Absence of Nuisance, Increased Options, and Happiness
I am reading Arnold Kling's recommendable Learning Economics. Perusing his chapter on "Can Money Buy Happiness?" prompted me to rephrase my view of the happiness-matter. I wrote these encapsulating comments in the margins:
Happiness is finite in all stages of human and civilisatory development -- unlike the inclination of human beings to extend freedom from nuisance and increase the options available to pursue one's developing interests and preferences. One cannot be infinitely happy or content, but there are no limits to man's ability to improve his lot by shielding himself from nuisance and attaining better options.
Painless dental care or the right to choose freely among a large number of occupations rather than being forced to pursue one's father's occupation -- the attainment of aims such as these will not move the ceiling of happiness any higher than advancements achieved at earlier stages of human development. Yet, they will be pursued because they remove nuisances and widen the range of options from which one may choose.
This assessment is based on my anthropological views, whose core tenet states that
man is the animal that adjusts to its environment by constantly developing new desires, needs, interests and preferences.
Humans are neither built to enjoy permanent rapture, nor is their personal and social weal dependent on constantly high levels of happiness. What is far more important for human wellbeing is (a) the absence of nuisances and (b) the presence of fruitful avenues for personal development; both of which conditions will be accompanied predominantly by low levels of emotional involvement - think of the meditative quality of much of what one likes doing -, though they may lead to an overall situation associated with words such as "happiness" or "contentment".
Two Meanings of Happiness
Happiness as the object of assessment and happiness as an emotional state are two very different kinds of animals. The former will tend to refer to a cluster or series of episodes most of which do not involve high levels of emotionally present happiness.
While writing this post, I am largely free from disturbances and enjoy the pursuit of a large range of options (to argue this or that, to do something else) allowing me to apply myself to activities that I feel drawn to. None of these components of the overall activity are of an emotional quality that I would designate as "happiness". In fact, it is not rare that pain and effort are involved, as when I fail to find the right words or discover contradictions in my beliefs.
It is the overall activity, including the satisfactory result brought about by it, that I tend to refer to when speaking of happiness - happiness as the object of assessment. And this seems to be rather in keeping with my anthropological theory: to be in balance, man does not so much need a permanent stream of ecstatic feelings but the ability to adopt to his environment by creating and fulfilling new desires, which is why I do not read the same book a million times and do not stop playing tennis after the first match, but look for renewed challenges.
So, happiness can be either (1) a localised feeling, mostly of high intensity, or the object of a broader assessment, in which latter sense it is (2) the expression of a balance between our manifold human faculties and the surrounding in which we find ourselves. In its second import, happiness is not necessarily an event of high emotional intensity; in fact, it may be deemed pleasant precisely because it lacks the grip of passion.
At any rate, while happiness as a localised feeling, mostly of high intensity, is finite both in its intensity and frequency, and a mere component among many other components of wellbeing, happiness as expression of a balance between the human and her environment is infinite in its permutations, a challenge to be approached in an infinite number of ways, and a complex achievement comprising many components of very different kinds. Striving for happiness in this sense is part of human nature, and does not lose its high significance for a person because she has surpassed a certain level of income or wealth.
Happiness Research and Behavioural Economics
Happiness research and behavioural economics tend to be popular with those who believe in a world view that seeks to infantalise and hospitalise the average man, i.e. turning him into the subject on which political paternalism is eager to perform its human experiments.
The happiness researchers' perfidious argument then runs like this: our studies show that an income/wealth level above $ 50.000 does no longer increase happiness; so it is fine to take income/wealth above that threshold and to redirect it to those who at lower levels still stand to enhance their happiness either by receiving the redistributed funds directly or by the help of authorities thus funded.
"The rich" are thieves of happiness; they misappropriate resources that are needed to make other people happy. Wastefully happy, "the rich" are denying "the poor" their share of happiness, as the latter are lacking the very resources squandered on the richmen's exhausted capacity for happiness.
Headline: "Economic Research Shows Politics Needed to Achieve Just Distribution of Happiness" - when in fact, there is no economics involved whatsoever, but a highly biased, agenda-driven, and ill-thought through concept of happiness.
Behavioural economists, in their turn, work ardently on "proving" that human beings are (far more) irrational (than previously thought) and hence dubious candidates for responsible action that need to be taken custody of.
Until just over a century ago, the idea that a company could be a criminal was alien to American law. The prevailing assumption was, as Edward Thurlow, an 18th-century Lord Chancellor of England, had put it, that corporations had neither bodies to be punished nor souls to be condemned, and thus were incapable of being “guilty”. But a case against a railway in 1909, for disobeying price controls, established the principle that companies were responsible for their employees’ actions, and America now has several hundred thousand rules that carry some form of criminal penalty. Meanwhile, ever since the 1960s, civil “class-action suits” have taught managers the wisdom of seeking rapid, discreet settlements to avoid long, expensive and embarrassing trials.
