Category Archives: State/policy

The robots are coming. What purpose do we have left?

A life without purpose is no life all.

Our purpose – a key element of a happy and fulfilling life – could be radically overturned by the rise of robots. Automation and artificial intelligence, sometimes referred to as the Fourth Industrial Revolution, are threatening work and the economy as we know it. With that, even our happiness levels could be at risk.

The robots are coming

A seminal study on the future of employment by Frey and Osborne of 2013 put the figure of US jobs that could be automated by the early 2030s at around 47%. Imagining that about 1 in 2 employees lose their jobs is massive, but it is an average. For some sectors, like truck drivers or cab drivers, the figures are 70% or higher. If self-driving cars deliver on their promise, they will drastically reduce, or even eliminate, deathly car accidents. They will also radically cut employment in a sector that now represents about 3% of the US economy, and offers people with low education access to a middle-class lifestyle.

The gastronomy sector is another example. In a few years, you can order your pizza capricciosa online, and have it delivered home without any human intervention (we’re already almost there, though we still need a few humans). The dough could be prepared by one robot, the stuffing and sauces by a second, a third could bake it, and it could be delivered to your doorstep by driverless vehicle. Hygiene and efficiency would increase. For a capitalist, it is great: robots can work 24/7, without asking a salary, requesting additional training, getting bored, or going on strike.

White collar jobs are also at risk

But it’s not only blue collar jobs that can lose out. Also part of complicated jobs, like lawyers, accountants or radiologists can be automated. Again, their performance can be better than of humans. A well-programmed (or ‘trained’, through machine learning), robot accountant does not make the mistakes a human makes. A robot radiologist sees more cases during its training that a human during their entire career, and scores better in its diagnoses. These are just some examples: robots might also threaten your job, because humans can be beaten in every repetitive task.

Dramatic social effects

All these developments have massive social and economic effects. If robots take over so much of the current work, what will we do? Can we create new jobs for the 47%? Or will only be half the population be able to be employed? The demand-and-supply laws would posit that salaries would go down. Only those who control robots, the new means of production, would earn good salaries. Inequality would massively increase. This development is already visible in places like San Francisco. A four-person family with an income below $105,00o is now considered poor.

Maybe the entire economy would collapse. If only few people work and earn salaries, who can afford to consume of all products and services that robots produce? Henry Ford’s production line only started to take off when he realised that he needed to pay his staff enough to buy his T-Fords. Supply is nowhere without demand.

A new social contract?

Many in the tech industry, from Elon Musk to Mark Zuckerberg spoke out on basic income as a tool to protect those who lose out. In an interview last year, Bill Gates advocated a robot tax: “The human worker who does, say, $50,000 worth of work in a factory has his income taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level”. Policy makers, such as San Francisco counsellor Jane Kim, have started to think what it could look like. Basic income might be part of the new social contract in a robot-driven economy – who knows?

What is our purpose?

At the moment, we have many more questions than answers. We know robots can do many parts of our jobs, and that some sectors are destined for radical transformation. But we don’t know what comes next. When coal mines in Western countries were closed in the 1970s and 1980s, nobody could tell coal miners not to worry – we didn’t know yet that their children and grand-children could make a living as social media managers or YouTubers.

Similarly, the jobs that will be needed in the 2030s may not exist yet. At the same time, there are a few things that can give us hope. Coding is safe – robots cannot programme themselves (yet?). Social skills and social relations will remain important. And while robots are great in performing repetitive actions in situations they have seen before, they cannot (yet?) deal with completely new situations and decide what to do.

So, there are at least two avenues to find our purpose: one is to do the non-routine, creative work that is hard to automate (some creativity can be automated though – robots can create music and paintings). Another thing we can imagine is living the life as in Keynes vision – with a 15 hour working week, we can spend so much more time on holidays. There are a few big ifs – firstly, we need to have a new social contracts that allows it. Secondly, we  need to find a raison d’etre, a purpose outside work.

We should hurry to do so. The 2030s are close.

How’s life in 2017? Social divisions result in lower happiness, finds OECD

How’s life?

It’s not only mother or your colleague who’s asking from time to time. Policymakers are interested, too.

The Organisation for Economic Cooperation and Development (OECD) every year comes with thick studies to answer the question. Earlier this month, the 2017 edition was published, mapping how people in OECD countries feel about a bunch of things: jobs, health, safety, life satisfaction, and so on. Altogether, the datasets cover eleven broad indicators of the OECD Better Life Index.

These studies are important. Data is power, and having information on how people feel matters a great deal to making the world a better place. As the OECD says it: it helps achieving well-being for all.

So, how do we feel?

The answer is 6.5.

That is, on a ten-point scale, is the average life satisfaction for 2017, marginally lower than the 6.7 score shown in 2005. The small decline probably results of the interaction of a few steps forward and a few step backwards. For instance:

    • Incomes and earnings went up, by 8% and 7% respectively. But inequality remains strong: 1/3 of people would go in poverty if they had to miss three months of salary.
    • The employment rate went up by 1.3 percentage points, and working hours improved in most countries. But long-term unemployment got worse in half of the countries.
    • Since 2005, the number of smokers reduced from 22% to 18%. But the number of obese people increased from 22% to 24%.
    • Education levels see strong improvements. But voter turnout and trust in government decline in more than half the countries.

