Wrong answer, surely

The idea that GDP does not capture everything that contributes to community well-being is pretty old-hat these days.  And there have been lots of attempts to provide alternative measures – Ken Henry was a bit of fan and even the ABS has had a go – but many of these alternative measures simply cycle with GDP, so it hard to escape the conclusion: “what is the point”.

My particular favourite is Bhutan’s index of happiness – because we are all dying to migrate to the Kingdom of Bhutan.

And then there is Joe Stiglitz and Amartya Sen persuading Sarkozy to adopt measures other than GDP to measure economic performance, because the French economy is doing so well and we will all be copying that one too.

But now the team of Gittins, Irvine and Gruen have decided to collaborate to produce a quarterly measure of wellbeing which takes into account health, education, job satisfaction, environmental degradation and the like, as well as the traditional economic measures.

WELLBEING grew twice as fast as gross domestic product in the September  quarter thanks to a big rise in national income from the boom in commodity  prices and cheaper imports.

The Herald/Lateral Economics Index of Australia’s Wellbeing  rose 2.2  per cent in the quarter, outstripping GDP growth of 1 per cent.

The index is a Herald initiative that adjusts GDP for changes in the  nation’s physical, natural and human capital, and in health, income inequality  and job satisfaction.

In other good news, the pace of deterioration in our physical and mental  health eased slightly in the September quarter. But the erosion of our natural  environment continued to be a small – but growing – negative for wellbeing.

The negative impact on wellbeing from job dissatisfaction grew 2 per cent,  due to a slight rise in the jobless rate around mid-year.

But our human capital – the knowledge and know-how of our people – grew 1.4  per cent in the quarter, adding to wellbeing. However, human capital was up only  1.7 per cent over the entire year, due to a fall in the proportion of school  students staying to year 12.

I thought the whole point of these exercises was to show that GDP overstates our economic welfare but on this measure, the reverse is true.

The key reason seems to be that the index uses Net National Income, which takes into account the TOT while deducting off overseas liabilities.  This measure will be absolutely overwhelmed by movements in the TOT.

It is also hard to avoid the conclusion that there is lots of double counting in the measure: expenditure on education is in GDP but is augmented for higher school and university participation (even when it is wasteful, like those pointless university degrees).  And mental health is in (query: accuracy of measurement) but expenditure on mental health is already in GDP.

The fact that we are all fat and getting fatter – as a negative –  is somehow included.  (Don’t tell Reubens.)

And job satisfaction is in – again, query measurement (according to HILDA data, we are pretty happy with our jobs, as well as our lives) but if unemployment goes up,  job satisfaction goes down.  Hmmm … wouldn’t being unemployed mean that you don’t have a job to be satisfied or dissatisfied about.

And as for inequality?  Well, surely, that is just a value-based inclusion.  If Bill Gates moves into your suburb and observed inequality increases, is that a good thing or a bad thing?

As long as the high returns earned by the lucky few are not a result of rents arising from uncompetitive or monopoly arrangements (themselves generally the result of bad government policy) but rather hard work and risk taking, then observed inequality is neither here nor there, particularly with an aggressive redistributive tax and transfer system we have in Australia.

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67 Responses to Wrong answer, surely

  1. Token

    Same old trick, if you want to hide the facts on how bad a government is, change the metrics so comparisons can not occur.

    It was earlier this week that Sinc and John C noted they can’t compare gov revenue & expenses post 2007 to pre 2007 as Goose changed all the metics at the Treasury.

  2. wes george

    Measuring “well-being” is always going to say more about the unexamined assumptions of the measurer than anything empirical about those being measured. One can imagine the well-being index, now soaring under the enlightened governance of Gillard/Brown, would naturally tumble as soon as the Coalition is elected.

    …then observed inequality is neither here nor there, particularly with an aggressive redistributive tax and transfer system we have in Australia.

    The riots in London, Greece and the car-b-ques of Paris show that “an aggressive redistributive tax and transfer system” actually breeds class envy by creating a dependent, immobile class of sloth, which has been taught it is entitled to other people’s wealth, while asked for nothing in return. It’s an example of socialism self-fulling its class warfare raison d’etre by deliberately creating a permanent underclass beholden to an ever-expanding government.

