How can governments mitigate the impact of COVID-19 on human flourishing?

This is an appropriate question for economists with an interest in public policy to be considering. It recognizes a possible role for governments and recognizes that an approach focused on human flourishing is likely to be more appropriate than one focused entirely on reducing the death rate or reducing adverse impacts on GDP.

The possible role for government stems from the perception that people who are most vulnerable would not able be to protect themselves adequately without some government intervention. People who know they are vulnerable have a strong incentive to practice social distancing, but personal circumstances often make that difficult. Without the threat of coercion, it is unlikely that we will see the degree of social distancing necessary to reduce the rate of spread of the virus. In that event, hospital services are likely to be over-whelmed by the number of people requiring treatment. 

As always, with government intervention, there is a risk that the cure will end up worse that the disease, but the risk is probably worth taking in this instance.

What is the appropriate indicator of human flourishing to be used as a policy objective? There isn’t just one! The prime candidates, per capita GDP and average life satisfaction both suffer from the same flaw – they don’t account for the impact of early death on the well-being of the dear departed. We should continue to consider the impacts of policies on death rates as well as their impacts on the well-being of the living.

Per capita GDP was never intended to be a measure of well-being, but it is relevant. Many factors that impinge on well-being – such as the ability of people to afford food, housing and health care – are influenced by per capita GDP levels. However, per capita GDP cannot account for impacts of coercive policy interventions, such as enforced home confinement, on psychological well-being.

Average life satisfaction seems to be a reasonable indicator of the average psychological well-being of groups of people. It is a poor indicator of economic and social progress because it doesn’t account for the extent that members of one generation perceive themselves to be better off, or worse off, than members of preceding generations. Fortunately, that deficiency is not pertinent for present purposes.

There is some evidence that lock-down and GDP decline have potential to have substantial negative impacts on average life satisfaction.

An article entitled ‘Health, distress and life satisfaction of people in China one month into the COVID-19 outbreak’, has recently been published by Stephen X Zhang, Yifei Wang, Andreas Rauch, and Feng Wei. The article is a pre-print and has not been subjected to peer review, but no major flaws are obvious to me. As might be expected, the study suggests that the life satisfaction of people with chronic medical conditions was adversely affected in locations with severe outbreaks of COVID-19.

However, the life satisfaction of people who exercised a lot was also adversely affected in locations with more severe outbreaks, suggesting frustration at restrictions imposed. Those who were able to continue to work had higher life satisfaction than those who had stopped work, with people who were able to work “at the office” having higher life satisfaction than those who worked at home.

The relationship between per capita GDP and average life satisfaction is complicated. Average life satisfaction is relatively high in countries with high per capita GDP, but tends to grow very slowly, if at all, as per capita GDP rises further in such countries.  However, there is some evidence suggesting that when per capita GDP falls in high-income countries, this is likely to be accompanied by substantial declines in average life satisfaction. Austerity in Greece reduced per capita GDP by about 26% over the decade to 2017 and was accompanied by a decline in average life satisfaction of about 20% (GDP data from OECD and life satisfaction data from World Happiness Report, 2020).

Hopefully, COVID-19 will result in much smaller declines in per capita GDP than in Greece. and economic recovery will be much more rapid.

What are the trade-offs involved in shut-down? The human welfare implications of shutting down large parts of an economy for an extended period are enormous. However, a short close-down of all those activities in which social distancing is difficult might be preferable to a less severe and more prolonged lock-down. Tomas Pueyo’s discussion of the hammer and dance (see graphic above) makes sense to me, even if the Hammer needs to last more than 3-7 weeks.

Social distancing and lock-down is an investment in buying time. Buying time for what? It can’t be for development of a vaccine. That will take too long!

It makes sense to buy time to build up the stock of respirators, ICU beds etc. to help cope with an influx of hospital patients needing treatment.

It also makes sense to buy time to obtain testing equipment that can give accurate results within a short time frame. Speedy and accurate testing has potential to enable infectious people to be detected and temporarily taken out of circulation, so that the rest of the population can return to something like normal life.

This post has not yet referred to stimulus packages. I support giving money to people to help them survive a crisis that is likely to depress aggregate demand. Please note, however, that what people can buy depends ultimately on what is produced. When an economy closes down the necessities of life tend to become scarce.

My conclusions:

• Policies to mitigate COVID-19 should be considered from a human flourishing perspective rather than solely in terms of either minimizing deaths or minimizing damage to an economy.

• The best policy seems to be to buy time by enforcing strict social distancing for a relatively short period rather than less strict distancing for a longer period. The policy aim should be to buy enough time to enable hospitals to cope better with an influx of patients and to put in place a testing regime that can enable life to return to something like normal as soon as possible.

Postscript: May 6, 2020

There isn’t a great deal of substance that I would like to change in this article with the benefit of 6 weeks hindsight. The graphs showing possible outcomes in terms of exponential growth and bell curves still look right. Some countries, including Australia, have moved along to the end of “the hammer” phase of the bell curve and are beginning the tricky “dance”. Perhaps infection rates may be greatly under-estimated and there is now considerable herd immunity, but I doubt it.

Although the governments of some countries are behaving abominably, at this stage I am confident that in Australia the intervention ‘cure’ (palliative might be a better word) will not be worse than the disease. To a large degree, the shutdown occurred spontaneously, with governments playing catchup, as large numbers of people stayed home, and businesses shut down. There has been some coercion, e.g. shutting of beaches in metropolitan areas and travel restrictions. Some police have risked public goodwill by excessively diligent (stupid) enforcement, e.g. picking on individuals sunning themselves in parks many metres away from any other human. Most people seem to be following social distancing rules because they accept that it is a sensible precaution to take for their own benefit and/or the benefit of others.

From an analytical perspective, I have been reminded that it is possible to incorporate deaths and economic considerations in a common metric if you try hard enough. Richard Layard, Andrew Clark et. al. have presented a WELLBY analysis that seeks to do that in a paper entitled, ‘When to release the lockdown: A wellbeing framework for analysing costs and benefits’. The authors use estimates of wellbeing-years (based on life satisfaction surveys) to balance the impact of policy decisions upon the number of deaths from COVID-19 against incomes, unemployment, mental health, public confidence and other factors (including CO2 emissions).

