How important is resilience to individual flourishing?

 

Everyone knows that resilience is important in coping with misfortune. However, it may be more important than I had thought.

My attention was grabbed recently by a newspaper article discussing a study suggesting that people with higher levels of resilience may live up to 10 years longer. The study was discussed in an article (possibly gated) by Lucy Dean in the Australian Financial Review (8 Sept, 2024) which also draws on an interview with Justine Gatt, director of the Centre for Wellbeing, Resilience and Recovery at UNSW and Neuroscience Research Australia.

The Longevity Study

The findings of the study by Aijie Zhang et al were published in an article entitled ‘Association between psychological resilience and all-cause mortality in the Health and Retirement Study’, in BMJ Mental Health (2024;27:e301064).

The study was based on the experience of 10,569 U.S. adults aged ≥50 (mean chronological age  67 years ) in the Health and Retirement Study (2006–2008). Mortality outcomes were determined using records up to May 2021.  During that period, 3,489 all-cause deaths were recorded.

The questionnaire used to measure resilience covered qualities such as perseverance, calmness, a sense of purpose, self-reliance and the recognition that certain experiences must be faced alone.

After adjusting for potential confounding factors, the researchers observed a decrease in the risk of death by 38% in the quartile with higher psychological resilience scores, compared with the group with the lowest scores.

The authors note that their findings are consistent with studies that have shown a significant positive correlation between life goals and self-rated health, with life goals moderating the relationship between self-rated health and mortality. Maintaining a positive self-perception of ageing has a positive effect on functional health, and optimism independently protects against all-cause mortality. Other studies demonstrate that individuals with poor social relationships have an increased risk of death.

The Compass Wellbeing Scale

Justine Gatt leads a project which aims to identify the underlying markers of wellbeing and to improve understanding of the underlying mechanisms that contribute towards resilience to stress and adversity.

In this project, mental wellbeing is measured using the 26-item COMPAS‑W Wellbeing Scale which provides a ​“composite” measure of wellbeing; that is, a measure of both subjective (hedonia) and psychological wellbeing.

The COMPAS‑W scale encompasses measures of composure, own-worth, mastery, positivity, achievement and satisfaction. The existence of a relationship between the Compass scale and resilience is based on the view that factors associated with resilience, include:

• The capacity to make realistic plans and take steps to carry them out
• A positive view of yourself and confidence in your strengths and abilities
• Skills in communication and problem solving
• The capacity to manage strong feelings and impulses
• A feeling that you are a master of your environment and in control
• A general positive outlook on your life and satisfaction with everything you have achieved

Justine Gatt argues these are skills that people can learn and develop for themselves. 

The research on resilience is ongoing, but the qualities encompassed in the Compass scale are obviously worth fostering.

Does your well-being depend on your PCNs?

 

The accompanying graphic suggests that it does. It is from Michael A Bishop’s book, The Good Life: Unifying the Philosophy and Psychology of Well-Being, published in 2015.

What is a PCN? A PCN is a positive causal network, or feedback loop. The general idea behind PCNs is that a person has a high level of well-being when they are experiencing a self-perpetuating cycle of positive emotions, positive attitudes, positive traits, and successful engagement with the world.

Bishop wrote the book to provide positive psychology with a solid foundation based on “a bit of fairly conventional philosophy of science”. He argues that the philosophical literature on well-being (hedonism, informed desire theory, and Aristotelianism) is too fragmented to provide positive psychology with a solid foundation.

The author observes that positive psychology offers practical, science-based advice about well-being. The explosion of scientific research on well-being has revealed homeostatically clustered sets of feelings, emotions, attitudes and behaviors. That provides the basis for positive psychology to be viewed as the study of the structure and dynamics of PCNs.

Bishop demonstrates that much research in positive psychology can be viewed in that light.

Consistency with my view of well-being

In my view, it makes sense to view psychological well-being as being at the opposite end of the spectrum to mental illness. Felicia Hupert and Timothy So viewed it as being on the opposite end of the spectrum to anxiety and depression. Those authors identified ten symptoms of well-being: competence, emotional stability, engagement, meaning, optimism, positive emotion, positive relationships, resilience, self-esteem, and vitality. They examined relationships among those symptoms in a study using data from a representative sample of 43, 000 Europeans. (‘Flourishing Across Europe’, Soc. Ind. Res. 2013.)

The view of psychological well-being adopted by Hupert and So seems to me to be easier to understand than Michale Bishop’s view that it consists of PCNs. Nevertheless, the two views don’t conflict. At one point Bishop actually suggests that it is possible to understand PCNs by contrasting them with negative or vicious causal cycles involving negative thoughts, feelings, attitudes, behaviors and dysfunctions.

Do PCNs constitute “The Good Life”?

As a neo-Aristotelian, the main objection I have to Bishop’s book is its title.

I am not particularly concerned that Bishop’s approach might be at variance with that of psychologists who claim to have an Aristotelian approach to positive psychology. Those people are well-intentioned but the indicators they use seem to be somewhat removed from what Aristotle had in mind when he expressed the view that human flourishing is a virtuous activity of the soul.

I guess that Aristotle would see a strong positive link between virtue and PCNs. After all, he saw virtue as being about not just about doing the right thing but also taking pleasure in it. Of course, Aristotle also acknowledged that people could obtain pleasure (but not eudaimonia) without being virtuous.

That raises the question of whether it is possible for a villain to have a high level of psychological well-being. In my book, Freedom, Progress, and Human Flourishing I expressed a view implying that villains can’t have high level of psychological well-being:

“It may be possible for a villain to score highly on positive emotion and self-esteem, but I doubt that a villain could obtain a high overall score in a competently administered psychological assessment.”

I based that view on research findings relating to the dark triad.

Bishop presents a different view:

“In a culture in which cruelty is rewarded, a person naturally disposed to cruelty can have success and a high degree of well-being. This is not a consequence to jump for joy about. It’s just a sobering fact about our world that bad people can have well-being.”

Bad people can certainly have the outward signs of success in a culture in which cruelty is rewarded but I suspect that, even in that cultural context, people who take a stand against cruelty may tend to have stronger PCNs. (I could be wrong about that. It is an empirical question.)

In their book, Modernizing Aristotle’s Ethics, Roger Bissell and Vinay Kolhatkar suggest that humaneness is constitutive of a psychic state humans desire and cite evidence opposed to the widespread belief that ruthless people tend to get ahead in life, love, and especially business. (For references, please see my essay entitled ‘Is it possible for humans to flourish if they don’t live good lives?’, recently published on The Savvy Street).

Irrespective of whether bad people can have high PCNs, no Aristotelian could accept that they are flourishing. The view that bad people can live “good” lives is also opposed to the folk view of what it means to live a good life. (Please see the essay cited above for references and discussion.)

