Are We Desperate Yet?

Yglesias provides the best argument yet for Canada-style socialized medicine: socialized medicine makes it easier for young folk to make music popular with wealthy American white kids! Sounds good to me. But is it even true?

A very quick glance at the Pitchfork best recent list reveals (without actual counting) something like 10% Canadianness. Is that high or low? I think Canada's population is just shy of 10% the US's. So that doesn't strike me as Matt's “indie rock dominance.” Oh well.

It's true, though, that socialized medicine is probably the best deal when you you're young and don't actually need medical care. As Canadian medical entrepreneur Dr. Brian Day put it this New York Times article about Canada's hungry uptake of newly legal private service:

This is a country in which dogs can get a hip replacement in under a week and in which humans can wait two to three years.

Russ Roberts has more on the demise of the Canadian model.

Growth and Economic Folk Morality

I recently wrote a review of Friedman's Moral Consequences of Economic Growth for the forthcoming edition of the Cato Journal, and I wrote a lot of notes that I didn't use. And what good are blogs if not for publishing your discarded book review notes!

A main weakness of the Friedman book is that he becomes increasingly fuzzy about what he takes to be the specifically moral consequences of growth. Toward the end, you strongly suspect “moral” in Friedman's mouth means something like “egalitarian welfare liberal.” As much as this undermines the credibility or interest of his overall case, this move has been, I think, a rhetorical success for Friedman. His resolute sloppiness about the normative side of the equation gives him a lot of room to move. And he gets credit (though not so much from me) for avoiding the standard economist moral argument for growth. And here's what I have to say about that.

Which consequences of growth count as moral consequences? This is no small question. The answer naturally turns on one’s moral theory. According to the utilitarian philosophy (sometimes just called “consequentialism”) morality is entirely a matter of consequences, and the consequences that matter are those that increase the net quantity of pleasure or happiness. If economic growth increases the net sum of happiness, then that’s all we need to know in order to endorse it morally.

In fact, a kind of simple utilitarianism is the house philosophy of the economics profession. In the orthodox neoclassical theory, utility just is a measure of the satisfaction of an agent’s preferences, and it is a logical consequence of the definition of terms that an increase in income leads to the choice of a more preferred combination of goods, thereby increasing utility. It should be emphasized that the formal notion of utility as preference satisfaction, is, well, formal, and is not a substantive psychological notion at all. Formal utility implies nothing whatsoever about subjective experience and is not synonymous with pleasure or happiness, just as “preference” in the formal theory implies nothing about liking or wanting. Preference is nothing more than that which is revealed by what an agent has done, and utility is the notation for representing it.

Nonetheless, economists are generally all-too-happy to shuffle back and forth between the two notions of utility according to convenience. The slide from formal to substantive utility, combined with utilitarian moral theory, leads to what I call “economic folk morality.” According to economic folk morality, the moral desirability of economic growth is close at hand. Broad-based growth makes almost everyone wealthier; wealthier people can satisfy more of their preferences; satisfying preferences just is happiness; and happiness just is the moral summum bonum. So growth is morally good. QED.

But economic folk morality is false for at least three reasons. First, preference satisfaction does not entail happiness. It is possible to want and get things that will make us miserable. Second, the pleasure or happiness a life contains does not exhaust its value. The value and quality of our lives depends not only on how we feel, but also on how much of our human potential has come to fruition, the content of our characters, and the objective nature of our behavior. Third, morality is not primarily a matter of adding up a quantity of anything. A person who achieves her ends, honors her obligations, and contributes to her community has lived a moral life, regardless of the quantity of happiness she added to it.

Part of the interest of Friedman’s book is that he does not lean on the economic folk proof for the morality of growth. Insofar as the folk proof is unsound, that has to be to Friedman’s credit. However, the folk proof is tantalizingly close to a profound truth about the morality of economic growth. My complaint is that Friedman’s list of the moral consequences of growth are in fact moral consequences only because they are instrumental to some further state of affairs that is good.

Democracy, tolerance, openness are not good for their own sakes, but for what they enable. But what they enable—an increase in the scope of opportunity and the realization of meaningful human ends—is what economic growth enables, too. Friedman's moral favorites are not things of independent value with which to justify growth. Rather these liberal desirables are part a package of political-economic goods that already includes growth. These elements are part of the same package in virtue of the fact that they each make life more secure, more satisfying, and more worth living. Growth has better consequences when it occurs within a liberal system. But liberalism is worth having in very large part because it enables economic growth and its consequences. Friedman's moral desirables are in fact desirable because they enable and magnify the life-enhancing powers of wealth. If it is true that growth in turn enables the conditions that enable it, then we will have a virtuous circle. But we have to get out of the circle to morally vindicate growth. And the folk proof shows the way: growth makes life better.

