Thursday, January 31, 2008

Let Them Eat Grass

The decision by the EU to ban Brazilian beef is one of the most cynical acts of protectionism that I have seen in years. Our own Government's connivance in the act is shameful.

Let's be clear about the purpose of the ban: it is to protect European beef farmers from cheap Brazilian imports, enabling them to charge European consumers far more than would otherwise be the case. Brazilian farmers get screwed, European consumers get screwed, but European farmers get to enjoy inflated incomes for another while.

The Irish Farmers Association have been at the forefront of this disgraceful assault on consumers and on developing world farmers. They are delighted at the EU's ban, ostensibly on the grounds that "Brazil had failed on FMD controls, movement and traceability, border controls and animal health and food safety issues." The entire agri-lobby from Ireland to the European Commission has ganged up on Brazil (one of the world's largest exporters of beef) for the cynical purpose of protecting their patch, whatever the cost to Europe's citizens and families.

All this nonsense about 'traceability' and 'food safety' is a pure smoke screen, of course. John Bryan, Chairman of the IFA's National Livestock Committee let slip the real motive for the ban, revealed in an item in today's Irish Times:
John Bryan, said last night that he expected the removal of Brazilian product from Europe should lead to higher cattle price.
The same article quotes Fine Gael agriculture spokesman, Michael Creed TD, saying:
... it was now time for meat factories to pay a decent price for Irish beef.
So there you have it - a shameless, cynical act to foist higher prices on Europe's citizens, regardless of the damage done to the efforts of one of the BRIC economies to trade it's way to a higher standard of living. A country with the energy and ambition of Brazil deserves better from us privileged folk in Europe.

Maybe Bono or Bob (or ICTU or Concern) will take up the case and demand a better deal for Brazil, its farmers and agri-workers, and a better deal for Europe's consumers as well. Meanwhile, when you next hear an Irish politician mouthing platitudes about our commitments to aid and development, just ask them "where's the beef"?

Wednesday, January 30, 2008

Stop, You're Killing Us

Most of the coverage of the latest Public Service Benchmarking report focused on pay rises. One assumption that went unchallenged, however, was that wage rates should be the same throughout the country.

New research from the UK shows just how disastrous such a policy of enforced equality can be. It finds, literally, that pay regulation in public health services can kill. Here are the statistics:
Centralised pay regulation means hospitals in high wage areas treat fewer patients and these patients have poorer health outcomes. These effects are not trivial: the results suggest that a 10% increase in the gap between the wages paid to NHS nurses and those paid to women working in the private sector locally raises the fatality rate among people admitted with a heart attack by 5%.
It's bad enough that increases in taxes and public spending are detrimental for the economy generally, but it gets really worrying when a politically driven equality agenda puts the health of citizens at risk in the high wage, high cost parts of the country (that's Dublin, folks, in case you were wondering).

Make that example no. 4386 of The Law of Unintended Consequences.

Tuesday, January 29, 2008

Punching Above Our Weight

The news that the Government's Irish Aid programme will be funding several Irish third world charities to the tune of €400 million over the next three years is significant. It points to a new level of commitment and involvement by Ireland in foreign aid - something that has been more aspirational than actual in the past. Bono et al can take some credit for this turn of events.

The key question, however, is: will it be effective? Aid has a part to play in helping some countries climb onto the ladder of economic progress, but only a part. As explained by Paul Collier in an interview over at EconTalk, helping the poor help themselves requires a great deal more than aid. Effective support may even require military intervention according to Collier. Though I'm a tad more agnostic on that idea than he is.

Coming back to the question of effectiveness, the 'measurement' task this implies may be easier than we think. Tim Harford gives one example of making sure money is spent wisely: in this case, education support in the form of teachers salaries in African schools. The task - how to make sure they show up for work? The solution - install cameras to take photos at the time they should be at work. Can't see the Irish schools inspectorate trying this one mind ...

Still, as Irish Aid's budget increases, we will all want reassurance that it is money well spent - requiring real measures of effectiveness. We (the taxpayers) will be paying for it after all.

Monday, January 28, 2008

Blog Cuttings

There's a handy guide to Global Risks 2008 published by the World Economic Forum at Davos. They score risks in terms of likelihood and severity. The biggest risk? House and asset prices collapsing in the US, UK and Europe causing a recession. So now you know.

