Wednesday, March 31, 2010

How should wellbeing be considered in providing policy advice?

Every public policy analyst should know that the correct answer to this question is that wellbeing should be considered by comparing outcomes under existing institutions with likely outcomes under the alternative policies that are being contemplated. Bonus marks should be awarded to analysts who suggest that the risks associated with alternative policies should also be considered. Any analyst who suggests that comparisons should be made between the outcomes of existing policies and an unachievable perfect system should be recommended for a career change e.g. writing speeches for politicians.

What are the likely outcomes that are most relevant to consideration of wellbeing? Most economists would probably answer in terms of comparing the consumption possibilities over time associated with the alternative policies being considered. They might talk about potential Pareto improvements or about benefits and costs, including non-market benefits and costs. They might also talk about discount rates and distributional considerations. But I think the answer most economists would give could be fairly easily translated into a comparison of consumption possibilities over time.

The Australian Treasury provides a somewhat different answer in its wellbeing framework for provision of policy advice. Among the five dimensions of its wellbeing framework the Treasury does include consumption possibilities, the distribution of consumption possibilities and the level of risk that people are required to bear . The other two dimensions, however, are the level of opportunity and freedom that people enjoy – which is listed first – and the level of complexity that people are required to deal with.

When I first read the document containing Treasury’s wellbeing framework the first thing that struck me was the number of references to Amartya Sen. My first thought was somewhat cynical. I thought that the Treasury was feeling unloved and had decided to change its public image. It seemed to me that Treasury was sending out a signal that it was prepared to entertain broader concepts of wellbeing in order to counter the argument that it had a narrow economic focus. The Treasury had, of course, had a broad concept of well-being for a long time - at least since it issued a paper in the 1960s discussing limitations of GDP measurement - but it had also earned reputation over a long period for provision of hard-headed policy advice that was often unpalatable to governments. Since this had encouraged the development of competing, more political, sources of advice it seemed to me that the Treasury had decided that it needed to soften its image in order to stay in the game.

However, having looked more closely at the Treasury wellbeing framework, I now think it may be worth considering seriously as a move to consider broad issues relating to opportunity and flourishing, such as the issues that I am interested in on this blog. (See, for example, ‘Is the good society a useful concept?)

The Treasury document explains the relevance of Sen’s work as follows:

‘The recent work of Sen has sought to incorporate aspects of freedom from both the utilitarian and classical liberal approaches. He argues that freedom does have a special status for wellbeing, beyond its impact on happiness or pleasure. However, he expands the focus beyond simply the rights available to individuals, to include their effective opportunities to exercise those rights, given their personal and social circumstances’.

Sen’s concept of freedom is defined by ‘our capability to live the kinds of lives we have reason to value’. The main problem I have with this concept of freedom is Sen’s incorporation of a role for public debate and democratic decision-making in determining what kinds of lives we have reason to value. It seems to me that Sen’s capability concept doesn’t deserve the freedom label because it contains a strong element of paternalism.

This does not mean, however, that I think Treasury is on the wrong track in identifying opportunity and freedom in its wellbeing framework. As Robert Sugden has recently suggested, it is possible to conceive of opportunity as resting on ‘an understanding of persons as responsible rather than rational agents’. Each individual viewing the world from the standpoint of her own desires and beliefs, accepting her own entitlements as given and accepting responsibility for her own actions can value expanded opportunities for herself. (‘Opportunity as mutual advantage’, Economics and Philosophy (26)).

I don’t see any reason why Treasury should have any difficulty with the idea that in discussing opportunity and freedom it should view individuals as responsible for their own actions, even though they do not always act as rational agents. This does not preclude consideration of the consequences of paternalistic interventions – it just helps avoid confusing the meaning of freedom.

I had also intended to include discussion of the complexity dimension in this post, but I will leave that for another day. (Postscript: The discussion continues here.)

Wednesday, March 24, 2010

Is Buddhism opposed to individualism?

“Searching all directions with one’s awareness, one finds no one dearer than oneself. In the same way, others are fiercely dear to themselves. So one should not hurt others if one loves oneself.”

Who said that? Was it John Galt? No, it was the Buddha. The quote is from the Pali canon. Thanissaro Bhikkhu tells the delightful story behind the quote as follows in an article entitled ‘Hang on to your ego’, reproduced on the blog ‘Integral Options Cafe’:

‘King Pasenadi, in a tender moment with his favorite consort Queen Mallika, asks her, “Is there anyone you love more than yourself?” He’s anticipating, of course, that she’ll answer, “Yes, your majesty. You.” And it’s easy to see where a B-movie script would go from there. But this is the Pali canon, and Queen Mallika is no ordinary queen. She answers, “No, your majesty, there isn’t. And how about you? Is there anyone you love more than yourself?” The king, forced into an honest answer, has to admit, “No, there’s not.” Later he reports this conversation to the Buddha ... . the Buddha’s response is quoted above.