The drawbacks of America’s civil tort system are well known. What is new is the way that regulators and prosecutors are in effect conducting closed-door trials. For all the talk of public-spiritedness, the agencies that pocket the fines have become profit centres: Rhode Island’s bureaucrats have been on a spending spree courtesy of a $500m payout by Google, while New York’s governor and attorney-general have squabbled over a $613m settlement from JPMorgan. And their power far exceeds that of trial lawyers. Not only are regulators in effect judge and jury as well as plaintiff in the cases they bring; they can also use the threat of the criminal law.
How do I know which is the proper libertarian policy? Can there be something like THE proper libertarian policy? Or will a spontaneous order emerge from the competitive deliberations and disparate approaches that different parties take concerning the political and technical implementation of their preferred policies?
Will policies not be altered by the very process that makes them advance from the visionary stage to open-ended fruition?
I would tend to argue that if you do not factor into your policy proposal a realistic account of the intermediary conditions created by scientific and political competition - that is: how to register and analyse these intermediary conditions, how to instrumentalise them, how to deal with opponents and the need for compromise - what you offer is not really a policy proposal, but a mere expression of wishful thinking.
Attempts at overcoming hard and manifold theoretical and political resistance are just as important a source of realistically informed policy as is the ability to open up to competition and compromise, to try out, and alter the scheme in operative reality.
Successively, Friedrich Hayek supported at least three different, mutually exclusive policies to deal with the overall money system: the gold standard, a commodity-backed-currency, and freely competing private currencies.
Which one of these is more libertarian than the others?
What this puzzle confronts us with is the peculiar logic of scientific competition as well as political competition. These non-market arenas of competition form a vast delta of path-defining parameters, a system of intricately ramified intermediary conditions from which contingent results emerge that need to be acted upon as they appear. These intermediary conditions cannot be built into and dealt with appropriately in advance by a set of initial premises.
Intellectual competition requires and, indeed, forces admission of diverging views, by which dynamic the issues fit to be pursued are defined, i.e. accepted for handling by the political machinery and the public behind it. Political competition is inevitable, if only to organise scientific and economic competition and transform their results into concrete policies. Political competition requires and forces admission of widely diverging views and policy aims, opening up another vast area of contingent ramifications, i.e. intermediary conditions determining the path along which outcomes will be arrived at. This process and its results cannot be preempted by libertarian precepts. They are embodiments of the indeterminacy of freedom, which keeps advancing by bursting her banks.
2. The Hayekian Deficit
Although Friedrich Hayek is often credited with initiating the resurgence of research in alternative monetary systems, his own proposal received sharp criticism from Milton Friedman (1984), Stanley Fischer (1986), and others at the outset and never gained much support among academic economists or the wider population. According to Friedman, Hayek erred in believing that the mere admission of competing private currencies will spontaneously generate a more stable monetary system. In Friedman’s view, network effects and switching costs discourage an alternative system from emerging in general and prevent Hayek’s system from functioning as desired in particular.
Hayek simply assumes that a competitive environment "will spontaneously generate" the desired outcome. But he disregards important "intermediary conditions" on which the set of realistically attainable outcomes depends.
According to the above paper opponents of Hayek's proposal argue that economic actors are not likely to desert an established money in favour of newly created competing private monies owing to inordinate switching costs, negative network effects, and rational expectations - for more see here. Milton Friedman supports this contention by pointing to a lack of empirical evidence that economic actors would react to the offer of competing monies in the way Hayek predicts (e.g. in the face of a weak and volatile Dollar, Americans did not typically switch to German or Swiss money). Hayek replies that people tend to be discouraged to switch currencies owing to legal restrictions; if the latter were lifted, his predictions would prove correct. Regardless of Hayek's objection being pertinent or not, characteristically, he does not address the essentially political condition on which he expressly claims his policy proposal hinges.
3. The Libertarian Non-Policy Bias
The entire spectrum of libertarian thought espoused from anarcho-capitalists to crypto-anarchists to Hayek-type of classical liberals are united in systematically avoiding analysis of politics as a means both representing and structuring intermediary conditions that ultimately link up or decouple initial premises (e.g. competition is good, so currency competition must be good) and final outcome (the operative monetary system).
(i) Anarchists live in total denial of the need of politics and the state (henceforth simply "government" or "state"), which is the most convenient and least convincing way of dealing with the issue.
