Everything's Swimmy in Gay Paree?

One of Ezra's co-bloggers, John, writes:

Mark Weisbrot has a good column explaining that, no, France's economic problems are no more severe than those faced by any other G8 country, including the US.  At the very least, there's no convincing evidence that the usual proposed “solution” — more liberalized market reforms — is going to solve the problems France faces.

I thought Weisbrot's column was an half-assed attempt to explain away France's poor economic performance by someone who would like to see failed French policies implemented in the U.S. But who cares what I think?! One thing's for sure, Weisbrot isn't going to win the Nobel Prize in economics, unlike Edmund Phelps, who won it last year and wrote in February:

As is increasingly admitted, the economic performance in nearly every Continental country is generally poor compared to the U.S. and a few other countries that share the U.S.'s characteristics. Productivity in the Continental Big Three–Germany, France and Italy–stopped gaining ground on the U.S. in the early 1990s, then lost ground as a result of recent slowdowns and the U.S. speed-up. Unemployment rates are generally far higher than those in the U.S., U.K., Canada and Ireland. And labor force participation rates have been lower for decades. Relatedly, the employee engagement and job satisfaction reported in surveys are mostly lower, too.

Why does it suck so bad there “compared to the U.S. and a few other countries that share the U.S's characteristics?”

In my thesis, the Continental economies' root problem is a dearth of economic dynamism–loosely, the rate of commercially successful innovation. A country's dynamism, being slow to change, is not measured by the growth rate over any short- or medium-length span. The level of dynamism is a matter of how fertile the country is in coming up with innovative ideas having prospects of profitability, how adept it is at identifying and nourishing the ideas with the best prospects, and how prepared it is in evaluating and trying out the new products and methods that are launched onto the market.

There is evidence of such a dearth. Germany, Italy and France appear to possess less dynamism than do the U.S. and the others. Far fewer firms break into the top ranks in the former, and fewer employees are reported to have jobs with extensive freedom in decision-making–which is essential at companies engaged in novel, and thus creative, activity.

Further, I argue that the cause of that dearth of dynamism lies in the sort of “economic model” found in most, if not all, of the Continental countries. A country's economic model determines its economic dynamism. The dynamism that the economic model possesses is in turn a crucial determinant of the country's economic performance: Where there is more entrepreneurial activity–and thus more innovation, as well as all the financial and managerial activity it leads to– there are more jobs to fill, and those added jobs are relatively engaging and fulfilling. Participation rises accordingly and productivity climbs to a higher path. Thus I see the sort of economic model operating in the Continental countries to be a major cause– perhaps the largest cause–of their lackluster performance characteristics.

Another thing Weisbrot is not going to do is write a comprehensive, top-notch economic history of The European Economy since 1945, like Berkeley's Barry Eichengreen just did. In a lecture just over a week ago, Eichengreen concluded: 

So, in a month when we mark the EU's 50th anniversary, it is worth remembering that Europe has a lot on its plate. It needs further deregulation of labor and product markets. It needs stronger incen­tives for innovation and entrepreneurship. It needs more immigration-friendly policies. It needs lower tax rates and more efficient delivery of public servic­es.

Funnily enough, John's post is titled, “Is it something about France that makes people stupid?” Maybe! 

A Sensible Natalist Proposal

If we're willing to see rates of reproduction as a kind of public good, then why not try to replicate the conditions or yore in which children redounded to their parents' bottom line. Pass a law that gives parents a claim on some percentage of their children's future earnings. This will not only increase the quantity of children produced, but will increase the quality of children as parents make targeted invetsments in their childrens' human capital in order to maximize their take from their kids' future production.

Doesn't this make grown children slaves to their parents? Well, it's not exactly clear how this differs in principle from the way taxes make us slaves to the state. If it turned out that the incentive for parents to produce kids and invest in their skills led to average after-parent-tax earnings greater than average earnings in our current system, and it produced a higher rates of economic growth through greater labor productivity, a stable level of population growth, cultural continuity, and non-collapsing pension systems, wouldn't that be enough to justify it to the grown kids themselves? Shouldn't we want the state to require that we pay the tax to parents, rather than to the state, if paying taxes to our parents produces all these externalities?

