Rich countries and happiness: the story of a bet.

Posted on December 10, 2013 by Paul Frijters

Do countries that are already rich become even happier when they become yet richer? This was the essential question on which I entered a gentleman’s bet in 2004 with Andrew Leigh and which just recently got settled.

The reason for the bet was a famous hypothesis in happiness research called the Easterlin hypothesis which held that happiness did not increase when rich countries became even richer. In my ‘Fred Gruen’ presentation on this matter in 2004 I used the following graph to illustrate the happiness income relation across countries:

This graph shows you the relation between average income (GDP in purchasing power terms) and average happiness on a 0-10 scales for many countries. As one can see, the relation between income and happiness is upward sloping for low levels of income, but becomes somewhat flat after 15,000 dollars per person. I championed the idea that this was not just true if you looked across countries, but that this would also hold true over time.

Andrew Leigh’s thinking was influenced by other data, particularly a paper by Stevenson and Wolfers which – he thinks debunks the Easterlin hypothesis. Here’s one of their graphs: Continue reading →

The Forgotten Protocols

Posted on November 12, 2013 by Gummo Trotsky

The Montreal Protocol on Substances that Deplete the Ozone Layer came back into the news on Monday (11 November), with reports[i] on a paper published in Nature Geoscience which finds that reductions in chlorinated fluorocarbon (CFC) emissions achieved under the Montreal Protocol have contributed to the lower rate of global warming since the 1990s. This is because CFCs – and other halogenated hydrocarbons covered by the protocol – are also greenhouse gases, socutting these emissions provides a double benefit for the environment.

According to the Commonwealth Department of the Environment the Montreal Protocol ‘is widely considered as the most successful environment protection agreement’. Well, they would say that wouldn’t they? Them being a federally funded sheltered workshop for greenie policy wonks and all. Put that cynicical idea aside, however, and you’ll find that there are good reasons to hail the Montreal Protocol as a success. I’ll restrict myself to two:

First up, the Montreal Protocol is the first international environmental treaty to achieve universal ratification. That’s merely a political success but it does demonstrate that it’s possible to get at least universal lip service to international action to deal with international environmental problems;
According to NASA’s Ozone Watch, the Antarctic Ozone hole reached its largest extent on 24 September 2006 – it’s now a lot smaller, so there was enough genuine commitment on the part of signatories to make the protocol work.

The Montreal Protocol isn’t the only international protocol on the environment that has been a success: the Convention on Long Range Transboundary Air Pollution has been equally successful in dealing with the problem of acid rain. It’s worth remembering these lessons of recent history in the current political climate where it seems so many are advocating, as their bottom line on dealing with climate change, that the responsible position for Australia to take is ‘We won’t ‘til you do and so there’.

[i] Such as this one from National Geographic and locally, this one from The Australian.

Perverse Consequences of Well Intentioned Regulation: Evidence from India’s Child Labor Ban

Posted on November 5, 2013 by Nicholas Gruen

by Prashant Bharadwaj, Leah K. Lakdawala, Nicholas Li – #19602 (CH DEV)

Abstract:

While bans against child labor are a common policy tool, there is very little empirical evidence validating their effectiveness. In this paper, we examine the consequences of India’s landmark legislation against child labor, the Child Labor (Prohibition and Regulation) Act of 1986. Using data from employment surveys conducted before and after the ban, and using age restrictions that determined who the ban applied to, we show that child wages decrease and child labor increases after the ban. These results are consistent with a theoretical model building on the seminal work of Basu and Van (1998) and Basu (2005), where families use child labor to reach subsistence constraints and where child wages decrease in response to bans, leading poor families to utilize more child labor. The increase in child labor comes at the expense of reduced school enrollment. We also examine the effects of the ban at the household level. Using linked consumption and expenditure data, we find that along various margins of household expenditure, consumption, calorie intake and asset holdings, households are worse off after the ban.

The paper is here.

Tiptoeing through the taboos of vox pop democracy

Posted on November 4, 2013 by Nicholas Gruen

Schumpeter’s two chapters on democracy in his great book Capitalism, Socialism and Democracy provide the best framework I know of articulating the things that trouble me about the current state of democracy.

The chapters assert the following propositions:

Rousseau’s idea of the will of the people is an illusion for the simple reason that that will is distilled from a chaos of conflicting interests.
Democracy arrives at decisions by way of a process by which factions of the political class vye for the consent of the governed.
When considering politics, people are in a highly abstract world that’s usually far from their own concrete experience. They also know that their own singular vote amongst millions gives them an infinitesimal chance of influencing political outcomes. So their practical knowledge and their incentive to exercise care are both gravely diminished compared to situations where they are making decisions about their own welfare. This invites voting which is at least as much expressive as it is deliberative. In Schumpeter’s words, “In politics the typical citizen . . . argues and analyses in a way which he would readily recognise as infantile within the sphere of his real interests. He becomes a primitive again. His thinking becomes associative and affective”. Schumpeter draws attention to the similarities between this and the process by which advertising is addressed to manipulating the unconscious.
In all things organisational, whether from the Federal Government to the local tennis club, a division of labour is necessary for the organisation to function effectively. Schumpeter puts it this way. ”Collectives act almost exclusively by accepting leadership — this is the dominant mechanism of practically any collective action which is more than a reflex.”. Schumpeter thus grafts the idea of leadership onto this division of labour and perhaps he is right that one needs leadership, but one doesn’t even need anything as strong as that to make the point. We need a division of labour. And that calls for delegation. Right now I am reliably informed that the polity is in the lengthy process of investigating how to deal with Food Derived from Reduced Lignin Lucerne Line. I’m thinking we need delegation here. Getting us all to come up with an opinion on Alan Jones show just won’t cut the mustard. Thus we have any number of agencies in our society that do this kind of stuff, or advise governments and all the rest of it. But the people remaining sovereign have the power to overrule their delegates. That’s as it should be. But if the thing is going to function tolerably the people need to give due regard to the fact that they don’t know the details – the people we delegated the issues to know the details.