Conclusions

In his book, The Good Life, Michael Bishop argues that positive psychology should be viewed as the study of the structure and dynamics of positive causal networks (PCNs). PCNs are self-perpetuating cycles of positive emotions, positive attitudes, positive traits, and successful engagement with the world.

The view that psychological well-being is deeply rooted in strong PCNs seems to be consistent with the view that it lies on the opposite end of the spectrum to anxiety and depression.

The title of Bishop’s book is at variance with his view that it is possible for bad people to have strong PCNs. I am not convinced that it is possible for bad people to have high PCNs. Irrespective of whether that is so, however, people of bad character certainly do not live “the good life”.

Is "scout mindset" a worthy objective of personal development?

 

If someone had mentioned “scout mindset” to me a week ago, I would probably have thought they were referring to mottos of the scouting movement such as “Be prepared!” and “Do a good turn every day!”. Since then, I have had the opportunity to read Julia Galef’s book, Scout Mindset, Why some people see things clearly and others don’t, which was published last year.

I think this is a remarkably good book - even though it has left me feeling somewhat more modest about the accuracy of some of my perceptions.

Scout mindset versus soldier mindset

Julia Galef defines scout mindset as ‘wanting your “map” – your perception of yourself and the world – to be as accurate as possible’. The scout aims to form a map of the strategic landscape. The scout mindset is characterized by accuracy motivated reasoning and guided by the question: Is it true?

By contrast, “soldier mindset” is aimed at fighting off threatening evidence. It is directionally motivated reasoning, evaluating ideas through the lenses of “Can I believe it?” and “Must I believe it?”

Galef suggests that soldier mindset is our default setting, and argues that in many, if not all situations we would be better off abandoning it and learning to adopt a scout mindset instead.

I am inclined to the view that intuitive thinking is our default setting, and that there are often good reasons to be reluctant to abandon intuitions and expectations that are based on patterns that have we have observed in the past. Nevertheless, it is probably fair to argue that most of us have a tendency to keep fighting conflicting evidence long after it should have persuaded us to change our minds. That is the soldier mindset. When we adopt a scout mindset, we begin to assimilate the evidence and re-assess our views sooner – perhaps by engaging in reasoning akin to Bayesian updating of probabilities.

Galef explains that there are several reasons why people tend to adopt a soldier mindset. It enables them to avoid unpleasant emotions by denial or by offering comforting narratives. It helps them to feel good about themselves by maintaining illusions. It helps them to motivate themselves by exaggerating their chances of success. It helps them to convince themselves so they can be more successful in convincing others. It enables them to choose beliefs that make them look good. It also helps them to belong to social groups of like-minded people.

The author suggests that scout mindset is more useful to us than for our ancestors. I have some reservations about that claim. Scout mindset would have been a useful attribute for our hunter and gatherer ancestors when they were searching for food. Nevertheless, she is persuasive in arguing that, by comparison with your ancestors, “your happiness isn’t nearly as dependent on your ability to accommodate yourself to whatever life, skills, and social groups you happened to be born into”.

In subsequent chapters, Galef proceeds to discuss how to develop self-awareness, thrive without illusions, change your mind, and develop a scout identity. In what follows, my focus is selective. Readers seeking a more comprehensive review should also read Jon Hersey’s article in Quillette, which persuaded me to read the book.

It seems to me that the strongest objection that people raise to having accurate perceptions of themselves is that self-delusion serves them well. The strongest objection to seeking accurate perceptions relating issues of public policy is that it is not worth attempting because the individual voter’s influence on policy outcomes is insignificant. I will look at those objections before discussing scout identity as an objective of personal development.

Does self-delusion serve us well?

A substantial amount of psychological research purports to show that people who deceive themselves are happier than realists. Galef points out that these research findings are based on measures of self-deception that lack any objective standards of reality as a basis for comparison. They use measures of self-deception that conflate positive beliefs with illusions. For example, the measurement methodology assumes that people who claim that they never get angry are deceiving themselves. Similarly, people who claim that they always know why they like things are assumed to be deceiving themselves.

It is not necessary for us to deceive ourselves about the probability of success before embarking on new ventures. Galef refers to Elon Musk as an example of an investor who has proceeded with ventures even though he has a clear-eyed view that they have a low probability of success. When asked why he has said:

“If something is important enough you should try. Even if the probable outcome is failure”.

A gamble can worth taking if the expected payoff (value of each outcome x probability of occurrence) is positive.

There can also be an issue of perspective involved in assessing probability of success. I find it helpful to think in terms of adopting a player mindset rather than a spectator mindset. On the basis of past performance, spectators might be justified in assessing that the player has low probability of success in a particular event. However, a coach who knows a great deal about the player’s capability might have good reasons to suggest to her that the spectators are under-rating her chances. Encouraging the player to adopt a mindset that makes use of her inside knowledge might induce her to take a more positive attitude toward training etc. My point is that adopting a player mindset is an exercise in realistic self-appraisal, rather than self-deception.

Julia Galef is not alone in being critical of empirical research which purports to show that holding positive illusions about oneself tends to promote happiness. As previously noted on this blog Neera Badhwar has also taken that position, and has argued strongly that realistic optimism about oneself and one’s future beats unrealistic optimism. Badhwar also notes that Abraham Maslow and Carl Rogers, leaders of the human potential movement, viewed realism as central to mental health and well-being. She notes that in Rogers' view the fully functioning individual is open to experience, distorting neither his perceptions of the world to fit his conception of himself, nor his conception of himself to fit his perceptions of the world. I find this particularly interesting in the light of Rogers’ use of Alfred Korzybski’s notion that “the map is not the territory”. Carl Rogers recognized that our maps do not serve us well if they are not realistic.

Why seek accurate maps of public policy issues?

Readers who are familiar with Chapter 6 of Freedom, Progress, and Human Flourishing will be aware of my concern that individual voters lack incentive to become well-informed about policy issues. Most voters are either apathetic about politics, or view it in the same way as they view sporting contests. They cheer for their team and jeer at their opponents.

Galef discusses Bryan Caplan’s concept of rational irrationality. In explaining what he means by rational irrationality Caplan suggests:

“In real world political settings, the price of ideological loyalty is close to zero. So we should expect people to ‘satiate’ their demand for political delusion, to believe whatever makes them feel best” (The Myth of the Rational Voter, p 18).

Galef rejects the view that voters are rationally irrational on the grounds that it implies that they are “already striking an optimal balance between scout and soldier”. She seems concerned that if she were to accept that rational irrationality is widespread, she would have to appeal to the desire of the readers of her book to be good citizens, and/ or to love truth, in urging them to adopt a scout mindset.