I was interested in Thanissaro Bhikkhu’s discussion of examples in the Buddha’s teachings of tips on healthy ego functioning because it seems relevant to a question I have been thinking about, namely the extent that Buddhist views of ethics differ from western views. In a review article I wrote about gross national happiness (GNH) I related a statement by Karma Ura, president of the Centre for Bhutan Studies, that governments should ‘create conditions for happiness in which individual strivings can succeed’ to Robert Nozick’s view of the ethics of social cooperation. I suggested that conditions that enable individual strivings to succeed would correspond to Nozick’s most fundamental level of ethics – the ethics of respect – mandating among other things respect for the rights of others. Nozick views the ethics of respect as the foundation upon which higher levels of ethics, including caring for the needs of others, may grow. (References to my article are given in my last post).

Before reading Thanissaro Bhikkhu’s article I was wondering how I would respond if someone suggested that I have placed an inappropriate western interpretation on what Karma Ura was writing about when he referred to individual strivings. What if he was talking about individual strivings to overcome self-love? I am now more confident that when a Buddhist refers to individual strivings there is a good chance that whatever they are talking about is consistent with what a westerner might refer to as healthy individual functioning.

If the Buddhist view of individual strivings was fundamentally different to the western view I would expect this to be evident in the psychological well-being section of the GNH questionnaire. However, the questions seem to cover similar ground to comparable western questionnaires, including recognition of the importance of self-worth, self confidence, overcoming difficulties, facing up to problems and enjoying life.

Delving further into Buddhist views about individualism I was reminded that the Dalai Lama is skeptical about the importance of cultural differences between easterners and westerners on issues relating to emotional management and ethics. He suggests that there is a very strong element of individualism in Buddhism:

‘One of the four laws of karma is, if you do not create the cause you will not experience the result. If you have created the cause, you will definitely experience the result. All this is individual, so the experiences you have are tied into your individuality’ (as reported by Daniel Goleman in ‘Destructive Emotions’, 2003, p. 254).

None of this implies that Buddhists, or anyone else for that matter, should be in favour of an atomistic individualism. I discussed why here last year.

Saturday, March 20, 2010

Are Bhutanese people grossly happy?

Photo by Suzy Bates

Just about everyone who has heard of Bhutan would know that this tiny country – with population of about 800,000 in an area similar in size to Switzerland - has adopted Gross National Happiness as a national objective. The objective apparently has its origins in the 1970s in an assertion by the former king of Bhutan, Jigme Singye Wangchuck, that ‘Gross National Happiness is more important than Gross National Product’. Despite the origins of gross national happiness (GNH) in a play on words it is now recognized as an objective in Bhutan’s constitution.

I wrote a literature review article about GNH last year for Asian-Pacific Economic Literature (Vol 23 No 2). The article considers whether aggregate happiness is an appropriate policy objective and the advantages and disadvantages of various well-being indicators. (A policy brief summarising the article is available here; the final version of the article can be purchased here; and a draft is freely available here.) My conclusions, very briefly, were that it is possible to make sense of GNH as a policy objective if we think in terms of creating conditions in which individual strivings can succeed; that there are problems with happiness surveys and with composite measures of well-being (such as the human development index) as well as with GNP (and GDP). I acknowledged that the recently developed approach to GNH measurement in Bhutan is an impressive contribution, but my bottom line was that the best approach to well-being assessments is to gather together a suite of relevant indicators.

How is GNH measured in Bhutan? A few years ago the official answer was that happiness was measured by looking at the breadth of the smiles on the faces of the people. However a more quantitative and technical approach to measurement has recently been adopted. The underlying philosophy seems to be that a range of minimum conditions must be met before a person can be considered to be happy. The methodology involves attempting to measure the extent to which the attainments of members of the population approach a ‘sufficient level’ in nine dimensions: psychological well-being, time use, community vitality, diversity and resilience of cultural traditions, health, education, environment (perceptions and ecological knowledge), living standards and perceptions of governance. The methodology gives greater weight to large deficits in particular dimensions than to small deficits in several dimensions.

So, how happy are the people of Bhutan? Unfortunately, since Bhutan is the only country attempting to measure GNH, we can’t use the GNH methodology to compare the well-being of people in Bhutan and other countries. The initial survey results enable comparisons to be made between people in different regions in Bhutan – which may be useful for policy purposes within Bhutan – but is not helpful in making international comparisons.