  3. Judith Sloan

    Yes, I agree with your point wes; when I wrote that, I thought it needed a qualifier – that there are signficant deadweight losses associated with our tax and transfer systems.

  4. John comnenus

    Now what’s the bet that all those indexes fall under a Coalition government?

  5. PSC

    even when it is wasteful, like those pointless university degrees

    Why are they wasteful?

    “It only has to do with the respect with which we regard one another, the dignity of men, our love of culture. It has to do with those things. It has to do with, are we good painters, good sculptors, great poets? I mean all the things that we really venerate and honor in our country and are patriotic about. It has nothing to do directly with defending our country except to help make it worth defending.” — Robert R. Wilson, answering Congress’ question on how the new accelerator will affect the nation’s security.

  6. wreckage

    Why do university degrees get more weight than primary education? Sure, they’re more expensive, but basic literacy is far more important than a bachelor’s degree.

  7. Peter Whiteford

    Wes

    The Australian tax and transfer system is actually considerably more redistributive than the Greek, French or British systems, although I’m not sure that I would describe it as aggressively so. See Chapter 4 of “Growing Unequal”
    http://www.oecd.org/document/4/0,3343,en_2649_33933_41460917_1_1_1_1,00.html

  8. Jim Rose

    Judith,
    gary becker has worked in this area to incorporates longevity in the evolution of cross-country inequality.

    becker measures the growth of full income rather than per capita income—the growth in individual income plus the value placed on the growth of an individual’s life expectancy.

    it is misleading to analyze the evolution of a country’s well-being (or difference in wellbeing across countries) based only on income, since life expectancy is an important dimension of welfare.

    While life expectancy has been rising for all countries, poor countries have gained more in longevity than rich countries. The change in inequality based on income per capita underestimates the convergence in overall economic welfare.

    Becker finds that the growth rates for full income for 1965 to 1995 averaged 140 per cent for developed countries and 192 per cent for developing countries.

    Longevity gains accounted for 55 percent of the 1965 gross domestic product (GDP) per capita in developing countries, versus 29 percent for developed nations.

    Countries with higher initial income tended to have lower subsequent full income gains than countries that started out poorer once life expectancy gains are included

    Global income inequality is decreasing and people in developing countries are experiencing more prosperity than some critics acknowledge.

  9. wreckage

    It has to do with, are we good painters, good sculptors, great poets?

    Utter non-sequitur. Practical mentoring is where artistic skills are developed, not degrees. Have you ever picked up a brush?

  10. sean

    So GDP will also reflect that people living longer then also produce/consume more?

  11. Jim Rose

    sean, full income is a different to GDP.

    A central part of full income is assigning a monetary value to life based on willingness to pay.

    Willingness to pay can be defined as the estimated amount a person is willing to pay to reduce their risk of dying by 1 percent.

    Becker and his co-authors used previous research on the economic value of risks to life to determine the marginal willingness to pay for longevity gains.

    The total lifetime value (willingness to pay) of longevity gains for an individual born in 1995 correspond to more than 3 times the value of GDP per capita for the U.S., and more than 10 times the GDP per capita for countries like Chile and Egypt.

    These values correspond to permanent increases of more than 10 percent in annual income for the United States and more than 50 percent for Chile and Egypt.

  12. Boris

    I thought UN human development indiex (based on purchasing power partity, life expectancy, litaracy rates and something else) was pretty reasonable. At least the results across countries looked reasonable to me.

  13. Jim Rose

    boris,

    UN human development index does not give much weight to income after a lowist threshold and democracy is missing in action as a basic criteria to get any points at all

  14. Rabz

    … because we are all dying to migrate to the Kingdom of Bhutan.

    There’s a reason why peons in the Bhutan are all so happy.

    An old saying, “If you didn’t laugh, you’d cry”.

  15. Adrien

    Well, surely, that is just a value-based inclusion.

    Really? But the ‘uselessness’ of certain university degrees is objectively demonstrable?

  16. Boris

    democracy is missing in action

    it can be argued that democracy is not a goal but a means to acheive other goals. I think democracy is the best political system, and thus there is such a good correlation between prosperity and democracy.