However, it seems to me that readers of this book who have any interest in politics are more likely to be Vulcans than Hooligans – to use the terminology of Jason Brennan (in Against Democracy, 2016). Vulcans try to avoid bias, while the Hooligans are the rabid sports fans of politics. The Hooligans are so wedded to soldier mentality that their beliefs are determined by the social groups that they identify with. The only hope of persuading these soldiers to modify political beliefs that are at variance with reality rests with the ability of scouts to persuade the generals (opinion leaders they respect) to modify their views.

Galef has little respect for those Vulcans whose reasoning resembles that of Spock in Star Trek, but has plenty of advice for people who really want to avoid bias in beliefs relating to policy issues. For example, she discusses the research of Phil Tetlock, which suggests that people who are willing to make subtle revisions of forecasts of global events in response to new information tend to make more accurate forecasts than academic experts.  

The author also has some interesting advice for people who want to reduce bias in their beliefs by exposing themselves to views outside of their echo chambers. Exposing partisans to the views of their political opponents tends to reinforce their existing views. She suggests:

“To give yourself the best chance of learning from disagreement, you should be listening to people who make it easier to be open to their arguments, not harder. People you like or respect, even if you don’t agree with them.”

Scout identity

Galef notes that identifying with a belief can wreck your ability to think clearly because you feel that you have to defend it, which motivates you to feel that you have to collect evidence in its favour. She suggests that activists are likely to be most successful if they hold their identity lightly enough to be capable of engaging with the views of opponents and making clear-eyed assessments of the best ways to achieve goals.

The author presents several arguments for seeking to adopt scout identity, but suggests that the most inspiring one is “the idea of being intellectually honorable: wanting the truth to win out, and putting that principle above your own ego”.

In reading The Scout Mindset, I was struck by parallels between the argument presented for adoption of scout mindset and the views of Robert Kegan on stages of mental development from a socialized mind, which enables people to be faithful followers and team players, to a self-authoring mind and self-transforming mind. Readers wishing to investigate further might find it helpful to read Immunity to Change, by Robert Kegan and Lisa Lahey. (I discuss the book here.) 

Conclusions

In my view Julia Galef makes a strong case for people to seek to have realistic maps - perceptions of themselves and the world that are as accurate as possible.

The author successfully challenges research findings claiming that self-deception contributes to happiness of individuals, and she provides useful advice to those seeking to make their maps more accurate.

Galef offers particularly useful advice for people seeking better mapping of public policy issues. If you want to become less biased, listen carefully to the views of opponents you respect rather than seeking exposure to opponents you do not respect.

I agree with the author that the most important reason to seek to have realistic maps is because that is intellectually honorable. Scout mindset is a worthy objective of personal development.

Would a good society seek to maximize a social welfare function?

 This article is about my personal experience in attempting to understand social welfare, the concept of a good society, and my role as an economist involved in the processes of social choice. I decided to write about this topic after writing an article for Savvy Street on the related topic, “Can social planning enhance individual flourishing?”

When economists talk about maximizing social welfare, they are referring to a concept that appears to have something to do with the well-being of people. However, the concept is best viewed as a signaling device to suggest that the social planner claims to have obtained insights about society from studying an abstract mathematical model. Such signaling is not helpful to consideration of the merits of policy proposals.

Maximizing social welfare can encompass policies that would enlarge the economic pie (national product) so that there is potential for everyone to be given a larger slice. In that case, it might be reasonable to argue that the policy would receive widespread support among citizens. A good society - one that is good for the people who live in it – could be expected to adopt such policies. However, claims about pursuing social welfare objectives make such policies no more attractive than if they are advocated to simply expand opportunities for individual flourishing.

Maximizing social welfare can also encompass policies to redistribute the economic pie in a manner that advocates believe will somehow enhance the collective well-being of citizens.  When maximizing social welfare is said to require redistribution of the cake, some citizens will be advantaged at the expense of others. It is possible for some policies of this nature to receive widespread support (e.g. provision of a basic social safety net) but that is less likely when extensive redistribution is proposed to equalize the utility that different individuals obtain at the margin from additional income.

Whose welfare function should we maximize?

The idea of social welfare maximization implies the existence of a social welfare function reflecting insights about determinants of collective well-being and expressing the “general will’ of the people. It was over 50 years ago that I began to realize that this idea is highly problematic. My libertarian friends might find this hard to believe, but it happened while I was studying welfare economics.

An article by Francis M Bator influenced me greatly, although perhaps not in the way the author intended. As I was reading Bator’s article - ‘The Simple Analytics of Welfare Maximization, The American Economic Review, 17(1) March 1957 - I remember feeling that this was an object of great beauty. I suppose the article seemed beautiful for the same reasons that abstract art can seem beautiful. Bator provides a geometric presentation of the derivation of a production possibilities curve, then proceeds to derivation of the utility possibility frontier, which he then crowns with a social welfare function, as shown in the diagram above.

Bator’s description of that diagram left a lasting impression on me. He tells us that BB represents the grand utility possibilities frontier, showing at each point the maximum utility for person X given any feasible level of utility for person Y, and vice versa. He then proceeds to explain the “bliss point”, Ω, in the following words:

“To designate a single best configuration we must be given a Bergson-Samuelson social welfare function that denotes the ethic that is to “count” or whose implications we wish to study. Such a function – it could be yours, or mine, or Mossadegh’s, though his is likely to be non-transitive – is intrinsically ascientific.”

What Bator meant by ascientific is that the function involves ethical valuations. However, the point that has stuck in my mind is that despite the heroic assumptions Bator was making in constructing his beautiful geometric edifice, he did not try to pretend that it could be crowned with a social welfare function aggregating the preferences of all citizens. The function depicted “could be yours, or mine, of Mossadegh’s”. (Mohammad Mosaddegh was an Iranian prime minister who held office from 1951 until 1953, when his government was overthrown - apparently in a coup orchestrated by M16 and the CIA.)

Is it possible to make sense of the diagram? 

As I look at the diagram now, the idea of choosing between the utility levels of different people seems problematic. It would also be problematic to some modern utilitarians whose social welfare function is defined simply in terms of maximizing average life satisfaction (making the implicit ethical judgement that everyone deserves to have the same life satisfaction). In that case, if the axes measure the life satisfaction of X and Y, the bliss point would be defined by the intersection of the possibility frontier and a 45⁰ line drawn from the origin. The 45⁰ line would represent all points where X and Y have equal life satisfaction – X and Y would each have maximum life satisfaction at the bliss point.

However, I reject that modern utilitarian view. It seems to me to reflect an inadequate understanding of the determinants of individual flourishing. As argued in Freedom, Progress, and Human Flourishing, even though average life satisfaction may be a reasonable indicator of the average psychological well-being of large groups of people, psychological well-being is just one of the basic goods of a flourishing human. In my experience, when people are encouraged to offer more than perfunctory responses to questions about how they are faring, they tend to talk about a combination of different things such as their aspirations and the choices they have made, their health, and their personal relationships. Satisfaction is relevant, but does not encompass all relevant aspects of human flourishing.

