Links this week (a slightly sparse list as I didn’t find much time to see what was out there):
And if you missed them, my posts this week:
A PwC report and associated press release claiming that Australia could “fall from the G20” has triggered a round of media (e.g. here and here) questioning Australia’s role in the world.
There’s nothing new in the report to worry about. Under the PwC model, Australia drops out of the top 20 countries by GDP on PPP terms (down to 29th), but is still in the top 20 at market exchange rates in 2050. If you’re worried about international clout, the latter is more important. Plus, GDP per person stays high – it’s only because of the development of nations with large populations that the relative rankings change. Australia is, after all, not even in the top 50 countries by population.
Then there is the reality of what “dropping out the G20” looks like. South Africa remains a member of the G20 despite ranking around 30th in GDP. And there are actually more than 20 countries involved as the European Union is one of the 20.
And why should we even care about G20 membership? Or who believes these sorts of projections anyhow?
But let’s suppose you want to make your nation great and maintain relative rankings in economic clout. How should you go about doing it?
In my last post, I pointed out that having educated intelligent populations is the key ingredient to a nation being “great”. And the PwC response reflects that to an extent, stating that we need to invest “in highly skilled workers and become the knowledge nation”.
However, I don’t expect any miracles (or possibly even change) from national pushes such as that. I have nothing against desires to increase STEM education or have the education system teach skills that might actually be useful, but the evidence that there is benefit from pushes such as this is scant.
What goes unsaid is the most effective approach to increasing economic clout – increasing population. As other large countries develop and close the gap on a per capita basis, increases in population are the simplest way to maintain the global ranking. If Australia could increase its population to 25 per cent above projected 2050 levels, it could be climbing the rankings.
As I mentioned in my last post, the composition of that population is important, so this is not a pure numbers game. But given the mass of educated and intelligent people from around the world who would like to come to countries like Australia, increasing population while maintaining (or even increasing) the human capital of the population is achievable.
So, that points us to the lever of immigration policy. Where do we start?
For one, Australia has a skilled migration program that forms the majority of its immigration intake, although numbers are controlled through measures such as “occupation ceilings”. Why we don’t allow everyone who meets a certain benchmark to enter astounds me. We could simply set some education and occupation benchmarks, and all who meet them can come.
Further, Australia has a few hundred thousand foreign students in our university system at any point. We could easily introduce a program where those who graduate with certain degrees or levels of achievement gain the right to stay. Another source of highly educated, intelligent people.
But what of those talented people who may not have had the same opportunities as those in developed countries? One option would be to introduce a series of IQ tests or some other similar standard. Everyone who meets that level can migrate and benefit from the Australian education system. This could provide a potential avenue to increase the humanitarian intake.
With that flood of educated, intelligent people, a country would gain the scale necessary to be among the largest global economies, while also maintaining a population base conducive to high levels of development.
This option, however, has time-limited availability. In another 20 to 30 years, many of the sources of potential immigrants will be highly developed themselves, so the queues to enter places like Australia could be much shorter. But for the moment, if you are worried about Australia (or any developed country) sliding into irrelevance, there is an easy, accessible solution waiting to be exploited.
I am not convinced that Jim Collins’s management classic Good to Great: Why Some Companies Make the Leap…And Others Don’t has stood the test of time, despite the “384 million bytes of computer data” accumulated during the process of putting it together. That the first of the good to great companies named in the book is Fannie Mae, which became “the best capital markets player in the world at managing mortgage interest risk”, does not help the case.
However, my purpose in this post is not to criticise the book or the management strategy genre in general, as there is no shortage of other places where that has already been done well.
What I want to do is admit some sympathy for the good to great ingredients that Collins identifies, particularly the idea of “First Who….Then What”. And then I want to ask – is there a something in that concept for the wealth of nations?
The idea of “First Who….Then What” is that, to change your company from good to great, you need to get the right people on the bus. It is only when the right people are on board that you should decide where you want to drive it. And the key to that sentence is “right people”. It is not “your people” who are the most important part of the company – the “right people” are.
This approach means that strategy comes after hiring. In a company full of the right people, good answers will tend to emerge. Questions such as compensation are not as important as you’re not trying to motivate the right behaviours from the wrong people.
You could draw a similar argument with what might make a nation great. Those nations with high-IQ, educated populations tend to have higher levels of economic development. Although rich countries tend to have good political institutions and policies that are not completely crazy, the direction of causation is population to institutions. If you have the “right” people in a nation, decent political frameworks tend to follow.
Of course, North Korea is the exception. But North Korea could become a classic case study in a few decades. Imagine if the dictatorship fell and North Korea came under a government similar to that in South Korea. How long would take for North Korea’s development to reflect that of its southern neighbour?