Alas as time has passed since Joseph Schumpeter shared his dyspeptic but insightful thoughts with us, two things have been exacerbating the tensions in this system. Continue reading →

Kludge and how think tanks and policy wonks make it worse

Posted on October 13, 2013 by Don Arthur

Think tank scholars and policy wonks strive to be both practical and clever. Being practical means proposing policies that have a good chance of getting taken up by government in the short term. And being clever means policies that generate big benefits at little or no cost. But according to American political scientist Steven Teles, the short term benefits of practicality and cleverness have long term costs.

Continue reading →

Appeal to General Dempsey | Consortiumnews

Posted on August 31, 2013 by Ingolf

MEMORANDUM FOR: General Martin Dempsey, Chairman, Joint Chiefs of Staff

FROM: Veteran Intelligence Professionals for Sanity ^[1]

SUBJECT: Syria and Our Oath to Defend the Constitution

Dear Gen. Dempsey:

Summary: We refer to your acknowledgment, in your letter of July 19 to Sen. Carl Levin on Syria, that a “decision to use force is not one that any of us takes lightly. It is no less than an act of war.” It appears that the President may order such an act of war without proper Congressional authorization.

As seasoned intelligence and military professionals solemnly sworn to support and defend the Constitution of the United States, we have long been aware that – from private to general – it is one’s duty not to obey an illegal order. If such were given, the honorable thing would be to resign, rather than be complicit.

Who knows if this appeal (h/t SST) will strike a spark. The trend these retired intelligence professionals are trying to bring to an end is long-standing and backed by powerful interests. Nevertheless, its issuance alone is a critical marker of how deep the disaffection runs.

It’s true too that for once, a touch of optimism may be in order. Public opinion is strongly against any further military actions in the Middle East. The Obama administration’s unseemly rush to judgement and action also leaves them very exposed. The question of why there’s no time for proper evaluation of the evidence and open discussion of the potential consequences isn’t an easy one to avoid. And then there’s the UK Parliament which on Thursday took the radical step of voting against any British participation in punitive actions in Syria.

The imperial presidency that’s become the regrettable norm in recent decades may at last have tactically overreached. Continue reading →

Punishing the innocent: Syria and the politics of symbolism

Posted on August 29, 2013 by Ingolf

Simply bombing Damascus or Aleppo to assuage the conscience of the West that they ‘did something’ seems like the worst form of symbolic politics.

It’s not the only sensible thing Matthew Fitzpatrick had to say in an article at The Drum today.

He also argued the appropriate forum for judging (and, should the verdict be guilty, punishing) a war crime such as gassing one’s own people is the International Criminal Court.

It seems to me he’s blindingly right. Any other approach is not only wrong (and dangerous) in terms of process and precedent, but punishes the wrong people. However carefully planned and executed, military strikes would inevitably add to the woes of Syria’s long-suffering population. The argument “but how can we not respond to this terrible crime” therefore falls over at the first hurdle. First do no harm is sometimes a decent rule of thumb in international affairs as well.

In any case, punitive strikes would be action in a vacuum. Continue reading →

Exiting the maze

Posted on August 10, 2013 by Ingolf

That power must reside elsewhere, with the best and brightest, with those who have surveyed the perils of the world and know what it takes to meet them. Those deep within the security apparatus, within the charmed circle, must therefore make the decision, on America’s behalf, about how much democracy – about how much discussion about the limits of democracy, even – it is safe for Americans to have. (America against democracy – The Economist)

Until Snowden flew to Hong Kong, that’s how things were. Small wonder the reaction to his revelations often seemed so disproportionate to those of us on the outside. No provision had ever been made for well founded, fact based cross-examination of their surveillance activities. It was never meant to happen. They were to operate quietly in the shadows, always the watchers, never the watched.

The American public weren’t alone on the outside. Despite repeated efforts by NSA supporters and the White House to suggest otherwise, Congress didn’t fare much better. With the exception of those on the House and Senate Select Committees of Intelligence, they’ve been consistently stonewalled.

And, just to close the circle, any members of those committees who might want to share concerns with the public are prevented by law from doing so.

Two Democratic Committee members in the Senate, Ron Wyden and Mark Udall, spent years warning Americans that they would be “stunned to learn” of the radical interpretations of secret law the Obama administration had adopted in the secret FISA court to vest themselves with extremist surveillance powers.

Yet the two Senators, prohibited by law from talking about it, concealed what they had discovered. It took Edward Snowden’s whistleblowing for Americans to learn what those two Intelligence Committee members were so dramatically warning them about.

One needn’t conjure up a conspiracy to account for this somewhat grotesque outcome. Continue reading →

George H W Bush & The Broccoli Wars

Posted on August 8, 2013 by Gummo Trotsky

George H W Bush (father of George W, who had one less initial and a lot fewer functioning cortical neurons) divided US public opinion with this famous declaration in March 1990:

I do not like broccoli and I haven’t liked it since I was a little kid and my mother made me eat it. And I’m President of the United States and I’m not going to eat any more broccoli. Now look, this is the last statement I’m going to have on broccoli. There are truckloads of broccoli at this very minute descending on Washington. My family is divided. For the broccoli vote out there: Barbara loves broccoli. She has tried to make me eat it. She eats it all the time herself. So she can go out and meet the caravan of broccoli that’s coming in.