Their analytical framework looks elegant, but I am concerned about the implied policy context. It seems to me that this kind of analysis is more relevant to decision-making by a benevolent dictator (one applying utilitarian philosophy) than to a society where government should see its prime responsibility as protecting the lives and liberty of citizens.

Another article that has been brought to my attention is: ‘Some basic economics of COVID-19 policy’, by Casey Mulligan, Kevin Murphy and Robert Topel. This article looks at the trade-offs we face in regulating behavior during the pandemic.  It uses conventional cost benefit analysis to consider several possible policy objectives, including buying time and limiting the cumulative cost of a pandemic that will ultimately run its course. They conclude:

“The key difference in terms of the optimal strategy is whether our focus is on keeping the disease contained. If the objective is to buy time, then our analysis favors early and aggressive intervention. This minimizes the overall impact … . In contrast, limiting the cumulative cost of a pandemic that will ultimately run its course argues for aggressive policies later, when they will have the biggest impact on the peak load problem for the health-care system and when they will have the greatest impact on the ultimate number infected”.

The authors conclude by listing some simple economic principles to guide how public policy should proceed when faced with a new but poorly understood pandemic. Those principles include buying time upfront, and using that time wisely to gather information to implement a screen, test, trace and quarantine (STTQ) policy. They suggest that both the “buy-time” and long-term containment strategies will have to be based on an effective STTQ policy.

The approach adopted by Mulligan et. al. of considering the nature of trade-offs and suggesting policy principles is more to my liking. If these authors had used their conventional cost benefit analyses to provide specific recommendations of the kind provided by Layard et. al. I would raise the same concerns about the implied policy context of advising a benevolent dictator, rather than informing a democratic political process.

I have misgivings about the valuation of life in both studies, but have not considered the relative merits of each approach, and have nothing better to offer other than directly considering the economic cost of saving lives under alternative strategies.  

"How dare you?"

I have stopped laughing about Greta Thunberg’s performance at the United Nations a few months ago.

At the time, I was amused by her quixotic antics in attacking world leaders. People who think they can change the world by staging tantrums do not deserve to be taken seriously. It was predictable that Greta’s outburst would have a negligible impact on climate change policies.

I was also amused by Greta’s misconceptions about the relationship between economic growth and climate change.

On reflection, however, those misconceptions are no laughing matter. They are more widely held than I had imagined, including among some people who have had a great deal more education than Greta. By making economic growth the villain, climate activists seem likely to antagonize many of the people who would like more action to be taken to reduce greenhouse gas emissions.

Global climate change is perceived to be a serious problem by a high proportion of the population in many different countries. However, there is much less support for action to be taken to limit greenhouse gas emissions. The obvious obstacle is the additional cost to consumers of transition to alternative energy sources (including the cost of energy storage and backup to ensure reliable supplies). The advocates of zero economic growth add another obstacle by telling people they will have to make huge changes in their lifestyles to mitigate climate change. The lifestyle changes required for adaptation may seem preferable to many people.

The nature of economic growth

Misconceptions about the relationship between economic growth and climate change stem largely from ignorance about the nature of economic growth.

When economists talk about economic growth, defined as an increase in the amounts of goods and services produced, some environmentalists just think of increases in the amount of stuff they don’t like. A little further thought might enable them to acknowledge that much additional stuff is being produced these days under environmentally friendly conditions. They might even be particularly fond of some additional stuff e.g. organic food, solar panels, electric cars and batteries. There are also some services they might like, such as health and education. 

Greta and her followers are probably concerned that economic growth requires us to dig up more and more natural resources until there are no more to be discovered. If that was true, it would be easy to understand why they might see endless economic growth as a fairy tale. However, growth in capital stock - created by transforming natural resources into equipment, buildings and infrastructure - typically accounts for only a small proportion of economic growth. In the 1950s, research by Robert Solow, a Nobel prize-winning economist, showed that only one-eighth of the increase in gross national product per man-hour in the United States between 1909 to 1949 could be attributed to increased capital stock. The remaining seven-eighth, which became known as the Solow residual, was attributed to technical change. Subsequent research has shown part of the Solow residual to be associated with improvement in labour skills, with the remainder, often described as total productivity growth (or multifactor productivity growth) being attributed to innovation, technological progress and the advance of knowledge.

Economic growth will probably end one day, but there doesn't seem to be anything inherent within the growth process that must bring that about. How do Greta and her followers propose to end economic growth? Do they propose to require people to take the benefits of technological progress in the form of more leisure, rather than more goods and services? Or do they propose to stop the advance of knowledge and innovation? 

The former approach seems more likely. It is certainly not unprecedented in human history for the advance of knowledge to come to a virtual standstill for long periods. However, it would be surprising to see the environmentalists of wealthy countries advocate policies to make that occur.

Environmental impacts of growth

If economic growth is largely about innovation, technological progress and the advance of knowledge, does it necessarily have adverse environmental impacts?  Of course not! In recent years, a significant amount of research, development and innovation has been directly related to development of alternative energy or other environmentally friendly activities.

Much of the other innovation that has occurred over the last decade or so - for example, improvements in communication technology - seems to have been benign in terms of its environmental impacts. It is possible to think of technological innovations that have raised environmental concerns, e.g. fracking and genetically modified crops, but that could hardly justify the blanket ban on innovation that is implicit in a zero economic growth scenario.

My view of growth

At this point some readers might have gained the impression that I am an advocate of endless GDP growth. That is not so. My reservations about GDP as a measure of well-being, and of GDP growth as a societal objective have been on display in articles I have written over the past 15 year (for example one on the priority given to economic growth in Australia, and one on the concept of Gross National Happiness).

As discussed previously on this blog, I advocate growth in opportunities for human flourishing - that is, growth of opportunities for individuals to live the lives that they aspire to have. If increasing numbers of individuals choose a lifestyle involving stable incomes and more leisure to one with rising incomes, I can see no reason to object (unless they want me to subsidize their lifestyle choice). In my view, there is certainly no case for governments to require or induce people to work harder or longer to foster growth of GDP.

However, it seems likely, even in high income countries, that for the foreseeable future the aggregate outcome of choices freely made by individuals as consumers and producers of goods and services will continue to involve economic growth. That outcomes seems likely, even in the presence of the minimal restrictions on individual freedom are necessary to achieve widely accepted environmental goals.

