Population woes
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The Perils of elbowing one's way up The Straits Times 23 Oct 2012
THE King of Bhutan wants to make us all happier. Governments, he says, should aim to maximise their people's Gross National Happiness rather than their Gross National Product (GNP). Does this new emphasis on happiness represent a shift or just a passing fad?
It is easy to see why governments should de-emphasise economic growth when it is proving so elusive. The euro zone is not expected to grow at all this year. The British economy is contracting. Greece's economy has been shrinking for years. Even China is expected to slow down. Why not give up growth and enjoy what we have?
No doubt this mood will pass when growth revives, as it is bound to. Nevertheless, a deeper shift in attitude towards growth has occurred, which is likely to make it a less important lodestar in the future - especially in rich countries.
The first factor to undermine the pursuit of growth was concern about its sustainability. Can we continue growing at the old rate without endangering our future?
When people started talking about the \"natural\" limits to growth in the 1970s, they meant the impending exhaustion of food and non-renewable natural resources. Recently the debate has shifted to carbon emissions. As the Stern Review of 2006 emphasised, we must sacrifice some growth today to ensure that we do not all fry tomorrow.
Curiously, the one taboo area in this discussion is population. The fewer people there are, the less risk we face of heating up the planet. But, instead of accepting the natural decline in their populations, rich-country governments absorb more and more people to hold down wages and thereby grow faster.
A more recent concern focuses on the disappointing results of growth. It is increasingly understood that growth does not necessarily increase our sense of well-being. So why continue to grow?
The groundwork for this question was laid some time ago. In 1974, economist Robert Easterlin published a famous paper, Does Economic Growth Improve the Human Lot? Some Empirical Evidence. After correlating per capita income and self-reported happiness levels across a number of countries, he reached a startling conclusion: probably not.
Above a rather low level of income (enough to satisfy basic needs), Mr Easterlin found no correlation between happiness and GNP per head. In other words, GNP is a poor measure of life satisfaction.
That finding reinforced efforts to devise alternative indexes. In 1972, two economists, Mr William Nordhaus and Mr James Tobin, introduced a measure they called \"Net Economic Welfare\", obtained by deducting from GNP \"bad\" outputs like pollution, and adding non-market activities like leisure. They showed that a society with more leisure and less work could have as much welfare as one with more work - and therefore more GNP - and less leisure.
More recent metrics have tried to incorporate a wider range of \"quality of life\" indicators. The trouble is that you can measure quantity of stuff, but not quality of life. How one combines quantity and quality in some index of \"life satisfaction\" is a matter of morals rather than economics, so it is not surprising that most economists stick to their quantitative measures of \"welfare\".
But another finding has also started to influence the current debate on growth: Poor people within a country are less happy than rich people.
In other words, above a low level of sufficiency, people's happiness levels are determined much less by their absolute income than by their income relative to some reference group. We constantly compare our lot with that of others, feeling either superior or inferior, whatever our income level; well-being depends more on how the fruits of growth are distributed than on their absolute amount.
Put another way, what matters for life satisfaction is the growth not of mean income but of median income - the income of the typical person.
Consider a population of 10 people (say, a factory) in which the managing director earns $150,000 a year and the other nine, all workers, earn $10,000 each. The mean average of their incomes is $24,000, but 90 per cent earn $10,000. With this kind of income distribution, it would be surprising if growth increased the typical person's sense of well-being.
That is not an idle example. In rich societies over the last three decades, mean incomes have been rising steadily, but typical incomes have been stagnating or even falling. In other words, a minority - a very small minority in countries like the United States and Britain - has captured most of the gains of growth. In such cases, it is not more growth that we want, but more equality.
More equality would not only produce the contentment that flows from more security and better health, but also the satisfaction that flows from having more leisure, more time with family and friends, more respect from one's fellows and more lifestyle choices.
Great inequality makes us hungrier for goods than we would otherwise be, by constantly reminding us that we have less than the next person. We live in a pushy society with turbo-charged fathers and \"tiger\" mothers, constantly goading themselves and their children to \"get ahead\".
The 19th-century philosopher John Stuart Mill had a more civilised view:
\"I confess I am not charmed with the ideal of life held out by those who think... that the trampling, crushing, elbowing and treading on each other's heels, which form the existing type of social life, are the most desirable lot of human kind... The best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back by the efforts of others to push themselves forward.\"
That lesson has been lost on most economists today, but not on the King of Bhutan - or on the many people who have come to recognise the limits of quantifiable wealth.
