Where are people most satisfied with efforts to preserve the environment?

This question arose as I was thinking about the relationship between the determinants of happiness (i.e. survey measures of subjective well-being or SWB) and human flourishing at a national level.

Recent research has been able to explain around 90% of inter-country differences in average SWB in terms of average income levels, enough money for food, healthy life expectancy, friends to count on, perceptions of freedom, corruption, charitable donations and church attendance. (See: John Helliwell et al, NBER Working Paper 14720.) It is not surprising that these factors affect well-being but it is hard to accept that items on this short list could explain as much as 90% of variation among countries in average well-being. Other factors that might also be thought likely to affect well-being include education, environmental quality, democratic institutions, and participation in cultural and sporting activities.


In the case of education, some studies have shown that while higher levels of education tend to be associated with higher levels of SWB, the effects of education tend to drop out when other factors such as health status and income are included in models. Education improves health and income-earning potential and thus indirectly contributes to SWB. Furthermore, the importance of education to individual well-being does not depend solely on its impact on satisfaction with life or happiness. Education could arguably still be good for people even if it did not make them feel good.


It is possible that similar considerations may apply with regard to environmental quality. For example, water and air pollution are detrimental to health and longevity. Furthermore, arguments advanced in favour of preserving the natural environment do not rest solely on the contribution it makes to the emotional well-being of humans.


However, there does not seem to have been as much research done on the contribution of environmental quality to SWB. This may be because of the difficulty of interpreting available survey data relating to perceptions of the natural environment.


The World Values Surveys include questions concerning the priorities that people give to environmental protection. These surveys show that the proportion of the population who consider that higher priority should be given to environmental protection than to economic growth tends to be somewhat higher in high-income countries with relatively high average SWB. These results might reflect what Ronald Inglehart has described as a shift toward postmaterialist values in advanced industrial societies rather than dissatisfaction with efforts to preserve the environment.


The Gallup World Poll asks respondents specifically whether they are satisfied or dissatisfied with efforts to preserve the environment in their country. Some characteristics of countries in which high and low proportions of the population are satisfied with efforts to preserve the environment can be compared in the chart below. The other variables shown in the chart are: per capita GDP expressed as a percentage of that in the country with highest per capita GDP (United Arab Emirates); average quality of life (data from the Gallup World Poll expressed in percentage terms); government effectiveness -perceptions of the quality of public services; and regulatory quality - permitting and promoting private sector development. (The latter two indexes are sub-indexes of the World Bank’s suite of governance indicators, converted to percentage terms such that the country with lowest rating has a score of 0% and the country with the highest rating has a score of 100%.)

The chart shows that satisfaction with efforts to preserve the environment tends to be somewhat greater in countries with higher average incomes. The factor that stands out most, however, as a characteristic of countries in which there is greatest satisfaction with efforts to preserve the environment is government effectiveness.

Countries which rate highly in terms of both satisfaction with environmental efforts and government effectiveness include Singapore, Austria, Switzerland and New Zealand. At the other end of the scale, countries which combine low ratings in terms of both of these factors include Mongolia, Ukraine and Pakistan.

What institutions explain the peacefulness of societies?

I don’t think many people would dispute the idea that the observance of common rules plays an important role in making it possible for individuals to live together peacefully in society. Even if I were to quote something written by Friedrich Hayek that emphasizes the importance of that idea, I doubt whether that would provoke many people to dispute it. (For some suitable quotes from Hayek, see: Are the institutions of the “good society” the same as those of the “great society”? )

 However, in this instance accepting the logic of a proposition is only one step along the road to understanding its practical significance. It might be useful to know to what extent the peacefulness of societies can be attributed to various factors associated with observance of common rules – factors such as political stability, the quality of legal institutions, civil liberties, and strong social networks and relationships. I report below an attempt to assess the relative importance of these factors using regression analysis.


The measure of the peacefulness of societies used in the analysis is the Legatum Institute’s safety and security sub-index (LSS), which is a component of its Prosperity Index. Indicators covered in the LSS include standard measures of violence such as homicides and assault, refugees and displace persons, flight by professionals (brain drain), civil war and ethnic violence, survey information relating to incidence of theft and perceptions of whether people feel safe walking alone at night. (I compared the LSS and the Global Peace Index here.)


The measure of political stability is the World Bank’s political stability and absence of violence index which captures perceptions of the likelihood of governments being overthrown by unconstitutional or violent means.


The measure of the quality of legal institutions is the World Bank’s rule of law index. This index captures perceptions about contract enforcement, property rights, the police and the courts, as well as the likelihood of crime and violence. The appropriateness of this index for current purposes is discussed here.


The measure of civil liberties is the Freedom House civil liberties index. This index covers freedom of expression and belief, associational and organizational rights, rule of law and personal autonomy.


The measure of social networks and relationships is the Legatum Institute’s social capital sub-index (LSC), which is a component of its Prosperity Index. The coverage of the LSC includes perceptions relating to reliability of others, importance of friends, trustworthiness of others and membership of various types of community organizations.


To enable the estimated contribution of the explanatory variables to be compared more readily all indexes have been converted to the same form as the Legatum indexes i.e. with highest value equal to one and the lowest value equal to zero. Estimated coefficients (with standard errors in brackets) are as follows:


• Intercept:                              0.06 (0.03)
• Political stability:                 0.46 (0.06)
• Quality of legal institutions: 0.42 (0.06)
• Civil liberties:                     -0.02 (0.05)
• Social capital:                     -0.01 (0.04)          Adj. R squared = 0.82


The results confirm that political stability and quality of legal institutions play an important role in explaining the peacefulness of societies. They suggest that civil liberties and social capital do not play a significant independent role in this context, but it is possible that these factors may contribute positively to political stability and the quality of legal institutions.


A chart showing how well political stability and quality of legal institutions predict the peacefulness of societies is shown below.

It is apparent from the chart that actual peacefulness is never much greater than predicted peacefulness. This means that political instability and poor quality legal institutions virtually guarantee that a society will not be peaceful.

Does the World Bank's rule of law index measure the quality of legal institutions?

The authors of ‘Governance Matters’, Daniel Kauffman, Aart Kraay and Massimo Mastruzzi, tell us that the World Bank’s rule of law index captures “perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police and the courts, as well as the likelihood of crime and violence” (Working Paper 4978, p 6).



On the basis of that description the index seems highly relevant to assessment of whether societies have institutions that enable their members to live in peace with one another. (For background on reasons why I am interested in such indexes see: Is a ‘good society’ index a good idea?)


I think it would be more appropriate to describe this index as a legal institutions index than as a rule of law (RoL) index. The rule of law is the ancient principle that no-one, not even the king, is above the law. It possible for a jurisdiction to have a relatively high score on the World Bank’s RoL index even though its legal foundations for rule of law may be somewhat tenuous e.g. Hong Kong. (Someone might be interested in a previous post on the question: Is rule of law an esoteric concept?)


As with the five other indexes in the World Bank’s suite of governance indicators the RoL index is based on perceptions based data reflecting the views of a diverse range of people, including tens of thousands of household and firm survey respondents and thousands of experts working for the private sector, NGOs, and public sector agencies. The aggregation method gives greater weight to indicators that are correlated with each other.


The RoL index seems to cover similar ground to the Legal structure and property rights sub-index (LSPR) of the Fraser Institute’s economic freedom index. Indicators incorporated in the LSPR cover: judicial independence, impartial courts, protection of property rights, military interference in legal and political processes, integrity of the legal system, contract enforcement and regulatory restrictions on sale of property.


