Is Maslow's hierarchy of needs a pernicious doctrine?

I recently heard a distinguished economist claim that Abraham Maslow’s hierarchy of needs is a ‘totally pernicious doctrine’. He expressed a strong objection to the idea that ‘first you have to satisfy the body and, only when you have done this can you satisfy the spirit’. I will refrain from naming the individual and providing a link to his remarks because I am not sure that the comment represents his considered view. He might have just been intending to provoke further thought about Maslow’s theory.


Maslow presented his hierarchy of needs as a theory of motivation in a paper written in 1943. He suggested that a person who is lacking in food, safety, love and esteem would probably hunger for food more strongly than anything else. He hypothesized that humans are motivated by a hierarchy of needs, which they seek to satisfy in the following order: physiological, safety, love, esteem and self-realization. He acknowledged that the order of need gratification might not be as rigid as this ranking implies and that it was not necessary for a particular need to be entirely satisfied before a higher need emerged.

It seems to me that the idea at the core of Maslow’s theory is that gratification of the most basic needs releases a person to focus on higher needs. This idea of natural progression to satisfaction of higher needs is the opposite of extreme asceticism which implies that higher needs can only be met through denial of desire. There may also be some tension between Maslow’s view and the Buddhist view that gratification of desires can be addictive, as explained by Lam Goembo Dorji in a recent paper.

In testing Maslow’s theory it seems to me that the central issue is the extent to which people actually move on to satisfy higher needs as their incomes rise. Maslow’s theory should be rejected if most people do not respond to rising incomes by moving on to satisfy higher needs. It ought not to be rejected just because a few relatively enlightened people are able to flourish even though they have relatively low incomes.

A recent study by Louis Tay and Ed Diener tests Maslow’s theory using data from the Gallup World Poll as indicators of the needs identified by Maslow. The authors found some support for Maslow’s theory in that people tend to achieve basic and safety needs before other needs. They also found that fulfilling the various needs has relatively independent effects on subjective well-being, so humans can derive happiness by simultaneously working on a number of needs regardless of the fulfillment of other needs. (The paper, entitled ‘Needs and Subjective Well-Being Around the World’, JPSP (2011) can be obtained here, and Bridget Grenvill-Cleave has written a good summary here.)

There are some other posts on this blog that are relevant to the priority that people give to various needs. In a recent post I discussed evidence presented by Christian Welzel and Ronald Inglehart that as the contribution of greater financial satisfaction to overall life satisfaction has become ‘saturated’ to a greater extent with higher levels of economic development, people tend to achieve higher life satisfaction to a greater extent through activities that enhance feelings of agency.

In the post entitled ‘Does the law of diminishing returns apply to a level of achievement?’ I used Australian survey data to explain life satisfaction in terms of levels of satisfaction with seven domains: standard of living, health, safety, relationships, community connectedness, future security and achievement. Best fit was obtained from a linear function, suggesting that the various domains have independent effects on life satisfaction. However, satisfaction ratings in the various domains are correlated - for example, there is a relatively high correlation between satisfaction ratings for relationships and achieving.

In a related study (reported here) I attempted to identify whether high satisfaction in any particular domains of life are more necessary than others to high satisfaction with life as a whole. The criterion used was the percentage of respondents with high satisfaction with life as a whole among those with low ratings on particular domains of quality of life. The relevant percentages were follows (ranked in order of importance of each domain): personal relationships 10.8%, achieving in life 11.8%, standard of living 12.8%, future security 15.6%, health 15.9%, community connectedness 19.0% and safety 20.3%. The results suggest that satisfaction with personal relationships and achieving are more necessary to high life satisfaction of Australians than is satisfaction with standard of living and future security.

A post entitled ‘Are the world’s poor motivated solely by survival needs?’ discusses survey evidence about the ways very poor people spend their incomes. Surprisingly, they tend to spend a substantial proportion of their income on entertainment, suggesting that they are not motivated entirely by survival needs. The post discusses why this might be so and also why some wealthy people stay fixated at a materialistic level. The way people respond to experiences depends importantly on what those experiences mean to them. It is possible for wealthy people to feel deprivation and for poor people to feel that living means a lot more than meeting physiological needs.

So, where do I end up? I like the idea that self-realization is a fundamental human need that people seek to satisfy if they are able, but I don’t think gratification of desires is a particularly helpful frame of mind - individuals are more likely to realize their potential if they seek equanimity rather than pleasure. Yet, it seems obvious that human flourishing is not possible unless basic physiological needs to be met. I am impressed by the evidence that there is a general tendency for people to move on to satisfy other needs as their basic physiological needs are met. At the same time, there is plenty of evidence that some people achieve high levels of satisfaction with life at relatively low incomes and that some wealthy people are not satisfied with their high income levels. The extent to which people perceive increased economic opportunity as an opportunity to satisfy higher needs may be strongly influenced by culture, values, frames and beliefs.

Maslow may have been too simplistic in suggesting that gratification of the most basic needs releases a person to focus on higher needs, but that doesn’t mean his theory is a pernicious doctrine.

Should advertising be allowed in schools?

Nicola has sent me a message presenting the following views and providing links to a range of different web sites discussing the issues involved:

‘A school should be a simulating learning environment for our children. We trust our schools with our children to provide them with an opportunity to learn and grow. The school breaks this trust by allowing corporations to influence and manipulate their minds. As adults we have the ability to be critical of advertising, however, a school environment is one of trust, therefore, children are more likely to take the advertising at face value. Furthermore, the advertising appears to be endorsed by the school that heightens its power when compared to other contexts.

America has led the way on this form of advertising in schools. The present push by the major supermarkets to put advertising billboards on our school gates and in our schools in the form of voucher collectors is the first step. The use of TV screens with commercials and product placement in our classrooms is not far behind this. Is this the direction we want to take our education system and the welfare of our children?

There should be a blanket ban on advertising in schools as it exploits our children. In the interest of your children, please speak to your children's school management and lobby for the removal of banners and voucher collection.’

It seems to me that this is a matter that should be decided by parents’ organisations in individual schools. If parents think that some form of commercial sponsorship is an appropriate method of fund raising, why should I object?

However, there is probably no harm in expressing a personal view. In my view schools must be really desperate for ways to raise money to allow commercial organizations into schools to give prizes to kids for singing advertising jingles. What is the world coming to?

For further explanation of what Nicola is writing about, see this story in ‘The Australian’. There is a paper here discussing the methods of modern marketing being applied in schools.

Postsript:
I neglected to say that Nicola Moir is a Sydney artist.  The emphasis of her work is on what she describes as 'the forgotton spaces we inhabit between work, home and leisure' - 'the spaces where we come together as a community'. Her web site is well worth visiting. Among other things it might prompt you to consider whether you really are 'a happy little vegemite'. (For the benefit of non-Australians, the vegemite song is probably the most successful advertising jingle ever aimed at children in Australia.)

Would we be more satisfied with life if we lived in the best of all possible worlds?

How would we know if we lived in the best of all possible worlds? A possible world is not a perfect world. If we lived in the best possible world we would still be fallible humans. If you asked someone living in the best possible world how satisfied they are with their life it seems to me that they would be likely to look around at the lives that other people live and use that as the basis for their response. If Australia was the best of all possible worlds my guess is that average life satisfaction of Australians would not be much higher than their average life satisfaction has been over the last decade or so.