Well-being for all

A large part of the 2017 report is dedicated to equality. While debates about inequality are often about wealth and income, the OECD believes that inequality is felt in every area of our lives.

For instance, the richest 20% are advantaged in many well-being indicators:

  • Rich people spent 11 times more time on social activities than poor people
  • The top-20% has 5-fold higher household income than the bottom-20%
  • Life satisfaction is twice as high
  • And poorer people tend die a lot younger: the standard deviation in age at death is 13 years

And as a special section of the report shows, migrants particularly tend to be worse off.

This all matters, because more equal societies tend to be happier ones. While the situation is a bit scattered, there is some correlation between income equality and life satisfaction. In OECD data, the correlation is even stronger when inequality is plotted against the broad well-being indicators.

The American Dream vs Janteloven

Take the examples of the United States and Denmark. If you are successful in life, you can have all the American dream. The US is a ‘winners’ society: it is an extremely rewarding environment to build a business and prove yourself. Income taxes are low, and healthcare and social security provisions are bare. At the level of society, the payoff in happiness is not too high. America ranks 14th in the World Happiness Report, with an average below 7 out of 10. Not that great, one might say.

Denmark, to the contrary, is a society that also wants to make ‘losers’ thrive. It offers a strong social security system, that’s even a factor contributing to high happiness. Denmark also wants to offer a good life to people that ‘fail’ in life. Indicative for the Danish way of looking at success is the ‘Janteloven’, or Law of Jante. Janteloven is a list of ten rules that basically boil down to: don’t imagine you’re someone, we’re all the same, and you’re not worth anything. Though, depressingly, the sense of equality it instills helps contributing to a balanced, and happy, society. Denmark often ranks on top of the happiness list, finding itself back at 2 in 2017.

Data to learn from

Either way, Americans and Denmark are both as they are. Even cultural differences in our thinking about inequality could affect our happiness. Beyond books and articles about hygge, reports like the OECD one help to learn from each other. It feels naive to write this down, but the United States can become a little bit more like Denmark. And among the wealth of data, Denmark can also find some inspiration in how people in the US pursue happiness.

View of Nyhavn, Copenhagen.

View of Nyhavn, Copenhagen.

Basic income, revisited: the Finns are on it!

Until recently, I lived and worked in Belgium, and benefitted from a benevolent state taking care of me. I received lunch vouchers for around €100 to €150 a month. Plus ‘ecological vouchers’ for organic products or train travel. Plus ‘sports and culture’ vouchers, for, well, sports and culture. My monthly contribution to the public insurance fund came in at a very modest €8,00, and my own contribution for most treatments was fairly low. Had I lost my job, there would be an expansive social security system where I could get support. Sounds good, doesn’t it?

Well, I spent my time in one of the most heavily taxed countries of the world. Relatedly, Belgium ranks on top of the list across the OECD as for the labour costs – income tax, and employees and employers’ social security contributions. Over half of the wage costs of a Belgian employer account for income tax and social security contributions. Or in other words: it costs over €4,000 to have an employee with a take home pay of €2,000.

Tax wedges in OECD countries. Source: OECD

Tax wedges in OECD countries. Source: OECD

Basic income, revisited

Even if you agree with the noble goals, and despite the correlation between high taxes and happiness, wouldn’t it be a lot better to remove this money pumping function of the state? If a tax reform increased  my net salary by the same amount, I’d have happily foregone all my vouchers and started paying an amount closer to the real cost of my insurance. Sweet and simple!

Last year I already wrote about the possibility of using basic income as a tool to simplify social spending. At the time – just after the Swiss voted ‘no’ in a referendum on the subject – I saw the possibility to get rid of series of tax breaks and charges that have little more effect than creating employment for tax collectors on the one side and tax consultants on the other.

Two things made me revisit the issue. Firstly, the policy discussion on basic income has advanced: more studies have been produced, and Finland’s experiment is underway. Secondly, we are getting a better picture on how basic income can help us solving social problems around globalisation and automation (the robots are coming, and they may give us the cash we need!). Let me take the second issue in a later piece, and look at the policy discussion now.

The Finnish experiment

Finland’s national experiment with basic income launched in January 2017, and contrary to other recent tests has nationwide coverage. 2000 selected Finns now get a monthly sum of €560 – no questions asked. That’s a modest amount, compared to the €2,500 national average wage. It’s not universal basic income per se, though. The participants are all unemployed; typical employees and billionaires don’t get basic income. Kela, the Finnish social security body that organises the experiments, deducts basic income from other social spending, so that basic income mostly replaces existing tools. Despite these limits in scope, the basic income is fully unconditional: participants are free to spend the money any way they like.

While Kela is clear that conclusions will only be reported after the end of the experiment, initial feedback confirms earlier anecdotal evidence that basic income increases the sense of freedom and happiness. Vice went to speak to Juha Järvinen, an artist who feels basic income allows him to focus on what he enjoys: creating the shaman drums that he sells. For Järvinen, the money is not the main advantage of the experiment: “you need to be a magician to survive” on €560 a month in Finland. Instead, it’s the fact that the employment office is not at his back all the time that gives him a sense of liberation. The basic income provides a first basis that makes it easier to undertake the project he likes. He recognises that with this level of spending a beneficiary couldn’t simply be lazy and do nothing, as some adversaries of basic income fear.