*****

Looking back rather than forward, one paper I read recently points out that Adam Smith anticipated many of the insights of behavioural and neuro-economics without the aid of an fMRI scanner. A good introduction to both Smith and the new field of behavioural economics.

*****

A recent episode of BBC Radio 4's Thinking Allowed featured an interview with Roy Foster, whose book Luck & The Irish I have just started to read. Also contributing to the discussion was John Murray Brown, whose recent feature for Prospect I mentioned in a previous post. It's worth listening to, if only for the clip of Michael O'Leary giving out about Tony Blair apologizing for the Irish Famine ...

*****

Sometimes historical analogies help clarify what's going on the present day ... like the epic battle now under way between the HD DVD and Blu Ray formats for the next generation of DVDs. Don't leave the bunker.

*****

Sunday, January 27, 2008

Climate & Punishment

It seems only yesterday that Ireland was Europe's poster child for the benefits of sound policies and economic growth. Now it seems we have become Europe's poster child for unsound policies and economic growth.

This week Ireland was given 1,000 lines by Brussels: "I will not increase my standard of living at the expense of polar bears", or something like that. I'm referring of course to 20-20 by 2020, the European Commission's plan to reduce carbon emissions by 20% AND increase the share of renewables in final energy consumption to 20% by 2020.

The Economist sees it as the opening salvo in a heated debate about European environmental policy after Kyoto concludes in 2012 - and especially who will share the burden (€60 billion) or 0.5% of GDP it will likely cost by 2020. The problem for us in Ireland is that we're now expected to make one of the biggest proportionate contributions to this target. As set out in the Commission's own assessment of what every EU member is expected to do (see Tables I and II in the annex), Ireland is expected to reduce emissions by 20% relative to 2005 in those sectors not covered by EU ETS. Only Denmark and Luxembourg have similarly high targets. The target for renewables in Irish final energy demand is set at 16%.

Table II tells us that the combined impact of the proposed measures for Ireland could cost 0.45% of GDP by 2020. Curiously, Minister Ryan's comments welcoming the Commission's proposals only mentions the 16% renewables target, and doesn't mention either the emissions reduction nor the economic cost.

But while a few of us fret about Ireland being asked to do too much, there are those who think we are not being asked to do enough; cue Friends of the Earth responding to the Commission's proposal last week - this from their press release:
  • The overall EU commitment - a 20% cut in emissions from 1990 levels by 2020 - is not enough. It does not reflect Europe's fair share. The IPCC science says rich countries should cut by 25-40% by 2020.

  • The proposed EU target for Ireland - a 20% reduction from 2005 levels - is ludicrious. It would reward us for our profligacy over the last 10 years. In 2005 our emissions were at record levels (70Mt) way above our Kyoto target. Our new target should be set from where we were supposed to be in 2005 (61 Mt) not where we were because of 10 years of inaction.

  • The 2020 target proposed for Ireland is about 56MT - almost exactly a return to 1990 levels, no better than that. Our EU target for 2020 should be 49 Mt.

  • In the inter-government negotiations that will now take place Ireland should ask for a tougher target, in line with our fair share (49Mt).

  • The Programme for Government commitment to reduce emissions by 3% a year on average will see Irish emissions fall to 47 Mt in 2020, so Fianna Fail, the PDs and the Green Party are already agreed to a tougher target that the one that will be proposed by the EU tomorrow, one more in line with what the science dictates and equity demands.
The tone of FOE's response is amusing if a little chilling: it seems we should be punished for our 'profligacy' over the past 10 years (all those jobs and all that wealth created, tut tut); and in the best tradition of S&M, they're asking that Ireland be 'whipped a little harder' for being a naughty boy. I'm no psychotherapist but I'd reckon there's many a session on the couch in that lot.

As I pointed out in a previous post, Richard Tol at the ESRI estimates that meeting the 3% target lauded by Friends of the Earth will require that half the population of Ireland leaves by 2012: but curiously nobody has responded to his estimate. Like Tol, I take most of these targets (including those announced last week) with a pinch of salt. We need to take prudent and proportionate measures to insure ourselves against low probability, high impact risks such as extreme climate change. A carbon tax, for example, that increases over time is one of the better measures proposed. And what about a prize fund for green innovations - with winning ideas shared free with developing countries, as suggested in Positive Environmentalism, a report from the Globalisation Institute?

But my money is on rising oil and gas prices to provide the clearest and loudest signal that consumers and businesses have to change their energy usage practices. Just as they have already started to do so.