My point is not that life in Australia is close to the best possible, but that life satisfaction may not be a reliable indicator of whether our lives are getting better. If we lived in the best of all possible worlds, many of us would have greater opportunities than we have now and would take advantage of those opportunities to achieve better lives. However, since most of us would adapt fairly quickly to our new lives, average life satisfaction would not be much higher than it is now. We would readily acknowledge that our lives had improved, but our level of contentment would not be much greater.

Why do I think that? Well, take a look at the ABS web site showing Measures of Australia’s Progress. The picture presented there is of improvement in many aspects of well-being over the last decade, including health and education as well as income. The negative outcomes are in respect of environmental outcomes that tend not to be at the front or our minds when we think of our personal well-being. (In the best possible worlds our consciences might be more troubled by negative environmental impacts of our actions, but this would have led us to reduce such impacts.) On balance, the indicators suggest that the personal well-being of most Australians has improved substantially over the last decade.

Now, take a look at the chart below showing what has happened over the last decade to average life satisfaction and the personal well-being index produced by Australian Unity and the Australian Centre on Quality of Life. The life satisfaction rating is derived by asking respondents to give a rating from 0 to 10 in response to a single question: ‘Thinking about your own life and personal circumstances, how satisfied are you with your life as a whole?’ The personal well-being index is the average of satisfaction for a range of life domains including standard of living, health, achieving in life, personal relationships, feeling part of the community and future security.

Australians were apparently more satisfied with life than usual at the time of 2004 Olympics and less satisfied than usual during the onset of the global financial crisis, but there is not much change in either index over the decade as a whole. The same survey asks respondents how satisfied they are with the economic situation in Australia. Ratings of the economic situation fluctuate far more than the life satisfaction responses, but there is still not much evidence of an upward trend reflecting the growth in real income levels over the decade.

The chart also shows that ratings of the economic situation have fluctuated more or less in line with the consumer confidence index produced by Roy Morgan research. This consumer confidence index is constructed from answers to questions about current economic conditions and economic conditions over the next five years as well as family finances and whether or not this is a good time to buy major household items.

The following chart shows how responses to the question about economic conditions over the next five years have fluctuated in the recent past. Over the last year or so, a lot of us have tended to become more pessimistic about the economic outlook.

Fortunately, our satisfaction with our own lives does not fluctuate to the same extent as our assessments of the economic situation. Both types of measure have the same deficiency, however, as indicators of progress or regress. When we are asked to rate our own lives or the state of the economy we tend not to look back and reflect upon changes that have occurred unless we are asked explicitly to do so.

The Gallup World Poll asks respondents to rate their lives five years ago and five years ahead as well as their life today, all relative to the best possible life. The results provide an indication of whether survey respondents perceive that their lives are getting better. The average rating Australians give for their current life in 2011 is 7.4 and their rating of life in five years is 8.0 . In 2008, Australians rated their life five years previously at 6.8 . I don’t know why the data is so patchy, but it does suggest, nevertheless, that Australians perceive that their lives have improved over the last decade.

Which is the more appropriate policy objective: opportunity or contentment?

Carol Graham’s new book, ‘The Pursuit of Happiness’, makes an important contribution to consideration of the relevance of happiness research to government policy because it considers explicitly which dimensions of happiness are most relevant as public policy objectives. Happiness researchers have previously argued in favour of particular definitions of happiness - for example positive feelings, emotional well-being, satisfaction with life, capability or opportunity – without much consideration of the relevance of their favoured definitions to public policy.

Early in the book, Carol suggests: ‘A plausible assumption is that most societies would be interested in maximizing the number of citizens who believed they were leading purposeful lives but less concerned about how often people had smiled yesterday. Yet even that statement reflects normative priors that might not apply to all cultures and societies, some of which might emphasize the importance of contentment in day-to-day living more’ (p.30).

Near the end, she comes to the conclusion that a policy that aims to guarantee contentment to all citizens, rather than the opportunity to pursue a fulfilling life, ‘might be unacceptable in most societies’ (p 122). Carol also acknowledges that measures of subjective well-being can contribute to better government policies by making policy process better informed, irrespective of whether any particular dimension of happiness is pursued explicitly as a national objective.

The public policy choice between pursuit of contentment and widespread opportunity is characterised in this book as a choice between Bentham and Aristotle, with Bentham in favour of maximizing the contentment (or pleasure) of the greatest number and Aristotle in favour of maximizing the number of people who have the opportunity to lead a meaningful life (i.e. to flourish). This might be a little unfair to Bentham, who held that utility includes anything that ‘tends to produce benefit, advantage, pleasure, good or happiness’, which would certainly encompass the opportunity to lead a meaningful life. Nevertheless, many Benthamites have tended to equate happiness with pleasure and even J S Mill, who sought to distinguish between the merits of higher and lower pleasures, saw both tranquillity (contentment) and excitement as the main constituents ‘of a satisfied life’.

The opportunity to lead a meaningful life implies agency, which Carol defines as ‘the capacity to make choices and act on them’ (p 41). She perceives individual agency to be limited by income, education and information constraints as well as institutional constraints, i.e. by all factors that limit individual opportunity.

So, doesn’t greater agency or opportunity lead to greater contentment? Not necessarily. Carol points out that people with limited wealth often report being very happy while people who are in the process of obtaining higher levels of wealth (frustrated achievers) often report feeling miserable. She suggests that the way people answer happiness questions in surveys is to a large extent determined by their agency. The process of acquiring agency may produce short term unhappiness because of uncertainty associated with the adjustment process (e.g. in relocation away from family and friends) and if expectations of a more fulfilling life do not materialize this could result in lasting unhappiness.

Doesn’t this make contentment a more appropriate objective than agency? If the peasants are happy with their lives as they are, why seek to improve the opportunities available to them? I think Carol provides a good answer to these questions. She points out that while adaptation to circumstances is usually positive from an individual psychological perspective, it can lead to collective tolerance for a bad equilibrium. For example, crime and corruption have less effect on subjective well-being in countries where crime and corruption have become an entrenched feature of society. This should not make it any less desirable to reduce crime and corruption in such places.

The numerous examples that Carol draws from her research experience to illustrate the points she is making help make this book a pleasure to read. Readers are told about happy peasants and frustrated achievers in Latin America; about survey respondents in Afghanistan who are apparently happier than the world average despite objective conditions that are markedly worse; about migrants who are markedly less happy than the average for the countries they have migrated to; and about obese people who are less happy than the non-obese, but much less unhappy when there are more obese people around them.

My only reservation about the book is that I am not persuaded that the unhappy growth paradox – lower average happiness in countries with relatively high rates of economic growth after controlling for per capita income levels – is largely attributable to unhappiness associated with the process of acquiring agency. As I have suggested before, I think the unhappy growth phenomenon might disappear if researchers could control for wealth rather than income levels. The appearance of unhappy growth might largely reflect the influence on well-being of wealth (reflected in quality of housing, financial assets, human capital, public infrastructure, social capital etc.) which may take several decades to accumulate.

However, that is a minor reservation. I have no hesitation in recommending this book to anyone who is interested in the role of government in the pursuit of happiness.

Postscript:
A recent conference presentation by Carol Graham on 'Happiness around the World: The Paradox of Happy Peasants and Miserable Millionaires' is available here.

Is the social fabric stronger when a high proportion of the population identify with helping the people nearby?

In my last post I presented some evidence that people who do not identify strongly with ‘always behaving properly’ nevertheless tend to identify strongly with helping the people nearby if they feel a great deal of freedom and control of their own lives (i.e. if they have strong feelings of individual agency).