Links this week:
And if you missed them, my posts this week:
Organ donation rates are an often used example of the power of defaults. Take the following passage by Dan Ariely, explaining this (also often used) chart from Johnson and Goldstein (2003) (ungated pdf):
One of my favorite graphs in all of social science is the following plot from an inspiring paper by Eric Johnson and Daniel Goldstein. This graph shows the percentage of people, across different European countries, who are willing to donate their organs after they pass away. When people see this plot and try to speculate about the cause for the differences between the countries that donate a lot (in blue) and the countries that donate little (in orange) they usually come up with “big” reasons such as religion, culture, etc.
But you will notice that pairs of similar countries have very different levels of organ donations. For example, take the following pairs of countries: Denmark and Sweden; the Netherlands and Belgium; Austria and Germany (and depending on your individual perspective France and the UK). These are countries that we usually think of as rather similar in terms of culture, religion, etc., yet their levels of organ donations are very different.
So, what could explain these differences? It turns out that it is the design of the form at the DMV. In countries where the form is set as “opt-in” (check this box if you want to participate in the organ donation program) people do not check the box and as a consequence they do not become a part of the program. In countries where the form is set as “opt-out” (check this box if you don’t want to participate in the organ donation program) people also do not check the box and are automatically enrolled in the program. In both cases large proportions of people simply adopt the default option.
But does this chart seem right given that story? 99.98 per cent fail to opt-out in Austria? 99.97 per cent in Hungary? It seems too many. And for Dan Ariely’s story, it is too many, because the process is not as described.
The hint is in the term “presumed consent” in chart description. There is actually no time where Austrians or Hungarians are presented with a form where they can simply change from the default. Instead, they are presumed to consent to organ donation. To change that presumption, they have to take steps such as contacting government authorities to submit forms stating they don’t want their organs removed. Most people probably don’t even think about it. I would feel uncomfortable calling it a “default” – and Johnson and Goldstein are clear that there are ethical questions with such “opt-out” arrangements.
So what does this mean in practice? Take the following from an Austrian government site:
In Austria, organs, parts of organs or tissue of potential donors may be removed if the person in question did not expressly refuse organ donation before their death.
In order to document such objections effectively, the Opting-out Registry of persons refusing organ donation was established. Apart from refusals documented in the Registry, also other forms of refusal of post-mortem organ donations are respected (e.g., a written explanation among the identification papers or an oral refusal witnessed by relatives).
The Opting-out Registry has primarily been designed for people living in Austria, and the Austrian social security number is used as the main identification tool. Persons who are staying in Austria for a short time only (for holidays, conferences, family visits) should preferably keep their written personal wishes regarding donations, among their identification papers (consent: I am willing to donate my organs; refusal: I do not want to donate my organs). Their wish is respected in the event of death. In addition, this person’s relatives are consulted.
You can download a form from that page to lodge a refusal in the registry.
The last sentence of the government text gives a hint to the process on the ground – the deceased’s relatives are consulted. The process effectively leaves the question of organ donation unaddressed until after death.
I expect consultation with relatives is part of the reason behind the much smaller differences in the outcome we care about – organ donation rates. Germany at 15.3 deceased donors per million people is not far from Austria’s 18.8 and Sweden’s 15.1. Spain, which has an opt-out arrangement, is far ahead of most countries at 33.8, but the United States, an opt-in country, is also ahead of most opt-out countries with a donation rate of 26.0.
Having said all this, a lot of interesting options for organ donation should be explored – active choice, preferential access to organs for previously registered donors, respecting the wishes of the deceased over the preferences of relatives, or payments of some kind. But the story behind this chart is not as neat as it seems. And a lesson – if you can, read the original paper.
Late last year I went to a presentation by Schlomo Benartzi on how people think differently when they are using a screen. The punchline was that many of the classic behavioural biases do not play out as expected in digital mediums. (Benartzi has a book on this topic, co-authored with Jonah Lehrer, coming out later this year.)
One example Benartzi gave involved defaults. The standard understanding is that defaults are powerful ways to influence behaviour – people will tend to stick to them. But Benartzi spoke of digital experiments with pre-populated checkboxes where people went out of their way to untick the box. The default backfired.
Why does this occur? I suggest a starting point should be our experience with defaults. Online retailers know the power of defaults, and regularly pre-populate checkboxes to join their mailing list or buy add-ons such as insurance. Generally, the default is a crap option. (Look at Dark Patterns for a pile of examples.) So what does someone with experience do? You scan every pre-populated checkbox to see whether you are being lumped with something you don’t want. If unsure, uncheck it.
As we are moving to a world where most interactions with government will be digital, will the power of defaults be lost? Will we untick the “register as an organ donor” or “save 3 per cent of you salary” boxes due to a newly acquired habit? And what other “nudges” will we resist when we learn that many nudgers don’t have our best interests at heart?
Links this week:
It has taken a while for this month’s Cato Unbound, “Can Public Policy Stop Obesity?“, to warm up. But Christopher Snowdon’s latest post is full of good material. He takes on the question of whether obesity is a drain on the public purse, whether we consumer high sugar soda because we have no no choice, and the burden of sugar taxation.
The opening is particularly pointed. Is obesity a public health problem? And, can parents solve the childhood obesity crisis?
