Can MEMEnomics help us to predict social change?

MEMEnomics is the title of a book by Said Dawlabani, a cultural economist. The book, published in 2013, is an application of the psycho-social model of human development pioneered by Clare Graves and Don Beck. MEMEnomics has been praised by several prominent people, including Deepak Chopra and Bruce Lipton, but I have yet to see any praise by prominent economists. The author does not claim that his book is part of the economics mainstream.

Said Dawlabani suggests that MEMEnomics represents the coming together of two fields: memetics – the study of the replication, spread and evolution of memes - and economics. Just as genes carry the codes that define human characteristics, memes carry the codes that define cultural characteristics. The book is focused on value-system memes - the varying preferences and priorities that humans have in their lives depending on their level of development. The way human values may change with levels of human development was discussed in a recent post on this blog.

The author defines MEMEnomics as “the study of the long-term effects of economic policy on culture as seen through the prism of value systems”. Much of the book is devoted to attempting to explore the cultural implications of changes in economic policy in the United States. The author recognizes the desirability of ensuring that his model can explain history before it is used to attempt to predict the future.

There are three memenomic cycles identified in the book:

·         a “fiefdoms of power” cycle, peaking around 1900, in which American industrialists played a dominant role - large-scale exploitation, fraud and corruption came to identify the values of that era;

·         a “patriotic prosperity” cycle, peaking around 1950, characterized by economic expansion and government intervention – Keynesian macro-policies and social polices – and ending in stagflation;

·         and an “only money matters” cycle, peaking around 1980, characterized by monetarism and deregulation of the economy, and leading to the financial crisis of 2008.

I am not sure the author succeeds in demonstrating that changes in economic policies have led to cultural change. The cycles identified seem to me to be caricatures of beliefs held by powerful elites rather than accurate descriptions of deep-seated changes in values held by ordinary citizens. Nevertheless, it might be reasonable to argue that the cycles represent changes in ideologies of opinion leaders that have been reflected superficially in voting preferences and priorities of the American public.

The author suggests that we are standing on the cusp of a fourth cycle, “the democratization of information cycle”, in which technological advances are allowing social networks to play a pivotal role in affecting social change. That view has merit in my view, but I think this technology-driven change is better viewed as an exogenous factor rather than a new ideology emerging from the down-side of “only money matters”. At this stage it seems that, in the aftermath of the 2008 financial crisis, social networks have aided the return of economic nationalism rather than a policy environment placing higher priority on human development and living in harmony with nature.

As discussed in previous posts (here and here) there does seem to be scope for technological advances to have profound impacts on human values and the way we organise ourselves relative to each other over the next few decades. However, since some of those innovations threaten the scope of government, it seems unlikely that government policy will play a top-down role encouraging them to happen. Policy change seems more likely to occur in response to the demands of ordinary citizens for governments to get out of the way, so citizens can make effective use of new technology.

I enjoyed reading the final chapter of the book discussing the concept of a sustainable corporation. Inspirational examples are provided of corporation leaders setting out to define how the core values of their organisations can enable them to simultaneously pursue profits and a higher purpose. Unfortunately, some of the shining examples of 2013 do not all shine so brightly today.  Said Dawlabani has written an interesting article recently on the reasons why that has happened.

 Entrepreneurs who are selling new sets of values to investors, staff and customers will always encounter naysayers. In the face of this negativism some of these pioneers will succeed, many will not.

One of the messages I get from MEMEnomics is that individual entrepreneurs are likely to play a crucial leadership role in facilitating transition from a subsistence value system limited to expressions of selfish interests, to a value system that understands the interconnectedness of all life on the planet.

It strikes me that for economics to shed light on the role of the entrepreneur in this process it needs to recognize that the value created by entrepreneurs is likely to have a large non-pecuniary component in future. In pursuit of personal values some innovative entrepreneurs are offering investors the opportunity to feel that their funds are being used for the betterment of humanity and/or the environment, as well as generating financial returns. Similarly, they are offering employees the opportunity to feel they are engaged in a meaningful venture rather than just an income earning activity, and are also offering consumers opportunities to feel good about their purchases.

The economic model that seems most relevant in this context is 'identity economics' - as discussed in a book of that name by George Akerlof and Rachel Kranton. The key idea is that people gain satisfaction when their actions conform to the norms and ideals of their identity. In a tribal society, identity economics is like identity politics – people adopt the norms and ideals of the tribe to which they belong. In a cosmopolitan society the relevant norms and ideals are those of the market economy, incorporating a large measure of respect for the rights of others and social trust. Over the next few decades, hopefully the relevant norms and ideals will incorporate greater concern for the well-being of all humans and other living creatures.