Left-wing and right-wing basic income

The Finnish government is a centre-right one, and this is visible in the design of the experiment. Typically, many proponents of basic income are centre-left, focusing on the benefits basic income offers to personal freedom and development, and quality of life. From a left-wing perspective, basic income is about citizens’ rights and distribution of state means. Basic income could then be a tool to ensure that citizens have equal possibilities, and that people of poorer or minority groups are not worse off.

The centre-right perspective would rather emphasise simplification and reduction of state spending. Basic income could replace up to 100 tax incentives in the Finnish case. This is also a key condition to ensure that basic income remains affordable, they argue.

Can we pay it?

That begs the critical question: can we afford basic income? The low Finnish basic income is set up with affordability in mind. It’s not an easy question. The answer of the advocacy group, the Basic Income Earth Network (BIEN), boils down to ‘it depends‘: if we narrowly redistribute existing benefits, it could work. However, if we maintain all existing benefits and then add a broader basic income for everybody to live comfortable, governments will struggle to find the means.

Is basic income better than current social spending?

The Organisation for Economic Cooperation and Development (OECD) weighed into the debate via a study outlining a slightly different question: does basic income reduce poverty and increase equality? The study started with the observation that social expenditure is targeted in wildly different ways. As of 2013, the 20% richest in the average OECD country benefitted only marginally less from cash transfers than the 20% poorest. In most countries, the poor obviously benefitted more from transfers than the rich. But in a few countries, particular subsidies worked out in a net transfer from everybody else to the rich, including Greece, Italy, Poland, and Portugal.

Beneficiaries of cash transfers in OECD countries, 2013. Source: OECD

Beneficiaries of cash transfers in OECD countries, 2013. Source: OECD

So, does basic income do a better job? According to the OECD, it probably doesn’t. If basic income were to be set at the level of current spending -  a narrow basic income – it would remain below the poverty line across all OECD countries, sometimes staying far below. Not surprisingly, if you consider that at present only a share of the population benefits from public spending. As such, basic income would risk distributing from the poor to all. Then, it could draw similar criticism as some education grants do: funds paid for by the baker and the electrician to finance the career investment of the lawyer’s son.

Redistribution from the poor to all

Looking at modeling of how basic income could work in Finland, France, Italy, and the UK, the study finds that a narrow basic income indeed would not reduce poverty. Rather than sharing wealth, the changes in public expenditure would redistribute poverty along different lower-income groups. As such, simply pooling existing benefits and reallocating them as basic income is not the right solution. But there might be other ways – maybe robots could come to rescue? That, however, is a topic for another post. See you later!

The Netherlands: small happy cities in a ‘madly cool country’

The population of the Netherlands is two-faced. When we are among ourselves, we like to complain: about our politicians, the weather, taxes, the healthcare system, declines in fixed jobs, and immigration. In this year’s elections, parties with populist policies won over 25% of the vote.

While we tend to be pessimistic about society as a whole, most people are very satisfied with their own lives. Despite our complaints, the Netherlands is one of the happiest countries of the world. Indeed, when we speak to foreigners, we paint a proud picture of our country. We speak of the Netherlands as a country that is hard-working but not too serious, innovative, well-organised, and with high standards of life. PM Rutte’s daily job is to tell Dutchmen they live in a ‘waanzinnig gaaf land’, which means something as a ‘madly cool country’. A Financial Times feature just before the elections broadly supported the claim.

Indeed, if we look at the stats, it is fair to say ‘The Netherlands second’, as the viral video presenting the country to President Trump did this year did. Dutch economist Mathijs Bouman mapped the Netherlands’ performance on a range of indicators, comparing various rankings on competitiveness, innovation and human development. His conclusion? The Netherlands is the best country of the world, second only to… Switzerland. Only when the World Happiness Report was added, the Netherlands jumped over the United States to second place.

The Netherlands second. Source: Mathijs Bouman, http://mathijsbouman.nl/nederland-is-het-beste-land-ter-wereld-op-zwitserland-na/

The Netherlands second. Source: Mathijs Bouman, http://mathijsbouman.nl/nederland-is-het-beste-land-ter-wereld-op-zwitserland-na/

Happiness: the last frontier

With good scores on so many levels, it is time to reach the last frontier: make society even happier. And the Dutch are getting to business: over the last years, society’s happiness and alternative indicators have gained more attention in the Dutch public debate. Last year, the Dutch Parliament supported steps to create a ‘Monitor Broad Well-being’, to better assess quality of life in the Netherlands.

A happiness atlas

Researchers and marketeers are also spending time on the topic. Recently, a study crowned the central Netherlands town of Ede the happiest city of the Netherlands.

The Atlas of Municipalities, prepared with the support of the Happiness Research Centre of the University of Rotterdam, compared happiness levels in the 50 largest towns. Mid-sized towns like Ede, Apeldoorn and Gouda rank to the top, while most of the larger cities like Groningen, Amsterdam and The Hague are on the bottom of the table. Rotterdam, the second-largest city, even closes the list of 50. The map below outlines the top-10 in turquoise, and the bottom 1o in red.

This map shows cities ranked 1-10 (in turquoise) and 41-50 (in red) in the Atlas of Municipalities. Source: Trouw, based on data of the Atlas. https://www.trouw.nl/home/het-geluk-is-te-vinden-in-een-middelgrote-stad-ede~aeb4553a/

This map shows cities ranked 1-10 (in turquoise) and 41-50 (in red) in the Atlas of Municipalities. Source: Trouw, based on data of the Atlas.
https://www.trouw.nl/home/het-geluk-is-te-vinden-in-een-middelgrote-stad-ede~aeb4553a/

What is happiness, anyway?

