Club Troppo

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. (Continued)

I cam across this post in my morning Google reader perusal:

A ballot measure that StateImpact Ohio (a creation of local public media and NPR) describes as “a referendum on a constitutional amendment…aimed at keeping the national health care reform law from taking [e]ffect” won in all 88 counties in Ohio. In 81 of the counties, it won by a margin of at least 20 percentage points. Statewide, it won by 32 points (66 to 34 percent).

Ohio is a northern swing State not a so-called “Red State” so you’d have to regard this vote as a significant measure of the apparent unpopularity of Obamacare.  I can’t help asking why?  I’m not au fait with the details of Obamacare, but in general terms I thought it was not all that dissimilar (at least in philosophy) to Australia’s Medicare system i.e. universal health care cover.  Why then the almost diametrically opposed outcomes in terms of public support?  Australia’s Medicare system was so popular after introduction that the Coalition was forced to reverse its initial opposition to it and has promised ever since to retain it.

Are Americans so radically different from Australians?  Or is Obamacare a radically different or badly flawed initiative?  I simply don’t know enough about it to have an opinion, so I’m rather hoping some more erudite Troppo readers can advise.

BTW Despite rumblings and an application before the US Supreme Court, it doesn’t look very likely that Obamacare will be held unconstitutional.

Disappointed Troppo readers everywhere have gradually come to a realisation – upon which I came clean on in a recent thread.  Troppo is really an ‘eyeballs’ play as we say in the trade and things haven’t been this good for eyeballs since Tim Blair sent some brownshirts our way a long while ago.  Anyway, it turns out that economic development has a surprisingly robust relationship with penis size. As this paper shows. Discuss with relation to any rocks you would like to get off. Baseless accusations are encouraged – though participants are reminded about our point of difference here at Club Pony – they’re not compusory.

From Supersizing supercenters? The impact of Walmart Supercenters on body mass index and obesity, by Charles Courtemanche and Art Carden, Journal of Urban Economics 69 (2011) 165–181

Researchers have linked the rise in obesity to technological progress reducing the opportunity cost of food consumption and increasing the opportunity cost of physical activity. We examine this hypothesis in the context of Walmart Supercenters, whose advancements in retail logistics have translated to sub- stantial reductions in the prices of food and other consumer goods. Using data from the Behavioral Risk Factor Surveillance System matched with Walmart Supercenter entry dates and locations, we examine the effects of Supercenters on body mass index (BMI) and obesity. We account for the endogeneity of Walmart Supercenter locations with an instrumental variables approach that exploits the unique geo- graphical pattern of Supercenter expansion around Walmart’s headquarters in Bentonville, Arkansas. An additional Supercenter per 100,000 residents increases average BMI by 0.24 units and the obesity rate by 2.3% points. These results imply that the proliferation of Walmart Supercenters explains 10.5% of the rise in obesity since the late 1980s, but the resulting increase in medical expenditures offsets only a small portion of consumers’ savings from shopping at Supercenters.

I never fully understood Google Health.  It seems to be a consumer product, inviting you to input your data and track your health, set health goals and so on. Certainly there could be some benefits in this and in the aggregation of information, but the amount of effort maintaining all your records and doing so accurately boggles the mind.  I can’t see myself wanting to do it.

But its real power, surely, would come from the way in which it might operate as a unit patient record, and if it was going to operate as one of those, you needed to get buy in from health systems. Then you could really be cooking with gas with the system inputting data, you doing likewise as well as controlling the permissions that allow people to access your data at different levels of intimacy. With a lot of people included in the system the data would really be powerful when aggregated.

Given that, I thought Google’s strategy would be to build the best consumer app they could but then go hell for leather to get some health systems to interface with them.  Then once some health systems demonstrated the power of the approach, Google would be sitting on top of the incipient standard and – they’d be happy campers, and given that the health systems would not agree to do this without assurances of the portability of data, it’s hard to see how we all wouldn’t be happy campers. I don’t know how much they tried to engage health systems if at all.  They do talk about “adoption among certain groups of users like tech-savvy patients and their caregivers, and more recently fitness and wellness enthusiasts”.

“But” Google reports, “we haven’t found a way to translate that limited usage into widespread adoption in the daily health routines of millions of people,” and so they have just announced the closure of Google Health.

(Continued)

Cartoon purloined following Patrick's excellent advice @ comment 8.

