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Happiness and unhappiness

June 30th, 2015

I have a chapter in a newly released book on happiness, extracts of which have been published in The Conversation. My argument, summed up as Measures of happiness tell us less than economics of unhappiness, is a reworking of points I’ve made in the past. In particular, I argue that it’s more useful to think about removing avoidable sources of unhappiness, and that has been the great success of social democracy and the welfare state.

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  1. BilB
    June 30th, 2015 at 21:16 | #1

    This is a particularly relevent time to be reflecting on happiness. Particularly with so much happiness destruction going on in the world.

  2. July 1st, 2015 at 00:57 | #2

    Great Post!

  3. James Wimberley
    July 1st, 2015 at 07:43 | #3

    JQ has it about right on unhappiness. It is easier to analyse, and in a significant number of cases to fix. Even causes that have been abandoned by policymaksrs, like the breakdown of marriages and other long-term relationships, may be at least partially tractable if you make an effort’s . One idea would be a less adversarial divorce process.

    Count me unconvinced by the false dichotomy. Consider our relationship to the natural world. The Pope, channelling St. Francis, has it right that this should be a source of joy. Ameliorating unhappiness does not get you to national parks or a ban on whaling.

  4. Ikonoclast
    July 1st, 2015 at 08:33 | #4

    @James Wimberley

    Our relationship with the natural world is fraught. The natural world is just as likely to bring us misery as joy. Disease, pestilence and famine are just as much natural phenomena as health and plenty. Civilization, science and modern economics combined are a Faustian bargain. We destroy nature to be free of it. Yet we are wholly of, from and dependent on nature. Thus in freeing ourselves we destroy ourselves.

    I think it was Eric Blair (George Orwell) who wrote of Wordsworth that such a nature poet could only exist in a tamed land where nature was domesticated and here and there parceled into pretty pieces of remaining wilderness. The idea of a poet offering paeans to nature in malarial jungles seemed quite absurd to Blair.

    Our project is to tame a little of what is horrible about nature from the human view (and there is much) without destroying nature as a sustainer and without succumbing to hubris and imagining we are better than nature or outside it somehow.

    To get back on topic, there is more utility in overcoming major causes of misery for most people than in trying to wring ever more happiness out of life and nature for an ever wealthier elite.

    When I consider what “happiness” is I think it mainly consists in not being in pain and then being occupied: having something interesting to do which you want to do and can in a sense lose yourself in. It is better both selfishly and altruistically if that “something to do” is useful to other people. It is not possible for a member of a eusocial species (which homo sapiens assuredly is) to exist only for itself.

  5. Uncle Milton
    July 1st, 2015 at 09:48 | #5

    it’s more useful to think about removing avoidable sources of unhappiness, and that has been the great success of social democracy and the welfare state.

    Yeah, but what about the high suicide rate in Sweden, blah blah blah?

    (I am anticipating this question from a usual suspect.)

  6. Sancho
    July 1st, 2015 at 10:47 | #6

    @Uncle Milton
    Extended seasonal daylight is not avoidable for Swedes.

  7. Megan
    July 1st, 2015 at 10:50 | #7

    This Wiki entry has Sweden at #58, US at #50 and France at #47.

  8. Julie Thomas
    July 1st, 2015 at 10:59 | #8

    @Uncle Milton

    re the suicide rate in Sweden; could be a myth based on a mistake.

    “The long-perpetuated myth of Sweden’s unusually high suicide rate is widely accepted to date back to the late 1950s and a speech given by the then US President Dwight D. Eisenhower, statistics based on an inaccurate briefing.

    Swedish suicide numbers decreased significantly during the 1980s and 1990s, levelling out during the 2000s. Numbers were once as high as 2,200 suicides per year, and by 2010 had dropped to 1,400.”

    and

    “countries such as France, Australia, and Germany have higher suicide rates than Sweden, which comes in slightly higher than the US and Canada.”

    This was in 2014.

    About happiness and what it is. I thought that the relevant human right was to be able to pursue happiness; there is no right to be provided with happiness itself is there?

    Maslow’s heirachy of needs, if you substitute happiness for self-actualisation might be a useful way of looking at what things to remove so that we all can aspire to happiness.

    ” The earliest and most widespread version of Maslow’s (1943, 1954) hierarchy of needs includes five motivational needs, often depicted as hierarchical levels within a pyramid.

    “This five stage model can be divided into basic (or deficiency) needs (e.g. physiological, safety, love, and esteem) and growth needs (self-actualization).

    “One must satisfy lower level basic needs before progressing on to meet higher level growth needs. Once these needs have been reasonably satisfied, one may be able to reach the highest level called self-actualization.”

    Maslow seems to be suggesting in some of his later discussions that western society doesn’t imagine happiness in terms of self-actualisation so we don’t aim for that level of happiness and get trapped in the lower levels.

    But poor people in this society that doesn’t exist are always anxious when they have to jump through hoops they don’t understand to get for those things that are fundamental, food and shelter not to mention love and approval. Even if people do not get depressed and do not develop anxiety symptoms that are diagnosable, there is a constant anxiety about what choice to make and the unintended consequences of those choices, and this does not provide them with any opportunity to find or create any happiness.

  9. Ernestine Gross
    July 1st, 2015 at 12:30 | #9

    I am very happy, for an instance in time, about JQ’s lecture, by means of an example, on the difference between rankings within a scale and measurement. This is a problem in many areas in which various branches of social sciences have applied their method (eg performance assessment, student evaluations of teachers, universities, aircraft noise assessment, …).