  17. Boris

    But the ‘uselessness’ of certain university degrees is objectively demonstrable?

    yes, through employment indicators. Imperfect and incomplete, but a measurable proxy.

  18. Jim Rose

    Boris,
    Bryan Caplan argues that the ultimate problem with the HDI is lack of ambition.

    It proclaims an end of history where Scandinavia is the pinnacle of human achievement.

    Scandinavia comes out on top according to the HDI because the HDI is basically a measure of how Scandinavian your country is.

    http://econlog.econlib.org/archives/2009/05/against_the_hum.html

  19. Elizabeth (Lizzie) B.

    Hari Krishnas delight in being exceedingly happy and full of well-being with just an orange toga, a tambourine, some brown rice and a guru. Happiness is beyond metrics, merely a pursuit. Well-being is also very subjective.

    Only the demographic basics of longevity, educational level, employment, housing, food supply and health are statistically useful regarding the condition of the populace, but not as an aggregate figure, where meaninglessness intrudes. Environment is a nonsense category unless it is connected to health.

    This silly SMH index is just another Labor Good Idea, and we all know what they do.

  20. wes george

    Happiness is beyond metrics, merely a pursuit.

    Happiness is elusive if pursued directly that’s why it can’t be purchased. It creeps up unexpectedly on those who toil productivity at whatever hand life dealt them.

    food supply and health are statistically useful regarding the condition of the populace, but not as an aggregate figure, where meaninglessness intrudes. Environment is a nonsense category unless it is connected to health.

    It’s far from meaningless to evaluate the well-being of a population. It’s chock full of insights about the assumptions of the evaluators, even if it says little about the subjects. Such data will be immensely valued by future historians as they try to piece together how we so tragically failed to respond to the real great moral challenges of our day.

  21. Judith Sloan

    No problem about including longevity – it is must be better to live longer (quality assumed).

  22. Boris

    Jim,

    Bryan Caplan argues that the ultimate problem with the HDI is lack of ambition.

    It proclaims an end of history where Scandinavia is the pinnacle of human achievement.

    Scandinavia may be on top, but it reflects the lack of ambition only if the only real measure is your position relative to other countries. This is not sensible. Sergey Bubka may have been number 1 in his sport for quite some time but he was still chasing records.

    One can actually argue that the best cummulative indicator is lefe expectancy. The rest (economics, education, health, freedom etc) are means to acheieve life expectancy. Surely this is not the only goal of an individual person but somehow it is a reasonable proxy.

  23. Rabz

    No problem about including longevity – it must be better to live longer

    Given that you get one life on this earth, then yes, the longer you live the better.

    I’m sort of starting to come around to the idea of reincarnation, not that it will happen, but anyway.

    We should all be so bleeping grateful.

    Of all the yumans that have ever existed, we are some of the luckiest ever.

    The One Percent, if you will.

    The greatest country ever, at the best time, conflict free (for the time being) on the exponential curve.

    Enjoy!

  24. Elizabeth (Lizzie) B.

    It’s chock full of insights about the assumptions of the evaluators, even if it says little about the subjects.

    Very true.

  25. Judith Sloan

    And the anti-market biases of the evaluators.

  26. Elizabeth (Lizzie) B.

    I’m sort of starting to come around to the idea of reincarnation, not that it will happen, but anyway.

    Got your tambourine yet Rabz?

  27. Rafe

    How does longevity correlate with the other major indicators?

  28. Rabz

    Got your tambourine yet Rabz?

    Lizzie,

    I’ll be bangin’ it when I start believin’ in reinbloodycarnation and not a moment before, thanks Squirette!

  29. Jim Rose

    rafe,
    there is more success on the health side than on the income growth because it is easier to transfer health knowledge.

    You can cheaply inoculate for smallpox etc., but to make a poor person rich, their country needs functioning economic and legal institutions, relatively corruption-free government, and so on.

    reductions in mortality for infectious, respiratory, digestive, congenital, and perinatal diseases—most before age 20 or between the ages of 20 and 50—were responsible for most of the reduction in life expectancy inequality. Drops in respiratory and digestive diseases deaths alone accounted for 81 percent of the reduction.

