How many WELLBYs is the corona panic costing?

Posted on April 8, 2020 by Paul Frijters

How much unhappiness is created by the unemployment of millions of people in Western countries (mainly N-Am +Europe) caused by the corona panic? How much unhappiness has been created due to the vast expansion of loneliness and physical inactivity? And in terms of the tradeoff between the quality of life and the length of life, how many “equivalent lives” are the isolation policies costing us via our reduced quality of life?

In an earlier post I calculated the loss of life due to the economic recession caused by the hysteria to be at least 10 million whole lives in the whole world, probably closer to 50 million. This was essentially calculated from taking the discounted economic loss to be at least 50 trillion and combining it with the rule of thumb that the value of a statistical life in the world is around 1-4 million each, a bit higher in the richer countries and much lower in the poorest countries. 10-50 million lives lost was thus the expected loss of life in the decades to come due to less government services, poorer nutrition, and increased social tensions of the type we are seeing in India.

Now I want to consider the importance of the quality of life, focussing just on the billion or so living in the West, using a wellbeing criterion: the likely effect of the social isolation and the economic collapse on the levels of life satisfaction of the population. The basic unit of analysis is the WELLBY, which is one point change in life satisfaction for one person for one year when measured on a 0-10 scale. As a rule of thumb, the average year of life in richer countries is worth about 6 WELLBYs, less in poorer countries where average wellbeing levels are lower. Then a whole life of 80 years, which is the average life expectancy in the West, is worth about 480 WELLBYs.

I will look only at the two items that I think are the most important components of the WELLBY loss involved in the panic and the social isolation policies: unemployment and the mental health costs of isolation.

We cannot accurately know the full WELLBY costs from unemployment and loneliness caused by the corona panic, but we can make an educated guess using the estimates around on the economic collapse, the social collapse, and what we know from the wellbeing literature. Over the fold, I detail why I think another month of mass isolation will cost the West at least the equivalent of a million deaths in terms of reduced quality of life. Continue reading →

Posted in Coronavirus crisis, Death and taxes, Democracy, Education, Employment, Health, History, Politics - international, Science, Social, Social Policy, Uncategorized | 34 Comments

May the farce be with you: legal edition

Posted on April 7, 2020 by Nicholas Gruen

Well, well, well. The legal system has bungled its way to releasing a guilty man. Even if George Pell were not guilty of any acts of child molesting (as it was called during most of the time he was doing it) he’d belong in jail for his criminal disregard and wilful hostility towards the interests of the thousands of innocent children who were abused and whose lives were so devastated as people were shifted from parish to parish.

Having watched Revelation’s Episode 3 – remarkably quickly removed from the ABC’s iView Website this morning – 1it is clear on a host of similar fact evidence that Pell is in fact guilty of the crimes he was convicted of by a judge and jury.

For now, I take a small amount of comfort that the monumental incompetence of this system which has enriched the lives of so many lawyers in the last few years for putting on this dysfunctional show, has engineered a situation where a man goes to jail even though everyone has known there was a good chance he’d be found not guilty at the end of the process.2

I’m sure if I asked a lawyer why this was the case they’d come up with a good reason – or at least a reason that satisfied them. It wouldn’t satisfy me – it’s completely stupid. Perhaps you know that you haven’t really made it as a profession if you can’t do things that are utterly absurd on their face and have a large number of the trained professionals telling you that it really was for the best and that the system would be much, much worse if it didn’t do such utterly stupid things.

Certainly, economics qualifies as a profession if that’s the criterion. Professions that have to build things that work – like engineering – not so much.

Postscript: Just tell me about the money. One more thing. At the end of Episode 3 of Revelation the (I think) then most senior Catholic was in Rome for a Vatican gabfest on the crisis of child sex abuse in the Church. He seemed like a reasonable enough guy – but who knows. He’d obviously have been schooled in the PR of it all and he gave some statement to the assembled cardinals (if that’s what they were – they dressed in green silken robes and had pink skull caps on – as you do.)

