What do subjective measures of well-being tell us about the relationships between freedom and flourishing?
A recent review of happiness research, conducted by Will Wilkinson, suggests that a great deal of caution is required in drawing any conclusions from subjective measures of well-being (In pursuit of happiness research, Is it reliable? What does it imply for policy?). There is disagreement about what researchers should be trying to measure and about the limitations of current measurement techniques.
Even if subjective measures can be accepted at face value there are problems in interpreting what they mean. The nature of these problems is shown in reactions to the observation that subjective indicators of well-being, such as satisfaction with life as a whole, show only small increases in response to rising incomes in wealthy countries. Some observers have suggested that this makes economic growth akin to chasing a mirage. As incomes rise people adapt to higher incomes and their aspirations rise. In his book, "Happiness" (2005), Richard Layard suggests that rising aspirations reflect a problem of addiction which justifies high levels of taxation.
Others (including me) have suggested that rising aspirations reflect the innate capability of humans to avoid chasing mirages – that is, to be satisfied with outcomes that are technologically feasible. Economic growth reflects technological progress and the extent to which the institutional environment facilitates related productivity improvements.
In his review of happiness research Will Wilkinson notes that several studies have found that economic freedom makes an important contribution to levels of subjective well-being. A recent study by Tomi Ovaska and Ryo Takashima found that economic freedom was statistically significant and that the relationship between economic freedom and well-being was more robust than that between per capita income and subjective well-being. The authors conclude:
“The results suggest that people unmistakably care about the degree to which the society where they live provides them opportunities and the freedom to undertake new projects, and make choices based on one's personal preferences” (‘Economic policy and the level of self-perceived well-being: an international comparison’, Journal of Socio-Economics, 35(2), 2006).
Tuesday, April 15, 2008
What do objective measures of freedom and flourishing tell us?
Attempts at objective measurement of human flourishing have been made for more than two centuries. In his recent book, Happiness: a history (Grove Press, 2006) Darrin McMahon describes a study by the Marquis de Chastellux published in 1772 (pp 214 -216). Chastellux contended that levels of population and the productivity of agriculture correlated directly with the happiness of people in different countries. He was able to use these indicators of the extent that basic physiological needs are satisfied, together with other indicators, such as the prevalence of slavery and war, to argue that people were in general happier in contemporary Europe and North America than in ancient Greece and Rome.
Given advances in collection of statistics it is now possible to compare indexes of freedom for a large number of countries with a variety of indicators of human flourishing. An index of economic freedom measures the extent to which policies and institutions of countries are supportive of economic freedom - which encompasses personal choice, voluntary exchange, freedom to compete and security of privately owned property (Economic Freedom of the World, Annual Reports).
The best modern day indicators of the extent to which basic physiological needs are satisfied are life expectancy and infant mortality. Average life expectancy at birth is 78 years in the quartile of countries with greatest economic freedom, using the Fraser Institutes index of economic freedom. That is 9 years longer than in the second quartile, 15 years longer than in the third quartile and 20 years longer than in the quartile of countries with the least economic freedom. Infant mortality rates are 12 times higher in countries with low economic freedom than in countries with high economic freedom (pp 22-24).
Access to the goods and services that money can buy is substantially greater in countries with high levels of economic freedom. GDP per capita is 8 times higher in the quartile of countries with greatest economic freedom than in the countries with least economic freedom. The economic condition of the poor is also better in countries with high economic freedom. The average incomes of the poorest 10 percent of the population in the countries with greatest economic freedom is more than double the overall average income level of the countries with least economic freedom. (Obtained by comparing data in Exhibit 1.14 (p 25) and Exhibit 1.6 (p22) Economic Freedom of the World, 2006 Annual Report).