To make sense of the choices represented in the social welfare function depicted, I would need to replace “utility” with “opportunity to flourish”. Even then, I would need good reasons to make an ethical judgement about whether X and Y deserve to have their opportunity to flourish enhanced or restricted.

What are the implications for social choice?

While Bator’s description of the social welfare function let the cat out of the bag for me, I remember reading about Kenneth Arrow’s impossibility theorem at about the same time. I think the main lesson I took away was that the processes of government must inevitably be somewhat dictatorial. That makes it important to have constitutions that protect liberty and electoral processes that are capable of kicking tyrants out of office.

While studying welfare economics, I also took a course in public choice in which I had my first exposure to The Calculus of Consent, by James M Buchanan and Gordon Tulloch. That book and other writings by Buchanan have had a profound impact on my views about the good society and the role of economists.

Buchanan and Tulloch noted that when individuals are considering constitutional rules that they expect to be in place for a long time, they are uncertain as to what their own interests will be in any of the whole chain of later collective choices made according to those rules. Such uncertainty may enable people to set aside their current economic interests in making constitutional choices. One implication is that individuals will tend to choose somewhat more restrictive rules for social choice-making for areas of potential political activity that could involve violation of liberty.

Buchanan and Tulloch link liberty directly to the concept of a good society:

“The acceptance of the right of the individual to do as he desires so long as his action does not infringe on the freedom of other individuals to do likewise must be a characteristic trait in any “good” society. The precept “Love thy neighbor, but also let him alone when he desires to be let alone” may, in one sense, be said to be the overriding ethical principle for Western liberal society.” (p 217).

 Buchanan later warned that the norms that underlie democratic institutions are under threat when politics is allowed to become little more than a ‘commons’ through which competing coalitions seek mutual exploitation.  (For further discussion of this please see Chapter 6 of Freedom, Progress, and HumanFlourishing).

What should economists do?

Economists who advise on public policy often view themselves as social planners who are advising benevolent despots. They are frequently disappointed to find that those whom they advise give higher priority to political and personal goals than to publicly stated economic objectives, or lack the political power to implement recommendations.  

James Buchanan suggested that economists should adopt a contractarian approach, with a focus on the consequences of rules and, in particular, on the question of what rules of the game individuals might accept voluntarily as participants in an authentic constitutional convention. In providing an example of this approach, Buchanan suggested that such a convention would be unlikely to endorse rules of the game which allow majorities in a single generation to impose public debt burdens on subsequent generations of taxpayers. (Nobel prize lecture).

My career

The focus of my career in public policy advice was partly contractarian. For most of my public service career I had the good fortune to work in agencies of the Australian government (predecessors of the Productivity Commission) which undertook research and published reports on the economic implications of changing the rules of the game for economic development. The focus of much of this work was assessing effects of barriers to international trade and other forms of industry assistance.

I note that my career was only partially contractarian because the agencies were required to make recommendations to the government according to specific terms of reference for individual inquiries and more general guidelines. The specific terms of reference were sometimes designed to ensure that governments received politically palatable recommendations, but the research and policy analysis published in inquiry reports, and in annual reports, informed policy-making processes in ways that led eventually to adoption of rules of the game more favourable to free trade.

The advisory agencies were given general guidelines including having “to have regard to the desire of the Australian Government …  to improve and promote the well-being of the people” and to “improve the efficiency with which the community’s productive resources are used”. I do not believe that the collectivism reflected in the reference to people and privately owned capital as “the community’s productive resources” had one iota of influence on the research and policy analyses conducted by the agencies.

I have endeavored to maintain a focus on the implications of different “rules of the game” in the public policy aspects of my subsequent consulting career and my writing on freedom and flourishing on this blog and in my books. There have been some lapses, but I hereby forgive myself 😄 . It has not always been easy to avoid falling into the trap of viewing oneself as a social planner advising a benevolent despot. 

How are life satisfaction ratings related to living standards evaluations?

 

It is well known that in wealthy countries, further improvement of average incomes has only a small impact on average life satisfaction. Diametrically opposed explanations have been offered.

On the one hand, there are those who say that if rising incomes have little effect on average life satisfaction, that must mean that their apparent impact on living standards is a mirage – rising incomes do not count as progress.

On the other hand, there are those who say that average life satisfaction numbers are garbage – you can’t expect to get useful information by asking people to rate their satisfaction with life on a 10-point scale. They say that rising average incomes provide an accurate picture of progress.

In my view, those opposing explanations are both unhelpful to an understanding of the relationship between living standards and life satisfaction. In my book, Freedom, Progress, and Human Flourishing, I explain that rising incomes result in actual improvements in living standards, and count as progress because that is what people aspire to have. Since self-direction is integral to human flourishing, it is obvious that progress is inextricably linked to conditions that enable individuals to meet their aspirations more fully. In the book, I also explain why I think average life satisfaction is an appropriate measure of psychological well-being at a national level. I suggest that psychological well-being, along with wise and well-informed self-direction, is one of several basic goods that a flourishing human could be expected to have.

The moving benchmark problem.

The failure of life satisfaction to reflect improved living standards is explained as follows in my book:

“The happiness surveys behind this puzzle, often referred to as the Easterlin puzzle, ask respondents to rate their lives relative to benchmarks such as the best possible life. Let us assume that when a person in a high-income country, call him Bill, answered that question in 1990, and he gave a rating of 8/10 for his life. Since then, Bill’s income has increased at about the same rate as the average for the country in which he lives, and there have been no abnormal changes in the circumstances of his life. In January 2020 … he again rated his life as 8/10. …

Bill’s income has risen, but his rating of his life has not risen.

The problem is that the survey prompted Bill to rate his life against a moving benchmark. Bill’s view of what constitutes the best possible life is likely to have risen over time. The people he sees living such a life have obtained access to better communication technology, and other things that have potential to enhance the quality of life. If you ask people to rate their current lives relative to a benchmark that is moving upwards over time, measurement error is inevitable.”

Ways to avoid the moving benchmark problem include the ACSA approach previously discussed on this blog (here and here). For reasons best known to themselves, happiness researchers have not shown much interest in using that approach to test the extent to which life satisfaction measures are distorted by moving benchmarks.

Living standards comparisons

The moving benchmark problem does not arise when people are asked how their standard of living compares with that of their parents when they were about the same age. Surveys of that kind have tended to provide information consistent with perceptions of ongoing progress with rising incomes in wealthy countries.

There is no plausible reason why such inter-generational comparisons should be viewed as less credible than life satisfaction ratings, or vice versa. As I see it, they are cognitive evaluations of different things. The intergenerational comparisons are measuring perceptions of progress, and the life satisfaction ratings are measuring current psychological well-being.

