Should we welcome globalization or fear it?

Having just finished reading Gregg Easterbrook’s new book, ‘Sonic Boom’, I'm not sure how he would answer that question. He sees fantastic potential for social progress, but improved living standards are likely to be ‘wrapped with ribbons of stress, anxiety and dissatisfaction (p.34). His bottom line seems to be that globalization is inevitable and that we just have to learn to live with it.

Easterbrook expects the forces of globalization to grow stronger. That means that the insecurity that people often associate with globalization is likely to accentuate:

‘Job turmoil, the economic roller-coaster, financial bedlam, media superficiality, celebrity inanity, political blather, targeted advertising, scream-and-shout discourse, the paving over of nature – they’re all going to get worse. A lot worse in some cases. Most likely, global economics will be blamed for whatever about coming decades we don’t like.’

He also suggests, however, that much of what people tend to like about life will get better:

‘Prosperity will increase, especially in the less affluent nations where improvement is most needed. Democracy will flourish on five and perhaps six continents ... . Information and knowledge will proliferate as never before, while art and culture become available to everyone. Many aspects of this evolving sonic boom will be really terrific.’

Then comes the recommendation:

‘The terrific aspects and the anxiety inducing aspects will be intertwined and we’re just going to have to live with this’ (p. 209).

Why is globalization inevitable? I think Easterbrook discusses this in several places but I have noted one place in particular. (I’m glad I made notes as I read the book because there are few clues offered in the contents page about where to find stuff and the index doesn’t seem to be as helpful as it could be. But I digress!) Easterbrook suggests that we can’t stop global change because it is associated with the spread of freedom – ‘most of the world’s nations are acquiring the same core structures (democracy, free-market economics, emphasis on education) that makes the United States the current world leader ... . The more America-like the world becomes, the faster the pace of economic change will be’ (p. 192).

I think Easterbrook is basically right about this. It would probably take a world war to stop globalization and there doesn’t appear to be one of those on the horizon. Perhaps some people said similar things around 1900 - prior to a few decades of disruption in global trade and investment. Even so, the main point is that the forces shaping the future of the global economy are beyond the control of any individual, firm or government. At a national level it is possible to shield some groups from the forces of global change but only by reducing the opportunities available to others.

Easterbrook acknowledges that it is possible for governments to provide a safety net that will provide citizens with some degree of security, particularly in relation to health care. He argues that people in the U.S. suffer more stress than do people in western Europe because of problems associated with the U.S. health care system (pp. 200-202). I don’t know whether or not this is a valid point. Evidence from the Gallup World Poll suggest that people in the U.S. tend to experience more stress than do people in western European countries and Australia. But Mexicans report experiencing a lot less stress than Americans and less stress than Europeans and Australians - so there is probably more involved than health care.

My main reservation about this book, as with Easterbrook’s earlier book ‘The Progress Paradox’ (discussed here), is that I think he overstates the insecurity that people actually feel as a result of the forces of globalization. The book seems to be full of colourful phrases to describe this insecurity. For example, Easterbrook writes of ‘change-based anxiety’ (p.34), ‘Multiple Media Personality Disorder’ which he defines as a ‘a universal low grade nervous tension from which there may be no realistic escape’ (p.70), ‘the Super Bowl of stress’ (p. 72) and ‘collapse anxiety’ (p. 168).

I acknowledge that job insecurity has increased. Easterbrook makes a strong case that each year it gets easier for someone to come along with a superior idea and put an established firm out of business (p. 134). He could be right that in future there will be a greater risk that people who have risen to the middle classes will ‘fall back’ down the economic ladder and end up bitterly unhappy (p. 196). I also acknowledge that the insecurity of modern life is a popular topic of conversation, particularly in the media. But I don’t think insecurity is having a large impact on behaviour and the way people feel about their lives. If a lot of employed people were feeling a high degree of insecurity about their jobs I think they we would see more precautionary saving and less willingness to go into debt than we have seen in recent years. Survey evidence suggests that the vast majority of people in high-income countries feel that they have a great deal of control over their lives.

This leaves me thinking that there must be a huge gap between the fears that a lot of people express when they talk at a superficial level about the challenges and insecurity of modern life and the deeper feelings that they have about opportunities and threats in their own lives. By the way, returning to the original question, I think we should welcome globalization for the potential it offers for ongoing improvements in living standards.

Postscript:
Gallup poll data for the U.S. shows, not surprisingly, that people working in firms that are hiring more people are more likely to be thriving than are people working in firms that are letting people go. However, even in the firms that are letting people go the percentage who are thriving exceeds the percentage who are struggling. It seems that most people who have a job are optimistic about the future even if their job is insecure.