Positive Externalities of Positional Preferences

Most of the literature on positional preferences emphasizes the downside. But what if the upside is bigger?

Becker and Murphy in Social Economics argue that without a taste for status, there would be too little entreprenuerial activity, because the expected monetary payoff of an entrepeneurial gamble would often be too small. However, if you add the expected status payoff to the monetary payoff, entrepreneuial gambles become rational. We would all be poorer if we didn't have a taste for status.

Today, Tyler points to a number of papers by Rick Harbaugh. His “Falling Behind the Joneses: Relative Consumption and the Growth-Savings Paradox” is a beautiful example of the possible upside of positional preferences. Here is the introduction:

Consumers in rapidly growing economies should borrow against future earnings to smooth consumption, or at least should save at a lower rate than consumers in countries with stagnant or falling incomes. Instead, multi-country studies show a strong positive correlation between income growth and savings rates (Bosworth, 1993). Such a correlation could result from high savings rates inducing high growth rates (Lucas, 1998), but the pattern in most rapid-growth economies has been for rapid income growth to precede sharp increases in household savings rates. Of the possible explanations for this growth-savings paradox, the Duesenberry (1949) relative consumption model, which assumes utility comes from individual consumption relative to societal per capita consumption, seems an unlikely candidate. Rising incomes would appear to induce excessive consumption as consumers attempt to “keep up with the Joneses”. This notion is examined with a simple two-period model. Rather than increasing consumption, concern for relative consumption can induce a fear of falling behind which raises precautionary savings. As societal income growth increases this fear intensifies, allowing for a positive effect of growth on savings rates and potentially explaining the growth-savings paradox.

Benjamin Friedman argues that growth is a public good and, as is the nature of public goods, individuals will underinvest in it unless the government does something about, in this case by mandating or rewarding savings relative to consumption. Could it be that our fear of falling behind just is the “tax” that motivates investment in growth?

Commuting and Consuming

If there's one thing that happiness research makes clear it is that commuting makes us miserable. This story in the Washington Post makes the “affective ignorance” literature plausible. Check this:

Ockershausen reported the conditions from the scene last night and said he wasn't moving. “It's gridlocked all the way across the bridge,” he said, speaking on his cell phone. “I guess I'll listen to the radio. It's the only choice I have.”

He awakes at 4 a.m. to come to work and often waits until after 7 p.m. to leave so he can miss the heaviest traffic. His 48-mile commute typically takes two hours or more, and he gets home so late, he usually heads straight to bed.

That makes no sense to me. Why would he do that to himself? There may be a good reason. But it is very possible that there is no good reason. If I was this guy, I would be willing to accept a 100% increase in housing costs to reduce my commute to 10 minutes, or a 50% pay cut to work 10 minutes from where I already live. This wouldn't only buy him about a month a year of time to do things more meaningful than sitting in a car, but would diminish his stress level magnificently.

My sense is that commuting nightmares are often a function of two earner families. They make a mistake and think of a huge metropolitan area as a single “place” and one takes a job in Gaithersburg and one takes a job in Alexandria. Maybe they live in Gaithersburg and mom has a 10 minute commute. But it takes dad two hours during rush to get to Alexandria. Isn't it just bizaree that people do this. In Iowa, for example, practically no one lives in Cedar Rapids and drives to Des Moines every day. Because that would be crazy. But people from Gaithersburg are willing to drive two hours to Alexandria because, why? It's the same sprawling metro area? The Washington Post classifieds make it look like a single labor market? No doubt this is sometimes worth it, but my guess is that a lot of people are just being imprudent.

My ideal commute is about zero minutes. I think my optimal happiness balance would have me work from home in a quiet, rural location (the studies are unequivocal in showing country as less anxiety inducing than town — and, anyway, I am not at heart city folk) and then, maybe once every other month, spend a week in Washington DC or New York City or some such place maintaining a high-status instititutional affiliation and high social capital urban social network. And then I could go back home to the quiet and the dogs and the good warm people of Meadow Junction (with a sack of gourmet groceries from the city). This is, of course, the sort of thing you need some money to do. (House in the country, apartment in the city…)

And that's precisely how money makes you happy: by financing an otherwise infeasible happiness-producing lifestyle. You know, I would also get a personal trainer who would ensure that I excercised more,  and take more Yoga classes, if I could afford them. And this would very likely give me a happiness bump, too. Of course, money per se doesn't do much for you (except insofar as simply having money produces a sense of higher status), and you can spend it in ways that will make you miserable. But not having more money certainly rules out doing more stuff that could make you happier. Its the consumption pattern that matters. If the better patterns are available with more money, then money matters.