  10. Julie Thomas
    July 1st, 2015 at 15:30 | #10

    EG you are being very kind to the social sciences to only mention this problem.

    JQ this bit from your article “Malcolm Fraser, in his now-forgotten incarnation as an admirer of Ayn Rand, put this sentiment as well as anyone when he opined that “life wasn’t meant to be easy”.”

    I quite like the quote if you include the second part of it; “my child, but take courage: it can be delightful.” When I first heard that man Frazer say it, I was very conflicted and suffered from cognitive dissonance; how could I like a quote that such an awful enemy of the people had used.

    Did he get a chance to say the whole quote or did the media cut him off?

    I’m happy that I got over my cognitive dissonance and can still think that it is a good quote to use in the right context.

    I heard Frazer sometime during the late ’90’s on a panel show on RN. One of the other guests was an ex-disciple of Rand and I don’t remember his name or the other people on the panel. There was one exchange in which somebody mentioned that Rand had said she would not get out of her car to save a dying child by the side of the road – when driving though an area of famine – something like that – and Frazer said, yes but she was speaking figuratively not literally.

    Frazer sounded quite sure of this interpretation of Rand’s meaning but the disciple was quite insistent that Rand meant exactly what she said. I was waiting for Frazer to say something but he was silent for the remainder of the discussion.

    He just used motivated cognition to believe that her male heroes were men like him.

  11. rog
    July 1st, 2015 at 15:55 | #11

    There was this recent twaddle from NSW finance minister Perrottet citing Moynihan “In essence, the welfare state was acting as a substitute for the family, crowding ­out its formation, and increasing rates of divorce,”

    The counter argument is that the welfare state gave unhappy couples more opportunity to resolve their situation.

    http://www.smh.com.au/nsw/welfare-to-blame-for-marriage-failure-declining-fertility-nsw-finance-minister-20150630-gi1lgc.html

  12. J-D
    July 1st, 2015 at 16:57 | #12

    @Julie Thomas

    He had every chance to use the whole quote if he’d wanted to, but he was not cut off from doing so by the media, because he was giving a lecture, uninterrupted. The entire lecture can be found at this URL (munged to avoid automoderation):

    http colon doubleslash www dot unimelb dot edu dot au slash malcolmfraser slash speeches slash nonparliamentary slash towards2000 dot html

    The relevant paragraph is this one:

    Arnold Toynbee once wrote twelve volumes to demonstrate and analyse the cause of the rise and fall of nations. His thesis can be condensed to a sentence, and is simply stated: That through history nations are confronted by a series of challenges and whether they survive or whether they fall to the wayside, depends on the manner |and character of their response. Simple, and perhaps one of the few things that is self evident. It involves a conclusion about the |past that life has not been easy for people or for nations, and an assumption for the future that that condition will not alter. There is within me some part of the metaphysic, and thus I would add that life is not meant to be easy.

  13. Donald Oats
    July 1st, 2015 at 18:09 | #13

    Emotions, moods, and demeanour.

    A person has the capacity to feel emotions, and can switch from one emotion to a quite different one in the blink of an eye. Think of a situation where people are conversing and someone drops in a taboo and totally out of line comment: the change to disgust, shame, embarrassment, humiliation, etc, is abrupt.

    A mood is a sustained mixture of emotions, persistent for some time, but generally self-limiting. A demeanour is a person’s set-point, to which they return once the external stimuli (causing an emotional reaction) have resolved, and the resultant mood has run its course.

    When we talk of being happy and seeking happiness, we are conflating the emotion of happiness with the demeanour of contentedness with life, for want of a better way to put it. The person who seldom fails to bring a cheerful mood to the conversation. The person with the contented demeanour is able to face life’s little challenges with equanimity.

    IMHO…

  14. Julie Thomas
    July 1st, 2015 at 18:36 | #14

    @J-D

    Thanks for that. I was giving Frazer the benefit of the doubt.

    And, I haven’t read the speech yet but I was thinking that even if Frazer had used the full quote, it was still wrong because the quote is for children, not adults. So he didn’t understand it or cynically improperly or dishonestly misused it, or all of the above?

    I think I might not gain much happiness from reading the full speech after the quote; it’s not that rational.

  15. totaram
    July 1st, 2015 at 19:44 | #15

    Prof Q:
    I suggest you send your little piece to the King of Bhutan, who figured that “Gross Domestic Happiness” might be a better measure of a nation. Perhaps you could define a Gross Domestic Unhappiness (GDU) measure, that nations could try to minimise.

  16. July 1st, 2015 at 22:23 | #16

    Pr Q said:

    I argue that it’s more useful to think about removing avoidable sources of unhappiness, and that has been the great success of social democracy and the welfare state.

    The concept of a political philosophy focusing on ameliorating unhappiness has a familiar ring. Popper’s “negative utilitarian” view was set forth in “The Open Society and its Enemies” (1945), written in the aftermath of a 50 year bloodbath that puts our tremendous trifles into perspective:

    I believe that there is, from the ethical point of view, no symmetry between suffering and happiness, or between pain and pleasure. Both the greatest happiness principle of the Utilitarians and Kant’s principle, “Promote other people’s happiness…”, seem to me (at least in their formulations) fundamentally wrong in this point, which is, however, not one for rational argument….In my opinion…human suffering makes a direct moral appeal for help, while there is no similar call to increase the happiness of a man who is doing well anyway.