Maybe you're uncomfortable about treating people as mere means even to the end of their own welfare. Then maybe you're against taxation altogether, which is absurd.  

Why Americans Breed

Nicholas Eberstadt's American Interest article on American demographic exceptionalism is a great antidote to the badly undermotivated worry that America has lost its animal spirits and assimilationist mojo. His conclusion:

U.S. demographic exceptionalism is not only here today; it will be here tomorrow, as well. It is by no means beyond the realm of the possible that America's demographic profile will look even more exceptional a generation hence than it does today. If the American moment passes, or U.S. power in other ways declines, it won't be because of demography.

Hell yeah! To those who worry that strong American birthrates are actually due to high rates of immigration, and that we will shortly become the Estados Unidos Norte Mexicanos, Eberstadt points out that

The single most important factor in explaining America's high fertility level these days is the birth rate of the country's Anglo majority, who still account for roughly 55 percent of U.S. births. Over the past decade and a half, the TFR [total fertility rate] for non-Hispanic white Americans averaged 1.82 births per woman per lifetime–subreplacement, but more than 20 percent higher than corresponding national levels for western Europe, and much higher if one compares “Anglo” TFRs with those of western Europe's native born populations.

So what explains the fact that America is the land where white people reproduce? Here's Eberstadt:

Public opinion surveys, for example, have thoroughly established that Americans tend to be more optimistic about the future than Europeans–a disposition that could weigh on the decision to bring children into the world. Similarly, more Americans report being “proud” of their country than do Europeans, which, quite plausibly, could lead to more births. All else equal, patriotism or nationalism may conduce to higher birth rates. Most portentously, perhaps, survey data indicate that the United States is still in the main a believing Christian country, with a high percentage of households actively worshipping on a monthly or weekly basis. In striking contrast to western Europe, which is often provocatively (but not unfairly) described as a post-Christian territory these days, religion is alive and well in the United States.

He then goes on to lament that the U.S. Census collects no data on religious affiliation. My gut says that Eberstadt wants the religiosity hypothesis to be true but seems to know that the macro-level trend in religious participation cuts the wrong way for his theory, which perhaps is what led him to produce this sentence:

Attempts to connect those two factors on the basis of broad, aggregate observations and trends run the risks of committing what statisticians call the “ecological fallacy”–mistakenly associating two unrelated phenomena for want of examining relationships at the individual level.

Well, I will run the risk by showing you a chart of the aggregate trend in religious participation in the U.S.

Religious Participation in the United States, 1972-2002

This is from Ronald Inglehart and Pippa Norris's Sacred and Secular: Religion and Politics Worldwide. The U.S. has been getting markedly less religious, even during the upsurge in fertility after the mid-70s nadir. Norris and Inglehart also note that the U.S. is not really that exceptional in religiosity relative to, say, Italy, which has about the lowest birthrates around. For the religiosity hypothesis to account for rising and then stable white fertility rates, we'd need to find that the ever-smaller proportion of white religious people have been breeding at ever-higher rates. Perhaps certain denominations have been pumping out neonates at rates sufficient to offset the general decline. But in that case, fertility wouldn't be a function of religiosity generically but of Mormonism specifically — just for example.

I like the optimism explanation. It's easy to see why folks would refrain from reproduction if they thought their kids had only a broiling, denuded planet full of wretched consumer-zombies living pointless lives in cookie-cutter McMansions and soulless big box strip malls to look forward to. The data are convincing. This Harris Poll lays it out:

Nearly two-thirds (65%) of adults in the United States say they expect their lives will improve in the next five years [Best in the world!] . . . At the other end of the spectrum, only 23 percent of Germans, 35 percent of Austrians, 36 percent of Belgians, and 37 percent of the Dutch expect their personal situations will improve.

In a fantastic paper [pdf] by Deutsche Bank Research's Stefan Bergheim, the OECD countries with higher average self-reported happiness also had higher birthrates. And what are the correlates of high levels of happiness? Bergheim says, high trust, low corruption, low unemployment, high education levels, high incomes, high employment rates for old people, small shadow economy, high levels of economic freedom, low employment protection, and, well, high birth rates. We should consider the possibility that some portion of high happiness and high birthrates are jointly caused by these other variables. Bergheim observes that in happy countries, “societal institutions and social cohesion are evidently so good that many people decide to have children.” However, social cohesion happens not to be the U.S.'s greatest strength relative to the European countries. But how about this?

