Are the arts a force for progress or do they just reflect contemporary society?

As I begin to attempt to answer this question, I wonder whether it might not be too silly to consider seriously. First there is the problem of making broad generalizations about the arts. It is possible that some components of the arts to be a force for progress whilst others promote regress.  Then there is the possibility that just by reflecting society the arts could be a force for progress. Even offensive and grotesque examples of punk art – which seem to reflect some of the worst characteristics of the societies we live in - might provoke some people to contemplate whether it might be possible to build better societies. Negative actions sometimes provoke positive reactions.

The point I was trying to get at when I posed the question was whether there is a strong component of the arts at present that is likely to be viewed in future as a force for the progress of culture - in the same way, for example, as we now view Shakespeare’s plays, the music of Mozart and Beethoven and the impressionist art of Monet and Renoir. And, if such a force exists, what might cause us to recognize it as a force for progress? What is it that has led us to regard the great historical achievements in literature, music and art as progress? Do we accept such developments as progress merely because the most powerful influences on our own personal development – including our parents, teachers and peers - cultivated our taste for them? If so, doesn’t that imply that we have to concede the possibility that one day a high proportion of the world’s population might come to regard the advent of punk art as a positive force for progress?

It seems to me that the best way to escape despair about current trends in the arts is to find criteria that developments could reasonably be expected to meet if they are to be viewed as progress. Frederick Turner’s book, ‘The Culture of Hope’ (1995) seems highly relevant in this context.

Turner nominates beauty as the test of all ideas:

‘In the absence of the deep test of beauty, by which all true scientists and philosophers assay their ideas, cognition is increasingly arbitrary in its conclusions, the search for truth is bereft of its compass, and the connection between human beings and the rest of nature begins to get lost.  … Without beauty, the difference between good and evil comes to be defined in terms of the avoidance of pain and the maximization of comfort. I think we are still aware that a human being whose sole desire is a state of painless comfort is scarcely a human being at all, since we ban the drugs that can induce such a state, but we are in danger of forgetting the intellectual or moral or perceptual beauty that might make someone choose the pain and struggle and deprivation of discovery, heroic charity, and art’.

In my view, this passage claims too much for beauty. We don’t actually need to apply a test of beauty in the search for truth and goodness. We test claims regarding the advance of scientific knowledge by confronting them with evidence. We assess claims regarding the ethical merits of changes in social norms in terms of whether or not they are good for the members of the societies concerned.

Yet, there must be a close relationship between beauty, truth and goodness. It makes sense to think of truth as having the quality of ‘epistemological beauty’ and goodness to have the quality of ‘ethical beauty’. The meaning which the author attaches to beauty comes through clearly in the passage in which he describes his personal experience as a teacher of karate and literature. He notes that young karate students begin to shift from the self-esteem ethic they learn at school and attain greater humility and confidence as they adopt ‘the pure pursuit of good karate form’. Similarly, the allegiance of literature students shifts from their own psychological comfort to the poem they are working on as they come to understand when ‘a rhyme is forced or a line stumbles’. Turner makes the point very well that as a ‘as a culture we are stunningly ignorant about beauty’.

It seems to me that Turner also has a strong response to the view that beauty exists solely in the eye of the beholder. Although recognition of beauty emerges from the neurobiology of the individual, the findings of scientific research suggest that it exists as a reward for ‘the recognition and creation of certain complex, organized and unified patterns – patterns traditionally known a beautiful’. Turner points out that beauty is a natural pleasure and intuition possessed by all humans which is activated, sensitized and deepened by culture.

It is not possible in the space I am allowing myself here to do justice to Turner’s concept of social progress and the role that may be played by the arts in reconnecting with science and improving our understanding of beauty and its links with acceptance of shame. The flavour of what he is suggesting is that progress involves ‘continuation of the natural evolution of the universe in a new, swifter and deeper way, through the cooperation of human beings with the rest of nature, bringing conscious intention and organized creativity to the aid of natural variation and selection’.

The arts are certainly a force for progress insofar as they promote changes that meet the test of beauty. It seems to me, however, that beauty is not the only relevant test. When I ask myself whether Adrian Bejan’s constructal law would shed any light progress in the arts (see a recent post for relevant links) the answer I come up with is that the function of the arts is primarily to facilitate flows of communications about the feelings and insights of the artist. In this context, progress occurs as the flows generate shape and structure which make communication more effective.

It is easy to identify artistic endeavours that are destined to fail because they generate resistance rather than facilitate flow. For example, self-respecting humans do not willingly subject themselves to communications that are insulting or degrading.

It is also possible to identify other developments in the arts that represent progress because they contribute to better communication between the artist and the audience. For example, I think Nicola Moir’s painting ‘The in-between space’, reproduced below, is successful in conveying the authors message that ‘everyday’ landmarks of the suburbs such as telegraph poles, road signs etc. can look beautiful.  Nicola has stated that her intention is ‘to inspire the viewer to stop in their city, look around it and appreciate it’.

Postscript:
Troy Camplin has posted a response on his Austrian Economics and Literature site.

How much willpower do we want to exercise?

Where does a person get the willpower to read a book with the title, ‘Willpower: Rediscovering our Greatest Strength’? A book with such a title could not help reminding readers of their past failures in exercise of willpower. However, I didn’t find the book by Roy Baumeister and John Tierney an ordeal to read. Rather than making me feel more guilty, the book left me feeling that some of my past failures might perhaps be understandable under the circumstances.

The authors discuss research findings which suggest that in the short term an individual’s willpower is limited and is depleted by exertion. When your willpower is depleted you are more likely to become frustrated and to act impulsively. This means that the best time to make changes in your life is when there are few other demands being made on you, so you can allocate most willpower to the task.

The book provides some good advice about how to deal with procrastination and the anxiety that can be associated with it. For example, once you make a definite plan to do the things that you have been procrastinating about, you will stop fretting about them. If you find yourself procrastinating by substituting other activities for the activity that should have highest priority, try the ‘nothing’ alternative. Set aside time to be spent either on the high priority activity or doing nothing.

The book also has good advice on how to deal with temptations. Postponement can work better than trying to deny yourself altogether. Where necessary, use pre-commitment. Set bright lines – clear unmistakeable boundaries that you expect your future self to respect. Monitor performance regularly and don’t forget to reward yourself for reaching goals.

One of the points that came through to me in the book is how careful we need to be in making judgements about the ability of other people to exercise willpower. For example, the book suggests that it is often a mistake to attribute obesity to lack of willpower. Paradoxically, many people who are over-weight or obese have in the past exercised a great deal of willpower in following crash diets that have resulted in rapid weight loss. The problem is that when subjected to diets that simulate the effects of famine, human bodies tend to respond by holding on to every fat cell they can.

My main reason for reading the book – apart from the feeling that my own willpower could do with some improvement – was to see what light it sheds on arguments for government interventions to remove temptations that are bad for individual health and well-being. This issue is not discussed directly but, as the subtitle implies, the book argues strongly that individuals have the potential to exercise a great deal of self-control if they know how and want to do so.

