Monday, August 25, 2014

Happiness: The Failure of Growth

International comparisons of how per capita GDP affects happiness reveal the same pattern that we saw in the last two posts about health care and education: economic growth (higher per capita GDP) increases happiness at lower levels of income but stops increasing happiness at a level much lower than what we now have in the United States.

Here is a graph of per capita GDP and people's responses to survey questions asking them how happy they are and how satisfied they are with their lives.


We can see that higher per capita GDP stops increasing happiness at about $15,000 per year, less than half the per capita GDP of the United States.

This result is not surprising. In poor countries, more income is needed to provide people with decent housing, food, education, health care, and other essentials; it makes sense that people will become happier as they can afford more of the necessities and basic comforts of life. But when people reach about one-half of the average American’s current income, they have enough to make them comfortable, and there is relatively little benefit to consuming even more. 
Once you have the basic elements of economic comfort, such as good housing, health care, and education, and you also have some luxuries, such as music, books, and travel, consuming even more does not bring great benefits—but it does bring real costs.
Growth continues to cause massive environmental costs even after it stops bringing significant benefits. There would obviously be less chance of ecological disruption in the coming century, if nations that were already economically comfortable tried to achieve the best possible quality of life rather than the fastest possible rate of economic growth.
Derek Bok, former president of Harvard University, has written a book summarizing the current research on happiness, and he sums up the issue we face very neatly when he says:
“If it turns out to be true that rising incomes have failed to make Americans happier, as much of the recent research suggests, what is the point of working such long hours and risking environmental disaster in order to keep doubling and redoubling our Gross Domestic Product?” (Bok, The Politics of Happiness, p. 63)

Monday, July 28, 2014

Education: The Failure of Growth

International comparisons of educational spending and outcomes reveal the same familiar pattern that we saw in the previous post about health care. Greater expenditures produce better outcomes at lower levels of spending, but the benefits disappear after spending reaches a level that is much lower than what we spend in the United States.

Here is a graph of educational spending and achievement. The measurement uses the PISA test, which is the best data for international comparisons of educational achievement.

We can see that spending more per pupil on education does not increase achievement after spending reaches Australia's level. The United States spends more than twice as much as Australia, but has lower achievement.

In the case of health care, there was a very obvious reason why the United States had worse outcomes than other high-spending nations: we have the highest rate of obesity of any developed nation.

In the case of education, the reason is not as obvious. A couple of reasons seem plausible.

One possible explanation is lack of family time. Our economy requires many parents to work two full-time jobs, leaving them with little time for their children.  More children than ever are cared for by state agencies or are latchkey children who return to empty homes after school.  According to the Census Bureau, one-third of school-age children are home alone during at least part of the week.

A second possible explanation is excessive use of media. According to a recent study by the Kaiser Family Foundation, the amount of time that eight-to-eighteen-year old children spend with media increased from 6 hours 21 minutes per day in 2004 to 7 hours and 38 minutes in 2009. In 45% of all homes, the television is on most of the time, even when no one is watching it, and 71% of children have their own televisions in their bedrooms. The overuse of media is a direct distraction from learning: Almost half of all children watch television while doing their homework.

Media addiction works against academic achievement. This study found that 47% of the children who are heavy media users (spending more than 16 hours per day with media) get fair or poor grades, compared with only 23% of children who are light media users (spending 3 hours a day or less with media). Minority students are affected most: black and Hispanic students spend about four and a half hours more per day with media than white students.

It is astounding that heavy users are defined as those who spend more than 16 hours a day with media. There are only 24 hours in the day, so if you spent 8 hours sleeping, 16 hours with media would take up all your waking hours. Yet heavy users manage to spend more time than this. 

When it comes to education, we have reached a point where economic growth no longer brings significant benefits: we can see from the graph that there is little or no benefit to spending more than half of what the United States spends. At the same time, our consumer society works against education, by leaving parents with too little time for their children and by turning children into passive consumers of entertainment who have trouble making the effort that is needed to learn.

