Before attempting to answer this question I should recap some previous posts about the good society.
Is there such a thing as a good society? Yes. A good society is one that has institutions that are good for its members.
What are the characteristics of a good society? I suggest three characteristics:
• Its institutions enable its members to live together in peace.
• Its institutions provide its members with opportunities to flourish – to obtain the things that it is good for humans to have.
• Its institutions provide members with a degree of security against threats to individual flourishing.
Are the institutions of a good society the same as those of the “great society”? I suggest that there is a lot of overlap between the institutions of the good society and the liberal principles of the great society, or open society, as discussed by Friedrich Hayek.
Why is it wrong to coerce people for their own good? Richard Kraut raises this question in his book, “What is good and why”. My answer is that it is wrong to coerce people for their own good because this is not consistent with living in peace with them.
Should we expect the rules of the good society to be good for everyone? Richard Kraut questions societal rules such as those discouraging theft and interference with other people because they are not always good for everyone. The point I make is that the rules for the good of all – rules that nearly everyone would agree to behind a veil of ignorance about their own particular interests and vulnerabilities - are not necessarily good for everyone.
So, I think I am on the way to identifying the characteristics and institutions of a good society. Having reached this point the thought has crossed my mind that it might not be too difficult to identify indexes that others have constructed that measure the various characteristics and institutions of a good society. If I were to combine those indexes into a good society index that would make it easy to classify various societies as bad, not so bad, OK, good, better, best. (I might even be able to think of a better classification.) A composite index of this kind would make the statistical feast more easily digestible and might even grab public attention (and perhaps even make me rich and famous).
I see a couple of problems with this idea, apart from the possibility that the world might already have just about enough composite indexes measuring broadly similar things (and fame would probably not be good for me). First, as I noted in my article ‘Gross National Happiness’, recently published in Asian-Pacific Economic Literature (abstract; draft), there is the problem of finding appropriate weights for each item included in a composite index. It is not really good enough to just have a set of weights that reflect my own values. Even if I could find a Nobel prize winner, or two, prepared to endorse a particular set of weights that would not really help much because people do not get Nobel prizes because their values are universally accepted. Ideally, every user of the index would be able to use a set of weights reflecting their own values, but then we would have a multitude of indexes rather than a single index.
Other options include use of equal weights or weights that come out of regression analyses that use the sub-indexes to explain per capita GDP levels or average life satisfaction in different countries. Equal weights are intrinsically mindless and the second option would not be much better because the ‘good society’ index resulting from it would not amount to much more than an index of average of per capita GDP or average life satisfaction.
The second problem is that composite indexes tend to hide the relationships between sub-indexes. It seems to me to be more useful to make observations about such things as differences in life expectancy in countries with differing levels of economic freedom than to be able to classify particular societies as being good, bad or indifferent using a single index number.
I have decided that a good society index would not be a good idea. In later posts I will attempt to identify the suite of indicators that would be most relevant to assessing to what extent particular societies might qualify as good societies.
Sunday, November 15, 2009
Thursday, November 12, 2009
What does the Legatum Prosperity Index measure?
Prosperity. However, my initial reaction when I first looked at the index was that it was more like an index of the quality of life or well-being than of prosperity. My perception of prosperity was too narrow. One of the purposes of the index is apparently to encourage people ‘to take a holistic view of prosperity’. The authors might have a point. Dictionary definitions of prosperity don’t focus solely on economics – they suggest that prosperous is synonymous with flourishing, successful and thriving.
The index has nine components or sub-indexes:
• Economic fundamentals
• Entrepreneurship and innovation
• Democratic institutions
• Education
• Health
• Safety and security
• Governance
• Personal freedom
• Social capital.
Is this a comprehensive list of factors affecting human flourishing? One apparent omission is environmental quality. Although this is considered to some degree in the indicators used for health, I get the impression that the authors’ view of prosperity does not place much value on the enjoyment that people obtain from the natural environment. I wonder whether that view is backed up by research findings.
The main problem I have with this report is that I am not sure how much substance lies behind it. The presentation is incredibly smooth, mainly because it is completely uninterrupted by references to research papers or data sources. The preface suggests that information on data sources is available on the prosperity web site. All I could find on that site, however, apart from the acknowledgement of input from research consultancy, Oxford Analytica, is a statement that the index draws on the Gallup World Poll and other data and includes only factors for which a statistical link with material wealth or life satisfaction can be shown.