PROJECT SYNDICATE
The writer, a member of the British House of Lords, is professor emeritus of political economy at Warwick University. -
3Boys:
Hi. Some issue with people is the perception that only the top 20% earners have their income increased along with the sizzling economic growth. The remaining 80% have more or less a stagnated or even decreasing income adjusted to inflation. But when they suggested a higher tax for the high earners to even out the widening gap, the government appears very reluctant. Thus, the perception that government only take of care of the elites and riches.
Don't turn this into class warfare, its about making the the MAJORITY get access to high value jobs that come from an open economy. Its about not putting up barriers that will WEAKEN our industries in the long run. Show me that in Singapore, businessmen get filthy rich at the expense of the majority, with no ROI for the population. Yes, your number of 5% benefit or employment is really from thin air, completely out of touch with reality. Corporate taxes alone are at over 18%, for context.
Please take a look around for heaven's sake. When businesses suffer, the whole country suffers, including the majority that you are trying to protect. Just look at Greece, 25% unemployment.
Unprofitable or 'survival mode' businesses don't expand, they don't hire, they don't pay well, why is it so hard to understand that? Crowding is small price to pay for economic vibrancy. -
WeiHan:
I support higher income taxes for the higher income bracket.
Hi. Some issue with people is the perception that only the top 20% earners have their income increased along with the sizzling economic growth. The remaining 80% have more or less a stagnated or even decreasing income adjusted to inflation. But when they suggested a higher tax for the high earners to even out the widening gap, the government appears very reluctant. Thus, the perception that government only take of care of the elites and riches.3Boys:
Don't turn this into class warfare, its about making the the MAJORITY get access to high value jobs that come from an open economy. Its about not putting up barriers that will WEAKEN our industries in the long run. Show me that in Singapore, businessmen get filthy rich at the expense of the majority, with no ROI for the population. Yes, your number of 5% benefit or employment is really from thin air, completely out of touch with reality. Corporate taxes alone are at over 18%, for context.
Please take a look around for heaven's sake. When businesses suffer, the whole country suffers, including the majority that you are trying to protect. Just look at Greece, 25% unemployment.
Unprofitable or 'survival mode' businesses don't expand, they don't hire, they don't pay well, why is it so hard to understand that? Crowding is small price to pay for economic vibrancy. -
cherryc:
For someone who is a professor emeritus, this is a really poor piece of incoherent rambling, in my view. He takes one world view and constructs a 1000 word essay with scant support for his conclusion, which I deduce is that \"slower growth leads to more happiness\". Extrapolating from that, one should assume that negative growth would result in even MORE happiness/ In which case Greece should be the happiest place on earth today, since they have had 3 straight years of economic contraction.
No doubt this mood will pass when growth revives, as it is bound to. Nevertheless, a deeper shift in attitude towards growth has occurred, which is likely to make it a less important lodestar in the future - especially in rich countries.
The first factor to undermine the pursuit of growth was concern about its sustainability. Can we continue growing at the old rate without endangering our future?
When people started talking about the \"natural\" limits to growth in the 1970s, they meant the impending exhaustion of food and non-renewable natural resources. Recently the debate has shifted to carbon emissions. As the Stern Review of 2006 emphasised, we must sacrifice some growth today to ensure that we do not all fry tomorrow.
Curiously, the one taboo area in this discussion is population. The fewer people there are, the less risk we face of heating up the planet. But, instead of accepting the natural decline in their populations, rich-country governments absorb more and more people to hold down wages and thereby grow faster.
A more recent concern focuses on the disappointing results of growth. It is increasingly understood that growth does not necessarily increase our sense of well-being. So why continue to grow?
The groundwork for this question was laid some time ago. In 1974, economist Robert Easterlin published a famous paper, Does Economic Growth Improve the Human Lot? Some Empirical Evidence. After correlating per capita income and self-reported happiness levels across a number of countries, he reached a startling conclusion: probably not.
Above a rather low level of income (enough to satisfy basic needs), Mr Easterlin found no correlation between happiness and GNP per head. In other words, GNP is a poor measure of life satisfaction.
That finding reinforced efforts to devise alternative indexes. In 1972, two economists, Mr William Nordhaus and Mr James Tobin, introduced a measure they called \"Net Economic Welfare\", obtained by deducting from GNP \"bad\" outputs like pollution, and adding non-market activities like leisure. They showed that a society with more leisure and less work could have as much welfare as one with more work - and therefore more GNP - and less leisure.
More recent metrics have tried to incorporate a wider range of \"quality of life\" indicators. The trouble is that you can measure quantity of stuff, but not quality of life. How one combines quantity and quality in some index of \"life satisfaction\" is a matter of morals rather than economics, so it is not surprising that most economists stick to their quantitative measures of \"welfare\".
But another finding has also started to influence the current debate on growth: Poor people within a country are less happy than rich people.