Friday, June 27, 2014

Health Care: The Failure of Growth

International comparisons of health care spending and outcomes reveal a familiar pattern. Greater expenditures produce better outcomes at lower levels of spending, but the benefits disappear after spending reaches a level that is much lower than what we spend in the United States.

It is a commonplace to say that the United States spends about twice as much as the other industrial nations on health care but does not have better outcomes.  An international comparison shows that greater expenditures stop producing benefits at a much lower level.

Here is a graph of health care spending and life expectancy.


We can see that spending more on health care does not increase life expectancy after spending exceeds about $1,500 per capita. The United States spends more than four times this much, the most of any nation in the world, but has lower life expectancy than almost all the nations that spend more than $1,500.

And here is a graph of health care spending and infant mortality.


Here, too, we see that spending more on health care does not reduce infant mortality after spending exceeds about $1,500 per capita.  Though the United States spends more than four times this much, we have higher infant mortality than every nation except one that spends over $1,500.

These graphs do not show that all our health care spending over $1,500 per capita is useless.  Much of this spending produces some benefit, but the benefits are so small that they are outweighed by other factors.

The United States has the highest obesity rate in the world, and this is one factor causing our poorer health.


Americans are also more sedentary than most people in the world, because our cities are built around the automobile.  And high levels of inequality in the United States undoubtedly contribute to greater infant mortality and lower life expectancy among those with lower incomes, pulling down the average.

These graphs do show that we have reached a point where we spending more on health care produces very small benefits, which are outweighed by differences in lifestyle.  If we want large improvements in our health, we will get them by exercising more and eating better diets - not by spending more on health care.

Monday, May 26, 2014

Berkeley Flexible Work Time Initiative

I organized the Flexible Work Time Initiative, and we have gathered enough signatures to get it on the November Berkeley ballot.

This initiative is an advisory measure that calls on the city council and on the state and federal government to make it easier for employees to choose part-time work and other flexible working arrangements by passing laws similar to laws that have been successful for over a decade in the Netherlands, Germany, and the UK and that have recently been passed in Vermont and San Francisco.

Existing laws emphasize the benefit to parents who need to balance their work and family obligations.

We are also emphasizing the environmental benefit: if people choose to consume less and work less, then they will also pollute less. A study by the Center for Economic and Policy Research found that, if Americans worked the same hours as west Europeans, it would reduce our greenhouse gas emissions by 20% - and the reduction would become greater over time.

Many environmentalists say that we need to live more simply to deal with the ecological problems of the coming century, but people cannot live more simply as long as they do not even have the choice of working shorter hours, choosing to have more time instead of more stuff. This is the one politically feasible law that will make it easier for people to downshift economically. 

At first, the environmental effect will be small, but over the coming century, this sort of law can make a major contribution to controlling global warming and to improving the quality of life.

For more information, see www.flexibleworktime.com.

