How can you tell if you’re really happy? What makes other people happy? Are these empirical questions that can be answered? In this episode, EconTalk host Russ Roberts continues his exploration of happiness studies with psychologist Emiliana Simon-Thomas of UC Berkeley. From our many previous episodes on happiness, we know that many disciplines have tried and are trying to conceptualize and measure the idea of subjective well-being. Are such efforts prey to to the dangers of Hayek’s scientism? Simon-Thomas defines happiness as “a broader quality of life,” and cites such consequences as longevity, greater professional and academic success, and decreased risk of cardio-vascular disease. She also mentions other studies which purport to determine whether you will be happy long-term on the basis of your yearbook photo… (And no, I will not share mine!) You can share your yearbook photo if you like, but of course what we’re most interested in are your further thoughts on this episode. We look forward to hearing your comments on our prompts below:     1- Roberts kicks off the conversation by asking Simon-Thomas whether you can really get happier? How does she respond? What are the three components of happiness, according to Simon-Thomas, and how pliable do you think each component is each?   2- How much of happiness is a result of your genetics versus your adjustability? What does Simon-Thomas mean when she says, “life circumstance factors explain about 10% of the [happiness] variance between one person and the person next to them…And the other 40% of the variance in happiness is explained by daily activities.” How might YOU alter your daily activities in pursuit of greater happiness?   3- What does Simon-Thomas say is the argument for inculcating conscience in children on secular grounds? (Recall the story of the dropped wallet in this recent Munger episode.) How would you answer this question differently?   4- What is the role of marriage and parenting in creating happiness, according to Simon-Thomas? To what extent do you think this is universally true? What are other life circumstances that can offer the same benefits?   5- Why is gratitude important to happiness, and to what extent is it a skill you can practice and get better at? Can you offer any examples of such a successful practice from your own life? (0 COMMENTS)

Brennan and Lomasky’s expressive voting model tries to explain why politics is largely about style and stories, not substance and numbers.  Long story short: Political entertainment is a private good; political results are a public good.  As a result, political systems primarily yield entertainment, not results.  Jonah Goldberg nicely illustrates these insights in a recent column.  Highlights: For instance, during what was supposed to be the debate period for President Biden’s $1.9 trillion COVID-19 relief package, which spent plenty on non-pandemic Democratic priorities, the Republican National Committee was silent on it. The RNC did release two statements about it — but only after the bill passed. Yet plenty of Republicans found time to decry the “cancellation” of Dr. Seuss. He continues: We tend to define bipartisanship as both parties openly agreeing with each other in a gauzy spirit of civic cooperation. But there’s another kind of bipartisanship — when each party cynically and tacitly agrees to take turns doing things they denounce when the other party does them. That’s what the parties do on spending and debt (and Supreme Court nominations, gerrymandering and a host of other issues). The cumulative effect is a political culture that says you can do whatever you can get away with. Why should voters care about deficits when most politicians only claim to care about them when it’s the other party increasing them? But here’s the catch. Political parties need to differentiate themselves from their competitors. Neither Republicans nor Democrats can run on the vow, “There’s not a dime’s worth of difference between us and the other party.” So what does that leave? Culture-war stuff. Application to immigration: [I]mmigration is a perfect example of what I’m getting at. It’s an important issue regardless of where you come down on the specifics of immigration policy. But there’s a reason Republicans and Democrats often invest so much more in the issue than it warrants. It taps into, among other things, questions of race, national identity and the relationship between wealthy elites and average workers. Democrats love the issue because it lets them demonize Republicans — often but not always unfairly — as rank nativists and bigots. It lets Republicans rail about Democratic animosity toward the working class and indifference — real or alleged — to American culture. I can’t recall if Jonah and I discussed immigration in this interview, but in a sense I agree.  If massive deregulation of immigration is on the table, it’s the most important issue in the world.  But if we’re only arguing about whether borders should be 98% closed or 99% closed, there’s little reason for either side to get excited. P.S. My main disagreement with Jonah, strangely, is on Dr. Seuss: For the record, Seuss wasn’t actually canceled. His estate announced it wouldn’t continue to publish a handful of his least popular and allegedly racially insensitive works. The estate will cease publication of some books because they’re worried someone somewhere might take offense where none was intended?  That’s virtually the definition of “cancelled.”  Furthermore, when I actually looked up the list, I discovered that two of cancelled works – If I Ran the Zoo and To Think That I Saw It On Mulberry Street – were personal favorites.  Indeed, I routinely use the expression “if I ran the zoo” when people query my precise policy preferences.  So yes, while the budget is objectively a million times more important, I’m still unhappy about what happened to the noble Dr. Seuss. (1 COMMENTS)