Merging life satisfaction and living standards evaluations

In order to obtain a better understanding of the linkage between perceptions of progress and current life evaluations, it is necessary to bring those different cognitive evaluations together in some way. That has been made possible by inclusion in the latest round of the World Values Survey of a question asking respondents whether their living standards are higher, lower, or about the same as those of their parents when they were about the same age. The graphs shown above were prepared using the excellent Online Data Analysis facility of the World Values Survey. Information is shown for the United States and Australia, but similar pictures emerge for other high-income countries.

The most obvious point illustrated by the graphs is that people tend to be much less satisfied with their lives if they perceive that their living standards are lower than those of their parents at a comparable age. Their perceptions that their living standards have fallen tends to make them feel grumpy about life.

The second point to emerge is that the life satisfaction ratings of those who perceive that their living standards are better than those of their parents are not much higher than for those who perceive that their living standards are about the same as those of their parents. Their perceptions of progress are not reflected to any great extent in their satisfaction current lives. That result is consistent with my view that life satisfaction is a poor indicator of the extent to which people meet their aspirations for higher living standards.

Implications

Perceptions of change in living standards that emerge from intergenerational comparisons are related to the recent history of economic growth in different countries. The greatest percentage perceive that their living standards are higher than their parents in countries that have sustained high rates of growth in per capita GDP over several decades. Of the 54 countries for which data are available, Vietnam has the greatest percentage in that category (90%) and Iraq has the lowest (21%). The corresponding percentages for Australia and the U.S. are 56% and 48% respectively.

Percentages who perceive that their living standards are lower than their parents follow a broadly similar pattern, but in most countries are within the range of 10% to 25%. Of the 54 countries, Zimbabwe is the only one where more than half of respondents perceived that their standard of living was lower than that of their parents. The corresponding percentages for Australia and the U.S. are 15% and 19% respectively.

The age structure of people who perceive themselves to be worse off than their parents suggests that this source of grumpiness is likely to pose a greater problem in Australia and the U.S. in the years ahead. The incidence is lowest among the 65+ age group (7.6% for Australia and 8.4% for the U.S.). The highest incidence in Australia is in the 25-34 age group (20.1%) and in the U.S. in the 35-44 age group (26.4%).

Conclusions

Average life satisfaction provides useful information on psychological well-being at a national level, but is a poor measure of the extent to which people are meeting their aspirations for higher living standards. As expected, people who perceive their standard of living to be higher than that of their parents, do not rate their life satisfaction much higher than those who perceive their standard of living to be about the same as that of their parents. However, people who perceive their standard of living to be lower than that of their parents have markedly lower life satisfaction than the other groups. The percentage of grumpy people in countries such as Australia and the U.S. seems set to rise in the years ahead unless opportunities improve for young people to meet their aspirations for higher living standards.

How useful is the WELLBY concept in assessing the benefits and costs of alternative policies?

 

There are good reasons why public policy discussions often revolve around the benefits and costs of alternative policies. Discussions that begin with the consideration of rights often require participants to acknowledge conflicting rights and to weigh up consequences in a search for the principles that can most appropriately be applied.

For example, consider what followed when I suggested recently in a discussion of the merits of lockdowns to counter the spread of COVID19 that such policies should be assessed against the principle that individuals have a right to direct their own flourishing, provided they do not interfere with the similar rights of other people. The latter part of that assertion implies a willingness to consider whether infected people who spread disease are interfering with the rights of others. At an early stage of the discussion, I acknowledged that it would be a step too far to insist that everyone has the right to recklessly endanger the lives of others. I argued that there should nevertheless be a presumption in favour of freedom, and that those who advocate restriction of freedom should be required to demonstrate that the benefits clearly exceed the costs.

That illustrates how the discussion of benefits and costs tends to rule the roost in civilized discussions of public policy. An exchange of different views about rights can be enlightening, but endless repetition of conflicting assertions about rights does not qualify as civilized discussion in my view.

A WELLBY (or Wellbeing Year) is equal to a one-point increment on a 10-point life satisfaction scale. If you assessed your level of life satisfaction as 8/10 in 2019 and 7/10 in 2020, that would be a decline of one WELLBY.

I began thinking about the WELLBY concept while considering how it is possible to measure the costs and benefits of lockdowns, but in this article, I will focus on the usefulness of that concept rather than on the question of whether benefits of lockdowns could ever exceed the associated costs.

Assessing the psychological cost of lockdowns

Indicators of subjective well-being are obviously relevant in assessing the psychological costs associated with policies that require people to stay at home. Available evidence suggests that lockdowns caused a decline in average life satisfaction of about half a point in the UK and similar countries in the
period to March 2021. On that basis, Paul Frijters, Gigi Foster, and Michael Baker estimate that lockdowns cause loss of life satisfaction to the general public in the U.K. of 41,667 WELLBYs per million citizens for each month of lockdown. This estimate is in Chapter 5 of their book, The Great Covid Panic, 2021.

I think that is an appropriate use of the WELLBY concept. If anyone knows of a better way to assess the psychological costs of lockdowns, I would be interested to know what it is.

Frijters, Foster, and Baker incorporate several other items in their assessment of the costs of lockdowns. I will consider one of those later, but I want to turn now to use of the WELLBY concept in the assessment of the main hypothetical benefit of lockdowns, namely lives potentially saved.

Assessing the value of a life saved

Richard Layard and Ekaterina Oparina have published a provocative article using a WELLBY approach to assess the monetary value of preventing the loss of one year of human life (Chapter 8 of World Happiness Report, 2021).

Layard and Oparina begin their discussion by observing that the average WELLBY is 7.5 in advanced countries. On that basis, they claim that preventing the loss of one year of the life of one person saves 7.5 WELLBYs.

The authors draw upon information on the relationship between income and life satisfaction in order to assess the monetary value of that loss. After some discussion of relevant research, they suggest that a coefficient of 0.3 is an appropriate measure of the impact on life satisfaction of a unit change in absolute log income. With average income of $30, 000, the loss of $1 is equivalent to 1/100,000 WELLBYs (0.3/30,000). It follows, they suggest, that “we” should be willing to pay up to around $750, 000 to save a year of life (7.5 WELLBYs).

Layard and Oparina point out that the $750, 000 would be shared over the whole population. Nevertheless, it still seems an extremely large sum to pay to prolong a life by just one year.

One possible source of error is that life may have no value for people with very low life satisfaction, for example those with a rating less than 2/10. If you assume that a life year is equivalent to 5.5 WELLBYs (7.5 minus 2.0), the estimated sum that “we” should be willing to pay to prolong life by one year is reduced to $550, 000. That still seems implausibly high.

The estimate could be further reduced by taking account of the fact that the people who are most vulnerable to COVID19 often have pre-existing ailments that would tend to reduce their life satisfaction, and many of those in nursing homes would be unlikely to live another year in any case.

