In my last post I suggested that the reasons why rapid economic growth has not resulted in increased average life satisfaction in China over the last couple of decades have more to do with rising aspirations than with increased income inequality. In this post I want to consider those issues further.
My first point is that in recent years the Chinese have been about as satisfied with life as people in most other countries with comparable income levels. This shows up clearly in charts in Angus Deaton’s article, ‘Income, health and well-being around the world’ (“Journal of Economic Perspectives”, 22 (2)).
Second, survey evidence is not consistent with growing discontent caused by rising inequality - or by anything else. According to recent Gallup data about 66 percent of Chinese are satisfied with their standard of living and 83 percent say that their standard of living is getting better. A paper by Nicole Naurath show that in 2008 over 80 percent of Chinese claimed that economic conditions were getting better in the city or area where they live and that it was also getting better as a place to live.
Third, there is evidence that life satisfaction in China is more strongly influenced by satisfaction with income growth (i.e. satisfaction with income now compared with income in the past) than with either absolute or relative incomes. The results of a study by Lina Song and Simon Appleton do not support the view that dissatisfaction with relative income is a major cause of social discontent in China (“Life Satisfaction in Urban China”, IZA DP: 3443, 2008).
Fourth, Andrew Deaton found in his cross-country study, cited above, that while level of per capita income has a positive effect on life satisfaction, economic growth has a negative effect. His results suggest that it would be normal for the negative effect of economic growth to outweigh the positive effects of increases in income levels in countries that are experiencing rapid economic growth (see Table 2 in his article). Deaton argues that his results are consistent with life satisfaction responding to the long-term average income, as in a permanent income model of life satisfaction.
Fifth, the ratings that the Chinese give to the quality of their lives five years ago and five years into the future suggest that large upward revisions are occurring in their aspirations. The Gallup data for 2008 indicates that the Chinese rated their lives five years ago less highly than just about every country in the world outside Africa. The rating they give to their lives five years ahead is higher than that in some western European countries. When they appraise their current quality of life in five years time they will realize that they still have somewhat further to go before attaining “the best possible life”. But they are not likely to become discontented while they continue to experience the economic growth they have come to expect.
I think the lesson to be learned from consideration of the relationship between average life satisfaction and rising per capita incomes in China is that the failure of life satisfaction to rise with income does not necessarily imply discontent with the consequences of economic growth. Those who suggest that economic growth has led to widespread discontent in China are mistaken. Economic growth has merely cursed the Chinese with great expectations.
Sunday, August 30, 2009
Wednesday, August 26, 2009
The Chinese are becoming wealthier, so why aren't they happier?
This is the question raised in a recent article in the Journal of Happiness Studies: “The China puzzle: falling happiness in a rising economy”, by Hilke Brockman, Jan Delhey, Christian Weizel and Hao Yuan (V10, 4, 2009).
The focus of the study is the decade from 1990 to 2000. Even though real per capita GDP in China was 2.8 times higher in 2000 than in 1990, the percentage of Chinese describing themselves as very happy declined from 28 percent to 12 percent and the average life satisfaction rating fell from 7.3 to 6.5 (on the WVS 10 point scale).
The authors consider three possible explanations: anomie (powerlessness), political disaffection (declining trust in government) and relative deprivation (frustration because increased income inequality resulted in a higher proportion of the population with below average incomes). Anomie is measured by survey data on the lack of a feeling of free choice and control over the way you live your life. Political disaffection is measured by survey data on lack of trust in the government and parliament. Survey data on financial dissatisfaction (dissatisfaction with the financial situation of your household) is used as a proxy for relative deprivation.
To cut a long story short, the authors conclude that relative deprivation provides the best explanation because the decline in life satisfaction is strongly associated with a decline in financial satisfaction. (A fuller summary of the article is available on Psyblog )
The main problem I have with this conclusion is that data presented in the article suggests that average life satisfaction of high income earners declined along with the life satisfaction of those on lower incomes. There was no reason for the high income earners to feel relative deprivation.
When I look closely at the data it seems to me that the main puzzle is not why average life satisfaction in China was lower in 2000 than in 1990, but why such a high proportion of Chinese were recorded as satisfied with life in 1990. This figure, 68 percent, was higher than in such high income countries as Austria, France, Germany and Japan.
When you look at average life satisfaction of people in different age groups (Fig. 1) older people seem to have been much happier than young people in 1990 and the situation has been partially reversed since then. A comparison of Figure 1 and Figure 2 shows similar patterns for life satisfaction and financial satisfaction. This suggests to me that the apparent decline in average life satisfaction between 1990 and 2000 might possibly be attributable to perceptions by older people that their financial security had declined for some reason e.g. concerns that as a result of social changes young people might be less likely to support them in their old age.
The focus of the study is the decade from 1990 to 2000. Even though real per capita GDP in China was 2.8 times higher in 2000 than in 1990, the percentage of Chinese describing themselves as very happy declined from 28 percent to 12 percent and the average life satisfaction rating fell from 7.3 to 6.5 (on the WVS 10 point scale).
The authors consider three possible explanations: anomie (powerlessness), political disaffection (declining trust in government) and relative deprivation (frustration because increased income inequality resulted in a higher proportion of the population with below average incomes). Anomie is measured by survey data on the lack of a feeling of free choice and control over the way you live your life. Political disaffection is measured by survey data on lack of trust in the government and parliament. Survey data on financial dissatisfaction (dissatisfaction with the financial situation of your household) is used as a proxy for relative deprivation.
To cut a long story short, the authors conclude that relative deprivation provides the best explanation because the decline in life satisfaction is strongly associated with a decline in financial satisfaction. (A fuller summary of the article is available on Psyblog )
The main problem I have with this conclusion is that data presented in the article suggests that average life satisfaction of high income earners declined along with the life satisfaction of those on lower incomes. There was no reason for the high income earners to feel relative deprivation.