    Of course Popper was, at the time, writing under the spell of that notorious fascist F.A. von Hayek so perhaps his words should be taken with a grain of salt.

    Johhny von Neumann’s Mini-Max philosophy, which predates Popper by a generation, aimed at minimizing the maximum possible loss in gambling. von Neumann was always miles ahead of the curve.

    The same risk-aversive principle applies to a policy of avoiding high levels of societal pain. Rawls used the maxi-min principle to argue for maximizing the state of the worst off percentile of society. (I tend towards maxi-medi, maximizing the position of the median percentile, but thats just me being a crude populist.)

    Checking back through copies of me endless stream of Pr Q comments (17 MAY 2003) I see we have already been over this ground, and the ground is common:

    I agree that utilitarianism is the only political philsophy that can claim to have general public assent. It may be that Popper’s negativist “harm minimising” approach rather than Bentham’s positivist “happiness maximising” is better as pain is easier to identify and ameliorate than pleasure.

    I still think that a negative utilitarian (minimizing unhappiness) political philosophy is right as far as it goes. Perhaps positive utilitarinism (maximizing happiness) is okay as a personal philosophy, given that moments of transcendence seem to be somewhat idiosyncratic. But my gut feeling is that, as we move into the post-human era, utilitarianism may reach the point of diminishing marginal returns.

    The technological potential (through GAI enhanced VR or drugs) for humans to turn themselves into hedonistic zombies means that utilitarianism (whether positive or negative) is necessary but not sufficient political philosophy for a Good Society. One does not want to sell one’s soul for poll position on the hedonic treadmill.

    The crucial problem is whether humans can retain a real form of consciousness necessary for moral agency or whether they enter a Matrix like void which swallows consciousness in retrurn for an alleviation of earthly woes. This is, IMHO, a plausible explanation of the Fermi Paradox. The answer to “where are they?” maybe that they have hooked into a utilitarian “Experience Machine”. So no need to go exploring.

    Thus I agree with Taleb that humans need some form of (mildly painful) stress in order to challenge them to engage with the world and retain their human capacity to screw up and redeem themselves.

  17. JKUU
    July 1st, 2015 at 23:39 | #17

    Jefferson wrote “pursuit of happiness” as one of three “god-given” rights which people hold in the face of government. He modified Locke’s inalienable rights of “life, liberty, and estate (property?).”
    Since 1776 scholars have debated what he actually meant.

  18. Ikonoclast
    July 2nd, 2015 at 06:55 | #18

    Question of the day. Are Greeks happy or unhappy?
    A. Unhappy.

    Second question. Did anyone predict this?
    A. Yes.

    As Wynne Godley predicted in 1992 in his essay “Maastricht and All That”:

    “If a country or region has not power to devalue, and if it is not the beneficiary of a system of fiscal equalization, then there is nothing to stop it suffering a process of cumulative and terminal decline, leading, in the end, to emigration as the only alternative to poverty or starvation.”

    In more detail;

    “The central idea of the Maastricht Treaty is that the EC countries should move towards an economic and monetary union, with a single currency managed by an independent central bank. But how is the rest of economic policy to be run? As the treaty proposes no new institutions other than a European bank, its sponsors must suppose that nothing more is needed. But this could only be correct if modern economies were self-adjusting systems that didn’t need any management at all.

    I am driven to the conclusion that such a view – that economies are self-righting organisms which never under any circumstances need management at all – did indeed determine the way in which the Maastricht Treaty was framed. It is a crude and extreme version of the view which for some time now has constituted Europe’s conventional wisdom (though not that of the US or Japan) that governments are unable, and therefore should not try, to achieve any of the traditional goals of economic policy, such as growth and full employment. All that can legitimately be done, according to this view, is to control the money supply and balance the budget. It took a group largely composed of bankers (the Delors Committee) to reach the conclusion that an independent central bank was the only supra-national institution necessary to run an integrated, supra-national Europe.

    But there is much more to it all. It needs to be emphasised at the start that the establishment of a single currency in the EC would indeed bring to an end the sovereignty of its component nations and their power to take independent action on major issues. As Mr Tim Congdon has argued very cogently, the power to issue its own money, to make drafts on its own central bank, is the main thing which defines national independence. If a country gives up or loses this power, it acquires the status of a local authority or colony. Local authorities and regions obviously cannot devalue. But they also lose the power to finance deficits through money creation while other methods of raising finance are subject to central regulation. Nor can they change interest rates. As local authorities possess none of the instruments of macro-economic policy, their political choice is confined to relatively minor matters of emphasis – a bit more education here, a bit less infrastructure there.

    “What happens if a whole country – a potential ‘region’ in a fully integrated community – suffers a structural setback? So long as it is a sovereign state, it can devalue its currency. It can then trade successfully at full employment provided its people accept the necessary cut in their real incomes. With an economic and monetary union, this recourse is obviously barred, and its prospect is grave indeed unless federal budgeting arrangements are made which fulfil a redistributive role. As was clearly recognised in the MacDougall Report which was published in 1977, there has to be a quid pro quo for giving up the devaluation option in the form of fiscal redistribution. Some writers (such as Samuel Brittan and Sir Douglas Hague) have seriously suggested that EMU, by abolishing the balance of payments problem in its present form, would indeed abolish the problem, where it exists, of persistent failure to compete successfully in world markets. But as Professor Martin Feldstein pointed out in a major article in the Economist (13 June), this argument is very dangerously mistaken. If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.”