Does an identification with helping the people nearby have a positive effect on the social fabric or, to use an Australian expression, is it just about ‘looking after your mates’? In some contexts, helping the people nearby could even be corrupt behaviour. Fortunately, it is possible to test the relationship between identifying with helping the people nearby and attitudes toward corruption using data from the World Values Survey. This survey asks respondents to rate their view on whether it is ‘justifiable for a person to accept a bribe’ on a scale from 1 to 10, where a rating of 1 means that it is never justifiable and a rating of 10 means that it is always justifiable. (As before, I am basing my analysis on cross-tabulations for about 80,000 respondents in 57 countries from the 2005 Survey.)

The relationship between identifying with helping the people nearby and attitudes toward corruption is shown in the chart below. (The percentages shown in the chart add to 100 per cent along the horizontal axis.)

It is clear from the chart that people who identify with helping the people nearby have less tolerant attitudes toward corruption. Similar analyses show that these people are also less tolerant of social security and tax fraud, and fare evasion on public transport. It seems clear that the social fabic is stronger when a high proportion of the population identify with the importance of helping the people nearby.

Do you have to be a goody-goody to identify strongly with helping others?

No! People who feel a great deal of freedom and control of their own lives identify strongly with helping others even if they don’t see themselves as goody-goodies. People with strong feelings of individual agency identify strongly with the proposition ‘it is important to help the people nearby’ even if they don’t identify at all with the proposition ‘it is important to always behave properly’.


Before I present a chart showing this, I should provide some background information. I ended my last post wondering whether people who feel little freedom in their own lives might tend to be more likely to engage in anti-social activities if they give high priority to having a good time and feel little control over their own lives. However, when I looked at World Values Survey data on people who identify strongly with the proposition ‘it is important to this person to have a good time’ I found that they tend to identify much more strongly than average with helping others, even when they feel little control over their own lives. (I am basing these observations on cross-tabulations for about 80,000 respondents in 57 countries from the 2005 Survey.)

So, I decided to see if this is also true of people who identify strongly with the proposition ‘it is important for this person to be rich’. It is. It is also true of people who identify strongly with ‘being very successful’, ‘thinking up new ideas and being creative’, ‘being adventurous and taking risks’, ‘looking after the environment’, ‘living in secure surroundings’, ‘tradition’ and ‘always behaving properly’. It seems that people who identify strongly with just about any proposition about the importance of a particular value in their own lives tend to identify strongly with helping others, even when they feel little control over their own lives.

It is hardly surprising that people who identify strongly with the proposition ‘it is important to this person to always behave properly’ would identify with helping others. What about those who see themselves as being a bit naughty – the people who say that proposition ‘is not like me, or not at all like me’? I gave the answer in the first paragraph. It is also shown in the chart below.

I’m not sure of the implications of the finding that people who do not see themselves as giving importance to behaving properly tend nevertheless to identify strongly with helping others if they have strong feelings of personal agency. Perhaps feelings of personal freedom and control of their lives help individuals to behave responsibly even when they prefer to see themselves as being fallible rather than virtuous. This deserves further study.

How much do we know about the relationship between freedom and human flourishing?

I have been thinking about this subject for a long time. I have blogging about various aspects of it for more than 3 years and I have just written a conference paper entitled ‘Some Observations on the Relationship between Freedom and Well-Being’. Yet I still don’t feel as though I know enough about the relationship between freedom and individual flourishing.


My interest in this topic stemmed partly from the questioning by some influential people of the economist’s traditional assumption that adult individuals of sound mind are the best judges of their own interests. There seems to have been an increasing tendency to question whether people make good use of opportunities available to maintain or improve their well-being and that of their families. There seems to be increasing support for paternalistic restrictions on freedom in an effort to discourage behaviour that is harmful to health (e.g. smoking) and financial well-being (e.g. gambling).

A priori reasoning can take us some distance in establishing the importance of self-direction and autonomy to human flourishing. As discussed in the paper referred to above, a strong case can be made that humans are creatures that cannot fully flourish unless they are responsible for the way they live their lives. Respect for individual autonomy also provides the basis for social cooperation. It is difficult to help other people to flourish – or even to live in peace with them – if we do not respect their autonomy.

Empirical analysis of the relationships between various aspects of freedom and dimensions of well-being also suggest a positive relationship between freedom and well-being. At a subjective level, feelings of individual agency – feelings about the amount of freedom and control that people have over the way their lives turn out – are closely related to life satisfaction. There is evidence that feelings of individual agency are influenced by institutions relating to democracy, freedom of expression and economic freedom. There is also evidence of a positive relationship between economic freedom and various subjective and objective measures of well-being.

The paper also looks at evidence on the question of whether strong feelings of individual agency are associated with more selfish behaviour. It concludes that, if anything, the opposite seems to be the case.

So, we have strong grounds to argue that self-direction and autonomy are important and that people do tend, in general, to make good use of the opportunities available to improve their well-being and that of their families.

Why do we need to know more than that about the relationship between freedom and flourishing?

One important reason has to do with way many of us tend to respond to the fact that some people use the opportunities available to them in ways that are harmful to their own well-being or that of other people. We often have tendency to support policy responses that seek to reduce temptations of vulnerable people, by restricting freedom, rather than to consider why such people have become vulnerable and how they might be helped to resist temptations. (I use the words ‘us’ and ‘we’ in this context because of my previous support for policies that I thought would reduce availability of harmful drugs when my children were in their teens.) I think that we tend to resort too readily to paternalistic interventions that attempt to remove temptations because we don’t know enough about what makes people vulnerable to temptations or how their vulnerability is affected by the institutional environment.

I think we also need a better understanding of the causes of anti-social activities, such as those associated with binge drinking, if we are to avoid attempts to deal with such problems without further restricting the liberty of innocent people. It might be helpful to know, for example, to what extent people behave irresponsibly because of the feeling that nothing they do has much effect on the way their lives turn out, in combination with of the priority they give to having a good time. It might also be useful to know whether such feelings and attitudes are more prevalent in some countries than others and, if so, why.

Postscript 1
I am intending to add postscripts to keep track of findings of additional research on this topic.

I now reject the hypothesis implicit in the last paragraph above. When I looked (here) at World Values Survey data on people who identify strongly with the proposition ‘it is important to this person to have a good time’ I found that they tend to identify much more strongly than average with helping others, even when they feel little control over their own lives. It seems that people who identify strongly with just about any proposition about the importance of a particular value in their own lives tend to identify strongly with helping others, even when they feel little control over their own lives.

As noted above, strong feelings of individual agency tend not to be associated with selfish behaviour. Further research (reported in the post linked above) suggests that people who have strong feelings of individual agency tend to identify strongly with the proposition ‘it is important to help the people nearby’, even if they don’t identify at all with the proposition ‘it is important to always behave properly’.

Does identification with helping the people nearby have a positive effect on the social fabric? Findings reported in another post suggest that people who identify with helping the people nearby have less tolerant attitudes toward corruption, are also less tolerant of social security and tax fraud, and fare evasion on public transport.

Where to from here? The general question I want to explore further is whether feelings of agency interact with various beliefs and values in ways that might help to explain self-destructive and anti-social behaviours. For example, do people with low feelings of agency generally tend to have more cynical attitudes toward factors leading to wealth and success in life and is this associated with different attitudes toward helping others, corruption and desirable child qualities?

Postscript 2
I have discussed the question of whether attitudes towards success, wealth accumulation and competition are  linked to feelings of individual agency in this post.