Those who urge the introduction of policies to stop economic growth are contemplating a great deal more interference with the rights of individuals to manage their own lives than could possibly be justified to pursue widely accepted environmental goals.

Bottom line

Despite substantial reductions in the cost of alternative energy that have occurred over the last decade or so, the cost of transition to alternative energy still seems to be a major obstacle to effective international action to reduce greenhouse gas emissions. Those who make the false claim that economic growth is incompatible with widely accepted environmental objectives are adding a further obstacle to effective international action.

Instead of frightening people by urging governments to impose huge changes in lifestyles on citizens, perhaps environmental activists could pursue their goals more effectively by making a case for further government funding of research to help make alternative energy more affordable.

Are values opposed to virtues?

In an article recently published in “The Australian”, Peter Kurti, a senior research fellow at the Centre for Independent Studies, noted:

“Unease is growing in Australia that something has changed for the worse in our live-and-let-live culture”.

The context of his comment is the “opprobrium and venom” that dissent from “prevailing new orthodoxies” about gender and sexual orientation seems to attract. The author suggests this has contributed to “the sense that the common bonds of civility that helped to build mutual trust in our society are under strain”.

I concur with those sentiments. They are consistent with views recently expressed on this blog: Does Israel Folau deserve support from advocates of free speech?

However, the headline of Kurti’s article “Israel Folau: Moral compass all askew as virtue is eclipsed by values” seems to me to be codswallop. Unfortunately, the headline accurately reflects Kurti’s explanation for the fracturing of our culture in terms of what he describes as “the eclipse of virtue by values”.

It is difficult to see how values can be opposed to virtues in terms of common usage of those terms in discussions of ethics. The Concise Oxford defines the terms as follows:

Virtue: “moral excellence, uprightness, goodness”; “the seven cardinal virtues”.

Value: “one’s principles or standards, one’s judgement of what is valuable or important in life”.

Kurti makes values appear to be opposed to virtues by claiming that values “are simply emotional statements about personal beliefs, feelings or attitudes”. He claims that values “cannot be normative because it is impossible to erect any shared meaning on the foundation of something that is personal and subjective”.

Those claims are clearly incorrect. For example, when Friedrich Hayek writes about the “values of a free civilization” he is not referring merely to emotional statements about personal beliefs, feelings or attitudes. What Hayek and others have written about shared values is clearly closely related to norms of behaviour.

Kurti doesn’t seem to recognise the existence of shared values. His constructivist perspective, evident in use of the term “erect” when discussing the possibility of shared meaning, has apparently made it impossible for him to comprehend that the common values of an open and free society could evolve spontaneously as individuals pursue what is important in their lives.

Perhaps what Kurti was intending to convey is that the common bonds of civility are fracturing because people are increasingly adopting personal beliefs, feelings and attitudes that are inconsistent with common bonds of civility. So, why does he seek to discredit values language?

I was hoping that question might be answered by reading Kurti’s recently published CIS paper, entitled Cracking Up? Culture and the Displacement of Virtue. No such luck! In that paper, Gertrude Himmelfarb and Iain Benson are quoted as asserting that values language rejects the idea of shared moral goods, but they are no less wrong about that than Peter Kurti.

I agree with much of what Kurti writes about the importance of the traditional virtues. However, when Kurti refers to virtues he is referring only to the traditional virtues. I think that poses a problem for him. He claims “prevailing new orthodoxies” exist, so he must surely acknowledge that the people who subscribe to those new orthodoxies see political correctness as a virtue.

In my view it is probably an overstatement to claim that the new orthodoxies are “prevailing”. But it is impossible to deny that there has been a shift in what many people perceive to be virtuous that is inextricably linked to a shift in their values.

There is a more fundamental problem is asserting that cracks appearing in our live-and-let-live culture can be mended by appealing to the traditional virtues. The traditional virtues have been acknowledged for thousands of years, but our live-and-let-live culture has only recently evolved.  Freedom of religion has had a firm legal basis in only a few countries for only a couple of centuries. The idea that members of minority religions should not be discriminated against has been a widely shared value and accepted norm of behaviour for less than a century in most western countries, including Australia. Our live-and-let-live culture, with harmonious collaboration between people of different religions, ethnic backgrounds and gender in work and community organisations, has only been in existence for a few decades, despite the lip service paid to civility in earlier times. Live-and-let-live has been inclusive of LGBT people for an even shorter period.

The shared values underlying our live-and-let-live culture include freedom of expression, tolerance and politeness.  The norms of behaviour associated with these shared values enable people to obtain mutual benefit from working, playing sport and socializing with people whose attitudes and behaviours they disagree with, and in some instances may even consider to be immoral.

The main threat to our live-and-let-live culture comes from those who insist that to enhance social harmony people should exercise much greater restraint in what they say and publish to avoid the possibility of giving offence to members of the religious, ethnic, gender and LGBT groups pandered to by identity politics. This gives rise to the potential for a return to tribal values as members of an increasing number of individual groups abandon shared values and threaten social disharmony in order to redress perceived disadvantages or to obtain advantages over others. 

The most obvious and straight forward way to avoid a return to tribal values is for supporters of our live-and-let-live culture to make their views heard whenever the shared values of that culture come under threat from those who take offence unreasonably. A return to tribal values can be avoided if enough people of goodwill continue to support the rights of others to express views they disagree with.  

How does skin in the game help solve the Black Swan problem?

As I was reading Skin in the Game, Nassim Taleb’s latest book, the thought crossed my mind that the author might classify me as an IYI (intellectual yet idiot). He puts economists in the IYI category along with psychologists.

Taleb writes: 

“Knowing ‘economics’ doesn’t mean knowing anything about economics in the sense of the real activity, rather than the theories … produced by economists”. 

I agree. Some economists know little about the real world.

Despite his low opinion of economists, the author acknowledges that some of the economists I admire, including Friedrich Hayek, Ronald Coase and Elinor Ostrom, had useful insights about the real world. He even suggests that Paul Samuelson made a useful contribution by pointing out that people reveal their preferences in their market behaviour rather than in what they say.

Rather than viewing Nassim Taleb’s offensive anti-intellectualism as evidence that he suffers from SFB, I think economists and psychologists should view it as a clever ploy to attract the attention of their students. I hope Taleb succeeds, and also hope that his book helps students to pose difficult questions for some of their professors.