The chart below shows how closely the World Bank’s RoL index and the Fraser Institute’s LSPR index correspond to each other. The blue diamonds represent actual indexes and the pink diamonds represent the predicted value of the LSPR index using linear regression.

In later posts relating to good society indicators I will use the World Bank’s RoL index as an index reflecting the quality of legal institutions.

How closely does the global peace index reflect internal safety and security?

In my last post on the Global Peace Index (GPI) I implied that potential users (such as myself) who are primarily interested in the internal peacefulness of different societies would be more interested in a sub-index excluding the effects of militarization. It so happens that a sub-index of the Legatum Prosperity Index, the Safety and Security Sub-index (LSS), may provide a good measure of internal peacefulness.

Indicators covered in the LSS include standard measures of violence such as homicides and assault, refugees and displace persons, flight by professionals (brain drain), civil war and ethnic violence, survey information relating to incidence of theft and perceptions of whether people feel safe walking alone at night. The safety and security indicators covered in the GPI seem to be broadly similar.
The LSS and GPI are compared in the chart below. The position of each blue diamond reflects the scores on both index for each country. The pink diamonds are predicted scores of the GPI resulting from a linear regression.

It is apparent from the chart that both indexes present a similar picture of the peacefulness of the vast majority of countries. The two main exceptions are Israel and the United States – which have a higher level of internal peacefulness than others with similar GPI scores.

What does the global peace index measure?

The creators of the Global Peace Index (GPI), the Institute for Economics and Peace (aka Vision of Humanity), claim that their index represents the first attempt that has been made to rank the nations of the world by their peacefulness. The GPI is apparently the brainchild of Australian entrepreneur, Steve Killelea, but has been developed in conjunction with the Economist Intelligence Unit and with the guidance of an international team of academics and peace experts.


As noted in the 2009 GPI report, peace is notoriously difficult to define. The approach adopted was to define peace as ‘absence of violence’ and to use metrics that combine both internal and external factors to rank144 countries. The Index is composed of 24 indicators covering three broad categories: measures of ongoing domestic and international conflict, measures of safety and security in society and measures of militarization.


The third category seems to me to raise a problem because it may sometimes be possible for us to promote peace more effectively by sending potential aggressors a credible message that if they mess with us they will suffer hellish consequences, rather than by disarming to convince them that we do not pose a threat. Instead of basing the index on the assumption that unilateral disarmament would promote peace I think it would have been preferable to leave this question open for further research.


For the benefit of potential users (such as myself) who are primarily interested in the internal peacefulness of different societies it would be desirable for the creators of the GPI to publish sub-indexes which exclude the effects of militarization (and international conflicts).


In view of the way the GPI has been constructed it is not surprising that a country like New Zealand, which does not have any reason to feel threatened by any other country, should be given the highest ranking as a peaceful country. The United States could be expected to have a somewhat lower ranking because of its greater militarization. I was surprised, however, that the GPI ranking of the U.S. is as low as 83 out of 144.


The relatively low ranking of the U.S is not entirely attributable to militarization. The percentage of the population in jail in the U.S. is apparently higher than in any of the other countries included in the index and the rate of homicide is higher than in New Zealand (and many other countries including Australia and the Britain).


The chart below indicates that it is possible for a country to have a relatively low GPI ranking while remaining relatively peaceful. For example, despite its relatively low ranking, the GPI score of the U.S. is much closer to that of New Zealand than to that of Iraq.

One final thought might be worth noting. This measure of the peacefulness of nations does not take account of the extent that different governments pursue policies that induce some of their residents to send their capital to other jurisdictions to avoid confiscatory taxation. This omission may be important for users who are interested primarily in the internal peacefulness of different societies.

Is a 'good society' index a good idea?

Before attempting to answer this question I should recap some previous posts about the good society.
 
Is there such a thing as a good society? Yes. A good society is one that has institutions that are good for its members.

What are the characteristics of a good society? I suggest three characteristics:
• Its institutions enable its members to live together in peace.
• Its institutions provide its members with opportunities to flourish – to obtain the things that it is good for humans to have.
• Its institutions provide members with a degree of security against threats to individual flourishing.


Are the institutions of a good society the same as those of the “great society”? I suggest that there is a lot of overlap between the institutions of the good society and the liberal principles of the great society, or open society, as discussed by Friedrich Hayek.


Why is it wrong to coerce people for their own good? Richard Kraut raises this question in his book, “What is good and why”. My answer is that it is wrong to coerce people for their own good because this is not consistent with living in peace with them.


Should we expect the rules of the good society to be good for everyone? Richard Kraut questions societal rules such as those discouraging theft and interference with other people because they are not always good for everyone. The point I make is that the rules for the good of all – rules that nearly everyone would agree to behind a veil of ignorance about their own particular interests and vulnerabilities - are not necessarily good for everyone.


So, I think I am on the way to identifying the characteristics and institutions of a good society. Having reached this point the thought has crossed my mind that it might not be too difficult to identify indexes that others have constructed that measure the various characteristics and institutions of a good society. If I were to combine those indexes into a good society index that would make it easy to classify various societies as bad, not so bad, OK, good, better, best. (I might even be able to think of a better classification.) A composite index of this kind would make the statistical feast more easily digestible and might even grab public attention (and perhaps even make me rich and famous).


I see a couple of problems with this idea, apart from the possibility that the world might already have just about enough composite indexes measuring broadly similar things (and fame would probably not be good for me). First, as I noted in my article ‘Gross National Happiness’, recently published in Asian-Pacific Economic Literature (abstract; draft), there is the problem of finding appropriate weights for each item included in a composite index. It is not really good enough to just have a set of weights that reflect my own values. Even if I could find a Nobel prize winner, or two, prepared to endorse a particular set of weights that would not really help much because people do not get Nobel prizes because their values are universally accepted. Ideally, every user of the index would be able to use a set of weights reflecting their own values, but then we would have a multitude of indexes rather than a single index.


Other options include use of equal weights or weights that come out of regression analyses that use the sub-indexes to explain per capita GDP levels or average life satisfaction in different countries. Equal weights are intrinsically mindless and the second option would not be much better because the ‘good society’ index resulting from it would not amount to much more than an index of average of per capita GDP or average life satisfaction.

The second problem is that composite indexes tend to hide the relationships between sub-indexes. It seems to me to be more useful to make observations about such things as differences in life expectancy in countries with differing levels of economic freedom than to be able to classify particular societies as being good, bad or indifferent using a single index number.


I have decided that a good society index would not be a good idea. In later posts I will attempt to identify the suite of indicators that would be most relevant to assessing to what extent particular societies might qualify as good societies.

What does the Legatum Prosperity Index measure?

Prosperity. However, my initial reaction when I first looked at the index was that it was more like an index of the quality of life or well-being than of prosperity. My perception of prosperity was too narrow. One of the purposes of the index is apparently to encourage people ‘to take a holistic view of prosperity’. The authors might have a point. Dictionary definitions of prosperity don’t focus solely on economics – they suggest that prosperous is synonymous with flourishing, successful and thriving.

The index has nine components or sub-indexes:
• Economic fundamentals
• Entrepreneurship and innovation
• Democratic institutions
• Education
• Health
• Safety and security
• Governance
• Personal freedom
• Social capital.

Is this a comprehensive list of factors affecting human flourishing? One apparent omission is environmental quality. Although this is considered to some degree in the indicators used for health, I get the impression that the authors’ view of prosperity does not place much value on the enjoyment that people obtain from the natural environment. I wonder whether that view is backed up by research findings.