When I was in the UCLA Ph.D. program, one of the readings in my Monetary Theory course with Ben Klein, if I recall correctly, was Milton Friedman’s 1953 classic, “Commodity-Reserve Currency.” It was a chapter in his Essays in Positive Economics but originally appeared in the Journal of Political Economy in 1951. It was that article, more than any other, that convinced me that a gold standard was too expensive. Friedman had shown that the annual cost of maintaining a gold standard would be 2.5 percent of GDP. That’s huge. I now know that Friedman was wildly wrong. He greatly exaggerated the resource cost of a gold standard. I learned that in my Monetary Theory and Policy course, taught by Jeff Hummel at San Jose State University. In his 1999 book, The Theory of Monetary Institutions, the main textbook for the course, Lawrence H. White goes through the math. The important point, though, before we get to the math, is that Friedman got his estimate by assuming that banks would hold 100 percent reserves of gold against demand deposits and time deposits. That assumption is wildly unrealistic and so his estimate of the resource cost of the gold standard is way too high. Friedman gets his estimate as follows: Delta G/Y = Delta G/Delta M * Delta M/M * M/Y where Delta G is the dollar value of the annual change in the stock of gold, Y is annual national income, M is the size of the money stock M2, and Delta M is the annual change in M2. For M/Y Friedman took M2/NNP (where NNP is net national product). That was 0.625, which White says is roughly right today. What is Delta M/M? White and Friedman assume that the purchasing power of gold remains constant as money demand grows. So the money stock must grow to maintain a constant price level (zero inflation). Using the dynamic equation of exchange (which I used to call the “quantity equation” until Jeff said the “equation of exchange” is more precise), Delta M/M + Delta V/V = Delta P/P + Delta y/y, Where V is velocity, P is price level, and y is real income. Friedman estimated Delta V/V to be -1% annually and Delta y/y, the growth rate of real income, to be 3% annually. With a zero inflation rate, therefore, Delta M/M =4% annually (0 + 3 -(-1)) With Friedman’s earlier mentioned 100 percent reserve requirement, Delta G/Delta M = 1. So now plug into: Delta G/Y = Delta G/Delta M * Delta M/M * M/Y Delta G/Y = 1(0.04)(0.625) = 0.025. In short, the annual cost of maintaining a gold standard is a whopping 2.5% of GDP.   But White considers the actual history of reserves against deposits under the gold standard and gets a very different answer for the ratio of gold to money, G/M. G/M = (R + Cp)/M, where R = bank reserves, Cp is gold coins held by the public, and M is M2. (R + Cp)/M can be rewritten as R/(N +D) * (N + D)/M + Cp/M. R/(N + D) is the ratio banks maintain between their gold reserves and their demand liabilities, which are N (currency notes) and D (demand deposits.) In 19th century Scotland, which had a gold-based banking system and no legal reserve requirements, R/(N +D), was 2% or 0.02. (N +D)/M is the ratio of M1 to M2. Coins in 1999 United States were 8 percent of currency, currency was about 51% of M1, and M1 was about 32% of M2. So Cp/M = 0.08 * 0.51* 0.32 = 0.013 Since M1 is 32% of M2, and coins (Cp) are 1.3% of M2, currency notes and demand deposits must equal 32% – 1.3% = 30.7% of M2 Therefore, R/(N +D) * (N + D)/M = 0.02 * 0.307 = 0.00614 So (R + Cp)/M  = 0.00614 + 0.013 = 0.01914. The ratio of gold to the money stock is therefore about 2%, which is 1/50th of Friedman’s estimate. So the annual resource cost of the gold standard, as a fraction of GDP, equals: 0.02 * 0.04 * 0.625 = 0.0005. So that’s 0.05 percent of GDP.  QED.                   (0 COMMENTS)