This raises the question of how much self-control each of us wants to exercise over our impulses. While reading the book I found myself thinking that I don’t actually want to remove from my life all temptations for impulsive behaviour that I might later regret. I feel that I may obtain some satisfaction from leaving myself somewhat vulnerable to impulsiveness. For example, while I accept that there would probably be health benefits in restricting my (already moderate) alcohol intake to one glass of wine per day, that is a bright line that I don’t want to draw – at least, not yet!

I suspect that a lot of other people think as I do about such matters. We feel that it is appropriate for the control we exercise over ourselves to be somewhat lenient. Some of the boundaries we set are deliberately flexible, for example with allowances for special occasions. We don’t want our lives to be totally governed by bright lines. The last thing we want is a paternalistic government that seeks to help us by taking the temptations out of our lives.
Paternalists tend to respond: ‘It's not about you. Our aim is to help vulnerable people’.  

So why don’t they help vulnerable people to develop the inner strength they need to deal with their addictions and leave the rest of us to run our own lives for ourselves?

Should the 'constructal law' restore our faith in progress?

‘Everything that moves, whether animate or inanimate, is a flow system. All flow systems generate shape and structure in time to facilitate this movement across a landscape filled with resistance (for example, friction). The designs we see in nature are not the result of chance. They arise naturally, spontaneously, because they enhance access to flow in time.’

The quote is a statement of Adrian Bejan’s ‘constructal law’ and is from ‘Design in Nature, How the constructal law governs evolution in biology, physics, technology and social organization’ (2012, p 3). Bejan, a professor of mechanical engineering, has co-authored the book with Peder Zane, an assistant professor of communications.

A basic point that the authors are making is that it is no accident that treelike patterns emerge throughout nature, e.g. trees, river systems, lightning bolts, blood capillaries and dendrites of neurons in brains. The treelike pattern is an effective design for facilitating flows – both from areas to points (as in the flow of water through the root system of a tree to its trunk) and from points to areas (as in the flow of water from the trunk of a tree to its leaves).

When I began to read the book I felt as though I had always believed that the design of flow systems in nature would evolve to facilitate the flow of the stuff that is flowing through them. It seemed intuitively obvious that that should be so, even though I could not claim to have thought much about the matter previously. (In fact, insofar as I had previously thought about it I would probably have been inclined to the view that the evolution of design in nature must be largely random because it is largely a consequence of random events.) After reading a few pages of the book, the main question in my mind was how the authors would justify the claim in the sub-title that the constructal law governs the evolution of technology and social organization as well as natural phenomena.

It seems to me that the authors’ application of the constructal law to technology and social organization is analogous to the application of the theory of evolution to economics (evolutionary economics) and culture (e.g. Hayek’s theory of group selection). The flow perspective actually helps to promote an understanding of social evolutionary processes as being about much more than just survival of the fittest – whether in terms of crude social Darwinism, or more sophisticated concepts relating to survival of ideas, firms, forms of economic and social organization, and social norms.

In my view the authors make a strong case that the accumulation of scientific knowledge can be viewed as a process in which the stuff that is flowing (new ideas) determines design (the organization of knowledge). In their words:

‘Indeed, all the great discoveries, from Newton’s laws of motion to the laws of thermodynamics, didn’t just tell us something new, they organized and streamlined our knowledge’.

The authors explain that scientific discoveries allow disorganized pieces of empirical information to be replaced by summarizing statements (laws). They suggest:

‘A hierarchy of statements emerges naturally because it facilitates the flow of information. It is an expression of the never-ending struggle of all flow systems to design and re-design themselves’ (p 163).

The application of the constructal law to social organization provides insights similar to those provides by the ‘new institutional economics’.  Institutional designs tend to evolve to facilitate transactions – i.e. to reduce transactions costs (which are analogous to friction in physical systems). Unfortunately, the authors don’t provide an explicit discussion of path dependency – in particular the potential for some societies to remain locked in to inferior institutions involving high transactions costs and poor social outcomes. Perhaps a flow perspective provides us with greater grounds for optimism that all people suffering under inferior institutions will eventually obtain the freedom they need to better their condition.

So, should the constructal law restore our faith in progress? The constructal law has not changed my view that it is better to think in terms of conditions for progress than faith in progress (see my last post). We can only be optimistic about progress if conditions are favourable. It makes more sense to ask whether the constructal law provides grounds for greater optimism than to ask whether it should restore our faith in progress. It seems to me that the constructal law provides an appropriately optimistic frame of reference for thinking about progress. Progress isn’t inevitable, but we have strong grounds to view it as a natural or normal phenomenon.

Postscript:
Adrian Bejan has responded as follows:

'Thank you very much for reading our book Design in Nature and writing about it.

I can respond to your call for "how the authors would justify the claim in the sub-title that the constructal law governs the evolution of technology and social organization as well as natural phenomena".

This is actually discussed in ch. 10, and it pivots on Fig. 57. The long version of this response is in the review article published last fall in Physics of Life Reviews (read the comments on Figs. 1, 5, and 20-24.

In our book Design in Nature, the justification is best illustrated by the story of how nature (not man) invented the wheel (Ch.4). Technology is all the contrivances that we make and attach to ourselves to in order to move farther, faster, more efficiently, and for longer (i.e. to live longer). This is no different than the morphological changes that stick as the river basin evolves

So, everything that looks good and we adopt and we acquire is helpful in this constructal flow direction, which is for the whole to flow more easily.. It sounds simple, and it is. Think about the evolution of the technology for power generation, for example. The same with transportation technology, science, language, communications, and currency, and bank tellers, and English as the global language. They all help us go with the flow.'

The article to which Professor Bejan refers in Physics of Life Reviews is also available at the constructal theory web site.

Does belief in technological progress have to involve faith?

In an essay entitled ‘The Idea of Progress’ (published in 1979) Robert Nisbet, an American sociologist, suggested:

 ‘Disillusionment with science and technology is very much a part of the intellectual landscape, and it would be a rash soul indeed who declared it a purely peripheral and transitory thing’.

It would probably be fair to say that disillusionment with science and technology is now fairly common among the general populace of high income countries. Data from World Values Surveys conducted in 2005-08 show that the percentages who completely agree with the proposition that science and technology are making our lives healthier, easier and more comfortable are only around 14% in Australia, 11% in the US and 6% in Japan. The corresponding percentages are much higher for countries with lower incomes: 31% for Mexico and China and 40% for Indonesia.

Nisbet argued that the idea of progress was born of Greek imagery and is central to Christianity with its emphasis on hope - to be given gratification in this world as well as the next. He observes that rationalist-secular confidence, once so great in Western society, has been fast-diminishing as a result of boredom with the goods, material and psychic, provided by modernity as well as disillusionment with science and technology. In his concluding paragraph he speculates that a renascence of religion might ‘fill the vacuum brought on by those elements of modernity … and with this, a shoring-up of the idea of progress from past to future’.