Why should we view individual rights as metanormative principles?

I first came across the concept of a metanormative principle when I read ‘Norms of Liberty’ (2005) by Douglas Rasmussen and Douglas Den Uyl. These authors argue that individual rights are metanormative principles that provide a solution to the problem of finding a political/legal order that will in principle not require that the flourishing of any person or group be given structural preference over others (p 78). They point out that individual rights are a unique ethical concept that differs from other ethical concepts – individual rights are not needed to know the nature of virtue or our obligations to others but are needed to enable people to flourish in different ways, according to their own values, without coming into conflict with each other. They suggest that an ethics that conceives of human flourishing as the ultimate standard should uphold a political legal order that sees protection of individual liberty as its chief aim (p.85). (There is an earlier post discussing these views here.)


It seems to me that Friedrich Hayek advanced a metanormative argument for individual rights similar to that advanced by Rasmussen and Den Uyl. Hayek argued that restriction of the use of the coercive powers of the state to enforcement of the negative rules of just conduct (prohibition of actions harming others) makes it possible for individuals and groups to live in peace without agreeing on common ends. He also presented a slightly different metanormative argument for liberty - that it makes possible a society in which mutually beneficial exchanges enable people to help each other to achieve their individual ends without agreeing on what those ends should be. This means that people ‘while following their own interests, whether wholly egotistical or highly altruistic, will further the aims of many others’ (Law, legislation and liberty, V2, 1982, p 110). I think Robert Sugden refers to that line of argument as ‘opportunity as mutual advantage’ (see below).

Robert Nozick’s view of the ethics of respect also seems to me to be a metanormative argument for recognition of individual rights. Nozick argues that the ethics of respect – mandating respect for the life and autonomy of others - is a foundation upon which higher layers of ethics may grow. For example, respect may grow into responsiveness to needs of others, which mandates acting in a way that is responsive to their value, enhancing and supporting it and enabling it to flourish (‘Invariances’, 2001, p 280).

J S Mill presented a metanormative argument in favour of individual rights when he suggested that the experimentation of different individuals and groups in living as seems best to themselves has value for society as a whole:

“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).

Mill also endorsed the argument that individuals are the best judges of their own interests. Viewed as an assertion about matters of fact this is not always correct. But it seems to me that Mill presents it as a metanormative argument for individual rights. He wrote:

‘... neither one person, nor any number of persons, is warranted in saying to another human creature of ripe years, that he shall not do with his life for his own benefit what he chooses to do with it. He is the person most interested in his own well-being, the interest which any other person, except in cases of strong personal attachment, can have in it, is trifling, compared with that which he himself has; the interest which society has in him individually (except as to his conduct to others) is fractional, and altogether indirect: while, with respect to his own feelings and circumstances, the most ordinary man or woman has means of knowledge immeasurably surpassing those that can be possessed by any one else’ (‘On Liberty, Ch 4).

A problem with this line of argument is that it is possible for any of us to claim that other people would benefit from being prevented from engaging in what we think is foolish behaviour because they do not seem to be sufficiently interested or knowledgeable about the effects of that behaviour on their well-being. Robert Sugden makes the point that when people make this argument they are imagining that ‘whoever designs the regulations will share their own sense of what is foolish, rather than belonging to the party of fools’.

Sugden suggests that from each person’s own perspective of what is good for herself she is much more likely to see herself as benefiting from opportunities to do as she likes (while accepting responsibility for her actions). From each person’s perspective on what is good for her she is also likely to see herself as benefiting from the opportunities that that other people have to do as they like - because that includes opportunities for actions that will benefit her. The opportunities available to each individual provides mutual advantages for themselves and others, including strangers with whom they trade on the basis of strict reciprocity. (See: Robert Sugden, ‘Opportunity as mutual advantage’, Economics and Philosophy, 26, 2010).

It seems to me that Sugden’s argument for opportunity to be viewed as mutual advantage is a strong metanormative argument in favour of individual rights and free trade. Since opportunity may also be viewed as potential for flourishing the concept of opportunity as mutual advantage also provides a link between freedom and individual flourishing.

How can policy advisors come to grips with complexity?

In this post I continue my discussion of the Australian Treasury’s wellbeing framework for policy advice. (The preceding discussion is here.)


The Treasury incorporates a range of considerations in its discussion of the complexity dimension of its wellbeing framework. The discussion is itself quite complex.

This section of the framework is headed: ‘Level of complexity that people are required to deal with’. This might be expected to lead to a discussion of the desirability of simple and transparent rules that are clearly defined (do not involve a large amount of administrative discretion) and which do not involve citizens and firms in incurring unnecessary legal fees and compliance costs to remain on the right side of the law. This aspect of complexity is covered, but much of the discussion involves somewhat deeper issues.