Postscript: for those of you want to follow the climate debate in more detail, check out Climate Debate Daily, a good source of 'pro' and 'con' insights into what is (or isn't) going on.

Friday, January 25, 2008

Are You Ready to Play?

It's definitely a sign of old age when you come across an increasingly popular phenomenon and you 'just don't get it'. And so, sadly, I have to admit that that's exactly how I feel about the subject of gaming. I know it's big - and I know it's going to get much, much bigger - but alas it will do so without any help from me.

There's a really interesting discussion on gaming (and reactions like mine) over at EconTalk, easily the best economics podcast on the web. It features Edward Castronova, of Indiana University and author of Exodus to the Virtual World, talking about his thesis that a growing number of people around the world will be spending more and more time playing multiplayer games in virtual reality both as a form of escape and as a search for meaning.

Some of what Castronova has to say may be familiar - such as the extraordinary growth of Second Life and the numbers playing World of Warcraft. But a few things surprised me - I didn't know, for example, that the modal gamer demographic in the USA is 30-55 women!

Where will it all end? My money is on a future not unlike that portrayed in a delightful novel by Vernor Vinge called Rainbows End. Ultimately there won't be a virtual versus a real world - rather we will 'wear' our computers and communications devices with the virtual world 'overlaid' on the real world. You'll have to read the book to have any idea about what I am (or rather, Vinge is) going on about.

And what about the business of games and gaming? A recent report by Accenture - G3: Games, Gaming & Gambling - approaches the gaming phenomenon from both an economic and a business perspective, helpful for those of us who wouldn't know one end of a Nintendo Wii from another:
Today, games, gaming and gambling – for which we have coined the term G3 – represent a $345bn global business, eclipsing both the movie and music industries. As the planet’s premier entertainment choice, G3 is not only growing but changing – rapidly evolving to the imperative of a wired world and shifting consumer tastes. Ready or not, players in the sector should not underestimate G3’s power over their businesses or the enormous opportunities it represents.
If, like me, you're more than a little surprised to learn that gaming is already a bigger industry than movies or music then all I can say is 'welcome to my world' ...

Wednesday, January 23, 2008

Marital Affairs

One of the most interesting research studies I was involved in last year was about the first seven years of marriage. The study showed that marriage in Ireland seems to be in robust good shape as an institution - and, more importantly, as a lived experience for the couples involved.

Recent CSO data on the number of marriages and the marriage rate up to Q1 2007 confirms that marriage appears, if anything, to be increasingly popular in Ireland. But what about the future? There's a fascinating debate over at Cato Unbound including an article by Stephanie Coontz on The Future of Marriage. Coontz takes the reader through the history of marriage up to its present day manifestation as a 'partnership of equals' - something it most definitely hasn't been in the past. She is in turn quite optimistic about the future of marriage because of its remarkable capacity to adjust to societal and cultural change, referencing two key lessons from history:
First, marriage is not on the verge of extinction. Most cohabiting couples eventually do get married, either to each other or to someone else. ... The second lesson of history is that the time has passed when we can construct our social policies, work schedules, health insurance systems, sex education programs — or even our moral and ethical beliefs about who owes what to whom — on the assumption that all long-term commitments and care-giving obligations should or can be organized through marriage. Of course we must seek ways to make marriage more possible for couples and to strengthen the marriages they contract.
But what about adjusting to economic change? Tim Harford, the Undercover Economist, has written two excellent articles on behavioural economics and marriage in Slate (part 1 on The Economics of Marriage, and part 2 on Divorce is Good for Women). Like Coontz, he charts a remarkable change in marriage from the perspectives of men and women alike, examining the role of female employment, contraception and education on couples' expectations of marriage.

So marriage is changing in Ireland (as elsewhere), but the one constant is its continuing popularity as a desired state for most young singles. But not everything is changing, as noted in the ESRI report Work Rich, Time Poor? Time Use of Women and Men in Ireland. Irish married men it seems do less than an equal share of the housework, including childcare (but rather more of the paid work).

Though quite why they needed to do a survey to find this out is not explained ...

Monday, January 21, 2008

Happy 'Most Depressing Day of the Year'

Today is apparently the most depressing day of the year. Like you didn't know already ...

