The Secular Nature of Inequality Growth

The OECD has just published a substantial report on inequality across its member countries (most of the world’s developed nations). To give you a taste of the topic, the OECD’s 2 minute introductary video is here:

Let me pull out some key charts and make some observations. First, aggregate income has been rising, but the elites have been harvesting the majority of the gains (click for larger image):

OECD Inequality jpegIf you were of libertarian disposition, you may look at this chart and say “so what? Everyone is growing richer, but some are just growing richer faster.” I would be very reluctant to adopt such a stance. Continue reading

The IMF, Fossil Fuels and the Name for a Rose

Juliet:

Tis but thy name that is my enemy;
Thou art thyself, though not a Montague.
What’s Montague? it is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O, be some other name!
What’s in a name? that which we call a rose
By any other name would smell as sweet

 IMF:

But if thine enemy is the fossil fuel industry,
And one would name a rose as ‘tax’,
then television, and radio, and newspapers
and twitter and a multitude of social media
would declare such rose as smelling most foul,
like vomit, or excrement or the pustulent sores
of a pox-ridden hag in the lowliest of taverns

In truth, Juliet was wrong. Names do matter. They frame narratives, just as the names Montague and Capulet did.

We live in a neoliberal world where both ‘tax’ and ‘subsidy’ are framed as evil. So whatever you do don’t talk about introducing a carbon ‘tax’, talk about eliminating a carbon ‘subsidy’. And this is what the IMF has done in a widely publicised report issued yesterday (here):

A key factor in estimating the magnitude of current subsidies is which definition of “subsidies” is used. Pre-tax consumer subsidies arise when the price paid by consumers (that is, firms and households) is below the cost of supplying energy. Post-tax consumer subsidies arise when the price paid by consumers is below the supply cost of energy plus an appropriate “Pigouvian” (or “corrective”) tax that reflects the environmental damage associated with energy consumption and an additional consumption tax that should be applied to all consumption goods for raising revenues.

Generally, when we talk about externalities, we talk about costs rather than subsidies, but, like double-entry book keeping, these are two sides of the same concept. When consumer A transfers a cost to consumer B, we can think of consumer B subsidising consumer A. Continue reading

The Evolution of Aspiration

I’ve been thinking and reading about consumption as seen through the eyes of evolutionary psychologists for some considerable time. This ties in with my interest in well-being economics, particularly the question of why we do things that don’t necessarily make us happy. From an evolutionary perspective, the answer is quite simple: human happiness mechanisms are purely means to an end in evolutionary terms, not ends in themselves. Frankly, our genes don’t care if we are happy; rather, they care that we survive, reproduce and help our close kin to survive and reproduce.

There is scope for reciprocity and trust in this Darwinian jungle. But such higher moral values are again just tools, albeit sophisticated ones, to further our genetic inheritance. We may act altruistic, but this is to either earn potential altruism in return at some future date or purely to signal our superior intellectual or physical fitness.

The evolutionary psychologist Gad Saad argues that a mind is no different from any other organ that has evolved in the body (here).

The human mind is an amalgamation or collection of domain specific computational systems, each of which evolved to solve a specific adaptive problem: find a mate, avoid predators, find nutritious food, avoid poisonous foods, invest in kin, build coalitions and friendships. Each of these important problems would necessitate some adoptive solutions that are ultimately incapsulated in our human minds….

….This is very much well-described by the Swiss Army Knife metaphor. So if you think of the Swiss Army Knife, it is an amalgamation of different knives each of which serves a different function.

Saad doesn’t address the issue of happiness and well-being. However, if you follow his logic, happiness is a dog treat to get our minds to perform these computational tricks. But you don’t give a dog an infinite series of treats after performing one trick. Likewise, we never remain in a permanent state of bliss regardless of our individual evolutionary successes.

An evolutionary psychologist who does delve into the link between evolution and happiness is David Buss of the University of Texas. In a paper called “The Evolution of Happiness“, Buss starts by emphasising that we do what we do because such strategies were successful in the past. Those that may have adopted different strategies in the past are no longer with us, suggesting such strategies were either inferior, or just met unlucky fates. Continue reading

Austerity and Aspiration UK Style

Apologies for my blogging hiatus: I’ve been otherwise engaged for the last few weeks in academic activities, some economics consulting and (most timing consuming of all) grassroots campaigning in the run-up to the UK general election.

I am not a natural ‘party political animal’, being too eclectic in my ideological views. Indeed, I like bits of each party manifesto but find other parts bonkers. Nonetheless, being back on home turf for an election for the first time in over 15 years, I wanted to get involved.

My own personal ‘wedge’ issues in this election were twofold: climate change (as would be expected from this blog) and anti-austerity. Climate change is still, to me, the central risk of our times. It has the potential to overturn everything within my children’s lifetime, not least of which is democracy itself. Unfortunately, neither climate change nor the environment in general feature in the top 10 concerns of the UK public (click for larger image):

Ipsos Mori Election Issues copy

Of the five main political parties that competed in the UK general election–the Conservatives, Labour, Lib-Dem, UKIP and Green–three have an aggressive commitment to act over climate change (Labour, Lib-Dem and Green). Unlike the Republican Party in the US, the Conservatives have in the past also had a forward-looking approach to carbon emission mitigation (as evidenced by their continued support of the UK’s Climate Change Act). The leadership, has, however, grown increasingly lukewarm over leading on the climate-change issue.

With regard to austerity, my stance is more nuanced. In short, why prioritise reducing debt at a time when interest rates on long-term government debt are at rock bottom levels? The following chart is taken from the Bank of England‘s latest “Inflation Report” published on the 13th May, Continue reading

What Maslow Misses

For many years, any discussion of what people want has been shaped by Abraham Maslow’s hierarchy of needs. His pyramid is perhaps one of the few tenets of psychology that could be referenced by any educated man or woman on the street (click for larger image on all charts).