There is some irony in the fact that Taleb has a low opinion of intellectuals, since Daniel Kahneman views Nassim Taleb as “one of the world’s top intellectuals”. Kahneman, a psychologist, won the Nobel prize for economics, largely for his research on asymmetry in the way people value potential gains and losses in making decisions. Taleb is critical of that research.

The question I raised at the outset was prompted by the following passage:

“Skin in the game helps to solve the Black Swan problem and other matters of uncertainty at the level of both the individual and the collective: what has survived has revealed its robustness to Black Swan events and removing skin in the game disrupts such selection mechanisms. Without skin in the game, we fail to get the Intelligence of Time".

It is worth trying to take that apart to understand the reasoning behind it.

Skin in the game is about more than just sharing in the benefits of an activity. It involves symmetry and reciprocity – paying a penalty if something goes wrong as well as sharing in the rewards for risk taking.

Most people who provide us with goods and services still pursue occupations where they have skin in the game. The problem is that many of the people who don’t have skin in the game - for example, politicians, bureaucrats, bankers and university professors - occupy positions where their mistakes can have far-reaching consequences.

The Black Swan problem arises when we ignore extreme events – potential disasters - that occur infrequently. Taleb’s main point is that there are some risks that we can’t afford to take even though there is a low probability that they will occur at any point in time. His book, The Black Swan, was published in 2007 and made him famous following the 2008 financial crisis. Taleb contends that banks and trading firms are vulnerable to hazardous Black Swan events. The bank blow-ups occurred in 2008 as a result of hidden and asymmetric risks in the financial system.

At the level of the individual, skin in the game helps to solve the Black Swan problem because it helps people to focus on their need to survive in order to succeed. Taleb argues for profiting from risk-taking that doesn’t threaten survival. He points out that Warren Buffet made his billions by picking opportunities that passed a high threshold, rather than by applying cost benefit analysis.

At the collective level, skin in the game helps to solve the Black Swan problem because it requires decentralization of decision-making. Under a decentralized system the costs of the mistakes made by individuals are borne by those individuals, without necessarily affecting other participants. Centralized systems are exposed to the Black Swan problem because they can only be run by people who are not directly exposed to the cost of errors.

What has survived has revealed its robustness to Black Swan events. That applies to ideas, institutions, technologies, political systems, procedures, intellectual productions, car models, scientific theories etc. The only effective judge of things is time, because time is equivalent to disorder. The longer things survive, the more likely it is that they will have survived Black Swan events.

Removal of skin in the game disrupts selection mechanisms. When people have skin in the game they are less likely to reject ideas that have withstood the test of time in favour of new ideas that that have been published in peer-reviewed journals. A lot of findings published in peer reviewed journals fail subsequent replication tests.  

Without skin in the game, we fail to get the Intelligence of Time. Time removes the fragile and keeps the robust. The life expectancy of the nonfragile lengthens with time. Taleb writes:

The only definition of rationality that I’ve found that is practically, empirically, and mathematically rigorous is the following: what is rational is that which allows for survival."

I think Nassim Taleb is correct in his view that skin in the game helps to solve the Black Swan problem. Unfortunately, however, when it is comes to consideration of potential Black Swan events that threaten the survival of humanity, the political systems we have inherited do not ensure that political leaders have enough skin in the game for their minds to focus appropriately. Political leaders focus on their survival at the next election rather than on the survival of humanity. It is up to citizens who are concerned about potential Black Swan disasters to initiate appropriate action themselves.

What should be done about echo chambers in the social media?

Why bother reading a book by Cass Sunstein which suggests that echo chambers in the social media are becoming a problem for democracy and that something should be done about them? That was a question I had to ask myself before deciding to read Sunstein’s recently published book, Republic: Divided Democracy in the Age of Social Media.

The people who are likely to be most enthusiastic about reading this book will be concerned about echo chambers already, and be fans of Sunstein. I was already concerned about echo chambers before reading the book, but reading other books by Sunstein did not induce me to join his fan club. From his interview about this book with Russ Roberts on Econ Talk, I thought some of the views presented would be challenging. 

I was in no hurry to read the book.

That illustrates a problem with echo chambers. Many of us have a tendency to avoid being challenged even when there is potential to learn something useful from people who have opposing viewpoints. I only read the book because I have recently been thinking and writing about the potential benefits of listening to opposing viewpoints.

The book was worth reading to help me clarify my own views. In summary, Sunstein suggests: 

“to the extent that people are using social media to create echo chambers, and wall themselves off from topics and opinions that they would prefer to avoid, they are creating serious dangers. And if we believe that a system of free expression calls for unrestricted choices by individual consumers, we will not even understand the dangers as such”.

The serious dangers that Sunstein is referring to include group polarisation, the spreading of falsehoods within echo chambers, a high degree of social fragmentation and greater difficulty of mutual understanding.

The author doesn’t claim that this is currently the general pattern, or that group polarisation and cybercascades are always bad. He recognizes that it is sometimes good for a perception or point of view to spread rapidly among a group of like-minded people. His claim is that group polarisation can, nevertheless, be a significant risk even if only a small number of people choose to listen and speak solely with those who are like-minded. Enclave deliberation can cause members of groups to move to positions that lack merit e.g. terrorist agendas. “In the extreme case, enclave deliberation may even put social stability at risk”.

Turning to the second part of the quoted passage, readers may wonder how Sunstein can argue that a system of free expression can be consistent with regulation of consumer choices.  His argument seems to rest on two propositions:

·         First, free speech is not an absolute – despite the free speech guarantee in the U.S. constitution, government is permitted to restrict speech in various ways e.g. attempted bribery, criminal conspiracy, child pornography.

·         Second, the free speech principle should be read in light of the commitment to democratic deliberation rather than consumer sovereignty. From the perspective of supporting democratic deliberation, regulation of television, radio and the Internet may be permissible to promote democratic goals.

I’m uneasy about the second proposition. The U.S. Supreme Court would presumably disallow legislation which purported to support democratic deliberation in a manner that conflicted seriously with fundamental freedoms. In parliamentary systems that have no constitutional guarantees of liberty, however, legislative action to support democratic deliberation could be far-reaching and ideological. For example,  it could mandate coverage in school curriculums of the foundations of democracy in the history of western civilization, or alternatively, its foundation in the history of protest movements and revolutions.

