Friday, January 11, 2013

More signs of a renaissance in psychology

This is an interesting column from David Brooks in the NYT, mostly because he sees many of the main challenges in public policy as a matter of better psychology.

What about the big problems? How do we get people to restrain government commitments now so that debt down the road won’t be so ruinous? How do we calculate the multiplier effects of tax cuts or spending increases among different subgroups of the population, or under different emotional conditions? How do we rig the context of budget negotiations so participants can actually come to a deal? How are people in different cultures likely to react to drone strikes? How do we structure sanctions against Iran to cause the greatest psychic humiliation?

These are the big questions, and most of our policies rely on crude folk psychology from a few politicians. But there’s hope. As Brian Wansink notes in Eldar Shafir’s volume, the 20th century saw great gains in sanitation and public health. The 21st century could be a great period for behavior change.

No mention of economics at all. Of course, economics has some things to say about credibility and commitment, such as the Kydland/Presscott time inconsistency literature. But the rational actor approach appears to be yielding diminishing returns. The focus of the social sciences can shift over time. I've been seeing more and more interesting things in psychology recently.


Sunday, January 6, 2013

The Golden Age and the stale 1980s debates

Here's a take on Keynes' long view from an Australian economics professor. (H/t AI Daily).

Malthusian ideas of scarcity began to be contested in the late 19th century.

The idea that a combination of technological progress and political reform could produce a genuine utopia became an appealing alternative to the ‘pie in the sky’ of an afterlife. Edward Bellamy’s Looking Backward (1888), a critique of 19th century capitalism written from the imagined perspective of the year 2000, was the archetypal example of this literature.

Few utopians had a serious theory of growth, he says, but Keynes was more realistic in expecting incremental improvements in living standards over many decades.

The trouble is Keynes' vision has not been realized.

So on a first reading, ‘Economic Possibilities for our Grandchildren’ seemed prophetic. Yet, 40 or so years later, I am a grandparent myself, the year 2030 is rapidly approaching, and Keynes’s vision seems further from reality than ever. At least in the English-speaking world, the seemingly inevitable progress towards shorter working hours has halted. For many workers it has gone into reverse.

The culprit, he thinks, is market liberalism. He says

If work was distributed more equally, both between households and over time, we could all be better off. But it seems impossible to achieve this without a substantial reduction in the centrality of market work to the achievement of a good life, and without a substantial reduction in the total hours of work.

The first step would be to go back to the social democratic agenda associated with postwar Keynesianism. Although that agenda has largely been on hold during the decades of market-liberal dominance, the key institutions of the welfare state have remained both popular and resilient, as shown by the wave of popular resistance to cuts imposed in the name of austerity.

Key elements of the social democratic agenda include a guaranteed minimum income, more generous parental leave, and expanded provision of health, education and other social services.

This is the problem. He sees it as a reason to go back to 1980s-style welfare liberalism and expand already bloated public services. It is fighting out the debates of the late twentieth century over and over. It makes it far more difficult to achieve any genuine change if it becomes associated with outdated liberal leftism.

However, he does come close to a good point.

It seems clear enough that technological progress can generate the necessary productivity gains, so what is needed most is a change in attitudes to work that would make a guaranteed minimum income socially sustainable. The first is that the production of market goods and services needs to become pleasant enough that those doing it don’t mind supporting others who choose not to. The second is that the option of receiving a guaranteed minimum income does not become a trap, leading into the kind of idleness that produces despair.

The key is to make some form of minimum income "socially sustainable" without causing resentment. That is where the left's ideas of equal distribution block anyway forward. Without some convergence on ideas about the good life, most people will not want to subsidize other's "rights". Liberal ethics undermines liberal economics.