When I look closely at the data it seems to me that the main puzzle is not why average life satisfaction in China was lower in 2000 than in 1990, but why such a high proportion of Chinese were recorded as satisfied with life in 1990. This figure, 68 percent, was higher than in such high income countries as Austria, France, Germany and Japan.
When you look at average life satisfaction of people in different age groups (Fig. 1) older people seem to have been much happier than young people in 1990 and the situation has been partially reversed since then. A comparison of Figure 1 and Figure 2 shows similar patterns for life satisfaction and financial satisfaction. This suggests to me that the apparent decline in average life satisfaction between 1990 and 2000 might possibly be attributable to perceptions by older people that their financial security had declined for some reason e.g. concerns that as a result of social changes young people might be less likely to support them in their old age.
Even if we disregard the 1990 data, however, it is apparent from the Figures that we are still left with the problem of explaining why average life satisfaction and financial satisfaction has not increased since the mid 1990s. The decline in consumption as a percentage of GDP from about 50 percent around 1980 to about 32 percent in recent years cannot provide a complete explanation, because this has not prevented real per capita consumption from increasing substantially.
My guess is that the failure of average life satisfaction to rise in China is associated with a change in the benchmarks that people use to assess their current well-being. In 1990 many people in China may have been using past living standards as the benchmark in assessing their current satisfaction with life. Since then, however, their aspirations have probably risen as they have come to view the living standards enjoyed in high income countries as attainable in the foreseeable future. If I am right most Chinese people would probably agree that “they have never had it so good”, to borrow an unsuccessful political slogan. But those old enough to remember what life was like 30 years ago would probably rather forget about that.
Note: A follow-up post on this topic is here.
Sunday, August 23, 2009
Is it possible to make an appropriate emotive appeal by just telling a story?
A post by Peter Boettke on The Austrian Economists blog has got me thinking about emotive appeals in politics. I think the point that Boettke is making is that rhetorical experts are offering poor advice when they suggest that writers try to get their message across by telling stories that appeal to the emotions, in the manner of Dickens and Steinbeck, rather than using stories to illuminate systemic forces, as Ayn Rand did in “Atlas Shrugged”.
I think it might be worth noting that it is sometimes possible to make effective emotive appeals without telling stories and that some stories are capable of speaking for themselves in illuminating systemic forces.
My example of an effective emotional appeal that does not involve a story comes from “John Stuart Mill, Victorian Firebrand”, by Richard Reeves, which I have just finished reading. When Mill was a member of the House of Commons, arguing for women to be given the right to vote, he used an accounting framework to urge rejection of the view that the political interests of women were safe in the hands of their fathers, husbands. and brothers. Mill said:
“I should like to have a return laid before this House of the number of women who are annually beaten to death, kicked to death, or trampled to death by their male protectors: and, in an opposite column, the amount of the sentences passed, in those cases in which the dastardly criminals did not get off altogether. I should also like to have, in a third column, the amount of property, the unlawful taking of which was, at the same sessions or assizes, by the same judge, thought worthy of the same amount of punishment. We should then have an arithmetical estimate of the value set by a male legislature and male tribunals on the murder of a woman, often by torture continued through years, which, if there is any shame in us, would make us hang our heads” (Available at: Online Library of Liberty).
Richard Reeves comments that this passage “vividly captures the combination of sinewy logic and controlled anger employed by Mill’s best pieces of oratory” (p 423).
It can also be possible in some circumstances for a simple story to evoke an appropriate emotive response without any interpretation. For example, last night I read a story in a news magazine about a respected business man who is co-owner and general manager of a travel agency in the country in which he lives. A few months ago this man moved in with his parents while his own house was being renovated. Four days after he left the house his next door neighbours decided to take advantage of his absence by forcing open the front door and changing the locks. They are now occupying the house and refusing to leave. As soon as he found out what had happened the man contacted the police expecting that they would evict the squatters, but the police took them food and supplies. The man has taken the matter to court but the case has still not been resolved.
I have left out some details of this story such as the country where this is alleged to be happening, and the man’s name and ethnicity because I don’t think such details should be relevant to one’s emotive response. (If anyone is interested in following up the story it is in The Weekend Australian Magazine for August 22-23, 2009.)
How do you respond to this story? My initial reaction was anger at the way property rights were apparently being disregarded and dismay that the rule of law seemed to be breaking down in the country concerned.
I hope there is another side to this story that will make my initial reaction inappropriate. For present purposes, however, the only point I want to make is that the story speaks for itself. I don’t think many people would need to be told explicitly that the story illustrates that there may be something wrong with the justice system of a country in which such things can occur.
I think it might be worth noting that it is sometimes possible to make effective emotive appeals without telling stories and that some stories are capable of speaking for themselves in illuminating systemic forces.
My example of an effective emotional appeal that does not involve a story comes from “John Stuart Mill, Victorian Firebrand”, by Richard Reeves, which I have just finished reading. When Mill was a member of the House of Commons, arguing for women to be given the right to vote, he used an accounting framework to urge rejection of the view that the political interests of women were safe in the hands of their fathers, husbands. and brothers. Mill said:
“I should like to have a return laid before this House of the number of women who are annually beaten to death, kicked to death, or trampled to death by their male protectors: and, in an opposite column, the amount of the sentences passed, in those cases in which the dastardly criminals did not get off altogether. I should also like to have, in a third column, the amount of property, the unlawful taking of which was, at the same sessions or assizes, by the same judge, thought worthy of the same amount of punishment. We should then have an arithmetical estimate of the value set by a male legislature and male tribunals on the murder of a woman, often by torture continued through years, which, if there is any shame in us, would make us hang our heads” (Available at: Online Library of Liberty).
Richard Reeves comments that this passage “vividly captures the combination of sinewy logic and controlled anger employed by Mill’s best pieces of oratory” (p 423).
