from the world's big
Are we confusing money with well-being? New Zealand's leaders believe so.
New Zealand's recent budget policy puts the health and well-being of its citizens over economic growth.
- Economists and politicians have traditionally focused on economic growth to set policy and measure how citizens fare.
- New Zealand has become the first country to put well-being, not growth or production, at the center of its economic policy.
- Calls for "purposeful capitalism" are emerging in other countries, including the United States.
Politicians love to flaunt economic growth. A healthy gross domestic product (GDP) means an economy is doing well, which means the country is doing well, which means its citizens are doing well. It's all thanks to sagacious policy crafted by our savvy political leaders.
That's the rosy narrative anyway. In truth, GDP measures the average of per capita output in an economy overall, but tells us little about the prosperity of individual citizens.
For example, GDP can increase in tandem with income inequality. Social mobility can be quashed even within a prosperous economy. Corruption can take root in rich countries. And production measurements can ignore consequences such as environment degradation.
Some economists argue that our love affair with GDP needs to end and be replaced with more robust economic measurements. As Nobel Prize laureate Michael Spence told The Atlantic:
"Many of us think we would benefit from a multi-dimensional approach that captures things people care about. Missing from [economic] growth are many things: health, distributional aspects of growth patterns, sense of security, freedoms of various kinds, leisure broadly defined, and more."
New Zealand's Prime Minister Jacinda Ardern has taken up that call. Last month the island nation unveiled its new well-being budget, a policy designed to put the health and happiness of its citizens at the economic fore.
Happiness as a benchmark of success
Prime Minister-designate of New Zealand Jacinda Ardern before her swearing in. Photo credit: Governor-General of New Zealand/Wikimedia Commons
New Zealand's new economic policy will shift away from growth and production as a measure of economic success. As noted in New York Times, its new focus will be on "goals like community and cultural connection and equity in well-being across generations." While other countries have reconsidered traditional economic metrics, New Zealand is the first to initiate such a wellbeing-guided policy.
"This is not woolly, it's critical," Ardern said at the World Economic Forum's 2019 meeting in Davos. "This is how we bring meaning and results for the people who vote for us. It's not ideological either. It's about finally saying this how [sic] we meet expectations and try and build trust back into our institutions again, no matter where we are in the world."
The revised policy sets five priorities for New Zealand's governmental spending: thriving in the digital age; improving mental health services; reducing child poverty; developing a low-emission, sustainable economy; and addressing inequality, especially among the country's Maori and Pacific Island peoples.
The new policy has earmarked nearly NZ$2 billion for mental health services. (New Zealand has one of the highest teen and young adult suicide rates among Western democracies.) Resources have also been designated for child poverty and long-term shelter for the homeless, more than NZ$1 billion and NZ$200 million respectively.
Of course, not every New Zealander is onboard with the budget's new direction. "New Zealanders won't benefit from a government that is ignoring the slowing economy and focusing instead on branding," Amy Adams, a lawmaker in the opposition National Party, said in a statement to the Times. "We're facing significant economic risks over coming years, but this government is focusing on a marketing campaign."
A well-being paradigm shift?
As noted by the World Economic Forum, it will take years for New Zealand to refine its goals and then quantify the results, but other countries' well-being experiments will help us gather data in the meantime.
The United Arab Emirates employs a Minister of State for Happiness and a National Program for Happiness and Well-Being. The program sets benchmarks for happiness and fosters conditions of well-being that allow employees to thrive within the country's economy.
Elsewhere, Bhutan uses a Gross National Happiness index to evaluate its citizens well-being and incentivize policymakers. The index measures nine categories, among them health, education, time use, living standards, and community vitality.
Neither country has budgeted for well-being as New Zealand has, and they still use the GDP growth standard. But both have supplemented traditional economics with more purposeful economic thinking.
Capitalism: the root of all happiness
Can a more purposeful capitalism take root in the United States and other Western democracies? That answer will depend on a whole host of variables, among them New Zealand's successes and failures. However, there are already calls for similar changes to take place stateside.
In his book The War on Normal People, Democratic presidential candidate Andrew Yang laid the foundation for what he calls "human-centered capitalism." Yang wants to establish a universal basic income that gives Americans over the age of 18 $1,000 a month, no strings attached. Yang's so-called "freedom dividend" is the centerpiece of his policy, but his aim is wider is scope. He wants the market to support human experiences it previously undervalued, such as the arts, parenting, teaching, the environment, community connections, and disenfranchised groups.