The main problem I have with this report is that I am not sure how much substance lies behind it. The presentation is incredibly smooth, mainly because it is completely uninterrupted by references to research papers or data sources. The preface suggests that information on data sources is available on the prosperity web site. All I could find on that site, however, apart from the acknowledgement of input from research consultancy, Oxford Analytica, is a statement that the index draws on the Gallup World Poll and other data and includes only factors for which a statistical link with material wealth or life satisfaction can be shown.

The Legatum Institute claims to be a think tank. It seems to me that no organisation claiming to be a think tank should publish research findings without making sure that the underlying research is open to public scrutiny.

However, leaving aside my doubts, this report is worth looking at just to view the chart showing that countries with high prosperity tend to have high performance on all sub-indexes and those with low prosperity have low performance on nearly all sub-indexes.

Addendum:
Hamish Banks of Legatum has responded as follows:
"Thank you for writing about the Prosperity Index; may I refer you to the Prosperity Index website where you may download both the 55 page Methodology and 85 page Technical Appendix, which should answer your questions on the the data sources? (http://prosperity.com/report.aspx)

So far as possible we have been transparent with the sources and in some cases the data is publicly available; in others, like the Gallup World Poll, it is proprietary and not ours to publish.
You are right in surmising that the non-inclusion of environmental quality is based on research findings: we did not simply choose the factors that appealed to us, but regressed more than 200 variables to the 79 for which there was a clear and strong correlation with prosperity - environmental quality qualified only, as you note, in the general health indicators."

How do preferences relate to well-being?

Readers of this blog will know that I am attracted to a developmental view of individual well-being. I have previously argued that if happiness is viewed as a positive emotional state (involving, for example, peace of mind, optimism, uncompression, exuberance, flow, joy and cheerfulness) then well-being cannot be the same thing as happiness. Well-being also involves other factors - including personal security and security of property, health and longevity, access to goods and services – as well as a positive emotional state. (See: What are the links between freedom and flourishing?) The kind of life that is best for all humans is a life of flourishing - one that follows a pattern of psychological and physical growth filled with enjoyment.

 What does a developmental view of individual well-being have to say about the relationship between well-being and the satisfaction of preferences? Richard Kraut’s questions whether a more preferred outcome is necessarily a better outcome for an individual, even if it satisfies her properly informed and rational desires. His point is that it is possible to have properly informed and rational desires that are not good for us.

 One example Kraut gives is a desire for fame:


“There is no way to criticize the desire for fame except to say that its object is not something that it is good to have. But it should not be at all surprising that human beings sometimes have desires whose objects fall into this category. Nature has not installed in us some wonderful mechanism that guarantees that what propels us forward and focuses our minds on certain courses of action will bring us to something that it is good for us to have. Somehow or other, we have to take steps to learn about what is good for us, and even to care about what is good for us; that is not a topic about which we inevitably come to have tacit knowledge merely by virtue of having desires” (“What is good and why”, p 185).


Daniel Hausman and Michael McPherson note that if well-being is not the same as preference satisfaction then the normative significance that economists attach to preference satisfaction would appear to be without foundation. These authors then offer a new partial defence of welfare economics based on the view that if people are more or less self-interested with respect to certain alternatives, then economists can use their preferences to make inferences concerning what they believe will benefit them. This means that if it is reasonable to suppose that individuals are good judges of what will benefit them, then economists can use people’s preferences as evidence concerning what in fact makes them better off (‘Preference satisfaction and welfare economics’, Economics and Philosophy: 25 (2009).


What happens if we are dealing with policy issues where evidence has accumulated that individuals are often poor judges of what will benefit them? Does this mean that paternalistic government intervention will produce better outcomes? No. The argument that imperfections in individual judgement justify government intervention is just as fallacious as the old argument that departures from perfect competition in markets justify government interventions to increase competition.


In order to consider whether intervention is warranted it is necessary to consider the consequences of alternative institutions, or rules of the game. The judgements that governments make on behalf of individuals may be worse than the judgements that people make on their own behalf. For example, compulsory superannuation in Australia forces some young people to begin to save for their retirement at a time of their life when they would probably be better off saving to buy a house.


In addition, it is important to consider the consequences of government interventions that displace personal responsibility. It is good for adult humans to accept responsibility for decisions affecting their own well-being because this contributes to their personal development and self-respect.

Should we expect the rules of a good society to be good for everyone?

In my view, we should expect the rules of a good society to have the assent of nearly everyone but that does not mean that these rules are good for everyone. In particular, the law of liberty – preventing people from interfering with the protected domain of others – cannot be expected to be good for everyone even though it serves the good of all.

 A good place for me to begin to explain the point I am trying to make is with Richard Kraut’s suggestion that under certain conditions norms, rules and laws do not serve the good of all (“What is Good and Why”, p31). The example he gives is of a situation in which our confidence that it is wrong to steal could possibly be diminished because “the property system may make it impossible for some to have the material resources they need to maintain their health ...”. Kraut asks: “What objection can be made to taking what is not yours if you need it to sustain the health of your children, and the person from whom you take it has so much that it would do him no good?” The point he is making is that the rule against taking what is not yours “must be evaluated as a component of the social system in which it is embedded”.



I agree that the rule must be evaluated as a component of the social system, but I don’t think we need to be assured that the social system functions in a way that is good for all members before we can endorse laws prohibiting theft. Does Kraut’s example demonstrate that we could expect people to flourish to the same extent in a society with large wealth disparities in which there are no rules against theft as in a similar society where there are rules against theft? I don’t think so. If there were no rules against theft some resources currently devoted to mutually beneficial activities would be allocated to theft and to the protection of property against theft. Those who have a particular aptitude for stealing might benefit, but the costs to other people would clearly outweigh the benefits to thieves.



Some might argue, however, that our disapproval of theft should allow exceptions in circumstances where the thief has great needs and the victim is relatively unaffected. We might approve of such redistributions if we were to choose behind a veil of ignorance about our chances of being in a situation where we might be tempted to steal or of becoming a victim of theft. In the real world, however, how could a potential thief be sure that a potential victim would be relatively unaffected by the theft of any particular item? Even people who wear their wealth lightly can still own items that have great sentimental value.


Such considerations suggest to me that nearly everyone would agree that theft should be prohibited. I think it is likely that support for such a prohibition would be widespread even among population groups whose members have reason to be aggrieved about their treatment under the prevailing social system. In this sense disapproval of theft may be widely considered to be for the good of all, or at least widely considered to be likely to produce better outcomes than would an ambivalent attitude toward theft.

 Does it change matters when the redistribution is undertaken by governments rather than by thieves? There are similarities between theft and rent seeking - the competing efforts of various individuals and interest groups to use the coercive powers of the state to have income redistributed to themselves at the expense of other groups in the society (for example through government budget allocations, provision of services, trade protection and other forms of industry assistance). The involvement of governments is an important difference, however, because the decision-making processes of governments may be widely viewed as having greater legitimacy than those of thieves. In addition, the information required to implement modest redistributions that might be given nearly universal assent behind a veil of ignorance – for example, provision of a welfare safety net – is available to governments responsible for implementing such redistributions.

 The considerations involved seem to be similar when we come to paternalistic interventions to prevent adults from harming themselves. Norms, rules and laws protect individuals from all kinds of interference by other people, including well-meaning interference to prevent people from harming themselves. It is possible, however, to construct examples where our confidence that it is wrong to interfere is diminished. Richard Kraut gives us the example of a person who has fallen into an acute but curable despondency who proposes to kill himself even though he has many good years ahead of him (p 238). The argument that it is wrong to coerce a person for his own good because this is inconsistent with living in peace with him (see my last post) loses some force if the powers of judgement of the person concerned are obviously impaired.