The discussion begins with a definition of complexity that does not actually clarify anything but does serve to make the point that policy decisions involve many interconnected considerations. The following paragraph discusses what the authors refer to as the conventional analysis of complexity that has focused on the economic impact of sets of rules. In that paragraph the authors suggest, among other things, that complexity ‘usually brings benefits both through a better targeting of rules and through the provision of greater certainty’. Benefits to whom? In my experience the complexity of government programs usually arises because of political pressure to make special provisions for particular groups. A paper by Ann Krueger and Roderick Duncan (NBER 4351), which is cited in the Treasury document, makes the important point that since a tendency for increasing complexity of controls is inherent in most efforts to regulate it should be taken into account in initial policy formulation.

The final paragraph of the section raises issues related to the ‘emergent properties’ of ‘complex adaptive systems’. The discussion takes place at such an abstract level, however, that I am not sure that anyone other than its author would know what it means. From my personal experience, when bureaucrats write like this they do so for a reason – for example, so that they can deny that they intended to convey a critical reader’s interpretation of their words, or so that they can claim to have covered points that they have actually chosen to omit. In view of this, rather than speculate about what the authors may have meant, I will present some points relating to the implications of complexity that I think the authors of the document should have incorporated explicitly (but more briefly than I have below).

First, in presenting policy advice it should not be presumed that political leaders will be capable of exerting top-down control to implement recommendations of their departmental advisors even if they, the political leaders, are not lacking in intestinal fortitude. When democratic political systems work well to promote ongoing policy improvements it is usually as a result of the development of widely-shared understandings that are often inherently fragile. One of the implications of this is that there may not be much point in proposing large scale reforms in a political environment that is receptive only to incremental change. Another implication is that there is an important role for public inquiries in providing forums in which the views of policy analysts may emerge as more widely-shared understandings - if those views can survive public scrutiny.

Second, it is important to understand the nature of problems before proposing solutions. This might be obvious to Treasury officers, but it is still worth emphasising in any public document discussing the implications of complexity for policy advice. Gary Banks, chairman of the Productivity Commission, has made the point as follows:

‘Half the battle is understanding the problem. Failure to do this properly is one of the most common causes of policy failure and poor regulation. Sometimes this is an understandable consequence of complex forces, but sometimes it seems to have more to do with a wish for government to take action regardless’ (‘Evidence-based policy making ...’ reprinted in ‘An Economy-wide view: speeches on structural reform’, 2010).

Elinor Ostrom has provided an excellent example of how poor understanding of problems can be a trap even for people who have some knowledge of economic theory:

‘Many textbooks on environmental policy present ... conventional theory of an open-access common-pool resource as the only theory needed for making effective policies ... . Massive deforestation in tropical countries and the collapse of multiple ocean fisheries are cited by many policy analysts and public officials as sufficient evidence to confirm the general validity of the theory. ... Policy analysts tend to distrust local citizens to create effective forms of governance. Consequently, they assume that multiplicities of self-organized regimes ... are by their very nature disorderly and ineffective. Order is presumed to result from central direction. ... These common-sense assumptions, however, lead to proposals to improve the operation of political systems that have the opposite effect. By removing decisions about the way to innovate, adapt, and coordinate efforts from those who are directly affected, these policy reforms have created institutions that are less able to respond to the problems for which they were created’ (‘Policy analysis in the future of good societies’, The Good Society, 11.1, 2002).

Elinor Ostrom observed that in many countries where governments have taken control of common-pool resources from local users the governments concerned have lacked the funds and personnel required to monitor these resources effectively. As a result many governments have exacerbated the resource management problems that they were trying to guard against.

Finally, in my view any discussion of the implications of complexity for policy advice that does not incorporate a reference to Friedrich Hayek’s insights about the dispersion of knowledge is deficient. Those insights seem to me to be just as relevant to explaining current problems in public provision of education and health services in Australia as to explaining the failure of economic planning in the former Soviet Union. Hayek’s insights about the implications of dispersed knowledge are particularly relevant to considering proposed public investments in infrastructure (such as the proposed broadband rollout). For all I know, the authors of Treasury’s wellbeing framework may have had good reasons to neglect mentioning Hayek’s insights. Nevertheless, I will attempt to compensate in a small way for their neglect by quoting a short passage from Hayek’s seminal article on the subject:

‘In ordinary language we describe by the word “planning” the complex of interrelated decisions about the allocation of our available resources. All economic activity is in this sense planning; and in any society in which many people collaborate, this planning, whoever does it, will have to be based on knowledge which, in the first instance, is not given to the planner but to someone else, which somehow will have to be conveyed to the planner. The various ways in which the knowledge on which people base their plans is communicated to them is the crucial problem for any theory explaining the economic process. And the problem of what is the best way of utilizing knowledge initially dispersed among all the people is at least one of the main problems of economic policy – or of designing an efficient economic system’ (‘The use of knowledge in society’, American Economic Review, 1945).