Nisbet seems to be suggesting that belief in progress involves faith. It arose from religious faith and may return to those roots as enthusiasm for science and technology wanes.

    

Does belief in progress have to involve faith? For a couple of centuries in western countries enthusiasm for technological progress did involve faith. It was akin to religious faith, with doctrines about the inevitability of progress – in some accounts even according to laws of evolution or laws of history. It is possible, however, to believe that, on balance technological advances are beneficial, without having much confidence that they will necessarily make our lives healthier, easier and more comfortable.

Data in the World Values surveys on whether it would be a good or bad thing if there was more emphasis on technology in future may reflect a widespread belief that, on balance, technological advances are beneficial. Despite their reluctance to agree completely that technology is making their lives better, only a small percentage of people in high income countries say that more emphasis on technology would be a bad thing – and the percentages don’t differ in any obvious way from those for low income countries. (The relevant percentages for Australia, US, Japan, Mexico, China and Indonesia are 6%, 7%, 5%, 7%,1% and 14% respectively.)

It seems to me that Karl Popper’s institutional theory of scientific and technological progress provides an appropriate framework in which to consider the possibility of progress. The basis of Popper’s theory is that there are ‘conditions for progress’ and hence conditions under which progress may be arrested. Popper emphasized that science is based on free competition and thought:

‘If the growth of reason is to continue, and human rationality to survive, then the diversity of individuals and their opinions, aims, and purposes must never be interfered with (except in extreme cases where political freedom is endangered). Even the emotionally satisfying appeal for a common purpose, however excellent, is an appeal to abandon all rival moral opinions and the cross-criticisms and arguments to which they give rise. It is an appeal to abandon rational thought’.

Popper concluded:

‘The mainspring of evolution and progress is the variety of the material which may become subject to selection. So far as human evolution is concerned it is the 'freedom to be odd and unlike one's neighbour'--'to disagree with the majority, and go one's own way'. Holistic control, which must lead to the equalization not of human rights but of human minds, would mean the end of progress’ (‘The Poverty of Historicism’, 1957, Chapter IV).

How does the United Nations view social progress?

I have previously expressed the view on this blog that if progress is to have any meaning from a public policy perspective it must mean movement toward a good society or movement from a good society to a better society. The improvement of society can, of course, be referred to as ‘social progress’.

When I did an internet search on ‘social progress’, the second item listed was the United Nations Declaration on Social Progress and Development adopted in 1969. This Declaration stands in stark contrast to the resolution sponsored by Bhutan and adopted in July last year calling on Member States ‘to pursue public policy steps that would better capture the importance of pursuing happiness and well-being in development’.

   

As might be expected, the 1969 UN declaration begins by asserting the value of humans and the rights of everyone to enjoy the fruits of social progress. Without attempting to define social progress it then goes on to assert that social progress requires the ‘full utilization of human resources’ and giving everyone the ‘right to work’. The declaration then proclaims the importance of economic growth to social progress:

‘The rapid expansion of national income and wealth and their equitable distribution among all members of society are fundamental to all social progress, and they should therefore be in the forefront of the preoccupations of every State and Government’.

I guess the authors were trying to make the point that growth in productivity and technological progress are central to meeting the aspirations of people to improve their living standards. In the preamble to ‘Part II Objectives’ it is asserted that ‘progress and development shall aim at the continuous raising of the material and spiritual standards of living of all members of society’. The recognition of spiritual needs is interesting, but the authors gave no hint of what they meant by ‘spiritual standards of living’. Considered as a whole, the document has the appearance of having been drafted by economic planners to foster greater recognition of their own importance.

Perhaps I should view the UN Declaration on Social Progress as a product of its times and be glad that the UN has moved on. I can’t help feeling, however, that the wording of the document is particularly crass, even given views that were prevalent at the time the document was written.

If the authors had wanted to emphasize the aspirations that people have for improvement of their material living standards it would not have been hard for them to come up with an appropriate definition of social progress in those terms. For example, they could have written a definition, along the lines I have drafted below, based on words used by Ludwig von Mises, leader of the Austrian School of economic thought, in his book ‘Theory and History’, which was published in 1957:

Most humans want to live and to prolong their lives; they want to be healthy and to avoid sickness; they want to live comfortably and not to exist on the verge of starvation. Advance toward these goals means progress, the reverse means retrogression.

If the authors had set their sights a little higher they might even have been able to benefit from the thoughts of another famous Austrian economist, Friedrich Hayek:

‘In one sense, civilization is progress and progress is civilization. The preservation of the kind of civilization that we know depends on the operation of forces which, under favourable conditions, produce progress. If it is true that evolution does not always lead to better things, it is also true that without the forces which produce it, civilization and all we value – indeed almost all that distinguishes man from beast – would neither exist nor could long be maintained’ (‘Constitution of Liberty’, 1960, 39-40).

Hayek saw progress as a process of learning, the cumulative growth of knowledge which when achieved becomes available for the benefit of all. He wrote:

‘It is through this free gift of the knowledge acquired by the experiments of some members of society that general progress is made possible, that the achievements of those who have gone before facilitate the advance of those who follow’ (p 43).

How much does personality change over time?

A post I wrote on this topic in 2010 attracted a fair amount of interest. That might be explained by the provocative  title: ‘Once a neurotic always a neurotic?’ The view presented was that while personality is generally fixed by about age 30, there is some evidence of personality change among older adults, associated with such things as use of anti-depressant drugs, cognitive behavioural therapy and meditation.

Recent research has provided evidence that personality is much more variable than it was previously thought to be. The findings of some relevant research by Christopher Boyce, Alex Wood and Nattavudh Powdthavee are summed up in the title of their article: ‘Is Personality Fixed? Personality changes as much as “variable” economic factors and more strongly predicts changes to life satisfaction’. (The article has been published in ‘Social Indicators Research’).

The research uses data from the HILDA surveys, which in 2005 and 2009 asked 8,625 Australians questions designed to measure their personality according to the Big Five criteria: openness to experiences, conscientiousness, extraversion, agreeableness and neuroticism. The authors found substantial variation of all personality criteria between the surveys. The variation of agreeableness and neuroticism for the same individual was about half as great as the variation between individuals.

In their initial analysis the authors corroborated earlier cross-section research showing that some personality factors have large impacts on life satisfaction. They found that emotional stability (the opposite of neuroticism) had the greatest impact, followed by agreeableness and extraversion. The estimated coefficients on the personality variables were generally somewhat lower in the analyses focusing on the effects of changes over time suggesting to me that some of the apparent change in personality might be attributable to measurement error. Nevertheless, the implied impacts of change in personality are still relatively large by comparison with the impacts of the economic variables such as income and employment status.

What are the implications of the finding that individual life satisfaction may change substantially over time as a result of personality changes? The answer depends partly on how important we see life satisfaction in the context of the overall quality of life. For example, it is interesting to speculate that the phenomenon that Carol Graham describes as the happy peasant, frustrated achiever paradox – happiness declining for some people whose wealth is rising – could be attributable to personality change. People may choose to have opportunities for better education and higher incomes, even if this may result in some loss of contentment (perhaps as a consequence of personality changes).