"We must make the market serve humanity rather than have humanity continue to serve the market. We must simultaneously become more dynamic and more empathetic as a society," Yang writes.
Similarly, the Green New Deal supports a multiplex of ideas that would feel at home with a wellbeing-based capitalism. To name a few: universal health care, a right to affordable housing, the restoration of Glass-Steagall, and debt relief for students and homeowners.
New Zealand is a small island nation — and so out of the way that it's often forgotten by mapmakers. Yet, it could be the start of some big changes in how we measure progress and happiness.
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Richard Feynman once asked a silly question. Two MIT students just answered it.
Here's a fun experiment to try. Go to your pantry and see if you have a box of spaghetti. If you do, take out a noodle. Grab both ends of it and bend it until it breaks in half. How many pieces did it break into? If you got two large pieces and at least one small piece you're not alone.
But science loves a good challenge<p>The mystery remained unsolved until 2005, when French scientists <a href="http://www.lmm.jussieu.fr/~audoly/" target="_blank">Basile Audoly</a> and <a href="http://www.lmm.jussieu.fr/~neukirch/" target="_blank">Sebastien Neukirch </a>won an <a href="https://www.improbable.com/ig/" target="_blank">Ig Nobel Prize</a>, an award given to scientists for real work which is of a less serious nature than the discoveries that win Nobel prizes, for finally determining why this happens. <a href="http://www.lmm.jussieu.fr/spaghetti/audoly_neukirch_fragmentation.pdf" target="_blank">Their paper describing the effect is wonderfully funny to read</a>, as it takes such a banal issue so seriously. </p><p>They demonstrated that when a rod is bent past a certain point, such as when spaghetti is snapped in half by bending it at the ends, a "snapback effect" is created. This causes energy to reverberate from the initial break to other parts of the rod, often leading to a second break elsewhere.</p><p>While this settled the issue of <em>why </em>spaghetti noodles break into three or more pieces, it didn't establish if they always had to break this way. The question of if the snapback could be regulated remained unsettled.</p>
Physicists, being themselves, immediately wanted to try and break pasta into two pieces using this info<p><a href="https://roheiss.wordpress.com/fun/" target="_blank">Ronald Heisser</a> and <a href="https://math.mit.edu/directory/profile.php?pid=1787" target="_blank">Vishal Patil</a>, two graduate students currently at Cornell and MIT respectively, read about Feynman's night of noodle snapping in class and were inspired to try and find what could be done to make sure the pasta always broke in two.</p><p><a href="http://news.mit.edu/2018/mit-mathematicians-solve-age-old-spaghetti-mystery-0813" target="_blank">By placing the noodles in a special machine</a> built for the task and recording the bending with a high-powered camera, the young scientists were able to observe in extreme detail exactly what each change in their snapping method did to the pasta. After breaking more than 500 noodles, they found the solution.</p>
The apparatus the MIT researchers built specifically for the task of snapping hundreds of spaghetti sticks.
(Courtesy of the researchers)
What possible application could this have?<p>The snapback effect is not limited to uncooked pasta noodles and can be applied to rods of all sorts. The discovery of how to cleanly break them in two could be applied to future engineering projects.</p><p>Likewise, knowing how things fragment and fail is always handy to know when you're trying to build things. Carbon Nanotubes, <a href="https://bigthink.com/ideafeed/carbon-nanotube-space-elevator" target="_self">super strong cylinders often hailed as the building material of the future</a>, are also rods which can be better understood thanks to this odd experiment.</p><p>Sometimes big discoveries can be inspired by silly questions. If it hadn't been for Richard Feynman bending noodles seventy years ago, we wouldn't know what we know now about how energy is dispersed through rods and how to control their fracturing. While not all silly questions will lead to such a significant discovery, they can all help us learn.</p>
What happens if we consider welfare programs as investments?
- A recently published study suggests that some welfare programs more than pay for themselves.
- It is one of the first major reviews of welfare programs to measure so many by a single metric.
- The findings will likely inform future welfare reform and encourage debate on how to grade success.