It can also be possible in some circumstances for a simple story to evoke an appropriate emotive response without any interpretation. For example, last night I read a story in a news magazine about a respected business man who is co-owner and general manager of a travel agency in the country in which he lives. A few months ago this man moved in with his parents while his own house was being renovated. Four days after he left the house his next door neighbours decided to take advantage of his absence by forcing open the front door and changing the locks. They are now occupying the house and refusing to leave. As soon as he found out what had happened the man contacted the police expecting that they would evict the squatters, but the police took them food and supplies. The man has taken the matter to court but the case has still not been resolved.
I have left out some details of this story such as the country where this is alleged to be happening, and the man’s name and ethnicity because I don’t think such details should be relevant to one’s emotive response. (If anyone is interested in following up the story it is in The Weekend Australian Magazine for August 22-23, 2009.)
How do you respond to this story? My initial reaction was anger at the way property rights were apparently being disregarded and dismay that the rule of law seemed to be breaking down in the country concerned.
I hope there is another side to this story that will make my initial reaction inappropriate. For present purposes, however, the only point I want to make is that the story speaks for itself. I don’t think many people would need to be told explicitly that the story illustrates that there may be something wrong with the justice system of a country in which such things can occur.
Saturday, August 22, 2009
How could J.S. Mill have reconciled his views on liberty and indoctrination of morals?
In “John Stuart Mill, Victorian Firebrand” Richard Reeves suggests that the question of whether Mill’s essay, “Utilitarianism”, can be reconciled with his more famous essay, “On Liberty”, is one that “will keep scholars engaged for the foreseeable future” (p. 330). That is probably correct, but I don’t think Mill would have had a huge problem in reconciling his views in the two essays if he had felt inclined to do so.
What is it that needs to be reconciled? In “On Liberty”, Mill argues that human flourishing requires the exercise of individual choice: “The human faculties of perception, judgment, discriminative feeling, mental activity, and even moral preference, are exercised only in making a choice. He who does anything because it is the custom, makes no choice. He gains no practice either in discerning or in desiring what is best. The mental and moral, like the muscular powers, are improved only by being used” (Ch. 3).
In “Utilitarianism”, written about the same time, Mill argues that people should be indoctrinated with a version of utilitarian morality: “To do as you would be done by, and to love your neighbour as yourself, constitute the ideal perfection of utilitarian morality. As the means of making the nearest approach to this ideal, utility would enjoin, first, that laws and social arrangements should place the happiness, or (as speaking practically it may be called) the interest, of every individual, as nearly as possible in harmony with the interest of the whole; and secondly, that education and opinion, which have so vast a power over human character, should so use that power as to establish in the mind of every individual an indissoluble association between his own happiness and the good of the whole; especially between his own happiness and the practice of such modes of conduct, negative and positive, as regard for the universal happiness prescribes; so that not only he may be unable to conceive the possibility of happiness to himself, consistently with conduct opposed to the general good, but also that a direct impulse to promote the general good may be in every individual one of the habitual motives of action, and the sentiments connected therewith may fill a large and prominent place in every human being's sentient existence (Ch 2).
Different people have different views about the tension between Mill’s emphasis on the importance of individual choice and his proposals for indoctrination of an indissoluble association between individual happiness and the good of the whole. For example, Linda Raeder writes: “A deep immersion in Mill’s thought leaves one with the decided impression that his aspirations for human beings were not for the flowering of their unique individuality but for their conformity to his personal ideal of value and service” (“John Stuart Mill and the Religion of Humanity”, 2002). Richard Reeves adopts a more conventional view of Mill’s aspirations: “The animating idea at the heart of Mill’s life and work is individual liberty. His image of a good society was one in which every man (and, he would add, every woman) can shape the course of their own life. ... Mill wanted our lives to be free, but he also wanted them to be good ” (p. 6).
Mill’s view on the importance of diversity in education seem to me to provide an example of the way in which it would have been possible for him to reconcile his desire for us to be free with his desire for us to be good. He wrote: “All that has been said of the importance of individuality of character, and diversity in opinions and modes of conduct, involves, as of the same unspeakable importance, diversity of education. A general State education is a mere contrivance for moulding people to be exactly like one another: and as the mould in which it casts them is that which pleases the predominant power in the government, whether this be a monarch, a priesthood, an aristocracy, or the majority of the existing generation, in proportion as it is efficient and successful, it establishes a despotism over the mind, leading by natural tendency to one over the body. An education established and controlled by the State, should only exist, if it exist at all, as one among many competing experiments, carried on for the purpose of example and stimulus, to keep the others up to a certain standard of excellence” “On Liberty”, Ch 5.
Mill also emphasised the value of experimentation at a more general level:
“It will not be denied by anybody, that originality is a valuable element in human affairs. There is always need of persons not only to discover new truths, and point out when what were once truths are true no longer, but also to commence new practices, and set the example of more enlightened conduct, and better taste and sense in human life” (“On Liberty”, Ch 3).
In his “Autobiography” Mill noted that he viewed “On Liberty” as “a kind of philosophic text-book of a single truth, which the changes progressively taking place in modern society tend to bring out into ever stronger relief: the importance, to man and society of a large variety in types of character, and of giving full freedom to human nature to expand itself in innumerable and conflicting directions” (Ch 7).
It seems to me that it would have been possible for Mill to reconcile his views on liberty and ethics by making the case that recognition of the right of individuals to experiment in living as seems best to themselves is of over-riding importance to society. Not only does this open the possibility of discovering new truths, it also opens the possibility that people can learn from the mistakes of others. As Friedrich Hayek wrote: “It is whenever man reaches beyond his present self, where the new emerges and assessment lies in the future, that liberty ultimately shows its value” (“Constitution of Liberty”, p. 394).
If Mill had argued more explicitly that the right of individuals to live as seems best to themselves is of over-riding importance it would have been clearer that he did not intend that his personal values should be imposed on people who do not desire them.