The objective indicators discussed above are obviously relevant in considering the extent that basic physiological needs are being met. Arguably, income measures are also a relevant indicator of the extent to which some higher goals are being met. The question of whether rising incomes contribute to well-being in wealthy countries has become highly contentious, however, given the observation that subjective indicators, such as satisfaction with life as a whole, show only small increases in response to rising incomes in those countries. (I will write next about what subjective measures tell us about links between freedom and flourishing.)
Given advances in collection of statistics it is now possible to compare indexes of freedom for a large number of countries with a variety of indicators of human flourishing. An index of economic freedom measures the extent to which policies and institutions of countries are supportive of economic freedom - which encompasses personal choice, voluntary exchange, freedom to compete and security of privately owned property (Economic Freedom of the World, Annual Reports).
The best modern day indicators of the extent to which basic physiological needs are satisfied are life expectancy and infant mortality. Average life expectancy at birth is 78 years in the quartile of countries with greatest economic freedom, using the Fraser Institutes index of economic freedom. That is 9 years longer than in the second quartile, 15 years longer than in the third quartile and 20 years longer than in the quartile of countries with the least economic freedom. Infant mortality rates are 12 times higher in countries with low economic freedom than in countries with high economic freedom (pp 22-24).
Access to the goods and services that money can buy is substantially greater in countries with high levels of economic freedom. GDP per capita is 8 times higher in the quartile of countries with greatest economic freedom than in the countries with least economic freedom. The economic condition of the poor is also better in countries with high economic freedom. The average incomes of the poorest 10 percent of the population in the countries with greatest economic freedom is more than double the overall average income level of the countries with least economic freedom. (Obtained by comparing data in Exhibit 1.14 (p 25) and Exhibit 1.6 (p22) Economic Freedom of the World, 2006 Annual Report).
The objective indicators discussed above are obviously relevant in considering the extent that basic physiological needs are being met. Arguably, income measures are also a relevant indicator of the extent to which some higher goals are being met. The question of whether rising incomes contribute to well-being in wealthy countries has become highly contentious, however, given the observation that subjective indicators, such as satisfaction with life as a whole, show only small increases in response to rising incomes in those countries. (I will write next about what subjective measures tell us about links between freedom and flourishing.)
Do we need more command and control?
Economic reform in Australia (and some other countries) has involved a mixture of command and control and free market approaches. It seems to me that the command and control approach is appropriate within military organisations and some corporations, but it is a bad approach to public policy because it makes the individual interests of citizens subordinate to the interests of the central government. Furthermore it doesn’t work very well. If Benito Mussolini wasn’t able to get the trains to run on time using a command and control approach why would anyone expect NSW transport ministers to do any better?
Advocates of the command and control approach to economic reform tend to stress five points.
First, the reform agenda needs to be well-defined and consistently articulated. There is nothing wrong with that except that the kind of objectives that advocates of this approach have in mind tend to be whatever seems like a good idea at the time to the people in control of policy development. Thus we tend to get objectives like increasing the proportion of children who complete secondary education, without much thought being given to whether it is actually a good idea for more children to stay longer at school and whether this is a decision that governments should be making in any case.
Second, clear performance standards need to be established. The kinds of performance standards that advocates have in mind include specific, measurable targets relating to things like improving literacy and numeracy standards in schools, reducing waiting times for surgery in public hospitals and, of course, getting the trains to run on time. This all sounds desirable but the problem in setting targets, as any business manager knows, is that the people responsible for meeting them often find ways to do so that are inimical to the broader quality and efficiency objectives that the targets are intended to advance. Managers of firms are well-placed to deal with such problems, but it is more convenient for political leaders to pretend they don’t exist.
Third, those responsible for the implementation of policy must be accountable for their use of performance data to improve outcomes. This is the nasty part of command and control because accountability necessarily involves penalties for failure to meet performance objectives. It seems to me that such accountability is entirely appropriate within organisations (and particularly so in corporations in which I own shares) but it is not appropriate for state governments to be accountable to the federal government as though they were merely its agents. Rather than seeking to enable the federation to work effectively by aligning revenue raising and policy responsibilities, the advocates of command and control seek to make the central government responsible for everything and the state governments accountable to the central government. State governments should be accountable to the citizens who elect them to office.