Do you think your hedonically optimal consumption pattern is available to you at your current income? If you think not, what do you think the probability is that you are wrong?  (Keep in mind, the higher your income, the higher the probability that you are wrong!)

Hey Will! What's Going on at Cato Unbound?

Glad you asked! If you have yet to check out the February issue of Cato Unbound, which asks, “Is 'Old Europe' Doomed?” then now's a great time to catch up. All the formal replies to Theodore Dalyrmple's lead essay are in, and the informal conversation has just begun with a response by Dalrymple. (Choice line: “Multiculturalism is not couscous: it is the stoning of adulterers . . .”)

Before the free-for-all conversation heats up, take a look at Timothy B. Smith's careful elucidation of the economic problems of the traditional Western European powers, and the distinction between these and the healthier Scandanavian welfare states. Georgetown's Charles Kupchan vigorously dissents from Dalrymple's dour economic diagnosis, but argues that the problem of integrating immigrants may be even more serious than Dalrymple made it out. Last, but far from least, Pulitzer Prize-winner Anne Applebaum writes a prescription for what ails Old Europe.

And keep an eye out for details about next month's issue featuring David Schmidtz, Peter Singer, Jacob Hacker, and more on equality.

Model Argument Against Benjamin Friedman

Not against the idea that growth is good (heaven forbid), but against what Friedman says is good about it.

(Cogency warning: this is a sketch, and only sketch. Blog as dialectical scratchpad.)

Friedman argues that economic growth “fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy,” and that these are moral goods.

This is a varied list, is it not? Let's just assume that Friedman is arguing that growth actually produces more fairness and democracy and not just “commitment” and “dedication.” Anyway, many of the things on the list strike me as the vehicles through which growth creates moral consequences.
This of course all depends on what you think “morality” is about. What do I think morality is about? I think morality is, on the one hand, about people realizing the ends that make their lives meaningful and, on the other, about the constraints on individual and collective opportunistic behavior that enable individuals to realize their meaningful ends in cooperation with others.

It turns out that my foundational theory of what morality is FOR says that the function of morality is, by and large, to enable gains from cooperation. That is, the point of morality is to produce cooperative surpluses. (That morality does enable gains from cooperation is an evolutionary possibility condition for morality. If it didn't enable cooperative gains by constraining opportunistic behavior, morality wouldn't exist.) But economic growth just is periodic expansion in the overall size of the surplus in the broader network of cooperation. So, the way I see it, economic growth is more or less what morality is for.

For instance, fairness matters because cooperative surpluses matter. If we cannot divide the gains from cooperation according to terms that each party finds mutually agreeable, then we will not cooperate, and so there will be no gains to divide. Fairness is morally desirable because gains from cooperation are morally desirable. If growth produces more fairness, then great, because fairness leads to cooperation, which leads to cooperative surpluses, and better cooperation leads to bigger surpluses, which is what we want! The moral consequence of fairness is: growth! And if Friedman is right and fairness is a moral consequence of growth, then growth is a moral consequence of itself. Growth is its own reward!

Surplus is desirable because we're individually better off with a piece of the surplus than without a piece. That's why we cooperate. And by “better off” I mean: helps us realize our meaningful ends. I actually mean more than that. The surplus often opens up the space of ends, making formerly infeasible ends feasible. Some of these ends will be more meaningful for us than the ends in the pre-surplus feasible set. So surpluses can make available more meaningful ends, and therefore more meaningful lives. And meaningful lives is the real bottom line.

If increasing cooperative surpluses in the service of meaningful lives is what morality is for, then it may seem that growth is basically what morality is for. Maybe we've got a scalability issue here, and surpluses arising from huge impersonal networks of cooperation have too many negative external effects, and so defeat the ability to put our shares of the surplus to use in building meaningful lives. Morality collapses in on itself at a certain scale. I doubt it. But the real point is that this is a question about whether morality is scalable or self-defeating. If we can point out that growth has moral consequences, but all we're doing when we point that out is that growth helps consolidate the preconditions for growth, then we will have gotten exactly nowhere.