The Legatum Institute claims to be a think tank. It seems to me that no organisation claiming to be a think tank should publish research findings without making sure that the underlying research is open to public scrutiny.
However, leaving aside my doubts, this report is worth looking at just to view the chart showing that countries with high prosperity tend to have high performance on all sub-indexes and those with low prosperity have low performance on nearly all sub-indexes.
Addendum:
Hamish Banks of Legatum has responded as follows:
"Thank you for writing about the Prosperity Index; may I refer you to the Prosperity Index website where you may download both the 55 page Methodology and 85 page Technical Appendix, which should answer your questions on the the data sources? (http://prosperity.com/report.aspx)
So far as possible we have been transparent with the sources and in some cases the data is publicly available; in others, like the Gallup World Poll, it is proprietary and not ours to publish.
You are right in surmising that the non-inclusion of environmental quality is based on research findings: we did not simply choose the factors that appealed to us, but regressed more than 200 variables to the 79 for which there was a clear and strong correlation with prosperity - environmental quality qualified only, as you note, in the general health indicators."
The index has nine components or sub-indexes:
• Economic fundamentals
• Entrepreneurship and innovation
• Democratic institutions
• Education
• Health
• Safety and security
• Governance
• Personal freedom
• Social capital.
Is this a comprehensive list of factors affecting human flourishing? One apparent omission is environmental quality. Although this is considered to some degree in the indicators used for health, I get the impression that the authors’ view of prosperity does not place much value on the enjoyment that people obtain from the natural environment. I wonder whether that view is backed up by research findings.
The main problem I have with this report is that I am not sure how much substance lies behind it. The presentation is incredibly smooth, mainly because it is completely uninterrupted by references to research papers or data sources. The preface suggests that information on data sources is available on the prosperity web site. All I could find on that site, however, apart from the acknowledgement of input from research consultancy, Oxford Analytica, is a statement that the index draws on the Gallup World Poll and other data and includes only factors for which a statistical link with material wealth or life satisfaction can be shown.
The Legatum Institute claims to be a think tank. It seems to me that no organisation claiming to be a think tank should publish research findings without making sure that the underlying research is open to public scrutiny.
However, leaving aside my doubts, this report is worth looking at just to view the chart showing that countries with high prosperity tend to have high performance on all sub-indexes and those with low prosperity have low performance on nearly all sub-indexes.
Addendum:
Hamish Banks of Legatum has responded as follows:
"Thank you for writing about the Prosperity Index; may I refer you to the Prosperity Index website where you may download both the 55 page Methodology and 85 page Technical Appendix, which should answer your questions on the the data sources? (http://prosperity.com/report.aspx)
So far as possible we have been transparent with the sources and in some cases the data is publicly available; in others, like the Gallup World Poll, it is proprietary and not ours to publish.
You are right in surmising that the non-inclusion of environmental quality is based on research findings: we did not simply choose the factors that appealed to us, but regressed more than 200 variables to the 79 for which there was a clear and strong correlation with prosperity - environmental quality qualified only, as you note, in the general health indicators."
Friday, November 6, 2009
How do preferences relate to well-being?
Readers of this blog will know that I am attracted to a developmental view of individual well-being. I have previously argued that if happiness is viewed as a positive emotional state (involving, for example, peace of mind, optimism, uncompression, exuberance, flow, joy and cheerfulness) then well-being cannot be the same thing as happiness. Well-being also involves other factors - including personal security and security of property, health and longevity, access to goods and services – as well as a positive emotional state. (See: What are the links between freedom and flourishing?) The kind of life that is best for all humans is a life of flourishing - one that follows a pattern of psychological and physical growth filled with enjoyment.
What does a developmental view of individual well-being have to say about the relationship between well-being and the satisfaction of preferences? Richard Kraut’s questions whether a more preferred outcome is necessarily a better outcome for an individual, even if it satisfies her properly informed and rational desires. His point is that it is possible to have properly informed and rational desires that are not good for us.
One example Kraut gives is a desire for fame:
“There is no way to criticize the desire for fame except to say that its object is not something that it is good to have. But it should not be at all surprising that human beings sometimes have desires whose objects fall into this category. Nature has not installed in us some wonderful mechanism that guarantees that what propels us forward and focuses our minds on certain courses of action will bring us to something that it is good for us to have. Somehow or other, we have to take steps to learn about what is good for us, and even to care about what is good for us; that is not a topic about which we inevitably come to have tacit knowledge merely by virtue of having desires” (“What is good and why”, p 185).