  19. J-D
    July 2nd, 2015 at 07:43 | #19

    @Ikonoclast

    Reading those repeated references to emigration makes me wonder. As I understand it, freedom of movement in the EU should facilitate migration from Greece to other EU countries. So what I’m wondering is how many Greeks are emigrating now, and also what might be holding others back from doing so. (All the things that normally hold people back from leaving their homes, I understand that, but on the other hand, those factors don’t always stop people from emigrating.)

  20. Ikonoclast
    July 2nd, 2015 at 08:00 | #20

    I think the Greek Government should simply take what they owe, double it and submit it to Germany and Britain as the bill for their war crimes against Greece.

    http://www.theguardian.com/world/2014/nov/30/athens-1944-britains-dirty-secret

    It would be symbolic of course. Germany and Britain will never adequately admit or pay for their crimes against Greece.

    Then Greece should repudiate the entire debt and leave the EU forthwith. They can then re-adopt their own currency and allow it to find its correct valuation. The adjustment pain would be very significant but in the long run they would end up better off than in the EU.

  21. J-D
    July 2nd, 2015 at 10:50 | #21

    @Ikonoclast

    Why are you suggesting such a low level for Greek demands?

  22. Ernestine Gross
    July 2nd, 2015 at 11:48 | #22

    Wynne Godley is remembered as a highly regarded UK economist (he died a few years ago, aged in his 80s). He was among those whose work contradicted the unconditional blind belief version of ‘general equilibrium’ (ie self-regulating system). However, the 1992 article referred to by Ikonoclast above was out of date at the time of publication because of the ‘big bang’ of 1988 (London). This 1988 event may be said to be a big milestone in the development of the global financial system which led to the GFC. ‘Devaluation’ of a currency by a ‘national government’ was not as easy as it sounds even during the preceding versions of the Keynesian (Bretton-Woods) monetary system. The coordination of monetary policies surely was a big topic during this period, even back in the late 1970s. Thereafter devaluation became all but meaningless for convertible currencies.

    I am not writing here to defend the Mastricht Treaty. I am writing here to defend the idea that criticisms should be consistent with historical events. One of the empirical facts, which influenced the decisions of governments in southern European countries to join the northern now EURO countries is the persistent high inflation and stagnation in the former. Furthermore, contrary to the suggestions in Ikonoclast’s posts, it is the desire for ‘cultural sovereignity’ as well as recognition of uneven development within the EURO zone countries, which preserved national sovereignity in terms of fiscal policies (which includes measures for income and wealth distributions, taxation, retirement income policies, labour market regulations, to name a few) and, via national banking regulations to strongly influence financial conditions, particularly debt generation.

    As JQ mentioned in his first thread on Greece, non-EU banks were involved in the development of the Greek dilemma, Goldman-Sachs in particular. Moreover, it transpired that international banks in their lending to Greece treated the EURO as if it were the US$, ignoring the EU specific institutional environment. Brussel has no control over the mindset of these banks.

    The monetary sovereignity of the US and the UK did not help in avoiding the financial disasters for millions of the poorer segments of their society. Surely, this is a indication that there are other and more fundamental factors than the EURO and the beauracracy in Brussel that are at the core of the problem.

    Finally, the US achieved federation by means of war. Europe is trying a beauracratic negotiated way (having tried the military way since Charlemagne if not earlier during the Roman Empire). It is not the case that the ‘unification’ of the states into the United States of America came without financial turmoil, see:

    http://econweb.umd.edu/~wallis/Papers/Sovereign%20Default%20and%20Repudiation_Wallis_version8-3-04.pdf

    I do know from other sources that some States in the USA had defaulted during the 19th century. I was not aware there were so many.

  23. Ikonoclast
    July 2nd, 2015 at 11:59 | #23

    @J-D

    I will play a straight bat to sarcasm. The reason is realism. Clearly, nobody will help Greece so they will have to help themselves. The only way they can do this is by reclaiming complete economic sovereignty by leaving the EU. Then their fate will be more in their own hands. It would be fallacious to pretend that all their economic problems are caused by EU membership and that everything will be cured by leaving the EU. However, leaving the EU is the first step. They are trapped and condemned to an endless economic depression in their current situation. They first must leave the debt and currency trap of the EU before any positive steps can be taken.

  24. Ernestine Gross
    July 2nd, 2015 at 12:19 | #24

    Wynne Godley is remembered as a highly regarded UK economist (he died a few years ago, aged in his 80s). He was among those whose work contradicted the unconditional blind belief version of ‘general equilibrium’ (ie self-regulating system). However, the 1992 article, referred to by Ikonoclast above, was out of date at the time of publication because of the ‘big bang’ of 1988 (London). This 1988 event may be said to be a big milestone in the development of the global financial system which led to the GFC. ‘Devaluation’ of a currency by a ‘national government’ was not as easy as it sounds even during the preceding versions of the Keynesian (Bretton-Woods) monetary system. The coordination of monetary policies surely was a big topic during this period, even back in the late 1970s. Thereafter ‘devaluation’ became all but a meaningless word for convertible currencies.

    I am not writing here to defend the Mastricht Treaty. I am writing here to defend the idea that criticisms should be consistent with historical events. One of the empirical facts, which influenced the decisions of governments in southern European countries to join the northern now EURO countries is the persistent high inflation and stagnation in the former. Furthermore, contrary to the suggestions in Ikonoclast’s posts, it is the desire for ‘cultural sovereignity’ as well as recognition of ‘uneven development’ within the EURO zone countries, which preserved national sovereignity in terms of fiscal policies (which includes measures for income and wealth distributions, taxation, retirement income policies, labour market regulations, to name a few) and, via national banking regulations to strongly influence financial conditions, particularly debt generation.