In other words, above a low level of sufficiency, people's happiness levels are determined much less by their absolute income than by their income relative to some reference group. We constantly compare our lot with that of others, feeling either superior or inferior, whatever our income level; well-being depends more on how the fruits of growth are distributed than on their absolute amount.
Put another way, what matters for life satisfaction is the growth not of mean income but of median income - the income of the typical person.
Consider a population of 10 people (say, a factory) in which the managing director earns $150,000 a year and the other nine, all workers, earn $10,000 each. The mean average of their incomes is $24,000, but 90 per cent earn $10,000. With this kind of income distribution, it would be surprising if growth increased the typical person's sense of well-being.
That is not an idle example. In rich societies over the last three decades, mean incomes have been rising steadily, but typical incomes have been stagnating or even falling. In other words, a minority - a very small minority in countries like the United States and Britain - has captured most of the gains of growth. In such cases, it is not more growth that we want, but more equality.
Great inequality makes us hungrier for goods than we would otherwise be, by constantly reminding us that we have less than the next person. We live in a pushy society with turbo-charged fathers and \"tiger\" mothers, constantly goading themselves and their children to \"get ahead\".
The 19th-century philosopher John Stuart Mill had a more civilised view:
\"I confess I am not charmed with the ideal of life held out by those who think... that the trampling, crushing, elbowing and treading on each other's heels, which form the existing type of social life, are the most desirable lot of human kind... The best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back by the efforts of others to push themselves forward.\"
That lesson has been lost on most economists today, but not on the King of Bhutan - or on the many people who have come to recognise the limits of quantifiable wealth.
PROJECT SYNDICATE
The writer, a member of the British House of Lords, is professor emeritus of political economy at Warwick University.
The only thing I can see with some supporting numerical data is his conclusion that people are just plain envious beings, they want equal rewards, failing which, they want equal misery. Woe betide the neighbour that does better than them.
Guess what? It's be tried out before.... -
cherryc:
The last highlighted section is an example of a completely slanted and 'frog in the well' view of a purported ideal human situation. If our evolutionary forefathers had that kind of attitude whilst coming out of the bowels of Africa tens of thousands of years ago, we would not be facing these issues today, because we would be EXTINCT as a species.
But another finding has also started to influence the current debate on growth: Poor people within a country are less happy than rich people.
In other words, above a low level of sufficiency, people's happiness levels are determined much less by their absolute income than by their income relative to some reference group. We constantly compare our lot with that of others, feeling either superior or inferior, whatever our income level; well-being depends more on how the fruits of growth are distributed than on their absolute amount.
Put another way, what matters for life satisfaction is the growth not of mean income but of median income - the income of the typical person.
Consider a population of 10 people (say, a factory) in which the managing director earns $150,000 a year and the other nine, all workers, earn $10,000 each. The mean average of their incomes is $24,000, but 90 per cent earn $10,000. With this kind of income distribution, it would be surprising if growth increased the typical person's sense of well-being.
That is not an idle example. In rich societies over the last three decades, mean incomes have been rising steadily, but typical incomes have been stagnating or even falling. In other words, a minority - a very small minority in countries like the United States and Britain - has captured most of the gains of growth. In such cases, it is not more growth that we want, but more equality.
More equality would not only produce the contentment that flows from more security and better health, but also the satisfaction that flows from having more leisure, more time with family and friends, more respect from one's fellows and more lifestyle choices.
Great inequality makes us hungrier for goods than we would otherwise be, by constantly reminding us that we have less than the next person. We live in a pushy society with turbo-charged fathers and \"tiger\" mothers, constantly goading themselves and their children to \"get ahead\".
The 19th-century philosopher John Stuart Mill had a more civilised view:
\"I confess I am not charmed with the ideal of life held out by those who think... that the trampling, crushing, elbowing and treading on each other's heels, which form the existing type of social life, are the most desirable lot of human kind... The best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back by the efforts of others to push themselves forward.\"
That lesson has been lost on most economists today, but not on the King of Bhutan - or on the many people who have come to recognise the limits of quantifiable wealth.
PROJECT SYNDICATE
The writer, a member of the British House of Lords, is professor emeritus of political economy at Warwick University.
\"while no one is poor, no one desires to be richer, \"
I almost spilled my coffee reading this. So seductive, but such a falsehood. If no one desires to be richer, EVERYONE would be poor. Only that no one would be POORER, because we would be all equally poor.
Perhaps that is the ideal state of humanity in some people's eyes.
Of course the poor must be helped. Some form of redistribution MUST be in place. Already the top earners in Singapore bear a much larger share of the tax burden. It is the RIGHT thing to do!
BUT, don't hamper the ability of the companies and businessmen to generate wealth, for themselves, for the country, and for others.
