm the health and welfare of their peoples over many years, and what price do the English courts put on all those blighted lives?

Less than £8.5 million ($12.7 million).

That is not to say these deals are popular among judges, lawyers and investigators, as events demonstrated. A Law Lord had to be called in to take on the case after the original trial judge, Judge Rivlin, attacked the plea bargain deal as “deeply wrong” given such “massive criminality”. Lord Justice Thomas described cases of this type as being about the very rule of law and democracy and a “matter of seriousness which is unimaginable”. Those who corrupt foreign government officials “have engaged in criminality of the most severe kind“ such that a “seismic change” is needed to make massive fines possible. He also rebuked the SFO for its “distasteful” plan to issue a joint press release with the company, saying that it suggested white-collar criminals were treated differently from other kinds of wrongdoers.

Imagine.

Even the shabby-but-popular ‘everybody’s doing it’ defence seems thread bare in this case. Innospec is a monopoly supplier of TEL, so where is the competitive justification? And yet, just as in the Balfour Beatty and BAe cases, the penalty is pathetic. The fine represents less than 5% of the company’s TEL sales to Indonesia between 2000 and 2006. There is no deterrent effect in fines so small for crimes so serious and cynical.

And why have no executives been brought to book? That individuals knew full well what they were involved in is beyond doubt. The SFO has executive emails to prove it. Why should businessmen be able to evade their personal responsibility simply by hiding behind a corporate persona? How does this differ morally from the once popular “I was only following orders”?

As many a Big Four partner will tell you, the corporates love the ‘new look’ SFO and it’s ‘efficient’, negotiated ways of tackling corporate fraud and corruption. As one put it to me recently: “they just want to draw a line and move on”. Not exactly the language of moral engagement and contrition, is it? Sounds more like thinly veiled denial to me.

Mis-selling financial products

14 Mar 2010 at 21:28

Trevor

Financial capability, Fraud, Mis-selling

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Know thyself

Hector Saints, outgoing director of the Financial Services Authority, has admitted to the BBC that the FSA should have stepped in earlier to prevent the past mis-selling of financial services products. I’ll say! For the uninitiated, ‘mis-selling’ is the industry euphemism for a fraud so horribly widespread and commonplace that the regulator and the criminal justice system simply cannot look it in the eye for fear that they will be turned to stone.

The new noises are reassuring, as they have tended to be since Thursday 16 October 2008 (just after the horse had bolted), but I doubt the FSA will go far enough when the time comes, partly because it will start from the wrong place. The real problem with people and money is not a shortfall in general maths skills, but our inherent cognitive weaknesses when it comes to all decision-making – weaknesses that are as human (and therefore as ubiquitous) as opposable thumbs.

In July 2008 a report for the FSA by three economists at the London School of Economics, reviewed the deep vein of research on human cognition as it applies to financial decision-making. The report cast doubt on the use of  classroom-based education and training to raise basic numeracy and financial capability. It also revealed why dealing with your high street bank and being rooked by a full-on fraudster can feel so uncannily similar.

Briefly, the report found that “people’s financial behaviour may primarily depend on their intrinsic psychological attributes rather than information or skills or how they choose to deploy them”. The authors concluded that financial capability initiatives which are designed to inform and educate – in other words pretty much every one conducted so far by the government, the FSA and the industry – have little impact.

The principal problem apparently lies in “a collection of deep seated cognitive biases” that all people share to varying degrees. These include old friends such as procrastination, creating strict but artificial budgets covering different kinds of spending and saving, information overload, incorrect inferences, focusing on inappropriate or unimportant data, over-deliberation and unjustified optimism. Worryingly familiar, aren’t they?

The gap between the economic and financial understanding of even a well-educated person and the demands of informed choice in the modern personal financial market is larger than we have so far found the courage to admit. If the behavioural economists and economic psychologists are right, and the problems many of us have with protecting ourselves from financial deception (wherever we find it) stem not from laziness long ago in 4B but from naturally occurring cognitive weaknesses, then we have all got a lot of waking up to do.

Come to think of it, didn’t the scale and intractability of the numeracy skills shortfall seem to point to something systemic, rather than individual, all along?

Ethics in public life

14 Mar 2010 at 20:58

Trevor

Ethics, Trust

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The non-dom cash question

Michael Ashcroft deceives his friends, enemies and tax payers alike but investigating parliamentarians of both main stripes are fumbling even this open-and-closed ethical case.