However, let us return to the question of whether $550,000 is a plausible estimate of what “we” should be prepared to pay to prolong by one year the life of a person with an average life satisfaction rating. An alternative way to approach the issue of determining the monetary value of a year of life is to consider estimates of the impact of changes in healthy life expectancy on average life satisfaction. Regression analysis suggests that the addition of one year to healthy life expectancy adds only 0.033 to average life satisfaction (Table 2.1, World Happiness Report, 2019). The income loss providing an equivalent loss of life satisfaction is only $3,300 (0.033*100,000). That strikes me as an implausibly low estimate of the value of a year of life.

My view of what is a plausible estimate of the value of one year of life is not based solely on my own gut feelings. The assumed value of a life year in cost-benefit analysis typically ranges from $50, 000 to $250, 000. Those assumptions are based on surveys asking people how much they would be willing to pay to extend their lives and estimates of amounts people need to be paid to accept jobs involving greater risks to life.

Estimates of the value of a year of life within that range seem to be broadly consistent with community expectations. Some groups may lobby for lives to be valued more highly in assessing whether life-saving drugs should be subsidized by governments. However, I don’t see large numbers of people suggesting that they would be willing to pay higher taxes to fund that.

There seems to me to be a fundamental problem in attempting to assess the value of a life-year from the relationship between average income and average WELLBYs. As I explain in Freedom, Progress, and Human Flourishing, psychological well-being is just one of the basic goods of a flourishing human. When you ask individuals open-ended questions about how they are faring, their responses are not confined to the extent that they are “satisfied” with life. They are likely to talk about whether they are achieving their aspirations, the state of their health and their personal relationships. If you ask a person who already has high life satisfaction why they aspire to earn a higher income, they are not likely to claim that they expect a higher income to enable them to become more satisfied with their own life. They are more likely to say that they want to put some money aside for various reasons, for example to assist with education of children or grandchildren, or to have something to fall back on in the event of illness.

If an individual is faced with a decision about whether to use accumulated wealth (or to mortgage their house) to purchase an expensive drug that might prolong their life for a year, the quality of that extended life (WELBYs) is not the only factor that they are likely to consider. The choice they make may well give consideration to their desire to improve opportunities available to the next generation of their family. There is an intergenerational choice involved in placing a value on an additional year of life.

What value should be placed on the lives of potential humans?

Frijters, Foster, and Baker include among the costs of lockdown the shutting down of the in-vitro fertilization (IVF) program during lockdowns in the UK because it was deemed to be a nonessential service. This resulted in about 30 fewer IVF births per million citizens per month of lockdown.

The cost of disruption of the IVF program is not critical to the authors’ conclusion that the cost of lockdowns exceed the benefits. Nevertheless, in my view there is a strong case for it to be taken into account. Potential parents clearly place a high value on the new lives that the program makes possible.

However, the methodology which Frijters, Foster, and Baker use to estimate the cost of disruption of the IVF program is a straightforward application of the WELBY concept to value lives. They calculate that each of these potential humans could be expected to enjoy 480 WELLBYs during his or her life – each is assumed to have a value equal to 6 WELLBYs and to live on average for 80 years. With the loss of 30 IVF babies per month, that amounts to the loss of 14,400 WELLBYs worth of human well-being per month per million citizens.

The reasoning is impeccable if you accept the utilitarian assumptions associated with use of the WELLBY concept to measure the value of a human life. Within that framework, if government policies prevent potential humans from being born, that diminishes the sum of human happiness by the amount of happiness they would have enjoyed during their lifetimes.

I have already indicated that I don’t accept that people value their own lives exclusively on the basis of WELLBYs. However, if I have not yet persuaded you to reject the WELLBY approach to evaluation of lives, you may wish to consider the following possible outcome of applying that approach.

Let us suppose that a government is considering a ban on all forms of contraception and seeks the services of some utilitarian advocates of maximization of human happiness to evaluate the costs and benefits of the proposal. It seems reasonable to predict that the utilitarians would conclude that the additional births resulting from the policy change would result in a large net increase in WELLBYs, and therefore an increase in the sum of human happiness. The more, the merrier they might say!

Conclusions

The WELLBY concept has a useful role to play in evaluation of some policies that have an impact on psychological well-being.

However, the valuation of lives according to the number of WELLBYs individuals might enjoy seems to be at variance with the approach that individuals take in making choices in relation to extension of their own lives. That approach to valuing lives is widely at variance with the approach most people in advanced countries adopt in considering the value of potential lives of the many additional humans that they could bring into the world if they felt inclined to do so. It counts the lives of potential people as having equal value to the lives of the living.

The WELLBY approach to valuation of human life should be rejected.

Postscript

A survey conducted by UBS has provided relevant information on the proportion of wealth that investors are willing to sacrifice for additional years of life. The survey covered 5,000 wealthy investors in 10 countries. On average, those with financial wealth in the $1 to $2 million range indicated that they were willing to give up 32% of their wealth for an additional decade of healthy living. That may seem a lot, but amounts to only $32,000 to $64,000 per annum when spread over 10 years.

Those figures are far lower than the $750,000 (discussed above) that an application of the WELLBY approach to life evaluation has suggested that “we” should be willing to pay to save a year of life.

Is it possible to have sensible policy discussions about climate change?

 

Development of public policy depends to a large extent on sensible public discussion to filter out stupid proposals.  Climate change is no exception. The problem is that instead of having sensible discussions a lot of people just accuse one another of being deniers or alarmists, and use political stunts to advance or defend stupid policies.

It is easy to get the impression that most people can be classed as either deniers or alarmists, but surveys suggest to me that such extremists make up a relatively small proportion of the population of most countries. How many people get classified as deniers and alarmists is obviously influenced by the way these concepts are defined.

It makes sense to classify people as “deniers” if they claim climate change is “not a threat”. A survey by the Pew Research Center conducted in 2018 found that the percentages saying that climate change is not a threat vary substantially among the 26 countries included, from 21% in Nigeria to 3% in France and South Korea. Corresponding numbers were 16% in the U.S., 9% in Australia and 4% in Sweden.

The Pew survey found that in most countries a majority viewed climate change as “a major threat”, but it would be an exaggeration to label all those as alarmists. The people I describe as alarmists tend to say things like: “It is already too late to avoid the worst effects of climate change”. An international poll by YouGov, taken in 2019, found that people who say that vary from 20% of the population in France to 4% in Oman. Corresponding numbers were 10% in the U.S. and Australia, 8% in Sweden, 11% in Britain, and 6% in China.

False alarm

I was prompted to attempt to get a handle on the percentages of deniers and alarmists by my reading Bjorn Lomborg’s latest book, FalseAlarm: How climate change panic costs us trillions, hurts the poor, and fails to fix the planet. Lomborg sees climate change alarmism as a greater problem than denial. He suggests that the arguments of the deniers have been “thoroughly debunked” and approves of media refusing to give space to deniers. His main gripe is that media are “failing to hold climate alarmists to account for their exaggerated claims”.