Leaving France [which appears to have implemented successful natalist initiatives] aside, the overall analysis of the ten happiness-relevant dimensions in this report shows that a truly successful family policy is normally accompanied by good conditions in many other segments such as the labour market.

Now we're getting somewhere! It turns out that America's optimism outstrips even it's own considerable levels of happiness. Maybe we're just a sunny bunch, laboring under a mass delusion. Or maybe Americans expect the future to turn out well on the basis of past experience. I think flexible American labor markets have something to do with this.

In a fascinating review of recent literature in family economics by Shelly Lunberg and Robert Pollack question the effectiveness at policy aimed specifically at encouraging higher birthrates:

Kohler, Billari, and Ortega (2006) review studies of population policies in low-fertility countries, including family cash benefits and work–family reconciliation policies such as parental leave and childcare subsidies. They report that the effects of such policies are at best only modestly positive and have more influence on the timing of births than on completed family size. They conclude that policy measures tend to affect reproduction only in the long-term, so that consistent and credible application of policy over time may be a precondition to effectiveness. They also suggest that policies reducing economic uncertainty in early adulthood—for example, reducing high unemployment—may have stronger pro-natalist effects than subsidizing births or childcare. Children imply very high costs, both in money and time—particularity mother's time—over many years. Hence, governments can only influence fertility decisions with very large subsidies, or with credible long-term commitments to support childrearing. [emphasis mine]

At this point, the correct question to ask about exceptional American fertility is: what would Gary Becker say? Why not this? If white Americans produce more children than their European counterparts, then the (expected total) cost of children must be lower for Americans, especially women. Maybe this has to do with some mix of confidence in the possibility of successful re-entry into the work force after time out, or in the possibility of flexible work arrangements. Might American optimism have something to do with the fact that things really are better economically in the U.S.? It might. In any case, the belief, true or not, that things are getting better must have some effect. If we bring our children's welfare inside our own welfare functions, the expectation of an improving standard of living for our children lowers the cost of having them. Right?

It's late. That'll have to do, as a start.

Rodrik on Procedural Fairness and Trade

Harvard economist Dani Rodrik has joined the blogosphere. Welcome! I'm glad, because he seems like a thinker well worth disagreeing with. For instance, in this post on why people get riled by economic dislocations caused by trade, but not by technology, Rodrik writes:

[Economists conventionally] do not ask whether the trade opportunity involves an exchange that most people would consider unacceptable if it took place at home. So it is immaterial to our story if the gains from trade are created, say, by a company shutting down its factory at home and setting up a new one abroad using child labor. . . .

The thought experiment clarifies, I think, why the archetypal man on the street reacts differently to trade-induced changes in distribution than to technology-induced changes (i.e., to technological progress). Both increase the size of the economic pie, while often causing large income transfers. But a redistribution that takes place because home firms are undercut by competitors who employ deplorable labor practices, use production methods that are harmful to the environment, or enjoy government support is procedurally different than one that takes place because an innovator has come up with a better product through hard work or ingenuity.

 

I think Rodrik is either thinking too hard or not hard enough. First, I suspect many people don't really grasp how it is that the surplus from trade is increased by either comparative advantage or technological advance, so a change in the allocation of the surplus intuitively strikes these people as involving a new winner and a new loser. The main concern, then, is who the winner is: us or them.

 

The key word in Rodrik's anaylsis is “home” and the key phrase is “home firms,” members of our national coalition. If you watch Lou Dobbs for about five minutes, you'll see that the animating emotional force behind his protectionism is simple in-group/out-group coalitional solidarity. If it turns out that the other, who is so much poorer than us, happens to employ labor practices less luxurious than ours, or pollutes at a higher rate than we do, then so much the better for illustrating and reinforcing the differences between the enlightened at home and those miserable, dirty, slave-driving foreign savages who want to steal our jobs and undermine our way of life. Never mind if their next best alternative to the factory is worse for them. Never mind that they are making the same kind of trade-off between growth and environmental quality we made at a similar stage of development. Because, not to put too fine a point on it, we don't actually care about them.

