Is Australia's political system broken?

“The process of debate, competition and elections leading to national progress has broken down. The business of politics is too de-coupled from the interests of Australia and its citizens. This de-coupling constitutes the Australian crisis”.

The quote is from the last chapter of Paul Kelly’s most recent book, Triumph and Demise, The broken promise of a Labor Generation (published by MUP, but I purchased the Kindle version from Amazon). Over several decades Paul Kelly has developed a formidable reputation as Australia’s leading ‘big picture’ journalist. I don’t think anyone else has been more successful in identifying the defining elements of the changing political landscape in Australia.

In launching the book, Tony Abbott, Australia’s current prime minister, took issue with Kelly’s claim that the system has broken down. He suggested that the style of government of the past six years had been just a passing phase, rather than “the new normal”. The PM said:

“It’s not the system which is the problem, it is the people who from time-to-time inhabit it. Our challenge at every level is to be our best selves.”

More recently, the electoral triumph of the New Zealand National Government under John Key appears to have demonstrated that it is still possible for a government to contain the growth of government spending in the face of political obstacles similar to those faced by governments in Australia.

So, is Paul Kelly wrong? I don’t think so. The system must be broken if achievement of reforms requires politicians to become their “best selves”.

Paul Kelly writes of “volatility and fragmentation” as being “the new driving forces” of Australian politics. He argues that the system has evolved in ways that have given sectional interests more power than ever before. He mentions technology and campaign techniques in this context, and brings fragmentation of the traditional media and the rise of social media into the discussion. He also makes the point that it has become more difficult for leaders to talk honestly to the community as they have become subjected to greater media pressure to rule out any action that might disadvantage any powerful interest group.

However, the strongest points which Paul Kelly makes in support of the view that sectional interests now have more power relate to the rise of minor parties, accompanied by a decline in tribal loyalty to the major parties. Minor parties tend to play to sectional interests because “they lack any governing culture or responsibility for the national interest”.

It has for many years been a normal part of the Australian political landscape for government legislation to be subject to obstruction from the cross-benches in the Senate. In the past, Governments were often able to deal effectively with this by threatening a double dissolution election. Paul Kelly points out that following the expansion in size of Parliament in the mid-1980s, there is now more likelihood that a double dissolution election will result in even more minor party representation because the quota of votes required for election is easier to obtain.

It is possible, of course, for the major parties to come together to agree to the spending cuts or tax increases required to avoid an explosion in government debt. But it is particularly difficult for the major parties to be seen to agree on a strategy to achieve that. The small remaining philosophical differences between the major parties hinge around fiscal policies - the Labor party tends to favour a bigger role for government, while the Liberal party tends to be somewhat opposed to government playing a bigger role.  In addition, even though there may not be much difference in practice between the policies the major parties implement when they are in government, when in opposition neither party has an incentive to offend interest groups that might help them win to the next election.

Perhaps the current government will be able to resolve the immediate fiscal problem by proposing spending cuts that will be more acceptable to the opposition, or the minor parties, than those currently proposed. The chances of such reforms being accepted will improve as the next election approaches and the opposition comes under greater pressure to demonstrate fiscal responsibility. As government debt increases, it will also become increasingly difficult for the opposition to oppose fiscal reform on the grounds that Australia is not Greece.

However, even if the immediate fiscal problem can be resolved satisfactorily, it is difficult for anyone to claim that Australia’s political system is not broken when it contains in-built incentives for fragmentation of the major parties. As the minor parties demonstrate to interest groups the advantages of Senate representation, voters have a strong incentive to break their allegiance to the major parties. This is particularly likely if (to use words of my friend Jim Belshaw on his blog a few years ago) they “reject the intellectual, institutional and political constructs” of the major parties. As the parties fragment, some excellent minor party candidates, like Senator David Leyonhjelm of the LDP (whom I claim to have voted for intentionally in the last election) will probably be elected.  In the end, however, we are likely to be left with a situation where the line of least resistance will usually prevail and governments will always be able to blame Senate obstruction for poor economic policy outcomes.

In an article posted here a couple of months ago, I suggested that better policy outcomes could be expected if Senate candidates were chosen randomly, rather than selected by parties. There is not much chance of a proposal along those lines being seriously considered in the near future.

There are probably other ways to reduce Senate obstruction that would be more acceptable to the major parties. The major parties will be doing a useful service to themselves, as well as the nation, if they can get together to consider and implement reforms to the Senate before the benefits of accountable government disappear entirely. 

Postscript: 
Jim Belshaw has responded to this post on his blog.