Fourth, a broad constituency for change must be built. I have no problems with efforts to promote more widespread understanding of the benefits of free market approaches that will enhance individual freedom to choose and enable people to flourish. But I do not find the idea of building a broad constituency for greater centralisation of power and greater use of command and control approaches in public policy to be appealing.
Fifth, performance of those responsible for implementation of policy should be assessed independently of politics and funding made conditional on progress. Am I alone in thinking that there is something peculiar about the idea of making assessment of public policy independent of politics in a democracy? The advocates of this position seem to be saying that we want the government to have responsibility for command and control, but we do not want the elected representatives of the people to influence the process.
I have a great deal of sympathy with the idea that responsibility for things like education and health services should be independent of politics and that funding should be conditional on outcomes. This could be achieved by an approach to reform that involves greater reliance on the incentives and disciples of a free market in these services.
Advocates of the command and control approach to economic reform tend to stress five points.
First, the reform agenda needs to be well-defined and consistently articulated. There is nothing wrong with that except that the kind of objectives that advocates of this approach have in mind tend to be whatever seems like a good idea at the time to the people in control of policy development. Thus we tend to get objectives like increasing the proportion of children who complete secondary education, without much thought being given to whether it is actually a good idea for more children to stay longer at school and whether this is a decision that governments should be making in any case.
Second, clear performance standards need to be established. The kinds of performance standards that advocates have in mind include specific, measurable targets relating to things like improving literacy and numeracy standards in schools, reducing waiting times for surgery in public hospitals and, of course, getting the trains to run on time. This all sounds desirable but the problem in setting targets, as any business manager knows, is that the people responsible for meeting them often find ways to do so that are inimical to the broader quality and efficiency objectives that the targets are intended to advance. Managers of firms are well-placed to deal with such problems, but it is more convenient for political leaders to pretend they don’t exist.
Third, those responsible for the implementation of policy must be accountable for their use of performance data to improve outcomes. This is the nasty part of command and control because accountability necessarily involves penalties for failure to meet performance objectives. It seems to me that such accountability is entirely appropriate within organisations (and particularly so in corporations in which I own shares) but it is not appropriate for state governments to be accountable to the federal government as though they were merely its agents. Rather than seeking to enable the federation to work effectively by aligning revenue raising and policy responsibilities, the advocates of command and control seek to make the central government responsible for everything and the state governments accountable to the central government. State governments should be accountable to the citizens who elect them to office.
Fourth, a broad constituency for change must be built. I have no problems with efforts to promote more widespread understanding of the benefits of free market approaches that will enhance individual freedom to choose and enable people to flourish. But I do not find the idea of building a broad constituency for greater centralisation of power and greater use of command and control approaches in public policy to be appealing.
Fifth, performance of those responsible for implementation of policy should be assessed independently of politics and funding made conditional on progress. Am I alone in thinking that there is something peculiar about the idea of making assessment of public policy independent of politics in a democracy? The advocates of this position seem to be saying that we want the government to have responsibility for command and control, but we do not want the elected representatives of the people to influence the process.
I have a great deal of sympathy with the idea that responsibility for things like education and health services should be independent of politics and that funding should be conditional on outcomes. This could be achieved by an approach to reform that involves greater reliance on the incentives and disciples of a free market in these services.
Monday, April 14, 2008
Is freedom a necessary condition for human flourishing?
I believe that freedom should be viewed as a necessary condition for human flourishing because human flourishing is inherently a self-directed process. Adult humans have the capacity for self-direction and they cannot flourish unless they are able to exercise that capacity. Douglas Rasmussen and Douglas Den Uyl explain this point as follows:
“Since there are no a priori, universal rules that dictate the proper weighting of the goods and virtues of human flourishing, a proper weighting is only achieved by individuals having practical insight at the time of action. They need to discover the proper balance for themselves” (“Norms of Liberty, p 87).