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.

Where is the best place to live?

The pathway above Orion beach, Vincentia, NSW, Australia

Over the last few months I have had personal reasons to ponder this question. My wife and I decided that the time had come for us to move closer to family and downsize.

I can’t claim that I reviewed research relating to the question in a systematic way before we decided where we should live. However, I have been reading and writing about happiness research for over a decade, so that probably had some influence.

Since we made our decision I have read some of the more recent literature on the impact of happiness of location. Perhaps my recent reading could be explained in terms of seeking additional evidence to support the decision we have made, but I do find the topic intrinsically interesting.

My intention here is to discuss research findings on the impact of location on happiness rather than to attempt to justify our decision.  Relocation decisions made by different individuals and families obviously need to reflect their differing values and changing priorities at different stages of life.

If you do an internet search on “happiness best place to live” one of the first items to come up is likely to be an article telling you that according to a major Gallup poll, Hawaii is the U.S. state with the highest well-being ranking, with the top score in the physical, financial and community categories. If you search for the cities that are the best places to live, you are likely to find articles based on Gallup polls which suggest that the cities that score highest are near the ocean. When you read on you find that there is more involved than just beachside living. Research by Andrew Oswald has shown that average life satisfaction levels in different places closely correlate with objective measures of the quality of life – as measured sunshine hours, congestion, air quality etc.

Survey data on the happiness of people in different federal electorates in Australia suggests that many of the happiest electorates in Australia are not close to the coast (although the New South Wales south coast electorate of Gilmore, where we have lived for the last 12 years, is among the top five). Some of the unhappiest electorates in the country are in suburban Sydney. Some headlines claiming that major cities create unhappy Australians prompted me to write sceptically on this topic a couple of years ago. I suggested that current life satisfaction is not the only important consideration in making location decisions. Many families face trade-offs between current and future life satisfaction.

I recommend that people considering a move should also read an article by Brad Waters in Psychology Today which draws upon the insights of Daniel Kahneman to make the point that life satisfaction is influenced by many factors other than location. He suggests that people considering relocation should ask themselves: “Does a move satisfy those factors or does it temporarily distract us from satisfying them?”

There is evidence of substantial benefits from living in a location where it is possible to see family and friends frequently. For example, research by Nick Powdthavee, undertaken about a decade ago, suggested that the benefits of seeing relatives and friends “most days” rather than “less than once a month” was greater than the benefit of getting married and was sufficient to compensate for about two-thirds of the happiness loss from such events as unemployment or going through a separation.

A couple of years ago when I wrote about the link between happiness and nature connectedness I speculated that some part of the correlation between nature connectedness and happiness is associated with “feeling connected”. Feeling connected to nature might be similar in that respect to feeling connected with family, friends or community.

Evidence continues to accumulate that actual contact with the natural environment has positive benefits for health and happiness. For example, a study conducted by Simone Kuhn (and others) for the Max Planck Institute for Human Development (discussed in this Forbes article) found that city dwellers who live near forests were more likely to have healthy amygdalas and thus better able to manage stress, anxiety and depression. A study by Chris Neale (and others) using mobile EEG has found that when walking in urban green space old people had a higher level of engagement and lower levels of excitement than when walking in both busy urban commercial streets and quiet urban space. The authors concluded that the urban green space seemed to have a restorative effect on brain activity.

An article by Ming Kuo has identified 21 plausible pathways linking nature to human health and has postulated that one pathway, enhanced immune functioning, may be of central importance.

Thoughts along those line prompted me to begin reading The Secret Life of Your Microbiome, why nature and biodiversity are essential to health and happiness, by Susan Prescott and Alan Logan. Perhaps I will write more about that later.

Meanwhile, my bottom line is that, other things equal, it might be a good idea to find a place to live where you can spend a fair amount of time in the natural environment with family and friends. Unfortunately, many people in this world do not currently have the luxury of making that choice.

What reasons do we have to look forward to the future?

In his book, Progress: ten reasons to look forward to the future, Johan Norberg spends a lot of time looking back on progress that has been made. 