What does it mean to be thriving?

I am asking myself that question because I am trying to come to grips with the findings of the new Gallup-Healthways Global Well-Being Index.

The methodology of the index looks like a sensible way to assess the extent to which people are thriving in different countries. Surveys are used to obtain subjective data relating to the following five elements:

• Purpose: liking what you do every day and learning or doing something interesting every day
• Social: having supportive relationships - someone who encourages you to be healthy and family and friends who give you positive energy
• Financial: having enough money to do what you want to do and not being worried about money
• Community: liking where you live and having pride in your community
• Physical: feeling active and productive, and that your physical health is near perfect.

When I look at the results, however, I wonder whether the new Gallup-Healthways index actually measures the extent to which people are thriving.

The top ten countries in the index are as follows:

1. Panama
2. Costa Rica
3. Denmark
4. Austria
5. Brazil
6. Uruguay
7. El Salvador
8. Sweden
9. Guatemala
10. Canada.

When Scott Sumner looked at that ranking he wasn’t surprised to see some of the countries of Latin America do well, but he was shocked to see Sweden bracketed by Guatemala and El Salvador.  His comment:

“Just to be clear, I’m NOT saying that the people in those two countries are not just as happy as the Swedes; for all I know they are happier.  I have no idea how to measure happiness. But if you are talking about country rankings, people are going to assume you are making some sort of statement about socio-economic/political systems.  And if a large share of the people in these highly successful societies are risking murder, rape and dying of thirst in order to flee to a country where they don’t speak the language, so that they can get jobs cleaning toilets or picking vegetables in the hot sun all day long, then I have to wonder whether these rankings actually mean much of anything”.

Gallup’s potential net migration index suggests that large numbers of people who live in Guatemala and El Salvador would indeed prefer to live elsewhere. Recent surveys suggest that while about 28% of the population of Guatemala would prefer to live elsewhere, the corresponding figure for El Salvador is about 33%.

In Free to Flourish I made the point that if you want to measure the quality of different societies it makes more sense to attempt to define the characteristics of a good society and attempt to measure the extent to which societies have those characteristics, rather than to attempt to infer the quality of a society solely from happiness indexes. Nevertheless, it comes as a surprise when a high proportion of the population is assessed to be thriving in societies from which large numbers of people wish to migrate to seek better opportunities.

When I set out to find out the reasons for the results obtained by Gallup-Healthways my first thought was that it might reflect the method used to rank countries. The criterion used is the percentage of the population that are thriving on the basis of three or more of the elements defined above. However, when I constructed an index by averaging the scores on all five elements (giving thriving a rating of 3, struggling a rating of 2 and suffering a rating of 1), El Salvador remained in 7^th place and the ranking of Guatemala remained fairly high (falling from 9^th to 14^th).

My second thought was that people would be unlikely to give equal weight to the five specified elements in assessing the quality of their lives. In order to assess what weights might be appropriate I used regression analysis to explain the old Gallup thriving index in terms of the five elements of the new index. The old Gallup index is based on the Cantril methodology under which survey respondents are asked to evaluate their own lives relative to the best and worst possible life. Under the old Gallup index the percentages of the population assessed to be thriving in El Salvador and Sweden were 36% and 68% respectively.

There is a problem with the use of regression analysis to obtain weights because the old and new indexes relate to surveys taken years apart, but that seemed to me to be a minor problem by comparison with use of equal weights.

The results of the analysis suggest that it might be appropriate to give a weighting of 40% to Purpose, 30% to Financial, 30% to Physical, and zero weight to Social and Community. The rankings on that basis are:

1. Panama 
2. Sweden
3. Denmark
4. Austria
5. Costa Rica
6. Canada
7. Netherlands
8. Iceland
9. Mexico
10. El Salvador

At this point I have to acknowledge that the high rating given to El Salvador is unlikely to be a result of the methodology used for ranking, or failure to weight elements appropriately.

No matter how I look at it, the people of El Salvador seem to be highly positive about their lives. This is consistent with the results of other Gallup surveys which have shown that the people of El Salvador experience a great deal of positive emotion.

The problem is that while it is good to have positive emotional states or positive states of mind, thriving involves more than that. From observed behaviour it is obvious that humans see their ability to thrive as related to objective circumstances such as incomes, life expectancy and education – which are reflected in the UN’s Human Development Index (HDI) – as well as to their emotional states.

Anyone interested in identifying the countries in which people have the best opportunities to thrive might find the following chart of some interest.

What is the secret of happiness?