Why do some people use the opportunities available to them in ways that are harmful to their own well-being or that of other people? In my view view the best place to look for an answer is in terms of their sense of identity and the satisfaction they obtain from acting in accordance with their sense of identity. Various posts with the 'Identity' label are relevant in this context.

From a public policy perspective it is important to ask how government actions are likely to impact on an individual's sense of identity. For example, are they likely to encourage the individuals to perceive themselves as productive members of society.

From the perspective of individual self-improvement it is relevant for everyone to ask themselves what kind of person they want to be. Steven Stosny has an interesting post on this topic on the Psychology Today blog.

How does Bhutan beckon?

‘Bold Bhutan Beckons’, by Tim Fischer and Tshering Tashi, was first published in 2009. I almost bought a copy then. I had just written a review article about Bhutan’s gross national happiness (GNH) objective and was naturally interested in Tim Fischer’s views on Bhutan – since he is a fellow Australian and former leader of the National Party. Anyhow, the moment passed and I didn’t think again of buying the book until a couple of weeks ago when I had it in my hand in a bookshop in Thimphu. As soon as I flipped through the pages I knew that I had to read it.

In his introduction, Tim Fischer mentions that when he and his friend Tshering Tashi (a businessman and writer who lives in Thimphu) were talking about joint authorship of this book, someone warned him that joint book writing was ‘possibly a guaranteed way to spoil a friendship’. That might have been good advice, but the way Tim and Tshering have written the book seems to have been designed to reduce the potential for conflict. Rather than attempting to write jointly, they have each made separate contributions to the book and have told readers who wrote each chapter.

One of the highlights of the book, in my view, is the discussion of Zhabdrung Ngawang Namgyal, whom Tshering describes as the founder and conscience of Bhutan. Tim tells the story of how two Jesuits visited Bhutan in 1627, when Zhabdrung was a young king. Zhabdrung offered them hospitality and apparently allowed them to attempt to convert local people to Christianity. Zhabdrung might have been confident that the Jesuit’s proselytising efforts would be unsuccessful, but he also claimed to be respectful of individual liberty in other contexts. Tshering notes that many times the king told his lamas that ‘though they are most submissive, everyone is his own master to do what he likes’ (p 25). It is not clear from the book, however, whether Zhabdrung’s acknowledgement that everyone is his own master extended to their use of what he described as ‘the evil, stinking, poisonous weed named tobacco’ (p 29).

Zhabdrung stressed the virtues of perseverance and self-discipline. He quoted his teacher who said: ‘If you do not work hard you will not find sweet food. If you do not know the taste of suffering, you will not know the taste of happiness’. Zhabdrung’s achievements include the building of seven dzongs (combining the functions of fortresses and monasteries) built in strategic locations in different parts of the country. The first was built in 1629 at Simtokha, about 5 km south of Thimphu (the capital city) on the road to Paro and Phuentsholing. The photo below was taken from the road from Thimphu to Punakha.

The Punakha dzong, shown in my last post, was also built by Zhabdrung.

Another highlight of the book is Tim Fischer’s discussion of road-building in Bhutan in the 1960s. While we were being driven along the relatively good road from the international airport at Paro to Thimphu, my fellow passengers were discussing the fact that Bhutan was virtually closed to the outside world before the major road construction effort that occurred about 50 years ago. The idea that road construction in Bhutan began only when I was in my final years at school resonated much more strongly a few days later, however, when I was being driven over the narrow, winding mountain road from Thimphu to Punakha. This road barely copes with the amount of traffic using it, but I was impressed with the regard to safety of most of the drivers and with the signaling system that drivers use to let following vehicles know that it is safe to pass. (The left indicator means that it is safe and the right indicator means that it is unsafe. Vehicles drive on the left hand side of the road.)

Since I have already distracted myself away from reviewing the book, this might be an appropriate opportunity to present some photos I took on the road from Thimphu to Punakha.

This is my guide, Nado Richen, who was most helpful. After my return to Australia, Nado emailed a fact sheet to me to ensure that I understood what he had been saying. Nado was concerned that his command of English was not strong enough to answer some of my questions.

Bhutan is very keen on use of hydro power - and not just for electricity generation. This photo shows a water-powered prayer wheel.

These are the Druk Wangyal Chortens -108 stupas at Dochula pass (3050m) a popular place, with panoramic views. Stupas are spiritual monuments offering observers a direct experience of inherent wakefulness and dignity.These stupas were built by the eldest Queen Mother, Her Majesty Ashi Dorji Wangmo Wangchuk, in honor of soldiers who fought in the 2003 low-intensity border conflict to expel Indian militants. The Indian militants had been threatening Bhutanese sovereignty by using camps in Bhutan as a base to pursue their revolutionary aims in India. Tshering Tashi wrote a chapter discussing the conflict in ‘Bold Bhutan Beckons’.

Prayer flags at a lake in the Royal Botanical Park at Lamperi.

This truck is typical of those passed on the road from Thimphu to Punakha. The prayer wheel in Nado’s car is shown in the foreground and is reflected in the windscreen.

Some cows on the road near Punakha.

Rice fields near Punakha.

Now, where was I before I interrupted myself? I was writing about Tim Fischer’s account of road building in Bhutan in the 1960s. Tim was helped in writing this story by his discussions with Hardy Pradhan, an Australian engineer who worked on the first roads in Bhutan. The roads were built with the help of Indian expertise but the labour involved was largely a national effort by Bhutanese people. All Bhutanese were apparently expected to work on the project for 33 days.

Another highlight of the book, for me, was Tshering’s account of his meeting with Tsham Penjor, whom he describes as the great hermit. I know little about hermits, but some aspects of the story did not surprise me. I had expected that any person who had spent most of his life in solitary meditation would have little attachment to material things. The part of the story that surprised me is that despite his solitary life, Tsham is apparently a warm, hospitable and happy person.

Tshering argues that the pursuit of materialism and the desire to be admired respected and noticed brings with it a great deal of uncertainty. He suggests that ‘it is in the simplicity of people like Tsham Penjor that the truth and greatness really live’. Through the example of his life Tsham ‘reminds us that the mountains have the power to liberate humans from this uncertainty’ (p 78).

Is that why Bhutan beckons? Is it the challenge to spend more time on our mountains – geographical or metaphorical - aiming to live in harmony with nature and our neighbours and to seek goodness and enlightenment? That seems to me to be an important part of the story. Tim Fischer has another important part of the story in his suggestion that Bhutan acts as a magnet because its culture, customs and traditions survive to this day in a careful blend with modernity (p 19). For me, the main attraction is that the Bhutanese people are taking charge of the blending process themselves, individually and collectively, with the aim of building a happier society.

Postscript 1:

In thanking me for this review, Tshering Tashi has reminded me that Bhutan may also be the last bastian for many endangered animals. He has written about this in the book. He has also written an article in Kuensel about the blue bear, which is believed to be extinct.

Postscript 2:

I neglected to mention that my main reason for visiting Bhutan was to attend a conference on 'Happiness and Economic Development'. Some of the conference presentations are now available on this site.

How should a libertarian view the pursuit of happiness in Bhutan?

I was pondering this question last week on my first visit to Bhutan. Some readers may wonder why anyone who loves liberty would actually need to ponder this question. It is obvious that such a person could not support a law requiring citizens to wear national dress, particularly when this law means that ethnic minorities with a different cultural heritage are expected to wear the traditional attire of the majority of the population. Nor could anyone who loves liberty support a law specifying that any person found with more than the permissible quantity of tobacco products for personal consumption ‘shall be guilty of the offense for smuggling’.