In any case, I think the best way to assess the well-being of the Bhutanese people is to use a suite of indicators to look at how they are faring by comparison with India, their big neighbour. For example:

• GDP per capita in 2007 was $US 4,837, 75% higher than in India;

• the growth rate of real per capita GDP was 7.9% per annum over the decade to 2007; that for India was 4.9% per annum;

• average life expectancy is only slightly higher than in India - 65.7 versus 63.4;

• adult literacy is lower than in India - 53% versus 66%;

• poverty rates are much lower in Bhutan than in India – 26% with daily income below $1.25 versus 42% for India;

• average life satisfaction in Bhutan (according to nef estimates) is about 11 per cent higher than in India.

It seems to me that even though the people of Bhutan have plenty to smile about there is still room for improvement in some aspects of their well-being e.g. health and education.

Friday, March 12, 2010

Is there a progress paradox?

In his book, ‘The Progress Paradox’ (2004) Gregg Easterbrook suggested that if his readers’ great-great-grandparents materialized in the United States of the present day they might say that it is the realization of utopia, ‘except for the clamour and speed of society, and trends in modern music’ (p. xv). The supposed paradox is that people who live in the U.S. (and other countries with similar standards of living) ‘live in a favored age yet do not feel favored’ (p. xx).

The sub-title of Easterbrook’s book is ‘How life gets better while people feel worse’. His account of how practically everything in our lives has been getting better seems to me to be comprehensive and unassailable. However, I don’t think his suggestion that ‘people feel worse’ while life gets better stands up to scrutiny.

Easterbrook claims:
‘Today Americans tell pollsters that the country is going downhill; that their parents had it better ; that they feel unbearably stressed out; that their children face a declining future ...’ (p. xv).
Let us look at each of the claims made in the quoted passage, in turn:

Have Americans been telling pollsters that the country has been going downhill while their own lives have been getting better? The latest Gallup poll appears to provide support for that proposition: only 19 percent of Americans are satisfied with ‘the way things are going in the United States at this time’. But this data is highly volatile. Since this poll started in 1979 there have been three other periods of sub-20 percent satisfaction ratings - all of which have coincided with difficult economic times. In 1999, after several years of strong economic growth, about 70 percent of Americans were satisfied with the way things were going. The evidence does not support the view that Americans have been telling pollsters that the country has been going downhill during periods when their own lives have been getting better.

Have Americans been telling pollsters that ‘their parents had it better’? No. In surveys conducted by the Pew Research Centre nearly two-thirds of respondents say that their standard of living exceeds that of their parents at the age they are now. The proportions have been similar in all survey years since 1994. (Chart here.)

Have Americans been telling pollsters that ‘they feel unbearably stressed out’? Not really. In a 2008 survey, conducted by the Pew Research Centre, 36 percent said they experience stress frequently, a similar proportion said they experience stress sometimes and the remainder claimed that they experienced it rarely or never.

Have Americans been telling pollsters that ‘their children face a declining future’? No, at least not in the survey results I have seen. Research by the Pew Research Centre suggests that the number of Americans who consider that the future will be better than the present substantially exceeded those who consider it will be worse in all years surveyed from 1964 to 2006. It would not be surprising if these numbers have turned around since the global financial crisis – but that could hardly be attributed to people feeling worse while life gets better.

In my view Easterbrook’s progress paradox is a myth.

If there is a progress paradox in the U.S. it relates to the happiness of particular groups rather than to the whole population. For example, there is a puzzle as to the causes of declining female happiness, which is discussed in a recent article by Betsey Stevenson and Justin Wolfers.

There has also been a declining trend since the 1970s in the percentage of those who identify with the political left who are ‘very happy’. It might be possible to argue that this is a progress paradox if one could believe that self-styled progressives are actually in favour of progress.

Leaving that aside, Gregg Easterbrook’s thoughts about what he calls complaint proficiency might provide an explanation for the apparent decline in happiness of those who identify with the political left:
‘About many things, especially injustice, we should complain. But we practice complaining so much, and on so many minor issues, that we become too proficient: And then complain more, if only because we are confident we are good at it. Expressing gratitude or appreciation does not come easily to us because we practice it so little’ (p. 118).

Sunday, March 7, 2010

Is democracy akin to a process of scientific experimentation?

In his book, ‘The Science of Liberty’ (2010), Timothy Ferris argues that liberal democracy and science are similar in important respects:

‘Both start with tentative ideas, go through agonies of experimentation, and arrive at merely probabilistic conclusions that remain vulnerable to disproof. Both are bottom-up systems, constructed more from individual actions ... than from a few allegedly impervious precepts. A liberal democracy in action is an endlessly changing mosaic of experiments, most of which partially or entirely fail’ (p 13).