Postscript:
I should have noted that Hayek explicitly made the point that "the existence of individuals and groups simultaneously observing partially different rules provides the opportunity for the selection of the more effective ones" ("Constitution of Liberty", p.63).
What is it that needs to be reconciled? In “On Liberty”, Mill argues that human flourishing requires the exercise of individual choice: “The human faculties of perception, judgment, discriminative feeling, mental activity, and even moral preference, are exercised only in making a choice. He who does anything because it is the custom, makes no choice. He gains no practice either in discerning or in desiring what is best. The mental and moral, like the muscular powers, are improved only by being used” (Ch. 3).
In “Utilitarianism”, written about the same time, Mill argues that people should be indoctrinated with a version of utilitarian morality: “To do as you would be done by, and to love your neighbour as yourself, constitute the ideal perfection of utilitarian morality. As the means of making the nearest approach to this ideal, utility would enjoin, first, that laws and social arrangements should place the happiness, or (as speaking practically it may be called) the interest, of every individual, as nearly as possible in harmony with the interest of the whole; and secondly, that education and opinion, which have so vast a power over human character, should so use that power as to establish in the mind of every individual an indissoluble association between his own happiness and the good of the whole; especially between his own happiness and the practice of such modes of conduct, negative and positive, as regard for the universal happiness prescribes; so that not only he may be unable to conceive the possibility of happiness to himself, consistently with conduct opposed to the general good, but also that a direct impulse to promote the general good may be in every individual one of the habitual motives of action, and the sentiments connected therewith may fill a large and prominent place in every human being's sentient existence (Ch 2).
Different people have different views about the tension between Mill’s emphasis on the importance of individual choice and his proposals for indoctrination of an indissoluble association between individual happiness and the good of the whole. For example, Linda Raeder writes: “A deep immersion in Mill’s thought leaves one with the decided impression that his aspirations for human beings were not for the flowering of their unique individuality but for their conformity to his personal ideal of value and service” (“John Stuart Mill and the Religion of Humanity”, 2002). Richard Reeves adopts a more conventional view of Mill’s aspirations: “The animating idea at the heart of Mill’s life and work is individual liberty. His image of a good society was one in which every man (and, he would add, every woman) can shape the course of their own life. ... Mill wanted our lives to be free, but he also wanted them to be good ” (p. 6).
Mill’s view on the importance of diversity in education seem to me to provide an example of the way in which it would have been possible for him to reconcile his desire for us to be free with his desire for us to be good. He wrote: “All that has been said of the importance of individuality of character, and diversity in opinions and modes of conduct, involves, as of the same unspeakable importance, diversity of education. A general State education is a mere contrivance for moulding people to be exactly like one another: and as the mould in which it casts them is that which pleases the predominant power in the government, whether this be a monarch, a priesthood, an aristocracy, or the majority of the existing generation, in proportion as it is efficient and successful, it establishes a despotism over the mind, leading by natural tendency to one over the body. An education established and controlled by the State, should only exist, if it exist at all, as one among many competing experiments, carried on for the purpose of example and stimulus, to keep the others up to a certain standard of excellence” “On Liberty”, Ch 5.
Mill also emphasised the value of experimentation at a more general level:
“It will not be denied by anybody, that originality is a valuable element in human affairs. There is always need of persons not only to discover new truths, and point out when what were once truths are true no longer, but also to commence new practices, and set the example of more enlightened conduct, and better taste and sense in human life” (“On Liberty”, Ch 3).
In his “Autobiography” Mill noted that he viewed “On Liberty” as “a kind of philosophic text-book of a single truth, which the changes progressively taking place in modern society tend to bring out into ever stronger relief: the importance, to man and society of a large variety in types of character, and of giving full freedom to human nature to expand itself in innumerable and conflicting directions” (Ch 7).
It seems to me that it would have been possible for Mill to reconcile his views on liberty and ethics by making the case that recognition of the right of individuals to experiment in living as seems best to themselves is of over-riding importance to society. Not only does this open the possibility of discovering new truths, it also opens the possibility that people can learn from the mistakes of others. As Friedrich Hayek wrote: “It is whenever man reaches beyond his present self, where the new emerges and assessment lies in the future, that liberty ultimately shows its value” (“Constitution of Liberty”, p. 394).
If Mill had argued more explicitly that the right of individuals to live as seems best to themselves is of over-riding importance it would have been clearer that he did not intend that his personal values should be imposed on people who do not desire them.
Postscript:
I should have noted that Hayek explicitly made the point that "the existence of individuals and groups simultaneously observing partially different rules provides the opportunity for the selection of the more effective ones" ("Constitution of Liberty", p.63).
Tuesday, August 18, 2009
How silly were J.S. Mill's views about income distribution?
J S Mill wrote: “The laws and conditions of the Production of wealth partake of the character of physical truths. There is nothing optional or arbitrary in them. ... It is not so with the Distribution of wealth. That is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like. They can place them at the disposal of whomsoever they please, and on whatever terms” (Principles of Political Economy, 1848, II,1.1).
In 1983, Friedrich Hayek commented that this view of J S Mill “is really an incredible stupidity, showing a complete unawareness of the crucial guide function of prices ...” Hayek explains: “We must face the truth that it is not the magnitude of a given aggregate product which allows us to decide what to do with it, but rather the other way around: that a process which tells us how to reward the several contributions to this product is also the indispensable source of information for the individuals, telling them where they can make the aggregate product as large as possible” (Conference paper published in Nishiyama and Leube, “The Essence of Hayek”, p 323). This must have been one of the most intemperate remarks that Hayek ever made about anyone.
One of the things I have learned from Richard Reeves book, “John Stuart Mill, Victorian Firebrand” is that Karl Marx was also unimpressed by Mill’s attempt to separate the laws of production and distribution. Marx viewed this as “a shallow syncretism” (Reeves, p 210). He thought Mill was attempting to reconcile irreconcilables.