In my previous post, I pointed out that the unusually generous unemployment benefits being paid out until early September were likely to depress employment of lower skilled workers during the summer months. You might wonder if there is any research that supports this claim. It turns out that there is.  A 2016 NBER study by Marcus Hagedorn, Iourii Manovskii & Kurt Mitman found that the expiration of the extended unemployment benefits at the end of 2013 led to an unusually large jump in employment during 2014.  Here’s the abstract: We measure the aggregate effect of unemployment benefit duration on employment and the labor force. We exploit the variation induced by Congress’ failure in December 2013 to reauthorize the unprecedented benefit extensions introduced during the Great Recession. Federal benefit extensions that ranged from 0 to 47 weeks across U.S. states were abruptly cut to zero. To achieve identification we use the fact that this policy change was exogenous to cross-sectional differences across U.S. states and we exploit a policy discontinuity at state borders. Our baseline estimates reveal that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.019 log points. In levels, 2.1 million individuals secured employment in 2014 due to the benefit cut. More than 1.1 million of these workers would not have participated in the labor market had benefit extensions been reauthorized. You may recall that Keynesian economists predicted the exact opposite, that cutting off benefits would reduce spending and thus reduce employment.  Yes, demand matters.  But so does supply. One point I forgot to mention in the previous post is that the artificially created labor shortage this summer is likely to lead to more illegal immigration. (0 COMMENTS)

At Law and Liberty, Daniel Mahoney has an interesting and often challenging article on Bertrand de Jouvenel. Mahoney, like Jouvenel, tries to reconcile the danger of the state (“the Minotaur” in Jouvenel’s terms) with the ancient philosophical ideal of a “common good” that political authorities are supposed to protect. My own reading of Jouvenel, specifically of his book On Power, has been mainly classical-liberal or libertarian, although I have emphasized the contradictions that professor Mahoney claims to resolve. One fundamental problem, which Mahoney does not discuss in his Law and Liberty article, is: What is the “common good”? Can you find many trade-offs or values on which everyone in society agrees? If not, who does the agreeing, who makes the choice? I remember Anthony de Jasay asking about Jouvenel, with insistent puzzlement, “What does he mean?” (0 COMMENTS)

In response to my ageless hypothetical, Jeremy Horpedahl raises some empirical doubts about the relative value of life for the young and the old: Surprisingly, though, roughly equally valuing all lives is actually the answer that a normal economic calculation, willingness-to-pay for risk reduction, would give you! Or at least roughly. I haven’t seen an estimate for a 10-year-old, but estimates of the Value of a Statistical Life for 20-year-old is roughly equal to an 80-year-old. I’ve written about this before, and here’s a summary of a working paper by Aldy and Smyth that I am drawing on. Middle age lives are worth more, using this method, though perhaps just 2-3 times more. Here’s the relevant graph. My main response: This result is more than merely “surprising.”  It’s positively insane.  If this graph is right, then the value of life from the age of 20 to the age of 50 is actually negative!  You burn a year of life, and at the end of the year the total value of your life is somehow greater.   What then should we conclude?  There are two main possibilities: 1. There’s something deeply wrong with the method used to calculate the value of life. or; 2. People are very foolish indeed.  So foolish, in fact, that their revealed preferences are a terrible measure of their actual well-being.   In the real world, both (1) and (2) are at work.  To give just two examples: On the methodological front, young people are usually liquidity constrained, so their measured value of life usually fails to account for most of their anticipated earnings. On the folly front, young people are notoriously myopic, so they take bone-headed risks even though they have more to lose than the rest of us. The severity of these problems would be even more obvious if we were talking about 10-year-olds rather than 20-year-olds.  I wouldn’t be surprised if their measured VSL was under $100,000, or even $1000.  Why?  Because they have almost no money, and they’re immature enough to run into traffic to save Pokemon cards.  Fortunately, their elders know better. Jeremy continues: So who is right? Caplan’s intuition? Or the modeled VSL calculations? For surely these are miles apart, and they can not both be correct. As an economist, I have a strong preference in favor of willingness-to-pay over our intuitions. Indeed, Caplan himself as defended the VSL approach quite forcefully! For the record, the piece Jeremy links to rejects a bunch of bad but popular complaints about VSL.  I leave open the possibility of good but unpopular complaints.  Starting with: Slightly different methods of measuring VSL could easily yield radically different answers.  Measuring the “overall value of life” probably implies very different results than measuring the “value of an hour of time” and multiplying it by expected time lost.  Measuring VSL using compensating differentials for jobs probably implies very different results than measuring VSL using willingness to follow unpleasant medical regimens.  And so on. In any case, it’s a odd to describe my view that one 10-year-old life is worth 100 or 1000 80-year-old lives as merely “my intuitions.”  I base my numerical answers on three virtually iron-clad reasons why the value of life has to decline sharply with age.  To repeat: 1. When the young die, they lose far more years of life. 2. When the young die, they are far more likely to lose healthy years of life. 3. When the young die, the people who survive them miss them much more – and miss them for a much longer time.   (1) and (2) are beyond debate.  Who would seriously deny that more years of life are better than fewer?  Who would seriously deny that healthy years are better than unhealthy years? (3) is slightly debatable, but Darwin should resolve any lingering doubt.  The genes of animals that prefer their parents to their offspring soon perish – even in cultures that officially put the aged on a pedestal.  Taken individually, each of these premises is stronger than any empirical paper I can recall.  Taken together, these three premises are stronger than any empirical paper we’re ever going to see. (0 COMMENTS)