    The World Health Organization reports that average life expectancy rose an average of 23 years in the poorest 50 percent of countries, but only nine years in the richest 50 percent.

    While East Asia and the Pacific led the way with an average increase of 29 years (from 42 to 71), life expectancy from birth in North America increased only seven years, from 70 to 77.

  30. Elizabeth (Lizzie) B.

    Merely a suggestion Rabz once you declared your interest. Glad you were horrified. Apparently the clamour focuses the mind on the next and better rebirth and goodies to come, obviously a preferable thing if brown rice is all you have to look forward to in the evenings. But that’s just you and me Rabz. They’re happy.

    I’m with you. We are the lucky all-time 1% of the world. We are the luckiest of the lucky luckers ever, and we should be falling around with gratitude for our luck. Time and tide are with us. Fortune has smiled upon us here in Oz. And Scandinavia has shocking weather. And lots of raw fish dishes. And socialists galore, more than us. So we have to come out on top. Always a good position.

  31. Elizabeth (Lizzie) B.

    North America has a weight problem; hence lower life expectancy. Arguably US also has worse medical system than comparable economies for poorer people. Malaria prevention measures and cheap and effective anti-AIDS drugs have also assisted life expectancies in poorer countries.

  32. Rabz

    Thanks Lizzie.

    Just stating the bleeding obvious, as usual.

    My favourite city – the one I was born in and lived most of my life until this January, has the best weather/climate on the planet.

    All part of the conspiracy, apparently.

    I’ve recently gone into self imposed exile in the nation’s capital, which as much as I hate to admit it, is bloody brilliant.

    Those wallies wont know what’s hit ’em …

  33. Jim Rose

    Arguably US also has worse medical system than comparable economies for poorer people

    lizzie,
    medicare covers the plus 65 and medicaid covers the poor. CHIPs covers children.

    some states and cities mandate universal care. does this solve the access problem?

    cheap health care is illegal because there is no interstate market

  34. Elizabeth (Lizzie) B.

    Rabz, looking out of my window at white sails on blue water right now, my thoughts sailing away on in the harbour city. Not the best of Sydney days, but good enough. Isn’t life sweet?

    Jim, on US medical systems, I said ‘arguably’ because I am just not sure. I know there is coverage of sorts for just about all; don’t know how good it is. I suspect gunshots and overeating account for a lot of the differences in mortality rates.

    Talking of overeating, I need to start cooking up a storm for guests tonight. Left it rather late as usual but I have a few magic tricks. Fish is quick.

  35. Irving j

    Let me just clarify some of the never ending nonsense that goes on regarding inequality.

    Wealth manifests in a free society as a power law distribution or Pareto curve.

    Pareto distributions are scale free.

    It is not possible within a large society that has relative freedom to eliminate inequality or vary dramatically the shape of the distribution.

    Scale free means that you can multiply the total wealth by 10 and the curve still has a self similar shape.

    Pareto curves are the results of multiplicative processes, also described as preferential attachment. In the simplest market terms it means that slight differences compound results. This can be seen from both the supplier side and the consumer side.

    The only possible way a decent sized society can achieve anything that even come vaguely close to a linear distribution is by micro managing every transaction.

    Simply raising taxes does not prevent Pareto distributions but does lengthen the timeline to building wealth. But! A relatively free market will still generate a Pareto distribution, even under the burden of high taxes.

    This means beyond a shadow of a doubt that the goals of the left for greater equality are utterly incompatible with freedom. It’s not a case of politics or belief, it’s just pure maths.

    Material equality requires a micro manged totalitarian society, it cannot come about in even a vaguely free society.

    The sooner this understanding is widely taught at schools, the sooner the left will disappear.

  36. Irving j

    Let me just clarify some of the never ending nonsense that goes on regarding inequality.

    Wealth manifests in a free society as a power law distribution or Pareto curve.

    Pareto distributions are scale free.

    It is not possible within a large society that has relative freedom to eliminate inequality or vary dramatically the shape of the distribution.

    Scale free means that you can multiply the total wealth by 10 and the curve still has a self similar shape.