Let’s dig in a little bit deeper into what this all means. First of all, what is happiness anyway? For the purposes of the study, it is “the extent to which an individual find satisfaction in their own life as a whole”. ‘Happiness’ is then measured via three metrics: an overall judgement of a respondent’s life satisfaction as a whole, the extent to which one is a happy human being, and the extent to which one felt happy in the last four weeks. Ede overall scored best at this, with 89% of the local population scoring at least an average of 7 out of 10 among the three.

Second, how is Ede different than others? The researchers identified seven factors that account for the differences in happiness levels across Ede and the other cities. These, include the size and composition of the population, the employment rate, health, religion, and the attractiveness of life in the city. That however doesn’t mean that Ede is the only city doing well on those factors, or on happiness. Overall, smaller cities tend to perform better than bigger ones: here, life is less chaotic, while there is more on offer than on the countryside.

Marginal differences

The differences between cities appear quite marginal and probably are not statistically significant. 17 out of the 50-sample score 88 or 89%, no fewer than 42 are in the 85-89% bucket, and even number last Rotterdam houses 82% of happy people. As such, the meaning of being ranked first, second, or even thirtieth, is fairly limited.

Other indices in the Atlas convey this point even more. The happiness index is only an annual theme of the Atlas, which annually compares cities on a range of metrics. Some of these metrics are pooled into indices, for instance mapping ‘attractiveness’ and social-economic performance.

The ‘attractiveness’ index aims to compare how attractive cities are as a place to live for the Dutch population. It looks at factors such as the jobs within range of the city, the share of owned and pre-war homes, distance to nature, and the culinary and cultural offer. The social-economic index, as the name says, looks at elements like employment, the population share on welfare and with low education levels, and the poverty rate.

Both rankings offer a radically different overview than the happiness ranking: ‘Happy’ Ede finds itself back at the 15th place as for its social-economic performance. ‘Unhappy’ Rotterdam is found a more attractive place to live than Ede (respectively 17th and 22nd on the attractiveness index).

Spotting strengths and weaknesses

The takeaway? Indices help to spot cities’ strengths and weaknesses, especially when you dig in the underlying data via the OECD-type dashboard approach the Atlas offers. But different measurements give different results. While it is fun to publish such rankings and see how our cities perform, one cannot a lot of value to small differences or annual movements in the Netherlands. And the key message remains that life in the Netherlands is good. We can be among 82% of happy fellow citizens, or among 89% in Ede. In this sense, the Dutch do live in a ‘madly cool country’, as Prime Minister Rutte said.

The World after GDP

Guano mining at the Chincha island off the Peruvian coast. Source: Wikipedia.

Guano mining at the Chincha island off the Peruvian coast. Source: Wikipedia.

Guano – basically bird dung with an exceptionally high quality as fertiliser – was a highly demanded product. Mainly found on Pacific islands off the coast of Peru it was a popular agricultural fertiliser since the 1840s. From the 1850s, demand sky-rocketed, and competition for guano deposits was fierce. It was guano that was at the basis of the United States imperialist tendencies. The Guano Island act of 1856 allowed US citizens to take control of unclaimed islands.

Why is this relevant, and what does it have to do with GDP?

Guano soon made the people mining it rich. But the environment suffered: it took few decades to exhaust all reservers and leave the islands containing deposits bare. Favouring short-term economic gain over long-term environmental sustainability destroyed the islands.

Guano is just one example, but fits a long human tradition of discovering, using, and then exhausting precious resources, without batting an eye about the environmental consequences – very often driven by the desire to achieve economic growth and increase GDP. But compared to the 1850s, we have a lot better understanding of how these patterns go, and a larger awareness that alternative strategies are possible.

The World Before and During GDP

The World After GDP by Lorenzo Fioramonti. Editor: Polity books

The World After GDP by Lorenzo Fioramonti. Editor: Polity books

The World After GDP, a new book by Lorenzo Fioramonti, offers some of thoughts to escape this trap. It starts by the notion that today, with the exceptions of few isolated and traditional populations, human beings above all are consumers. Private consumption is what is at the basis of GDP and keeps economies going.

GDP however has a bit different origin: it started as a tool to help the English king and French sovereigns in the 17th and 18th century determine how much tax their populations could sustain. The modern institution of GDP developed as of the 1930s, when economic Simon Kuznets helped the US administration understand the national income. Over time, GDP evolved from a metric to see the size of the economy to a goal per se.

Revise GDP, but don’t dethrone in favour of another flawed indicator

The beyond GDP argument that Fioramonti also makes has already been widely discussed on this blog. Fioramonti discusses, and welcomes, the many contenders of GDP. He dedicates some attention to the Human Development Index, the OECD’s Better Life Index, Gross National Happiness, the Social Progress Index, and more. He also notes that the criticism has resulted to some top-down changes to GDP, such as statistical revisions to add up the black market to national economy. The change to consider investment in research as a benefit rather than a cost is another example.

The Nordic leaders (Sweden, Norway, Denmark, Finland, Iceland) poking fun at US President Trump and Saudi king Salman

The Nordic leaders (Sweden, Norway, Denmark, Finland, Iceland) poking fun at US President Trump and Saudi king Salman. What if they would lead the G7?