The purpose for which Sunstein seeks government action to support democratic deliberation is to ensure a measure of social integration by promoting exposure of people to issues and views that might otherwise escape their attention. He writes:

“A society with general-interest intermediaries, like a society with a robust set of public forums, promotes a shared set of experiences at the same time that it exposes countless people to information and opinions that they would not have sought out in advance. These features of a well-functioning system of free expression might well be compromised when individuals personalize their own communications packages—and certainly if they personalize in a way that narrows their horizons”.

I support those sentiments  but I am wary of government intervention in support of them.  Seemingly benign government action in support of public forums can be counterproductive. I have in mind particularly the Q&A program of Australia’s public broadcaster. This is a taxpayer funded public forum which exposes people to opinions they would not seek to be exposed to. On issues that have become politicized, the people watching the show might be entertained by the antics of those presenting opposing views but are unlikely to have gained a better understanding of the issues.  

There are already many public forums on the Internet. If people choose to join forums that don’t welcome dissent from prevailing views that is akin to people avoiding public places where public demonstrations are held. That choice should be respected. 

If a growing proportion of the population chooses to spend an increasing proportion of their time echo chambers rather than open forums, that is a cultural problem with potential implications for democratic deliberation.  it should be dealt with as a cultural problem rather than a public policy problem.

Those of us who are concerned that echo chambers are becoming more prevalent should remember that sectarian echo chambers have warped democratic deliberation in the past. How were those religion-based echo chambers dismantled? I can’t claim to know much about the history, but I doubt that government intervention played a significant role. It was a cultural shift. It was presumably led by influential people within some factional forums who took a stand in favour of allowing dissenting voices to be heard. Influential people outside the echo chambers must also been active in encouraging individuals to think for themselves rather than to parrot the views of church leaders and sectarian politicians. In many organisations, tolerance of dissent came to be viewed as the norm and thinking for one’s self came to be viewed as a virtue.

Could that happen again?

What kind of government is most likely to promote human flourishing?

One way to approach this question is to rule out those kinds of government that are least likely to enable people to live lives that they value.

We can begin by ruling out those kinds of government that exercise absolute power in a cruel and oppressive way. There is no need to explain why that kind of despotism is inimical to human flourishing.

If you ask yourself how we can avoid being ruled by a cruel and oppressive despot you will probably begin to sketch out some constitutional rules requiring fair elections and preventing concentrations of power in a few hands. There is a fair chance that the constitutional rules you specify would describe liberal democracy. So far so good.

However, some written constitutions that appear to embody ideals of liberal democracy end up as a façade for oppressive government. So, I have to ask myself why some experiments in liberal democracy been more successful than others.

Before I can attempt to answer that I need to explain what I have previously described as democracy’s basic problem – which could also be described as the tragedy of democracy because of its similarity to the tragedy of the commons (see my preceding post). Democracy’s basic problem arises because of inherent tendencies for the responsibilities of elected governments to expand beyond their capacity to cope. That results from a combination of two factors. First, the perceived benefits to individual voters of proposals for an expansion of government responsibilities in areas of particular interest to them exceed the additional costs they incur as a result of those proposals. Second, when an individual elector sees others declaring their support for political parties which promise additional spending or regulation in their particular fields of interest, it is natural for her to feel that her interests will likewise be better served by behaving similarly. (Democracy’s basic problem is further explained in Chapter 8 of Free to Flourish.)

Democracy’s basic problem could be expected to result in an ongoing expansion of government spending, an increasing regulatory burden constraining growth in productivity, higher tax rates on those least able to protect themselves politically (e.g. foreign investors) with adverse effects on investment incentives, and expanding fiscal deficits with public debt growing beyond the capacity of the government to service it.

Those trends obviously can’t continue indefinitely. At some stage, the government’s bankers will refuse to advance additional credit. That means that funds will no longer be available to fund social services or to pay government employees. Civil disorder is likely to ensue. It is open to speculation who the main characters will be in the next act, as the political theatre turns into a democratic tragedy. Voters may resort to electing demagogues whose policies will cause further deterioration in the economy. In the final act it is quite common for the generals to take over the reins of government to restore order.

Thus, on the basis of that reasoning it might appear that democracy is unlikely to be a sustainable form of government over the longer term.

So, how come some democracies have survived for well over a century?

One possible explanation, which could be described as the Schumpeterian explanation, after the economist Joseph Schumpeter, is that this has been achieved by constraining democracy to ensure that “the effective range of political decision should not be extended too far”. (Again, there is more discussion of this in Chapter 8 of Free to Flourish.)

Another possible explanation (not adequately discussed in Free to Flourish) is that the culture of some countries has fostered normative conditions that have prevented democracy’s basic problem from emerging with irresistible force. In his book, Why I, too, am not a conservative, James Buchanan identified two norms that underpin liberal democracy:

·         that a sufficient proportion of the population can make their own choices and prefer to be autonomous rather than dependent on others; and

·         that a sufficient proportion of the population enter relationships with others on the basis of reciprocity, fair dealing and mutual respect.

The first norm needs to be met for people to be able to cast their votes to achieve outcomes that they prefer, whilst exercising restraint in the demands that they make on others through the political process. The second norm needs to be met to ensure that those who depend on transfers from the public purse do not consider those transfers to reflect successful exploitation of others through the political process, and that those whose tax payments fund those transfers do not consider themselves to be exploited.

Buchanan concluded:

“Generalized or widespread failure of persons to adhere to these norms, along with widespread recognition that others also disregard the standards, will insure that the liberal order itself must fail, quite independently from any institutional safeguards.” (p 28)

As early as the 1830s, Alexis de Tocqueville expressed similar concerns in Democracy in America about the implications for democracy of the emergence of a culture of dependence on government.  In his discussion of the “sort of despotism that democratic nations have to fear” he suggested that democratic governments might take upon themselves full responsibility for the happiness of citizens, reducing each nation “to be nothing better than a flock of timid and industrious animals, of which the government is the shepherd”.  Tocqueville remarked:

“It is indeed, difficult to conceive how men who have entirely given up the habit of self-government should succeed in making a proper choice of those by whom they are to be governed; and no one will ever believe that a liberal, wise, and energetic government can spring from the suffrages of a subservient people. … The vices of rulers and the ineptitude of the people would speedily bring about its ruin … ” See: Democracy in America, Book 4, Chapter 6.