It is difficult to consider the implications of changes in personality without knowing what causes personality to change. I found it surprising that the results suggest that the adverse impact of unemployment on life satisfaction is independent of personality change. (The estimated coefficient on unemployment remains unchanged when the personality variables are introduced into the analysis.)

 

Boyce et al speculate that personality change could be associated with environmental factors and that public policy could foster positive environments. However, the example they give of the possibility of personality change through improved availability of mental health services might have more to do with changing perceptions of experience and of identity than with changes in environmental factors.

It is possible that the effects of individual personality changes might tend to wash out in large samples. Those whose life satisfaction rises as a result of personality changes might be balanced by those whose life satisfaction falls.  But is not inevitable that this will happen. Perhaps pervasive changes in personality at an individual level might be reflected in changes at a national level in the extent of uncertainty avoidance or in the extent to which people are prepared to trust others.

It will be fascinating to see what light further research is able to shed on the causes and effects of personality changes.

Is inequality of income distribution determined by social values?

There has been a spirited discussion in recent years about the effects of inequality of income distribution on the social fabric and the quality of life. As noted in an earlier post, it seems likely that inequality has some adverse effects on life satisfaction which are independent of the income levels of the individuals concerned. Stronger claims have been made by Richard Wilkinson and Kate Pickett in their book, ‘The Spirit Level: Why More Equal Societies Almost Always Do Better’. These authors suggest that in association with lower social trust, a wide range of health and social problems are worse in societies in which inequality is higher. The evidence has been hotly contested - references to opposing contributions listed on a Wikipedia site.

It seems more likely that the correlation that has been observed between low income inequality and high social trust is the result of high social trust leading to a reduction in inequality, rather than a reduction in inequality leading to higher social trust. The big welfare states have been undeniably successful in reducing inequality of income redistribution. Andreas Bergh and Christian Bjornskov have provided evidence that historical levels of social trust may predict the current size of welfare states. High trust levels could be expected to help sustain big welfare states by limiting problems caused by free riding on welfare, by reducing the costs of regulation and monitoring, and by reducing tax evasion and revenue collection problems.

In this post I want to discuss evidence linking trust levels with the importance that people in different countries place on progress toward a more humane society and government action to reduce income inequality.

   

The first step is to consider whether there is a link between social trust and high priority for progress towards a more humane society. The World Values Survey asks respondents to choose which goal is most important: a stable economy; progress toward a less impersonal and more humane society; ideas count more than money; and the fight against crime. Individuals who say that most people can be trusted are more likely to select a humane society and less likely to select the fight against crime as the most important objective. The percentages from the 2005-08 survey choosing progress toward a less impersonal and more humane society are plotted in Figure 1 below against levels of social trust for 53 countries.

Figure 1 suggests that in societies in which there are high levels of social trust, a higher proportion of the population tend to attach most importance to the humane society objective. The main exceptions are for low income countries (China, Vietnam and Indonesia) in which priorities could be expected to be different. France is also exceptional in having a relatively high attachment to the humane society objective despite relatively low levels of trust. This case is particularly interesting in terms of the direction of causation. There are some obvious historical reasons why French people could be expected to attach importance to the humane society objective (egality, fraternity etc.) despite relatively low social trust, but there does not seem to be any obvious reason why French people should have relatively low levels of trust if causation ran in the opposite direction.

The next step is to look at the link between the humane society objective and income inequality. Figure 2 shows the level of income inequality after taxes and transfers (as measure by the gini coefficient) plotted against the proportion of the population attaching most importance to the humane society objective for 21 OECD countries.

Figure 3 shows the link between the humane society objective and government involvement in income redistribution for the 21 OECD countries. The extent of income redistribution is measured as the ratio of the gini coefficient after taxes and transfers to the gini coefficient before taxes and transfers. The value of the variable would be 1.0 if there are no taxes and transfers which reduce income distribution. The ratio is shown in reverse order on the vertical axis. Countries with the greatest income redistribution appear at the top of the chart.

Figure 4 shows the link between the humane society objective and a measure of egalitarian sentiment from the World Values Survey. This measure is derived from responses to a question asking for a value from 1 to 10 to be assigned depending on whether views are closer to the proposition ‘Incomes should be made more equal’ (1) or ‘We need larger income differences as incentives’ (10). The percentages with ratings from 1 to 4 were used as a measure of egalitarian sentiment.

Figure 2 shows that disposable income (i.e. income distribution after tax and transfers) tends to be more equal in countries where a relatively high proportion of the population view the humane society objective as particularly important. Chile is an obvious exception.

Figure 3 shows that the extent of government income redistribution tends to be greatest in countries where support for the humane society objective is greatest. The extent of redistribution is lower than would be predicted on this basis in Chile, Mexico, Turkey and Korea, but these are all countries with relatively low average incomes by OECD standards.

Figure 4 shows that, as might be expected, egalitarian sentiment tends to be greatest in countries in countries in which there is greatest support for the humane society objective. However, comparing Figure 3 and Figure 4, it is apparent that high levels of redistribution are not always associated with strong egalitarian sentiment. For example, egalitarian sentiment seems to be particularly strong in Chile and Switzerland which have redistribution levels somewhat lower than might be predicted on the basis of support for the humane society objective. In the case of Sweden, redistribution is greater than might be predicted and egalitarian sentiment is lower than might be predicted.

The overall picture that emerges is consistent with the view that inequality of income distribution tends to reflect social values. People in high trust societies tend to have greatest support for moving toward a more humane society and greatest income redistribution, leading to relatively low income inequality. Although egalitarian sentiment tends to be greatest in countries where there is greatest support for moving towards a more humane society, it is stronger in some countries in which there has been little income distribution than in countries that have extensive redistribution. The experience of a big welfare state may dampen egalitarian sentiment.

How concerned should we be about trends in income distribution?

At the end of my last post I suggested that the evidence on changing income redistribution – in the OECDs recent publication ‘Divided We Stand’ - poses some serious questions to those of us who are inclined to argue that governments can create widespread opportunities by just getting out of the way. I stick by that, but I don’t see much that is of particular concern in trends in income distribution in OECD countries since the mid-1980s.

In his discussion of Wayne Swan’s recent ravings about income distribution, Henry Ergas agreed with Swan that it is possible to avoid a rising gap between income growth of those at the top of the income distribution and those at the bottom. He noted, however, that ‘the four countries that from the mid-1980s on, most conspicuously did so’ were ‘Portugal, Ireland, Greece and Spain, usually known as the PIGS. In those countries, the bottom 10 percent’s incomes increased by about 1.7 percent more a year than those of the 10 percent at the top’.

I had missed this point when I first looked at the ‘Overview’ of ‘Divided We Stand’. When I looked at the relevant table, it seemed like a good idea to graph the data. The result is shown below.