As I’ve said at least once before, my own approach to economics could be described as looking for $100 bills on the pavement. I think they’re everywhere. I keep finding them.  Like I said when I last posted on this.

How many times have I visited a hospital where the patient has an ‘on-off’ switch for their lights. Now the teensy weensiest bit of thought about the situation the patient is in would lead one to install a switch with some capacity for dimming – so the patient or the nurse can set a level of light that seems right at the time. Now of course lots of hospitals have this. But whenever I see the lots that don’t I sigh with exhaustion. What hope is there for us if we can’t build beds for patients in hospitals that show the slightest thought for the patient?

It seems to me there’s a whole agenda here both within organisations and within policy. But, perhaps because there’s no overarching ‘narrative’ as we’ve come to call it, this stuff disappears for lack of some larger thematics.  In this sense the issue is similar to what I described as ‘the political economy of minutiae’ which stymies endless attempts to ‘fix’ the over-regulation problem.  Business and others are endlessly irritated and worse by regulation, but can’t really be bothered with attending to the micro-detail necessary to do something about it.

Likewise there are any number of things some small, some not so small that could improve our world at minimal cost or risk. Why aren’t they done?  Good question, but one is simply that everyone is busy doing what they do, they’re creatures of routine as are the organisations for which they work and nothing much happens. As Alfred North Whitehead wrote (and was quoted writing by Hayek in Chapter Two of his magnum opus, The Constitution of Liberty:

Civilization advances by extending the number of important operations which we can perform without thinking about them. Operations of thought are like cavalry charges in a battle — they are strictly limited in number, they require fresh horses, and must only be made at decisive moments.

And it seems that we need a cavalry charge to get something new happening.  Of course that’s well and good if it’s a difficult thing. Even if it looks like a good thing, if it’s going to really upset some people, if it’s going to be difficult to do, then a certain Burkean conservatism would say that that is not such a bad thing.  But often there are things that could make a substantial contribution to making things better without making anything worse (like the example above) but even so, they’re just not done – until that is some cavalry charge is mobilised to support them.

Anyway, here’s a $100 bill moment from Eliezer Yudkowsky (HT: Robin Hanson.

Have I ever remarked on how completely ridiculous it is to ask high school students to decide what they want to do with the rest of their lives and give them nearly no support in doing so? Support like, say, spending a day apiece watching twenty different jobs and then another week at their top three choices, with salary charts and projections and probabilities of graduating that subject given their test scores? The more so considering this is a central allocation question for the entire economy?

I’d also put my proposal for ‘windows on workplaces’ in the same category.  But somehow it doesn’t really fit any ideological mould and so there’s nothing to give it any urgency, nothing to get a cavalry to charge on its behalf.  So it sits there. . . .

Comments appreciated below, but comments itemising other $100 bills on the pavement appreciated even more.

Note to self: This Ted Talk touches on the same phenomenon.

We examine how multitasking affects performance and check whether women are indeed better at multitasking. Subjects in our experiment perform two different tasks according to three treatments: one where they perform the tasks sequentially, one where they are forced to multitask, and one where they can freely organize their work. Subjects who are forced to multitask perform significantly worse than those forced to work sequentially. Surprisingly, subjects who can freely organize their own schedule also perform significantly worse. Finally, our results do not support the stereotype that women are better at multitasking. Women suffer as much as men when forced to multitask and are actually less inclined to multitask when being free to choose.

By: Thomas Buser (University of Amsterdam)
Noemi Peter (University of Amsterdam)
URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:20110044&r=exp

Saul Eslake asked a bunch of people for comments on the recent Grattan Institute study of productivity and I sent him back a long email which I reproduce with some editing here. Nothing very surprising for people who are regular visitors here, but perhaps worth posting in case it provokes any thoughts.

• We’ve done a lot of micro-economic reform in basic goods and services and it’s driven productivity up.
• There’s only a bit more to do here.
• What we do to follow up on that brings in sectors like health, education, government services of various kinds.

 
These areas are different in a variety of ways:

• They are areas in which government is much more inextricably involved than they are in lots of the more easily ‘privatisable’ areas.
• They’re areas in which it’s not nearly as clear how to reform things (though there are admittedly some self evidently destructive things that one can reform – like egregious incentives to cost shift in health).
• They’re areas in which it is difficult and sometimes essentially impossible to measure productivity.
• Indeed, I was intrigued by a blog post I recently blogged about myself that many of these sectors are not just producers of ‘credence goods’ to a substantial extent, which is to say they produce goods which the customer may never know the quality of (even after consuming them). They are goods where the practitioners are feeling their way also. A teacher for instance often doesn’t know what works but plugs away doing the best they can.

