Tag Archives: Social economy

They Go Together: Freedom, Prosperity, and Big Government

Countries with larger government sectors tend to have more personal freedom
By Ed Dolan – The Human Freedom Index consists of two parts. One is the Economic Freedom Index (EFI) from the Fraser Institute, which includes measures of the size of government, protection of property rights, sound money, freedom of international trade, and regulation.

The other is Cato’s own Personal Freedom Index (PFI), which includes measures of rule of law, freedom of movement and assembly, personal safety and security, freedom of information, and freedom of personal relationships. The Cato and Fraser links provide detailed descriptions of the two indexes.

In order to explore the way freedom influences other aspects of human well-being, I will draw on a third data set, the Legatum Prosperity Index (LPI) from the Legatum Institute. The LPI includes data on nine “pillars” of prosperity, including the economy, business environment, governance, personal freedom, health, safety and security, education, social capital, and environmental quality.

The relationship between economic and personal freedom is partly explained by the fact that both are positively associated with income. As the next chart shows, that relationship is nonlinear for both measures of freedom. The log of real GDP per capita, expressed in U.S. dollars at purchasing power parity, provides a reasonably good fit.

There are many measures of prosperity and well-being available. I hope to be able to explore several of them and their relationships to human freedom in future posts. In this introductory treatment, however, I will limit myself to the education, health, and personal security indicators from the Legatum Prosperity Index. In what follows, I will refer to the average of these three Legatum “pillars” as the education-health-safety index, or EHS, measured on a scale of 1 to 100. more>

Updates from Chicago Booth

The danger of making policy based on assumption
By George J. Stigler – The denunciation of American complacency, however, is not my purpose, at least not my explicit purpose. I admire the humane and generous sympathies of our society—sympathies that extend to the uneducated and the uncultured and the unenterprising and even the immoral as well as to the educated and the cultured and the enterprising and the moral.

We are a people remarkably agreed on our basic goals, and they are goals which are thoroughly admirable even to one, like myself, who thinks one or two less fashionable goals deserve equal popularity.

Fortunately, our agreement on basic goals does not preclude disagreement on the way best to approach these goals. If the right economic policies were so obvious as to defy responsible criticism, this would be an intolerably dull world. In fact, I believe that each generation has an inescapable obligation to leave difficult problems for the next generation to solve—not only to spare that next generation boredom but also to give it an opportunity for greatness. The legacy of unsolved problems which my generation is bequeathing to the next generation, I may say, seems adequate and even sumptuous.

It is not wholly correct to say that we are agreed upon what we want but are not agreed upon how to achieve it. When we get to specific goals, we shall find that our agreement does not always extend to orders of importance. For example, some people are willing to preserve personal freedom of choice for consumers even if the choice is exercised very unwisely in some cases, and others will be more concerned with (say) the health of consumers which these unwise choices may impair. Nevertheless, it is roughly true that we know where to go.

We do not know how to get there. This is my fundamental thesis: we do not know how to achieve a given end. more>

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In the future, you’ll never have to leave your neighborhood

By Layla McCay – In the city’s center, people stroll in landscaped gardens, enjoying the positive impact of nature, exercise, and socialization on their mental health and well-being. But for those living on the outskirts, that epicenter can feel distant, separated by slashes of motorways.

Public transportation often points inward in a spoke-and-wheel configuration, emphasizing that there is just one truly desirable destination. People of the peripheries must commute back and forth, below ground and along highways, on trains and buses, losing time for friends and family, relaxation, leisure, culture, and sports. The fable of city life is out of reach, lost in the sprawl.

Instead of focusing on city centers, we should reconfigure the infrastructure of the outskirts. The result could see the end of such epicenters: a future where we identify as much with our hyper-local neighborhoods as we do with the greater metropolis.

We can see this in the growing trend of placemaking. This is a planning and design approach that works with communities to understand, imagine, and deliver solutions that meet their local needs, rather than relying on the whims of a grand city plan. more>

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Updates from Chicago Booth – Are profits passé?