The language had been amped up from the (at least in retrospect) creepy language adopted by so many apologists for the church as these revelations have been processed by the churches. I recall Pell talking about his ‘Melbourne’ model of solving this crisis talking about ‘walking with victims’ and all that stuff. (About all that can be said for that kind of stuff is that it’s better than the treatment they got in private.)

Anyway, I’m thoroughly uninterested in words from the church. I think we should have a moratorium on them. The only thing that will satisfy me are the words Mario Draghi used to save the Euro – at least for a time. “Whatever it takes”. I want to hear senior Catholics say this:

Enough with the words.  I am ashamed to say that my church has utterly debased them since this crisis was dragged into the light – with the Catholic Church relentlessly resisting at every turn. ‘By their fruit ye shall know them’. Accordingly, I say to you now that my Church is not serious if it does not immediately set about unwinding the labyrinth of the legal structures it has put in place to deny those who have a rightful prior claim on the wealth of the church – the victims of my church’s crimes.

Post-postscript: The Pope seems pretty pleased he’s got his boy off – all very reminiscent of Jesus really when you think about it.

  1. It reads “In response to the High Court’s decision regarding Cardinal George Pell, the ABC has temporarily removed episode three of Revelation from its platforms while updating its content”. ↩
  2. The only case for this would be if Pell was a chance to abscond, but measures can be taken to render the chances of that negligible. ↩
Posted in Cultural Critique, Law, Religion | 76 Comments

Troppo group subscription to Crikey: is this the last gasp?

Posted on April 3, 2020 by Nicholas Gruen

From Twitter.

Till now I’ve organisd a TROPPO GROUP CRIKEY SUBSCRIPTION for around 50

I advertised I was doing renewals on Twitter and Troppo a month ago and got about 1 or 2 takers

Now someone else wants a renewal

If I can get some serious buy-in I’ll rinse and repeat

If not that’s it!

Posted in Best From Elsewhere, Blegs | 2 Comments

Dependency theory and my impatience with impatience

Posted on April 3, 2020 by Nicholas Gruen

This post is barely worked up from an email I wrote in response to a student in development studies. She’d been working on environmental this and that and the Sustainable Development Goals (about which I’d class myself a card-carrying member of the economists club as being highly sceptical). Anyway, having sent her to my missive on environmental policy as symbolism, She asked me about Dependency Theory. This is, with a bit of light editing, what I wrote back. As you can see, I’m going on impressions I have, not any deep learning about the subject. So this is strictly FWIW – which may be very little.

I don’t know much about dependency theory. I’d be wary of the way in which it is so easily politicised. I don’t mean by that to suggest an ideological bias one way or the other but rather something else. I’ve recently come to think that one of the most important ways we hold ourselves back is impatience. Particularly the impatience with which we proceed from intellectual idea to some policy proposal. (This was the point of all those pictures of Leonardo Da Vinci doing design and engineering work on flying machines and the impossibility of building an efficient modern jet plane without literally millions of hours of work – design work, engineering work prototyping. Much of this work won’t work out, some of it will and slowly capability – social, technical, organisational, economic, policy – is built – see this presentation.

So of the people who cooked up dependency theory – at least reading about it on Wikipedia, I’ve not done so before – they’re not all people with ideological barrows to push – a lot of them are just trying to understand development to promote it.

But it’s then become a way for the left to blame the developed countries for their plight and a means to justify impatience. The pitch is this – “just follow our (often Marxist or strongly leftist) agenda and things will all sort themselves out”. But the main problem of the developing countries is their inability to patiently build all the technical, social and market infrastructure for their economy to become more productive.

A good rule of thumb here is the idea that if a nation imposes trade restrictions, it will bear around 80 percent of the total global cost of those restrictions – with countries trading with it bearing the other 20% (this will generally vary somewhat with the size of the country and at least intuitively you’d expect the larger the country, the more costs it could impose on other countries, but that’s just my intuition – it could be wrong).

So there’s some truth in dependency theory I think but

  • It’s only a very partial explanation of under-development and
  • More importantly if one wants to use it as a frame, you can use it to pinpoint very specific ways in which it might work – so that the developing country can focus its policy response to those things that are blocking its development. That then gives you a way to frame what is a more promising line of analysis in people like Rodrik, Hausmann and so on (Being South American, you’ll be pleased that Hausmann is South American – though in his case Venezuelan).