How silly were Mill’s views about distribution? In order to answer this question I think we need to understand Mill’s views about property and inheritance.
I see a lot of merit in much of what Mill wrote about property. For example: “The institution of property, when limited to its essential elements, consists in the recognition, in each person, of a right to the exclusive disposal of what he or she have produced by their own exertions, or received either by gift or by fair agreement, without force or fraud, from those who produced it” (“Principles of Political Economy”, II, 2.2).
It is when Mill writes about “landed property” that I begin to see problems: “When the "sacredness of property" is talked of, it should always be remembered, that any such sacredness does not belong in the same degree to landed property. No man made the land. It is the original inheritance of the whole species. Its appropriation is wholly a question of general expediency” (“Principles of Political Economy”, II,2.26). Given that land can be exchanged for other goods I don’t see how it is possible to argue that rights to ownership should not be recognized as the same for land as for other goods.
The problem that Mill had with “landed property” seems to be associated with the potential for a relatively small number of families to have a disproportionate amount of wealth and to exercise disproportionate political power. He was against the inheritance of “enormous fortunes which no one needs for any personal purpose but ostentation or improper power”. Richard Reeves points out that Mill was particularly concerned to distinguish between “earned” and “unearned” income. Mill viewed inheritances as “unearned” and argued that it would be socially beneficial to impose a limit on the amount any person could inherit.
Mill’s views about redistributive taxation were also influenced by his aversion to inherited wealth: “To tax the larger incomes at a higher percentage than the smaller is to lay a tax on industry and economy; to impose a penalty on people for having worked harder and saved more than their neighbours. It is not the fortunes which are earned, but those which are unearned, that it is for the public good to place under limitation. ...I conceive that inheritances and legacies, exceeding a certain amount, are highly proper subjects for taxation: and that the revenue from them should be as great as it can be made without giving rise to evasions ... such as it would be impossible adequately to check” (“Principles of Political Economy”, V, 2.14).
It seems to me that Mill’s claim that distribution of wealth should be viewed as entirely separate from production was silly – and contradicted by his own views about the adverse consequences of progressive taxation. Mill’s idea for an upper limit on the amount that anyone could inherit also seems extremely silly. I can see some wisdom in his views about taxation of inheritances, but even here it seems to me that he was fooling himself if he thought that inheritance taxes would impose no disincentives to working and saving. Despite all this silliness, however, Mill still had many sensible things to say about property rights and taxation.
In 1983, Friedrich Hayek commented that this view of J S Mill “is really an incredible stupidity, showing a complete unawareness of the crucial guide function of prices ...” Hayek explains: “We must face the truth that it is not the magnitude of a given aggregate product which allows us to decide what to do with it, but rather the other way around: that a process which tells us how to reward the several contributions to this product is also the indispensable source of information for the individuals, telling them where they can make the aggregate product as large as possible” (Conference paper published in Nishiyama and Leube, “The Essence of Hayek”, p 323). This must have been one of the most intemperate remarks that Hayek ever made about anyone.
One of the things I have learned from Richard Reeves book, “John Stuart Mill, Victorian Firebrand” is that Karl Marx was also unimpressed by Mill’s attempt to separate the laws of production and distribution. Marx viewed this as “a shallow syncretism” (Reeves, p 210). He thought Mill was attempting to reconcile irreconcilables.
How silly were Mill’s views about distribution? In order to answer this question I think we need to understand Mill’s views about property and inheritance.
I see a lot of merit in much of what Mill wrote about property. For example: “The institution of property, when limited to its essential elements, consists in the recognition, in each person, of a right to the exclusive disposal of what he or she have produced by their own exertions, or received either by gift or by fair agreement, without force or fraud, from those who produced it” (“Principles of Political Economy”, II, 2.2).
It is when Mill writes about “landed property” that I begin to see problems: “When the "sacredness of property" is talked of, it should always be remembered, that any such sacredness does not belong in the same degree to landed property. No man made the land. It is the original inheritance of the whole species. Its appropriation is wholly a question of general expediency” (“Principles of Political Economy”, II,2.26). Given that land can be exchanged for other goods I don’t see how it is possible to argue that rights to ownership should not be recognized as the same for land as for other goods.
The problem that Mill had with “landed property” seems to be associated with the potential for a relatively small number of families to have a disproportionate amount of wealth and to exercise disproportionate political power. He was against the inheritance of “enormous fortunes which no one needs for any personal purpose but ostentation or improper power”. Richard Reeves points out that Mill was particularly concerned to distinguish between “earned” and “unearned” income. Mill viewed inheritances as “unearned” and argued that it would be socially beneficial to impose a limit on the amount any person could inherit.
Mill’s views about redistributive taxation were also influenced by his aversion to inherited wealth: “To tax the larger incomes at a higher percentage than the smaller is to lay a tax on industry and economy; to impose a penalty on people for having worked harder and saved more than their neighbours. It is not the fortunes which are earned, but those which are unearned, that it is for the public good to place under limitation. ...I conceive that inheritances and legacies, exceeding a certain amount, are highly proper subjects for taxation: and that the revenue from them should be as great as it can be made without giving rise to evasions ... such as it would be impossible adequately to check” (“Principles of Political Economy”, V, 2.14).
It seems to me that Mill’s claim that distribution of wealth should be viewed as entirely separate from production was silly – and contradicted by his own views about the adverse consequences of progressive taxation. Mill’s idea for an upper limit on the amount that anyone could inherit also seems extremely silly. I can see some wisdom in his views about taxation of inheritances, but even here it seems to me that he was fooling himself if he thought that inheritance taxes would impose no disincentives to working and saving. Despite all this silliness, however, Mill still had many sensible things to say about property rights and taxation.
Saturday, August 8, 2009
Does our Nicole worsen income inequality in the United States?