    As JQ mentioned in his first thread on Greece, non-EU banks were involved in the development of the Greek dilemma, Goldman-Sachs in particular. Moreover, it transpired that international banks in their lending to Greece treated the EURO as if it were the US$, ignoring the EU specific institutional environment. Brussel has no control over the mindset of these banks.

    The monetary sovereignity of the US and the UK did not help in avoiding the financial disasters for millions of the poorer segments of their society. Surely, this is a indication that there are other and more fundamental factors than the EURO and the beauracracy in Brussel that are at the core of the problem.

    Finally, the US achieved federation by means of war. Europe is trying a beauracratic negotiated way (having tried the military way since Charlemagne if not earlier during the Roman Empire). It is not the case that the unification of the States into the United States of America came without financial turmoil, see:

    http://econweb.umd.edu/~wallis/Papers/Sovereign%20Default%20and%20Repudiation_Wallis_version8-3-04.pdf

    I do know from other sources that some States in the USA had defaulted during the 19th century. I was not aware there were so many.

    PS: I am using single quotation marks (‘, ‘) instead of italics to denote the word has conceptual content.

  25. Ikonoclast
    July 2nd, 2015 at 12:31 | #25

    @Ernestine Gross

    Broadly speaking, the proof is in the empirical pudding. Which great economic zone has come out (or rather not come out) of the GFC in the worst shape? Is it USA, China or the EU? The answer most clearly is the EU.

    I don’t doubt that southern European countries joined the EU in an effort to improve their economies. However, long term it has not worked. It has now wrecked their economies.

    The article “Greece’s poor are back to where they were in 1980” from the Washington Post says it all. I won’t use a link.

    Certainly, the decade after joining the EU showed a great improvement. This is when the money flowed in. The EU system initially worked in sunny economic weather. The over-lending to asset bubbles was certainly a global phenomenon not just a Greek phenomenon. Once the headwinds of the GFC occurred the EU system proved unable to deal with these crisis conditions whereas the essentially federal fiscal systems of Australia, USA and China have performed somewhat better at crisis recovery due to essentially Federal or national intervention.

    We need to look at why the EU seems to be hamstrung and unable to cope with this crisis. The clear reason in summary is that the EU system removes the currency sovereignty of member states but does not design in the federal fiscal transfers needed for an area which is not an OCA (optimal currency area).

  26. rog
    July 2nd, 2015 at 12:59 | #26

    @Ikonoclast The reason that the EU is behind the eight ball is that they have allowed the central bank unfettered power – monetary policy dictated fiscal policy. Bankers tell govts how to operate. The powers to be in China used fiscal policy to boost the economy as export demand softened.

    Culturally the Greek way of “doing things” is so different to the northern countries and could take a long time to harmonise.

  27. Tim Macknay
    July 2nd, 2015 at 13:56 | #27

    @Ikonoclast

    I don’t doubt that southern European countries joined the EU in an effort to improve their economies. However, long term it has not worked. It has now wrecked their economies.

    Your comment seems a little too general. Greece’s economy certainly appears to be wrecked (although in May the European Commission was forecasting it to grow this year). Portugal, Spain and Ireland also suffered severe economic damage, but now appear to be recovering much better than Greece. But is this ‘long term’? The economic damage has been sustained essentially in the past six years. How long have these countries been in the EU? Ireland has been a member since 1973, Greece since 1981, and Spain and Portugal since 1986. Or are you conflating the EU with the currency union?

  28. J-D
    July 2nd, 2015 at 14:04 | #28

    @Ikonoclast

    My question ‘Why are you suggesting such a low level for Greek demands?’ was intended to relate to where you wrote ‘I think the Greek Government should simply take what they owe, double it and submit it to Germany and Britain as the bill for their war crimes against Greece.’

  29. J-D
    July 2nd, 2015 at 14:07 | #29

    @Ikonoclast

    I am not aware of any respect in which the people of China are better off than the people of the EU.

  30. Troy Prideaux
    July 2nd, 2015 at 14:11 | #30

    Tim Macknay :
    Portugal, Spain and Ireland also suffered severe economic damage, but now appear to be recovering much better than Greece. But is this ‘long term’?

    That’s a good question. It appears as though a fair chunk of public(?) debt has been used to stabilize them or their banking systems? http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging

  31. Robertito
    July 2nd, 2015 at 14:49 | #31

    It’s a bit of a shame that this conversation has drifted into macroeconomics, which I don’t find interesting. However, I loved reading John’s piece, which chimes with a discomfort I’ve always felt with the word “happiness”, in behavioural economics. “Wellbeing” has always seemed a much better term, which could certainly incorporate the argument about unhappiness.

  32. Ikonoclast
    July 2nd, 2015 at 15:55 | #32

    @Tim Macknay

    I have inaccurately used the term EU when I should, I think, have used the term EMU (Economic and Monetary Union) or maybe the term “currency union” which you used. The situation is such a mess and shambles it’s hard to know what to call it.

