Why are old Americans more satisfied with their lives than are old Europeans?

The latest WorldHappiness Report (2015) contains an interesting chapter examining how happiness varies around the world by gender and age. The chapter was written by Nicole Fortin, John Helliwell and Shun Wang.

What would you expect those comparisons to show? I guess many people would expect that, on average, women would be less happy than men because in most of the world the opportunities available to females are still less favourable than those available to males.

The data doesn’t actually show that. When people are asked to rate their lives relative to the best possible and worst possible life (i.e. using the so called Cantril ladder) the world averages show that until they are about 50, women tend to rate their lives more highly than men. Perhaps women are more inclined to look on the bright side of life.

In any event, differences between the happiness of women and men are much less marked than differences between young and old people. On average, happiness tends to decline to about age 40 - a few years later for men than women - and then to stay relatively flat.

That finding was a surprise to me. I was given the impression from research I had read about that happiness was U-shaped over the life cycle. When I looked for more recent literature, just now, I found an article by Paul Frijters and TonyBeatton, published in 2012, based on panel data for Germany, Britain and Australia, which suggests the dominant age-effect is a strong happiness increase around the age of 60, followed by a major decline after 75. So I should have had an open mind about what to expect.

The data in the World Happiness Report shows a great deal of variation in the relationship between age and happiness in different parts of the world. Happiness does not vary much with age in South-East Asia, South Asia and Sub-Saharan Africa. Happiness declines sharply with age in CEE&CIS region (former Soviet Union, Eastern Europe and Central Europe) and less sharply with age in Latin America, Middle East and North Africa and Western Europe. The only regions with the U-shape are East Asia and NA&ANZ (North America, Australia and New Zealand).

It does not surprise me that there is a different relationship between happiness and age in high and low income countries, but I did not expect to see the different patterns in Western Europe and NA&ANZ which are shown below (based on Figure 3.2 of the World Happiness Report 2015).The NA&ANZ data are dominated by America (regional averages are calculated using population weights) so I am seeking an explanation of why old Americans are relatively more satisfied with their lives than old Europeans.

The different pattern between America and Europe also showed up in survey respondents’ reports of some positive emotions experienced the preceding day: smiling and laughing a lot; enjoyment; and learning or doing something interesting. The survey data also shows that older women in Western Europe report experiencing greater sadness, physical pain and depression than do men of comparable age in that part of the world, or people of either gender in America.

A hint about the possible causes of the difference in patterns between America and Europe is given by looking at the determinants of life satisfaction, as indicated in the regression analyses undertaken for the report. Those determinants are income, health, generosity, corruption, freedom of choice and social report.

An inspection of the graphs showing how those variables differ according to the age of respondent suggests that the main area of difference is in respect of perceptions of social support. What this means is that, on average, older people in Western Europe perceive that they are less able to count on relatives and friends for support when they need it than are older people in North America.

It is interesting to speculate about the reasons why old people in Western Europe are less likely to feel that they can count on relatives and friends in times of need. The thought that passes my mind is that the reasons might have something to do with the nature of the welfare states of Western Europe, but that might just reflect my prejudices. 

Should scientists be seeking to persuade or inform?

When I hear scientists engaged in policy advocacy I often cheer them on. At other times I make cynical comments questioning whether their conjectures have any substance. I notice that other people seem to have similar reactions, but some jeer when I cheer and vice versa.

In thinking about my own reactions I am able to rule out some possible reasons for negativity without much difficulty.

Expertise: My reactions are not always closely related to my own expertise. I can react positively or negatively to scientific advocacy in relation to areas of public policy in which I have no expertise as well as in aspects of economic policy where I can claim some expertise.

Conservatism: My reactions do not seem to be consistently conservative in the sense of being cautious about change. Sometimes I feel that scientists are setting out to make me worry unduly about the implications of our current lifestyles, but I am less inclined to feel that they are trying to make me feel more complacent than I should be about potential adverse effects of various innovations e.g. GM food or health effects of living close to power lines or wind farms.