    Pareto curves are the results of multiplicative processes, also described as preferential attachment. In the simplest market terms it means that slight differences compound results. This can be seen from both the supplier side and the consumer side.

    The only possible way a decent sized society can achieve anything that even come vaguely close to a linear distribution is by micro managing every transaction.

    Simply raising taxes does not prevent Pareto distributions but does lengthen the timeline to building wealth. But! A relatively free market will still generate a Pareto distribution, even under the burden of high taxes.

    This means beyond a shadow of a doubt that the goals of the left for greater equality are utterly incompatible with freedom. It’s not a case of politics or belief, it’s just pure maths.

    Material equality requires a micro manged totalitarian society, it cannot come about in even a vaguely free society.

    The sooner this understanding is widely taught at schools, the sooner the left will disappear.

  37. Irving j

    Oops. Double post. My bad.

  38. PSC

    Utter non-sequitur. Practical mentoring is where artistic skills are developed, not degrees. Have you ever picked up a brush?

    Utter non-sequitur squared. Ms Sloan’s reference was clearly to “unproductive” activity which would not otherwise be captured in GDP numbers. Why are “wasteful” university degreees wasteful?

    The question is, do these “wasteful” activities add value? My argument is that learning adds value in the (very) long term. It adds value by defining our culture and thereby defining who we are.

    In my world, I remember the medieval period, a thousand years ago, for laying the foundaton of Western civilization. I remember it for the extraordinary wealth of the Catholic tradition then being built. I don’t have the foggiest as to what Y = C+I+G+X even means when we’re arguing about legacies. How do you remember the legacy of Ethelred the Unready – I doubt anyone can quote a GDP statistic.

    How will we be remembered in 1000 years? I suspect Gittins’ measure will caputure this much better than naive GDP.

  39. Irving j

    What undermines the lefts entire ideology is old Newtonian linear thinking. But wealth is a scale free phenomena, that relatively speaking the top 1% will ALWAYS have the lions share of total wealth over a long enough timescale.

    Since rich and poor are relative concepts, the lefts goals are not only unachievable in free society but create a core pressure for increased authoritarianism, regulation, control and bigger and bigger government.

    Totalitarianism is the DNA of the left at the heart of its ideology.

  40. Irving j

    Another obvious policy implication is that no amount of transfer payments, short of 100% affects the scale free nature of power law outcomes.

    The rich will always get richer, so long as the total size grows. Also in a power law distribution The majority are ALWAYS below the mean. Again it’s just maths of power law distributions, no conspiracy required.

    Yet the apparent failure of welfare politics to alter the scale free nature of wealth distributions creates frustration and pressure towards more and more counter productive policy by the left.

    It’s hard to come to any conclusion other than leftist policy ultimately reaches a point of implosion, either having destroyed all incentive or destroyed all wealth, simply from failing to see the scale free nature of wealth distribution.

  41. Irving j

    IMO lefties come in three broad flavors, some of the tail end who see a free meal ticket, the do-gooders who are seduced by the vision of non scale free distributions and its implied “fairness” “social justice” “equality” etc and the totalitarians who will impose a non scale free distribution by any means.

  42. Winston Smith

    Lizzie and Rabz, when I feel a bit down, or someone else is having a hard time, I tell them – “By being born in Australia, you have won the lottery of life. Celebrate.”
    After all, you could have been born in Saudi Arabia, or Pakistan.

  43. Irving j

    Any of our resident lefties seeing the light yet?

  44. Irving j

    Let’s take occupy wall street. Take the Wealth of the top 1% who have say 40% of all wealth and remove it and them entirely from the planet. What is left is still a power law scale free distribution. The new top 1% still have 40% of the remaining wealth. Remove them and again the remaining population at the top 1% still have 40% of the remaining wealth.

    Take the wealth fom the top 1% and distribute it to the bottom 50%, within a finite period, as people spend and money moves around the economy, the distribution of wealth will return to pretty much the identical shape it had before.

    So what is OWS railing against really? They are railing against the very nature of reality in a free society.

  45. Irving j

    Whether somebody kills you might be a good start along with are you going to die soon.

    People cling to their world view tenaciously, they have to. People need something concrete in a chaotic universe for there bearings, beliefs and direction in life.