    I suppose in full I mean stage 3 from 1999 as per Wikipedia;

    “Stage Three: 1 January 1999 and continuing

    From the start of 1999, the euro is now a real currency, and a single monetary policy is introduced under the authority of the ECB. A three-year transition period begins before the introduction of actual euro notes and coins, but legally the national currencies have already ceased to exist.
    On 1 January 2001, Greece joins the third stage of the EMU.
    On 1 January 2002, the euro notes and coins are introduced.
    On 1 January 2007, Slovenia joins the third stage of the EMU.
    On 1 January 2008, Cyprus and Malta join the third stage of the EMU.
    On 1 January 2009, Slovakia joins the third stage of the EMU.
    On 1 January 2011, Estonia joins the third stage of the EMU.
    On 1 January 2014, Latvia joins the third stage of the EMU.
    On 1 January 2015, Lithuania joins the third stage of the EMU.”

    The EMU did not cause the GFC but the EMU is preventing the EU and the southern European nations from recovering from the GFC . I hope people can see the clear distinction I am making in this argument.

  33. Ernestine Gross
    July 2nd, 2015 at 16:06 | #33

    @Ikonoclast

    I am all for empirical evidence. Using unemployment rates as a rough indicator for ‘the state of economic affairs, it may be helpful to look at the distribution of unemployment for alternative units of analysis.

    a) Eurostats. Time series for each of the countries and major outsiders

    http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Table_2_Unemployment_rate,_2003-2014_%28%25%29.png

    b) Greater Sydney

    http://www.sbs.com.au/news/map/labour-markets

    c) USA

    https://en.wikipedia.org/wiki/List_of_U.S._states_by_unemployment_rate

    So, where is the proof of your pudding? Surely, someone as interested in physical realities as you are (and good on you), may come to the conclusion that reality is a little more complex than suggested by macro-economic models of whatever theoretical bend.

    Back to the topic of this thread. The long list of issues JQ has addressed for about 10 years on this blog-site in relation to ‘neo-liberalism’ are much more important than your notion of ‘monetary sovereignity. These same issues are on the public agenda in Europe, however defined, in the USA and I am not sure where else.

  34. Ernestine Gross
    July 2nd, 2015 at 16:11 | #34

    Apologies, I mistakenly assumed we are on the thread on “A progressive economic agenda”.

    (my last post is in moderation)

  35. Tim Macknay
    July 2nd, 2015 at 17:04 | #35

    @Ikonoclast
    Thanks for the clarification.

  36. rog
    July 2nd, 2015 at 18:00 | #36

    @Ikonoclast Doesn’t matter, all those in the EU excepting Denmark and the UK have taken up the Euro.

  37. Tim Macknay
    July 2nd, 2015 at 18:12 | #37

    @rog
    Sweden, Poland, Czech, Hungary, Croatia, Romania and Bulgaria are EU members that have not adopted the Euro.

  38. Ikonoclast
    July 2nd, 2015 at 22:12 | #38

    In reply to Ernestine Gross:

    Yes, I am indeed all for empirical evidence. And this graph supports my case 100%.

    http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Unemployment_rates_EU-28_EA-19_US_and_Japan_seasonally_adjusted_January_2000_May_2015.png

    As I said, “The EMU did not cause the GFC but the EMU is preventing the EU and the southern European nations from recovering from the GFC . I hope people can see the clear distinction I am making in this argument.”

    The graph above clearly, unequivocally and indisputably makes my point. The US and Japan recovered from the GFC far better than the EU (albeit still imperfectly in their own ways). There is clearly something additional amiss in the EU compared to the various things that are (very arguably) amiss in Japan and the US. My argument is that one additional factor which is amiss in the EU is essentially the Monetary Union itself. If you don’t accept that argument, you need an alternative theory for the poor EU performance post the GFC. However, you seem to just want to pretend this poor performance away.

  39. July 2nd, 2015 at 23:16 | #39

    @rog

    I reckon the welfare state does increase divorce rates. And I reckon its particularly problematic for indigenous people. There are so many indigenous families with a strong matriarch and no significant male.

    But I don’t think that the problem is welfare per se. The problem is that a low income family with several children benefits very little from the earned income of the father (or the mother for that matter). For large families, the effective marginal tax rate for the welfare to work transition is too high. So the father is superfluous. And hence they are quite often dispensed with.

    This aspect of welfare is in need of urgent reform. The consequences of leaving things as they are are too bad.

  40. Ikonoclast
    July 3rd, 2015 at 00:08 | #40

    @John Brookes

    What the welfare state did show was that the traditional patriarchal white male was superfluous in many senses. Apart from providing an income he was largely useless to the female and children in the modern setting. With an assured income they didn’t need the traditional adult male. So the message for men was change or become irrelevant to liberated or independent women. Men will not be dispensed with if they remain useful. As they say; “No wife ever killed a husband while he was doing the dishes.”

    There is no need for welfare reform if the rationale is solely to rescue men from irrelevance. It’s up to men to rescue themselves from irrelevance by better load sharing and caring behaviour towards women and children. There may well be needs for welfare reform for other reasons. I say all this as a white male by the way. The situation of black culture within our white supremacist racist culture is a whole other complicated issue. I am making no comment here on that issue.

  41. Collin Street
    July 3rd, 2015 at 06:41 | #41

    > The consequences of leaving things as they are are too bad.

    Could you detail some specific shifts in policy that you believe would improve the situation?

  42. Julie Thomas
    July 3rd, 2015 at 07:36 | #42

    @John Brookes

    Traditional indigenous societies didn’t have the same view of ‘marriage’ in which a male and female mate for life and own their children so that’s one factor that makes both marriage and divorce even more problematic in some societies.