Tocqueville doesn’t seem to have mentioned norms of reciprocity (or even adherence to the golden rule) explicitly as one of the factors that had led to maintenance of democracy in America, but he emphasised the importance of “the manners and customs of the people” and “the whole moral and intellectual condition of a people”.

Vincent Ostrom commented as follows:

“In light of the meaning to be assigned to the manner and customs of the people, we can understand why Tocqueville identified religion as the first of their political institutions even though religion took no direct part in the government of society. The place of religion was important to the whole moral and intellectual tradition of a people when complemented by the place of families, friends, neighbors, and schooling in the shaping of what might be called "habits of the heart and mind." The place of habits of the heart and mind is critical to the possibility that societies of men might establish systems of governance appropriate to the exercise of reflection and choice as ways of coping with problems of conflict and conflict reso­lution.” Vincent Ostrom, The Meaning of Democracy and the Vulnerability of Democracies, p 14.

Most readers will probably have gathered by now that I think that adherence to the norms that underpin liberal democracy has now diminished to such an extent that this form of government is in deep trouble, even in the western countries where it has been sustained most successfully in the past. So, we are faced with an ongoing struggle to avoid a democratic tragedy, with adverse implications for human flourishing.

However, such prognostications don’t help us much in answering the question I began with. The best way to move toward an answer, it now seems to me, is to follow the lead of Vincent Ostrom and to ask what forms of governance are likely to emerge when it recognized that each person “is first his or her own governor and is then responsible for fashioning mutually productive relationships with others” (p 84).

How can people who approach issues from different ideological perspectives have useful policy discussions?

Like the ideological opponents of free markets, the birds of Edinburgh show little respect for the founder of Economics 

In my view there is a lot to be said for attempting to develop a coherent ideological position – a system of ideas and ideals - that can be applied to public policy issues. Those who insist on approaching every issue with an empty mind, refusing to draw upon a priori reasoning and lessons learned from previous experience, are severely handicapping themselves.

It is important to note that having a coherent ideological position does not necessarily imply being ideologically blinkered. An ideological commitment can be consistent with being sufficiently openminded to consider the possibility that it could be appropriate to depart from a general principle in a particular instance. For example, people who have an ideological commitment to free markets are often open to persuasion that government regulation might be warranted in some instances.

Ideologies are not necessarily heavily laden with values.  In my view that applies particularly to the free market ideology favoured by many economists. As a result of their training and work experience economists tend to acquire objective knowledge about the operation of markets that leads them toward a system of ideas and ideals that is relatively favourable to free markets.

Many non-economists have an anti-market bias. As Bryan Caplan implied a few years ago in his book The Myth of the Rational Voter (discussed previously on this blog) some people have a strong ideological attachment to false beliefs.  More generally, however, it seems to me that the anti-market bias among non-economists is attributable to lack of understanding of the functioning of markets. Few people are so wedded to conspiracy theories about market behaviour that they are unwilling to consider economists’ explanations.

During my work career as an economist, I had many difficult policy discussions with engineers, who seemed to have acquired an ideological commitment to planning that led them to favour government regulation. From their perspective free markets appeared to be chaotic and planned solutions appeared to promise order. However, they were able to appreciate that actual outcomes that were likely to emerge from chaotic political and administrative processes might not be superior to market outcomes.

The most difficult policy discussions I have been involved in have been with Greenies whose ideological opposition to free markets is based on the view that capitalism leads to bad environmental and social outcomes. The main problem in these discussions is not a difference in values; we all want to avoid environmental and economic catastrophes. It seems to me that the main barrier to communication is that the Greenies have an ideological commitment to the belief that better outcomes will follow automatically if the regulation they favour displaces markets and voluntary cooperation. 

In thinking about how economists could have more useful policy discussions with Greenies it occurs to me that there is not much to be gained by talking to them about externalities. They might support proposals for limited intervention to correct specific externalities, but they actually see no virtue in limited intervention. They see market failure as pervasive and believe that superior outcomes can be produced by burdening governments with massive responsibilities.

I wonder whether it might be useful to begin a policy discussion with Greenies by considering the tragedy of the commons. When I re-read Garrett Hardin’s 1968 article with that title I was reminded of its shortcomings with regard to population projections, but his warnings about the potential for common pool resources to be over-exploited have a fairly solid foundation in economic reasoning.

Hardin wrote:

“The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy. …

Each man is locked into a system that compels him to increase his herd without limit - in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.”

However, as Elinor Ostrom demonstrated, it is by no means inevitable that use of common pool resources will end in tragedy in the absence of government intervention. She found that some communities of individuals have been able to manage common pool resources with reasonable degrees of success over long periods of time “relying on institutions resembling neither the state nor the market”.

The methodology adopted by Elinor Ostrom in her research strikes me as highly relevant to the question of how people who approach issues from different ideological positions can have useful policy discussions. In the preface to Governing the Commons: The Evolution of Institutions for Collective Action, Elinor Ostrom wrote:

"Instead of presuming that the individuals sharing a commons are inevitably caught in a trap from which they cannot escape, I argue that the capacity of individuals to extricate themselves from various types of dilemma situations varies from situation to situation. The cases to be discussed in this book illustrate both successful and unsuccessful efforts to escape tragic outcomes. Instead of basing policy on the presumption that the individuals involved are helpless, I wish to learn more from the experience of individuals in field settings. Why have some efforts to solve commons problems failed, while others have succeeded? What can we learn from experience that will help stimulate the development and use of a better theory of collective action – one that will identify the key variables that can enhance or detract from the capabilities of individuals to solve problems?"

Some advocates of smaller government (including myself) are fond of pointing out that the logic of the tragedy of the commons applies to interest group politics as well as to physical resources. When goods such as education and health services are converted into common pool resources there is an incentive for interest groups to attempt to increase their share at the expense of other groups and the general public. More generally, when interest groups view the coercive power of the state as a common pool resource to be used for the benefits of their members, the adverse impact of tax and regulation on incentives for productive activity is likely to result in outcomes that will be detrimental for everyone. The incentives facing individual interest groups in that situation are similar to those facing individual fishermen – when their collective actions results in over-fishing, that is detrimental to all.