When it comes to policy proposals,
(ii) crypto-anarchists like von Mises ascribe such a minute role to government that in its reduced night-watchman-format it appears as a factor hardly relevant to the policies in question. The policies can either somehow go ahead without government involvement, or the state's support for libertarian goals is simply assumed to be forthcoming, notwithstanding a view of the state practically incompatible with such compliance or neutral to affirmative midwifery.
(iii) Hayek, oscillates between contradictory views of government, which latter he is happy to enlist for the management of his vision of a minimalist welfare state ("Hayek's socialism," in Richard Epstein's provokingly paradoxical formulation), while at the same time figuring out at great effort a system of currency competition whose purpose it is to decouple money from the odious import of government.
What is not clear is how it is possible to fruitfully enlist and control government for the one purpose, but not for the other. Why should government not abuse its powers to expand far beyond a minimalist welfare state, when it cannot be trusted with the monetary system?
My message in a nutshell: you cannot have an effective policy that is supposed to organise the monetary order of society unless you have the intellectual and practical means to understand and participate in the processes of civic competition through which the monetary order is implemented and enforced.
Libertarians do not seem to be able to pursue effective policies in this area because they adhere to a truncated view of spontaneous order, which reflects only the self-organising features of market processes, ignoring an even broader dimension of spontaneous order that does not grow as analogous to market interactions, but follows its very own logic.
The cow on the old wall: Since there was lots of excellent grass on the old wall, some of the citizens of Schilda proposed to let a cow graze on it. A rope was put around the cow's neck and a group of strong men hauled her up. In the process, the cow got strangulated. When the citizens of Schilda saw that the cow was sticking her tongue out, they would jubilate: "Look she's grazing!
The federal government is moving towards abolishing the Renewable Energy Target rather than scaling it back in a move that will cost almost $11 billion in proposed investment and which is at odds with the views of its own Environment Minister.
Let’s parse this sentence bit by bit.
Scaling back the RET is described as “a move that will cost almost $11 billion in proposed investment”. “Investment” is one of those hurrah words so that anything that can be described as investment is automatically given a warm reception. What cutting the RET will actually do is cut almost $11 billion dollars of waste. Eleven bil on more windmills and solar panels would not get you back ten cents in the dollar. Stopping such expenditure dead in its tracks will only promote future economic growth, or at least it will if the government doesn’t decide to spend the money itself in some other totally useless way.
Here is the message: DO NOT SPEND MONEY ON ANY SINGLE INVESTMENT THAT WILL NOT OF ITSELF AND ON ITS OWN PROVIDE A POSITIVE RETURN ON FUNDS EMPLOYED IN A REASONABLE PERIOD OF TIME (LET US SAY THE NEXT THREE YEARS). If you can’t see a return, and prove it in a published cost-benefit study, don’t do it.
I don’t say you shouldn’t provide welfare. By all means provide welfare. Let us look after the sick, the aged and the disabled. But here, since the demands are near infinite, judicious allocations of funds will be required. But while welfare expenditures may be important for those who are unable to work or are too old to work, none of these expenditures will promote economic growth and future prosperity.
We do not have an infinite pool of productive resources. We must prioritise. Removing renewable energy targets is pure profit for the economy, a 100% benefit. So would getting rid of paid parental leave. Get rid of them both at once. I wish the NBN was also up for grabs since getting rid of it would also be a net positive.
And I should finally mention since I am throwing it all into the pot, do not raise taxes on anything in any part of the economy. If the kinds of revenues you are in receipt of are insufficient to pay for everything in the basket, then take some things out of the basket.
Bad news for the wailing libertarian, bad news for those whose belief in liberty makes them feel menaced and inundated everywhere by arbitrary power and injustice, decline and misery, evil and peril.
Depending on how you look at her, freedom is either a concept, or an aspect of reality, a vast and pervasive one, if we are lucky. As a concept it demands perfection and completeness, as part of reality it must accept a position, however prominent, next to other phenomena many of which may not square with the demands of liberty.
The best that we can hope to achieve for freedom is an open society which gives her plenty of space to unfold. However, an open society will never be congruent with freedom. An open society will always be a mixed society in terms of liberal and illiberal elements. With their countless different views of freedom, liberals are among the first to feed the blend of contrasting components that make up an open society.
"The truly great social catastrophes do not arise from a misapplication of the basic principles of a market economy. They arise from a wholesale disrespect for individual liberty, which is manifested in tolerated lynchings and arbitrary arrest, and from a total contempt for private property, through its outright seizure by government forces intent on stifling its opposition or lining its own pockets. The reason why Great Britain and the USA did not go the way of Germany and the Soviet Union in the turmoil of the 1930s was that the political institutions in both our countries were able to hold firm against these palpable excesses even as they went astray on a host of smaller economic issues."