Sure, count the social costs, mitigate, help the Singaporeans, but don't strangle the goose. -
I am unhappy that my neighbour has one yak more than me. It is the government’s job to give me that yak. I blame the government for my unhappiness.
I am also unhappy that although my other neighbour has the same number of yaks as me, his very talented son takes only two hours a day to milk them but my family have to spend eight hours a day. I demand more work life balance. -
Don't worry. You shall soon have your wish.
http://www.reuters.com/article/2012/10/22/uk-singapore-malaysia-iskandar-idUSLNE89L00O20121022
Excerpt:
[quote]Cheap as China and closer: Malaysia zone woos Singapore firms
(Reuters) - When Tastyfood Industries decided to boost production to meet demand in Africa and the Middle East, the maker of Mr Cafe instant coffee and Vitamax cereal did not expand its Singapore factory or another one it owns in Xiamen, China.
Instead, it plans to close its Singapore plant next year and move up the road to Malaysia's Iskandar economic zone, where it will set up a factory three times the size on low-cost freehold land and hire willing workers as cheaply as it can in China.
\"New generation Singaporeans do not like production positions as they are more educated now,\" Tastyfood founder and managing director Joseph Lim, a Singaporean, told Reuters.
\"It's not easy to manage a manufacturing company in Singapore unless you are in high-tech, high value-added businesses like pharmaceuticals.\"
Singapore companies dominate the firms setting up factories in Iskandar, accounting for around 15 percent of the 32.7 billion ringgit committed as of June, according to the Iskandar Regional Development Authority.[/quote] -
pirate:
[/quote]You think we are immune from poaching for even high value things like pharma?Don't worry. You shall soon have your wish.
http://www.reuters.com/article/2012/10/22/uk-singapore-malaysia-iskandar-idUSLNE89L00O20121022
Excerpt:
[quote]Cheap as China and closer: Malaysia zone woos Singapore firms
(Reuters) - When Tastyfood Industries decided to boost production to meet demand in Africa and the Middle East, the maker of Mr Cafe instant coffee and Vitamax cereal did not expand its Singapore factory or another one it owns in Xiamen, China.
Instead, it plans to close its Singapore plant next year and move up the road to Malaysia's Iskandar economic zone, where it will set up a factory three times the size on low-cost freehold land and hire willing workers as cheaply as it can in China.
\"New generation Singaporeans do not like production positions as they are more educated now,\" Tastyfood founder and managing director Joseph Lim, a Singaporean, told Reuters.
\"It's not easy to manage a manufacturing company in Singapore unless you are in high-tech, high value-added businesses like pharmaceuticals.\"
Singapore companies dominate the firms setting up factories in Iskandar, accounting for around 15 percent of the 32.7 billion ringgit committed as of June, according to the Iskandar Regional Development Authority.
http://www.iskandarmalaysia.com.my/news/101029/biocon-makes-161m-malaysian-rd-investment
Yeah, people will say, they will go anyway, why bother keeping those industries, there are plenty of things attracting others to Singapore. -
so why don’t they expand the factory in xiamen China?
-
3Boys:
You think we are immune from poaching for even high value things like pharma?pirate:
Don't worry. You shall soon have your wish.
http://www.reuters.com/article/2012/10/22/uk-singapore-malaysia-iskandar-idUSLNE89L00O20121022
Excerpt:
[quote]Cheap as China and closer: Malaysia zone woos Singapore firms
(Reuters) - When Tastyfood Industries decided to boost production to meet demand in Africa and the Middle East, the maker of Mr Cafe instant coffee and Vitamax cereal did not expand its Singapore factory or another one it owns in Xiamen, China.
Instead, it plans to close its Singapore plant next year and move up the road to Malaysia's Iskandar economic zone, where it will set up a factory three times the size on low-cost freehold land and hire willing workers as cheaply as it can in China.
\"New generation Singaporeans do not like production positions as they are more educated now,\" Tastyfood founder and managing director Joseph Lim, a Singaporean, told Reuters.
\"It's not easy to manage a manufacturing company in Singapore unless you are in high-tech, high value-added businesses like pharmaceuticals.\"
Singapore companies dominate the firms setting up factories in Iskandar, accounting for around 15 percent of the 32.7 billion ringgit committed as of June, according to the Iskandar Regional Development Authority.
http://www.iskandarmalaysia.com.my/news/101029/biocon-makes-161m-malaysian-rd-investment
Yeah, people will say, they will go anyway, why bother keeping those industries, there are plenty of things attracting others to Singapore.[/quote]How come Malaysia manage to implement minimum wage and yet companies still find the labour cost competitive enough to setup businesses there?
China workers go for strikes against their employers demanding higher wages and yet companies still find them attractive?
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