In his recent paper, “Thinking clearly about economic inequality”, Will Wilkinson – a research fellow at the Cato Institute in the U.S. (and prominent blogger)- mentions some reasons why Nicole Kidman is wealthy. He states: “Nicole Kidman is fabulously wealthy because millions of individuals have chosen to see a movie with Nicole Kidman in it instead of a non-Kidman movie, or instead of going bowling”. He uses Nicole as an example to illustrate how the pattern of incomes “emerges from billions upon billions of individual choices and transactions” (p 14).
I think Wilkinson is making a good point. People often talk about income distribution as though government is actually distributing national income among the citizens - like a mother deciding how large a slice of a cake to give to each of her children. If we want the cake metaphor to reflect the real world, however, we have to accommodate the fact that mother doesn’t actually bake the cake, the children do. And distribution is the result of mutually beneficial process in which individuals earn cake by contributing to its production.
Wilkinson’s mention of Nicole Kidman is also relevant to a somewhat different point that he is making, although he doesn’t make the link specifically. Nicole Kidman has dual citizenship between the U.S. and Australia. If she is viewed as a U.S. citizen for the purposes of considering the distribution of income that makes the distribution of income in the U.S. look more unequal. If she is viewed as an Australian citizen that makes Australia’s income distribution look more unequal. Who cares?
The point is, of course, that there is something peculiar about viewing income inequality as a cause for concern at a national level, when this can change just because people move across national borders. When people talk about the effects of migration on income distribution in countries like the United States and Australia they are more likely to be thinking of the migrants who make income distribution less equal by occupying the lowest rungs of the economic ladder than those who make it less equal by occupying the highest rungs on the ladder. But the questions raised about the relevance of income distribution to well-being are the same in both cases.
Wilkinson makes the point: “If you focus only on the shifting pattern of incomes among legal residents within the statistics-keeping jurisdiction ... you can easily lose track of the real story of human welfare ...” (p 14). He comments as follows on the effects of the migration of unskilled migration on economic inequality in the U.S.: ‘If were to assume a natural and mundane moral perspective, from which all people involved are taken into account and assumed to have equal worth ... what we would see is a profound reduction in both poverty and economic inequality. If the question is “What happened to the people in this scenario?” then the answer is “The poorest people became considerably wealthier, narrowing the economic gap between them and the rest”.’ (p 15).
It seems to me that this reasoning is relevant to Australia as well as to the U.S. If we are interested in the well-being of people we should be interested in the opportunities that are available to them. When you look at it carefully the concept of income inequality doesn’t have much relevance to well-being.
I think Wilkinson is making a good point. People often talk about income distribution as though government is actually distributing national income among the citizens - like a mother deciding how large a slice of a cake to give to each of her children. If we want the cake metaphor to reflect the real world, however, we have to accommodate the fact that mother doesn’t actually bake the cake, the children do. And distribution is the result of mutually beneficial process in which individuals earn cake by contributing to its production.
Wilkinson’s mention of Nicole Kidman is also relevant to a somewhat different point that he is making, although he doesn’t make the link specifically. Nicole Kidman has dual citizenship between the U.S. and Australia. If she is viewed as a U.S. citizen for the purposes of considering the distribution of income that makes the distribution of income in the U.S. look more unequal. If she is viewed as an Australian citizen that makes Australia’s income distribution look more unequal. Who cares?
The point is, of course, that there is something peculiar about viewing income inequality as a cause for concern at a national level, when this can change just because people move across national borders. When people talk about the effects of migration on income distribution in countries like the United States and Australia they are more likely to be thinking of the migrants who make income distribution less equal by occupying the lowest rungs of the economic ladder than those who make it less equal by occupying the highest rungs on the ladder. But the questions raised about the relevance of income distribution to well-being are the same in both cases.
Wilkinson makes the point: “If you focus only on the shifting pattern of incomes among legal residents within the statistics-keeping jurisdiction ... you can easily lose track of the real story of human welfare ...” (p 14). He comments as follows on the effects of the migration of unskilled migration on economic inequality in the U.S.: ‘If were to assume a natural and mundane moral perspective, from which all people involved are taken into account and assumed to have equal worth ... what we would see is a profound reduction in both poverty and economic inequality. If the question is “What happened to the people in this scenario?” then the answer is “The poorest people became considerably wealthier, narrowing the economic gap between them and the rest”.’ (p 15).
It seems to me that this reasoning is relevant to Australia as well as to the U.S. If we are interested in the well-being of people we should be interested in the opportunities that are available to them. When you look at it carefully the concept of income inequality doesn’t have much relevance to well-being.
Thursday, August 6, 2009
How can a conservative favour centralization of power?
One of my reasons for reading Tony Abbott’s recent book, “Battlelines”, was to remind myself why I am not a conservative. The more serious reason was to find our how a politician who proudly wears the conservative label would attempt to justify proposing an amendment to the Australian constitution that would remove current restrictions on the policy areas in which the federal government has power to make laws.
In writing this book Tony Abbott, a former minister in the Howard Government who is now on the opposition front bench in the federal parliament, seems to have taken on the role of defining where the battlelines should be drawn in the approach to the next election.
One of the things Abbott is clearly trying to do in this book is to identify enduring values that will continue to bind the Liberal Party together. In the process he does a reasonably good job of minimizing the differences between Hayekian liberals and Burkean conservatives. At one point he writes: “Following Adam Smith, Liberals tend to think that government is necessary to keep the peace but otherwise should let people make mutually beneficial arrangements with each other” (p 82). If I believed that was a statement of conservative philosophy, I would not mind being called a conservative. In other places in the book, however, Abbott displays the contempt for personal freedom that is associated with traditional conservative values. For example: “The basic problem is that most Western countries have privatised the next generation. Having children tends to be regarded as a personal choice rather than a social good” (p 97).