Labour members of the public administration select committee are probably twisting the knife with some glee, as alleged; their Conservatives colleagues are probably glad to have been handed an excuse to avoid discussing the thing at all. All that’s missing are the school uniforms. No wonder MPs passed-up the opportunity to judge their fellows and sent them to Southwark Crown Court instead. On this evidence it would have been a fiasco.

How ethically difficult can the Ashcroft case be for any MP? His good friend William Hague has described a serious breach of trust, both public and private. Ashcroft clearly misled (at the very least by ommission) past, present and future leaders of this country (including his own party leader) in his pursuit of a platform in parliament without the inconvenience of paying proper UK taxes or standing for election. I doubt even he thinks these dealings were truly above board; merely ‘acceptable’ in the circumstances, or perhaps ‘defensible’?

That the Michael Ashcrofts of this world seem to care so little about wider society’s opinion of them is unpleasant  but hardly surprising; public trust is the lifeblood of our communities, not theirs. The collective institutions in which the majority of us place our trust daily – our public schools and hospitals, our parliament  – they have no need of. In that sense they do not have a full stake in our shabby, cash-strapped society and nor do they want one.They can easily buy their own superior version.

The general public still does not know who to be more angry at, politicians or bankers. They can’t decide because the essential complaint is the same: we trusted you and you cheated us. It’s a complaint based on the rather obvious absence of something that is supposed to be a great British virtue and one which is also completely missing from the Ashcroft case too. Fairness.

The numbers matter

10 Mar 2010 at 15:17

Trevor

Financial capability, Numeracy

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Can’t live with ‘em …

Today it’s super-grocer Tesco moaning about poor teenage numeracy and literacy. Last week we heard that a decade of trying to improve numeracy in schools had been self-sabotaged by the government introducing more education initiatives than schools could cope with. Are they by any chance related?

Can’t say I’m losing sleep over whether Tesco’s mega profits take some tiny hit just because it can’t find enough compliant teens. But I do care about the teens themselves. Like it or not, we live in a society that fetishises business and finance. What George Orwell might have called moneyspeak (too much of it is in fact ‘doshtosh’ if you ask me) is now the lingua franca of most public debate and media coverage. But innumerate kids become grown-ups who are barely competent as citizens in an ‘enterprise society’. Without a certain minimum level of numeracy and literacy they quickly become not only victims-in-waiting for the likes of Kevin Foster, but dupes-in-the-making for the next government-sponsored financial ‘scandal’, be it the wilful mis-selling of complex products like personal pensions and payment protection, or the recent ponzification of our high street banks.

Between 2001 and 2007 the government spent around £5 billion improving the basic literacy and numeracy of 2.25 million adults in England. In 2006 researchers for the Financial Services Authority still found that: one in ten failed to read a bank statement balance; one in seven couldn’t say if that balance was enough to cover a particular direct debit; one in ten didn’t realise that £30 is more than 10% of £250; and one in five couldn’t work out the affect of price inflation on the value of savings.

In a UK financial services market with some 8500 mortgage products, 4000 savings accounts and 2000 retail investment products (2008 figures from HM Treasury), such people are being expected to cook dinner for the Queen when they can’t even boil an egg*.

More of the same – more products, more complexity, more remedial maths – doesn’t seem like much of an answer. Could it be that the government, Tesco, and the FSA’s financial capability police are all barking up the wrong cognitive tree? [More on this soon.]

*Sorry if that sounds like a reality TV pitch

Who can you trust?

09 Feb 2010 at 17:03

Trevor

Fraud, Trust

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Imagine this

You are trying to decide whether someone (a business associate, a date, a salesman, it doesn’t matter) can be trusted with an important part of your life. You are allowed to ask them just one question. What would it be?

In his book Born to be Good, neuropsychologist David Keltner gives this advice: ask them to tell you about their most embarrassing experience, then watch carefully as embarrassment “ripples” across their face.

But isn’t embarrassment about only the most superficial parts of our lives; things like being polite, having good manners, leaving  our nose alone in public?

No, says Keltner. The visible signs of embarrassment  are fleeting indications of how much that person respects the judgement of others*. An averted gaze, a head turn, a coy smile, these things reveal how much the person truly cares about the rules that bind us all together, both in our one-to-one relationships and in society at large. They are “potent non-verbal clues … to an individual’s commitment to the moral order”.

* If this sounds like a few lines from the US TV series Lie to Me that’s because Keltner did postgraduate work with Paul Ekman, whose pioneering studies of facial micro-expressions inspired the  programme (and much more, of course).