Ultimately, Fioramonti very sensibly states that all those alternative indicators, like GDP itself, only display one approach to wellbeing. Therefore he speaks out against replacing GDP by another, again inherently subjective and likely flawed, indicator. At the same time, these sections are full of careful reflection on the beyond GDP revolution, and contain interesting ideas. For instance, his mapping of alternative G7 is provided an interesting narrative. The strongest 7 countries of sustainable development does not contain any of the largest economies, but brings Costa Rica, Colombia, Panama, Ireland, South Korea, Chile and New Zealand together. The G7 of happiest countries includes Denmark, Switzerland, Iceland, Norway, Finland, Canada and the Netherlands. A G7 lead by these countries would be, well, a lot of different.

A bottom-down revolution?

Apart from the top-down changes, Fioramonti also sees a bottom-up pressure on GDP. This is where his book stretches beyond the usual beyond GDP literature. While he has a point that there is an increasing community of ‘de-growth’, authentic consumption, local produce and peer-to-peer services, the question is how much we really should read into this. Does someone who drinks a regional craft beer really has his lower contribution to GDP in mind when he sips away, or does he simply value the idea of getting something from close by?

And, isn’t there a lot in the ‘sharing economy’ that has little to do with sharing? AirBnB and Uber, referred to at multiple occasions by Fioramonti, do not only have positive effects. For instance, in reducing the cost of a car ride in New York, Uber drives people out of the metro and into congested traffic. AirBnB makes it easier for people to travel, but creates it own ‘buy to rent on AirBnB’ market, pushing residents out of inner cities and seeing them replaced by one-time consumers. Modern technologies thus simply are used to generate returns in a more modern way. While the book is well thought through and a worthy read, it may stretch the argument a bit to call this a post-GDP world.

Who do I vote for happiness?

Tomorrow my home country, the Netherlands, goes to the polls. The Dutch political system has a low barrier to enter the parliament. Especially this year, this leads to a proliferation of parties: there are 28 parties on the ballot, of which around 11 to 15 stand a stance to win seats according to recent polls.

The broad offer of political ideas also resulted in a large amount of online voting tools. Nowadays, about fifty sites offer tools to compare your views with party manifestoes. Apart from two big and generic ones, others help you to determine which party to vote if you are an entrepreneur, a young voter, if you want to see swift work on climate change, and even if you smoke cannabis (this remains the Netherlands…!).

 

A voting tool for happiness

But there is no tool on happiness. If I want to support a politician that promotes policies improving happiness and well-being, who should I vote? Does any politician ‘run on happiness’?

Happiness is a very tricky issue for politicians. Few politicians would directly promise to make their voters happy, and for good reasons. But if you dig a bit into some of the electoral manifestoes, a couple of ideas linked to wellbeing and the beyond GDP agenda do appear.

 

Four out of the seven large parties have some notion of happiness

Let’s run through the seven parties performing best in the polls; known as VVD, PVV, CDA, D66, GroenLinks, SP and PvdA in their Dutch acronyms.

Three of the main parties do not dedicate a single word to these ideas. For the one-page manifesto of the Freedom Party (PVV, Geert Wilders), this is not a surprise. It’s main aim is to ban things that does not make its leader happy: islamic, asylum seekers, the koran, and public expenditure on culture, wind mills, public broadcasters, etc.

For the Christian Democrats (CDA) and especially Labour (PvdA), I am a bit surprised not see a reference. Both have paragraphs on sustainable economic development, and the link to welfare and wellbeing could be easily made there.

The idea of basic income – arguably also a revision to the thinking about wellbeing – appears in some manifestoes. Some smaller parties wholeheartedly support it (including a dedicated basic income party), while Labour, Greens and Social Liberals (D66) favour experiments with this tool.

 

Liberals: we are happy already, nothing to do here

The Liberals (VVD) programme follows Prime Minister Rutte’s relentless optimism: if the Netherlands wouldn’t exist, we would invent it. We’re one of the happiest countries of the world. Almost nowhere else life is as good as here (the Netherlands second?). But the measures it then proposes do not concern happiness or wellbeing – the programme simply focuses on prosperity. Is our happiness then just a coincidence? If our basis is so strong, isn’t there any way to strengthen wellbeing even further?

 

Socialists: equality makes everybody happy

The Socialists (SP) start from the correct notion that people are happier in a country with smaller differences between people, and equality is a key objective of their policies. Elsewhere, the programme notes that there is more than GDP, and wellbeing and sustainability should be considered to measure prosperity. Surprisingly, this point does not lead to a plea for alternative indicators. Instead, the relevant paragraph continues to speak out against European budget rules…

 

Greens: GDP is not holy

The Greens include a section on a pleasant life, with mostly has to do with nature and spatial planning. Quality of life in our neighbourhoods should be improved, and with an allusion to Robert F. Kennedy, the programme states that “the value of the beauty of the landscape, nature and animal welfare cannot be expressed in money”.

Elsewhere, the manifesto states that ‘GDP is not holy’, and that “wellbeing is a lot broader: green growth with sustainable boundaries, based on knowledge and innovation; inclusive growth, that creates good jobs and fair incomes. That is what counts.” A couple of nice quotations, surely, and the manifesto is full of utopian ideas to get to such a society. Indeed, according to the Central Planning Agency that reviewed the impact of most parties’ programmes, the Greens gets us very far in reducing income differences. Revision in the taxation system should finance this: the Greens are the most radical in greening the taxation system via the ‘the polluter pays’ principle.