But don't worry, the Samaritans already have a website dedicated to supporting those suffering from Blue Monday syndrome. It is, of course, pure junk science - just the latest manifestation of the happiness industry that seems, if anything, to be making us miserable.

For a more interesting, and certainly more considered assessment of what get's us down, you need look no further than the excellent essay on The Pursuit of Unhappiness by Daniel Haybron. He argues that evolution has left us lacking the aptitude to navigate the choices and risks created by a modern, liberal capitalist society. I feel it is something of a straw man argument myself (he ignores the role of luck, longevity and lifestage, for example), but well worth the read for those of you into the happiness/unhappiness agenda.

But if economics and psychology don't do it for you, there's always religion. Better still, new research shows that people are more motivated by the thought of going to heaven than by the fear of going to hell. Though the more agnostic among you may still be wondering if "there's life before death" on the day that's in it ...

Sunday, January 20, 2008

Every Parent's (Other) Nightmare

It's your first break away as a couple without the kids in months, if not years. They're old enough now to look after themselves, you hope. Then you get the call, it's the police, and it's about your children ...

Or, if you have the misfortune to be Corey Delaney's parents, its about the 500 strong party currently demolishing your home and your neighbourhood despite the best efforts of riot police, dog handlers, and helicopters to stop them. Fighting for their right to party indeed. Needless to say, Corey has become a poster child for a generation seen as self absorbed, hedonistic, and amoral. Or just plain 'teenagers' if you prefer.

But (as the parent of two teenagers) I'm inclined to give Corey's generation the benefit of the doubt (though I'm not sure how I'd feel if I was Corey's parents). The image above is from the delightful Indexed blog by Jessica Hagy. Through her drawings she provides a commentary on the world around us, and this one certainly captures the moral panic provoked by Corey's 'free gaff' experiment.

A new report from the Social Issues Research Centre paints a somewhat more encouraging picture of the Trust Fund Generation. Though it is UK focused, some of the studies findings are relevant to Ireland. The SIRC study concludes:
We have chosen in this report to take a cautiously optimistic view of children and young people, disregarding much of the negative complaining about ‘the youth of today’ that passes for social commentary and analysis in the popular media and even in the outputs of some think tanks. This is a generation that is growing up in a far less ‘gentle’ age than was experienced by their parents, and certainly much less ‘fun’ than that of their grandparents.

These very ‘sensible’ but also very individualistic and experimenting young people have established, and will themselves drive, a lifestyle model that will impact on the Trust Fund generation in very significant ways. One thing we can be certain of is that today’s babies and toddlers, like their older teenage contemporaries, will have a very different outlook on life in fifteen to eighteen years from that of their parents as a result.
In other words, the younger generation will grow up and figure things out for themselves, because they'll have to. Just like us older folk did before them.

Saturday, January 19, 2008

A Glittering Future

There's an excellent primer on gold in today's Daily Telegraph. In case you haven't noticed, the price of gold (like oil) has been hitting record highs lately, a sure sign of 'turbulence ahead' if history is our guide.

Here's what Jeff Randall has to say about gold:
Control-freak politicians abhor gold because it ignores them; it won't do what it's told. It defies economists and laughs at central bankers.
And if you are inclined to agree with Randall's perspective then you'll enjoy this deeper analysis by the insightful Sean Corrigan.

I suspect that the financial market turbulence we are now experiencing is a precursor to a far more radical re-think about money. Though I don't expect a return to a gold standard, I do think it likely that we will move away from the fiat money system that we currently have. Former central banker Bernard Lietaer wrote a fascinating book a few years back on The Future of Money: and some of the ideas he set out in the book seem set to be a bigger part of all our futures.

Indeed, we shouldn't be surprised if carbon plays a key part in defining what we mean by money. One of the most innovative ideas (developed in Ireland by Feasta) is that of Cap and Share. In effect, we may end up moving to a carbon standard rather than a gold standard. Still, in the meantime, it might do no harm to invest in the 'barbarous relic' yourself, if you haven't already done so.

Thursday, January 17, 2008

Put a Contract Out on Yourself

Is there nothing you can't do online? I've blogged in the past about neuroeconomics and behavioural economics as interesting areas of research, but you know a topic is hot when people use it to launch new businesses.

Aptly timed for the New Year, a group of American academics and business folk have launched stickK. According to the blurb on the website: "stickK promotes healthier and happier living by helping people achieve their personal goals through the signing of Commitment Contracts. Happier people = happier world!"