In brief, his ten reasons for optimism are:

1. The incidence of famine has declined. Only a few hundred years ago famine was a fairly regular phenomenon, occurring more than twice a century even in countries like France. In recent years the death toll from famine has been only about 2% what it was a century ago, even though the world population has increased fourfold.
2. Sanitation improvements since the “Great Stink” in London in 1858 have helped improve longevity and reduce infant mortality over much of the world. About two-thirds of the world’s population now has access to proper sanitation facilities.
3. Average life expectancy in the world is now 71 years, having risen from 31 years in 1900.
4. Poverty has declined because of economic growth. In the early part of the 19^th century the standard of living of the average world citizen was equivalent to that of the average citizen in the poorest countries today (e.g. Haiti, Liberia and Zimbabwe).
5. Violence has declined. For example, the annual European homicide rate declined from 30 to 40 per 100,000 people in the 14^th century to around 1 per 100,000 in recent years.
6. Although environmental damage tends to increase initially with economic growth it subsequently tends to decrease as people become wealthier. Technological advances seem likely to enable future generations to reduce climate change risks and still enjoy higher living standards.
7. Literacy levels have risen with economic development. The global literacy rate rose from around 21% in 1900 to 86% in 2015.
8. Freedom has increased. Slavery is now banned just about everywhere. Democracy now limits the abuse of government power in many parts of the world. Economic freedom has risen: the global average rose from 5.3 to 6.9 on the Fraser Institute’s ten-point scale between 1980 and 2013.
9. There has been growing recognition of equality of rights, irrespective of ethnicity, gender and sexual orientation.
10. Children are now seen as worthy of being given the best conditions for a long and happy life, rather than as resources for the household economy to exploit.

Many readers of this blog will probably be thinking at this point that they already knew most of that. However, readers of this blog tend to be exceptionally well informed. In the epilogue of his book Johan Norberg provides evidence that in the broader population most people consistently underestimate the progress that has been made. For example, in the U.S. apparently 66% of the population think that world poverty has almost doubled in the last 20 years, and only about 5% are aware that it has almost halved over that period.

This book provides a vast amount of useful ammunition for those of us trying to get the message across that “the good old days” were not so great.

However, I doubt whether the ten reasons provided will actually encourage many pessimists to look forward to the future. It is too easy to acknowledge the progress that has been made and yet to hold to pessimistic views of the future. The author acknowledges that being worried about the future may be in our genes:

“The hunters and gatherers who survived sudden storms and predators were the ones who had a tendency to scan the horizon for new threats rather than those who were relaxed and satisfied”.

The author also acknowledges threats to progress such as large scale war, more extensive terrorism with advanced technology, climate change and more large scale financial crises. He is most concerned that “people led by fear might curtail the freedom and the openness that progress depends upon”.

On a more optimistic note, he observes that in our era of globalization many countries now have access to the sum of humanity’s knowledge and are open to the best innovations from other places. “In such a world, progress no longer depends on the whim of one emperor”.

Johan Norberg’s message is not one of complacency. He claims that the book was written as a warning not to take progress for granted and that is the message of his final sentence:

“If progress is to continue, you and I will have to carry the torch”.

That means, in my view, that we will need to encourage people to contemplate optimistic visions of how the future might evolve.

Can creative destruction be an inclusive process?

This question is prompted by my reading of Innovation and Its Enemies, Why people resist new technologies, a recently published book by Calestous Juma. The author takes much of his inspiration from Joseph Schumpeter, who famously described the innovation process as one of creative destruction. Juma argues that new controversial technologies are likely to enjoy more local support “where the business models include provisions for inclusive innovation”. I will explain later.

As the title suggests, the book explores resistance to introduction of new technologies. It does this mainly by telling the stories of nine innovations: coffee, printing of the Koran, margarine, farm mechanization, AC electricity, mechanical refrigeration, recorded sound, transgenic crops, and AquaAdvantage salmon.

Anyone who has an interest in innovation is likely to enjoy reading the stories presented in this book. Without reading a book like this one it would be difficult to fully appreciate that goods, like coffee, that are now commonplace, were once highly controversial innovations. The stories told in the book make me wonder whether future generations will look back with bemusement about my concerns about artificial intelligence and neural lace.

Although Calestous Juma delves into history in these case studies, he does not seek to provide much historical perspective on changing societal attitudes toward innovation. I doubt whether he believes that we are living in a time when opposition to innovation is particularly great by historical standards, but his views on such matters are not obvious from this book. Readers need to look elsewhere (e.g. The Enlightened Economy, by Joel Mokyr) for an understanding of the industrial enlightenment that began to occur in western Europe around 300 years ago. The author’s neglect of this big picture of attitudinal change is surprising in view of his acknowledgement that he obtained “early inspiration” from an article by Joel Mokyr on innovation and its enemies.

   

The stories told in Juma’s book are enlightening about the nature of resistance to new technologies. The general message is that resistance should not be lightly dismissed as irrational fear of change:

“Many of these debates over new technology are framed in the context of risks to moral values, human health, and environmental safety. But behind these genuine concerns often lie deeper, but unacknowledged, socioeconomic considerations. This book demonstrates the extent to which those factors shape and influence technological controversies, with specific emphasis on the role of social institutions”.