Monday, April 28, 2014

Why Nations Fail - Book Review

Why Nations Fail by Daron Acemoglu and James A. Robinson

The main thesis of this book makes sense.  “Extractive economies” run by an elite (such as aristocracies and slave economies) do not lead to sustained growth: people have little incentive to invest in new enterprises because the elite may take their property, and the elite often deliberately blocks growth because it could unsettle their privileges.  “Inclusive Economies,” with pluralistic governments, secure property rights and rule of law, lead to sustained economic growth.
There is a “which came first” problem, because there must be some degree of economic growth before pluralistic institutions develop. Thus, there were factories in England in the early seventeenth century, and the economic changes that had already occurred by this time made the middle class powerful enough that it could ultimately develop a pluralistic government with rule of law after the Glorious Revolution. Nevertheless, it does make sense that this “inclusive” government accelerated economic growth and made it sustainable, by providing the legal framework needed to encourage investment.
Yet this book claims that extractive or inclusive institutions are essentially the only thing that determines whether there can be sustained growth, and its wide-ranging history skips details about several countries that might challenge this thesis.
Switzerland threw off the aristocracy and developed an inclusive government long before England did, so why didn’t it develop the industrial revolution before England?  Obviously, because it is a land-locked, mountainous country, which lacked the transportation that could integrate it with the world economy.  Thus, it seems that geography is also important.
In the United States, this book uses the examples of Virginia, the Carolinas, and Maryland to explain why we developed an inclusive economy.  It says that these states were founded by aristocrats who wanted to create an extractive economy but who did not have enough indigenous people to exploit (as Mexico did), so they were forced to develop the more inclusive institutions that make the United States more prosperous than Mexico.  Yet we all know that these southern states developed an extractive economy based on slavery and that they were economic backwaters that were late to industrialize, while our industrial revolution began in the north. A later chapter talks about the industrial revolution beginning in the north because of the extractive economy based on slavery in the south, but without revising the earlier claim that America’s inclusive institutions began in these southern colonies. It seems that the southern states were founded by aristocrats, who managed to create an extractive economy despite the lack of indigenous people to exploit, while the northern states were founded by commercial interests (like New York) or by people seeking to be self-sufficient for religious reasons (like Massachusetts), who were more willing to create an inclusive economy.  Thus, it seems culture is also important.
Imperial Germany is the most puzzling case. Before World War I, it had an authoritarian government, and yet it was the fast growing economy in Europe, challenging England for economic dominance.  At the time, leftist economists used imperial Germany as evidence that an authoritarian governments were the best engines of economic growth.  South Korea and Taiwan have a similar history: development was successful under authoritarian governments, and these countries did not have inclusive governments until after growth had gone a long way.
Switzerland and the United States suggest that the contrast between inclusive and extractive institutions is an important part of the explanation of why nations become prosperous or poor, but that we have to modify this explanation so that it also includes other factors, such as geography and culture.
Imperial Germany, South Korea, and Taiwan suggest that the contrast between inclusive and extractive institutions might not always be the key to development after all. These countries challenge some of this books predictions, such as its claim that China’s growth will not be sustained.
It is possible that there is some explanation for growth in imperial Germany, South Korea, and Taiwan that can save the thesis of this book, but the book simply skips over these countries without explaining them. 
It has a map of countries that had abolished serfdom by 1800 (map 8), and it claims that this predicts their later economic success; yet the map shows that Greece had abolished serfdom while Germany had not, and we all know which of these two countries is more successful today. It mentions that Napoleon brought inclusive economic institutions to the western part of Germany, but it doesn’t explain why the united Germany was led by Prussia, its easternmost and most authoritarian state.
The failure to explain Germany, South Korea, and Taiwan is this book’s greatest weakness as history.
The failure to question the value of economic growth is its greatest weakness as politics. 
Clearly, growth was beneficial at first, when it was needed to reduce poverty.  Clearly, countries that have had growth, like the United States, are better off than countries that have never had growth, such as sub-Sahara Africa.  But after a country has a comfortable standard of living, further growth provides diminishing benefits and produces real environmental costs that we will have to deal with in the coming centuries.
This book takes the essentially conservative position that we should continue policies that were useful in the past because they promoted rapid economic growth. But policies that were useful in the past will not necessarily be useful in the future. 
When people ask why nations fail a century from now, “extractive” governments and economies may be less important answer than global warming.

Thursday, March 27, 2014

Globalization and Inequality

In my book The Politics of Simple Living, I argue that it is possible for the global economy to bring a future with widespread prosperity, if we act decisively to control environmental problems such as global warming, and if nations shift to slower growth when they reach the point where growth no longer improves well-being - about half the current per capita GDP of the United States.

Increasing income inequality seems to challenge this view. In the United States, most income gains are now going to the rich, while low and moderate incomes are stagnating or even declining. Some economists, such as Thomas Pickety, claim that this trend will get worse in the coming century.