Research funding: My reactions are not necessarily related to the question of how the scientists fund their research. In some instances I might suspect that they are advocating in the interests of the people who have provided funding, or slanting their presentations to further their interests in obtaining more funding, but such factors are not always relevant.

Indoctrination: My reactions are unlikely to be the result of indoctrination by particular branches of the news media. I am exposed to a range of media organisations with a range of different biases.

I had to think more carefully about whether my reactions could be related to the presentation skills of the scientists. I know I have a strong allergic reaction to being preached at or manipulated. So, I took a look at Jason Nazar’s 21 principles of persuasion and some other web sites discussing the art of persuasion. In the end I realized that I don’t have too much difficulty these days in being able to appreciate the persuasive skills of speakers while disagreeing with the messages they are presenting. I can also support the message being presented by speakers while thinking they could do with some help to improve their presentation skills.  Membership of Toastmasters encourages people to think about such matters.

It was not until I stumbled on an article by Dan Kahan on the science of science communication that I realized that the reactions that people have to advocacy by scientists might be related to Bryan Caplan’s concept of rational irrationality and Jonathan Haidt’s moral foundations theory (which have previously been discussed on this blog). Caplan suggests that people can have an almost religious attachment to irrational beliefs about economics, while Haidt suggests that identification with groups tends to blind people to the wisdom of people outside those groups.

Cutting to the chase, Kahan tests the performance of two hypotheses to explain why there is so much public dispute over science-based conjectures about the risks that humans are facing. The first thesis, the public irrationality thesis (PIT), predicts that the gap between public and expert assessments of risk narrows as members of the public become more literate about science. On that basis, people who scored highest on science comprehension could be expected to be more concerned about climate change than those with lower scores. However, this doesn’t happen - at least it doesn’t happen in studies cited by the author.

The second thesis, the cultural cognition thesis (CCT) posits that certain types of group affinities are integral to the mental processes ordinary members of the public use to assess risk. Kahan cites various studies that have tested CCT, but the results of one which tests CCT head to head against PIT are particularly interesting. The results show that on issues that have become politicized – such as global warming and fracking – the average divergence between risk assessments of people who identify as liberal democrats and conservative republicans is greater among those who have high levels science comprehension than among those who have low levels of science comprehension. (See chart below.) The results suggest that individuals who are most adept at scientific reasoning search out evidence to support their cultural dispositions.

 

Source: Dan Kahan, 'What is the science of science communication', Journal of Science Communication, 2015 

The study suggests that there is little difference between risk assessment of liberals and conservatives on issues that have not become politicized e.g. artificial food colourings, exposure to radio waves from cell phones, GM food, exposure to magnetic field of high voltage power lines, use of artificial sweeteners and nanotechnology. The PIT thesis does apply to such issues. I guess the results might differ in countries where some of these issues, e.g. the risks associated with GM food, have become politicized.

So, in the light of the above, how should I react to the Earth Statement recently published by a group of eminent scientists which suggests that “2015 is a critical year for humanity” and predicts dire consequences if international forums to be held this year decide to postpone substantial reductions in greenhouse gas emissions? Let me quote a paragraph:

“We can still avert dangerous climate change. However, we are currently on a warming trajectory that will leave our world irrevocably changed, far exceeding the 2°C mark. This gamble could propel us into completely uncharted waters, with unmanageable sea-­level rise and a vastly different climate, including devastating heat waves, persistent droughts and unprecedented floods. The foundations of our societies, including food security, infrastructure, ecosystem integrity and human health, would be in jeopardy, impacting most immediately the poor and vulnerable.”

My immediate reaction was along the lines that they would say that wouldn’t they. Those who preach about the end of the world can always be expected to tell us to repent now for the end of the world is nigh. Would you expect them to say that it is now too late to do avoid catastrophe, or that there is no need to worry much for the next 20 years or so?

I claim no expertise in climate modelling, but the little I know suggests to me that current models are not reliable enough to tell us that it is critical that further action be initiated in 2015. Such claims seem to me to be more like hysteria than science.