One of the things the book demonstrates is that resistance to innovation is often fuelled by people who have reason to fear competition from new products and new ways of doing things. Those faced with potential for economic loss have used every trick available in an attempt to protect themselves from the consequences of innovation. It is certainly true that many members of the public have genuine concerns about the potential impact of innovations on public morals, health and the environment, but the losers from change often exploit such concerns mercilessly to persuade governments to protect their interests. Thankfully, since the industrial enlightenment, the efforts of the losers to protect themselves from new competition have not been particularly successful.

Although he has chosen a similar title for his book, the author is clearly not a fan of Virginia Postrel’s The Future and its Enemies (which I discussed here).  He has little faith in the capacity of the spontaneous processes of free markets to manage innovation:

“Managing the interactions between change and continuity remains one of the most critical functions of government”.

Again:

“Political leadership on innovation and the existence of requisite institutions of science and technology advice are an essential aspect of economic governance. Such institutions need to embody democratic practices such as transparency and citizen participation that accommodate diverse sources of expertise”.

The author’s apparent faith in government regulation of the innovation process sits oddly with his acknowledgement of shortcomings in existing regulatory processes which focus largely on the risks of introducing new products. He acknowledges that these processes often fail “to compare the risks and benefits associated with the new product to those of existing production systems, even though it is precisely this difference that should form the basis of a regulatory decision on new technologies”. The author also acknowledges the potential for consumer protection regulation to be used for protectionist purposes:

“What may appear as a legitimate appeal for the right to know may in fact be driven by an effort to brand a product so it can be rejected by consumers for protectionist reasons”.

I agree with the author that sensible political leadership is a fundamental requirement, but sensible political leaders will aim to confine regulatory interventions to those circumstances where there are good reasons to fear that spontaneous processes might lead to outcomes that will be widely regretted. When political leaders set out to manage interactions between change and continuity they open their doors even further to interest groups seeking preferential treatment. It would be nice to think that sensible policies and social harmony will emerge from citizen participation that accommodates diverse sources of expertise, but experience suggests that elected politicians are more representative of broader community interests than are the interest group spokespersons that governments select as citizen representatives. The most likely outcome is for the interests that would be represented in such forums (e.g. consumer, environmental, industry and union groups) to conspire to protect their interests in regulating markets, at the expense of the interests of the broader community in allowing free competition to determine outcomes under most circumstances. The critical requirement for sensible policy development is for the claims of interest groups to be subjected to critical scrutiny within the context of a public inquiry process that is capable of providing trustworthy independent advice to governments. (Australia’s Productivity Commission may provide a useful model for other countries to consider.)

Calestous Juma suggests several ways in which innovation could be made a more inclusive process: greater involvement of public sector institutions in providing training in the emerging fields; creation of joint ventures; equitable management of intellectual property rights; segmentation of markets to enable the technology to be used for non-competitive products, and improvement of the policy environment to support long-term technology partnerships.

Smoke and mirrors may help political magicians to appear to be ‘inclusive’, but they cannot alter the fact that some people are adversely affected by innovations that provide widespread benefits to the broader community. In her book, Bourgeois Equality, discussed on this blog a couple of months ago, Deirdre McCloskey uses the term, ‘bourgeois deal’ to refer to societal acceptance of innovations that compete with and displace old ways of doing things in exchange for widespread improvements in living standards. I doubt whether ‘inclusive’ innovation policies - even if designed by intelligent and well-meaning people - can do much to help sustain public support for the bourgeois deal. Ongoing support for the bourgeois deal depends on expectations that innovation will continue to generate widespread improvements in living standards.

Postscript:
Calestous Juma has responded as follows:

"I appreciate your thoughtful review of my book. You raise important points that need addressing. First, you wondered why I did not address the question of whether public attitudes on new technologies have changed over the centuries. I address this issue by showing that the public responses to new technologies appear to be conserved over the 600 years that the case studies cover. At face value this may appear not to be the case because of the remarkable proliferation of technology into every aspect of human life. I think that the change has been in the availability of technologies due to the exponential growth in science, technology and engineering. Public perception of technological risks has not changed, mostly because as humans we have not changed in any discernible way over the last 600 years. We have not found a way to reprogram the amygdala, to simplify a little.