    You are right about the matriachs running the families. I’d say that this is based on traditional notions of the proper relationships, the law and how responsibilities are allocated; women take the role of being the default providers and men provide other things.

    I think one of the main role of men in traditional indigenous culture was to raise up the young men to behave well and follow the law appropriately.

    Fathers are superfluous in the current welfare arrangement and that is a huge problem but it is not that men are dispensed with, from my observations in the blackfella suburbs where so many ‘families’, and their families are not nuclear, come to live when they move into town.

    it is more that the men themselves *abandon* the family in any number of ways. They have no way of pursuing happiness because they do not know how it is to be obtained in this society.

    With reference to the family I described some time ago when we were discussing renting and renters, who lived next to the horse and refused to pay rent – until the landlord fixed the house up – when they became tenants of the house they previously owned, it was the matriarch who kept the house together and therefore the ‘family’ and took what responsibility was taken for the various nieces, nephews and grandchildren, as the younger members both male and female came and went.

    She was able to ‘lay down the law’ as my grandmother did, in the house, but her law is only applicable to things that happened in the house.

  43. Ernestine Gross
    July 3rd, 2015 at 14:53 | #43

    @Ikonoclast

    You derailed the topic of the thread and I fell for it and, by doing so, I derailed it too. Since JQ published my post in moderation after I had apologist for my misbehaviour, I assume, it is o.k. with the host of this blog for me now to reply to your subsequent ‘reply to Ernestine Gross’.

    Regrettably, you have ignored all the data I have provided and, worse still, the one diagram you selected (from the eurostat website I published) does not proof at all what you seem to believe it does.

    Go back to the sentence by Wynne Godley, which you quoted: “If a country or region has not power to devalue, and if it is not the beneficiary of a system of fiscal equalization, then there is nothing to stop it suffering a process of cumulative and terminal decline, leading, in the end, to emigration as the only alternative to poverty or starvation.”

    Like you, Godley is not precise about the ‘unit of analysis’ (“country or “region”). So I am free to choose either ‘country’ or ‘region’.

    Going to the graph you have published, which you claim proves that loss of monetary sovereignity is the crux of the problem with Europe in terms of unemployment rates, you will note the unemployment rate for Europe = E19 (a region) is above that of the USA for the entire period from 2000 to the present.

    You have failed to establish that it was a decision by the ECB (ignoring your apparent unawareness of the European Commission and the fact that there are regular meetings of the heads of governments of the member countries and finance ministers) to not “devalue” the Euro!! Don’t you think Germany, France, the Netherlands and many others would have benefitted from a lower EURO value compared to the US$?

    So I am waiting for your partial proof that, by implication, my argument about why Godley’s argument doesn’t hold in the post 1988 international monetary and financial system (and it was of limited relevance during the preceding period).

    I say partial, because, had you looked at the links I provided, you would have come across a diagram which shows the variance of unemployment rates within the United States of America. It is substantial and very substantial at times. How do you explain this?

    More on unit of analysis. If the word ‘global’ in global financial crisis is to be taken literally, then the corresponding aggregate unemployment rate would be that obtained from aggregating across all ‘countries’. Where is it? What conclusion could you then draw?

    Incidentally, the southern European countries, to which you refer, includes Italy, a member of the original 6 member countries which started the European project.

  44. Ikonoclast
    July 3rd, 2015 at 15:41 | #44

    @Ernestine Gross

    Part of my argument, which you seem to me to be ignoring, is that the EU (or rather that part which uses the common currency unit) is not an OCA (optimal currency area). Given that this is the case (or provisionally accepting it for the argument’s sake), I would argue that the value of the floating Euro (there is no “intentional or overt devaluation “) is a currency market valuation arrived at by market operations. As such, one would assume it would reflect a kind of average for the currency area and would likely be lower than a “purely for Germany” valuation and higher than a “purely for Greece” valuation of the Euro.

    The above means that the relatively strong German economy benefits from an undervalued Euro and the relatively weak Greek economy suffers from an overvalued Euro. For Germany, the advantages are their exports will be cheaper and they will grow leading to greater employment in export industries. Undervalued currency will make imports expensive for consumers, they will divert to domestic goods and thus employment in domestic industries will increase. For Greece the overvalued currency will make exports uncompetitive in the international market which will hurt their export industries. Imports are relatively cheaper to buy due to overvalued currency. Consumers will go in for more imports which will damage to domestic industries. Of course, an overvalued currency could confer same advantages for the Greek economy. Downward pressure on inflation i.e. imported goods will be cheaper, more imports can be bought and the high value of currency (relatively) could force domestic producers to improve their efficiency to be more competitive in the international market. For various reasons (structural problems with the Greek economy and its general lack of size and manufacturing base?), these advantages did not prove of any lasting value to the Greek economy.

    In a nutshell, Greece struggled with an over-valued currency. However, it also struggled with getting loans (which must be repaid) rather than getting more straight fiscal assistance (grants)
    which did not need to be repaid.

    Poor states in federal systems get more straight fiscal assistance (grants) from the Federal Government. This assistance does not always translate into improved employment in said poor states. However, it does translate into a better living standard and better alleviation of poverty. it still has a human and human value. I am sure you will understand how straight welfare assistance will not always translate into more local employment, at least not without the addition of other Federal programs. These kind of factors and considerations along with other structural issues explain the differences in state by state unemployment levels and render very dubious your claim that these variations are a refutation of my argument.