Stanley Park is one of the most beautiful recreational centers in Canada. It is, if I may be permitted to say so, the Jewel in the Crown of Vancouver, British Columbia. I am a race walker and I’ve entered dozens of 5k, 10k, and half marathons there. The outer track is about 6 miles; while walking, running, skating or biking around it, you can view the majestic Grouse Mountain, English Bay, the Vancouver skyline, numerous beaches, the Lion’s Gate Bridge, a statue of the mermaid, the University of British Columbia, North and West Vancouver, and much much more. It is truly a trip worth taking. But all is not well in what would otherwise clearly be considered this environmental heaven. There are coyotes at large in in Stanley Park, and some of them are not at all that friendly. To wit, several joggers, passersby, tourists- over a dozen- have already been bitten and more of the same would appear to be in the offing. Say what?! Let me repeat that: in this case, man doesn’t bite coyote, but coyote bites man. This species is not as dangerous as is the wolf, but if you are on the receiving end of their attentions, you’ll soon realize that they are not cuddly dogs either. One woman had her hamstring tendon detached as a result of an attack. No one, yet, has been killed by any of these predators, but if these depredations continue, such a tragedy should not occasion any great surprise. Especially vulnerable would be the elderly and children. Should a baby ever be bitten, its life would be at grave risk. Are we going to wait around for that to occur? What have the authorities done so far to quell this abomination? (Is that too harsh a word? Not if you are on the receiving end of one of these beasts’ attentions). In late January of this year conservation officers captured and killed two of these vicious animals. But there are an estimated dozen of them living and marauding in Stanley Park, and the authorities have taken no further action to quell this menace. Please be sitting down when you read this, otherwise you might keel over. How would a private owner of this precious real estate deal with this threat? It doesn’t take an entrepreneurial genius to appreciate that one of the very first steps of a Stanley Park Corporation would be to round up all of these predators, and either place them in a zoo, or release them into the wilds where they could do no harm. Profit and loss considerations would dictate this. Apart from a few weird masochists, no one likes to be bitten by a wild animal. Before you scoff at the idea of privatizing this vast area (1,001 acres) realize that private enterprise has successfully owned and operated other large attractions. For example, Disney World is 25,000 acres. If there are any coyotes there, you may be sure they are kept behind bars. Would the private owner of Stanley Park place high-rise buildings in its midst, thus risking what makes this area so attractive in the first place? Unlikely. Disney World, Six Flags, none of the rest have done any such thing. Further, this could be legally precluded by the transfer agreement. But, horrors, the SP Corp would charge admission! You think you don’t already pay for the care and mismanagement of this splendid park through taxes? Given the greater efficiency of the private vis a vis the public sector, it would be exceedingly likely that the costs would fall. I tell you this! I’m not entering any more races in Stanley Park until this threat is ended. I’m pretty fast for an old codger, but I can’t out-run or out-walk a hungry coyote. (0 COMMENTS)

Sociologist and author Mark Rank talks about his book, Poorly Understood, with EconTalk host Russ Roberts. Rank looks at a wide variety of aspects of poverty. He argues that many widely-held views on poverty are inaccurate, and in particular he argues that most Americans will be poor at some point in their lives. This is a wide-ranging […] The post Mark Rank on Poverty and Poorly Understood appeared first on Econlib.

Sociologist and author Mark Rank talks about his book, Poorly Understood, with EconTalk host Russ Roberts. Rank looks at a wide variety of aspects of poverty. He argues that many widely-held views on poverty are inaccurate, and in particular he argues that most Americans will be poor at some point in their lives. This is a wide-ranging […] The post Mark Rank on Poverty and Poorly Understood appeared first on Econlib.

Sociologist and author Mark Rank talks about his book, Poorly Understood, with EconTalk host Russ Roberts. Rank looks at a wide variety of aspects of poverty. He argues that many widely-held views on poverty are inaccurate, and in particular he argues that most Americans will be poor at some point in their lives. This is a wide-ranging […] The post Mark Rank on Poverty and Poorly Understood appeared first on Econlib.