Now to your more complex question: is inclusive innovation compatible with creative destruction? My answer is yes. In many cases disruptions, to use the term in a more prosaic way, is largely a result of the business model used. There are two examples that illustrate this. The introduction of mobile phones in Africa was by any measure disruptive. But it was also inclusive because from the outset the focus was to ensure that the poor had access to the service. Inclusive innovation was achieved through low-cost handsets and pre-payments for airtime. The early concern that mobile phones would be toys for the rich never came to be. The second example involves the strategies adopted under the Montreal Protocol to develop alternatives to the ozone-depleting substances. In this case those firms such as DuPont that were likely to be disrupted by alternative chemicals were included in new research efforts. The Protocol went further and introduced an amendment that promoting the sharing of the new technologies with developing countries.

Both examples involved private-public partnerships that were committed to promoting inclusive in innovation. In both cases incumbent technologies were displaced. Both case provide lessons of inclusive innovation. We can trace other examples of inclusive innovation in history. We have café au laite, as the name advertises, because of compromise to create a recombinant product. Proposals for co-existence are not new. It was tried, without success, to leave a niche for horses in American agriculture in light of the relentless march of tractors. The proposal came too late and the superiority of tractors over horsepower illustrates that there are many areas of technological transformation where inclusive innovation is not a viable option. In other cases there has been a long period of co-existence between butter and margarine. This wasn't a result of an inclusive innovation strategy but it offers some lessons worth considering."

Does stasis now make more sense than dynamism?

It is now about 18 years since Virginia Postrel suggested in The Future and Its Enemies that our political, intellectual and cultural landscape was increasingly being defined by “stasis” and “dynamism”:

“How we feel about the evolving future tells us who we are as individuals and as a civilization: Do we search for stasis – a regulated, engineered world? Or do we embrace dynamism – a world of constant creation, discovery, and competition?”

The author was writing about the United States, but the ideas in her book have much wider application. The old political divisions seem to breaking down all over the world. On many issues there is not much political distance between social reactionaries, green reactionaries and technocrats. The social reactionaries yearn for the kind of world our parents lived in, green reactionaries yearn for a premodern society and technocrats fear change that is not managed by governments. They all see virtue in government regulation of innovation. As a result, we see strange alliances forming on issues such as fracking.

By contrast, dynamists share beliefs in a spontaneous order. They emphasize individual flourishing and individual responsibility, and the possibilities for progress that emerge when people are free to experiment and learn. They care about “protecting the processes that allow an open-ended future to unfold”.

Virginia suggested that dynamists don’t yet share a political identity. She notes that they may view themselves as libertarian, progressive, liberal or conservative. That still seems to be true. Many dynamists eschew politics. Of those who take an interest in politics, people who see themselves as libertarians or classical liberals would have least objection to being labelled as dynamists - if they understand what the label is intended to mean.

Misunderstanding of the meaning of ‘dynamist’ might be a problem. To the uninitiated, the word could appear to refer to history’s hastening agents who seek to activate what they perceive as ‘historical forces’ to achieve a particular vision of future society. I can’t think of a positive word that adequately captures the idea of allowing an open-ended future to emerge. A new word might be required: e.g. ‘catallaxist’ - a believer in catallaxy, or spontaneous order.

Advances in technology have helped those who believe in spontaneous order to achieve some important victories over the last 18 years. For example, the emergence of services such as Uber are helping to break down regulation protecting incumbent service providers.

Yet, on balance, it looks to me as though the stasists have been winning the economic policy debate. In the aftermath of the GFC, deregulation has often been perceived as a cause of economic crisis, overlooking the effects of the regulatory environment in encouraging some financial institutions to believe that they were too big to be allowed to fail. The actions of some leaders of the economics profession in distancing themselves from market liberalisation policies has lent weight to populist demands for a return of stasist policy prescriptions.

As I see it, identifying myself as a believer in spontaneous order does not involve an ideological commitment never to advocate government intervention under any circumstances. It has to do with where the onus of proof should lie. In the case of migration, for example, I would argue that the onus should be on those favouring restrictions on international movement of people to justify why such restrictions should exist. It is argued that free international movement of people is incompatible with welfare systems in which immigrants can qualify for social assistance, but it is not obvious why immigrants should qualify for social assistance.  A more persuasive argument immigration restrictions can possibly be mounted in terms of potentially adverse social consequences of a large influx of migrants with different cultural traditions.

Similar considerations apply in relation to new technology. It is easy to mount a persuasive argument for regulatory restrictions on access to nuclear technology, but that is obviously an extreme example. Some statists have argued that innovations in home entertainment should be regulated to avoid adverse social impacts, but they imply that individuals are not capable of learning how to make sensible decisions for themselves and their families about use of new technology. Some of us had difficulty in making good decisions about use of our leisure time following the introduction of television, but that is not a powerful argument for the government to make such decisions for us. Of course, as suggested by Daniel Lattier, we have a responsibility to learn to use technology wisely, i.e., temperately. Similar considerations have applied in many aspects of life, e.g. food, beverages, sex, since ancient times.