Ferris acknowledges that these failed experiments make the democratic process frustratingly inefficient but he argues that the great strength of liberal democracy is its capacity to sustain the experimental process.

I think this view of liberal democracy as akin to a scientific process is a desirable ideal rather than a description of how democratic systems actually work. Before elaborating, however, I would like to praise this book for shedding light on the relationship between liberty and science. With the benefit of having read the book, I think it is valid to depict the relationships between liberty, economic progress and the advance of knowledge as shown below.

If I had drawn such a diagram before I read the book I doubt whether I would have thought to draw an arrow running directly from liberty to advance of knowledge. The author’s main achievement, to my mind, is in describing the historical relationship between liberty and the advance of knowledge. The book illustrates that, to use the authors words ‘science demanded liberty and demonstrated its social benefits, creating a symbiotic relationship in which the freer nations were better able to carry on the scientific enterprise, which in turn rewarded them with knowledge wealth and power’ (p 7).

Before reading the book I was aware of some of the relevant history, such as the Vatican’s attempts to suppress Galileo’s ideas and the negative influence of Lysenko and communist ideology on the biological sciences and agricultural production in the Soviet Union. At the same time, however, I tended to think of the advance of knowledge as something that occurs exogenously with the passage of time - as it is often modelled in the economic growth literature – rather than as a product of liberty.

One of the most interesting things I learned from the book is the extent to which scientifically-minded individuals have been at the forefront in promoting liberty. Isaac Newton was not only a scientist but also a strong proponent of liberty and a close friend of John Locke. Thomas Paine, Benjamin Franklin and Thomas Jefferson, who played large roles in inciting and carrying out the American revolution, were amateur scientists. Thomas Jefferson apparently ranked his service as first head of the U.S. Patent Office as comparable with having written the Declaration of Independence and been twice elected president.

In my view Ferris makes a strong case that the U.S. founding fathers deliberately adopted a structure of government that would sustain an ongoing series of policy experiments, rather than attempt to guide society towards a specific goal (p 102). By contrast, the French revolutionaries assumed that the point of the revolution was to implement a particular philosophy – stemming from Rousseau’s view that the power of the state should be used to impose equality (p 120). The American revolution resulted in an imperfect system of government but the French revolution resulted in a major disaster for the people of France.

As I see it the main problem in viewing liberal democracy as akin to a process of scientific experimentation is the weakness of democratic processes for ending policy experiments that partially fail. Elections seem to be a reasonably effective way for citizens to avoid being governed by despots, to get rid of politicians who are obviously corrupt and to experiment with new policies. However, even policy proposals that are viewed as radical reforms rarely involve more than a tweaking of the failing policy experiments that already exist.

The mosaic of policy experiments being conducted under liberal democracies at any time seems to me to be much more path dependent than scientific research. Unproductive avenues of research are replaced much more readily than government programs that are failing. The best we can hope for from policy reforms is that the tweaking of the existing policy experiment will set in train an evolutionary process that will eventually result in better outcomes.

The increasing involvement of the federal government in funding of hospitals in Australia illustrates the processes involved. The basic problem prior to federal intervention was ensuring appropriate access to hospital services for people who did not qualify for free access under the means tests applied by the hospitals and state governments. Some policy experimentation by the federal government was probably inevitable to attempt to solve the perceived problem – whenever the states experience a funding problem a substantial proportion of the Australian electorate expect the federal government to ‘do something’.

There were basically two kinds of policy experiment that might have been conducted. Under the first approach the federal government would offer to fund hospital care for those who claimed to be unable to pay for insurance, using the federal tax system to recover funds from those who were falsely claiming financial hardship. Under the second approach, the federal government would give funds to the states on condition that the state governments solved the means test and access problems. The second approach was adopted and we ended up with free access to basic hospital care for everyone who is still alive when they reach the top of the waiting list – as well as confusion of responsibility for service delivery, with state governments blaming inadequate federal funding for ongoing problems.

If the democratic process in Australia was akin to a process of scientific experimentation it seems reasonable to suppose that the current hospital funding experiment, that had its origins in the 1940s, would have long been abandoned in favour of a different kind of experiment more in tune with the market realities. Instead, what we have is a federal government proposal to tweak federal funding – to make it more closely related to services actually provided – being put forward as a major reform initiative. I think the most we can hope is that if it is implemented this proposal might possibly push the evolution of hospital funding in a more sensible direction.

Similar problems of path dependency are evident in the policy experiments in many different policy areas in Australia and in many policies adopted in other liberal democracies. The world would be a better place if democratic processes were more like the processes of scientific experimentation.