The PIGS certainly stand out for their success in achieving relatively high rates of growth for those in the bottom 10% of the income distribution. As expected, the growth in average incomes of those at the bottom of the income distribution in the United States was substantially lower than for those at the top – but the same is also true of Sweden. This presumably reflects substantial economic reforms undertaken in Sweden since the mid-1980s.

The growth in incomes for those in the lowest 10% of the income distribution in Australia looks fairly good by comparison with most other countries, and the income growth that occurred is hopefully more likely to be sustained that for the PIGS.

The overall picture shown in the graph suggests a fairly loose relationship between the growth in incomes at the top and bottom of the income distribution. Is the relationship any closer between growth in incomes at the top and in the middle of the distribution?

The second graph suggests that there has been a fairly close relationship between growth in incomes at the top of the income distribution and those in the middle. Given all the talk about rising income inequality in the United States, I was surprised to see that the US does not stand out in terms of incomes at the top rising much more rapidly than those in the middle. What is all the fuss about? Are the researchers who view rising inequality in the US as something exceptional looking at more recent trends? Or are they jumping at shadows?

Postscript:

After some further reading, I am inclined to answer my questions as follows:

1.         Most of the fuss has been about increases in incomes of the top 1% in the US. The increase in share of the top 1% was relatively large by comparison with most other OECD countries. See Figure 12 of the ‘Overview’ of ‘Divided We Stand’.

2.        Growth in incomes of the top 1% has been highly volatile in the US. See Figure 2, of the Congressional Budget Office report: ‘Trendsin the Distribution of household Income Between 1979 and 2007’.

3.      The issue is whether the increase in the incomes of the top 1% is at the expense of the rest of the population. Various explanations have been given for the rapid increase in incomes at the very top of the distribution, but I don’t think a convincing case has been made that there has been systemic market failure. With the benefit of hindsight some remuneration experiments could be counted as failures, but it would be unreasonable to expect all market experiments to succeed. Failure of particular remuneration experiments doesn’t mean that the 99% would benefit from regulation of the remuneration of the 1%, or from higher taxation of the income of the 1%.  

Is Australia's 'fair go' ethos under threat?

In his recent essay about the rising influence of ‘vested interests’ in Australia, Wayne Swan, the treasurer, notes that we Australians ‘always prided ourselves on being a nation that’s more equal than most – a place where if you work hard, you can create a better life for yourself and your family’ (‘The Monthly’ March 2012). He argues that this ‘fair go’ ethic is ‘under threat’ from ‘the rising power of vested interests’. He was not referring to the union movement, which has exercised extraordinary influence under the Gillard government. He was referring to wealthy people who have campaigned in recent years against a new resource rent tax and carbon taxes.

 Swan claims:

‘A handful of vested interests that have pocketed a disproportionate share of the nation’s economic success now feel they have a right to shape Australia’s future to satisfy their own self interest’.

An editorial in the Australian Financial Review (AFR, 3-4 March) contrasted the tone of Wayne Swan’s essay with that of an essay by Bob Carr, former premier of New South Wales, which was published in the AFR on the preceding day. The AFR noted:

‘Mr Carr’s thoughtful musings on the crisis of democratic socialism and the need for Labor to embrace the reform era of the Hawke-Keating era stand in stark contrast to Mr Swan’s belligerent swipe against private enterprise’.

Carr’s comments about the reforms of the Hawke-Keating era are worth quoting:

‘The best bet for Australian Labor might be to embrace and not shy away from the bold economic reform of the Hawke-Keating era. British Labor will sound absolutely inauthentic if it repudiates Blairism. In a similar spirit, Australian Labor cannot walk away from its legacy and is entitled to define itself as the party of economic liberalism, open markets and rising living standards’.

Bob Carr’s article was written before he knew that he was about to become Australia’s foreign minister. Unfortunately, it is not likely that he will be able to continue to write sensibly about Labor politics while in his new position.

The AFR editorial went on to suggest that Swan ‘is wedded to an outdated ideology’ and to claim that ‘Mr Swan is arguably the most left-wing treasurer since Jim Cairns’. (Jim Cairns was federal treasurer for a brief period in the 1970s.)

I rarely read newspaper editorials, let alone quote them, but that one seemed to me to be exceptionally good. There are, however, a couple of points that I would like to add.

My first point is that it is particularly obnoxious for a government representative to criticize people for trying to defend their wealth against confiscatory taxation. There may be a strong case for governments (state rather than federal) to obtain a larger share of resource rents on behalf of citizens, but it was outrageous for the federal government to seek to do this by changing the rules applying to existing mining projects. When an investment has been made on the basis that governments will take a share of rents according to a particular set of rules it is extreme opportunism (if not theft) to announce a sudden change in the rules which enable the government to take a larger slice of rents. In my view the miners are entitled to argue that such behaviour is contrary to Australia’s ‘fair go’ ethos.

My second point is that the tone Wayne Swan has adopted is counter-productive if his aim is to promote serious consideration of the issues associated with changes in income distribution. Swan refers to the recent OECD publication, ‘Divided We Stand: Why Inequality KeepsRising’. This report suggests that income inequality is likely to rise in countries like Australia in the absence of ongoing government involvement in extensive income redistribution.

The evidence on changing income redistribution poses some serious questions to those of us who are inclined to argue that governments can create widespread opportunities by just getting out of the way. It also poses the serious question for advocates of redistribution of how they propose to build widespread community support for removal of disincentives in the tax-welfare system. In that regard, Wayne Swan’s performance could only be described as abysmal.

Do comparative statements about 'national happiness' imply views about the characteristics of a good society?

Yes! I explain why in the draft of Chapter 5 of the book I am writing. This chapter is now available on the book’s web site.

The question of whether measurement of ‘national happiness’ implies views about the good society is not just an arcane topic of academic interest. International agencies such as the UN and OECD and some governments have shown dissatisfaction with use of GDP as a well-being measure and an increasing interest in measuring national well-being more directly. Some of this interest in well-being measurement is motivated by helping individuals to make better choices, but the hope is often expressed that such measurements will assist governments to make better public policy choices and even to pursue national happiness as an over-riding policy objective.

   

Some researchers have suggested that that average life satisfaction is the strongest candidate as a measure of societal well-being because it is a single number that can be collected directly through surveys without ‘arbitrary weighting’.  (For example, see: Jon Hall et al, ‘Cutting through the Clutter: Searching for an Over-Arching Measure of Well-Being’, Journal of Institutional Comparisons, 8(4)2010.)

After reading the draft of Chapter 5 I hope everyone will agree with me that it is fanciful to view average life satisfaction as a measure of national happiness that does not involve arbitrary weighting. Perhaps it might be helpful if I provide a brief outline of the argument here to help readers decide whether or not to read the draft chapter.

It is possible, of course, to conduct surveys asking people in different countries how satisfied with life they are on a scale of 1 to 10 and then to average the results obtained for each country. The issue is whether it is appropriate to view such averages as measures of ‘national happiness’.