How should we view decisions about whether to enhance brain power with neural lace? I ended a recent post on this topic suggesting that neural lace will not be worth having unless it can be developed in such a way as to enable humans to protect the privacy, autonomy and responsibility that is integral to their individual flourishing. I should have added that the decision to have a neural lace implant will be best left for individuals to make for themselves. Anyone wants to argue that choosing to use some particular form of neural lace would be tantamount to selling oneself into slavery, is of course free to try to make a case for regulation or prohibition.

My reading about potential consequences of artificial intelligence (see blog posts here and here) has left me feeling somewhat more cautious about new technology, but that does not mean that stasis now makes more sense than dynamism. Virginia makes some relevant points. She acknowledges: “the open-ended future can be genuinely scary, the turmoil it creates genuinely painful”. However, she follows with the observation:

“Statist prescriptions … stifle the very processes through which people improve their lives – from the invention of new medical treatments to the creation of art. In their quest for stability, statists make society brittle, vulnerable to all sorts of disasters”.

Like other technological innovations, the advent of super-intelligent machines has potential to expand the possibilities for human flourishing. It will also expand the range of technology by which the flourishing of individual humans could be threatened by other entities, including governments.  New technology will not alter the fundamental principle of liberalism and that adult individuals should be free to flourish as they choose, provided they do not interfere with the rights of others.

What is the appropriate discount rate to use in assessing climate change mitigation policies?

The correct answer, in my view, is that the appropriate discount rate depends on the kind of policy that is being considered. If that answer seems odd to you then there is a good chance you have not yet read Mark Harrison’s paper entitled ‘Addressing Wellbeing in the Longer-Term: a Review of Intergenerational Equity and Discount Rates in Climate Change Analysis’. The paper was published last year in Measuring and Promoting Wellbeing, a collection of essays in honour of Ian Castles (an Australian who deserved to be honoured highly for his work on measurement of wellbeing).

The kind of policy that was evaluated in the famous cost benefit study by Nicholas Stern (and the subsequent study by Ross Garnaut) involves imposing some kind of tax (perhaps via a cap and trade mechanism) on carbon emissions in order to improve the well-being of future generations. Stern and Garnaut assume that economic growth will continue even in the absence of policies to mitigate carbon emissions and global warming, resulting in much higher average income levels in future (3.6 times higher 100 years from now in Stern’s projection).

Photo by Robin Ellis. Some rights reserved.

The carbon tax that this kind of modelling exercise suggests to be appropriate is highly sensitive to the discount rate that is used to determine the present value of mitigation efforts. The use of a low discount rate suggests that strong immediate action is warranted to mitigate climate change, whereas a higher discount rate suggests that the most appropriate course of action is to begin with a very low carbon tax and raise it gradually. In an illustrative example Harrison shows that with a discount rate of 1.35%, as assumed by Stern, the optimal current carbon tax is $78.48 per tonne, whereas with a discount rate of 6% it is only $0.88.

The discount rates used by Stern and Garnaut are an application of the social welfare function approach. Social welfare functions necessarily embody ethical judgements, even though such judgements are hidden beneath empirical facts in some versions of the, so called, Ramsey formula used by climate change modellers. Opinions differ on what ethical judgements are appropriate and discount rates can vary widely depending on what assumptions are made. Harrison demonstrates that the Ramsey formula gives estimates of a risk free discount rate ranging from 0.24% to 11% under the range of parameter values used in a variety of studies over the past decade.

At this point some readers will probably be throwing up, while others will be wondering what discount rates would be consistent with ethical judgements that they would be prepared to endorse. One way to consider whether you would be prepared to pay a carbon tax costing you $x per month in order to make your great grandchildren better off is to ask yourself whether you would prefer to make a financial investment of the same amount each month into some kind of trust for their benefit. The answer you obtain by considering opportunity costs in this way is equivalent to discounting the real money value of the benefits of climate change mitigation by the rate of return that you could expect to obtain on the alternative investment – presumably higher than the average real long term bond rate over the past 20 years or so.

One possible objection to this approach is that the rate of return on alternative investments will incorporate an element of compensation for risk, which is not appropriate in considering public investments such as climate change mitigation. The response which Mark Harrison provides is to point out that investment in climate change mitigation are far from risk free. There is a great deal of uncertainty about future costs and benefits of such policies. Most obviously, if you decide to vote for the carbon tax option you have no guarantee that people in other countries will pull their weight by imposing similar taxes on their citizens.