Why we’re all impact investors now
By Chana R. Schoenberger – For nearly 50 years, many have been guided by the idea, laid out most famously by Milton Friedman, that the most appropriate way to create social change is to give profits to investors, and taxes to the government, and use that money to make an impact. For just as long, other investors have argued in favor of divesting from companies to make a political or social point—dumping shares of gun manufacturers or fossil fuel companies, for example.

But with the rise of index funds, divesting from individual company stocks has become more difficult, even though there are some funds that try to do this by designing a basket that tracks an index while excluding “sinful” stocks. It can even be counterproductive.

Investing with a social motivation has moved from divesting from certain companies based on values or preferences to a more regular form of seeking alpha, by investors who hope their stakes will generate returns as well as save the world.

Like financial philanthropists trying to affect specific social issues, these investors are often using markets and investing tools to shift behavior and create change. As a result, there are big shifts in thinking about the role of investors, who have had the luxury of worrying primarily about profits. Some prominent managers and investors are advocating for joining other stakeholders to push for change. more>

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Four Lessons (Not) Learned From The Financial Crisis

By John T. Harvey – That’s fantastic. Good work, Presidents Bush, Obama and Trump. But just because we bailed the water out of the sinking ship doesn’t mean we patched all the holes. And while the former is a necessary first step, without the latter we won’t remain upright for long.

So what didn’t we fix that could still potentially cause a catastrophic leak? Too much. Here’s a short list of what we should have learned but didn’t.

  1. If you are going to bail someone out, bail out the debtor and not the creditor
  2. Financial institutions should be very closely supervised
  3. The market is not always right
  4. Deficit spending doesn’t cause inflation or bankruptcy

Most people assume that what financial institutions do is loan out other people’s money. That is, of course, part of what they do, but what is far more significant is the fact that they create money. I don’t just mean the intro-econ, money-multiplier story where banks make loans after the Federal Reserve injects new funds. In fact, that view is so wrong that economics professors are beginning to eliminate it from their curriculum (not nearly fast enough, but it’s getting there).

Rather, the standard scenario is one in which banks increase the money supply first by making loans to customers and then the Federal Reserve steps in second to supply the necessary reserves. Financial institutions make money out of thin air, not from someone’s savings, and if that leaves the system short of reserves then the Fed buys securities from banks. They do this to prevent interest rates from rising above their targeted rate and therefore the central bank accommodates rather than dictates when it comes to the supply of money. more>

Anthropic arrogance

By David P Barash – Welcome to the ‘anthropic principle’, a kind of Goldilocks phenomenon or ‘intelligent design’ for the whole Universe. According to its proponents, the Universe is fine-tuned for human life.

The message is clearly an artificial one and not the result of random noise. Or maybe the Universe itself is alive, and the various physical and mathematical constants are part of its metabolism. Such speculation is great fun, but it’s science fiction, not science.

It should be clear at this point that the anthropic argument readily devolves – or dissolves – into speculative philosophy and even theology. Indeed, it is reminiscent of the ‘God of the gaps’ perspective, in which God is posited whenever science hasn’t (yet) provided an answer.

Calling upon God whenever there is a gap in our scientific understanding may be tempting, but it is not even popular among theologians, because as science grows, the gaps – and thus, God – shrinks. It remains to be seen whether the anthropic principle, in whatever form, succeeds in expanding our sense of ourselves beyond that illuminated by science. I wouldn’t bet on it. more>

Updates from Chicago Booth

Why the ‘dollars a day’ pitch works
By Alice G. Walton – Charities that encourage people to donate “just dollars a day” may have the right idea—and more businesses should consider following suit. University of Rhode Island’s Stephen A. Atlas and Chicago Booth’s Daniel Bartels find that framing a cost as a series of small daily expenses makes an offer more tempting—plus people think they’re getting more for their money, whether the outlay is for charity or a purchase.

The researchers established this preference for periodic pricing in a series of experiments that asked participants about charitable donations, car leases, and meal-delivery services.