That leaves those of us who accept the physics of the greenhouse effect with great difficulty in assessing the urgency of the threat to humanity that it may involve.  It is easy enough to find 22 ways to think about the climate debate, but it isn’t easy to find a dispassionate expert overview of the relevant science. Nearly all leading scientists seem to have become preachers.

When scientists seek to persuade people to adopt particular positions on contentious policy issues it is inevitable that they will be seen to be preaching rather than presenting information on the current state of knowledge. If scientists want to be listened to by people other than their political cheer squads of “true believers” they should distance themselves from policy debate and display some modesty about the quality of their conjectures. 

Did Christianity invent the individual?

Inventing the Individual by Larry Siedentop, makes an important contribution to available literature on the origins of the individualism and secularism which characterize Western Civilization.

Before I read the book I was aware from reviews that the author claims that, in some sense, Christianity “invented” the individual. How could that be so?

Siedentop summarizes his argument: “in its basic assumptions, liberal thought is the offspring of Christianity” (p 332). What he means by “inventing the individual” is recognition that individuals have natural rights, including the rights to liberty, to equality before the law and to election of representatives. As early as the 13^th and 14^th centuries, recognition of the important roles of conscience and individual choice even led some philosophers associated with the church to recognize that enforcing moral conduct is a contradiction in terms. The essence of Siedentop’s argument, is that liberal thought became established as a way of thinking “as the moral intuitions generated by Christianity were turned against an authoritarian model of the church” (p 332).

The words, “moral intuitions generated by Christianity”, raise another problem that I might as well consider before moving on to provide some positive comments. The moral intuitions that Siedentop is referring to are intuitions about moral equality and reciprocity – including the ideal of loving others as oneself and the golden rule of doing unto others are you would have them do unto you. My problem is that something like the golden rule is common to the major religions and is expressed in remarkably similar terms in Judaism, Buddhism, Taoism, Confucianism, Hinduism and Brahmanism. More fundamentally, the idea of moral intuitions being generated by religion seems to rule out of consideration the possibility that such intuitions are innate. Perhaps Siedentop means to argue that Christianity has been more successful than other religions in cultivating moral intuitions, but his book contains few references to other religions.

One reviewer, Samuel Moyne, writing in Boston Review, has suggested that there is a major difficulty for anyone who tells a Christian story of liberalism’s origins:

“They must explain how, against its original purposes, the Gospel’s message was brought down to earth, applied right now to radically new aims and institutions that Jesus and Paul would not have accepted. The reversal is stark: from a refusal of the relevance of Christian moral beliefs’ to politics to a revolution in this-worldly assumptions about the subordination of individuals to hierarchy. You need an argument to show how this happened. Siedentop doesn’t really have one. He just knows the reversal occurred”.

Siedentop has probably attracted such criticism because he has been over-ambitious in stating the aim of his book. He has set out to answer a very big question:

“Is it a mere coincidence that liberal secularism developed in the Christian West?”

In my view his book should be viewed as answering a more modest question:

Did Christianity contribute to the advent of liberal secularism in Europe? That is a fairly provocative question in view of the common belief that liberal secularism stems solely from the Renaissance in Italy and the rediscovery of ancient humanism.

This book shows that liberal secularism has some strong moral roots in Christianity. The author also acknowledges that the development of market towns and cities played an important role in the growth of freedom (as have other authors including Adam Smith in Wealth of Nations). 

I found the author’s discussion of St Paul’s contribution to be a powerful reminder that his message was about, among other things, the idea that all humans are children of God and the potential of that idea to liberate individuals from constraining perceptions of their personal identities as defined by social roles - such as father, daughter, official, priest or slave. Siedentop puts it his way:

“Paul overturns the assumption of natural inequality by creating an inner link between the divine will and human agency. He conceives that the two can, at least potentially, be fused within each person, thereby justifying the assumption of the moral equality of humans.  … That fusion marks the birth of a ‘truly’ individual will through the creation of conscience” (p 61).

The book is largely about the development of the concept of ‘moral equality’ within the Christian establishment as well as among heretics. Siedentop points out that the concept of moral equality was evident in the early years of Christianity, and led to recognition of the claims of conscience by some influential Christians. For example, he quotes Tertullian as recognizing that “it is a basic human right that everyone should be free to worship according to his own convictions” (p 78).