However, the circumstances in we would condone people coercing others for their own good are extremely limited. We might have somewhat more confidence in intervention by government agencies than by individuals whom we have no reason to trust, but substantial moral hazards are involved whoever is permitted to intervene. Regulation might be more permissible than ad hoc interventions.


Behind a veil of ignorance just about everyone might support regulations that restrict freedom to a minor extent in order to protect vulnerable people whose judgement is obviously impaired. But in the real world it is difficult to frame such regulations to achieve the right balance. For example, in its draft report on gambling the Australian Productivity Commission has recently published draft recommendations that the maximum bet limit on most gaming machines should be set at one dollar and the maximum amount of cash allowed to be inserted into a gaming machine at one time should be $20. While I claim no expertise in this area I think such limits could significantly inconvenience gamblers who want to minimize the time they spend playing mind-numbing machines, without doing much to protect problem gamblers. No matter how low the limits are set, they will not be low enough to prevent some vulnerable people from harming themselves.


This is true of all forms of regulation designed to protect vulnerable people from making bad choices. The rule that is good for all – the rule that nearly everyone would agree to behind a veil of ignorance about their own particular interests and vulnerabilities – will not be good for everyone. We should not expect the rules of a good society to be good for everyone.

Why is it wrong to coerce people for their own good?

In his recent book, “What is good and why”, Richard Kraut argues that pure antipaternalism is in a weak position because it cannot say why it is wrong to coerce someone to prevent him from doing himself harm. I think there is a very good reason why coercion is wrong under such circumstances, but first I want to quote some passages that I agree with.


I particularly like the following passages that seem to me to capture the developmental approach to well-being presented in the book:
“For human beings, no less that other living things, it is always good to flourish; and if a human being is flourishing in all ways, both physical and psychological, he is doing very well indeed” (p. 133).

“Speaking in the broadest possible terms, there is one kind of life that is best for all human beings – a life of flourishing, one that follows a pattern of psychological and physical growth filled with enjoyment. But it is no less true that the concrete realization of such a pattern differs enormously from one person to another” (p. 140).


Having recognized the importance of individual differences, it is hardly surprising that Kraut is quite positive about the value of autonomy to human flourishing: “Since our well-being consists in the exercise of our powers, and among these powers are those involved in reasoned choice, it is bad for us when matters that we can decide about, on our own, and take pleasure in controlling are taken out of our control” (p. 197). In the end, however, his endorsement of autonomy is qualified: “Important as it is, autonomy is only one good among many, and its value must not be exaggerated” (p. 201). Kraut suggests that since people often make poor choices about matters such as marriage partners we can’t be dogmatic that institutions such as arranged marriages are never good for people.


It seems to me that the problem here is that the author’s discussion of autonomy places too much emphasis on exercising the powers to make choices rather than on self-direction and responsibility. We do not harm our chances of flourishing by seeking advice in order to augment our limited capacity for reasoned choice when making important decisions. But a person can hardly be said to be fully flourishing if important personal decisions are taken out of her control, so that she does not bear responsibility for them.


This brings me to antipaternalism. Kraut writes: “There is no merit in the general idea that we should all be allowed to do whatever we choose. So why suppose that there is some merit in the idea that an adult should not be coerced, when the grounds for doing so appeal solely to his well-being? Why is that, in principle, never a good enough reason for coercion? Pure antipaternalism cannot advert to the bad consequences that would occur were this the only basis for bypassing someone’s will. It must say instead that this is simply wrong, but it cannot say why it is wrong” (p. 237).


In my view it is wrong to coerce a person to prevent him from doing himself harm simply because this is inconsistent with living in peace with him. In a good society coercion would be strictly limited to situations where it is necessary to prevent the actions of different individuals from interfering with each other. As I argued in my last post, if we perceive living in peace to be a necessary condition for a good society then we must accept the primacy of liberty.

Are the institutions of a "good society" the same as those of the "great society"?

In my last post I suggested that nearly everyone would agree that a good society has the following characteristics:
· institutions that enable its members to live in peace;
· institutions that provide opportunities for members to flourish; and
· institutions that provide members with security against various threats to flourishing e.g. foreign military threats and economic misfortune.

There is substantial overlap between the institutions of a good society and the institutions of the “great society” or “open society”, as discussed by Friedrich Hayek.

Hayek emphasized that “only the observance of common rules makes the peaceful existence of individuals in society possible” (LLL, I: 72). He argued that the aim of the rules of just conduct is to define “the protected sphere” of each person in order to prevent, as much as possible, “the actions of different individuals from interfering with each other” (LLL, I: 108). He observed: “The Great Society arose through the discovery that men can live together in peace and mutually benefiting each other without agreeing on the particular aims which they severally pursue” (LLL, II: 109). Hayek went on to make the point that in the great society we all “contribute not only to the satisfaction of needs of which we do not know, but sometimes even to the achievement of ends of which we would disapprove if we knew about them (LLL, II: 109-10). In the great society we have no way of knowing the purposes for which others will use the goods we supply.

If we perceive living in peace to be a necessary condition for a good society then I think we must accept the primacy of liberty - individual freedom and rules that determine the boundaries of the domains of freedom (the protected spheres of each person) are necessary conditions of a good society.

The implications of the primacy of liberty might be more profound than they appear at first sight. For example, a society in which the majority of people flourish could hardly be viewed as a good society if it has laws that cause individuals to be denied liberty if they pursue lifestyles that are offensive to the majority, even though those individuals have done nothing to infringe the protected spheres of other people. The majority might argue, perhaps with good reason, that the individuals concerned would have a better chance of flourishing if they were put in jail, but this does not justify the use of force to make them change their lifestyles.

Other aspects of the relationships between particular sets of institutions and opportunities for human flourishing and security against threats to flourishing seem to be of a more empirical nature. I would argue, for example, that high levels of economic freedom tend to provide greater opportunities for human flourishing, but that is a testable hypothesis. Some relevant discussion is here. Similarly, I would argue that governments have an important role in providing members of society with security, but the extent to which such a role might be warranted involves empirical questions.

The institutions of a good society may differ from those of the great society in relation to personal income security. Hayek argued that the provision of some kind of welfare safety net was not only “a wholly legitimate protection against a common risk to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the small group into which he was born” (LLL, III: 55). He recognized, however, that national safety nets that would be higher in wealthier countries would necessitate restrictions on migration. In my view such considerations may make it necessary for the institutions of a good society – one that its good for its members - to depart to some degree from the liberal principles of the great society.

What are the characteristics of a good society?

In my last post, (Is there such a thing as a good society?) I suggested that a good society would have good institutions – norms and laws that are good for its members.

In thinking about the characteristics of a good society different people tend to emphasise different things that they consider to be important e.g. egalitarianism, personal freedom, moral values and spirituality. Rather than just agreeing to differ I think it might be useful to try to identify some characteristics of a good society that nearly everyone would agree to be important. Then it would be possible to consider what evidence might be available about the nature of the institutions that would foster those characteristics. This might enable us to develop a view about the nature of the institutions of a good society that would be widely accepted.

So, what are the characteristics of a good society? First, as I suggested in my last post, the most important characteristic of a good society is a set of institutions that enable its members to live together in peace. This entails an absence of major threats to persons or property such as those associated with civil war, high levels of corruption and absence of rule of law. The institutions should also prevent use of the coercive powers of the state by despots or influential interest groups to enrich themselves at the expense of others or to restrict the freedom of others to choose how they will live their lives. Institutions that promote the peaceful co-existence of individuals and groups with differing interests and values are obviously a necessary condition for human flourishing.