Summing up, I am obviously not quite as impressed with the Australian Treasury’s wellbeing framework for provision of policy advice as are senior Treasury officials. But I’m not well placed to judge the overall effect it has had on the quality of advice they offer. It is pleasing that the Treasury has been thinking broadly about the concept of wellbeing and has published a framework that it apparently finds useful for provision of policy advice.

How should wellbeing be considered in providing policy advice?

Every public policy analyst should know that the correct answer to this question is that wellbeing should be considered by comparing outcomes under existing institutions with likely outcomes under the alternative policies that are being contemplated. Bonus marks should be awarded to analysts who suggest that the risks associated with alternative policies should also be considered. Any analyst who suggests that comparisons should be made between the outcomes of existing policies and an unachievable perfect system should be recommended for a career change e.g. writing speeches for politicians.


What are the likely outcomes that are most relevant to consideration of wellbeing? Most economists would probably answer in terms of comparing the consumption possibilities over time associated with the alternative policies being considered. They might talk about potential Pareto improvements or about benefits and costs, including non-market benefits and costs. They might also talk about discount rates and distributional considerations. But I think the answer most economists would give could be fairly easily translated into a comparison of consumption possibilities over time.

The Australian Treasury provides a somewhat different answer in its wellbeing framework for provision of policy advice. Among the five dimensions of its wellbeing framework the Treasury does include consumption possibilities, the distribution of consumption possibilities and the level of risk that people are required to bear . The other two dimensions, however, are the level of opportunity and freedom that people enjoy – which is listed first – and the level of complexity that people are required to deal with.

When I first read the document containing Treasury’s wellbeing framework the first thing that struck me was the number of references to Amartya Sen. My first thought was somewhat cynical. I thought that the Treasury was feeling unloved and had decided to change its public image. It seemed to me that Treasury was sending out a signal that it was prepared to entertain broader concepts of wellbeing in order to counter the argument that it had a narrow economic focus. The Treasury had, of course, had a broad concept of well-being for a long time - at least since it issued a paper in the 1960s discussing limitations of GDP measurement - but it had also earned reputation over a long period for provision of hard-headed policy advice that was often unpalatable to governments. Since this had encouraged the development of competing, more political, sources of advice it seemed to me that the Treasury had decided that it needed to soften its image in order to stay in the game.

However, having looked more closely at the Treasury wellbeing framework, I now think it may be worth considering seriously as a move to consider broad issues relating to opportunity and flourishing, such as the issues that I am interested in on this blog. (See, for example, ‘Is the good society a useful concept?)

The Treasury document explains the relevance of Sen’s work as follows:

‘The recent work of Sen has sought to incorporate aspects of freedom from both the utilitarian and classical liberal approaches. He argues that freedom does have a special status for wellbeing, beyond its impact on happiness or pleasure. However, he expands the focus beyond simply the rights available to individuals, to include their effective opportunities to exercise those rights, given their personal and social circumstances’.

Sen’s concept of freedom is defined by ‘our capability to live the kinds of lives we have reason to value’. The main problem I have with this concept of freedom is Sen’s incorporation of a role for public debate and democratic decision-making in determining what kinds of lives we have reason to value. It seems to me that Sen’s capability concept doesn’t deserve the freedom label because it contains a strong element of paternalism.

This does not mean, however, that I think Treasury is on the wrong track in identifying opportunity and freedom in its wellbeing framework. As Robert Sugden has recently suggested, it is possible to conceive of opportunity as resting on ‘an understanding of persons as responsible rather than rational agents’. Each individual viewing the world from the standpoint of her own desires and beliefs, accepting her own entitlements as given and accepting responsibility for her own actions can value expanded opportunities for herself. (‘Opportunity as mutual advantage’, Economics and Philosophy (26)).

I don’t see any reason why Treasury should have any difficulty with the idea that in discussing opportunity and freedom it should view individuals as responsible for their own actions, even though they do not always act as rational agents. This does not preclude consideration of the consequences of paternalistic interventions – it just helps avoid confusing the meaning of freedom.

I had also intended to include discussion of the complexity dimension in this post, but I will leave that for another day. (Postscript: The discussion continues here.)