 

The “archetypical man in the street” doesn't blink in the face of technology-driven distributional changes not because those changes are less procedurally unfair, but because there is no apparently competing out-group against which to galvanize visceral coalitional sentiments. Different states within the U.S. have different labor laws and environmental regs. When a firm in one state is undercut by a firm in another state, the difference in regulatory environments is often a part of the story. But this tends not to get anyone keyed up about “procedural fairness,” and I think that's largely because Minnesotans don't see Oklahomansthe same way Lou Dobbs's American audience sees the Chinese — as a threat. So there is no need to dress up tribal ugliness in the language of fairness.

 

Learning to “not ask whether the trade opportunity involves an exchange that most people would consider unacceptable if it took place at home,” is part of moral progress, not moral blindness, because our judgments of what is “acceptable at home” are myopic, reflecting our constraints, and the tastes that flourish within them, not theirs. But it is the constrainsts and desires of the people actually entering into the exchange that matter. If we aspire to be cosmopolitan humanitarians, instead of narrowly parochial self-serving moralizers, we will not attempt to see their choices through the lens of our circumstances. No doubt many people consider it “unacceptable” to exchange sex for money, because they cannot imagine any circumstances in which they would find that anything but degrading. But a failure of sympathy and moral imagination is not the way to a winning moral argument.

Unending Happiness

If you're tired of reading about happiness, maybe you'd like to hear me talk about it. Here's my appearance on Counterpoint for ABC National Radio (that's Australia) with presenter Michael Duffy, and my latest Cato podcast with Anastasia Uglova.

If you're not tired of reading about happiness, here are my contributions to the current Cato Unbound discussion.

The Quest for a Scientific Politics of Happiness

Happiness as an Input to Political Deliberation

Why We Think We're Unhappy and What Not to Do About It

Good News about Depression and Suicide

The Artificiality of Happiness

These are a bit more polished than my average blog posts. You should, of course, read the whole discussion, which I've personally found very stimulating.

Do We Have a Duty to Breed?

Commenting on Tyler Cowen's post reporting on Hans Peter-Kohler's paper [pdf] on the the effect of children on subjective well-being, Ross Douthat (subbing for Andrew Sullivan) writes:

Europe seems to have this pretty well figured out. And I don't mean to be flip — the European “let's stop at one” approach to childbearing really is well-calculated to maximize a certain kind of parental well-being, narrowly defined. Of course, it's also calculated to seriously diminish the “subjective well-being” of all the second and third children who don't get conceived because their parents decided it wasn't worth the trouble. And while the theory that parents have children “either for the benefit of the firstborn or because they reason that if the first child made them happy, the second one will, too” may be true in many or even most cases, it also reflects a certain degree of deplorable solipsism. The chief reason parents should take on the trouble of conceiving and raising a child is that the child is a good in and of itself – one of the greatest goods there is, in fact, in any moral scheme worth considering – not because they think that it will make them or their already-existing offspring happier.

That bringing a child into existence is “one of the greatest goods there is” may be a truism in Ross's moral scheme, it somehow figures into none of the major moral philosophies in the history of moral philosophy, as far as I can tell. Does Ross think that the entire history of moral philosophy is not worth considering? That he is a moral innovator of the first order? I think he's just not making sense, and insulting low-breeders on the way.

First, you just can't “diminish the 'subjective well-being' of all the second and third children who don't get conceived because their parents decided it wasn't worth the trouble,” because it is a logical impossibility, an embarrassment to reason. Ross is saying that there exists a person who is harmed by the fact that it has not been made to exist. It refutes itself.

Second, setting aside the logically impossible theory of harms, what is Ross's moral scheme? We know this much: there is more than one thing that is objectively, non-instrumentally good, producing new human beings is one of them, and is one of the most valuable. Let's just suppose this is true. Now, it is possible to acknowledge that some things are objectively good without falling under an obligation to produce them. That a state of affairs is valuable is almost always a reason to bring it about, but it does not create a duty to do so. Does Ross think there is a general moral duty to maximize the quantity of such objective goods, like blushing babies? If so, why?