Second, nearly everyone would agree that a good society would provide its members with opportunities to flourish – to have more of the things that are good for humans to have. This would include opportunities to live long and healthy lives, economic opportunities, opportunities for educational and cultural pursuits, opportunities to make important decisions affecting themselves and their families and opportunities to participate in political processes.

Why focus on opportunities rather than outcomes? Good institutions can make it possible for humans to flourish but humans can’t be made to flourish – for much the same reasons as you can lead a horse to water but can’t make it drink. Human flourishing is an inherently self-directed process. The best we can hope for is a set of institutions that will maximize the probability that any individual chosen at random will be a flourishing individual.

Third, I think there would be widespread agreement that a good society would provide its members with a degree of security against potential threats to individual flourishing. For example it would endeavour to maintain good foreign relations and provide national defence capability sufficient to deter foreign aggression; it would maintain safeguards against government corruption and misuse of the coercive powers of the state (e.g. processes that make it difficult for narrow interest groups to acquire or maintain disproportionate influence in policy-making processes and processes for removal of governments that do not have popular support); it would maintain appropriate machinery to prevent or deal with environmental disasters; it would prevent “the tragedy of the commons” by maintaining appropriate institutions for ownership, pricing and use of natural resources; and it would provide members with a degree of personal economic security against misfortunes such as accidents, ill-health and unemployment.

What evidence do we have about the institutions that tend to foster these characteristics of a good society? An attempt to answer that question will be left to a later post.

Postscript 1:
The best place to look for further discussion by me of the concept of a good society is Chapter 6 of my book Free to Flourish, which is instantly available for a very modest price. 

Postscript 2:

In March 2024, I decided that my view that peacefulness is a characteristic of a good society does not actually depend on the degree of support for that view in any society. Please see: Why should peacefulness be viewed as a characteristic of a good society?

Is there such a thing as a good society?

Margaret Thatcher famously said that there is no such thing as society. What she was actually reported as saying was that some people "are casting their problems at society. And, you know, there's no such thing as society. There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then, also, to look after our neighbours."

I think that Mrs Thatcher probably meant that human societies consist of nothing more than individual humans and the relationships between them. Society is not some kind of magic pudding that has an existence that is separate from the individuals that comprise it.

Human societies are characterized by patterns of relationships among individuals who share distinctive institutions. It seems reasonable to suppose that a good society would have good institutions.

Good for whom? If our focus is on humans, there are two possible answers: those outside the society and those within it. It might make sense to think of a good society as one that acts in ways that benefit people outside it, for example by fostering peaceful relations and trade. But it seems more relevant to focus on the way the culture and institutions affect the lives of those within the society and the quality of their relationships with one another.

What are the characteristics of a society that is good for the people who live within it? Different views have been expressed. For example, John Cruddas and Andrea Nahles write: “The good society is about solidarity and social justice. Solidarity creates trust, which in turn provides the foundation of individual freedom. Freedom grows out of feelings of safety, a sense of belonging, and the experience of esteem and respect.”

The main problem I have with this approach is that social justice tends to be a divisive concept. Even if there is widespread agreement that a lot of people deserve higher incomes and better health care and education etc than they obtain at present, the people who would have to pay higher taxes to make this possible through government intervention often feel, with some justification, that they deserve to keep the incomes they have earned. Policies to achieve social justice tend to increase distributional conflict.

Some authors suggest that the concept of a good society is inherently subjective. For example, in attempting to provide an answer to the question of what is a good society Lyndsay Connors writes: “Our answers to this question will always draw upon our personal values and describe the kind of society in which we could feel a sense of well-being.”

The personal values of Walter Lippmann, the famous journalist who wrote a book entitled “The Good Society” in 1937, are evident in his perception of the good society. Lippmann saw the good society as being synonymous with “the liberal, democratic way of life at its best” (“Essays in the Public Philosophy”, 1955, p.96). He also wrote: “The ideals of the good life and of the good society fall far short of perfection, and in speaking of them we must not use superlatives. They are worldly ideals, which raise no expectations about the highest good. Quite the contrary. They are concerned with the best that is possible among mortal and finite, diverse and conflicting men. Thus the ideals of freedom, justice, representation, consent, law, are of the earth, earthy. They are for men who are still (as Saint Paul says in Timothy I, 9-10) under the law. (op cit, p. 142-3).

However, it seems to me that there are objective characteristics of a good society, that nearly everyone would agree on. The most important characteristic of a good society – one that is good for the people living in it – is that the institutions of the society should enable those people to live in peace. In an earlier post I have discussed Friedrich Hayek’s view of what living in peace entails. In broad terms, it requires the ideals that Walter Lippmann identified.

Is there virtue in serving a purpose we do not know for reasons we do not question?

When I recently re-read John Galt’s speech (in “Atlas Shrugged by Ayn Rand) I was reminded of Rand’s view that the mystics of spirit, who believe that the good is God i.e. beyond man’s power to conceive, and the mystics of muscle, who believe that the good is Society, a super-being embodied in no-one in particular and everyone in general except yourself, have similar moral codes. Galt says: “No matter how loudly they posture in their roles of irreconcilable antagonists, their moral codes are alike, and so are their aims: in matter – the enslavement of man’s body, in spirit –the destruction of his mind”.

In the next paragraph Galt explains: “Man’s standard of value, say the mystics of spirit, is the pleasure of God, whose standards are beyond man’s power of comprehension and must be accepted on faith. Man’s standard of value, say the mystics of muscle, is the pleasure of Society, whose standards are beyond man’s right of judgement and must be obeyed as a primary absolute. The purpose of man’s life, say both, is to become an abject zombie who serves a purpose he does not know for reasons he is not to question” (p. 1027).

A few pages earlier Galt said: “Thinking is man’s only basic virtue, from which all the others proceed. And his basic vice, the source of all his evils, is ... the act of blanking out, the wilful suspension of one’s consciousness, the refusal to think ... . It is the act of unfocusing your mind and inducing an inner fog to escape the responsibility of judgement ...” (p 1017).

When I read this stuff 20 years ago it was like being at the sidelines at a football match cheering for my side to win. I thought that people who unquestioningly adhered to customs or the teachings of religious or secular authorities were behaving like zombies. It seemed obvious to me that individuals should be using their minds to decide for themselves how they should live.

So, what has changed? Not much, except that, having read a lot more of the writings of Friedrich Hayek since then, I now also see merit in the view that “submission to rules and conventions we largely do not understand ... is indispensible for the working of a free society”. Hayek argued that in our efforts to improve our institutions “we must take for granted much that we do not understand”: “We must always work inside a framework of both values and institutions which is not of our own making. In particular, we can never synthetically construct a new body of moral rules or make our obedience of the known rules dependent on our comprehension of the implications of this obedience in a given instance” (“Constitution of Liberty”, p. 63).

Is it possible to reconcile the view that it is good for people to decide for themselves how they should live their lives with the view that there is merit in observing rules that serve purposes beyond our understanding? I think Hayek was right to emphasise that it is unwise to reject customary rules just because we do not understand their purpose. Many customs deserve respect because they evolved through an evolutionary process in which groups that adhered to superior rules were most successful. Hayek recognized that for this cultural evolution to occur some people had to break with custom in order to introduce new practices advantageous to themselves, which then proved beneficial to the groups in which those practices prevailed. He noted that one of the benefits of freedom was to enable this cultural evolution to occur: “The existence of individuals and groups simultaneously observing partially different rules provides the opportunity for the selection of the most effective ones” (“Constitution of Liberty”, p. 63).