But this is an American perspective.  Globally, those with middle incomes are doing well, as we can see in this graph.


Globalization has created a huge pool of low-cost labor in the developing nations that competes with labor in the developed nations. Because of this competition, wages in the developed nation are stagnating, but wages in the developing nations are growing.

If we manage to avoid ecological crisis and current trends continue, wages in most of the developing nations will reach middle-class levels by the end of this century.  At that point, the world will be in a situation like the United States in the 1950s and 1960s, where wages go up steadily because there is little competition from low-cost labor.

Economists should realize that wages depend on supply and demand. In the United States, in western Europe, and in the other developed nations, wages went up during the post-war period, because population growth had slowed, limiting the supply of labor at a time when there was little competition from the developing nations.  Since the 1980s, wages have stagnated, because globalization made a vast new pool of labor available.  But by the end of this century, population growth will slow world-wide, and the supply of cheap labor will dry up, as it did in the developed nations in the 1950s and 1960s.

Of course, this possible future should not make us ignore the current problems of the American middle class.  We should use the tax system to reduce inequality, by increasing taxes on the rich and on unearned income, by lowering taxes on the middle class, and by increasing the Earned Income Tax Credit for those with lower incomes.

And this possible future should not make us complacent that global economic growth will solve all our problems.  On the contrary, unless we act decisively to control global warming and other environmental problems, economic growth will lead to an environmental crisis that will cause more human suffering than has ever occurred in history.

But if we succeed in dealing with environmental problems, we could have a world with widespread prosperity by the end of this century.  All through history, the great majority of people have lived in poverty.  We could move toward a future where the great majority live in middle-class comfort.

The graph is from the New York Times article, "A Global Boom but Only for Some," by Eduardo Porter.

Wednesday, February 26, 2014

Pastiche

Modernist architecture critics condemn any neo-traditional building as a "pastiche." Because this word is a cliche that they repeat without knowing what it means, they should consider a real pastiche, the Metropolitan Opera's performance of "The Enchanted Island."


The pastiche or pasticcio is an artwork made out of (or in imitation of) works of other artists. The Italian pasticcio originally meant a pie filling made of diverse ingredients, so a pastiche includes or imitates the works of many artists. 

Pastiche operas were popular through the early nineteenth century, using heavily revised librettos and adding the favorite arias of the performers. "The Enchanted Island" revives this tradition, with a libretto based on a combination of Shakespeare's Tempest and Midsummer Night's Dream and with arias taken from Handel, Vivaldi, Rameau, and others.

Architecture critics call any building that imitates historical styles a "pastiche," thinking that the word means an imitation, but they are wrong about the meaning.

For example, Jefferson's Monticello imitates the style of Palladio, but it is a unified work rather than a pastiche. If someone designed a building that looked like Monticello but had a dome like the Brunelleschi's Duomo in Florence replacing its Palladian dome, that would be a pastiche.

Should we condemn pastiche as fiercely as today's modernists do?  It obviously cannot be the greatest art, because it is not completely unified. But the success of "The Enchanted Island" proves that it can be enjoyable if it is well done.

Of course, modernist critics are too serious to appreciate works like this.  Rather than "The Enchanted Island," they prefer something like John Cage's aleatory music, composed using chance - or like Cage's 4'33" which has the musicians sit in silence for four minutes and thirty-three seconds.  This is serious art, unified expressions of the sensibility of a single artist, theoretical works meant to subvert the conventional idea of what music is.

The only problem is that no one can actually enjoy Cage's works in the way that normal people enjoy music.

The New York Times critic writing about "The Enchanted Island" defends it by using modernist rhetoric to attack modernism: "'The Enchanted Island' was designed to subvert modern ideas about the primacy of composers’ intentions."

Of course, it was actually designed so people could enjoy the music - but if today's critics need to invoke subversion in order to defend real music, let's make the most of it.

See the NY Times article.