Now that I have your attention I will do my best to keep it – but you cannot expect me to attempt to answer such an important question in just a few paragraphs.

It might be appropriate to begin by issuing a health warning about my ability to answer such a complex question. I can claim a great deal of interest in the subject, but my expertise is limited.

In my view human happiness is ultimately about having a meaningful life – one that is meaningful to the person living it - but that is certainly not a secret. Wise people have been saying similar things for thousands of years.

What I am about to write about now has to do with momentary happiness and the way we pursue our goals. It seems like a good idea for individuals to pursue their goals in ways that enable them to experience many happy moments and not too much disappointment along the way.

Some recent research on the links between risk-taking, expectations, rewards and happiness has produced some interesting findings. I propose to present some of those findings in a somewhat novel way and to combine them with some additional speculations.

The research by Robb Rutledge (of University College, London) and colleagues involved presenting participants in a decision-making game with choices between certain and risky options and repeatedly asking them to report their momentary happiness. The study used fMRI to examine the relationship between happiness reports and neural responses. The study also made use of the Great Brain Experiment app, to test results on large numbers of people playing the decision-making game on smart phones and tablets. (The game is actually still available the Great Brain Experiment site and good fun to play.) The research is reported in an article entitled ‘A Computational and neural model of momentary subjective well-being’, recently published in PNAS. Good summaries of the article have been published by ‘The Telegraph’ and ‘The Atlantic’.

The study found that momentary happiness is determined by the combined influence of recent reward expectations and prediction errors arising from those expectations. The happiness equation takes the following form:

Happiness = baseline average mood + what you can settle for (CR) + what you'll get on average if you gamble (EV) + the difference between that and what you actually get (RPE). 

The equation takes account of the fact that memory fades, so that more recent events have a larger impact on happiness than earlier events.

The findings suggest that happiness depends not on how well things are going, but on whether they are going better than expected.

It is a mistake to interpret the findings as in the headline in one paper: “The secret of happiness? LOWER your expectations: A good day is when things are going better than expected”. One reason the results don’t imply that people should lower their expectations is because the measure of expectation used is average reward, rather than a direct measure of optimism or pessimism. It would be slightly more accurate to interpret the findings as suggesting that people can avoid disappointment by staying within their comfort zone instead of choosing riskier options that involve high average (expected) reward. But that interpretation is also inadequate because it overlooks the pleasure that people get from anticipating a high reward (even if the outcome is not as good as expected) and also overlooks the buzz that some people get when they gamble (choose an option with high potential reward but lower average reward) and win.

I have attempted to map out some relationships between expectations, forecast errors and happiness in the following two charts.

In the first chart, we begin in Quadrant A, with expectations and happiness as indicated by the blue line i.e. a happiness rating above 7. Unfortunately, it turns out that outcomes are below expectations, so in Quadrant B it is apparent that we have a negative prediction error of -3. When we translate that to the X axis in Quadrant C (using the 45⁰ line in the south-east quadrant) we find that an error of -3 corresponds to a happiness rating of less than 6.

So, the question now arises of how you should respond to that disappointment. One way to respond is to get back into your comfort zone and adopt a strategy involving lower expectations and no prediction error. That strategy avoids disappointment but it means that you forgo the pleasure of contemplating the happiness that you could expect, on average, under the original strategy.

An alternative response is depicted in the second chart. That involves sticking with the original strategy but improving your luck.

 An improvement in luck is shown by a shift in the relationship in Quadrant B. By improving your luck you are able to achieve an outcome better than expected and end up happier than you expected.

So, the secret of happiness is to get lucky! 

Jokes aside, it makes sense to stick to a strategy that you have good reason to think will yield high returns over the longer term, even if you experience disappointing results in the short term. In other words, the secret of happiness is adopt the strategy that you expect to yield greatest rewards over the longer term and “stay the course”.

Some readers might question the wisdom of that on the grounds that most people tend to be optimistic in their expectations, relative to average reward (or mathematical expectation). However, the findings of a recent paper by Gigi Foster and Paul Frijters, which examines the formation of expectations by undergraduates at two Australian universities, suggests that optimistic expectations are benign. The results suggest that apart from their direct contribution to happiness, optimistic expectations motivate people to work harder to achieve their goals.

So, adding all that together, the secret of happiness would be to adopt the strategy that you expect to yield greatest rewards over the longer term, and to back your expectations by staying the course and working hard. But you already knew that!  And something important seems to be missing.

The real secret of happiness, in my view, is to play the inner frame games of self-acceptance and cheerfulness, and to adopt an attitude of awe and fascination about the world. 