However, I think Rand was right to emphasise that the purpose served by rules protecting lives, liberty and property are capable of being understood. As John Galt explains: “there are no conflicts of interest among rational men” ... “I deal with men as my nature and theirs demands: by means of reason. I seek or desire nothing from them except such relations as they care to enter of their own voluntary choice” (p 1022).

Did Ayn Rand regard selfishness as a virtue?

People who are familiar with Ayn Rand’s writings may consider the answer to this question to be obvious. Rand made no secret of the fact that she regarded selfishness as a virtue. So, why ask the question?

Having recently read “Atlas Shrugged” properly for the first time (rather than skimming through it) the heroes, including John Galt, Hank Rearden and Dagny Taggart, did not seem to me to be selfish. By the end of the book they had chosen not to live their lives for the sake of others and not to ask others to live for their sake. But this did not make them selfish in the sense of being deficient in consideration for others. Hank Rearden left his mother without means of support when he went off to start a new life, but it would be difficult for anyone who was aware of the way she repaid the kindness he showed her to argue that he had acted selfishly towards her.

Rand’s view that selfishness is a virtue follows from a narrow definition of selfishness as “concern with one’s own interests” and of individual happiness as the moral purpose of life. In the words of John Galt: “Happiness is the state of consciousness which proceeds from the achievement of one’s values” (p 1014).

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

Rand’s narrow definition of selfishness enabled John Galt to say: “This much is true: the most selfish of all things is the independent mind that recognizes no authority higher than its own and no value higher than its judgement of truth” (p 1030).

Why did Ayn Rand adopt a narrow definition of selfishness? She could have avoided a lot of confusion by using another term, e.g. “ethical egoism”, to describe the virtuous concern for one’s own interests and accepting the popular usage of selfishness to describe unethical behaviour that involves pursuing one’s own interests at the expense of others. I suspect that Rand adopted a narrow definition of selfishness in order to argue that selfishness is a virtue. And she wanted to argue that selfishness is a virtue in order to draw attention to her opposition to the view that self sacrifice is a virtue.

The view that self sacrifice is a virtue was clearly one of Rand’s main targets. In John Galt’s words: “If you wish to save the last of your dignity, do not call your best actions a ‘sacrifice’: that term brands you as immoral. If a mother buys food for her hungry child rather than a hat for herself, it is not a sacrifice: she values the child higher than the hat; but it is a sacrifice to the kind of mother whose higher value is the hat, who would prefer her child to starve and feeds him only from a sense of duty” (p 1029).

Postscript: 
Readers might also be interested in a later post on this topic based on a Cato seminar.

Don't restrictions on freedom affect the quality of life?

It is hard to believe that the Commission on the Measurement of Economic Performance and Social Progress would consider that freedom and personal responsibility have little relevance to the quality of life. However, I haven’t been able to find any discussion of freedom or personal responsibility in their recently published report. The Commission, whose members include Amartya Sen and Joseph Stiglitz along with a list of other prominent academics, was established by the President of France, Nicolas Sarkozy.

The Commission’s report seems to have plenty to say about the limitations of GDP, and various issues concerning measurement of quality of life and sustainability, but the closest it comes to recognition that freedom might have some relevance to the quality of life seems to be in a sentence discussing freedom to exercise political voice. While it is good for people to be permitted to complain about restrictions on their liberty, it seems to me that it would be better if they had less restrictions on liberty to complain about. The authors give the impression that they consider that only the latter two words in the call for “liberty, egality and fraternity” are relevant to the measurement of social progress.

I would have been pleasantly surprised if the Commission’s report had endorsed the theme running through this blog that human flourishing must be a self-directed activity and that liberty is necessary for self-direction. (Some posts discussing these concepts are here, here and here.)

However that would have been too much to hope for. Although the relevance of rights is widely recognized in discussions about political institutions, the importance of the right to self-direction is often overlooked when it comes to discussions of the merits and demerits of alternative policies. Rights are routinely overridden when democratically elected governments consider that more important matters are at stake such as “social justice” or even the well-being of the people whose rights they infringe.

I had hoped, nevertheless, that the report would give some recognition to research findings that people value freedom. For example, it could have mentioned John Helliwell’s finding that people tend to have higher life satisfaction in countries in which a high proportion of the population are satisfied with their freedom to choose what to do with their lives (see NBER Working Paper 14720). The Gallup World Poll shows that satisfaction with freedom in France (82%) is somewhat higher than the U.K., but lower than in the U.S. (88%), Australia (91%) and Denmark (96%).

The fact that the vast majority of people in democracies tend to be satisfied with their freedom is related to economic freedom and civil liberties (as shown here). In addition, people would not be expected to feel that their freedom is being unduly restricted unless they are not permitted to do things that they actually want to do. But their sense of personal competence and self-respect must be weakened when responsibility for important aspects of their lives – such as family health care, education and saving for retirement - are taken out of their hands by paternalistic governments.

There is some survey information available to compare the extent that people in different countries feel that they have personal responsibility for what happens in their lives. Data from the World Values Survey shows that French people tend to feel that they have less control over their lives than people in the U.K., U.S. or Australia. The French also scored lower than people in the U.K, U.S. and Australia on the Gallup World Poll question asking whether respondents were proud of something they did yesterday. The Commission seems to overlook such matters.

I am sympathetic to the Commission’s view that more research should be done to assess the links between various dimensions of the quality of life. It is disappointing, however, that the Commission does not recognize freedom as an important dimension of the quality of life.

Postscript, May 2012:
In retrospect, I should have read the report more closely. It contains at least one fairly strong statement of the value of freedom: 'what really matters are the capabilities of people, that is, the extent of their opportunity   set and of their freedom to choose among this set, the life they value'. I am particularly impressed that 'freedom to choose ... the life they value' is not qualified by weazelwords which cast doubt on the ability of people to choose lifestyles that they value.  (See para 29.)

How credible is Rudd's spin on the history of economic reform?

In his comments in “The Australian” (8 Sept. ’09) on Paul Kelly’s new book, “The March of Patriots”, Kevin Rudd attempts to make a distinction between the economic reforms of the Hawke-Keating Labor governments and those of the Howard conservative government. Rudd describes the Hawke-Keating reforms as “modernising our economy to make it more competitive in a rapidly globalizing world”. He describes the Howard reforms as “neo-liberalism” or “a form of free market fundamentalism that has little in common with the philosophy and policy of the reforming centre of Australian politics to which we belong”.

This attempt to associate the Howard government with free market fundamentalism is typical Rudd-speak. This time, however, Rudd seems to have spun himself into a corner by also claiming that the Howard government was lazy. Rudd states: “we would describe our opponents as indolent: perhaps not always opposing the great transformational reforms engineered by Labor during its 13 years in office but hardly adding to that reform agenda during their 12 years in office”. Can an indolent conservative government be guilty of excessive zeal in promoting market-oriented reforms?

Peter van Onselen noted this apparent contradiction (in an article in “The Australian” on 9 Sept. ’09). He also updated a table in a book by Andrew Charlton (senior economic advisor to the PM) to enable the economic reform records of the Hawke-Keating, Howard and Rudd governments to be compared. The table suggests that the Howard government made some substantial reforms and that the Rudd government has tended to roll back previous economic reforms. (Unfortunately the table does not seem to be available on line.)

The table prepared by van Onselen is informative, but it would be nice to be able to compare the economic reform efforts of the three governments quantitatively. This is attempted in the chart below using economic freedom indexes constructed by the Fraser Institute and Heritage Foundation.