However, it seems to me that different media outlets have different biases. Some pander to the prejudices of the noisy alarmists among their readers, while others pander to the noisy deniers. Unfortunately, the mass media no longer does much to promote sensible discussion of issues that have become politicized.

Lomborg’s book seems to me to advance a coherent viewpoint that could provide a basis for sensible discussion among people who are not wedded to extreme positions. His main points are as follows:

• Climate change is real. The amount of CO2 in the atmosphere affects global temperature.
• Global warming will have a negative impact on human well-being. Estimates of the likely damage from global warming by 2100 amount to a modest percentage of GDP (about 4%) if allowance is made for adaptation, fertilization (positive impacts of CO2 on crop yields and forest production) and the expanding bullseye effect (the tendency for more people to live in flood prone and fire prone areas).
• If all nations met their promises under the Paris Agreement, that would have only a small impact on global warming.
• With known technology and using the most efficient policy instrument to achieve Paris Agreement targets, the cost involved would be much higher (perhaps 3 times higher) than the expected benefits.
• There is potential for research and development to reduce the cost of green energy alternatives to use of fossil fuels. However, governments are not meeting the commitments they have made to expand relevant R&D activities.
• Carbon taxes and green energy innovation will not obviate the need for adaptation to a warmer climate over coming decades. Adaptation is a less costly option than attempting to reduce CO2 emissions to zero over the next few decades.
• Geo-engineering is worth researching as a backup plan to be used as required, e.g. if the West Antarctic ice sheet starts to melt precipitately.
• People in low-income countries will be better able to cope with the adverse impacts of climate change if they become wealthier. Holland and Bangladesh both have substantial areas of land below sea level, but Holland can afford infrastructure that enables it to cope better. 

 

My overall impression is that Lomborg has made a serious effort to focus discussion on things that are worth discussing. I have some reservations about his views, which I will mention below, but my initial focus is whether the book is generating useful discussion. I have found a couple of reviews by people who could be expected to challenge the argument that Lomborg advances.

Reviews

The first review is by Joseph Stiglitz, a Nobel prize winning economist. Stiglitz’s review was published in the New York Times. Rather than addressing the cost of current policies, Stiglitz appeals to an authority which he seems to view as infallible - an international panel chaired by himself and Lord Nicholas Stern – which apparently “concluded that those goals could be achieved at moderate cost”. I have not been able to find that conclusion in the report of his High-Level Commission, but I can’t claim to have read the document thoroughly. My brief reading left me with the impression that the costs will only be moderate if there is rapid progress in development of green technology. Stiglitz does not acknowledge that Lomborg advocates increased R&D for to promote more rapid development of green technology.

Stiglitz concludes by asserting:

“Lomborg’s work would be downright dangerous if it were to succeed in persuading anyone that there was merit in its arguments”.

Rather than engaging in sensible discussion, Stiglitz seems to me to be intent on using polemics to defend alarmism.

Surprisingly, there has been more sensible review in “The Guardian”. That review is by Bob Ward, who is associated with the Grantham Research Institute on Climate Change at the LSE. Ward combines his review of Lomborg’s book with a review of Michael Shellenberger’s book, Apocalypse Never. Ward’s remarks are somewhat offensive - he labels the authors as “lukewarmers”, promoting a “form of climate change denial”. Nevertheless, he manages to acknowledge that they make legitimate criticisms of alarmism by environmentalists. He agrees that the world should be investing more in helping poor people become more resilient to climate change. He also expresses sympathy for the view that nuclear power has a role to play in creating a zero-carbon energy system.

My reservations

The main problem I see with Lomborg’s argument relates to the use of GDP as a welfare measure. As well as the usual problems in the use of GDP in this way, there is the additional problem that many of the costs of adaptation are counted as making a positive contribution to GDP. For example, infrastructure investment to build walls to hold back rising sea levels is counted as part of GDP. As such adaptation investment comes to represent an increasing share of total investment, it will crowd out other investments that have potential to enhance human well-being.

This line of reasoning reinforces the importance of R&D that has potential to reduce the cost of alternative energy and hence to reduce the cost of mitigation. If it becomes less costly to pursue greater mitigation over the next few decades, that can obviously reduce the combined total of damage and adaptation costs over the longer term.

My other reservation relates to something that is not central to Lomborg’s argument, as outlined above, but is difficult to let pass. It is his endorsement of the proposition that “if everyone does a little, we’ll achieve only a little”. That seems to me to promote unwarranted pessimism about the likelihood of success of the polycentric approach promoted by Elinor Ostrom.

In a paper presented to the World Bank in 2009, Ostrom suggested that rather than wait for national governments to take concerted action, the best way forward was multi-layered action by individuals and firms, as well as by local, state, and national governments. The polycentric approach is messy, but there are hopeful signs emerging that it is developing sufficient momentum to facilitate effective action. The individual actions of environmentally conscious individuals may not add up to much by themselves, but they seem to be inducing an increasing number of firms to modify their behaviour. Some firms are presenting an environmentally friendly image without doing much to back it up, but others seem to be actively planning for a carbon-free future. The announcement last year by the world's largest asset management firm, BlackRock, that it will put climate change at the centre of its investment strategy, seems to me to signify a substantial change in the way the game is being played. If enough firms adopt R&D, innovation and investment strategies based on expectations of a carbon-free future, those expectations will tend to become self-fulfilling.

Bottom line

Lomborg’s book is not likely to persuade many climate change alarmists (or deniers) to modify their views, but it provides a basis for the rest of us to have sensible discussions about policy options.

How can governments mitigate the impact of COVID-19 on human flourishing?

This is an appropriate question for economists with an interest in public policy to be considering. It recognizes a possible role for governments and recognizes that an approach focused on human flourishing is likely to be more appropriate than one focused entirely on reducing the death rate or reducing adverse impacts on GDP.

The possible role for government stems from the perception that people who are most vulnerable would not able be to protect themselves adequately without some government intervention. People who know they are vulnerable have a strong incentive to practice social distancing, but personal circumstances often make that difficult. Without the threat of coercion, it is unlikely that we will see the degree of social distancing necessary to reduce the rate of spread of the virus. In that event, hospital services are likely to be over-whelmed by the number of people requiring treatment. 

As always, with government intervention, there is a risk that the cure will end up worse that the disease, but the risk is probably worth taking in this instance.

What is the appropriate indicator of human flourishing to be used as a policy objective? There isn’t just one! The prime candidates, per capita GDP and average life satisfaction both suffer from the same flaw – they don’t account for the impact of early death on the well-being of the dear departed. We should continue to consider the impacts of policies on death rates as well as their impacts on the well-being of the living.