My pondering has focused on the issue of whether such restrictions of liberty are central to Bhutan’s Gross National Happiness (GNH) objective. My conclusion is that I don’t think they are. While GNH seems to be mentioned whenever the government does anything in Bhutan, restrictions of liberty seem to me to be more appropriately attributed to the historical legacy of isolation from the rest of the world, the reasons that the Druk majority have had to fear that they might lose their cultural identity and political independence, and the history of paternalistic government that is greatly respected by a high proportion of the people (and which has generally deserved that respect).

It seems to me that attributing restrictions of liberty in Bhutan to GNH would be as silly as attributing the recent riots in Britain to its Westminster system of government, or the existence of a relatively high prison population in the US to the ideals expressed in its Declaration of Independence. Principles deserve to be considered on their merits, even though the claims to moral leadership of the countries that espouse those principles are often impaired to some extent by bad policies and policy outcomes.

The following remarks of the current king of Bhutan, his majesty Jigme Khesar Namgyel Wangchuck, seem relevant in this context:

‘GNH acts as our National Conscience guiding us towards making wise decisions for a better future. It ensures that no matter what our nation may seek to achieve, the human dimension, the individual’s place in the nation, is never forgotten. It is a constant reminder that we must strive for a caring leadership so that as the world and country changes, as our nation’s goals change, our foremost priority will always remain the happiness and wellbeing of our people – including the generations to come after us’.

The GNH concept originated in the early 1970s in a remark by the former king that ‘Gross National Happiness is more important than Gross National Product’. Systematic efforts have been made over the last decade or so to specify the objective clearly, to measure GNH and to incorporate relevant criteria in government decision-making.

The central idea behind Bhutan’s GNH objective is to integrate environmental conservation, promotion of cultural activities and good governance with economic growth and modernization. This idea has gained considerable international support. The UN General Assembly recently adopted by acclamation a resolution sponsored by Bhutan inviting countries ‘to pursue the elaboration of additional measures that better capture the importance of the pursuit of happiness and well-being in development with a view to guiding their public policies’. Bhutan has been invited to convene a panel discussion on the theme of happiness and well-being during the Assembly’s next session, which begins in September.

While offering its view of the pursuit of happiness to the rest of the world, the government of Bhutan does not claim to have resolved all the problems of economic development and social change. For example, public literature about GNH acknowledges that Bhutan faces problems associated with rural-urban migration, youth alienation and substance abuse.

One possible area of concern about pursuit of GNH is whether attempts to integrate environmental and cultural concerns with economic development will reduce economic freedom and constrain economic opportunities available to Bhutanese people. I’m not sure how restrictive the project approval processes might be, but it seems to involve a weighing up of the good and bad effects of individual projects. This approach seems to me to have potential to enable approval of a larger number of good projects than would the process in Australia of requiring projects to jump a series of environmental and/or social impact hurdles imposed by different levels of government. The inclusion of a good governance criterion should also help to ensure that projects are not held up by corrupt officials or narrowly focused interest groups.

Although the Heritage Foundation’s index suggests that Bhutan has a relatively low level of economic freedom (a ranking of 103 among the 179 countries ranked) it is not clear that its ranking is adversely affected by the pursuit of GNH. Bhutan’s economic freedom ranking is considerably higher than that of neighbouring countries such as India (124), China (135) and Nepal (146) whose governments do not have GNH as an explicit objective. I don’t see why pursuit of GNH in Bhutan would not be consistent with greater economic freedom than at present.

I thoroughly enjoyed my visit to Bhutan. I think it would be hard for anyone to visit the country without ending up with a great deal of respect for the peaceful people who inhabit this country. The people are so kind that the dogs even seem to feel safe sleeping on the roads. I don’t like the paternalistic restrictions on liberty in Bhutan but I think that there is a fair chance that the government will decide, before long, that such policies are actually inimical to individual flourishing and to GNH.

Do all well-being indicators tell similar stories at a regional level?

I have previously noted that there is a tendency for many different well-being indicators to tell similar stories in international comparisons. The most obvious reason for this is that well-being is related to socio-economic circumstances. People who live in countries with relatively high average incomes could be expected to have good housing, better health outcomes, greater life satisfaction etc.


It would seem reasonable to expect a similar pattern at a regional level within countries. Regions that have a high rating on an indicator, such as subjective well-being, might also be expected to have a fairly high rating on a range of factors that are known to be related to well-being.

There is an excellent facility in Victoria (Australia) to test whether this is the case. The site, known as Community Indicators Victoria, enables visitors to look at relationships between a large number of variables across local government areas (LGAs). I used the double data map facility to examine the relationship between subjective well-being (SWB) and a range of variables that I thought might reasonably be expected to be correlated with SWB. The SWB measure used is the Australian Unity Wellbeing Index combines satisfaction with life as a whole and satisfaction with various domains of life (standard of living, health, achievements in life, community connection, personal relationships, safety and future security).

The relationship with some relevant variables was strongly positive, as I had expected. The LGAs with higher average SWB also tend to have higher ratings in terms of: satisfaction with being part of the community, social support (ability to get help from friends), citizen engagement (e.g. attending town meetings, writing to politicians), safety (e.g. feeling safe walking in the local area at night) and volunteering.

However, the relationship with some other relevant variables was negative. These included household income (Census data), food security, satisfaction with work-life balance and acceptance of diverse cultures.

The explanation seems to lie mainly in differences between rural LGAs and those in Melbourne or close to it. The LGAs with highest average SWB tend to be rural. There seems to be an association between high average SWB and the relatively strong community networks in the rural LGAs. The variables for which a negative relationship was observed, such as household income, tend to have higher values in Melbourne and in LGAs close to Melbourne.

When I was growing up in country Victoria the people where I lived used to say that Melbourne might be a nice place to visit, but they wouldn’t want to live there. They were smiling but they weren't joking. People who live in rural area seem to be highly satisfied with their lifestyles. Perhaps an ideal lifestyle can only be obtained by earning a big-city income and living in the country.

A report prepared a few years ago by Bob Cummins et al, looking at SWB by statistical sub-division (SSD) over Australia as a whole, indicates that the SSDs with the highest levels of subjective wellbeing were all rural and those with the lowest subjective wellbeing were all inner-city. The authors noted that subjective wellbeing is generally lower in cities with more than 40,000 inhabitants and that the most important domain driving this is connection to community.

Is the incidence of depression higher where a high proportion of the population are 'suffering'?

Before being willing to guess the answer to that question I expect most readers would want to know how I define suffering. For the purposes of this exercise, I am using the definition of suffering adopted by the Gallup World Poll. Gallup classifies respondents as "thriving," "struggling," or "suffering," according to how they rate their current and future lives on a ladder scale, based on the Cantril Self-Anchoring Striving Scale, where the bottom rating is ‘the worst possible life’ and the top rating is ‘the best possible life’. Respondents are classified as suffering if they have poor ratings of their current life situation (4/10 and below) and negative views of the next five years (4/10 and below). They are more likely to report lacking the basics of food and shelter, more likely to have physical pain, a lot of stress, worry, sadness, and anger. They have less access to health insurance and care, and more than double the disease burden, in comparison to "thriving" respondents.


So, do you think the incidence of depression is likely to be higher in countries where a high proportion of people are suffering? By now, you are probably thinking that must be a trick question. Given the way Gallup defines suffering, surely it must be reasonable to expect the incidence of depression to be higher in countries with relatively high levels of suffering.

