Tuesday, January 31, 2012

Where is Ross Gittins coming from?

A few days ago, Evan, a person who comments on Jim Belshaw’s blog, wrote: ‘I think Ross Gittins is a good model for how to write on economics’. That was in response to a discussion Jim and I were having about Robert Frank’s ‘The Darwin Economy’ and the difficulty that we were experiencing in communicating on the issue of whether the ideology of the market is having too much influence in modern society. At least, that is my take on what the discussion was about. Jim and I agreed with Evan that Ross does write well.

It occurred to me soon afterwards that I have been ignoring Ross Gittins’ views on happiness for too long. Ross is the economics editor of the Sydney Morning Herald (SMH) and the leading economic journalist in Australia writing about happiness. When people have asked me what I think of Ross’s views on happiness I have refrained from saying much on the grounds that I rarely buy the SMH and haven’t read many of Ross’s columns in recent years.  I can’t use the excuse any longer, however, because I have discovered that Ross has a web site on which he posts his columns. (I have recenly included a link to the site on this blog to encourage myself to read his columns more regularly.)

When I looked at Ross’s site it was clear that, as well as the happiness theme, he is sometimes still playing an old tune that I like about the benefits of free trade. For example, one of the articles I read warns of the dangers to the rest of the economy from attempts to shield manufacturing industries from the consequences of the boom in the resources sector. This is consistent with the contribution Ross has made throughout his journalistic career in bringing good sense to public discussion of many economic issues.  I have a particularly high regard for the contribution that Ross made in earlier years in helping to improve public understanding of the costs of high trade barriers that were supporting inefficient resources use and unproductive work practices in this country. He deserves a medal!

But, what about Ross’s views on happiness? It wasn’t hard to find his review of ‘The Darwin Economy’. While well written and informative, the review is totally uncritical. In concluding his review, Ross gives the author, Robert Frank, the last word: ‘Frank concludes that the real reason we regulate markets is to protect ourselves from the consequences of excessive competition’. I was left with the impression that Ross concurs with that view.

How does Ross reconcile the view that regulation is desirable to protect against competition with his knowledge of how regulation has worked in the past in Australia to protect privileged interests at the expense of the rest of the community? How does Ross reconcile his opposition to economic growth, with his apparent ongoing support for productivity growth? I decided to buy Ross’s book, ‘The Happy Economist’ to see whether I could understand where he is coming from. (Since Ross is a strong supporter of international competition I’m sure he will not mind if I let readers of this blog know that I purchased the Kindle edition from Amazon for $9.99, rather than paying Allen and Unwin $26.99.)

I enjoyed reading Part I of the book, which is a discussion about such things as the nature of happiness, the evolutionary purpose of happiness, who is happy, whether wealth makes people happy, whether work makes them happy. This part of the book ends with a discussion of 10 hints about how to be happy. Perhaps it is strange for an economic journalist to be offering such advice, but from my (fairly extensive) reading in this field I get the impression that the advice Ross offers is based on the best research available.

Part II is comprised largely of an attack on mainstream economics and a sermon on ecological economics, mixed up with a strong dose of paternalism and proposals for increased government regulation. Despite all that, Ross manages somehow to convey the impression that he is more concerned about adulation of ‘the market’ than the actual existence of markets and competition.

Ross seems to be particularly concerned about the tendency of humans to over-indulge. He notes that many of us are tempted ‘to eat too much, get too little exercise, smoke, drink too much, shop too much, save too little, put too much on our credit cards, and work too much at the expense of our family and other relationships’.  He suggests that ‘individuals know they have trouble controlling themselves and would appreciate government taking temptation out of their way’.

This reminds me of a comment by the late Roger Kerr, executive director of the New Zealand Business Roundtable, in a speech aboutthe concept of progress that he made in 2009. Roger suggested that one consequence of the ‘fashionable academic preoccupation with happiness’ might be for more people to adopt the view: “I’m bald, fat and grumpy. What’s the government going to do about it?” I don’t think that is a necessary consequence of happiness research, but it seems to me that Ross is encouraging that kind of attitude in his paternalistic proposals. Among other things, Ross apparently wants governments to re-regulate shopping hours, limit advertising and take action to discourage spending on positional goods.