Daniel Hausman and Michael McPherson note that if well-being is not the same as preference satisfaction then the normative significance that economists attach to preference satisfaction would appear to be without foundation. These authors then offer a new partial defence of welfare economics based on the view that if people are more or less self-interested with respect to certain alternatives, then economists can use their preferences to make inferences concerning what they believe will benefit them. This means that if it is reasonable to suppose that individuals are good judges of what will benefit them, then economists can use people’s preferences as evidence concerning what in fact makes them better off (‘Preference satisfaction and welfare economics’, Economics and Philosophy: 25 (2009).
What happens if we are dealing with policy issues where evidence has accumulated that individuals are often poor judges of what will benefit them? Does this mean that paternalistic government intervention will produce better outcomes? No. The argument that imperfections in individual judgement justify government intervention is just as fallacious as the old argument that departures from perfect competition in markets justify government interventions to increase competition.
In order to consider whether intervention is warranted it is necessary to consider the consequences of alternative institutions, or rules of the game. The judgements that governments make on behalf of individuals may be worse than the judgements that people make on their own behalf. For example, compulsory superannuation in Australia forces some young people to begin to save for their retirement at a time of their life when they would probably be better off saving to buy a house.
In addition, it is important to consider the consequences of government interventions that displace personal responsibility. It is good for adult humans to accept responsibility for decisions affecting their own well-being because this contributes to their personal development and self-respect.
What does a developmental view of individual well-being have to say about the relationship between well-being and the satisfaction of preferences? Richard Kraut’s questions whether a more preferred outcome is necessarily a better outcome for an individual, even if it satisfies her properly informed and rational desires. His point is that it is possible to have properly informed and rational desires that are not good for us.
One example Kraut gives is a desire for fame:
“There is no way to criticize the desire for fame except to say that its object is not something that it is good to have. But it should not be at all surprising that human beings sometimes have desires whose objects fall into this category. Nature has not installed in us some wonderful mechanism that guarantees that what propels us forward and focuses our minds on certain courses of action will bring us to something that it is good for us to have. Somehow or other, we have to take steps to learn about what is good for us, and even to care about what is good for us; that is not a topic about which we inevitably come to have tacit knowledge merely by virtue of having desires” (“What is good and why”, p 185).
Daniel Hausman and Michael McPherson note that if well-being is not the same as preference satisfaction then the normative significance that economists attach to preference satisfaction would appear to be without foundation. These authors then offer a new partial defence of welfare economics based on the view that if people are more or less self-interested with respect to certain alternatives, then economists can use their preferences to make inferences concerning what they believe will benefit them. This means that if it is reasonable to suppose that individuals are good judges of what will benefit them, then economists can use people’s preferences as evidence concerning what in fact makes them better off (‘Preference satisfaction and welfare economics’, Economics and Philosophy: 25 (2009).
What happens if we are dealing with policy issues where evidence has accumulated that individuals are often poor judges of what will benefit them? Does this mean that paternalistic government intervention will produce better outcomes? No. The argument that imperfections in individual judgement justify government intervention is just as fallacious as the old argument that departures from perfect competition in markets justify government interventions to increase competition.
In order to consider whether intervention is warranted it is necessary to consider the consequences of alternative institutions, or rules of the game. The judgements that governments make on behalf of individuals may be worse than the judgements that people make on their own behalf. For example, compulsory superannuation in Australia forces some young people to begin to save for their retirement at a time of their life when they would probably be better off saving to buy a house.
In addition, it is important to consider the consequences of government interventions that displace personal responsibility. It is good for adult humans to accept responsibility for decisions affecting their own well-being because this contributes to their personal development and self-respect.
Tuesday, October 27, 2009
Should we expect the rules of a good society to be good for everyone?
In my view, we should expect the rules of a good society to have the assent of nearly everyone but that does not mean that these rules are good for everyone. In particular, the law of liberty – preventing people from interfering with the protected domain of others – cannot be expected to be good for everyone even though it serves the good of all.