“Our framework and results suggest that periodic pricing can help people appreciate the benefits they accrue from a purchase,” the researchers write. “So, under the right conditions, marketers can encourage purchase with periodic pricing, even for significant sums of money.” more>

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Updates from Adobe

Minimalism and Milad Safabakhsh
By Alyssa Coppelman – Milad Safabakhsh began photographing six years ago, coming to it “accidentally,” he says. While studying graphic design in university, he started playing around with a phone camera and sharing the results on Facebook. He submitted images to a Facebook page on minimalism, and one of them was featured. Another Facebook photography page selected one of his images as a pick of the week, and he decided to pursue photography more seriously.

After shooting photos for two years, he was drawn to incorporate photomontage into his art because it allowed him to share the “world inside your mind that has always been with you,” as he puts it. To build a composite image, Safabakhsh mostly pulls from his photo archive, occasionally shooting new images when his vision demands it.

Safabakhsh declares himself an “artist who loves the sciences and beyond.” He’s especially interested in quantum physics, and his first series, “The Space In-between” is about the holographic world, a theory that says our universe was formed in a radically different way than with a big bang. more>

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How evil happens

BOOK REVIEW

Passions and Tempers: A History of the Humours, Author: Noga Arikha.
Eichmann in Jerusalem, Author: Hannah Arendt.
The Science of Evil: On Empathy and the Origins of Cruelty, Author: Simon Baron-Cohen.
Home Fire, Author: Kamila Shamsie.

By Noga Arikha – The ‘sapiens’ in Homo sapiens does not fully describe our species: we are as violent as we are smart.

This might be why we are the only Homo genus left over in the first place, and why we have been so destructively successful at dominating our planet. But still the question nags away: how are ordinary people capable of such obscene acts of violence?

Today, biology is a powerful explanatory force for much human behavior, though it alone cannot account for horror. Much as the neurosciences are an exciting new tool for human self-understanding, they will not explain away our brutishness. Causal accounts of the destruction that humans inflict on each other are best provided by political history – not science, nor metaphysics. The past century alone is heavy with atrocities of unfathomable scale, albeit fathomable political genesis.

The social neuroscientist Tania Singer at the Max Planck Institute in Leipzig in Germany defines empathy as the ability to ‘resonate’ with the feelings of the other. It develops from babyhood on – as imitation at first, then joint attention – into the ability to adopt the point of view of another, along with a shift in spatial perception from self to other, as if one were literally stepping into another’s shoes.

This requires an ability to distinguish between self and other in the first place, an aspect of the so-called ‘theory of mind’ that one acquires over the first five years of life.

But while empathy ensures the cohesion of a group or a society, it is also biased and parochial. Revenge thrives on it. more>

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The Temp Economy and the Future of Work

BOOK REVIEW

Temp: How American Work, American Business and the American Dream Became Temporary, Author: Louis Hyman.

By Gabrielle Levy – The way people work is changing. Machines and computers reduce the need for labor. Companies have shifted to hiring relatively few permanent staff and opting instead to strike temporary contracts with outside workers.

Uber, the ride-sharing behemoth, is perhaps the best known of these modern companies, with its thousands of drivers operating as independent contractors, but it did not invent the form. The roots of the gig economy go all the way back to the years after World War II, with the creation of the first temp and consulting agencies, including Manpower Inc. and McKinsey & Co.

We will see work become less tied to a particular employer in lots of ways. For some people, that’s fantastic, If you’re a consultant or independent contractor and you have lots of control over your life and you get paid pretty well, then this is a fabulous turn. And if you are a gig worker and you are running errands for somebody else, it’s kind of a nightmarish turn.

Do people really want full-time work? Do they want secure work? And the answer is, yes and no.

Everybody likes to work when they want to work, just like every employer wants workers who will start and stop as needed.

How do we create a system where work can be flexible but we can still have a baseline level of security for our health and our families that allows us to take risks and be entrepreneurial and explore new economic possibilities? more>