Maslow jpeg

In reality, the 1943 paper that launched the pyramid, “A Theory of Human Motivation” now looks dated. The pyramid doesn’t recognise homo sapiens as being–if nothing else–social animals. Accordingly, the motivation for what we do is not so much to reach our own personal fulfilment but more to secure the appreciation of those around us–and thus reach our own personal fulfilment at one remove.

Of course, any evolutionary psychologist would emphasise that such acts may ultimately be selfish in terms of securing our genetic inheritance, but we still need others to get where we want to go. We don’t buy a BMW for the driving experience but rather as a signal to those around us of our wealth. Restated, to get what we need–whether sex, friends, family support or status– we must enlist the support of others. The psychologist Pamela Rutledge puts it this way in an article titled “Social Networks: What Maslow Misses“:

But here’s the problem with Maslow’s hierarchy. None of these needs — starting with basic survival on up — are possible without social connection and collaboration.

According to Rutledge, Maslows’ needs exist but there is no hierarchy. Rather, we strive for a variety of goals within a social setting.

Modern Maslow jpeg

Continue reading

Should Climate Change Override Every Environmental Concern?

One of America’s greatest living authors Jonathan Franzen has a provocative article in The New Yorker arguing that the environmental movement’s infatuation with climate change has been detrimental to local environmental initiatives. I am a huge fan of Franzen: “The Corrections” and “Freedom” are two of my favourites books. Yet I find his analysis muddled. In fact, I disagree with almost everything he says.

Franzen presents the ‘wicked problem’ of climate change as almost insurmountable.

Climate change shares many attributes of the economic system that’s accelerating it. Like capitalism, it is transnational, unpredictably disruptive, self-compounding, and inescapable. It defies individual resistance, creates big winners and big losers, and tends toward global monoculture—the extinction of difference at the species level, a monoculture of agenda at the institutional level. It also meshes nicely with the tech industry, by fostering the idea that only tech, whether through the efficiencies of Uber or some masterstroke of geoengineering, can solve the problem of greenhouse-gas emissions. As a narrative, climate change is almost as simple as “Markets are efficient.” The story can be told in fewer than a hundred and forty characters: We’re taking carbon that used to be sequestered and putting it in the atmosphere, and unless we stop we’re fucked.

Against this background, Franzen believes that the concerned citizen is being bounced into caring about only one true environmental ill.

The question is whether everyone who cares about the environment is obliged to make climate the overriding priority. Does it make any practical or moral sense, when the lives and the livelihoods of millions of people are at risk, to care about a few thousand warblers colliding with a stadium?

And this is a planetary ill they can do nothing about.

To answer the question, it’s important to acknowledge that drastic planetary overheating is a done deal. Even in the nations most threatened by flooding or drought, even in the countries most virtuously committed to alternative energy sources, no head of state has ever made a commitment to leaving any carbon in the ground. Without such a commitment, “alternative” merely means “additional”—postponement of human catastrophe, not prevention. The Earth as we now know it resembles a patient whose terminal cancer we can choose to treat either with disfiguring aggression or with palliation and sympathy. We can dam every river and blight every landscape with biofuel agriculture, solar farms, and wind turbines, to buy some extra years of moderated warming. Or we can settle for a shorter life of higher quality, protecting the areas where wild animals and plants are hanging on, at the cost of slightly hastening the human catastrophe.

Indeed, I think his answer over how much emphasis we should place on climate change is wrong on many levels. First, I don’t see a trade-off. Humanity doesn’t have a finite budget of morality. If I am a good father, does that mean I have no choice but to beat my wife? In reality, those individuals campaigning against climate change are also likely to be the ones doing grass roots environmental activity. Continue reading

What Does ‘a Good Life’ Mean?

The main British political parties are in the midst of publishing their policy manifestos ahead of the May 7 general election: The Labour, Green and Conservative party manifestos are already out, the Liberal Democrats and UKIP ones are yet to come.

I will focus on the Conservative Party manifesto in this blog post since it could quite easily form the policy platform of the next government. Moreover, in rolling out the manifesto, Prime Minister David Cameron chose to frame the policy prescription in terms of helping people to achieve “a good life”.

As a politics, philosophy and economics (PPE) graduate from Oxford, I am sure the PM is well aware that the term ‘the good life’ carries with it considerable philosophical baggage. Does he give a nod to Aristotle’s definition of “the good life” or has he reduced the concept to mere materialism? Let’s take a look by first pulling out each reference to “a good life”in the speech Cameron gave introducing the new manifesto:

The next five years are about turning the good news in our economy into a good life for you and your family.

Realising the potential of Britain…

…not as a debt-addicted, welfare-burdened, steadily-declining, once-great nation – which is what we found…

…but a country where a good life is there for everyone willing to work for it…

We can be the country that not only lives within its means and pays its way…

…but that offers a good life to those who work hard and do the right thing.

That’s what I mean by a good life – families secure, the peace of mind that comes with a proper job and a career, the security of knowing your children are getting a great education.

…to make this a country where those who work hard and do the right thing can enjoy a good life.

Part of having a good life is having a home of your own.

A good life should mean that raising your family feels like an incredible and joyful and – yes – sometimes exhausting journey…

It’s hard having a good life without a good job.

With five more years we can turn the good news in our economy into a good life for you and your family.

We offer a good life for those willing to try – because we are the party of working people.

So the good life includes 1) employment, 2) home ownership and 3) a great education for your children. It’s pretty pedestrian stuff and certainly a world away from Aristotle’s idea of the good life. Continue reading