    What I am saying is that once we have an understanding that in a free society we will NEVER eliminate scale free distributions of wealth; then policy can then become much smarter by not focusing on pointless counter productive means. Predominantly by now focusing on teaching people to fish, rather than giving them fish. The left neither can eliminate vast inequality while preserving any form of freedom nor can it graduate from handing out fish to teaching people to fish, because it fears that will undermine its very reason for existing.

    The left historically has ended up in two place, absolute totalitarianism or addicted to the heroin of the false promise of welfare politics, which ultimately will lead to some form of implosion.

  46. Winston
    100% agree with won the lottery if you give an economic value to Australian citizenship compared to world average standard you will end up with between $1million and $250 000 so that is not doing too bad just for being born.

  47. Irving
    I would agree the left in Australia’s case has led people to believe some things along the lines of what you are saying. First they seem to value academic achievement so much, over emphasising the importance of position like how they seem to want to have every one go to university. But the fact of the matter is if every one went to university it would just mean we have unhappy truck drivers with university degrees. This was shown in the 90’s when they indicated trades were of lower value and is still the case. This all breeds resentment.

  48. Irving j

    Look, the ignorance regarding reality is always going to create certain types of dynamics inside a scale free wealth distribution. Jealousy. Fear. Greed. cheating. Etc etc. etc. The vast majority will ALWAYS be below the mean, the top end grows as the economy grows, the shape stays vastly unequal.

    I am not saying let’s push truck drivers through university, what I am saying is its time for the left to abandon the impossible goal of altering the shape of the distribution in any meaningful way, it’s time it stopped playing class warfare in a scale free environment, that’s a prescription for wealth Annihilation

    Then the left can find more suitable policy for the tail end of the wealth distribution and its collectivist bent, which is not counterproductive nor net destructive. Its not up to me to work out what that policy should be.

    There will always be some tension between collectivist and individualist tendencies in society, but the left has to grow up and completely abandon its Marxist roots.

  49. I was agreeing with you just pointing out the ALP policy to over emphasise education. Which inevitably leads to dissapointment. Many of those occupy people fit into this group educated but can’t pay the education loan back in US case.

  50. Irving j

    Yes. Well at this point I’d like to officially announce my candidacy for president of the united states :)…… Cue cheer squad, trumpets and a rain of confetti

  51. sean

    So what is OWS railing against really? They are railing against the very nature of reality in a free society.

    Also it’s about the control the top 1% have with government and the extra benefits for insiders. There is certainly a mutual interest there for those more to the lassiez-faire side of economics.

    They are pissed off with ‘Socialism for the rich, and capitalism for the poor’ and of course mixed in is the hippie element, a view of greed not backed by decent economic theory and the general attack on capitalism.

  52. kae

    Lizzie B 6:09 pm to Rabz

    Apparently the clamour focuses the mind on the next and better rebirth and goodies to come, obviously a preferable thing if brown rice is all you have to look forward to in the evenings.

    Brown rice is not a bad thing if you’re reincarnated as a rat.

  53. kae

    Oh, and I concur with you both abou this, too:

    We are the lucky all-time 1% of the world. We are the luckiest of the lucky luckers ever, and we should be falling around with gratitude for our luck. Time and tide are with us. Fortune has smiled upon us here in Oz.

    Too many people don’t realise how well off they are here in Aus, and too many people who seem to want us to reverse back to a time before electricity (and some people who want us to do without medicine and the like), are just plain clueless.

  54. Boris

    It is not possible within a large society that has relative freedom to eliminate inequality or vary dramatically the shape of the distribution. etc. etc,

    It all sounds compelling but you have never stated your assumptions. Since we know that the curves are different in the US, Australia and Sweden, countires with a very similar wealth per capita, there must be ways to significantly alter the curve without destroying wealth of seriously affecting freedom.

  55. Irving j

    Boris the curves are only different in the exponent of the power law When you plot the wealth curve on log-log graph, the US Austealian and sweeden are still straight lines. They are just slightly apart. Ie still power law distributions of vast inequality.