When people refer to such averages as measures of national happiness they are implying that national happiness rises to the same extent if a person’s life satisfaction rating rises from 9 to 10 as if some other person’s rating rises from 1 to 2. Individual researchers can make such claims if they wish, but they cannot claim that they are value free. I don’t think that they could even claim that such a view of ‘national happiness’ reflects values that are widely shared.

The need for value judgements is usually more transparent when composite indicators are used to make assessments of national happiness.

    

Whatever method is used, it seems to me that when researchers make comparative statements about levels of national happiness they are making implicit claims about the extent to which different countries have characteristics that a good society might be expected to have. So, why not consider directly what characteristics ‘good societies’ should have and make comparative assessments on that basis?

I suggest that there would be widespread support for the view that good societies are characterized by peacefulness, extensive opportunities for individual flourishing and a degree of economic security. The indicators used to measure the extent to which different countries have those characteristics show a similar ranking of countries to that provided by the OECD’s ‘Better Life’ index and the UN’s Human Development Index. The main advantage of using the ‘good society’ framework is in focusing explicitly on a consideration of the characteristics of good societies.

In my view, a focus on the characteristics of good societies is particularly appropriate from a public policy perspective because it tends to concentrate attention on matters that are within the domain of public policy. By contrast, when governments adopt ‘national happiness’ as an over-riding objective they are blurring the distinction between public and individual responsibilities.

I would be grateful for any comments on Chapter 5, or on any of the other chapters.

Would a 'Modest Member' please take an interest in anti-dumping regulation?

It was good to see the return of ‘The Modest Member’ column in the Australian Financial Review a couple of weeks ago. The original column was written by Bert Kelly, who used his wit and wisdom to good effect in promoting free trade, much to the discomfort of many people on both sides of politics. The latter-day modest members will make a worthwhile contribution if they display half the wit, wisdom and courage of Bert Kelly.

It is not yet clear whether the latter-day modest members will have the courage to emulate Bert Kelly. The series started with a column by Jamie Briggs on 7 February about lifting the dead hand of government i.e. reducing government spending. Today’s column by Kelly O’Dwyer is about the high cost of regulation. This is not a bad start, but it is hardly a test of moral character. So far Briggs and O’Dwyer have written the sort of stuff conservative politicians usually write when they are not in government.

A useful test of character for the modest members would be to attempt to emulate Bert Kelly by writing something sensible about Australia’s anti-dumping system. The modest members could usefully begin their consideration with an article by Bert, published in March 1972 and reprinted in ‘Economics Made Easy’, in which he explained that export prices that are lower than domestic prices are quite common in Australia and elsewhere. He noted that when we do it the practice is known as ‘marginal pricing’ rather than dumping. If the modest members take up this issue they might note that Austrade actually encourages prospective Australian exporters to use this practice.

If the modest members look carefully at the Productivity Commission’s recent report on anti-dumping duties they will see that the Commission found that none of the economic arguments that had been advanced in support of the anti-dumping system ‘provide any justification for Australia to retain an anti-dumping system’. In looking at this report and subsequent responses by the government and opposition, they might ponder whether or not the Commission will turn out to have been correct in its judgement that the anti-dumping system should be retained - on the grounds that it is unlikely to do much harm and may continue to be helpful in dealing with aspects of protectionist sentiment within industry and the community.

The modest members should ask themselves what Bert Kelly would have thought of proposals by their political colleagues to require foreign producers to prove their conduct hasn’t hurt Australian industry. They should also ask themselves what consequences are likely to follow from the government’s plans to ‘streamline’ the anti-dumping system. In particular, they should ponder the appropriateness of proposals of the International Trade Remedies Forum – the high sounding title the government has given to an unholy alliance of industry, unions and bureaucrats who benefit from the anti-dumping system – to enlist the Australian Bureau of Statistics to help complainants make a case for anti-dumping assistance.

One of the great strengths of Bert Kelly’s writing was his use of particular examples to illustrate the points he was making. In that regard, the modest members might find plenty to interest them in the current anti-dumping inquiry relating to aluminium wheels from China. In the light of recent discussions concerning further budgetary assistance to the car industry, they might ask themselves whether there is not some irony in a situation where Australian taxpayers could end up having to pay for the additional cost of imported inputs if this anti-dumping case is successful.  If they read the submission by Ford Australia they might wonder about the potential for a firm that is involved in protracted and acrimonious legal proceedings against another firm to initiate anti-dumping action as a tactic in a legal battle. If they read the submission by GM Holden, which argues against anti-dumping action because of its adverse effects on down-stream users, they might wonder whether the government was wise to reject the Productivity Commission’s recommendation that a public interest test should be included in the anti-dumping system. They might wonder why GM and its advisors think that line of argument might be influential.

It would not surprise me, however, if the latter-day modest members decide not to accept the challenge of writing about anti-dumping. Their political careers might be at risk if they start questioning the views of SophieMirabella the shadow minister for industry protection. As they tell themselves that discretion is the better part of valour they may take comfort from the fact that Bert Kelly pretended not to be without fear. Bert ended his anti-dumping article by telling readers that he didn’t ‘feel like chasing after the anti-dumping hare’ because ‘Mavis says I am in enough trouble already without getting mixed up with this kind of nonsense’.

Will Australia remain a sweet spot?

‘Australia in 2010-11 offered the best conditions for human existence on planet earth, a sweet spot indeed.’

The quote is from Peter Hartcher’s book, ‘The Sweet Spot’, published in November last year. Hartcher bases his view that Australia is the sweet spot on well-being indexes such as the UN’s Human Development index and the OECD’s Better Life Index. That view seems to me to be soundly based. As I noted on this blog last year, Australia is ranked highly even when the weighting given to the criteria incorporated in the OECD index is changed to reflect differing priorities with respect to income, social and environmental objectives.

The great strength of ‘The Sweet Spot’, in my view, is that it provides historical perspective on how Australia came to be where it is now. This helps the author to get across the message of the sub-title: ‘Australia made its own luck and could now throw it away’.

Hartcher argues that Australia has become the sweet spot because it eventually found a good balance between opportunity and security, or between free markets and collectivism. A central focus of the book is the evolution and later dismantling of what Paul Kelly referred to as ‘the Australian settlement’, which led to what Donald Horne referred to as ‘the racket’. The Australian settlement, which was largely established around the time of federation, involved a consensus in favour of racially-based restrictions on immigration (the white Australia policy), trade protectionism, national wage regulation (the arbitration system) and government paternalism, underpinned by a belief that Australian prosperity was underwritten by the British Empire.

Donald Horne argued in his book, ‘The Lucky Country’, published in 1964, that Australia’s good fortune in terms of natural resources had become an excuse and perhaps even a licence for complacency. Hartcher reminds readers:

‘Horne had detected and foreshadowed Australia’s slide from the top ranks of the world’s richest countries, arguing that luck and complacency were poor substitutes for originality and investment. “Can the racket last?” he asked, immediately responding with a resounding “NO”. He was, of course, correct, and it was a slippage that gathered pace in the ‘70s and 80’s.’