The chart confirms that the Hawke-Keating governments had strong neo-liberal credentials, but the two indexes provide a somewhat contradictory picture of the Howard government. The Heritage Foundation index even suggests that the Rudd government has made positive contributions to economic freedom. It might be interesting if someone could investigate why this is so and why two indexes seem to tell different stories about the Howard government.

However, while the history is interesting, the future position of the Rudd government on economic reform will be far more important to the future well-being of Australians. The one hopeful sign in Kevin Rudd’s latest graceless contribution is his praise for the reforms of the Hawke-Keating era. When he was elected to government Rudd seemed to want to be indistinguishable from John Howard in all important respects. Then he wrote an essay in which he seemed to have adopted the attitudes and language of Hugo Chavez. Perhaps he has now recognized that it is not necessary to choose between John Howard and Hugo Chavez (to paraphrase some infamous Rudd-speak).

Would it be too optimistic to interpret Rudd’s latest spin as a signal that he has now adopted Paul Keating as his role model?

What do we know about the neurology of human flourishing?

“Human flourishing is fundamentally a self-directed activity. ... Flourishing does not consist in the mere possession and use of goods that might be necessary for a flourishing life. Rather, human flourishing consists in a person developing the skills, habits, judgements and virtues that will, in most cases, achieve the needed goods. The goods must, in a central way, be made one’s own”: Douglas Rasmussen and Douglas Den Uyl, “Norms of Liberty”, 2005: 86.

Is there a readable book about the neurology of human flourishing? The only book that I am aware of that comes close is “Iconoclast”, by Gregory Berns. This book discusses things that have probably happened at a neurological level when famous people have achieved extraordinary things. The brain functions and processes that Berns writes about, however, seem to me to be relevant to the character development and flourishing of all humans.

What are the factors most likely to prevent individuals from achieving according to their potential? Anyone writing a list from the top of their head would be likely to include such things as: getting one’s thinking stuck in a rut; being constrained by fear of the unknown or fear of ridicule; social environments that reward conformity rather than individuality; and lack of skills in social networking. Gregory Berns discusses these factors.

Points made by Berns include the following:

• In order to think creatively and imagine new possibilities it is necessary to break out of the cycle of experience-dependent categorization. We need novel experiences in order to see things differently.
• Constraints associated with conditioned fear responses can be inhibited through cognitive reappraisal (re-interpretation of information). For example, fear of uncertainty or ambiguity can be inhibited if the situation is viewed as an opportunity to gain additional knowledge by experimenting.
• People have a strong tendency to follow the herd in order to avoid activating their fear systems. But one dissenter is typically enough to break the herd effect.
• Important social networking skills include promoting familiarity with the goods you are selling (because familiarity defines what people like) and establishing a reputation for being trustworthy.
  
  

Do we need a neurologist to tell us such things? Probably not, but it is good to know that there is neurological evidence supporting at least some of the claims made by personal development practitioners.

There is a fair amount of discussion in the book relating to wisdom and knowledge, courage, humanity and justice, but I don’t think there is much discussion of temperance or transcendence. One could hardly have expected all the human virtues to be discussed in the book, however, because Greg Burns did not actually set out to write a book about the neurology of human flourishing.

What practical measures can be taken to improve policy outcomes in democracies?

There seems to be increasing scepticism these days about the worth of democracy. The following quote from a post by John Humphreys on the “Thoughts on Freedom” blog provides a good example of what I mean:


“Democracy has become a new faith. Simply saying the word supposedly makes an argument stronger, as though there is some inherent morality in two wolves and a sheep voting on what to have for dinner. Democracy has it’s uses — it allows you to change government without any killing and it puts downward pressure on corruption. But I doubt that it leads to better policy, and indeed I think it has a built-in bias towards ever more totalitarian policy controlled by special interest groups ...”


In my view Humphreys is wrong. There is an inherent morality in democracy when it is perceived appropriately as a system in which all members of the polity have equal potential to influence the construction and operation of the political order. The problem is that it is often seen to be legitimate for some groups to use democratic politics as a means to obtain benefits at the expense of others. Such attitudes should be denounced as immoral for the same reason that the attitude that the market economy exists to enable some people to benefit through opportunistic exploitation of others is widely denounced as immoral. As James Buchanan has emphasised, the viability of a market economy and a democratic political system both depend on norms of mutual respect and reciprocity.


The political system in most democratic countries does not have huge problems in dealing with blatant attempts by some people to benefit at the expense of others. Democratic politics can be effective in dealing with corruption (as John Humphreys acknowledges). It is worth noting, however, that corruption often goes undetected for long periods where dedicated institutional arrangements do not exist to detect it.


I think that democratic politics are also reasonably effective in dealing with unsubtle attempts at vote buying, for example where a governing party promises additional benefits to residents of marginal seats in a desperate attempt to hold onto or win office. Parties initiating such tactics risk being perceived by voters as acting unfairly - and hence unworthy of being elected to government.


It is much more difficult for voters to deal appropriately with complex issues such as those involved in trade protectionism. A recent policy brief prepared for the Lowy Institute by Bill Carmichael, Saul Eslake and Mark Thirlwell describes the nature of the problem as follows:


“Most of us have a limited understanding of what is at issue in decisions about protection. Our response to the prospect of opening domestic markets is influenced by the information available to us about the domestic consequences. In the absence of public information about the economy-wide gains at issue for the community as a whole, and in view of the more visible costs to prospective losers, the latter have naturally found support at home. As a result, governments have had difficulty mobilising a domestic commitment to open domestic markets to international competition” (“Message to the G20: defeating protectionism begins at home” p 7-8).


The solution advocated by the authors is “a domestic discipline on national decision-making that promotes wide domestic awareness of its economy-wide costs.” Rather than attempt to summarise the proposals here I recommend that people should read them in the context in which they are presented in the paper.


The thought that I would like to leave you with here is that there is scope for policy outcomes in democracies to be improved if more intellectual effort is put into constructive efforts of the kind presented in the Lowy paper.

Addendum by Bill Carmichael:

It should not surprise us that those responsible for articulating the theoretical basis for market economics and democracy--people like John Stuart Mill, David Hume and Adam Smith--placed a condition on the relevance of each in enhancing the quality of governance and community welfare. The condition was, and remains, the existence of a well informed community in the case of democracy and well informed consumers as the basis for market economics. The message from these theoretical founders is that the value (in each case) is not in the theory, but its practise. That is the rationale for the domestic transparency arrangements established in Australia in the early 1970's, structured to operate outside government and independent of private interest groups. Those arrangements were put in place for a specific purpose--to make our democratic system and market economics relevant in decision-making on protection issues, by providing the information governments, communities and consumers need to promote decisions that enhance community welfare. I believe such arrangements have a wider application than decision-making on protection In their absence, our expectations about what the community gains from market economics and democratic governance are likely to lack substance.

Is economic growth causing the Chinese to become discontented or more optimistic?

In my last post I suggested that the reasons why rapid economic growth has not resulted in increased average life satisfaction in China over the last couple of decades have more to do with rising aspirations than with increased income inequality. In this post I want to consider those issues further.

My first point is that in recent years the Chinese have been about as satisfied with life as people in most other countries with comparable income levels. This shows up clearly in charts in Angus Deaton’s article, ‘Income, health and well-being around the world’ (“Journal of Economic Perspectives”, 22 (2)).

Second, survey evidence is not consistent with growing discontent caused by rising inequality - or by anything else. According to recent Gallup data about 66 percent of Chinese are satisfied with their standard of living and 83 percent say that their standard of living is getting better. A paper by Nicole Naurath show that in 2008 over 80 percent of Chinese claimed that economic conditions were getting better in the city or area where they live and that it was also getting better as a place to live.