Anyone have any other (preferably better informed) thoughts?

Posted in Economics and public policy | 3 Comments

Information, ignorance, trade-offs and system collapse

Posted on April 1, 2020 by Nicholas Gruen

Whoever is doing PR for this virus has certainly come up with a natty logo.

An argument someone put to me today which makes a lot of sense. In the GFC markets collapsed not just because there was too much risk in the system – though there was – but because it was hidden. With the various bits of sub-prime debt sliced and diced into teensy pieces many of which had different risk characteristics anyway, it was impossible for many people on the hook to know their position. And so they couldn’t participate any longer in the market – because people wouldn’t accept them as a counterparty. And so one part of the market seized up after another.

One can distinguish between two approaches to the coronavirus crisis –  high information and low information. In low information countries which can’t locate the risk the trade-off between economic and health policy is very extreme. One needs to lock down the population to get the rate of spread down. These countries include China (early on), most countries in Europe and the US – though people are saying the Germans have better information – and are doing better.

Australia has done a lot of testing but it doesn’t seem to be very well targeted, though no doubt it’s getting better. Meanwhile, Singapore, Taiwan and South Korea have proceeded with much lower disruption to their economies, much less need to lock their population down, because they can track the virus with testing and strong case management of those who test positive.

I’ve previously noted my amazement at the official Australian policy of simply assuming that this will go on for six months because it seemed to me we weren’t given good reasons to believe that it was impossible to get the virus under control and then get rid of it with a short sharp shock of 4 to 8 weeks as New Zealand are trying to do. I now add this point. We were assured again today that we’re in this for six months.

If we can’t transition to a quick exterminate the virus strategy, why can’t we transition to the proven East Asian Strategy in the space of four to eight weeks? I also wonder why we’re not using normal tech much more. If you attend school in Nanjing now, they take your temperature on the way in. If it’s elevated you’re not welcome in the building. With over 80 per cent of coronavirus cases having elevated temperature, it’s a very efficient test.

Posted in Economics and public policy, Health | 14 Comments

Crowdsourcing the crisis: crossing the is/ought barrier

Posted on March 31, 2020 by Nicholas Gruen

I recently reposted my old column on blogging the 2008 crisis and there’s been some great blogging of this crisis. What about crowdsourcing the crisis? To some extent, we’re doing that with people out here in television land suggesting stuff and bureaucrats and politicians ‘triaging’ those ideas along with their own and their masters’ to try to respond to the spectacularly difficult position we’re in.

But having to be funnelled through the bureaucracy, this system is necessarily going to focus on all the big things – which are the most important things at least in the short term. In the longer-term however fine-grained attention to detail is arguably more, perhaps a lot more important. The graphs I’ve used above show the staggering difference in productivity growth over a long period of time between two hierarchies one of which has a functioning system of encouraging and implementing ‘bottom-up’ improvements while the other doesn’t.

When the Government 2.0 Taskforce ran in 2009, lots of people were saying “why can’t we have a Wikipedia of government?” My answer then, as now, is that Wikipedia and open source software were unusual outliers, or to change the metaphor, low hanging fruit. If crowds are to displace the work of well-organised hierarchies they need a focus of convergence. With open-source software, it’s software that works or works better. With Wikipedia, the point of convergence is the NPOV or ‘neutral point of view’. You can’t get agreement on Wikipedia on whether Donald Trump is a good president or not, but you can about when he was born.1

Although there were various near hoax stories, for instance, that the New Zealand police got the police act written on a wiki, the fact is that running a government is not about what is the case, but what ought to be the case. There was also a lot of hype about prediction markets at the time. Prediction markets are fine things, but they’re on the same side of the is/ought divide. They give you insights into the likely state of the world and provide only indirect insight as to what we should do.

