ASIDE from war, corruption is probably the biggest obstacle to economic and social development in poor countries. But it’s best we see ourselves as being on a continuum with them, rather than as having solved the problem. Even if no law was broken, Wall Street financiers imposed vast costs on us all by corrupting the financial system – while they walked away with billions.
The way I see it, all social and economic institutions are an ecology of private and public goods – of private and public motives. If I’m right, our penchant for ideological trench warfare between those arguing for the primacy of the private over the public or vice versa is a sideshow. What matters is making the ecology of public and private as healthy as possible.
Let me explain.
In a market, people pursue their own interests. That’s the point of markets. But that self-seeking is according to rules. In addition to pervasive social norms, there’s also the law. But whereas traders are self-interested (mostly within the rules) those enforcing the rules – such as police and judges – represent collective interests and must reflect that in their work, rather than their self-interest. Market failure arises where such public standards cannot be delivered – so traders must waste their time and resources checking to ensure they’re not being cheated and fighting for their share.
And this same ecology of public and private goods, of competitive and public spirited endeavour, is just as crucial in the market for knowledge. Continue reading
Economists love tradeoffs. Indeed, their basic model of the world breaks down where such tradeoffs don’t occur. Lucky for them since the world really is full of tradeoffs. If you want more carrots, you’ll have to do with fewer of something else. Here they’re substitutes. But, to use an ugly word which first became faddish in the 1980s, where there are synergies between things that you’re after, you’re in a wonderful world.
Economists love arguing that there is a tradeoff between equity (or perhaps equality of income) and efficiency. Of course there are such tradeoffs. If you tax work at high enough rates, especially of more productive people who are likely to be earning more, if you buy yourself sufficient equity between their own take-home pay and those who are less productive, you may also buy yourself less work from your most productive people – a classic equity/efficiency tradeoff.
But of course the world is full of synergies between efficiency and equity.
If you discovered that you had cancer would you (a) find a doctor who is an expert in treating your disease and follow their advice, or (b) attempt to devise your own treatment by reading about cancer on the internet?
According to some sources, Apple founder Steve Jobs may have shortened his life by relying too heavily on (b). Martina Cartwright at Psychology Today writes, "When Mr. Jobs was first diagnosed in 2003, he chose to pursue alternative therapies, including acupuncture, herbal, diet and fruit juice therapy and spiritual consultations. Many of these therapies he found on the Internet."
In the Weekend Australian Cassandra Wilkinson cites Jobs as an example of the "countless tragic cases of people delaying or denying medical treatment in favour of quackery. Jobs is only a high-profile example of a growing problem." Andrew Bolt concurs: "’alternative medicines’ are not just a danger to our health but an insult to our reason."
Also in the Australian, Brendan O’Neill complains that climate change sceptics can’t get a fair hearing because activists attack their motives rather than engaging with their arguments. This "stinks of intellectual cowardice", says O’Neil. "Instead of taking sceptics up on what they say in public, campaigners dig for dirt behind the scenes."
O’Neill wants a free public debate where "all of us can hear ideas, assess their worth and accept or reject them." What he doesn’t want is activists wasting everybody’s time by uncovering which climate change sceptics are being bankrolled by oil companies.
The Anglophone countries often cluster together on various measures of national greatness or depravity – such as household savings (we haven’t been doing much of it – until recently). But it’s quite dramatic how much worse we’re doing on obesity than anyone else.
And boy do those Americans have a track record in obesity.
Figures from this OECD Study.
Herewith my op ed from the Herald and Age today.
What is the good life and are we living it?
Assessing and measuring wellbeing has vexed us since ancient times. But a funny thing happened on the modern world’s way to the answer. The metric that economists used to dampen down the business cycle – Gross Domestic Product (GDP) – received such prominence that it ‘went viral’ as we say these days. It became the default measure of national progress.
But there’s lots wrong with GDP as a measure of economic wellbeing let alone more general wellbeing. Measuring gross activity, it ignores the growth and depreciation of assets – such as buildings, equipment, natural resources like farmland and mineral deposits, biodiversity and clean air. And that’s not to mention the greatest asset of all – our knowhow.
Moreover GDP is measured by money changing hands. So converting bread, mince and salad into a hamburger increases GDP in McDonalds but not at home. More starkly, an evening of passion and pleasure only adds to wellbeing as measured by GDP if it happens in a bordello! More broadly still, GDP takes no account of the distribution of income or of our physical or social wellbeing.
But considering how different all these phenomena are, how can we possibly measure their sum impact on national wellbeing in a single number? Because it would ‘dumb down’ complex issues, economics Nobel Laureate Amatya Sen initially refused to participate in the construction of a single index of human development to help guide development in poorer countries. But he relented because he appreciated that, however unsatisfactory a single wellbeing index might be, it was better than the alternative. Given the thirst for simple answers, the alternative is even more dumbing down as would occur if GDP yet again filled the vacuum. Continue reading