Postscript:
I linked to the wrong article by Gigi Foster and Paul Frijters. An abstract of the article I meant to to link to can be found here.

Can the "best possible life" get much better?

Someone is sure to try to tell me that the best possible life is a bit like Groundhog Day – it is as good as life can get. If I thought that the quality of life was just about emotional states I would agree. But there is more to life than emotional states, even though emotional states are very important.

The question is meant to be about the extent to which people perceive that it is possible for the quality of the best possible life to continue to get better, e.g. as a result of further advances in medical science or communications.

In happiness surveys people are often asked to evaluate their lives according to the Cantril ladder. The relevant question, as asked in Gallup’s World Poll, is as follows:

“Please imagine a ladder with steps numbered from zero at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?” 

I have not been able to find research that directly relates to the question of how perceptions of the best possible life differ between countries and change over time. Perhaps I haven’t looked hard enough, or in the right places. If any readers can steer me in the direction of relevant research I would be most grateful.

A few years ago, Angus Deaton, who has been associated with the Gallup World Poll, speculated as follows about the meaning of “the best possible life”:

“A simpler interpretation of the Gallup World Poll findings is that when asked to imagine the best and worst possible lives for themselves, points "10" and "0" on the scale, people use a global standard. Danes understand how bad life is in Togo and other poor places, and the Togolese, through television and newspapers, understand how good life is in Denmark or other high-income countries.

Such an interpretation is also consistent with Easterlin's conclusion that the "best possible life for you" is a shifting standard that will move upward with rising living standards. Thus, we might expect the Danes to continue to maintain an average rating of 8 as national income rises, provided they stay in the same position in the global income rankings. If this interpretation is correct, it would be an indication of how much the globalization of information has affected the perceptions of populations worldwide - because the consistently high correlation between income and satisfaction could not have existed in its absence.”

I have some problems with the first paragraph of the quote. Given the wording of the question, it seems likely that perceptions of the best possible life are strongly influenced by knowledge of what kinds of lives it might be possible for the respondent to live. There seems to be quite strong evidence that the reference groups that rural people in China use to evaluate their own satisfaction with life are their fellow-villagers. The reference group changes when people move to the city. (See paper by John Knight and Ramani Gunatilaka.) That seems to be related to the “paradox of happy peasants and frustrated achievers” discussed by Carol Graham. If people evaluate their lives according to a rural village reference point of the best possible life, they may not be overstating their happiness but they are basing their judgement of their well-being on imperfect knowledge of what is possible. In order to shed more light on such matters it would be useful to conduct surveys of migrants from rural to urban areas using the ACSA methodology discussed in a recent post.

When we consider high income countries, it seems reasonable to expect that perceptions of the potential for the best possible life to improve would be closely related to perceptions of whether today’s youth will have a better life than their parents. Gallup’s surveys for the United States suggest that from 1998 to 2008 around two-thirds of Americans were optimistic, and only one-third pessimistic, about whether today’s youth would have a better life than their parents. Since then, however, Americans have become equally divided on that question. That probably reflects ongoing economic uncertainty in the wake of the Global Financial Crisis.

It would be interesting to know to what extent people who consider themselves to be living the best possible life at present are optimistic about the potential for life to get even better. I don’t have access to the detailed Gallup data, but data from the World Values Survey relating to people who are “completely satisfied” with their lives (score of 10 on the WVS rating scale) may be relevant. The following chart is based on data for high income countries in the latest round of surveys (2010-14) who claim to be completely satisfied with their lives.

The chart shows that being completely satisfied with life does not prevent people from being in agreement with the proposition that because of science and technology there will be more opportunities for the next generation. Optimism about such matters might even help to explain why some people are completely satisfied with their lives.  

Postscript: November 2019

Recent research by Alan Piper has suggested that optimism and pessimism about the future have an important influence on life satisfaction that is not attributable to personality differences among individuals. The use of German panel data covering several decades enabled the author to control for individual fixed effects (including those attributable to personality differences). Controlling for fixed effects reduces the estimated coefficients, but their size suggests that views of the future have an important impact irrespective of personality differences. After controlling for fixed effects, the estimated reduction in life satisfaction experienced by individuals who report being pessimistic is comparable to that associated with unemployment.

The paper: ‘Optimism, pessimism and life satisfaction: an empirical investigation’, February 2019, German Socio-Economic Panel (SOEP)

The results suggest that while many people who have high life satisfaction might think that the life they are living is the best possible at present, that is consistent with them being optimistic about the potential for their lives to become even better in future.