A good place for me to begin to explain the point I am trying to make is with Richard Kraut’s suggestion that under certain conditions norms, rules and laws do not serve the good of all (“What is Good and Why”, p31). The example he gives is of a situation in which our confidence that it is wrong to steal could possibly be diminished because “the property system may make it impossible for some to have the material resources they need to maintain their health ...”. Kraut asks: “What objection can be made to taking what is not yours if you need it to sustain the health of your children, and the person from whom you take it has so much that it would do him no good?” The point he is making is that the rule against taking what is not yours “must be evaluated as a component of the social system in which it is embedded”.
I agree that the rule must be evaluated as a component of the social system, but I don’t think we need to be assured that the social system functions in a way that is good for all members before we can endorse laws prohibiting theft. Does Kraut’s example demonstrate that we could expect people to flourish to the same extent in a society with large wealth disparities in which there are no rules against theft as in a similar society where there are rules against theft? I don’t think so. If there were no rules against theft some resources currently devoted to mutually beneficial activities would be allocated to theft and to the protection of property against theft. Those who have a particular aptitude for stealing might benefit, but the costs to other people would clearly outweigh the benefits to thieves.
Some might argue, however, that our disapproval of theft should allow exceptions in circumstances where the thief has great needs and the victim is relatively unaffected. We might approve of such redistributions if we were to choose behind a veil of ignorance about our chances of being in a situation where we might be tempted to steal or of becoming a victim of theft. In the real world, however, how could a potential thief be sure that a potential victim would be relatively unaffected by the theft of any particular item? Even people who wear their wealth lightly can still own items that have great sentimental value.
Such considerations suggest to me that nearly everyone would agree that theft should be prohibited. I think it is likely that support for such a prohibition would be widespread even among population groups whose members have reason to be aggrieved about their treatment under the prevailing social system. In this sense disapproval of theft may be widely considered to be for the good of all, or at least widely considered to be likely to produce better outcomes than would an ambivalent attitude toward theft.
Does it change matters when the redistribution is undertaken by governments rather than by thieves? There are similarities between theft and rent seeking - the competing efforts of various individuals and interest groups to use the coercive powers of the state to have income redistributed to themselves at the expense of other groups in the society (for example through government budget allocations, provision of services, trade protection and other forms of industry assistance). The involvement of governments is an important difference, however, because the decision-making processes of governments may be widely viewed as having greater legitimacy than those of thieves. In addition, the information required to implement modest redistributions that might be given nearly universal assent behind a veil of ignorance – for example, provision of a welfare safety net – is available to governments responsible for implementing such redistributions.
The considerations involved seem to be similar when we come to paternalistic interventions to prevent adults from harming themselves. Norms, rules and laws protect individuals from all kinds of interference by other people, including well-meaning interference to prevent people from harming themselves. It is possible, however, to construct examples where our confidence that it is wrong to interfere is diminished. Richard Kraut gives us the example of a person who has fallen into an acute but curable despondency who proposes to kill himself even though he has many good years ahead of him (p 238). The argument that it is wrong to coerce a person for his own good because this is inconsistent with living in peace with him (see my last post) loses some force if the powers of judgement of the person concerned are obviously impaired.
However, the circumstances in we would condone people coercing others for their own good are extremely limited. We might have somewhat more confidence in intervention by government agencies than by individuals whom we have no reason to trust, but substantial moral hazards are involved whoever is permitted to intervene. Regulation might be more permissible than ad hoc interventions.
Behind a veil of ignorance just about everyone might support regulations that restrict freedom to a minor extent in order to protect vulnerable people whose judgement is obviously impaired. But in the real world it is difficult to frame such regulations to achieve the right balance. For example, in its draft report on gambling the Australian Productivity Commission has recently published draft recommendations that the maximum bet limit on most gaming machines should be set at one dollar and the maximum amount of cash allowed to be inserted into a gaming machine at one time should be $20. While I claim no expertise in this area I think such limits could significantly inconvenience gamblers who want to minimize the time they spend playing mind-numbing machines, without doing much to protect problem gamblers. No matter how low the limits are set, they will not be low enough to prevent some vulnerable people from harming themselves.
This is true of all forms of regulation designed to protect vulnerable people from making bad choices. The rule that is good for all – the rule that nearly everyone would agree to behind a veil of ignorance about their own particular interests and vulnerabilities – will not be good for everyone. We should not expect the rules of a good society to be good for everyone.