 

Social Liberals: measure wellbeing

The Social Liberals (D66) denounce both the dogma of a government that steps too far back and the dogma of the state as a ‘happiness machine’. The programme notes that employment and social expression contribute to people’s happiness. The party also has the most detailed view on measuring wellbeing. In a dedicated paragraph, the party states that we should not only measure GDP, but also evaluate our ecological footprint, welfare, and wellbeing. These elements should be evaluated to determine our success. And based on an amendment proposed by your happiness blogger, the programme also links this to the efforts ongoing on the Netherlands to develop an alternative indicator in the form of a ‘Broad Wellbeing Monitor’.

 

NL happy

A world beyond GDP: are we ready yet?

On the road to discover how happiness works, I learned a lot about happiness in my own personal life – and in your personal lives, too. I’ve also gained a lot of insight in happiness at work. But the main focus of my research effort has been around another question: is there something our governments can do to make us happy?

Allow me to dwell on this question today, before I start my ‘sabbatical’ as a blogger.

I am sure that governments can make us happier, and that they should aim to do so. There are many governments that are taking happiness-based data into account when setting policies. Gross National Happiness (GNH) in Bhutan is more of philosophical guide than a hands-on policy tool, but it shapes the narrative of the government’s action. Regions in the EU and elsewhere learn from the OECD Better Life Index and Regional Well-Being Index and from Social Progress Index (SPI). And on the local level, there is an uncountable number of projects where municipalities and social society players take happiness as inspiration in social, environmental and other projects.

 

GDP, an increasingly poor measure of prosperity

On one of the bigger and more abstract questions I have countered on the road is whether our data helps us to work on happiness. I’ve time and again argued that Gross Domestic Product (GDP) has plenty of limitations. Instead, I assessed the virtue of alternative indicators mentioned above. And I have been far from alone in this endeavour. Back in 1968, Robert F. Kennedy already decried that GDP measures everything, except that which makes life worthwhile. In the last ten years, the debate on ‘beyond GDP’ has been particularly fierce. A cover article of the Economist some months ago summarised these limitations very well, and labelled GDP “an increasingly poor measure of prosperity”.

Can we do without GDP? Does the acceptance of the constraints of GDP mean that a real competitor has risen to the stage? Did we get anywhere in those ten years?

After three years of researching, I fear that my answers: no, we cannot yet do without . No, there is no real competitor. And no, maybe we haven’t made as much progress as we like to think. In the remainder of this post, I explain why.

Kennedy GDP

 

Can we do without GDP?

Ever since its creation in the 1930s, GDP provides important information about national accounts and the size of the economy. It simply measures all production that has been created in a certain territory in a year. These data are important to inform decisions on investment, government spending, and taxation. But all too often, GDP becomes a proxy for progress or prosperity. As a tool, it only measures part of productive economy: GDP falls when a man marries his maid. Indeed, if they don’t increase the economy, GDP discounts social and environmentally desirable activities, such as household work.

Furthermore, GDP is an artificial number. Figures are routinely revised, often upwards and by large margins. After a new method is used in Ireland, GDP growth is not an already significant 7.6% over 2015, but a whopping 26% as a result of some accounting tricks. Imagine the consequences: in terms GDP per capita, Irish are suddenly a lot richer, and the budget deficit shrinks by the stroke of a pen!

Despite all these limitations, GDP is probably a bit like democracy. In Churchill’s words, democracy is the worst form of government, except for all the others. We still need GDP as a tool to measure economic activity, to make sense of poverty, and to determine how much tax we need to pay to run our common society. It might still be the best we can do?

 

Is there any competition?

Or can we? In this blog, I’ve covered many alternative indicators, from GNH to the OECD Better Life Index to the SPI, but also the UN’s Humanitarian Development Index and even the Happy Planet Index. In my view, these are good as part of driving the narrative for a broader sense of well-being and progress. Tools like the OECD Better Life Index, GNH and the SPI can be helpful in spotting where governments need to focus resources to increase quality of life.

But they aren’t appropriate for all economic purposes. All indicators have a stronger element of arbitrary and political choices. As such, they’re too political to be used in a more economic context. Countries simply would refuse to determine financial contributions to the United Nations based on performance in the HDI, or EU regional funds based on a regional SPI score. GDP too often is seen as the more ‘objective’ metric, and even though it is not objective or stable, it is doing better than alternatives. Intriguingly, GDP is also strongly correlated with performance like HDI and SPI, even around 80% for the latter index. Although the SPI is making advances in feeding into policy, altogether none of the indices is truly challenging the position of GDP as things stand in 2016. And I don’t think it will be very different in 2018, 2020, or 2025 for that matter.

 

Did we make so much progress?

Then, how much progress did we make in several decades of an academic debate, and overall ten years of statistical revolution? A lot has happened. Our insights in quality of life and happiness is a deeper than at any moment in history. OECD statistical offices are now routinely gathering data on subjective wellbeing, and there is a vibrant research agenda in positive psychology and related fields. Academics and practicioners, myself included, happily travel to Bhutan to learn about GNH.

But what was generated out of this debate? Are we paying more attention to quality of life after the financial crisis? A single indicator truly competing with GDP has not been born. UN and EU authorities, as well as national governments and parliaments, have underlined the importance of alternative ways of measuring progress. But the reign of GDP has never been in danger. My feeling is that GDP is simply too important, and the alternatives too complex. I fear that we’re not ready for this revolution yet.