Having now reminded myself why I am not a conservative, let me turn to Abbott’s views on federalism. The essence of his argument is as follows:
As I see it, the main problem of the federation arise from the stupidity of the central government in its choice of forms of intervention. The basic problem in both hospitals and schools prior to federal intervention was that people were unhappy with the services that state governments were providing from tax revenues. Instead of giving state governments more money to waste, the central government should have given people back some of the money they had paid in taxes so that they could purchase alternative services.
The central government does not need additional power in order to achieve contestable service provision. It just needs to stop propping up inefficient state bureaucracies and give power back to the people.
In concluding I would like to commend Tony Abbott for presenting his views in a forthright manner. It is nice to be able to disagree with quite a lot of the things he has written and yet still feel that, as politicians go, Tony Abbott is not a bad bloke.
In writing this book Tony Abbott, a former minister in the Howard Government who is now on the opposition front bench in the federal parliament, seems to have taken on the role of defining where the battlelines should be drawn in the approach to the next election.
One of the things Abbott is clearly trying to do in this book is to identify enduring values that will continue to bind the Liberal Party together. In the process he does a reasonably good job of minimizing the differences between Hayekian liberals and Burkean conservatives. At one point he writes: “Following Adam Smith, Liberals tend to think that government is necessary to keep the peace but otherwise should let people make mutually beneficial arrangements with each other” (p 82). If I believed that was a statement of conservative philosophy, I would not mind being called a conservative. In other places in the book, however, Abbott displays the contempt for personal freedom that is associated with traditional conservative values. For example: “The basic problem is that most Western countries have privatised the next generation. Having children tends to be regarded as a personal choice rather than a social good” (p 97).
Having now reminded myself why I am not a conservative, let me turn to Abbott’s views on federalism. The essence of his argument is as follows:
- When nothing else seems to solve problems, voters always expect the central government to ‘do something’.
- After more than 50 years of increasing federal government involvement in matters that were formerly the exclusive responsibility of the states, the federation has become dysfunctional. “There are few problems in contemporary Australia that a dysfunctional federation doesn’t make worse”.
- Current attempts to end the “blame game” between different levels of government are not going to work. Someone has to have the legal power to take responsibility.
- The only credible way to fix the problem is to give the central government the legal power to call the shots i.e. to over-ride the states.
- The argument that the states form a bulwark against the potential tyranny of the national government is “far-fetched”. Australia has states because this was the price of becoming a nation, not because the fathers of federation thought that an intermediate level of government was necessary to avoid tyranny.
As I see it, the main problem of the federation arise from the stupidity of the central government in its choice of forms of intervention. The basic problem in both hospitals and schools prior to federal intervention was that people were unhappy with the services that state governments were providing from tax revenues. Instead of giving state governments more money to waste, the central government should have given people back some of the money they had paid in taxes so that they could purchase alternative services.
The central government does not need additional power in order to achieve contestable service provision. It just needs to stop propping up inefficient state bureaucracies and give power back to the people.
In concluding I would like to commend Tony Abbott for presenting his views in a forthright manner. It is nice to be able to disagree with quite a lot of the things he has written and yet still feel that, as politicians go, Tony Abbott is not a bad bloke.
Postscript: August
2018
Nine years on it is obvious that the defining characteristic
of Tony Abbott’s policy stance hasn’t been centralism, Hayekian liberalism or
Burkean conservatism. The defining characteristic has been his attitude to
climate change.
It is possible to point to some differences between his
current approach to climate change, the approach he adopted when prime minister
and the approach adopted in Battlelines.
However, I see reasonable consistency in his position on this issue. In Battlelines he wrote:
“It sounds like common sense to minimise human impact on the
environment and to reduce the human contribution to increased atmospheric gas
concentrations. It doesn’t make much sense, though, to impose certain and substantial
costs on the economy now in order to avoid unknown and perhaps even benign
changes in the future”.
In a recent speech Abbott said:
“I have never thought that reducing emissions should be a
fundamental goal of policy, just something that’s worth doing if the cost is
modest.
I have never thought that climate change was, to quote Kevin
Rudd, the ‘great moral challenge of our generation’.
It was an issue, that’s all, and – at least on the actual
changes we’ve so far seen – not a very significant one compared to man’s
inhumanity to man; maintaining and improving living standards; and even to many
other environmental issues such as degraded bush and waterways, particulate
pollution, water quality in the third world, deforestation, and urban
overcrowding.”
In my view Tony Abbott has shown too little recognition of
the risks associated with climate change. He would be on firmer ground to argue
that emissions reduction targets do little to mitigate those risks.
As politicians go, Abbott seems to have been fairly
consistent in his views. However, I have revised my view that he is “not a bad
bloke”. His recent behaviour in destabilizing the leadership of the Liberal
Party has been appalling.
In Battlelines Abbott
posed the question: “How can Australians, individually and collectively come
closer to being their ‘best selves’ and what can the Liberal Party do to bring
this about?” Abbott should think more about his own contribution in that regard.
He hasn’t even been able to avoid doing harm to the electoral prospects of the
Liberal Party. If Abbott’s recent failure to be his best self assists a Labor government
to come to power in the near future we are likely to see not only deeper cuts
in carbon emissions and higher energy prices, but also the adoption of policies
that will make citizens increasingly subject to government regulation in many
aspects of their lives.
Monday, August 3, 2009
How can consciousness be explained?
Before reading “Out of Our Heads”, a recently published book by the philosopher Alva NoÑ‘’, I would not have questioned Francis Crick’s claim that “you, your joys and sorrows, your memories and ambitions, your sense of personal identity and free will, are in fact no more than the behavior of a vast assembly of nerve cells and their associated molecules” (quoted by NoÑ‘ on p 5).
If someone had asked me how I felt about that statement before I read this book I would probably have shrugged my shoulders and said that it was just one of those things we have to accept whether we like it or not. I might have added, however, that I thought that Friedrich Hayek made a good point over 50 years ago (in “The Sensory Order”) when he said that the type of explanation that the physical sciences aim for is not applicable to “mental events”. Hayek argued that human decisions are the result of the whole of the human mind (or personality) and we cannot reduce them to something else.