A good place for me to begin to explain the point I am trying to make is with Richard Kraut’s suggestion that under certain conditions norms, rules and laws do not serve the good of all (“What is Good and Why”, p31). The example he gives is of a situation in which our confidence that it is wrong to steal could possibly be diminished because “the property system may make it impossible for some to have the material resources they need to maintain their health ...”. Kraut asks: “What objection can be made to taking what is not yours if you need it to sustain the health of your children, and the person from whom you take it has so much that it would do him no good?” The point he is making is that the rule against taking what is not yours “must be evaluated as a component of the social system in which it is embedded”.
I agree that the rule must be evaluated as a component of the social system, but I don’t think we need to be assured that the social system functions in a way that is good for all members before we can endorse laws prohibiting theft. Does Kraut’s example demonstrate that we could expect people to flourish to the same extent in a society with large wealth disparities in which there are no rules against theft as in a similar society where there are rules against theft? I don’t think so. If there were no rules against theft some resources currently devoted to mutually beneficial activities would be allocated to theft and to the protection of property against theft. Those who have a particular aptitude for stealing might benefit, but the costs to other people would clearly outweigh the benefits to thieves.
Some might argue, however, that our disapproval of theft should allow exceptions in circumstances where the thief has great needs and the victim is relatively unaffected. We might approve of such redistributions if we were to choose behind a veil of ignorance about our chances of being in a situation where we might be tempted to steal or of becoming a victim of theft. In the real world, however, how could a potential thief be sure that a potential victim would be relatively unaffected by the theft of any particular item? Even people who wear their wealth lightly can still own items that have great sentimental value.
Such considerations suggest to me that nearly everyone would agree that theft should be prohibited. I think it is likely that support for such a prohibition would be widespread even among population groups whose members have reason to be aggrieved about their treatment under the prevailing social system. In this sense disapproval of theft may be widely considered to be for the good of all, or at least widely considered to be likely to produce better outcomes than would an ambivalent attitude toward theft.
Does it change matters when the redistribution is undertaken by governments rather than by thieves? There are similarities between theft and rent seeking - the competing efforts of various individuals and interest groups to use the coercive powers of the state to have income redistributed to themselves at the expense of other groups in the society (for example through government budget allocations, provision of services, trade protection and other forms of industry assistance). The involvement of governments is an important difference, however, because the decision-making processes of governments may be widely viewed as having greater legitimacy than those of thieves. In addition, the information required to implement modest redistributions that might be given nearly universal assent behind a veil of ignorance – for example, provision of a welfare safety net – is available to governments responsible for implementing such redistributions.
The considerations involved seem to be similar when we come to paternalistic interventions to prevent adults from harming themselves. Norms, rules and laws protect individuals from all kinds of interference by other people, including well-meaning interference to prevent people from harming themselves. It is possible, however, to construct examples where our confidence that it is wrong to interfere is diminished. Richard Kraut gives us the example of a person who has fallen into an acute but curable despondency who proposes to kill himself even though he has many good years ahead of him (p 238). The argument that it is wrong to coerce a person for his own good because this is inconsistent with living in peace with him (see my last post) loses some force if the powers of judgement of the person concerned are obviously impaired.
However, the circumstances in we would condone people coercing others for their own good are extremely limited. We might have somewhat more confidence in intervention by government agencies than by individuals whom we have no reason to trust, but substantial moral hazards are involved whoever is permitted to intervene. Regulation might be more permissible than ad hoc interventions.
Behind a veil of ignorance just about everyone might support regulations that restrict freedom to a minor extent in order to protect vulnerable people whose judgement is obviously impaired. But in the real world it is difficult to frame such regulations to achieve the right balance. For example, in its draft report on gambling the Australian Productivity Commission has recently published draft recommendations that the maximum bet limit on most gaming machines should be set at one dollar and the maximum amount of cash allowed to be inserted into a gaming machine at one time should be $20. While I claim no expertise in this area I think such limits could significantly inconvenience gamblers who want to minimize the time they spend playing mind-numbing machines, without doing much to protect problem gamblers. No matter how low the limits are set, they will not be low enough to prevent some vulnerable people from harming themselves.
This is true of all forms of regulation designed to protect vulnerable people from making bad choices. The rule that is good for all – the rule that nearly everyone would agree to behind a veil of ignorance about their own particular interests and vulnerabilities – will not be good for everyone. We should not expect the rules of a good society to be good for everyone.
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