Per capita GDP was never intended to be a measure of well-being, but it is relevant. Many factors that impinge on well-being – such as the ability of people to afford food, housing and health care – are influenced by per capita GDP levels. However, per capita GDP cannot account for impacts of coercive policy interventions, such as enforced home confinement, on psychological well-being.

Average life satisfaction seems to be a reasonable indicator of the average psychological well-being of groups of people. It is a poor indicator of economic and social progress because it doesn’t account for the extent that members of one generation perceive themselves to be better off, or worse off, than members of preceding generations. Fortunately, that deficiency is not pertinent for present purposes.

There is some evidence that lock-down and GDP decline have potential to have substantial negative impacts on average life satisfaction.

An article entitled ‘Health, distress and life satisfaction of people in China one month into the COVID-19 outbreak’, has recently been published by Stephen X Zhang, Yifei Wang, Andreas Rauch, and Feng Wei. The article is a pre-print and has not been subjected to peer review, but no major flaws are obvious to me. As might be expected, the study suggests that the life satisfaction of people with chronic medical conditions was adversely affected in locations with severe outbreaks of COVID-19.

However, the life satisfaction of people who exercised a lot was also adversely affected in locations with more severe outbreaks, suggesting frustration at restrictions imposed. Those who were able to continue to work had higher life satisfaction than those who had stopped work, with people who were able to work “at the office” having higher life satisfaction than those who worked at home.

The relationship between per capita GDP and average life satisfaction is complicated. Average life satisfaction is relatively high in countries with high per capita GDP, but tends to grow very slowly, if at all, as per capita GDP rises further in such countries.  However, there is some evidence suggesting that when per capita GDP falls in high-income countries, this is likely to be accompanied by substantial declines in average life satisfaction. Austerity in Greece reduced per capita GDP by about 26% over the decade to 2017 and was accompanied by a decline in average life satisfaction of about 20% (GDP data from OECD and life satisfaction data from World Happiness Report, 2020).

Hopefully, COVID-19 will result in much smaller declines in per capita GDP than in Greece. and economic recovery will be much more rapid.

What are the trade-offs involved in shut-down? The human welfare implications of shutting down large parts of an economy for an extended period are enormous. However, a short close-down of all those activities in which social distancing is difficult might be preferable to a less severe and more prolonged lock-down. Tomas Pueyo’s discussion of the hammer and dance (see graphic above) makes sense to me, even if the Hammer needs to last more than 3-7 weeks.

Social distancing and lock-down is an investment in buying time. Buying time for what? It can’t be for development of a vaccine. That will take too long!

It makes sense to buy time to build up the stock of respirators, ICU beds etc. to help cope with an influx of hospital patients needing treatment.

It also makes sense to buy time to obtain testing equipment that can give accurate results within a short time frame. Speedy and accurate testing has potential to enable infectious people to be detected and temporarily taken out of circulation, so that the rest of the population can return to something like normal life.

This post has not yet referred to stimulus packages. I support giving money to people to help them survive a crisis that is likely to depress aggregate demand. Please note, however, that what people can buy depends ultimately on what is produced. When an economy closes down the necessities of life tend to become scarce.

My conclusions:

• Policies to mitigate COVID-19 should be considered from a human flourishing perspective rather than solely in terms of either minimizing deaths or minimizing damage to an economy.

• The best policy seems to be to buy time by enforcing strict social distancing for a relatively short period rather than less strict distancing for a longer period. The policy aim should be to buy enough time to enable hospitals to cope better with an influx of patients and to put in place a testing regime that can enable life to return to something like normal as soon as possible.

Postscript: May 6, 2020

There isn’t a great deal of substance that I would like to change in this article with the benefit of 6 weeks hindsight. The graphs showing possible outcomes in terms of exponential growth and bell curves still look right. Some countries, including Australia, have moved along to the end of “the hammer” phase of the bell curve and are beginning the tricky “dance”. Perhaps infection rates may be greatly under-estimated and there is now considerable herd immunity, but I doubt it.

Although the governments of some countries are behaving abominably, at this stage I am confident that in Australia the intervention ‘cure’ (palliative might be a better word) will not be worse than the disease. To a large degree, the shutdown occurred spontaneously, with governments playing catchup, as large numbers of people stayed home, and businesses shut down. There has been some coercion, e.g. shutting of beaches in metropolitan areas and travel restrictions. Some police have risked public goodwill by excessively diligent (stupid) enforcement, e.g. picking on individuals sunning themselves in parks many metres away from any other human. Most people seem to be following social distancing rules because they accept that it is a sensible precaution to take for their own benefit and/or the benefit of others.

From an analytical perspective, I have been reminded that it is possible to incorporate deaths and economic considerations in a common metric if you try hard enough. Richard Layard, Andrew Clark et. al. have presented a WELLBY analysis that seeks to do that in a paper entitled, ‘When to release the lockdown: A wellbeing framework for analysing costs and benefits’. The authors use estimates of wellbeing-years (based on life satisfaction surveys) to balance the impact of policy decisions upon the number of deaths from COVID-19 against incomes, unemployment, mental health, public confidence and other factors (including CO2 emissions).

Their analytical framework looks elegant, but I am concerned about the implied policy context. It seems to me that this kind of analysis is more relevant to decision-making by a benevolent dictator (one applying utilitarian philosophy) than to a society where government should see its prime responsibility as protecting the lives and liberty of citizens.

Another article that has been brought to my attention is: ‘Some basic economics of COVID-19 policy’, by Casey Mulligan, Kevin Murphy and Robert Topel. This article looks at the trade-offs we face in regulating behavior during the pandemic.  It uses conventional cost benefit analysis to consider several possible policy objectives, including buying time and limiting the cumulative cost of a pandemic that will ultimately run its course. They conclude:

“The key difference in terms of the optimal strategy is whether our focus is on keeping the disease contained. If the objective is to buy time, then our analysis favors early and aggressive intervention. This minimizes the overall impact … . In contrast, limiting the cumulative cost of a pandemic that will ultimately run its course argues for aggressive policies later, when they will have the biggest impact on the peak load problem for the health-care system and when they will have the greatest impact on the ultimate number infected”.

The authors conclude by listing some simple economic principles to guide how public policy should proceed when faced with a new but poorly understood pandemic. Those principles include buying time upfront, and using that time wisely to gather information to implement a screen, test, trace and quarantine (STTQ) policy. They suggest that both the “buy-time” and long-term containment strategies will have to be based on an effective STTQ policy.

The approach adopted by Mulligan et. al. of considering the nature of trade-offs and suggesting policy principles is more to my liking. If these authors had used their conventional cost benefit analyses to provide specific recommendations of the kind provided by Layard et. al. I would raise the same concerns about the implied policy context of advising a benevolent dictator, rather than informing a democratic political process.

I have misgivings about the valuation of life in both studies, but have not considered the relative merits of each approach, and have nothing better to offer other than directly considering the economic cost of saving lives under alternative strategies.