It was, of course, many centuries before the implications of moral equality came to be tolerated by Christian churches - the full implications have arguably yet to be accepted by most church leaders. The author takes us through the history, providing a fairly persuasive case that the roots of Western liberalism were firmly established in the arguments of canon lawyers and philosophers by the 14^th and early 15^th centuries.

One of the most interesting parts of the book is the discussion of the views of John Duns Scotus and William of Ockham. At the end of the 13^th century Duns Scotus identified freedom as a necessary condition of moral conduct and argued that “an act is neither praiseworthy nor blameworthy unless it proceeds from the free will” (p 294). In the 14^th century Ockham probed the concept of dominium (or lordship) which had hitherto rested on the assumption of natural inequality and involved both a right to govern and a right to own. Thus, the role of the paterfamilias in the ancient family meant that the father not only governed but in a sense owned his family. Ockham insisted that the existence of a right implied moral authority – rightful power – rather than just exercise of de facto power. Discussion of rights brings to bear the concept of moral equality, and with that, recognition of freedom of the will and individual moral agency.

William of Ockham

My mind is unable to comprehend the book’s discussion of the contest between doctrines associated with Aquinas and Ockham on the question of whether references to eternal ideas in the mind of God implies a restriction on God’s freedom. In terms of the book's objectives, however, the important point concerns the role of the individual’s will. Siedentop notes that Ockham associated reason with individual experience and choice, and saw ‘right reason’ as obligated by principles of equality and reciprocity (p 309). 

Incidentally, the discussion of the different approaches of Aquinas and Ockham left me with the impression that the author is claiming that Ockham rejected Aristotle’s teleological reasoning.  However, the entry on Ockham in the Stanford Encyclopedia of Philosophy suggests otherwise. According to that source, Ockham accepted Aristotle’s view that humans have a natural orientation toward pursuit of their own ultimate good (happiness).  The point that Ockham adds is that this inbuilt orientation does not restrict individual choice - individuals are free to choose whether or not to will their ultimate good.

It seems to me that the author has provided people in the West with a timely reminder of the links between liberal secularism and the concepts of moral equality and freedom of conscience. The book reminds us that secularism is not devoid of values. As Larry Siedentop puts it, “secularism identifies the conditions in which authentic beliefs should be formed and defended”.

What tax and spending reforms might be feasible in Australia?

The government’s recent tax discussion paper contemplates a similar tax reform agenda to that recommended by the Henry tax review in 2010. The general thrust of the proposals is a move away from taxes which hamper efficient allocation of resources (e.g. stamp duties on property transfers) and taxes which impose disincentives on investment (taxes on capital income) or productive effort (high taxes on labour income).

Some commentators, for example Peter Martin in the SMH, have suggested that the discussion paper “has set out the case for an increase in Australia's rate of goods and services tax”.  Perhaps the report hints in that direction, but the Treasury research findings noted in the report do not seem consistent with the view that there are large gains to be had from substituting increases in GST for the taxes that have highest economic costs. The marginal excess burden (MEB) on GST is estimated to be in the medium range (around 20%) along with taxes on labour income, compared with an MEB of around 50% for company tax. As discussed in my recent post on the intergenerational report, the MEB of a tax rises exponentially with increases in the rate of the tax. If the relevant elasticities are such that the MEB on GST is currently around 20% (rather than around 10% as I previously thought) a doubling of the rate would cause the MEB on GST to 50% - as shown below.

It seems that the only way to get large economic gains by substituting one tax for another would be by relying more heavily on land taxes (and municipal rates) which, according to Treasury research, have a slightly negative MEB. The use of land tax to replace stamp duties on property transfers would make a great deal of sense from an economic perspective and should not pose huge political feasibility problems. People who cannot afford up-front payment of the land tax (e.g. old people who often income-poor despite being asset-rich) could be given the option of having payment deferred until after death, with appropriate interest being charged.