What I really like about StickK is that the entrepreneurs behind it are quite explicit about their use of economic theory to develop their service:
The Commitment Contract concept is grounded on two well-known principles of behavioural economics: (1) people don’t always do what they claim they want to do, and (2) incentives get people to do things.
The idea is to encourage you to a make a public statement of your intentions ('take a contract out on yourself' as they jocularly put it), as a way of encouraging you to stick to your New Year's Resolutions or plans or whatever you fancy.

I think it's clever. Only time will tell if it will stickK ...

Wednesday, January 16, 2008

We Wear Our Freedom Lightly

We Irish live in the freest country in Europe and the third freest in the world. That's according to the Heritage Foundation's Index of Economic Freedom 2008, just published. They define economic freedom thus:

The highest form of economic freedom provides an absolute right of property ownership, fully realized feedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself. In other words, individuals are free to work, produce, consume, and invest in any way they please, and that freedom is both protected by the state and unconstrained by the state.
They measure scores under each of ten headings (Business Freedom, Trade Freedom, Fiscal Freedom, Government Size, Monetary Freedom, Investment Freedom, Financial Freedom, Property rights, Freedom from Corruption, Labor Freedom) and then calculate the (unweighted) average to generate the overall freedom index score. They have a useful profile for each country (including Ireland) and suggestions for further improvement.

Of course an obvious critcism of the Freedom Index is that a) it's from the Heritage Foundation, and therefore could be seen an exercise in conservative political propaganda and b) it only addresses economic freedom - so freedom of the press, personal freedom etc. do not figure in their calculations. In fact, a look at the complete list of 157 countries for which indices are produced shows a strong correlation between liberal democracy and economic freedom (not to mention standard of living). Indeed, China - a poster child for some of unfettered free market capitalism, ironically enough - is ranked number 126 in the Heritage Foundation's scorings.

The muted response to our success in the Heritage Foundation's ranking made me realise that we wear our freedom lightly in Ireland. So much has been gained by and for the Irish people, but so much is taken for granted. The BBC broadcast a fascinating documentary last week called 'No Go: The Free Derry Story' which provided a poignant reminder (for those of us who were around at the time) of the power freedom has to stir our imaginations and ambitions, and not just in Ireland. Free Derry was a time and a place where there were no police, no soldiers, no government bureaucrats and yet there was peace and order. Anarchy indeed!

Of course there were the inevitable Republican and Socialist schisms and schemings in the background (and no libertarians!), but there was something deeply moving about a community of 25,000 men, women and children taking their freedom and their responsibilities into their own hands. And one couldn't help but look at the people in the images of 1969 and think of the grim future that awaited their community and others throughout Northern Ireland in the decades to follow. But, for a brief moment, they had real peace and freedom.

So here we are in 2008, nearly forty years later, experiencing a deeper, more secure peace and freedom on this island, amongst the freest people in the world. Now that really is making history.

The Net Works

It's funny how we all take the Internet for granted, even though 'we all' have become a majority of the Irish population in just the past 18 months. Yet every so often you come across something that really does bring home how pervasive the net is in the lives of many Irish people.

So it was with my recent experience of Jumble Town, the online community run by Irish local authorities for shifting unwanted furniture, equipment etc that you no longer want (but don't want to take to the dump). I've been a tad critical of local authorities in previous posts, but credit where credit is due: their Jumble Town service is excellent.

But it wasn't just the functionality and user interface that impressed me - it was how many other people were using it! Last Sunday afternoon I uploaded images and details of two chest of drawers I wanted rid off, and within six minutes I had my first offer - and within one hour I had twenty offers from people in the greater Dublin area willing to come around and take the drawers away. The first set of drawers were then picked up that evening, and the second set the next evening.

Quite amazing - and proof that the net really has become an embedded part of the lives of a million plus people in contemporary Ireland.

Tuesday, January 15, 2008

Follow That Emotion

Every once in a while you come across someone and you think: 'that guy's a genius'. And so it was when I stumbled upon Christian Nold, inventor of Bio Mapping.

Nold has recruited volunteers to wear a special device that measures their emotions (through their skin) as they walk around a particular area (e.g.: The Strand in London in the image above) whilst carrying a GPS device. The result is an 'emotional map' of an area or city that is quite extraordinary to behold.

He has even persuaded the UK's Ordinance Survey to allow him to plot his emotional maps over their actual maps and to resell them to the general public. Like I said, the guy's a genius.