However, that doesn’t seem to be so when the Gallup data are compared with the results of a recent study of the incidence of depression in 18 countries. The study, by Evelyn Bromet (and 21 co-authors) recently published in BMC Medicine involved face to face interviews of over 89,000 adults using the WHO’s Composite International Diagnostic Interview. I don’t know what that means exactly, but it sounds impressive. This looks like a reliable study.

The authors report that the incidence of major depressive episodes (MDE) was greater on average in the higher income countries than in the low-to- middle income countries included in their study. That is what attracted my attention initially and the reason why I thought it might be interesting to plot the incidence of MDE against Gallup estimates of the percentage of populations who are suffering, as shown below.

The chart doesn’t seem to show any evidence of a positive relationship between prevalence of MDE in the last 12 months and the percentage suffering. Similarly, a graph plotting lifetime prevalence of MDE against the percentage suffering showed no obvious positive relationship.

The data depicted in the chart suggest there is no simple relationship between income levels and prevalence of MDE. For example, the prevalence of MDE seems to be relatively high in the United States and relatively low in Japan, Germany and Italy.

The findings of the study reveal several things about depression that I was not previously aware of. The incidence of MDE among women is, on average, about twice that for men. The average age of onset is the mid-20’s. The strongest demographic correlate in high-income countries was being separated from a partner, whereas in low-to-middle income countries it was being divorced or widowed.

Depression is obviously related to emotional well-being, but the links seem to be complex. For example, I don’t know how to relate data suggesting that only 2 percent of the population in Brazil are suffering with data suggesting that about 10 percent had a major depressive episode in the last 12 months. Over the last few years I have gained some understanding of correlates of well-being, but that doesn't seem to help much in understanding the incidence of depression.

Postscript 1
Cameron Lau of International Business Times talks about the depression study here. However, seems to have his facts twisted when he claims that depression rates in rich countries far outpace those in poor countries.

Postscript 2
I have just remembered a recent study by John Helliwell and Shun Wang that sheds considerable light on the incidence of depression in different countries. These authors have been able to explain 58% of the variance of 117 average suicide rates drawn from different years in 50 countries around the world using only four key variables: social trust, membership in community organizations, strength of religious belief, and the divorce rate. They comment: ‘The first three variables act to reduce suicide, while higher divorce rates are associated with higher suicide rates. The effects of social trust are large and statistically significant. Moving 10% of the population from generally untrusting to generally trusting, a shift of … less than one standard deviation for the sample data, would be predicted to lead to a … drop in the suicide rate, more than 10% of its average value’ (‘Trust and Wellbeing’, IJW, 2011, p. 50).

Data from World Values Surveys for 2005-6 indicate that the percentage of the population who think that most people try to take advantage of them (ratings of 1 to 4 on a ten point scale) is much higher in Brazil and the Ukraine (shown to have a high incidence of depression in the above chart) than in Japan, Germany and Italy (which have a relatively low incidence of depression).

However, lack of trust does not seem to explain the relatively high incidence of depression in the United States, where the percentage of the population who think that most people try to take advantage of them is about the same as in Japan, Italy and Germany.

Do Australian political leaders lack vision?

I ended my last post asking why the major political parties in Australia seem to be finding it more difficult to promote sensible policies. One possible explanation I hear quite frequently is that our political leaders lack vision. The argument seems to be that the policies of the major parties are too easily blown around by powerful interest groups because the leaders are no longer anchored to a set of values that their parties stand for.


The argument is expressed most often about the prime minister. I often hear people ask: Who is the true Julia? What does she really believe in? What does stand for? (A recent example is in the remarks by Paul Gardner here.)

I am not about to become an apologist for the prime minister, but it seems to me that those questions are unfair. Julia Gillard tells an authentic story about her origins, the use she made of the educational opportunities available to her and the values she holds relating to opportunity and responsibility. Why can’t more people accept that she means what she says when she argues that ‘Labor's modern mission’ is ‘to spread opportunity with a matching sense of responsibility’?

One of Gillard’s problems is that her espousal of opportunity and responsibility seems vague and out of kilter with the leftist views she is known to have held in the past. Some people might feel that she is using the language of opportunity and security as a cover for statism and wealth redistribution.

The leader of the opposition, Tony Abbott, has a somewhat different problem stemming from his background. Abbott makes no secret of the fact that in his youth he was strongly influenced by Bob Santamaria, a catholic political ideologue, who was a particularly divisive figure in Australian politics. The problem that poses for Abbott is that some people think the values he has espoused are a cover for paternalistic conservatism.

So, what values has Abbott espoused? In his book, ‘Battlelines’, Abbott poses the question: “How can Australians, individually and collectively come closer to being their ‘best selves’ and what can the Liberal Party do to bring this about?” (p79). That question seems to me to imply a strong set of values relating to individual aspirations. The doubts that some people have about Abbott stem from the possibility that he may be inclined to impose a social conservative’s view of what it means to be ‘one’s best self’ rather than respecting the rights of every individual to live according to their own views of what it means to be ‘one’s best self’.

It seems to me that the claim that our political leaders lack vision is garbage. The values that Gillard and Abbott currently espouse deserve to be recognized and considered on their merits, even if there are be grounds for suspicion that both are still influenced by their respective ideological histories.

There should be more focus on the similarities and differences between the values that Gillard and Abbott espouse . It seems to me that Gillard’s ‘opportunity and responsibility’ is closely allied to allowing and helping people to come closer to being their ‘best selves’. The difference is that Gillard puts more emphasis on spreading opportunity while Abbott would probably put more emphasis on encouraging greater productivity and individual excellence. There is still potential for the major parties to compete for votes on the basis of their emphasis of different values even though the old political divide based on attitudes toward the role of the state have greatly diminished.

So, if lack of vision is not the problem, what is? The prime minister has failed to ensure that ‘opportunity and responsibility’ are reflected in policy development outside of education and social welfare. For example, the national broadband network seems to be as much about reducing opportunity for people in the big cities, by restricting competition, as it is about expanding opportunities for people in regional areas. Health policy seems to be more about attempting to reduce risk factors through greater government regulation, rather than encouraging individuals to take greater responsibility for their own health.

The leader of the opposition has adopted a small target strategy. Rather than promoting new policies to encourage greater productivity, he continues to recite the mantra he took to the last election about ending the waste, repaying debt, stopping the new taxes and stopping the boats.

What are the incentives for politicians to adopt small target strategies? What role does the media play in this? Why don’t journalists do more to hold political leaders to account for lack of consistency between their high ideals and the policies they adopt? Is there anything that ordinary people can do to raise the level of political debate in this country?

Postscript:
Jim Belshaw - an historian, economist, management consultant and blogger - has suggested in a comment below that there is a lack of good policy ideas and that people like me (and himself) have something to answer for in that regard. Jim has also posted a more extensive comment on his blog.

Should politicians be required to meet competency standards?

‘Until philosophers are kings, or the kings and princes of this world have the spirit and power of philosophy, and political greatness and wisdom meet in one, and those commoner natures who pursue either to the exclusion of the other are compelled to stand aside, cities will never have rest from their evils’ – Plato, ‘The Republic’.

Plato proposed that the philosophers and warriors who are guardians of his ideal state should live in poverty. I can see some merit in that idea. I find it difficult, however, to see much merit in the breeding program that Plato suggested for producing guardians. Plato suggested that individuals should be deceived into thinking that they were participating in a lottery for the selection of their partners, but the lottery would be rigged by a breeding committee in an attempt to produce the best offspring.