Alva NoÑ‘ goes further than Hayek in casting doubt on the capacity of neuroscience to explain consciousness. He claims: It is misguided to search for neural correlates of consciousness – at least if these are understood, as they sometimes are, to be neural structures or processes that are alone sufficient for consciousness. There are no such neural structures. How could there be? (p 185).
NoÑ‘ suggests: “To understand the sources of experience we need to see those neural processes in the context of the conscious being’s active relation to the world around it. ... Consciousness of the world around us is something that we do: we enact it, with the world’s help, in our dynamic living activities. It is not something that happens in us” (p 64).
He further explains: “The brain does not generate consciousness the way a stove generates heat. A better comparison would be with a musical instrument. Instruments don’t make music or generate sounds on their own. They enable people to make music or produce sounds” (p 64).
This is obviously a very different explanation of consciousness than that provided by Francis Crick. NoÑ‘ doesn’t discuss the views of other neuroscientists, such as Antonio Damasio, that seem to me to be more similar to his own view. For example, Damasio writes: “The secret of making consciousness may well be this: that the plotting of a relationship between any object and the organism becomes the feeling of a feeling” (“The Feeling of What Happens”, p 313).
It will be interesting to see whether NoÑ‘’s view becomes widely accepted. Daniel Dennett’s comment (on the dust jacket) suggests that those with different views may consider this book to be a worthy challenge: “Those of us who disagree with its main conclusions have our work cut out for us”. In “Freedom Evolves” Dennett takes as his starting point that we are “each made of mindless robots and nothing else” (roughly a hundred trillion cells) and sets himself the task of explaining the evolution of human consciousness. Dennett’s explanation is that human consciousness evolved for sharing ideas i.e. it is associated with the development of language and the enhanced survival capacity of groups in which reflective agents accepted responsibility for their actions.
NoÑ‘ has a very different view of when consciousness began. He views life as the lower bound of consciousness: “once you see the organism as a unity, as more than just a process, you are, in effect, recognizing its primitive agency, its possession of interests, needs, and a point of view. That is, you are recognizing its at least incipient mindfulness” (p 41).
That is the part of NoÑ‘’s view of consciousness that I have most difficulty accepting. Attempting to explain the capacity of humans to reflect upon their own actions is a different project than attempting to explain the incipient mindfulness shown by a bacterium – even accepting that both forms of behaviour are enacted with the world’s help by organisms engaged in dynamic living activities.
Finally, how would I respond now if asked how I feel about the quote from Francis Crick at the beginning of this post? I would say that Alva NoÑ‘ has persuaded me that Francis Crick’s claim is as misguided as attributing music solely to the components of musical instruments.
If someone had asked me how I felt about that statement before I read this book I would probably have shrugged my shoulders and said that it was just one of those things we have to accept whether we like it or not. I might have added, however, that I thought that Friedrich Hayek made a good point over 50 years ago (in “The Sensory Order”) when he said that the type of explanation that the physical sciences aim for is not applicable to “mental events”. Hayek argued that human decisions are the result of the whole of the human mind (or personality) and we cannot reduce them to something else.
Alva NoÑ‘ goes further than Hayek in casting doubt on the capacity of neuroscience to explain consciousness. He claims: It is misguided to search for neural correlates of consciousness – at least if these are understood, as they sometimes are, to be neural structures or processes that are alone sufficient for consciousness. There are no such neural structures. How could there be? (p 185).
NoÑ‘ suggests: “To understand the sources of experience we need to see those neural processes in the context of the conscious being’s active relation to the world around it. ... Consciousness of the world around us is something that we do: we enact it, with the world’s help, in our dynamic living activities. It is not something that happens in us” (p 64).
He further explains: “The brain does not generate consciousness the way a stove generates heat. A better comparison would be with a musical instrument. Instruments don’t make music or generate sounds on their own. They enable people to make music or produce sounds” (p 64).
This is obviously a very different explanation of consciousness than that provided by Francis Crick. NoÑ‘ doesn’t discuss the views of other neuroscientists, such as Antonio Damasio, that seem to me to be more similar to his own view. For example, Damasio writes: “The secret of making consciousness may well be this: that the plotting of a relationship between any object and the organism becomes the feeling of a feeling” (“The Feeling of What Happens”, p 313).
It will be interesting to see whether NoÑ‘’s view becomes widely accepted. Daniel Dennett’s comment (on the dust jacket) suggests that those with different views may consider this book to be a worthy challenge: “Those of us who disagree with its main conclusions have our work cut out for us”. In “Freedom Evolves” Dennett takes as his starting point that we are “each made of mindless robots and nothing else” (roughly a hundred trillion cells) and sets himself the task of explaining the evolution of human consciousness. Dennett’s explanation is that human consciousness evolved for sharing ideas i.e. it is associated with the development of language and the enhanced survival capacity of groups in which reflective agents accepted responsibility for their actions.
NoÑ‘ has a very different view of when consciousness began. He views life as the lower bound of consciousness: “once you see the organism as a unity, as more than just a process, you are, in effect, recognizing its primitive agency, its possession of interests, needs, and a point of view. That is, you are recognizing its at least incipient mindfulness” (p 41).
That is the part of NoÑ‘’s view of consciousness that I have most difficulty accepting. Attempting to explain the capacity of humans to reflect upon their own actions is a different project than attempting to explain the incipient mindfulness shown by a bacterium – even accepting that both forms of behaviour are enacted with the world’s help by organisms engaged in dynamic living activities.
Finally, how would I respond now if asked how I feel about the quote from Francis Crick at the beginning of this post? I would say that Alva NoÑ‘ has persuaded me that Francis Crick’s claim is as misguided as attributing music solely to the components of musical instruments.
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