Now imagine emotional maps of Ireland's cities and towns ...

Monday, January 14, 2008

Carbon Sunk

Sometimes it pays to read the small print. Richard Tol, Ireland's most prodigious economist, writes in the latest issue of the ESRI's Quarterly Economic Commentary about just one of the targets set out in the 86 page Agreement for Government signed by Fiánna Fail, the Greens and PDs in June last year. On page 19 of the Agreement we read that:
... the Government will set a target for this administration of a reduction of 3% per year on average in our greenhouse gas emissions.
As Tol points out, this amounts to a five year goal for the present government of reducing CO2 emissions by up to 25%. Or 'a considerable task' as he wryly puts it.

So what would it take for the Government to deliver on this one goal? Given that we're more or less stuck with the energy infrastructure, housing and transport systems that will predominate even by 2012 (as these things take decades to change), then more radical measures are required. Here are some of Tol's calculations of what it would (hypothetically) require for the Government to succeed:
  • Reduce the number of cattle in Ireland by 50% between now and 2012, or

  • Reduce the number of people in Ireland by 50%, or

  • Reduce energy usage per resident by 50% or

  • Move two fifths of industrial and service production off-shore
Tol therefore proposes that the Government actually abandons its target. I'm inclined to agree with him on this one. Remarkably, Tol's analysis has gone completely unchallenged by the Government, suggesting perhaps that they've realised the error of their ways and have indeed decided to quietly abandon this particular target. I hope so.

The wider context for the issues Tol addresses is one of political wishful thinking, economic ignorance and doomsday weather forecasts. Most people (including me) reckon that there are signs of significant climate change and that human activity has played a part in these changes. But beyond that there is a wide divergence of opinion about how fast, how far and how bad these changes will be. You only have to read the International Panel for Climate Change Working Group 1 Report "The Physical Science Basis" to appreciate that there is significant uncertainty about the future nature and impact of climate change in the short, medium and long term (though consensus that there will be some change and impact).

This is not to council doing nothing. Rather, as a number of critics of both the IPCC and the Stern Review (including Tol here) have argued in some fairly robust discussions in the Journal of World Economics and elsewhere, the balance of probabilities leads to a policy of introducing and gradually increasing measures such as carbon taxes. But the same probabilities in relation to climate change do not justify the kind of Khmer Rouge Year Zero extremism implied by targets such as the Government's above.

Climate skepticism does not necessarily mean 'climate change doubting': read the considered scepticism of the folk at Climate Resistance. But it does mean standing up to nonsense, even if it's nonsense with the imprimatur of binding orthodox consensus stamped on it. And anyway, we could always do what David Keith proposes, and inject a cloud of ash into the air above the poles, bringing the melting of the ice caps to a halt within days.

Mind you, I don't expect any consensus on that one any time soon ...

Sunday, January 13, 2008

Thinking Allowed

Here's a great way to energise your brain at the start of the year - browse through the latest musings from Edge. They asked 166 scientists, artists, philosophers and journalists to write on the topic of What Have You Changed Your Mind About?

Some of my favourite contributors are there, including Stephen Pinker and Nassim Nicholas Taleb; plus a few surprising and delightful contributions from the likes of Alan Alda and Brian Eno. I also like the contribution from James Geary, who changed his mind about neuro-economics: now he thinkgs it really can explain a lot of what's going on in society. Reassuring given my own focus on the topic from time to time in this blog!

Well worth a browse, and you never know, you might change your mind while you're there ...

Saturday, January 12, 2008

Can Capitalism Make Us Happy?

Maybe it's the time of year, but there do seem to be a lot of interesting studies and reports coming out about economics and happiness. Gallup have published a useful two part summary of the state of our knowledge which they summarise as 'The Gallup Path': a kind of macroeconomic version of Maslow's Hierarchy it seems to me.