If those are the serious proposals of a great philosopher, then it seems to me we might have reason to be concerned about the quality of public policy that philosopher kings might seek to implement. The great philosopher sets out to devise a system that would ensure that we are not governed by numpties and ends up, unwittingly, demonstrating what life might be like if we were governed by numpties. (I am indebted to Shona for introducing me to the word, ‘numpty’. According to one online dictionary, a numpty is a person ‘who, sometimes unwittingly, by speech or action demonstrates a lack of knowledge or misconception of a particular subject or situation to the amusement of others’. Others dictionaries that are less inclined to mince words suggest that a ‘numpty’ is a fool. Either way, it is probably a good idea for Australians to know what a numpty is before visiting the UK.)

There seems to me to be a lot more merit in the suggestion that politicians should be required to meet minimum competency standards than in the idea of breeding philosopher kings. This suggestion has arisen as a result of a discussion I have been having with Shona about political institutions. (Our discussion of politics began in a recent post.)

As a discussion starter, Shona suggests that politicians should be required to have a Master of Politics – something like an MBA for politicians. The degree would include practical work and be politically unbiased. It would cover a range of topics including political science, debating and language skills, law, economics and presentation. Shona noted that there could be a problem in ensuring that all politicians earn their MP degrees from reputable academic institutions. It would be necessary to find a way to stop some of them from just purchasing a degree on the internet.

When asked why she included presentation in her proposed course, Shona explained as follows:

‘Interestingly, I have just read and reviewed a large number of technical reports as part of my work. What infuriates me in doing so is the poor presentation, continual mistakes and many inconsistencies. Remind you of anything? I get angry with myself as a woman, looking at Julia Gillard and being distracted by a jacket too tight, poor make-up or dodgy hair, as opposed to focusing on what she has to say. When men do this it makes me very very angry. But I also notice the nose hairs, bad mannerisms and appalling body language of her male counterparts – so I’m not just judging the women. Presentation matters. Bad presentation distracts the reader/listener from the content/message. People would be more inclined to listen to what politicians have to say if they shine their shoes and clip their nose hair.’

In order to provide an example of how Australian politicians could present themselves in order to distract people from what they are saying it seems appropriate at this point to link to an interview of Sir Les Patterson.

The concern I have with the development of some kind of formal qualification for politicians is that it might tend to reinforce problems stemming from the similar backgrounds of many politicians. These days many seem to come from political families, study law at university and become party apparatchiks before standing for election. Mark Latham raised a related question in a recent article: ‘how can the Labor Party, having professionalised its ranks in the 1980s now look so unprofessional in office?’(‘A party without a point’, AFR, 30 June).

By coincidence, I am currently reading Vernon Smith’s book, ‘Rationality in Economics’, which has a useful discussion about wisdom of crowds and the characteristics of groups that enable good information aggregation. Smith (citing Suroweicki) suggests that four characteristics of groups enable good information aggregation outcomes: diversity, independence, decentralization and an aggregation principle to process private knowledge and yield group outcomes.

Does that mean that candidates for election should all do different work placements for a year – for example, as police, teachers, child care workers, hospital staff or garbage collectors? I am not confident that would produce better outcomes.

Mark Latham suggests, in the article mentioned above, that the Labor Party’s problems stem from a collapse of its policy-making culture. A particular problem for Labor has been the narrowing of the political divide following the end of the Cold War. Another contributing factor he mentions – the recent tendency for reformist ideas to be seen as an electoral liability – has inflicted both sides of politics.

So, that leaves me wondering whether competency of politicians is a fundamental problem in Australia. The basics of the system seem to me to be OK. Voters choose on the basis of criteria that are important to them. Political parties have strong incentives to find candidates who are acceptable to voters. The system should be able to weed out politicians who do not meet minimum competency standards.

Yet it would be hard to claim that in our political system everything is for the best in the best of all possible worlds. What is the problem with Australian politics? Why are the major parties finding it more difficult to promote sensible policies?

Postscript:
The web page I have linked to claims that the interviewer of Sir Les Patterson was Clive James. The interviewer was certainly not Clive James, whose web page can be found here.
Shona tells me that the interviewer was Clive Anderson. He is indentified as Clive Anderson in the description of the relevant video here.

Is the 'great big new carbon tax' a good idea?

I am using that emotive description of the new tax because I have previously suggested on this blog that a great big new carbon tax might not be a bad idea if it replaced other taxes that are having adverse effects on economic incentives. So, how good is the carbon tax package announced by the prime minister yesterday?


The first point that needs to be recognized in assessing the package is that it only makes sense if it is viewed as a signalling exercise. By itself this package will have a small impact on carbon dioxide emissions in Australia, a tiny impact on the world-wide emissions and an almost negligible impact on the stock of global emissions and global climate. Its impact depends almost entirely on the extent to which it may help to encourage people in other countries to take similar action to reduce their carbon dioxide emissions. If there is sufficient action by other countries more investors may come to expect that development of more efficient alternative technologies is likely to become a profitable venture.

The incentives that the tax provides for development of more efficient alternative technologies are the critical factor in whole exercise. If the world community ever gets serious about making substantial reductions in global emissions, the economic cost will be massive unless low-cost technologies are developed for energy generation and/ or removal of carbon dioxide from the atmosphere. Unfortunately, the proposed tax is unlikely to induce many people to rush into investing in development of new technology.

The tax cannot credibly be claimed to be anything other than a modest step by a small country. The longer term promises about the extent of reductions in emissions that are aimed for have little credibility. At best, the proposed carbon tax provides a weak signal of Australia’s willingness to participate in global action to reduce greenhouse gas emissions. The signal would be stronger if there was bipartisan support for the tax – but even if it is introduced and remains in place it will not amount to much in a global context.

Why don’t we hear the government arguing that ordinary people should be prepared suffer some pain in order to save the world from a climate disaster? The government is not talking about pain. It seems to have reasoned that since it will be obvious to almost everyone that the contribution of the tax to saving the world will be extremely modest and contingent on similar action by other countries, the tax can only be justified to Labor’s traditional voters if they suffer no pain. The package is being sold to the government’s traditional supporters as a redistribution measure that will actually improve their lot at the expense of the big polluters. And it is all being done in the name of ‘tax reform’!

Could anyone object to a new tax being used to fund reforms that will make the overall tax system more efficient? I imagine that such a proposal would have widespread support. The question that must be asked, however, is whether the proposed increase in the tax-free threshold should be viewed as a reform.

My concern is that the proposed tax relief will do very little to improve the work incentives faced by people with low incomes because it will leave effective marginal tax rates largely unchanged. The government has missed an opportunity to undertake some meaningful tax reform that might raise productivity. If this carbon tax package can be sold as economic reform, then the meaning of economic reform has changed beyond recognition and new words will have to be found to describe policy actions that will raise productivity.

Postscript:
In proposing to raise the tax threshold the government can claim to have followed a recommendation of the Henry review.
However, there is a strong case that greater tapering of welfare benefits would be a better way to tackle poverty traps.The relative merits of increases in the tax free threshold and greater tapering of welfare benefits as means of reducing poverty traps was discussed by David Ingles in a paper for the Australia Institute last year. Ingles suggested:  'In general, the recommendations of the Henry Tax Review are a slight improvement on the current situation but they do not address really fundamental issues and lack a coherent underlying rationale'.
In my view, Ingless goes too far in suggesting that the recommendations of the Henry review lack a coherent underlying rationale, but I can't see a coherent rationale in the way the government is cherry picking the recommendations of that review.

Why not think up a new political system?