Welfare as an investment<p>The <a href="https://scholar.harvard.edu/files/hendren/files/welfare_vnber.pdf" target="_blank">study</a>, carried out by Nathaniel Hendren and Ben Sprung-Keyser of Harvard University, reviews 133 welfare programs through a single lens. The authors measured these programs' "Marginal Value of Public Funds" (MVPF), which is defined as the ratio of the recipients' willingness to pay for a program over its cost.</p><p>A program with an MVPF of one provides precisely as much in net benefits as it costs to deliver those benefits. For an illustration, imagine a program that hands someone a dollar. If getting that dollar doesn't alter their behavior, then the MVPF of that program is one. If it discourages them from working, then the program's cost goes up, as the program causes government tax revenues to fall in addition to costing money upfront. The MVPF goes below one in this case. <br> <br> Lastly, it is possible that getting the dollar causes the recipient to further their education and get a job that pays more taxes in the future, lowering the cost of the program in the long run and raising the MVPF. The value ratio can even hit infinity when a program fully "pays for itself."</p><p> While these are only a few examples, many others exist, and they do work to show you that a high MVPF means that a program "pays for itself," a value of one indicates a program "breaks even," and a value below one shows a program costs more money than the direct cost of the benefits would suggest.</p> After determining the programs' costs using existing literature and the willingness to pay through statistical analysis, 133 programs focusing on social insurance, education and job training, tax and cash transfers, and in-kind transfers were analyzed. The results show that some programs turn a "profit" for the government, mainly when they are focused on children:
This figure shows the MVPF for a variety of polices alongside the typical age of the beneficiaries. Clearly, programs targeted at children have a higher payoff.
Nathaniel Hendren and Ben Sprung-Keyser<p>Programs like child health services and K-12 education spending have infinite MVPF values. The authors argue this is because the programs allow children to live healthier, more productive lives and earn more money, which enables them to pay more taxes later. Programs like the preschool initiatives examined don't manage to do this as well and have a lower "profit" rate despite having decent MVPF ratios.</p><p>On the other hand, things like tuition deductions for older adults don't make back the money they cost. This is likely for several reasons, not the least of which is that there is less time for the benefactor to pay the government back in taxes. Disability insurance was likewise "unprofitable," as those collecting it have a reduced need to work and pay less back in taxes. </p>
What are the implications of all this?<div class="rm-shortcode" data-media_id="ceXv4XLv" data-player_id="FvQKszTI" data-rm-shortcode-id="3b407f5aa043eeb84f2b7ff82f97dc35"> <div id="botr_ceXv4XLv_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/ceXv4XLv-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/ceXv4XLv-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/ceXv4XLv-FvQKszTI.js"></script> </div> <p>Firstly, it shows that direct investments in children in a variety of areas generate very high MVPFs. Likewise, the above chart shows that a large number of the programs considered pay for themselves, particularly ones that "invest in human capital" by promoting education, health, or similar things. While programs that focus on adults tend to have lower MVPF values, this isn't a hard and fast rule.</p><p>It also shows us that very many programs don't "pay for themselves" or even go below an MVPF of one. However, this study and its authors do not suggest that we abolish programs like disability payments just because they don't turn a profit.</p><p>Different motivations exist behind various programs, and just because something doesn't pay for itself isn't a definitive reason to abolish it. The returns on investment for a welfare program are diverse and often challenging to reckon in terms of money gained or lost. The point of this study was merely to provide a comprehensive review of a wide range of programs from a single perspective, one of dollars and cents. </p><p>The authors suggest that this study can be used as a starting point for further analysis of other programs not necessarily related to welfare. </p><p>It can be difficult to measure the success or failure of a government program with how many metrics you have to choose from and how many different stakeholders there are fighting for their metric to be used. This study provides us a comprehensive look through one possible lens at how some of our largest welfare programs are doing. </p><p>As America debates whether we should expand or contract our welfare state, the findings of this study offer an essential insight into how much we spend and how much we gain from these programs. </p>
Finding a balance between job satisfaction, money, and lifestyle is not easy.
- When most of your life is spent doing one thing, it matters if that thing is unfulfilling or if it makes you unhappy. According to research, most people are not thrilled with their jobs. However, there are ways to find purpose in your work and to reduce the negative impact that the daily grind has on your mental health.
- "The evidence is that about 70 percent of people are not engaged in what they do all day long, and about 18 percent of people are repulsed," London Business School professor Dan Cable says, calling the current state of work unhappiness an epidemic. In this video, he and other big thinkers consider what it means to find meaning in your work, discuss the parts of the brain that fuel creativity, and share strategies for reassessing your relationship to your job.
- Author James Citrin offers a career triangle model that sees work as a balance of three forces: job satisfaction, money, and lifestyle. While it is possible to have all three, Citrin says that they are not always possible at the same time, especially not early on in your career.