I've written before about the 'pseudo-science' of happiness research, and I do tend to approach statistical studies on happiness with a degree of scepticism. Still, sometimes you come across a study and you think 'that rings true', and one such study recently looked at personality differences between men and women, with some interesting insights into mental wellbeing. Called Why Can’t a Man Be More Like a Woman? Sex Differences in Big Five
Personality Traits Across 55 Cultures
, it finds that:
On responses to the Big Five Inventory, women reported higher levels of neuroticism, extraversion, agreeableness, and conscientiousness than did men across most nations. These findings converge with previous studies in which different Big Five measures and more limited samples of nations were used. Overall, higher levels of human development—including long and healthy life, equal access to knowledge and education, and economic wealth—were the main nation-level predictors of larger sex differences in personality. Changes in men’s personality traits appeared to be the primary cause of sex difference variation across cultures.
In other words, the more affluent societies becomes, the more, er, neurotic women are relative to men. Oops - perhaps our feminist sisters were right after all, capitalism really is a Patriarchal Conspiracy! Certainly psycho babblers like Oliver James seem to think that capitalism is driving us mad: maybe he really meant the women folk?

However, a more benign interpretation of the personality traits study across 55 countries (not including Ireland unfortunately) is that the freedom provided by affluence simply allows more of our innate differences to come to the surface - with all the potential for conflict AND creativity that this brings with it. In a delightful essay on Why Capitalism Is Good For The Soul Peter Saunders (in response to Australian critics of consumerism) points out that for all its detractors, capitalism provides more scope for people to pursue whatever makes them happy than any other economic system yet devised:
By perpetually raising productivity, capitalism has not only driven down poverty rates and raised life expectancy, it has also released much of humanity from the crushing burden of physical labour, freeing us to pursue ‘higher’ objectives instead. What Clive Hamilton airily dismisses as a ‘growth fetish’ has resulted in one hour of work today delivering twenty-five times more value than it did in 1850. This has freed huge chunks of our time for leisure, art, sport, learning, and other ‘soul-enriching’ pursuits. Despite all the exaggerated talk of an ‘imbalance’ between work and family life, the average Australian today spends a much greater proportion of his or her lifetime free of work than they would had they belonged to any previous generation in history.
I urge you to read the full text of Saunders essay.

What he has to say about Australia can also be said about Ireland. Though hardly a week goes by without some doleful dirge in one of our national newspapers about how crass and materialistic we Irish have become, the fact is: none of us wants to go back to the allegedly simpler, happier times that were the 1980s (or 1960s or whichever historical sweet spot you fancy). Think about it, places like Romania and Bulgaria have the same standard of living today that we had twenty years ago - but which way do you think the migration traffic is flowing?

At the end of the day, capitalism allows the mass of us to pursue happiness, but it does not guarantee it. Securing happiness is, for each of us individually, more a matter of philosophy and mindfulness I suspect, but only once we've move further up Maslow's Hierarchy.

And capitalism is the best ladder we've got.

Friday, January 11, 2008

You Can Bet On It

I've been researching prediction markets lately, and I came across a fascinating initiative called bet2give. Because of laws against online gambling in the USA, providers of such services have had to come up with all sorts of clever wheezes for getting around the obvious constraints this imposes.

One is bet2give, which allows you to bet on the outcome of different events in the future (the prediction markets), but any winnings go to one or more charities of your choice rather than into your bank account. A case of turning vice into virtue perhaps? I wonder how long before one or more Irish charities get in on the act - we've had charity lotteries before, this might seem a logical extension.

By the way, one of the charities supported by bet2give is new to me - it's called Free Rice and their goal is to link education to food aid. Very simply, you answer a word quiz on the site and each time you get the right answer they donate rice through the United Nations World Food Programme. It's really clever, but be warned: like gambling it can be addictive!

Wednesday, January 9, 2008

Catch Yourself On

I was interviewed by Mark Carruthers on BBC Radio Ulster yesterday about the economic outlook for the Northern and Southern economies. The context was an article in yesterday's Irish Times about the gathering sense of economic 'doom and gloom' there (as here in the South).

Naturally (if you've just read my previous post) I was not on the side of the 'gloomsters' on this one. I pointed out that recent forecasts are projecting a growth rate for Northern Ireland that is higher than the UK average, and only just below that for the Republic of Ireland. In fact, Northern Ireland currently has a lower unemployment rate (3.6%) than the South (and one of the lowest of any region in the EU) - a far cry from the situation prevailing in previous decades.