Shona has a suggestion for a new project for me. Regular readers of this blog will remember Shona as the person who wrote some guest posts about volunteering. Shona suggests that I should invent a new political system.


This is what Shona wrote:

I just had my meeting with our local MP. Actually, Bruce was a ‘no show’ so he asked his minion to talk to me. I wouldn’t have minded talking to the minion if that is what Bruce had asked me to do originally. I was surprised that Bruce had asked me to talk, although I did write a very long email to him a few months ago. The appointment was set up 5 or 6 weeks ago and clearly his schedule has been overrun with his new responsibilities.


Bruce’s new responsibilities involve looking at social policy. His focus is on social issues that have become institutionalized (with groups representing them) and not the broader picture. That is a big mistake in my opinion.


In my discussion with said minion, I suggested that it didn’t matter what party was in power, we have people who don’t know anything about a subject leading policy. And there is no long term strategic thinking.


It makes me wonder whether this political system we have ever satisfies anyone. Are there any good examples of political systems anywhere in the world? Our political system is based on the British system which is hundreds of years old. If we were to start from scratch, what sort of system would we establish? It also strikes me as very bizarre that a head of a government agency has to be qualified to do that job, but a politician who directs and takes responsibility for the agency doesn’t have to have any qualifications! Shouldn’t there be some sort of competency system for politicians?


I am appalled by current politics. I don’t want to be forced to choose between existing political parties or leaders. Maybe you could invent a new political system from scratch for discussion – a system to perpetuate our happiness, and then perhaps compare it with what we have now. You could write thoughts on everything from competency criteria for politicians to voting systems. We could come up for a great name for it - the Winton System rather than the Westminster?

My immediate response was to start thinking up reasons why it is not a good idea to start from scratch in thinking about what kind of political system we should have. I don’t think it is possible for anyone (not even me) to understand how some political system that they thought up from scratch would work in practice. It is difficult to predict how politicians, judges, the media, interest groups and the public might respond to the incentives we might seek to incorporate in a new system until we actually see how they respond. Many people may tend to be less self-interested in their role as citizens than in normal market behaviour, but few are angelic. It is probably much easier to predict how people would respond to changes to a system in which norms of behaviour have already been established.

The suggestion of looking around the world to borrow ideas that work is sensible. I understand that is what the Americans did when they had the opportunity to start from scratch to invent a new political system. Australians did the same thing in developing a new constitution at the time of federation.

My starting point in thinking about political reform is to acknowledge that the Westminster system has one very good feature – it usually enables governments to be held accountable for their actions and to be voted out of office if they become unpopular. I think some of the argy-bargy that many people dislike about politics is an inevitable result of the role of the opposition and media in holding governments accountable. But the system does not reward politicians who are seen to offer unfair criticism. Politicians run the risk of losing votes if they are seen to be excessively negative or unnecessarily destructive

Added to the normal argy-bargy, some of the bad odour associated with federal politics in Australia at the moment seems to me to stem from the unusual situation in which we find ourselves. It is difficult for voters to hold the government accountable for the policies it is adopting because there was no clear winner after the last election. That means that the policies that the government has been implementing are the result of negotiations with minor parties and independents, rather than policies that it took to the people at the last election, or even policies that it can honestly claim to be in the interests of the community as a whole.

My next point is that in thinking about political reform we need to recognize that politics has inherent limitations as a way of getting things done. A lot of the disappointment about outcomes in a wide range of areas seems to me to stem from attempts to achieve things through the political process that would be better left to the private sector or voluntary co-operation. Why take money from people in order to provide them with services when they could obtain better value for money by buying them privately? The only answer that makes any sense is to make the distribution of services fairer – but governments do not need to be involved in actual provision of services in order to do that. As far as I can see there is no more reason to think that governments would be good at running schools or hospitals than farms, shopping malls or chook raffles.

A major problem inherent in politics as a way of getting anything done is that it involves giving some people the power to push other people around. People don’t mind when the pushing is obviously justified. There are not many people who mind being required to obey laws to respect lives and property of others, or being required to pay taxes to defend the country against potential foreign aggression. Politics becomes particularly objectionable when people get pushed around in order to provide benefits for some group that happens to be politically powerful.

In order to enjoy politics you have to either enjoy pushing other people around or enjoy pushing back. I think our main priority should be to contain politics to those aspects of life where it is actually necessary – so the pushing and shoving doesn’t intrude into aspects of life where it is unnecessary.

So, rather than start with a blank piece of paper I think it is probably better to look at the political system we have and to consider how it could be improved. The competency of politicians might be a good question to consider first. Should politicians be required to meet competency standards?

Does economic growth help people to thrive?

Yes! The proportion of people who are thriving tends to be higher in countries that have experienced greatest economic growth over the longer term. It may take several decades, however, for economic growth to be fully reflected in subjective measures of well-being. The proportion of people who are suffering also tends to be lower in countries that have experienced greatest economic growth, but there are quite a few countries that do not fit that pattern.


These observations are based on the definitions of ‘thriving’ and ‘suffering’ used in the Gallup World Poll. Gallup classifies respondents as "thriving," "struggling," or "suffering," according to how they rate their current and future lives on a ladder scale, based on the Cantril Self-Anchoring Striving Scale, where the bottom rating is ‘the worst possible life’ and the top rating is ‘the best possible life’. Further information on the survey and classification method is available here.

The following charts show the percentages of people who are thriving or suffering in 122 countries relative to per capita GDP levels in those countries. It is clear that the percentages thriving tend to be higher and the percentages suffering to be lower, in countries with relatively high per capita incomes i.e. those which have experienced greatest economic growth in the past.

The countries that do not fit the general pattern are interesting. Several former communist bloc countries are outliers in terms of lower percentages of the population thriving and a higher percentages suffering than would be expected on the basis of per capita income levels. Some African countries have much better outcomes and some much worse than would be expected on the basis of income levels. The outcomes that are worse than expected can be explained by factors such as civil unrest. Better than expected outcomes for African and Latin American countries in studies such as this are often attributed to national characteristics, such as a positive outlook on life (but that is not necessarily irrelevant to emotional well-being). The lower than expected percentages of people thriving in China, Singapore, Hong Kong and Taiwan might also be attributable to some extent to a more reserved outlook on life by Chinese people.

Another factor relevant to considering China, Singapore etc. is the rapid economic growth of these countries. As discussed in my last post, to the extent that well-being is affected by wealth (reflected in quality of housing, financial assets, human capital, public infrastructure, social capital etc.) as well as current income, countries with relatively high growth rates could be expected to have lower levels of well-being than other countries with similar per capita incomes. Regression analysis, comparable to that reported in my last post, suggests that growth prior to 1970 makes a substantially greater contribution to the percentage of people thriving than does growth in the periods 1970 to 1990 and 1990 to 2009. The results provide support for the view that is that it takes time for economic growth to be translated into forms of wealth that enhance well-being, rather than for the ‘unhappy growth’ hypothesis which I have discussed previously. The unhappy growth hypothesis implies that the estimated coefficients on growth in the most recent period could be expected to be negative, but I found the estimated coefficients on growth to be positive in respect of all periods. (The estimated coefficient for 1990 to 2009 is not significantly greater than zero at the 95% significance level, but the standard error is smaller than the estimate. Anyone who would like to see the results is welcome to email me.)

It would be appropriate to round off this discussion with a profound statement stressing the importance of economic growth to reducing human suffering and allowing more people to thrive, while acknowledging that wealth does not guarantee that anyone will thrive. However, I’m not in the right mood for writing profound statements.