Third, there is evidence that life satisfaction in China is more strongly influenced by satisfaction with income growth (i.e. satisfaction with income now compared with income in the past) than with either absolute or relative incomes. The results of a study by Lina Song and Simon Appleton do not support the view that dissatisfaction with relative income is a major cause of social discontent in China (“Life Satisfaction in Urban China”, IZA DP: 3443, 2008).

Fourth, Andrew Deaton found in his cross-country study, cited above, that while level of per capita income has a positive effect on life satisfaction, economic growth has a negative effect. His results suggest that it would be normal for the negative effect of economic growth to outweigh the positive effects of increases in income levels in countries that are experiencing rapid economic growth (see Table 2 in his article). Deaton argues that his results are consistent with life satisfaction responding to the long-term average income, as in a permanent income model of life satisfaction.

Fifth, the ratings that the Chinese give to the quality of their lives five years ago and five years into the future suggest that large upward revisions are occurring in their aspirations. The Gallup data for 2008 indicates that the Chinese rated their lives five years ago less highly than just about every country in the world outside Africa. The rating they give to their lives five years ahead is higher than that in some western European countries. When they appraise their current quality of life in five years time they will realize that they still have somewhat further to go before attaining “the best possible life”. But they are not likely to become discontented while they continue to experience the economic growth they have come to expect.

I think the lesson to be learned from consideration of the relationship between average life satisfaction and rising per capita incomes in China is that the failure of life satisfaction to rise with income does not necessarily imply discontent with the consequences of economic growth. Those who suggest that economic growth has led to widespread discontent in China are mistaken. Economic growth has merely cursed the Chinese with great expectations.

The Chinese are becoming wealthier, so why aren't they happier?

This is the question raised in a recent article in the Journal of Happiness Studies: “The China puzzle: falling happiness in a rising economy”, by Hilke Brockman, Jan Delhey, Christian Weizel and Hao Yuan (V10, 4, 2009).

The focus of the study is the decade from 1990 to 2000. Even though real per capita GDP in China was 2.8 times higher in 2000 than in 1990, the percentage of Chinese describing themselves as very happy declined from 28 percent to 12 percent and the average life satisfaction rating fell from 7.3 to 6.5 (on the WVS 10 point scale).

The authors consider three possible explanations: anomie (powerlessness), political disaffection (declining trust in government) and relative deprivation (frustration because increased income inequality resulted in a higher proportion of the population with below average incomes). Anomie is measured by survey data on the lack of a feeling of free choice and control over the way you live your life. Political disaffection is measured by survey data on lack of trust in the government and parliament. Survey data on financial dissatisfaction (dissatisfaction with the financial situation of your household) is used as a proxy for relative deprivation.

To cut a long story short, the authors conclude that relative deprivation provides the best explanation because the decline in life satisfaction is strongly associated with a decline in financial satisfaction. (A fuller summary of the article is available on Psyblog )

The main problem I have with this conclusion is that data presented in the article suggests that average life satisfaction of high income earners declined along with the life satisfaction of those on lower incomes. There was no reason for the high income earners to feel relative deprivation.

When I look closely at the data it seems to me that the main puzzle is not why average life satisfaction in China was lower in 2000 than in 1990, but why such a high proportion of Chinese were recorded as satisfied with life in 1990. This figure, 68 percent, was higher than in such high income countries as Austria, France, Germany and Japan.

When you look at average life satisfaction of people in different age groups (Fig. 1) older people seem to have been much happier than young people in 1990 and the situation has been partially reversed since then. A comparison of Figure 1 and Figure 2 shows similar patterns for life satisfaction and financial satisfaction. This suggests to me that the apparent decline in average life satisfaction between 1990 and 2000 might possibly be attributable to perceptions by older people that their financial security had declined for some reason e.g. concerns that as a result of social changes young people might be less likely to support them in their old age.

Even if we disregard the 1990 data, however, it is apparent from the Figures that we are still left with the problem of explaining why average life satisfaction and financial satisfaction has not increased since the mid 1990s. The decline in consumption as a percentage of GDP from about 50 percent around 1980 to about 32 percent in recent years cannot provide a complete explanation, because this has not prevented real per capita consumption from increasing substantially.

My guess is that the failure of average life satisfaction to rise in China is associated with a change in the benchmarks that people use to assess their current well-being. In 1990 many people in China may have been using past living standards as the benchmark in assessing their current satisfaction with life. Since then, however, their aspirations have probably risen as they have come to view the living standards enjoyed in high income countries as attainable in the foreseeable future. If I am right most Chinese people would probably agree that “they have never had it so good”, to borrow an unsuccessful political slogan. But those old enough to remember what life was like 30 years ago would probably rather forget about that.

Note: A follow-up post on this topic is here.

Is it possible to make an appropriate emotive appeal by just telling a story?

A post by Peter Boettke on The Austrian Economists blog has got me thinking about emotive appeals in politics. I think the point that Boettke is making is that rhetorical experts are offering poor advice when they suggest that writers try to get their message across by telling stories that appeal to the emotions, in the manner of Dickens and Steinbeck, rather than using stories to illuminate systemic forces, as Ayn Rand did in “Atlas Shrugged”.

I think it might be worth noting that it is sometimes possible to make effective emotive appeals without telling stories and that some stories are capable of speaking for themselves in illuminating systemic forces.

My example of an effective emotional appeal that does not involve a story comes from “John Stuart Mill, Victorian Firebrand”, by Richard Reeves, which I have just finished reading. When Mill was a member of the House of Commons, arguing for women to be given the right to vote, he used an accounting framework to urge rejection of the view that the political interests of women were safe in the hands of their fathers, husbands. and brothers. Mill said:
“I should like to have a return laid before this House of the number of women who are annually beaten to death, kicked to death, or trampled to death by their male protectors: and, in an opposite column, the amount of the sentences passed, in those cases in which the dastardly criminals did not get off altogether. I should also like to have, in a third column, the amount of property, the unlawful taking of which was, at the same sessions or assizes, by the same judge, thought worthy of the same amount of punishment. We should then have an arithmetical estimate of the value set by a male legislature and male tribunals on the murder of a woman, often by torture continued through years, which, if there is any shame in us, would make us hang our heads” (Available at: Online Library of Liberty).

Richard Reeves comments that this passage “vividly captures the combination of sinewy logic and controlled anger employed by Mill’s best pieces of oratory” (p 423).

It can also be possible in some circumstances for a simple story to evoke an appropriate emotive response without any interpretation. For example, last night I read a story in a news magazine about a respected business man who is co-owner and general manager of a travel agency in the country in which he lives. A few months ago this man moved in with his parents while his own house was being renovated. Four days after he left the house his next door neighbours decided to take advantage of his absence by forcing open the front door and changing the locks. They are now occupying the house and refusing to leave. As soon as he found out what had happened the man contacted the police expecting that they would evict the squatters, but the police took them food and supplies. The man has taken the matter to court but the case has still not been resolved.

I have left out some details of this story such as the country where this is alleged to be happening, and the man’s name and ethnicity because I don’t think such details should be relevant to one’s emotive response. (If anyone is interested in following up the story it is in The Weekend Australian Magazine for August 22-23, 2009.)

How do you respond to this story? My initial reaction was anger at the way property rights were apparently being disregarded and dismay that the rule of law seemed to be breaking down in the country concerned.

I hope there is another side to this story that will make my initial reaction inappropriate. For present purposes, however, the only point I want to make is that the story speaks for itself. I don’t think many people would need to be told explicitly that the story illustrates that there may be something wrong with the justice system of a country in which such things can occur.