The subsequent chapters tell the story of how Australia opened up to the rest of the world, moved away from a rent-seeking culture and reformed its economy. In my view the story has been told fairly, with appropriate acknowledgement of the immigration reforms introduced by Whitlam, the influx of refugees from Vietnam during the time of the Fraser government, the floating of the Australian dollar, industry assistance reforms and the beginning of wider ranging economic reforms during the Hawke-Keating years and the privatisations, tax reforms and labour market reforms (subsequently aborted) of the Howard-Costello period of government. Hartcher makes the point that while the general thrust of these reforms was to give markets a greater role in the Australian economy, they were achieved, for the most part, without the rancour that accompanied the reforms of Margaret Thatcher in Britain and Ronald Reagan in the United States. He attributes this to greater reliance on consultation and consensus-building in Australia, in contrast to more overtly ideological approaches adopted by the UK and US governments. I would have like to have seen more attention given to the role of the policy advice processes adopted in Australia (but my view about the importance of the role played by the IAC and Productivity Commission might not be objective).

Let us now jump to 2007, by which time the economic strength which is reflected in Australia’s current ranking in quality of life indexes would have been established. I don’t think Peter Hartcher actually mentions it, but in October 2007 Paul Kelly announced the arrival of a “new Australian settlement engineered by political leaders during the past generation and a half”. He noted that the policies of the major parties had converged. For example, economic policy had become more pro-market, foreign policy had converged on a strategic outlook of simultaneously deepening ties with East Asia and the US, and immigration policies had converged on acceptance of increased immigration accompanied by a deeper commitment to Australian citizenship. A few weeks later, former Labor leader Mark Latham observed that the policies that the major parties had put forward in the election campaign then being conducted were virtually indistinguishable. He suggested that the policies of the major parties had converged to address the concerns of the middle classes. I can remember this because in April 2008 I posted an article on this blog entitled: Do we now have a new Australiansettlement? I agreed with Kelly and Latham, but subsequent events suggest that we were all wrong. Rather than a sensible convergence on policies that build on the strong legacy left by Hawke, Keating, Howard and Costello we now seem to be drifting in the opposite direction.

I don’t agree entirely with Peter Hartcher’s assessment of the political sins of the main political players over the last few years. I think he is far too kind to Kevin Rudd and Wayne Swan. Nevertheless, that doesn’t prevent me from agreeing with him that neither Gillard nor Abbott ‘seems to be the leader to take Australia into its next golden era of national improvement’.  I also agree with Hartcher’s qualification to that judgement: ‘Leaders change, and perhaps one, or both, can develop the agenda and skills to lead the country in the national interest’.

In my view ‘The Sweet Spot’ is a fine example of big picture journalism. It deserves to be as widely read and influential as ‘The Lucky Country’. With a bit of luck this book might help prevent a return of the rent-seeking culture that saw Australia’s relative living standards slip so dramatically during the 1970s and 80s.

How does income inequality affect happiness?

Early yesterday the thought occurred to me that it might be a good idea to write something about the effects of inequality on happiness levels. I have been thinking that the judgements people make about inequality are more like judgements about the characteristics of a good society than judgements about the effects of inequality on aggregate happiness (whatever that means). I thought I would spend an hour or so bringing myself up to date with the literature and then another hour or so writing something - and the rest of the day in the garden. However, the process has taken longer than I thought it would (and this post might also take longer to read than some people might think appropriate).

The issues involved are fairly complex. There are at least three different aspects of the relationship between income inequality and happiness that might be relevant – the effects of relative income levels on happiness, the more general effects of income inequality on happiness and the effects of income inequality on happiness inequality.

How do relative income levels affect life satisfaction? As discussed here some time ago, this is not always about envy and status-seeking. The findings of a study by Guy Mayraz et al, based on German panel data, are consistent with the more conventional view that income comparisons tend to have negative effects on life satisfaction of people with relatively low incomes. However, some of the authors’ findings shed further light on the issues:

• ·         Life satisfaction of men is more affected by relative income than that of women.
• ·          Comparisons with friends and neighbours are less important than broader comparisons with the whole population.
• ·          Those who perceive income comparisons to be important tend to have lower life satisfaction.
• ·         The negative effect of relative income comparisons for those with below average incomes is balanced (from a Benthamite perspective) by the positive effect for those with above average income.

Does inequality have an effect on life satisfaction over and above the relative income effect? Studies which have attempted to answer this question have often reached different conclusions. A recent study by Paolo Verme, which seems to be technically superior to previous studies, has found that income inequality tends to have a significantly negative effect on life satisfaction, after controlling for relative income effects etc. The results seem to apply in western countries as well as non-western countries and to rich people as well as to poor people.

This raises the question of why income inequality might have these effects. One possibility is that people feel more comfortable in societies where opportunities are relatively equal. Another possibility is that they are more concerned about equality of outcomes. If so, it seems reasonable to suppose that they are concerned about income inequality because they think it results in happiness inequality.

Is there strong correlation between income inequality and happiness inequality? In a post a couple of years ago I suggested that there was not much evidence of correlation between income inequality and happiness inequality - on the basis of a paper by Jan Ott and some research of my own. Since there were not many countries included in these studies, it seemed like a good idea to produce the scatter diagram below showing measures of income and happiness dispersion for a larger number of countries. (I used World Bank and CIA data on the income/consumption gini and data on standard deviation of life satisfaction from Veenhoven’s latest IAH paper. Both series are based on information for various years during the last decade.)

I can’t see any relationship between the variables in the chart, but statistical analysis suggests that a weak positive relationship might exist.  (The correlation between the variables is 0.13. The estimated coefficient relating inequality of happiness to inequality of income in a linear regression is positive, but the standard error is not much smaller than the estimate. The ‘t’ statistic is 1.38.)

The absence of a strong relationship between inequality of income and happiness at an international level is consistent with the observation of Betsey Stevenson and Justin Wolfers that there has not been a close link between trends in happiness inequality and income inequality in the United States. It is also consistent with the findings of a paper by Leonardo Becchetti et al, based on panel data, that the increase in income inequality has not been one of the drivers of the increase in happiness inequality in Germany.

So, how did this information enlighten me on the question of whether the judgements people make about inequality are more like judgements about the characteristics of a good society than judgements about the effects of inequality on aggregate happiness? The effects of relative income on life satisfaction do not seem relevant to this question. The relationship between income inequality and individual happiness does seem relevant, but I suspect it has more to do with empathy with compatriots and a desire to alleviate suffering of people near the bottom of the income scale rather than a more general concern about distributional equity.

Happiness inequality also seems relevant. When Ruut Veenhoven argues that the quality of a society should be judged by the disparity of happiness among its citizens as well by average happiness levels, he is clearly making a judgement about the characteristics of a good society. The weakness of the relationship between income inequality and happiness inequality certainly suggests that caution is required in basing judgements about the relative quality of different societies on income distribution data. The question I am left with, however, is to what extent disparities of happiness can be attributed to government policies and societal institutions (the rules of the game) rather than individual and group behaviour. It seems to me that to the extent that we introduce distributional considerations into our consideration of the quality of different societies, we are on safer ground in basing our judgements on the distribution of opportunities that are offered, rather than on the distribution of happiness outcomes.