• There’s a sense in the paper that ‘reform’ is fairly unproblematic, and I think the well of unproblematic problems is drying up. This amounts to more than saying that the low hanging fruit has been picked – though it has mostly been picked. It also means that further progress requires a lot more thought – not just action and bemoan  – or to change the metaphor the low hanging fruit has to a substantial extent been picked.
• That having been said there are many areas of potential micro-economic reform that have barely been spoken about.  To give just one example, our legal system is a ramshackle mess requiring people to bet their life savings on resolving disputes, many of which could be solved much more fairly, quickly and cheaply by a better designed system.  That would have huge benefits for many other areas of economic activity where a range of rigidities exist simply because the legal system is so dysfunctional.  Anyway I’ve set out some possible areas in the attached piece I did for Crikey a while back.

Regulatory reform is currently virtually useless. 
(Continued)

How could you compare the health systems of the world in terms of outcomes with plausible verisimilitude, in other words by making assumptions that don’t just give you junk? I was sceptical when I read of this index, but think it’s a pretty good, though like any such exercise it’s not hard to see that it’s not perfect.  Anyway, Bob Hahn and Peter Passell’s regulation2point0 newsletter drew my attention to this paper. And this is how they explain the methodology.

In order to provide a more precise measure of the outcomes that may legitimately be attributed to health care interventions, researchers have developed the concept of “mortality amenable to health care”. Amenable  mortality  is  generally  defined  as  premature  deaths  that  should  not  occur  in  the  presence  of effective and timely care. It takes into account premature deaths for a list of diseases, for which effective health interventions are deemed to exist and might prevent deaths before a certain age limit (usually 75, though sometimes lower).

Not so long ago economist Paul Frijters mused about drug legalisation here at Troppo.

It seems that Paul is an international trendsetter.  Now economist elder statesman Gary Becker and the world’s most prolific judge/legal academic Richard Posner are musing on the same topic at their joint blog.  Becker is unequivocally pro-legalisation though not especially analytical, while Posner attempts an economic analysis based on a recent paper by Miron and Waldock resulting in a couple of reservations and a proposed field study to resolve them:

Most important, the authors also do not consider the possible social benefits of prohibition. Prohibition reduces the consumption of mind-altering drugs. Of course there are mind-altering drugs that are not prohibited, and many of these are close substitutes. These include the numerous prescription drugs that have mind-altering effects very similar to those of the illegal drugs, and of course there is alcohol and cigarettes. Moreover, a tax on legalized drugs would raise the price to the consumer and thus moderate the effect of legalization on consumption. But if the tax is too high, it will result in reviving the illegal industry. And the authors probably underestimate the increased consumption that would result from a lower price or even the same price (brought about by a particularly stiff excise tax) because they don’t mention concerns with impurities and with the stigma of being a “drug addict” that are created by the prohibition and would be substantially reduced by its repeal.

The question would then be whether the external costs of increased consumption of mind-altering drugs would exceed the savings in law enforcement costs from legalization. It seems doubtful that marijuana consumption generates significant social costs, but legalizing it would generate only modest cost savings–$8.7 billion a year, according to the authors’ estimates. But cocaine, especially the crack form, along with heroin, ecstasy, LSD, methamphetamines, and perhaps others, may induce behavioral changes that cause social damage. Most leaders of black communities believe that rampant drug usage is highly destructive to their communities, and not only because of the gang activity that prohibition induces. Drug gangs would disappear with legalization and that would reduce the violence in those communities, but the effect might be more than offset by the effects of greater drug use.

Concern with the huge budget deficits of our federal, state, and local governments may gain the authors a more sympathetic reading than advocacy of repealing the drug laws usually does. From a budgetary standpoint, the authors are estimating an annual savings of almost $90 billion. But without an estimate of the social costs of increased drug usage, the path to repeal is blocked. It would a step in the right direction if the Justice Department would take the position that it will not enforce a federal drug law in any state that repeals its parallel prohibition of that drug; that way we might obtain experimental evidence of the social costs of illegal drugs.

NSW government criminologist Don Weatherburn addressed these questions in a recent address to the Medico-Legal Society of NSW.  It’s relatively short anyway but I’ve extracted the most relevant passages over the fold:

(Continued)