So what is it with this constant need on the part of so many commentators to see the cloud even when the silver lining is bigger? There's an excellent analysis of this very topic in the current issue of the New Statesman called: 'Why Life is Good'. To quote the author, Matthew Taylor:

That people whose beliefs imply optimism seem to spend most of their time wallowing in pessimism is one reason that leftists sometimes lack personal credibility ... But miserable idealists need to make a New Year resolution to look on the bright side. Pessimism is becoming an impediment to progressive politics. It is 50 years since J K Galbraith coined the phrase "private affluence and public squalor"; today, the dichotomy is between private hubris and public pessimism.
It's a thoughtful piece - and he adds further that:

Self-actualisation is the peak of Maslow's hierarchy of needs. There is evidence that more of us are trying to climb that hierarchy. It is in the crowds at book festivals and art galleries, in ever more demanding consumerism with an emphasis on the personal, sensual and adventurous. We want to enjoy ourselves, to be appreciated and to feel we are growing from the experience. Compare that to the last Labour Party, trade union or council meeting you went to.
The gloomsters have it wrong: consumerism and affluence delivers not because it gives us lots of stuff we don't need, but simply because it gives us precisely the things that we want. Sure the economy will slow this year - but a lower speed still means momentum, at whatever the pace.

So my message to the doomsters and gloomsters, North and South, is: catch yourselves on.

Monday, January 7, 2008

Scared Witless

The latest consumer confidence data for Ireland, released today, shows Irish consumers to be amongst the gloomiest in Europe. Overall confidence fell from -2 in January at the start of 2007, to -22 in December at the end of the year. The single biggest driver of the deepending gloom has been the shift in perceptions of the outlook for unemployment - with Irish consumers now the most fearful about job prospects over the next 12 months among all 27 EU countries.

This is ridiculous - Ireland is projected to have one of the lowest unemployment rates in the EU this year and next year (at around 5.5%), so the sense of doom and gloom is unfounded. Why then such negativity? Sure there are plenty of things to be concerned about (see my previous post), but nothing that threatens a return to anything remotely as bad as the 1980s (when unemployment was up to four times the current rate).

It seems to me that 'we' really are talking ourselves into a recession of sorts - though by 'we' I mean the 'doom and gloom' merchants that fill our airwaves and newspapers regularly with their doleful analyses. Maybe the best economic policy initiative for the government would be to offer the said 'gloomsters' an early retirement package - say somewhere warm, like Australia ...

That said, consumers themselves know the difference between the media spin and their own economic reality, so perhaps the consequences of the trend in consumer confidence will not be as dire as projected.

Thursday, January 3, 2008

France's Polish Paradox

I'm in the French Alps this week on a family holiday learning to ski (or attending ski school to be more precise, I'm not sure about the 'learning' bit!) I took this photo from my hotel room balcony yesterday morning, with my trusty N95. The scenery really is spectacular.

One interesting thing, paradoxically, is how many French people are here ... working in the hotels, cafes, restaurants and pubs. The experience is very different to that back home in Ireland, where (as one American tourist I met here lamented) you could stay in hotels the length and breadth of Ireland and not actually meet any Irish people (meeting Polish, Chinese and other nationalities instead, including French of course!)

Which got me wondering about the decision of countries like France not to let new Eastern European members of the EU enter their workforce after 2005, unlike Ireland (and the UK and Sweden) which opened its doors to all who wished to work (from the first wave of members anyway).

On the one hand it means that you do actually get to meet lots of French people when you holiday in France (and English waiters as well as it happens, working to fund their skiing lifestyle). On the other - and I never thought I'd say this - the service in France isn't as good as you'd get in many comparable places in Ireland in my experience: they just don't seem to have that many staff (often with one waiter looking after 10-15 tables at peak times). I have found myself occasionally wishing for an efficient Polish waiter to take my order rather than leave us waiting.

So French standards of service might have benefited from an influx of (relatively inexpensive) staff from Eastern Europe, even if the service experience might not have been the same for us tourists.

All that said, the quality of food in France remains, as ever, 'superbe'.

The Ceiling Becomes The Floor

I wrote in my last post about the inevitability of oil hitting $100 a barrel in 2008 - though I didn't expect it to happen on the second day of 2008! The graph from the excellent NYMEX web site shows the moment around midday New York time yesterday when the $100 ceiling was broken through.

I have written about oil and energy in several posts (here and here for example). There is no doubt that oil matters for Ireland's energy future and the wider economic outlook (including consumer spending). There's a very useful and timely primer on oil, by the way, over at the BBC business news web site.

A strengthening euro has protected us to some degree from rising oil prices, but it cannot protect us completely.

So the $100 price ceiling has now become the floor, and we can expect new highs to be reached in the months and years ahead.
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