Where is Ross Gittins coming from?

A few days ago, Evan, a person who comments on Jim Belshaw’s blog, wrote: ‘I think Ross Gittins is a good model for how to write on economics’. That was in response to a discussion Jim and I were having about Robert Frank’s ‘The Darwin Economy’ and the difficulty that we were experiencing in communicating on the issue of whether the ideology of the market is having too much influence in modern society. At least, that is my take on what the discussion was about. Jim and I agreed with Evan that Ross does write well.

It occurred to me soon afterwards that I have been ignoring Ross Gittins’ views on happiness for too long. Ross is the economics editor of the Sydney Morning Herald (SMH) and the leading economic journalist in Australia writing about happiness. When people have asked me what I think of Ross’s views on happiness I have refrained from saying much on the grounds that I rarely buy the SMH and haven’t read many of Ross’s columns in recent years.  I can’t use the excuse any longer, however, because I have discovered that Ross has a web site on which he posts his columns. (I have recenly included a link to the site on this blog to encourage myself to read his columns more regularly.)

When I looked at Ross’s site it was clear that, as well as the happiness theme, he is sometimes still playing an old tune that I like about the benefits of free trade. For example, one of the articles I read warns of the dangers to the rest of the economy from attempts to shield manufacturing industries from the consequences of the boom in the resources sector. This is consistent with the contribution Ross has made throughout his journalistic career in bringing good sense to public discussion of many economic issues.  I have a particularly high regard for the contribution that Ross made in earlier years in helping to improve public understanding of the costs of high trade barriers that were supporting inefficient resources use and unproductive work practices in this country. He deserves a medal!

But, what about Ross’s views on happiness? It wasn’t hard to find his review of ‘The Darwin Economy’. While well written and informative, the review is totally uncritical. In concluding his review, Ross gives the author, Robert Frank, the last word: ‘Frank concludes that the real reason we regulate markets is to protect ourselves from the consequences of excessive competition’. I was left with the impression that Ross concurs with that view.

How does Ross reconcile the view that regulation is desirable to protect against competition with his knowledge of how regulation has worked in the past in Australia to protect privileged interests at the expense of the rest of the community? How does Ross reconcile his opposition to economic growth, with his apparent ongoing support for productivity growth? I decided to buy Ross’s book, ‘The Happy Economist’ to see whether I could understand where he is coming from. (Since Ross is a strong supporter of international competition I’m sure he will not mind if I let readers of this blog know that I purchased the Kindle edition from Amazon for $9.99, rather than paying Allen and Unwin $26.99.)

I enjoyed reading Part I of the book, which is a discussion about such things as the nature of happiness, the evolutionary purpose of happiness, who is happy, whether wealth makes people happy, whether work makes them happy. This part of the book ends with a discussion of 10 hints about how to be happy. Perhaps it is strange for an economic journalist to be offering such advice, but from my (fairly extensive) reading in this field I get the impression that the advice Ross offers is based on the best research available.

Part II is comprised largely of an attack on mainstream economics and a sermon on ecological economics, mixed up with a strong dose of paternalism and proposals for increased government regulation. Despite all that, Ross manages somehow to convey the impression that he is more concerned about adulation of ‘the market’ than the actual existence of markets and competition.

Ross seems to be particularly concerned about the tendency of humans to over-indulge. He notes that many of us are tempted ‘to eat too much, get too little exercise, smoke, drink too much, shop too much, save too little, put too much on our credit cards, and work too much at the expense of our family and other relationships’.  He suggests that ‘individuals know they have trouble controlling themselves and would appreciate government taking temptation out of their way’.

This reminds me of a comment by the late Roger Kerr, executive director of the New Zealand Business Roundtable, in a speech aboutthe concept of progress that he made in 2009. Roger suggested that one consequence of the ‘fashionable academic preoccupation with happiness’ might be for more people to adopt the view: “I’m bald, fat and grumpy. What’s the government going to do about it?” I don’t think that is a necessary consequence of happiness research, but it seems to me that Ross is encouraging that kind of attitude in his paternalistic proposals. Among other things, Ross apparently wants governments to re-regulate shopping hours, limit advertising and take action to discourage spending on positional goods.

Ross’s presentation of his views on productivity, economic efficiency, market preferences and regulation involve as many twists and turns as the road from Thimphu to Punakha. At the risk of making this post excessively long, an appropriate place to begin might be with Ross’s claim that the regard mainstream economists have for ‘revealed preference’ – the idea that the choices people make reveals their preferences - has somehow led them to become ‘the great facilitators and advocators of economic growth – the high priests in the temple of Mammon’ (p 164). Economists who respect revealed preference actually have a long tradition of opposition to proposals by economic planners to lift savings and investment rates or give people incentives to work longer and harder in order to raise economic growth rates. My attitude has always been that if individuals prefer to spend rather than save or to enjoy leisure rather that to work long hours, their choices should be respected. A substantial component of my work involved providing advice about how governments could facilitate economic growth, but facilitating is about removing obstacles rather than pushing people around.

Ross makes it clear that he doesn’t see economic growth as being able to continue indefinitely – and in this regard he sees himself as one of history’s hastening agents (if I may borrow a phrase much used by a former work colleague). His discussion about ecological limits to growth and the desirability of the stationary state had me wondering how he was proposing to stop technological progress – a major source of economic growth. Ross eventually acknowledges that improvements in the efficiency with which resources are used are desirable. He suggests: ‘its growth in the throughput of natural resources we should forswear, not the rise in gross domestic product that comes from the continued pursuit of productivity improvement’ (p 221).

However, a few pages on Ross tried to convince me that I shouldn’t fear the end of economic growth. He states:

‘Many of the things that reduce our happiness stem from the search for greater efficiency so as to contribute to economic growth. Easing the efficiency imperative would be hugely liberating’ (p 229).

So, we will have productivity growth without the ‘efficiency imperative’ of market disciplines?

Ross agonizes further about efficiency a few pages later:

‘My fear is that, were the goal of increased efficiency to be abandoned, the motive of rolling back areas of privilege would be lost. It would then be a matter of first in, best dressed. Workers in unprotected industries would be obliged to continue propping up protected industries in perpetuity, with a great likelihood that, should further difficult times emerge, the privileged industries would be first in line for additional assistance in the name of preserving the status quo’ (p 233).

Well put! I am glad that Ross is troubled by that thought.

The closing sentence of Ross’s book reads: ‘In the end we are what we feel’. I think that might contain the key to the problem Ross has in reconciling his belief that because individual humans are inherently fallible they can’t be trusted to pursue happiness as they wish, with his admiration for the efficiency of markets and his understanding that governments are neither angelic nor infallible .

Our feelings are important. We obviously make ourselves unhappy when we make bad choices. But they are our choices. The nature of humans is such that we cannot flourish unless we have responsibility for our own lives.