The point of convergence is not just a guide for participants in their own work and in their choice of whose work is published (on Wikipedia) or enters the codebase (in open source software). It’s the principle around which a deep and hierarchical meritocracy is built.2

In deliberative discussion which is necessary to decide good from bad policy, we’ve not done so well. At the time of the Government 2.0 Taskforce. we pointed to the way in which the new tools held out hope of such a possibility but didn’t say much about how to build them. I went on a lot about the prospects it gave for the existing system to open up to new possibilities – for instance in identifying new talent. It still could, but existing systems aren’t very good at doing that.

But at the same time as the possibility of opening up discussion more widely presented itself, so the scope for media gotcha also ramped up. There were now millions of pairs of eyes looking for opportunities to misrepresent officialdom and get the resentment spiral going for their side of the ideological divide, or maybe just for kicks. And the incumbent system was already paranoid about being misrepresented, as well it might have been, given the mass media’s lack of interest in asserting its own role in being an active ‘umpire’ of partisan debate – it was simply optimising eyeballs and clicks long before social media revved up the effect.3

So we needed to explore digital tools to establish more meritocracy online. As I’ve argued elsewhere, that is a critical part of the middleware of democracy about which we’ve done next to nothing. As far as policymaking is concerned, shortly after the conclusion of the Government 2.0 Taskforce, a couple of volunteers helped me build a demonstration site which was an attempt to work towards a solution to these problems.

I chose fiscal policy as a good area in which to build a proof of concept. Below the fold is an edited version of a concept document produced then.  Continue reading →

  1. Just to drive home the point, the NPOV even works if you can’t agree even on that. Then you can agree on the disagreement about the source. “The NYC records say Donald Trump was born in NYC on June 14, 1946, but Barack Obama has raised doubts about this and has presented evidence that Donald Trump was not born, but rather hatched and that this took place in 1947 in Kenya”. ↩
  2. As I wrote here,
    • The vast outpouring of content available on the internet also means that one of the critical services provided by platforms is the filtering of content.
      • In purely social networks like Facebook and Twitter ‘friending’, ‘trending’ and ‘tagging’ provide principle means of filtering.
      • However, where users are interested in the quality of the content, either the project hierarchy filters good from bad content itself a la Wikipedia or it establishes a means by which reputations can be judged. Thus eBay records and presents reputational information to enable users of the site to identify good trading partners. Other sites like Slashdot have built organic, meritocratic elites within the project based on the community’s perception of the quality of individuals’ contributions with enhanced influence rewarding enhanced reputation.

    ↩

  3. See this post, especially section III for examples. ↩
Posted in Democracy, Economics and public policy, History, Politics - national, Web and Government 2.0 | Leave a comment

The master, his emissary and the balance of risk

Posted on March 27, 2020 by Nicholas Gruen

Is this a bunch of black patches on a white background? It is. Of course it is. (Remember you’re at Troppo now. No mucking around.) It also depicts something which you can’t unsee once you’ve seen it. Such is the power of perspective-taking. Now get back to reading the post and stop slacking off on the pictures.

The performance of expertise is tangled up in status displays. Often that subtly displaces what should be the true object of inquiry. Thus, for instance, economists will often be drawn off into spinning their view of a future which A. G. L. Shackle engagingly called “kaleidic”. As I’ve argued, they should, instead, be focused, as weather forecasters are, on understanding how much they know – which in forecasting would actually involve understanding how little they know. Further:

  1. Without confidence intervals around the forecasts, they could do more harm than good and
  2. Forecasts about the major risks to the economy would probably be more useful than point forecasts. They should be issued in a probabilistic form such as “We estimate the chances of recession in the next 6 months has risen from 10 to 20%”.

At the highest level of generality, these problems can be thought of in terms of Nietzsche’s story of the Master and his Emissary. In the story, the Master of a great kingdom can only run his empire by sending emissaries out to govern provinces. The emissary is a competent fellow, but the competence he’s shown his master is tightly defined in some domain – say accounting, and running committees. When the emissary usurps his master, his part of the kingdom declines because he lacks wisdom. You know – the wisdom that the master has – masters are like that. Continue reading →

Posted in Coronavirus crisis, Economics and public policy | 18 Comments