Some of you will by now be thinking that the cost benefit framework outlined above must be a load of garbage because you remain concerned about climate change, even though you would prefer to invest money for the benefit of your great grandchildren rather than to pay a carbon tax. If you are concerned about climate change, you are unlikely to be concerned that your great grandchildren will suffer losses that you could compensate for by increasing your savings rate by a small amount. The chances are that you (like me) will be concerned about the remote possibility that your great grandchildren might suffer from having to live with potentially catastrophic climate change outcomes.

Mark Harrison points out that by explicitly accounting for risk, rather than assuming it away, we can distinguish between policies that reduce risk and those that don’t. Mitigation policies that are potentially effective in averting disasters should be subjected to a discount rate that is below the risk-free rate because they pay off at a time when returns on other assets are low or negative, and when willingness to pay is great.

So, my conclusion:

•  the most appropriate discount rate to use to evaluate policies such as carbon taxes is the long-term average of real market rates of return on capital; and  
• the most appropriate discount rate to use to evaluate policies directed more specifically toward averting disasters - such as public investment in research to develop low-cost ways to removing greenhouse gases from the atmosphere - should be lower than the long-term average of real government bond rates.

In the unlikely event that we are faced with something close to the worst case climate scenario, our current policies to encourage adoption of inefficient alternative energy options are unlikely to avert catastrophe.  If the objective is to reduce the risk of catastrophe we should be using an evaluation methodology that helps us to choose the lowest cost method of achieving that objective.

Postscript:

There seems to be increasing awareness that we should be asking how we can insure against the worst climate change outcomes at lowest cost. Martin Wolf has published a relevant article entitled ‘Climate actions hould be seen as insurance’, in which he discusses Climate Shock, a new book by Gernot Wagner of the Environmental Defense Fund and Martin Weitzman of Harvard University. There has been a fairly favourable review of Climate Shock by William Nordhaus in the New York Review of Books.

I get the impression that the authors of Climate Shock have come to the conclusion that the best form of insurance is to reduce CO2 emissions as rapidly as possible. They rule out engineering solutions directed toward managing solar radiation (probably for good reasons) but it is not clear whether they have considered the potential benefits of research into ways to take greenhouse gases out of the atmosphere.

It is also unclear whether urgent action is justified, given the fact that when global warming resumes it will probably have positive net economic benefits for a few more years. I expect the variance of potential outcomes is not as great over the next decade or so as it is when we look further into the future.

The review article by William Nordhaus offers a solution to the free rider problem in international negotiations in the form of a climate change club  imposing trade sanctions on countries that are perceived to be laggards. That kind of thinking makes me wonder whether the science of climate change might turn out to be less important for a country like Australia than foreign policy and trade considerations. The formation of a climate change club seems a more worrying prospect at the moment than the potential for an increased incidence of droughts and bushfires. 

How does nature connectedness affect happiness?

White sands walk: Jervis Bay, NSW, Australia

How important is a constant intercourse with nature and the contemplation of natural phenomena to the preservation of moral and intellectual health!   Henry David Thoreau, Journal, 6 May 1851.

Thoreau still speaks eloquently for everyone who feels a need to spend time in the natural environment in order to re-charge their emotional batteries. Recognition of the importance of the natural environment to human happiness now seems to be supported by the findings of social research which show that nature connectedness - identifying with and feeling connected to the natural world – is correlated with happiness. The strength of this relationship is similar to that between happiness and personal income, marital status, volunteering, and personality traits such as conscientiousness and agreeableness.

Formal evidence on links between nature connectedness and happiness has only emerged during the last few years. What I write below is based mainly on a meta-analysis by Colin Capaldi, Raelyne Dopko and John Zelenski published in September last year. In order to be included in the meta-analysis, studies had to include at least one explicit, self-report measure of nature connectedness and at least one measure of happiness and report on their relationship. The meta-analysis covered 30 samples, giving a total sample size of 8523. Most samples came from Canada, the U.S. and Europe.

The meta-analysis showed that the strength of the measured relationship between nature connectedness and happiness was influenced by the way these variables were defined and measured. A measure of inclusion of nature in self had a stronger relationship than other measures of connectedness. Vitality was the happiness concept with the strongest relationship to nature connectedness.

The authors note that correlation between nature connectedness and happiness does not necessarily indicate that nature connectedness causes people to be happier. It is possible that causation might run from happiness to nature connectedness or that some third variable might be responsible for the observed correlation.

However, there is fairly clear evidence from another meta-study (by  Diana Bowler et al) that exercise in natural environments promotes greater emotional health benefits – in terms of feelings of energy, and less anxiety, anger, fatigue and sadness - than exercise in an artificial environment. There is also evidence that nature connectedness is positively related with time spend outdoors in contact with nature.