If there are good things happening in this world, we cannot ascribe them to freedom alone, as if all the hindrances in her way no longer matter. If there are good things happening in this world, then this is because of a tolerable, perhaps even felicitous mix of freedom and unfreedom. Thus, a more complete view of freedom ought to accommodate the manner and means by which freedom and unfreedom coexist to bring about a world that gives us Reasons to Be Cheerful.
It is easy to pick up a newspaper, watch television or look on a blog and assume the end is nigh. Between foreign affairs crises, demographic time bombs, debt icebergs and having only hours left to save the NHS (more on that another time…), it would not be unreasonable for us all to assume the world has got a lot worse – that capitalism has failed, inequality has sky-rocketed, and we are living shorter, sadder and more violent lives.
Happily, this is not so. Thanks to capitalism, free trade and globalisation we live in the most prosperous, healthy, safe, equal and free period in human existence. Across the globe, as liberal economic policy and capitalism have left communism and command economies in the dustbin of history, we are seeing remarkable falls in worldwide poverty, hunger, disease, inequality and (despite current humanitarian disasters) deaths from war and natural disaster.
It is worthwhile (as Free Enterprise Award winner Matt Ridley does) looking at the reasons to be happy with our world today and to be optimistic for the future.
I find David Glasner's blog post at Uneasy Money interesting for his discussion of (1) the role of axiomatic reasoning - much hailed by libertarians especially in the praxeological tradition (von Mises, Rothbard), (2) the aberrations of neoclassical economics, and (3) the concept of precision which is not infrequently used to rule out by denigration methods more appropriate to the social sciences, especially economics, than methods preferred because they yield the spurious appearance of supporting an "exact science".
The way I read Glasner, he is saying that axiomatization in economics has become a fetish, a misguided promise of more profound and more certain knowledge, and that modern economics in its immature ambition to be considered "an exact science" and by overemphasising mathematical formalization has lost the subject-matter of economics out of sight.
[...] that it is important to understand that there is simply no scientific justification for the highly formalistic manner in which much modern economics is now carried out. Of course, other far more authoritative critics than I, like Mark Blaug and Richard Lipsey (also here) have complained about the insistence of modern macroeconomics on microfounded, axiomatized models regardless of whether those models generate better predictions than competing models. Their complaints have regrettably been ignored for the most part.
I like the way in which Glasner looks beyond the foreground and middleground, probing into the remoter roots of fetishistic illusions about precision and exactness in science.
Thus, the author argues
[...] the concept of precision is itself hopelessly imprecise, and to set precision up as an independent goal makes no sense.
He backs up his view with quotes from Karl Popper's
enlightening discussion of the historical development of calculus despite its lack of solid logical axiomatic foundation.
[...] However, the absence of a rigorous and precise definition of the derivative did not prevent mathematicians from solving some enormously important practical problems, thereby helping to change the world and our understanding of it.
Writes Popper, the terms "exact" or "precise"
[...] strongly suggest that there exists what does not exist – absolute exactness or precision – but also because they are emotionally highly charged: under the guise of scientific character and of scientific objectivity, they suggest that precision or exactness is something superior, a kind of ultimate value, and that it is wrong, or unscientific, or muddle-headed, to use inexact terms [...]
[...] the demand for precision is empty, unless it is raised relative to some requirements that arise from our attempts to solve a definite problem. [...]
[...] the attribute of exactness is not absolute, and that it is inexact and highly misleading to use the terms “exact” and “precise” as if they had any exact or precise meaning [...]
[...] a lesson taught by the whole history of science: that absolute exactness does not exist, not even in logic and mathematics (as illustrated by the example of the still unfinished history of the calculus); that we should never try to be more exact than is necessary for the solution of the problem in hand [...]
Edward Elgar publishers, in association with the Institute of Economic Affairs, are about to launch a revised Second Edition of the must-read-book by my favourite economist Steven Kates: Free Market Economics. An Introduction to the General Reader.
The author gives us a little personal background information on the book's cover:
That is very likely the mill from which the plaque has been modelled. I wished to have a cover that showed a water mill made of clay because the two most important influences on me have been John Stuart Mill and the English economist, Henry Clay. My wife, bless her, found just such a combination on the net as the plaque was being sold just then. I therefore bought it, photographed it and now the clay representation of a mill is on the cover. I also like it because it is both nineteenth century and part of the productive apparatus of an economy. And it fits in with my understanding of Jean-Baptiste Say whose factory producing textiles was driven by a water mill. Finally, I just think it’s beautiful. I could not think of a better cover. My profound thanks to Ant for conjuring the origins up.