    The raw assumptions required are free choice in a network of buyers and sellers with slight differences in needs and offerings yields a power law distribution. In other words people choosing better products and services based on varying needs and offerings also described as preferential attachment is enough to create scale free outcome, which we see emerge in ALL free markets of suficient size.

    The exact same mechanism creates power law distribution of blog popularity. To eliminate it, you must micro manage every interaction to blogs, once people have free choice they will gravitate towards what they consider more relavent or interesting based on their personal values, needs etc.

  56. Irving j

    If the best Sweden has managed is to lower the line plot of wealth on a log log graph only slightly and lets keep in mind that Sweden is the poster child of progressive success. Further keep in mind It’s still a line on log log. What does that mean?

    It means that EVERYBODY is slightly worst off but the shape of the distribution is the SAME!!!!!

    This is a killer profound insight into the failure of so called progressive thought, EVERYBODY is worst off in this system. It’s a profound insight for setting ALL policy.

    Why does this happen? Because of the scale free nature of power law distributions. If you think of the system in terms of networks then the elimination of large nodes in that network (representing large wealth) has a flow on effect down to other nodes that interact with that node.

    The reverse also holds we improve the lot of EVERYBODY by the building of larger and larger nodes in the network. This happens automatically anyway, but by specifically targeting policy against larger nodes we impoverish EVERYONE!

  57. Adrien

    Boris – yes, through employment indicators. Imperfect and incomplete, but a measurable proxy.

    Yes, in a way. But that reduces education to training. It’s also used to evoke a mythology about the supposed uselessness of arts degrees. Despite this uselessness I find all of my alumnus crew in gainful employment. What some of them do might seem unrelated to their study, I’m sure I’m one of the only graduates of the media school to actually apply, say film history, in their professional lives, but all of them say they’d’ve never gotten where they did without the education.

    The world is run by people who just can’t understand knowledge if it doesn’t come to them in a graph. Graphs are useful. But over-rated.

  58. Adrien

    Larvatus Prodeo has a post this well-being versus GDP standard of happiness coming from the other end. Essentially they use facts and figures and say they prove that ‘happiness’ is best served by social democracy, wow, big surprise.

    The phenomenon they cite viz the boom in anti-depressant medication does state a certain aspect of the malaise. So does the boost in alcohol consumption and the decline of civilizing rituals for its consumption. Add to this the resort to other kinds of substances you may have something.

    You can’t measure ‘well-being’ and this is used to either disregard it. The Left refuse to admit this and try and measure ‘well-being’ believing, foolishly, that the solution to the apparent malaise is political. The problem is partially caused by politics and partially caused by the increasing tendency of those who ‘manage’ us to regard us as cogwheel or something.

    Traditionally this malaise has been soother by spiritual conviction. I made a comment on LP, it flew in their ears and out their noses. There was a quote:

    What you put in your toilet
    I put on my mantel
    If you flush it I flaunt it
    Y’see everything you celebrate
    I can barely tolerate, still
    I wasn’t looking for a fight
    Especially seeing that
    We’re all walking to the liquor store now
    As if there was a rainbow that ended at its door.

  59. Boris

    Irving, I agree it is a power law but it is these slopes and exponents that are critical for a healthy society. Any measure of inequality will depend on these parameters. One wants to optimize overall wealth and risk a popular discontent and another wants to optimize wealth with a contraint that inequality (slope) does not exceed a certain value.

    These are all rational and legitimate choices.

    Saying it is a power law without specifying the parameters is mesaningless.

  60. Boris

    But that reduces education to training.

    No, if we take into account broad employment in any sector and compare with a control group without these degrees. I know it is hard but not impossible.

    I guess employment considered should be the one above certain level (of income or status).

  61. Winston Smith

    …and a Merry Christmas to you too Rabz…

  62. Simon

    Here was me thinking it all pertained to how many loaves of bread you could buy for a brass razoo, when did we start measuring potential self-enhancement and immunity to bad luck as genuine indicators of success? I wonder if all the boat people are coming here because of our GDP or just because it’s easy to get in and get fed without being blown up? Measuring health outcomes just leads to crappy choices for the individual. Even those death insurance ads say it’s better to burn out than to fade away otherwise we all end up living dreadfully dull puritannical overly long lives at the expense of the next generation.

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