    It is true that EU employment performance has tracked above (worse) that USA and Japan from 2000 onwards. However, post-GFC there has been a VERY significant worsening of the worse performance: performance diverged further and the EU had essentially a double peak recession, the GFC recession and then an even higher post-GFC recession when USA and Japan were already improving. The EU has not handled the GFC shock nearly as well. The answer to my mind lies in the totality of the flawed currency system and the governance system where a non-optimal currency area is combined with a lack of federal fiscal transfers (grants). At the very least a federal system would have reduced the humanitarian crisis in Greece if not improving its unemployment performance. Though it is hard to see how economic and employment performance would not have been improved by lifting aggregate demand in Greece.

    You seem to be implying that my view implicitly argues that macroeconomic settings are everything: the be-all and end-all of economics. They are not of course. But very inappropriate macroeconomic settings can in themselves very seriously damage an economy and a society. Let us imagine if Australia ran a budget with the same receipts as now but stopped all Government spending: i.e. the budget surplus equaled total receipts and the government paid out absolutely nothing, no pensions, no government super, no public service salaries, no public works, program or departmental spending. What do you imagine would happen to the economy and our society? Hint, there would be the beginnings of a great depression shock to end all great depressions and an immediate, popular and total revolution.

  45. Troy Prideaux
    July 3rd, 2015 at 16:02 | #45

    @Ikonoclast
    The problems with Greece were numerous and over-consumption was one of the causes of their economic woes: http://www.mckinsey.com/locations/athens/GreeceExecutiveSummary_new/pdfs/Executive_summary_English.pdf

  46. Ikonoclast
    July 3rd, 2015 at 16:53 | #46

    Footnote:-

    I note that I am in Stiglitz’s camp (and Krugman’s for that matter) on the Greece issue. That gives me a lot of confidence that I am right.

    http://www.theguardian.com/business/2015/jun/29/joseph-stiglitz-how-i-would-vote-in-the-greek-referendum

  47. paul walter
    July 3rd, 2015 at 19:54 | #47

    I haven’t read all the comments because it’s dinner time. Of those I’ve read, Ionoclast’s comment #18 made some sense to me and I thought back to the economics commentator Kenneth Davidson and others who feel that the “name”of our economy has actually obscured its true function, which is to do with the illusory allure of power gained through manipulation of goods and bads by neolib apparatchiks, functionaries and zombies.

    I remember Emma Tom, another columnists, instead talking of an economics of excess, whereby displays of waste and obstentation sit side by side with grinding poverty or insecurity in rich places like this, to encourage or discourage conformity, as part of the outworking or manfestation of a primitive species nature at odds with altruism and reason.

  48. Ikonoclast
    July 4th, 2015 at 08:12 | #48

    @Troy Prideaux

    In detail, I don’t know what should be done to repair the Greek economy. At the broad macroeconomic level however it is clear what needs to be done. But I have already given those opinions. At a fundamental level, the first step in helping Greece would be to abandon the current set of Euro myths.

    1. The Greek pension system is over-generous. This is false. I have already shown the data which proves Greek pensions replaced previous working income at a rate closely comparable to other EU countries even before cuts in the last few years. The higher GDP percentage devoted to pensions in Greece was largely a result of Greece’s demographics. They have more old people than many European nations.

    2. The Greeks are lazy and profligate. This is standard racism. Try looking at the Washington Post story “Greeks work harder than Germans. Who knew?” and the OECD report it links to.

    3. Austerity works. This is the biggest myth of all. Everywhere, or almost everywhere that austerity policies (pro-cyclical spending) have been applied during a recession they have deepened the recession.

  49. paul walter
    July 4th, 2015 at 11:51 | #49

    I’ve discovered Prof Quiggin has stuff up at the Drum on the modern exemplar of global economics and “happiness/unhappiness”, which is to say Grexit, at the ABC’s Drum and folk heading there may get to read the summary offered.

    The comments section is also interesting, but not necessarily for the reasons you might hope.

  50. Donald Oats
    July 4th, 2015 at 18:23 | #50

    While the Greeks (a financial pun?) were in part responsible for their economic woes, the EU seems intent on compounding them and destroying a country in the process. All this rubbish about who works harder, as if working 80 weeks is a sign of virtue, simply fans the flames of division. Making a bunch of Greek people destitute is hardly helpful. Once the Greeks are crushed, exit or no, which country is the next to feel the blowtorch on their tummy?

    The aftermath of the Greek experiment by the EU is a couple of generations of people who will be very wary of their European neighbours. Austerity when already in deep recession cannot make friends, cannot u-turn an economy which has clearly fractured; what it can do is alienate an entire population.

  51. Donald Oats
    July 4th, 2015 at 18:24 | #51

    @Donald Oats
    Damn: “80 weeks” should read “80 hour weeks”.

  52. paul walter
    July 4th, 2015 at 19:46 | #52

    Troika gangsterism, Donald Oats.

    Gangsterism.

  53. Megan
    July 4th, 2015 at 21:18 | #53

    This site, keeptalkinggreece, looks OK as an unbiased/non-propaganda source.

    Also, “Ilargi” from ‘automaticearth’ is in Greece right now providing direct aid to the neediest and following events.

    IMF/neo-con fascism wants to have hospitals where patients must bring their own linen and analgesics and where newborn babies are held ransom at the hospital until the bill for their birth is paid.

    Australia – under this ALP/LNP/neoliberal fascist duopoly, that is your future.

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