It seems to me that two things follow from this. First, in order to flourish people have to be free to choose how they live their lives. Involuntary restrictions on self-direction constrain human flourishing. It may be possible for slaves to feel happy or even satisfied with life (if they feel that they have some control over their lives) but they cannot flourish according to their potential.
Second, if people are to be allowed to flourish to the maximum extent possible without infringing on the flourishing of others, then we need a political/ legal order that will not favour some varieties of human flourishing above others. Rasmussen and Den Uyl make the point as follows:
“By protecting liberty , the possibility of agency or self-direction, which is central to any and every form of human flourishing is socially preserved. The moral propriety of individualism and the need for sociality are reconciled”(p 78).
In effect, freedom is necessary for peaceful coexistence of people with different views about what constitutes the good life.
What reason do we have to believe that free people can flourish? We have Adam Smith’s key insight in the Wealth of Nations that when people are free to pursue their own interests, in mutually beneficial exchanges with others, their activities are coordinated by market prices to produce a cooperative effort that can be beneficial to everyone. Smith pointed out that “no human wisdom or knowledge could ever be sufficient” to perform the task of “superintending the industry of private people, and directing it towards the employments most suitable to the interest of the society” (“Wealth of Nations”, 1776 IV.9.51).
Smith acknowledged that individuals could be prodigal and imprudent under the “momentary and occasional” influence of “the passion for present enjoyment”. He considered, however, that most of the time most of us are more strongly influenced by the “principle of frugality” stemming from “the desire of bettering our condition”, which “though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave” (II.3.28). Smith’s claims about the strength of the desire that people have to better their own condition were supported by his observation that: “Great nations are never impoverished by private, though they sometimes are by publick prodigality and misconduct”(II.3.30).
Empirical evidence relating to these claims is considered in other posts.
“Since there are no a priori, universal rules that dictate the proper weighting of the goods and virtues of human flourishing, a proper weighting is only achieved by individuals having practical insight at the time of action. They need to discover the proper balance for themselves” (“Norms of Liberty, p 87).
It seems to me that two things follow from this. First, in order to flourish people have to be free to choose how they live their lives. Involuntary restrictions on self-direction constrain human flourishing. It may be possible for slaves to feel happy or even satisfied with life (if they feel that they have some control over their lives) but they cannot flourish according to their potential.
Second, if people are to be allowed to flourish to the maximum extent possible without infringing on the flourishing of others, then we need a political/ legal order that will not favour some varieties of human flourishing above others. Rasmussen and Den Uyl make the point as follows:
“By protecting liberty , the possibility of agency or self-direction, which is central to any and every form of human flourishing is socially preserved. The moral propriety of individualism and the need for sociality are reconciled”(p 78).
In effect, freedom is necessary for peaceful coexistence of people with different views about what constitutes the good life.
What reason do we have to believe that free people can flourish? We have Adam Smith’s key insight in the Wealth of Nations that when people are free to pursue their own interests, in mutually beneficial exchanges with others, their activities are coordinated by market prices to produce a cooperative effort that can be beneficial to everyone. Smith pointed out that “no human wisdom or knowledge could ever be sufficient” to perform the task of “superintending the industry of private people, and directing it towards the employments most suitable to the interest of the society” (“Wealth of Nations”, 1776 IV.9.51).
Smith acknowledged that individuals could be prodigal and imprudent under the “momentary and occasional” influence of “the passion for present enjoyment”. He considered, however, that most of the time most of us are more strongly influenced by the “principle of frugality” stemming from “the desire of bettering our condition”, which “though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave” (II.3.28). Smith’s claims about the strength of the desire that people have to better their own condition were supported by his observation that: “Great nations are never impoverished by private, though they sometimes are by publick prodigality and misconduct”(II.3.30).
Empirical evidence relating to these claims is considered in other posts.
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