However, it is reasonable for the advocates of big government to ask why the tragedy of the political commons has not resulted in the failure of all experiments in representative government. If we apply Elinor Ostrom’s research methodology we have to acknowledge that some countries have been more successful than others in coping with the common pool resource problems associated with interest group activity. The reasons for this seem to me to be an important topic for research and discussion.

It strikes me that people who approach issues from different ideological perspectives would be able to have more useful policy discussions if they could turn their attention to what they can learn from the actual experiences of people in different institutional and policy settings.

Are nature and biodiversity essential to health and happiness?

There is no prize for guessing the answer given by Susan Prescott and Alan Logan in The Secret Life of your Microbiome: Why nature and biodiversity are essential to health and happiness.

This recently published book is written for a popular audience, but the authors have expert knowledge of the microbiome – the microbes and their genetic material found in the human gut and skin. Susan Prescott is an immunologist and paediatrician. Alan Logan’s background is in research relating to naturopathic medicine. It is obvious that the authors have spent a lot of time sifting through scientific evidence in writing the book.

Some of the evidence suggesting that nature and biodiversity are essential to health and happiness is derived from inspection of the stools of our Paleolithic ancestors. Evidence from archaeological sites suggests that our hunter and gatherer ancestors ate a wide variety of plant food and had a greater diversity of micro-biota than most people living modern lifestyles. The same is true today of people who are still living traditional lifestyles close to nature.

The authors accept that modern medicine and hygiene have brought great benefits, but they point to evidence that a diet with a great deal of sugar, ultra-processed food and drinks – as well as excessive use of antibiotics, stress and physical exhaustion – can lead to gut permeability, an increase in blood endotoxins, and an increase in central nervous system inflammatory chemicals. Intestinal permeability is apparently associated with a range of chronic conditions including autism, asthma, allergies, chronic fatigue, depression, fibromyalgia, heart disease, irritable bowel, obesity, type 2 diabetes, psoriasis and schizophrenia.

Prescott and Logan argue that we have a symbiotic relationship with the human microbiome, which co-evolved with our ancestors. The microbiome provides functional benefits such as nutrient extraction, protection against harmful microbes, regulation of metabolism and production of important biochemicals. Researchers don’t yet understand what microbes would comprise an ideal microbiome, but the key seems to be diversity, which is encouraged by dietary diversity. The authors suggest that the human immune system has evolved to expect a kaleidoscope of biodiversity.

The authors view commercially available probiotics and prebiotics as a useful supplement that can help defend against dysbiotic forces in the modern environment, rather than as a substitute for the adoption of a healthy lifestyle. They emphasize the importance of dietary choices, physical activity, sleep and experience of natural environments.

There is substantial evidence, some previously discussed on this blog, that experience of natural environments has a positive impact on health and happiness. Prescott and Logan provide an interesting account of Japanese research relating to shinrin-yoku – the absorption of the forest into the body and mind:

“Remarkable studies have demonstrated that, individually, the sounds of nature, the sights of nature, the invisible chemicals secreted from trees (phytoncides, or phytochemicals), and the touch of natural products like wood (compared to synthetic resin), can positively influence stress physiology and our parasympathetic nervous system, the “rest and digest” branch of the nervous system that cools the jets of over-stimulation. The sum of research shows that our sensory system understands nature like an old friend.”

One of the authors’ aims seems to be to promote nature relatedness – fascination with nature and a desire for contact with it. They note evidence that nature relatedness is associated with high levels of psychological wellbeing, lower anxiety and greater meaning and purpose in life. Experience in nature tends to lift nature relatedness scores. Practicing mindfulness while walking in nature has additional emotional benefits. Moreover, the combination of nature relatedness, mindfulness and meaningfulness of life promotes pro-environmental behaviours.

Prescott and Logan leave readers in no doubt that they view pro-environmental behaviours to be desirable. I agree with them.

However, I strongly disagree with authors about economics and politics. They argue:

“It’s up to governments, insulated against lobbyists, to help curb the wild west that is fueling the dysbiosphere. Time and time again industry has shown it just can’t stop itself from pushing dysbiotic choices on our children.”

They oppose the view that “an individual can assume responsibility for personal health problems by simply adopting what biomedicine has to offer”. They suggest that view is deficient because it “doesn’t consider that a broken socio-ecological system might be the driving force for the need of biomedicine in the first place”.

When I read such views I have to remind myself that in writing about supporters of socialism Friedrich Hayek insisted “that it is neither selfish interests nor evil intentions but mostly honest convictions and good intentions which determine the intellectual's views”. (Quote from ‘The Intellectuals and Socialism’). It is not necessarily a waste of time to try to correct the errors of well-intentioned people.

Some of the errors made by Prescott and Logan are as follows:

1.       The view that government can be insulated against lobbyists is contrary to everything that is known about government and human nature.

2.       The phrase “pushing dysbiotic choices on our children” refers to advertising and selling products that are only harmful to human health when consumed inappropriately. There is nothing in our legal or economic system that requires parents to buy such products for their children or to allow them to over-indulge. Firms already offer foods for sale that are beneficial to health and will have a greater incentive to do so as consumers become more aware of the health implications of the choices they make on behalf of their children.

3.       The widespread human misery (and environmental catastrophes) caused by socialist economic experiments during the 20^th century should make us wary of claims that the socio-ecological system is broken. In what respects is it broken? What precise interventions are proposed to fix it? And, are we sure, beyond reasonable doubt, that those interventions will produce better overall outcomes?

Susan Prescott and Alan Logan were unwise to include ill-informed rants on economics and politics in this book. It seems to me that those rants detract from their efforts to promote a revolution in attitudes toward the micro-biome and the environment.

In my view this book is nevertheless worth reading because of the substantial body of scientific evidence it provides that many aspects of human health and happiness depend on the microbiome.

What caused the narcissism epidemic?

It seems obvious that there is a narcissism epidemic in many countries: people taking selfies everywhere we look; adolescents saying that their goal in life is to become famous; celebrities behaving like gods; people exploding in rage in response to imagined affronts; charlatans, shysters and jerks everywhere betraying trust. Psychologists have been written books about it: “The Narcissism Epidemic”, by Jean Twenge and Keith Campbell, tracked scores of U.S. college students on the Narcissistic Personality Inventory (NPI) across generations and found that there had been an increase in narcissism.