 

Time for a sabbatical

Three years on the road, my doubts on the alternatives to GDP are back. I see the beyond GDP agenda as a powerful discussion, but one that has not generated a strong enough alternative to truly challenge GDP.

On a personal level, this means that a reflection on my work is needed. Do I need to focus on something else? Do I need to work harder, or differently, for a state of happiness? Did I fail myself?

For the moment, I’ll take a break from this blog. I’ll reflect on other steps. I deserve to take some time off for a sabbatical to read more and generate other ideas. But I am sure I’ll be back with a new programme.

Because a life, enjoyably wasted in the pursuit of happiness, is a life worth wasting. Farewell!

The Social Progress Index: is your region better than its peers?

One of the common themes in my explorations on this blog has been in ‘alternative indicators’, or tools that are better equipped to measure quality of life than Gross Domestic Product (GDP). One of the most prominent ‘beyond GDP’ tools is the Social Progress Index, which I labelled “a better way to measure a good society”. And the SPI has seen a lot of development since my post of last year.

Let me start with a recap: the Social Progress Index (SPI) is developed as a broader notion of progress than GDP. It consists of 53 indicators, under the headings ‘basic human needs’ (shelter, access to clean water), ‘foundations of well-being (health, internet access) and ‘opportunity’ (human rights, social tolerance). Typically, countries tend to score higher on  basic human needs, as these often are met in high and middle income countries, even if they don’t meet the same standards on the social issues. Roughly speaking, performance for opportunity is lower, even in the richest countries. The exercise has been conducted for a couple of years now. In the 2016 update released this June, the list is topped by Finland, Canada and Denmark.

Better than your peers?

The aim of the index is similar to other beyond GDP tools I discussed like the OECD’s Better Live Index. Namely, to identify the areas of ‘progress’ or well-being in which a country is doing well, and those where it is underperforming peers. The concept of peer group is an important facet: the strengths and weaknesses are listed in comparison to a 15-country group of peers with similar levels of GDP.

This type of screening tool, in theory, could be used to help countries identify in which policy areas they could invest. The thought is that by learning from over-performing peers’ best practices, countries can use their limited resources in the most efficient way, namely by generating the highest additional well-being. The SPI has expanded a lot in the last year, starting projects with the US State of Minnesota, Reykjavik, Iceland, in the capital Bogota, other cities in Colombia and elsewhere in Latin America.

This is how the world is doing in social progress in 2016 (darker shades means higher SPI score). Source: SPI

This is how the world is doing in social progress in 2016 (darker shades means higher SPI score; grey means no data). Source: SPI

Digging down to regional level

In practice, indeed, the differences within countries are more important than between countries. More granular data at the regional and local indeed provides a lot more hands-on information to policy makers on where, and how exactly, they can do better. And the Brussels capital region may be better compared to another large city, like Hamburg, then to the province of Belgian Limburg, which in turn could learn more from a region of similar GDP as East Anglia.

That’s why both the OECD and the SPI have been complemented with data on regional level. In 2016, the SPI launched a pilot overview of the 272 regions in the EU. The Commission has released the data of the exercise in February, and an updated version is due to come out in October. And where OECD uses only 11 indicators, the European regional data provide 50 out of the original 53 of the SPI. They also built in the peer group comparison in the methodology.

Once we start comparing regions with each other in Europe, very quickly the next question comes: will the unprivileged regions get more money to bridge gap?Conceptually, one could argue that using the SPI data to address specific low performance areas is a good way to aiming investment at the area where progress can be made. But money is sensitive, and in presenting the data, the Commission has been crystal clear that it doesn’t want to revise this funding policy. Nonetheless, the granular data can provide what is necessary: a better way to measure a good, regional, society.

How is Brussels doing? A bit of under-performance compared to Hamburg, Prague, Vienna, and similar regions. Source: European Commission/Social Progress Imperative

How is Brussels doing? A bit of under-performance compared to Hamburg, Prague, Vienna, and similar regions. Source: European Commission/Social Progress Imperative

The Nanny State: repression of happiness?

It’s a pedagogic dilemma all parents will face: should we be strict to our children and prohibit them to do things that are bad for them? Or should we give them the freedom to learn for themselves that sand is not tasty, that you can fall if you climb a tree and that a drink too many has dire consequences the next day?

At the state level, similar dilemmas arise. Social-democrats traditionally don’t scare away from a dose of paternalism to educate citizens. Libertarians, on the other hand, abhor states that coerce a certain type of behaviour. Which recipe works best to develop a happy society?

Two weeks ago, I addressed the question “does size matter” – when it’s about the size of the state and happiness levels, that is. The evidence indicated that some of the happiest states are smaller countries, and that after a certain level? There is – surprisingly – a positive correlation between higher tax and higher life satisfaction. Does that also mean that a more active government, a Nanny State, could contribute to higher levels of happiness?

Nanny State Index

Republicans in the US and liberals in EU States – such as Dutch PM Rutte – agree on one thing: big government is big enough, and the state shouldn’t interfere too much with individuals’ life. That’s also the thought behind the Nanny State Index. It has been developed by liberal or libertarian think-tanks, and maps the strictness of regulation affecting personal choice in the 28 countries of the EU.