And even if we do have some such amazing duty, it appears that there are other goods in Ross's moral universe. Do we have similar duties to create beauty? Truth? Even if babies approach the summit of Ross's taxonomy of goodness, surely some quantity or combination of other goods outweighs the value of an additional baby. A life spent realizing one's potential, achieving one's valuable ambitions, say. Certainly Ross understands that pregnancy and motherhood often require the sacrifice of a woman's other ambitions, other values she could have brought to the world. Surely there are things, even inside this fantastic moral taxonomy, that men and women could do with their lives to compensate for their choice not to have children. Surely not all childless lives are deplorably solipsistic. Surely living a happy life is of some value and must weigh something. Would a mostly unhappy world swimming in billions upon billion of children really be better than ours? Ross seems to think so.

Anyway, I doubt Ross's deplorably thoughtless moral scheme (“the only kind worth considering”!) merits being taken even this seriously. What Ross seems to have offered us is a little bit of autobiography: he thinks he has some kind of duty to sire a big family. I don't mind that, and I'm sure the future mother of his future children will know what she's getting herself into. I do, however, mind the implication that those of us who believe our lives may produce more good by having just one child, or by having none, are spoiled monads who do too little of value to compensate the universe for our existence.

Wilkinson Sightings

My contribution to the Cato Unbound issue on happiness is now online.

I appear today on Bloggingheads TV with Henry Farrell of Crooked Timber and George Washington University (we know which affiliation is important).

And I was interviewed last night for Counterpoint with Michael Duffy on ABC (Australia) Radio. The show plays every Monday. I think my interview was Tuesday morning Down Under, so I guess I'll be on next week.

In Pursuit of Happiness Research: Is It Reliable? What Does It Imply for Policy?

That's the name of my long-awaited (by me, at least) Cato Policy Analysis, published today. Here's the abstract:

“Happiness research” studies the correlates of subjective well-being, generally through survey methods. A number of psychologists and social scientists have drawn upon this work recently to argue that the American model of relatively limited government and a dynamic market economy corrodes happiness, whereas Western European and Scandinavian-style social democracies promote it. This paper argues that happiness research in fact poses no threat to the relatively libertarian ideals embodied in the U.S. socioeconomic system. Happiness research is seriously hampered by confusion and disagreement about the definition of its subject as well as the limitations inherent in current measurement techniques. In its present state happiness research cannot be relied on as an authoritative source for empirical information about happiness, which, in any case, is not a simple empirical phenomenon but a cultural and historical moving target. Yet, even if we accept the data of happiness research at face value, few of the alleged redistributive policy implications actually follow from the evidence. The data show that neither higher rates of government redistribution nor lower levels of income inequality make us happier, whereas high levels of economic freedom and high average incomes are among the strongest correlates of subjective well-being. Even if we table the damning charges of questionable science and bad moral philosophy, the American model still comes off a glowing success in terms of happiness.

It is not a short paper, nor is it written at a USA Today level of difficulty. So reserve a cool hour for some serious intellectual contemplation. It's worth it, I hope.

DMU in an MRI

From Scientific American:

By measuring response time, the researchers got a sense of how quickly people learned which one of the abstract pictures indicated money would follow. They noticed an inverse correlation between how much money a person had (assets and income) and the swiftness with which they were conditioned. The poorer people tended to figure out which card signaled money ahead within about 12 trials, says neurobiologist Philippe Tobler, the study's lead author, whereas the richer people took about 35 trials.

The team next repeated the experiment while the subject's brains were scanned by an fMRI (functional magnetic resonance imaging) machine. Researchers focused their scans on the midbrain (which contains neurons or nerve cells that produce dopamine, a neurotransmitter central to reward-based learning), and the striatum, another reward-based center located under the cerebral cortex. This time, however, the participants did not have to physically respond. “We didn't want them to do that because there are neurons in the striatum that are responding to initiate an action of responding to reward,” Tobler says. It was this response preparation that the researchers timed.

Once again, an inverse association between wealth and learning appeared, with poor people displaying more increased activity in the midbrain and striatum when compared with the more affluent subjects.

It seems like every experiment I see confirms the idea that effort is not free. Take a unit of anything valuable — money, happiness, whatever — and there will some point at which the modicum of effort to acquire it isn't worth it.