Either growth facilitates our ability to live ever more meaningful lives in cooperation with one another or it doesn't. If it does, that's the worthy moral consequence of growth. If growth does that in part by promoting itself through increasing cosmopolitanism, broadening opportunity, increasing demand for liberal political institutions, etc., then great. But we should just take the argument straight home to meaningful lives rather then getting hung up in the socio-political instrumentalities. If growth doesn't facilitate our ability to live ever more meaningful lives in cooperation with one another, then growth is immoral, even if the antecedents of growth are morality itself. Then our task would be to pick out where the scale problem begins, and try to refurbish morality, and our moral sensbility, to reflect its own limitations of scope.

Well, I've got some real problems with that, but it was fun! What's your beef?

Republicans are Happier

The Pew poll mentioned below confirms a longstanding trend: Republicans say they are happier than Democrats. This year, 45% of Republicans said they were “very” happy as opposed to 29% of Democrats. That's a big gap! Here's the the 30+ year trendline from Pew:

This stability is interesting in part because, I take it, that the demographic composition of Republican and Democratic voters has changed not insignificantly over the last 30 years. Is that right? Anyway, what accounts for Dem.-Rep. gap? Well, it's not income. Republicans report themselves as happier at all points on the income distribution, as this Pew graph shows:

So what's the deal? Here's the Pew folk

[The regression] analysis shows that the most robust correlations of all those described in this report are health, income, church attendance, being married, and, yes, being a Republican. Indeed, being a Republican is associated not only with happiness, it is also associated with every other trait in the cluster.

Clean-livin' Christians are more likely to be in good health, go to church, be married, and vote Republican.
What doesn't the study mean? In today's Colorado Springs Gazette, hometown paper of the Focus on the Family folk, I am quoted thus:

Does membership in the GOP really make people happy? Probably not, said Will Wilkinson, who studies happiness for the Cato Institute. The bliss is probably connected to some other facet of life that also inclines people to be Republicans, he said.

“People might read that and say, ‘I’d like to be happy, maybe I should be a Republican.’ It definitely doesn’t mean that,” Wilkinson said.

Sorry Dobsonites!

Assuming that the entire Dem.-Rep. difference doesn't disappear when controlling for demographic variables, what psychological traits would you guess predict both higher self-reports and Republicanism?

Solidarity: More Than a Feeling

My meditation on solidarity as a social ideal is up today at TCSDaily. Here's a bit:

Solidarity is tricky. There is a feeling of solidarity, fraternity, and belonging that can pervade the gut and bring a tear to the eye. There is also a system of solidarity in which we can be embedded and enmeshed. As joint participants in the market, relying constantly on far-flung partners in a mind-boggling network of specialization, vying to cooperate with one another on increasingly beneficial terms, we are, in fact, in it together. We are part of the system of solidarity, whether we know it or not. One of the paradoxes of modern life is that the system of solidarity does not necessarily produce or even encourage the feeling of solidarity. I need not feel warmth for, or even recognize the existence of, the Chinese laborers running the machine that made my socks (nor they for me) in order for us to be participants in a needful common enterprise — to be related parts of an interdependent whole.

Check it out.

The Undercover Economist on Happiness

Tim Harford, writing in the new Forbes, tackles the money and happiness question in an entertaining article. Especially quotable:

So, money does not buy happiness. Or does it? “In every society, at any point in time, richer people are happier,” points out Will Wilkinson, a policy analyst at the Cato Institute in Washington D.C., who runs a blog on happiness research and public policy. “But that in itself doesn't tell you much about the relationship between money and happiness.”

Well, that's just my favorite part. Read the whole thing.
Here at the Fly Bottle we really like Tim's big sex-n'-Wittgenstein finish:

Some results are predictable enough: Work is miserable, and commuting is worse. Others are not so obvious. For instance, praying is fun, but looking after the kids is not. Spending time with your friends is one of the most enjoyable things you can do, but spending time with your spouse is merely OK. In fact, parents or other relatives turn out to make more enjoyable company than the supposed love of your life.

What is perfectly clear, though, is that socializing with anyone except your boss makes you feel good. Sex is best of all. This is handy advice at last. But what if you are having sex with your boss? Whereof economists cannot speak, we must remain silent.

Layard's advice in the article is good. I doubt Oswald was really trying to say that if you're depressed, wait until you're older. It is worth noting that satisfaction in about every life domain other than the financial declines as we age. So don't think this “money can't buy you happiness” schtick means you can go chintzy on the 401K. When your knees break down, your eyes start to go, half your friends have died, and your kids never call anymore, money is the main thing buying you happiness. (See Easterlin. Head right for the graphs in the appendix.)