However, I find it difficult to imagine that increased revenue from land taxes could do much more than to replace some of the most highly distorting taxes used by state governments. Perhaps I could fire up my imagination by reading what Henry George had to say many years ago about the desirability of funding government by a single tax on land. However, I doubt whether any politician could persuade the electorate to accept substantial losses on the wealth invested in their homes in the hope that they might enjoy the benefits of lower taxes on capital income. Most Australian politicians are not even game to contemplate the merits of subjecting home owners to the same capital gains tax regime as is applied to owners of other assets.

One way in which it might be feasible to obtain benefits from lower taxes on capital income would be to reduce the tax concessions applying to superannuation. It might also be possible to reduce government spending by tightening up the assets means test on aged pensions. The potential for a bi-partisan agreement emerging in these policy directions has recently emerged with the Labor party offering to end superannuation concessions for the wealthy and the Australian Council of Social Services (ACOSS) suggesting that the assets test on aged pension eligibility should be tightened to better target the pension to those who need it.

At first sight these indications of a willingness among some politicians to contemplate a reduction of concessions to the elderly might appear to be attempting to swim against the tide of grey power – the growing proportion of old voters in the electorate. Paradoxically, however, the ability of any group to benefit from redistributions extracted from the rest of the community tends to diminish as it comes to represent a higher proportion of the population.

A big question which groups representing old people need to face is whether they stand to gain more by using their political muscle to increase their share of the economic cake or by using their political muscle to increase the size of the economic cake. As the elderly come to represent a higher proportion of the population, their attempts to obtain a larger slice are eventually likely to reduce the size of the cake by leading to higher tax rates and thus dampening economic incentives. A larger slice of a smaller cake could end up to be very little indeed. The elderly can possibly defer the time of reckoning by encouraging governments to adopt a complacent attitude toward growing government debt, but that strategy runs the risk of great hardship if the welfare system becomes unsustainable and has to be sacrificed to repay debt. 

Perhaps we are now beginning to see the political limits of grey power in Australia. The way ACOSS is using its influence seems likely to produce outcomes along the lines of those I predicted a few years ago when I considered the question of whether the elderly poor tend to fare better under a pensions means test than under universal pension benefits:

“As the increase in proportion of elderly people in the population in Australia reduces the per voter political power of this group, I would expect the per voter political power of the elderly poor to diminish to a smaller extent than that of the much larger group who hope to benefit from the private superannuation tax and pension means test rorts. I expect incentives for early retirement implicit in the superannuation arrangements will be an early casualty as attempts are made to contain government spending on retirees. If a choice has to be made at some time in the future between, say, maintaining the current level of the aged pension in real terms and maintaining superannuation tax concessions, I expect that maintaining the aged pension levels would be likely to win the political debate. Similarly, given a decline in grey power on a per voter basis I doubt whether superannuation tax concession would win the political debate if a choice has to be made at some time in the future between maintaining these tax concessions and an overall lowering in income tax rates to promote economic growth.”

After reading that again, I hope that the government doesn’t forget to obtain a substantial reduction in tax on capital incomes as a quid pro quo for a reduction in superannuation tax concessions.

The conclusion of my last post that young people have good reason to be concerned about their futures is also relevant in considering what tax and spending reforms might be feasible. As young people become more aware of the range of factors that affect their future well-being, more of them can be expected to show interest in the way economic policies are impacting on their own incentives to acquire skills, and on the incentive for investors to take the risks that will need to be taken to ensure the growth of remunerative employment opportunities. Perhaps young people will come to recognize that, as a group, their interests are likely to be best served by lower government spending and lower tax rates.

When a government throws all the pieces of tax and spending policy in the air there is no guarantee that what we will end up with will look any better than the mess we had before. On this occasion, however, there are some grounds for optimism. The political winds seem to be blowing in the right direction .

Postscript
I have just noticed that Treasury estimates of marginal excess burden of GST in their working paper, Understanding the Economy-wide Efficiency and Incidence of Major Australian Taxes (2015–01) imply a much smaller increase at higher tax rates than shown above. See Chart 20, page 36. The Treasury estimates are more likely to be correct, but it would be nice to be able to understand the reasons for the difference.