Firstly, I should say that I do not hold some of the opinions that Harris and Saunders consider to be truisms. Saunders says ”that obesity is a major U.S. public health problem is not a subject of much dispute” while Harris says that “All agree that parents cannot solve the childhood obesity crisis on their own.” In fact, I do dispute that obesity is a “public health problem.” I don’t share the currently fashionable view that a public health problem is merely the aggregate of a nation’s private health problems. Obesity differs from genuine public health issues, such as unclean drinking water, pollution, and tuberculosis, in that it is not infectious and it can be prevented and cured without government intervention. It a private health problem – or, more correctly, it is a risk factor for private health problems.
I am loath to start a sentence with the words “as a parent,” but as a parent I reject Harris’s assertion that “parents can’t compete with the overwhelmingly unhealthy food environment surrounding their children as soon as they step outside the front door.” Parents can prevent their children becoming obese, particularly when they are young. Collectively, therefore, parents can “solve the childhood obesity crisis,” if it must be put in those terms. Similarly, parents can prevent themselves from becoming obese. The evidence is all around us. Even in the United States, with its supposedly “obesogenic” environment, two-thirds of adults and 83 percent of children are not obese. Obesity is not rare enough to be called deviant, but nor is it normal enough to be viewed as an unavoidable consequence of forces that are beyond the individual’s control.
In response, Russell Saunders partially runs up the white flag. Jennifer Harris gives a more spirited defence, particularly on advertising.
As someone whose diet broadly (in an 80:20 way) reflects paleo principles, I consume the occasional book on the subject. The latest is John Durant’s The Paleo Manifesto: Ancient Wisdom for Lifelong Health, which (thankfully) didn’t just repeat the same information you’ll hear over and over again if you dip your toes into the paleo literature.
I won’t offer a blow-by-blow of the account of the book, but it has some nice elements.
My favourite is a story about a Western lowland gorilla called Mokolo in the Cleveland zoo. Fed a diet of salad, fruit and fibre-fortified gorilla biscuits, Mokolo was overweight, had high blood pressure, showed indicators of heart disease and was on two blood pressure medications.
The zoo switched Mokolo’s diet to one more closely resembling a wild gorilla’s diet. Mokolo lost 70 pounds, which was about 15 per cent of his body weight. But to do this they did not fly in plants from Africa, but instead they bought vegetables from the local grocery store. The diet was not the same as Mokolo would have eaten in the wild, but it was a lot closer to the natural diet than gorilla biscuits.
This story is a nice illustration to give to those who state “You can’t eat what our ancestors ate. Most vegetables in the shops weren’t even available then.” A paleo diet is not an attempt to re-enact history. Rather, evolutionary theory provides a guide to what types of foods might be more conducive to health.
The other point to the story is that Mokolo consumed twice the calories on the new diet. Diets are not simply about calories in-calories out.
There are plenty of other interesting parts to the book. Durant gives a novel review of cultural practices as adaptations – particularly religious practices relating to health and disease. He also provides a case for experiencing extremes in temperature, although I am not sure I buy his argument to the extent he does.
One point this book made clear, however, is that I still haven’t read a decent critique of the paleo diet or lifestyle. If critics such as Marlene Zuk responded to this book instead of to random blog comments, we could have a more interesting debate. Instead Zuk continues to wheel out arguments that Durant and others have already dealt with. There’s actually some interesting points that could be debated here – I provided a list a couple of years ago – but the paleo-critics don’t seem to have invested enough time getting across the literature to make it interesting.
“Nudges” change the decision environment so that people make “better” decisions, while retaining freedom of choice. Fitting within what Cass Sunstein and Richard Thaler call “libertarian paternalism”, nudges are often framed as alternatives to coercive measures. If you can nudge most people toward the “right” decision through the way you frame the choice, the coercive measure is not required.
A recent example is the introduction of default retirement savings in Illinois. A default three per cent of income will be directed to a retirement savings account, with freedom to opt out or increase the contribution. Another is where the Australian Financial System Inquiry recommended offering a default retirement income product (with certain income and risk management characteristics) to people when they retire, with people otherwise free to choose another product or blow their retirement savings on a sports car.
Of course, plenty of coercive measures get branded as nudges, such as proposed bans on large sugary drinks. And after extolling the benefits of retaining choice, choice restricting measures are often praised (such as in this speech by Andrew Leigh, where he praises compulsory superannuation and then defends behavioural economics against claims it is paternalistic).
But, to the point of this post – Are there are any examples of coercive government requirements being wound back explicitly because a nudge was considered effective? Has anyone stated “We have some coercive measures in place, but we have realised that by framing decision in the right way, most of you will make a good decision. Let’s remove these coercive requirements and replace them with a nudge.”?
For example, have there been any compulsory savings programs replaced by default programs on the basis that the default program could be just as effective? (In fact, a default program with a higher contribution rate could result in more savings than a compulsory program.)
If you know of any examples, please help me out. At the moment, my example basket is empty.
*Bryan Caplan has previously proposed some measures of this nature, none of which have been adopted.