It is possible that some part of the correlation between nature connectedness and happiness is associated with feeling connected. Feeling connected to nature might be similar in that respect to feeling connected with the community. The relationship between nature connectedness and happiness is still evident, however, when other connections (e.g. family and culture) are controlled for.

The authors note that the relationship between nature connectedness and some forms of happiness may be adversely affected, to some extent, by a tendency of people who feel connected to nature to be worried about the future of the environment. Such concerns are more likely to dampen positive emotions than eudaimonic measures of happiness because such people are likely to become engaged in pro-environmental behaviours that make their lives seem more meaningful.

There is evidence that feelings of nature connectedness are stronger in some cultures than others and are influenced by early childhood experiences. That suggests to me that causation runs from nature connectedness to happiness, rather than vice versa.

Is human flourishing inconsistent with living in harmony with nature?

A view of Sydney in 2014

I like many of the ideas in the Ecomodernist Manifesto, but I don’t like the idea of having to choose between making room for nature and living in harmony with nature. Before discussing this issue I will provide some background.

The Manifesto, published in April of this year, has 18 authors of whom the best known are probably Ted Nordhaus and Michael Shellenberger of the Breakthough Institute.

The Ecomodernists begin with the proposition that the earth has entered into a new geological epoch, the Anthropocene, or age of humans. That provides the backdrop for consideration of the interaction between human flourishing and the natural environment.

Many environmentalists assert that a good Anthropocene is not consistent with the ongoing expansion of opportunities for human flourishing which economic growth provides. By contrast, the authors of the Manifesto are optimistic that the Anthropocene can offer expanding opportunities for humans, as well as protecting the natural environment, if knowledge and technology are applied with wisdom.

I endorse this proposition:

“A good Anthropocene demands that humans use their growing social, economic, and technological powers to make life better for people, stabilize the climate, and protect the natural world.”

My problem is with what follows immediately after:

“In this we affirm one long-standing environmental ideal, that humanity must shrink its impacts on the environment to make more room for nature, while we reject another, that human societies must harmonize with nature to avoid economic and ecological collapse.

These two ideals can no longer be reconciled”.

I don’t see any necessary conflict between the two ideals. It seems to me that the ideal of harmonizing with nature means that we should seek to live in harmony with the natural laws of the world in which we live. That means accepting that humans are in many respects like other animals and have deep emotional connections to the natural environment and other living things. These emotional connections are explicitly recognized in Chapter 5 of the Manifesto.

That suggests to me that the problem is just definitional. Nevertheless, it is hard to understand why the authors of the Manifesto would risk losing support by asking people to make an unnecessary choice between ideals.

What is the real choice that the authors want us to make?  When they object to the ideal of human societies harmonizing with “nature”, it seems that what they are referring to are natural systems - the part of the natural environment that has not yet been significantly modified by human activity. 

The authors argue:

“Natural systems will not, as a general rule, be protected or enhanced by the expansion of humankind’s dependence upon them for sustenance and well-being.

Intensifying many human activities — particularly farming, energy extraction, forestry, and settlement — so that they use less land and interfere less with the natural world is the key to decoupling human development from environmental impacts. These socioeconomic and technological processes are central to economic modernization and environmental protection. Together they allow people to mitigate climate change, to spare nature, and to alleviate global poverty”.

The real choice the authors want us to make is between intensifying human activities in particular regions and allowing them to spread in ways that would be detrimental to the natural environment.

The idea of decoupling human development from environmental impacts seems to me to make a great deal of sense as a broad generalization. I expect that governments will encounter difficulties in implementing such a strategy sensibly, but outcomes are likely to be worse if they do not try. One of the difficulties that is likely to stand in the way of implementation in some areas is the need to recognize the rights of indigenous people to use the natural resources they own. Another difficulty is the tendency of over-zealous supporters of wilderness to oppose the eco-tourism which is likely to be necessary to maintain broad political support for protection of wilderness areas. In some areas the involvement of indigenous people in eco-tourism is helping to meet the twin objectives of improving their economic opportunities and enlisting their support for greater environmental protection.

It seems to me to be particularly important for human well-being that attempts to decouple human development from environmental impacts does not occur at the expense of the ideal of living in harmony with nature in areas of intense human activity. The emotional needs that humans have for connection with the natural environment and other living things are unlikely to be satisfied by observing nature on TV and a once-in-a-lifetime visit to a wilderness area. 

Postscript:
In my next post I discuss the link between happiness and feeling connected with nature.