Claims based on the NPI have been disputed by Kari Trzensniewski, who conducted research using a slightly different data set and found no increase in NPI scores. In the face of ambiguous evidence, I wonder whether it might be narcissistic of me to continue to accept that there is a narcissism epidemic. Nevertheless, I will persist. A national survey conducted in the U.S. suggests that about 10 percent of people in their 20’s have experienced symptoms of Narcissistic Personality Disorder (NPD) at some time during their lives. So, even if narcissism hasn’t been increasing it might still be reasonable to view it as an epidemic.

NPD is a long-term pattern of abnormal behavior characterized by exaggerated feelings of self-importance, exaggeration of achievements and talents, an excessive need for admiration, and a lack of understanding of others' feelings. The Mayo Clinic has published a longer list of symptoms that are referred to in the DSMv. Narcissism exists on a spectrum, ranging from exhibiting a few traits to the full-blown personality disorder.

Anne Manne, an Australian journalist has provided an interesting discussion of the nature and causes of narcissism in her book, The Life of I, The new culture of narcissism, updated edition published 2015.

She notes that Twenge and Campbell have taken aim at myths regarding the relationship between narcissism and self-esteem. They point out that narcissism is not just high self-esteem, in the sense of a quiet and sturdy confidence in oneself. Narcissists feel superior; they are arrogant and unwilling to accept criticism.

Twenge and Campbell also suggest that it is a myth that narcissism is a mask for low self-esteem. They are opposed to the psychodynamic view that narcissists are flawed people who are ‘hurt deep down inside’. According to their view a narcissist is ‘just a jerk’.

However, Manne notes that Erin Myer and Virgil Zeigler Hill found that narcissistic people revealed lower self-esteem than non-narcissistic people when a bogus lie detector test was used in assessing self-esteem and narcissism. Narcissists don’t like to admit weakness or vulnerability.

Manne points to a corresponding division of views on the causes of narcissism. Twenge and Campbell argue that what makes a child into a narcissist is spoiling, indulgence, an absence of moral discipline in building character, and a culture of excessive praise, of telling children they are special. However, findings of research by Lorna Otway and Vivian Vignoles, using recollections of young adults to test a range of views of the role of parenting in development of narcissism, support a Freudian view. Apparently future narcissists receive constant praise from their caregivers that is accompanied by implicit messages of coldness and rejection rather than warmth and acceptance. This helps explain the combination of grandiosity and fragility exhibited by many narcissists.

Manne also discusses evidence that infants whose dependency needs are rebuffed by parents tend to become aggressive adults. Studies by Alan Sroufe suggest that preschoolers forced to self-reliance too early tended to bully others and engage in repeated acts of cruelty. Their early experiences at home made such behaviour seem natural.

The author also draws attention to research suggesting that affluent families are not immune to problems arising from parents being emotionally distant from their children. While insisting on high levels of achievement, such parents are often indulgent towards bad behaviour.

Manne sees the problems of parenting as linked to limited government support for parental leave. After a brief discussion of this topic she concludes:

“This brave new world is a whole lot larger than its symptoms – the self-esteem movement or the college kids with unrealistic ambitions or the helicopter parents rushing in to rescue a child whose grades are poor. Another way of looking at narcissism is that it is a quality required for survival in the hyper-competitive paradise of the new capitalism”.

That is indeed another way to look at the issue. Manne attempts to support that view in the second part of her book, holding Ayn Rand responsible for the “new capitalism”. She refers to Rand as “a monstrously narcissistic character” and suggests that “she practiced what she preached” in her philosophy of selfishness.

The main problem I have with that claim is that some of Rand’s behaviour seems to me to have been more selfish – showing less regard for other people - than that of the heroes of her novels. The behaviour of the heroes of her novels was presumably intended to illustrate the selfishness that she saw as a virtue, but I have difficulty, as previously noted, in recognising these fictitious characters as being particularly selfish

At one point Manne states that Rand’s “heroes are all young, male, wealthy … “. That left me wondering whether Manne had ever taken the trouble to read Atlas Shrugged. If she had done so, or even if she had looked up the list of characters on the internet, she would have been aware that Dagny Taggart was female.

Manne’s claim that Rand promoted “an ideology of narcissism” can be much better answered by an Objectivist, than by a reader of Rand’s novels like myself.  John Galt said:

“Happiness is not to be achieved at the command of emotional whims. Happiness is not the satisfaction of whatever irrational wishes you might blindly attempt to indulge. Happiness is a state of non-contradictory joy – a joy without penalty or guilt, a joy that does not clash with any of your values and does not work for your own destruction, not the joy of escaping from your mind, but of using your mind’s fullest power, not the joy of faking reality, but of achieving values that are real, not the joy of a drunkard, but of a producer”. (Atlas Shrugged, p 1022)

Manne raves on about what she refers to as “the neoliberal revolution” as creating an ideological framework for narcissism to flourish at an individual level. Yet she doesn’t specify the nature of the incentives that could have caused that to occur. If “neoliberalism” means free markets, how do free markets provide an incentive for appointment of narcissistic business leaders? Under normal circumstances the last thing individual investors want is to have their wealth depend on the actions of a narcissistic chief executive.

Some investors might think it makes sense to take a punt on a narcissistic entrepreneur in highly regulated industries where there may be something to be gained by hoodwinking politicians and voters. Otherwise, why take the risk that the narcissist might run off with your money or spend it to enhance his own image?

It is disappointing that Manne has not considered whether narcissism might be a problem in occupations other than business. Markets expose private sector narcissists to financial disciplines for failure to deliver on their promises unless they can use their skills to persuade governments to bail them out. Casual observation suggests that some other occupations - such as politics and some parts of the media - provide a breeding ground for narcissism and a sanctuary for narcissists.

Anne Manne has not, in my view, made a persuasive case that Ayn Rand’s philosophy played a large role in the partial return to classical liberalism in the U.S., the U.K, and a few other countries including New Zealand and Australia, during the 1980s and 90s. And she certainly hasn’t made a persuasive case that free markets promote narcissism.

Nevertheless, I enjoyed reading The Life of I. I particularly enjoyed reading her explanation of the behaviour of Anders Breivik and Lance Armstrong. The book seems to provide a good introduction to psychological research on the nature of narcissism and parenting styles that lead to narcissism.