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Archive for July 5th, 2009

“Four writers from around the country provide snapshots of their local economies”

Trading Down

Fish Store Out of Water

The Real Bank of America

Bike Among the Ruins

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As I’ve mentioned in the past, Mark Thoma’s blog Economist’s View was my introduction to the blogosphere. Even today, his blog is the first I look to for links and for commentary. So, of course, I’d like to pile on to the plaudits he’s been receiving these last few days, including being featured in a forthcoming WSJ article about econ bloggers, apparently. David Warsh, who writes an independent weekly column called Economic Principals, also had a nice write-up on him (which I found out about, as with many things on this blog, via Mark Thoma). I agreed with most of what he wrote, but I want to expand upon one thing that Warsh wrote.

But Thoma is the most nearly perpendicular of them all. He stands at a right angle to the plane of mainstream debate, selecting and presenting the various arguments fully and fairly. Anybody who builds anything knows that trueing things up – making them level, square, concentric, or, in this case, fair and balanced – is a crucial step along the way. Nobody does a better job of digesting online economic commentary than he does.

The only thing I’d like to add is to point out that Thoma does not merely engage the “mainstream debate.” He has consistently linked and blogged about things outside the mainstream of economics (including, ahem, this blog). I think it’s important to point that out, because it’s not something I see at all at Paul Krugman or Brad DeLong’s blog, for example. So, this is a thank you, Professor Thoma, for originally engaging me in the blogosphere, but also for engaging a diversity of material, including the voice ordinarily crowded out of the discussion.

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The New Economics Foundation, a self-described “think-and-do tank,” has released its report (pdf) of the Happy Planet Index 2.0, which endeavors to measure the ecological efficiency with which countries achieve long and happy lives. Professor Herman Daly, a renowned ecological economist, writes in the foreword,

Economists like the concept of efficiency, and the Happy Planet Index is the ultimate efficiency ratio – the final valuable output divided by the original scarce input. I hope economics faculties in universities will put some of their energy toward refining the measurement and application of this ratio, in the service of living well for a long future on a single planet.

The numerator in this ratio is something called “happy life years,” or happiness-adjusted life expectancy. Happiness is measured with a simple question that has been replicated in a number of surveys, and which the authors of the report claim has proved to be a meaningful and proven measure:

All things considered, how satisfied are you with your life as a whole
these days?

The authors argue,

Furthermore, responses to this question correlate well with other attempts to
assess well-being. People who say they are satisfied with their life tend also to
make other positive assessments, such as reporting more frequent good moods,
are described by their loved ones as being satisfied, are observed to smile more
often, and are less likely to commit suicide later on in life. Importantly,
reported life satisfaction also correlates with all the complex aspects of well-
being described earlier, such as feeling autonomous and being resilient.

As for the motivation for the denominator, the authors write,

No moral framework would accept high well-being if it was at the
expense of others living today and/or future generations. Such considerations
are particularly relevant where limited resources are required to support well-
being. And the most finite limited resources that we currently rely on are natural
ones.

It’s good to see that such and index is unafraid of its normative aspects, which are often shunned in mainstream economic circles. Acknowledging that their measure is morally motivated, and forcing people to choose whether they accept the morality prior or not can put this measure in a strong position.

The ecological meaure itself is,

a measure of the amount of land required to provide for all their resource requirements plus the amount of vegetated land required to sequester (absorb) all their CO2 emissions and the CO2 emissions embodied in the products they consume. This figure is expressed in units of ‘global hectares’. The advantage of this approach is that it is possible to estimate the total amount of productive hectares available on the planet. Dividing this by the world’s total population, we can calculate a global per capita figure on the basis that everyone is entitled to the same amount of the planet’s natural resources. Using the latest footprint methodology – and it should be noted that this is a developing methodology – the figure is 2.1 global hectares.

The report also takes a swipe at economic growth.

The myth of economic growth as progress has held sway for over half a
century. But now, stimulated by the ongoing economic crisis and impending
environmental and resource crises, alternative visions of progress, such as that
represented by the HPI, are gaining popularity. They are still not the dominant
view, but the tipping point may not be far off…economic growth is just one
strategy to achieve well-being and, in terms of natural resources, a demonstrably inefficient one…The notion of GDP growth almost seems to have a halo around it. It has reached the status of motherhood and apple pie…This growing momentum makes it quite clear that GDP’s days as our sole indicator of progress are numbered. The stage is set for the HPI.

And, some results of the index…

The planet as a whole earns a score of 49 out of 100.

Latin America comes out very well. Africa does the worst. Developed countries fall somewhere in the middle, while the US earns 30.7, 114th out of 143 countries.

There’s a lot more in the report. I hope this index gains some traction so that it will be honed and tweaked; it’s obviously imperfect, and I’m particularly concerned with the use of happiness surveys. Nevertheless, it deserves a place in a number of discussions in and around economics.

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