Ross’s presentation of his views on productivity, economic efficiency, market preferences and regulation involve as many twists and turns as the road from Thimphu to Punakha. At the risk of making this post excessively long, an appropriate place to begin might be with Ross’s claim that the regard mainstream economists have for ‘revealed preference’ – the idea that the choices people make reveals their preferences - has somehow led them to become ‘the great facilitators and advocators of economic growth – the high priests in the temple of Mammon’ (p 164). Economists who respect revealed preference actually have a long tradition of opposition to proposals by economic planners to lift savings and investment rates or give people incentives to work longer and harder in order to raise economic growth rates. My attitude has always been that if individuals prefer to spend rather than save or to enjoy leisure rather that to work long hours, their choices should be respected. A substantial component of my work involved providing advice about how governments could facilitate economic growth, but facilitating is about removing obstacles rather than pushing people around.

Ross makes it clear that he doesn’t see economic growth as being able to continue indefinitely – and in this regard he sees himself as one of history’s hastening agents (if I may borrow a phrase much used by a former work colleague). His discussion about ecological limits to growth and the desirability of the stationary state had me wondering how he was proposing to stop technological progress – a major source of economic growth. Ross eventually acknowledges that improvements in the efficiency with which resources are used are desirable. He suggests: ‘its growth in the throughput of natural resources we should forswear, not the rise in gross domestic product that comes from the continued pursuit of productivity improvement’ (p 221).

However, a few pages on Ross tried to convince me that I shouldn’t fear the end of economic growth. He states:
‘Many of the things that reduce our happiness stem from the search for greater efficiency so as to contribute to economic growth. Easing the efficiency imperative would be hugely liberating’ (p 229).
So, we will have productivity growth without the ‘efficiency imperative’ of market disciplines?

Ross agonizes further about efficiency a few pages later:
‘My fear is that, were the goal of increased efficiency to be abandoned, the motive of rolling back areas of privilege would be lost. It would then be a matter of first in, best dressed. Workers in unprotected industries would be obliged to continue propping up protected industries in perpetuity, with a great likelihood that, should further difficult times emerge, the privileged industries would be first in line for additional assistance in the name of preserving the status quo’ (p 233).

Well put! I am glad that Ross is troubled by that thought.

The closing sentence of Ross’s book reads: ‘In the end we are what we feel’. I think that might contain the key to the problem Ross has in reconciling his belief that because individual humans are inherently fallible they can’t be trusted to pursue happiness as they wish, with his admiration for the efficiency of markets and his understanding that governments are neither angelic nor infallible .

Our feelings are important. We obviously make ourselves unhappy when we make bad choices. But they are our choices. The nature of humans is such that we cannot flourish unless we have responsibility for our own lives.  


Evan said...

Much depends on the meaning of 'responsibility' I think.

For instance, if it means choosing from available options, then we are into a discussion about whether some options should be available.

I'm really not sure that economic growth per se need be an environmental threat. It has to do with money rather than resources I think - if we can use resources in renewable and sustainable ways I don't see why the ponzi scheme of economic growth can't go on.

Winton Bates said...

Thanks for your comment, Evan. What I mean by responsibility is self-direction. A slave might feel happy, if well treated, but she could not be fully flourishing because slavery means that she is not responsible for the way she lives her life. There is more explanation in the draft of chapter 3 of the book I am writing. Follow the links on the right to find drafts of the first 4 chapters of 'Free to Flourish'. I would be grateful for any comments you might have on the draft.
Are there options that you would like to see taken off the table other than those involving interference with the rights of others to control their own lives?

Is economic growth a ponzi scheme? I don't think so. It is largely a consequence of mutually beneficial activities. When one individual makes use of available opportunities to enhance their own well-being they tend to expand the opportunities available to others.

Evan said...

Thanks Winton, I'll have a read.