The Index lists four areas: e-cigarettes, tobacco, alcohol, and food. There is quite a difference in the freedom of access to this products across the EU. For instance, in Sweden alcohol is only available in state stores and e-cigarettes are effectively prohibited in Belgium.

Altogether, two of the paternalistic Nordics, Finland and Sweden, top the list. They stay ahead of UK and Ireland. As a result of strict rules on tobacco and so-called ‘sin taxes’ on unhealthy foods and drinks, Hungary completes the top-5. Denmark, which one might expect to be in sync with paternalist Nordics, only ranks 12th. On the lower end of the scale, we find Netherlands, Luxembourg, and Germany. The freest country of all is… the Czech Republic.

Nanny State Index. Source: www.nannystateindex.org

Nanny State Index. Source: www.nannystateindex.org

 

Does repression, or freedom, bring happiness?

Is there any correlation visible between being a nanny and low and high happiness levels? The evidence is difficult to interpret: the three top-1o countries of the World Happiness Report rank at different places in the Nanny State Index. Swedish is on top of the list, the Netherlands at the bottom, and to confuse the picture further, Denmark is mid-way in the table.

The implication might be the following. Policies may work out differently in different settings. It’s probably the same with children: all are different. Some kids will exploit freedom and end up in troubles; other will feel their confidence strengthened and will be good and happy citizens.

Basic income: utopian dream or the road to happiness?

Few ideas are more exciting for a happiness economist than a basic income. It sound like utopia: free money for everybody. Could it actually work?

The Swiss basic income referendum

The Swiss electorate had the chance to have its say on Sunday. And the answer is a resounding ‘no’: 77% of the population opposed the idea of a basic income. In the design for the Swiss referendum, the basic income would be unconditional: nothing would be demanded from citizens in exchange for the transfer of money. The level of the basic income would have to be set by law, according to the initiators, but they argued that 2,500 CHF for adults (around 2300 Euro) and 625 CHF for children would be an appropriate figure. That sounds like a lot, but remember that Switzerland is rich: a salary for a supermarket worker is around 3,000 CHF.

Proponents of the basic income argued that it would “enable the population to live a dignified life and to participate in public life”, providing people the freedom to live their life as they want. They also argued that basic income would be needed in an age where robotisation and digitisation would mean that many current jobs won’t exist anymore in ten years. The basic income has also been portrayed as an easier way to provide social security in a modernised and more efficient welfare state.

Opponents argued – not surprisingly – that the math behind the idea doesn’t add up. According to estimates, the Swiss state would spend around 200 bn CHF, or 35% of GDP, to pay its citizens such a basic income. It would require around 25 bn CHF extra in taxation revenue (which may have pros, as we saw last week) or expenditure cuts to finance the scheme. Beyond that, the idea would risk to destabilise the entire economy, as people wouldn’t work as much as before. In addition, there were moral arguments on the national laziness that would ensue.

Switzerland won’t have a basic income. But don’t believe proponents are demotivated by the loss. Instead, they see the fact that over 20% supported such a radical income as a sign that the real public debate is only about to start.

Performance by the initiators of the referendum, who dumped 8 million coins at a square when they reached the necessary number of 125,000 signatures to call the referendum. Source: Wikipedia,

Performance by the initiators of the referendum, who dumped 8 million coins at a square when they reached the necessary number of 125,000 signatures to call the referendum. Source: Wikipedia,

A Finnish experiment in simplification

While I am sympathetic to the idea, I do have my doubts on the math. It might be worth studying the consequences of a basic income for a smaller group, before implementing it for everybody. That is exactly what will be done in Finland: in 2017, it will provide a basic income to 10,000 lucky sampled citizens. Participation is mandatory. Importantly, the Finnish experiment will also simplify the social security system as part of the exercise.

Some proponents support basic income as a way to rationalise the various categories of social expenditure. Finland has around 100 different categories of social security spending, and during the experiment 50 of these would be replace by one single basic income. Also in other countries, citizens are subsidised for several hundreds of euro per month, for instance via services accessed for free. Couldn’t all this be simplified into one basic income? Or would it still be impossible to fund it? The Finnish experiment will be closely watched.

Free money, a way to happiness

Even if we may be unable to introduce free money for all, there are a couple of lucky people who actually received a basic income. The German foundation Mein Grundeinkommen crowd-funds a basic income: every time when they’ve gathered 12,000 Euro, one winner gets a basic income for one year. And according to its director Michael Bohmeyer (who receives his own monthly 1000 Euro basic income via the proceeds of shares in the company he left), the results are amazing.

Speaking at a panel discussion in Brussels, Bohmeyer told how he feels a lot more free, secure and relaxed with his basic income. When receiving the income, he realised how much people are in running mode every day. Work and the need to have a salary to provide for our life results in a lot of stress.

In his experience, that doesn’t mean that nobody would work anymore if they receive a basic income. Of the around 40 people who won a basic income through the lottery, all but one continued to work. And maybe it’s an issue of low trust in others: when asked if others would still work when they have a basic income, around 80% said no. When the question was if they themselves would still work, around 90% said they’d continue to work, says Bohmeyer (video in German).

Basic income may not only about simplified social security, but also about a better work-life balance and higher happiness. Let’s hope that the Finnish experiences shows that it is actually possible to get the math right.

For another passionate case on basic income, see the talk of Rutger Bregman, a Dutch journalist and basic income enthousiast. He wrote a book on the basic income under the title ‘Utopia for Realists‘.

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