Archive for the ‘Politics’ Category

Income distribution vs. happiness

Thursday, May 14th, 2009

Americans generally have more spending power now than 50 years ago, across almost all income levels. But the perception is that lower income families are losing ground. Of course, some are, but generally, pretty much all of us can buy more and better stuff than we ever could in the past. In 1909, many things we consider absolute necessities didn’t even exist. So why the perception of slipping back? The answer is that income distribution is indeed diverging. The extremely rich are getting much more of the expanding pie than anybody else, and those at the bottom get the least:

Income Distribution
Chart from the Afferent Input blog.

A rich class of people are becoming much more wealthy, and most other people are becoming somewhat more wealthy. So what? The problem is that our happiness is based on how we perceive we’re doing compared to those around us, and not on any absolute measure of our well being. This leads to three observations:

  1. A shepherd living in a hut in one of the poorest countries in the world is generally just as happy as someone living in a house in America, one of the richest.
  2. Displays of wealth are much easier for us to see than a measure of actual happiness – it is hard to fake driving around in a Lexus, but easy to hide psychologist visits for our depression.
  3. As soon as a remote shepherd acquires a television, his happiness will likely decline since suddenly he isn’t comparing his success with his shepherd neighbors, but instead to the wealthiest people on the entire planet.

Recognizing this human frailty – that our built-in happiness meter is relative rather than absolute, and therefore set more by how much stuff we see our neighbors have rather than by how much we have, is the only way to counter its effect. Moving yourself to an absolute rather than a constantly receding relative goal allows you to be happy with what you have even if others accumulate more. This is the crux of keeping up with the Joneses; the only way to win is to not play the game.

This also explains the discomfort I feel about credit card debt in the US. If it really did add to happiness, then all for the better. And indeed, some people use credit card debt for absolutes – food, basic shelter, etc that increase their happiness since they don’t starve to death. But the majority use it to try and exceed those just ahead of them on the consumption curve. Credit card debt therefore creates a self-fulfilling prophesy – you see your (current) peers pulling away with fancier homes, cars, clothes and stainless steel appliances, and you feel worse about yourself. So you also whip out your credit card to catch up, and the cycle continues. But nobody actually gets any happier, since the top keeps pulling away.

Have doubts? Let’s look further afield than the United States, where I suppose it can seem like I’m splitting hairs. Below is an IMF figure for world income distribution, albeit from 1989, although I doubt it has changed dramatically in the meantime. The people at the top of this diagram (United States and friends) are basing their happiness against their neighbors rather than the vast majority of the world.

World Income Distribution

Thrift = disaster?

Friday, February 27th, 2009

Last weekend, I read When Consumers Cut Back: A Lesson From Japan in the New York Times. I was hoping it would be about the benefits of thrift, but the article starts off a little differently:

As recession-wary Americans adapt to a new frugality, Japan offers a peek at how thrift can take lasting hold of a consumer society, to disastrous effect. The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy.

Wow – “dead weight on the economy?” Too often we forget that the economy is meant to serve us, and not the other way around. How do we reconcile a society that demands ever-increasing consumption, yet is running into environmental and human limits? Less interest in cars is a good thing, not a bad thing, yet the article disapprovingly states:

… only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000, contributing to the slump in sales.

There is no easy answer, and the economic pain is real. That said, there are plenty of jobs that need doing – they just aren’t the jobs that we’re currently set up to do. Let’s think about services, not stuff; more teachers, less cars; designers who make thoughtful products that last; repair, not obsolescence. Trying to prop up the failing status quo of an out of control consumer society is harmful, foolish, and destined for failure.

To help us keep the economy our servant and not our master, we need to measure more useful things: GNP is supremely flawed as a measure of success. Measuring contentment is more difficult than measuring dollars, but isn’t it much more important?

Recession? TGIAM

Wednesday, January 23rd, 2008

Lots of headlines are popping up predicting a US or global recession. I don’t claim to understand economic theory at more than a basic level – I took a few economics classes in college and manage our family investments, but that’s about it. We might go into a recession this year (my guess) or we might not. Either way, it is a fine time to re-examine how it would impact you.

Don’t count on the media to help you figure out what to do. On the one hand, there are lots of articles about stimulating spending in order to avoid recession, including giving people money in the hope that they spend it quickly and NOT use it to pay down debt. Yet personal advice columns are exhorting individuals to examine their spending carefully and reduce their debt, warning of job losses in a recession. So what should you do? Don’t be fooled by any rhetoric that you should feel good about spending because it “helps the economy” even if it puts you into debt that you might not be able to manage if things go south. The economy exists to serve you, and not the other way around – it isn’t some separate thing that we need to feed at our own expense. Spend money only if it is good for you. Decouple your spending from your earnings as much as you can so that the volatility and uncertainty in the world, which you can’t control, will not yank you back and forth as it rises and falls. I wouldn’t be foolish enough to say that a recession won’t hurt many people even if they have stripped their consumption to the bone, but hopefully living below one’s means whenever possible will limit the pain.

There is no better time to be a minimalist than right now – and that is always true, whether a recession is looming or not. If you’re personally at risk in a recession, learning what is essential to your happiness will help you through any bad times to come, whether they happen this year or a decade from now.

So, TGIAM – Thank Goodness I’m (attempting to be) A Minimalist.

Energy: There is no silver bullet

Tuesday, February 21st, 2006

Lots of talk in the news about alternative energy. I’m skeptical of Bush’s newfound passion for clean energy (much less his oops, I didn’t mean to cut funding and force dozens of layoffs at the National Renewable Energy Laboratory explanation), but money for renewables is money for renewables. That’s certainly better than no money spent investigating true long-term solutions. I’m equally skeptical about the “let’s get off of Mideast Oil” rationale, but as usual, Dilbert says it best.

What worries me even more is that we’re not also going to focus on reducing consumption. In the long-term, I’m pretty optimistic – there is tons of energy to be had from renewable resources, and I do believe we’ll figure out ways to harness it in relatively benign ways. But most of the alternatives being bandied about aren’t magical solutions without downsides. Solar panels take considerable energy to create, install, and maintain. Dams destroy fisheries and ecosystems. Biofuels use arable land, and sometimes actual food products, along with the pesticides and water use that come with any large-scale agribusiness. Thus, overly simplistic statements from the President like, “All of a sudden, you know, we may be in the energy business by being able to grow grass on the ranch! And have it harvested and converted into energy. That’s what’s close to happening,” simply aren’t encouraging for those who care about things other than poking Saudi Arabia in the eye.

In the lifetime of anyone reading this article, we will do massive damage to the world, both environmentally and politically, by regarding thoughtless, uncontrolled, and heavily subsidized energy use as the major underpinning of our happiness. Before recent events, this is exactly what the President believed. When asked at a press conference about conservation, his press secretary stated it baldly:

“But the President also believes that the American people’s use of energy is a reflection of the strength of our economy, of the way of life that the American people have come to enjoy.”

Has he really changed his mind? The SUV presidential motocades toodling around DC make me think not. It isn’t weak to minimize and conserve, but that’s certainly not the message being sent. We don’t need to freeze to death. We don’t have to give up going places. It is at least worth considering that living a more creative life rather than solving problems through greater energy use would actually increase our overall satisfaction. That’s the American way in my book.

Followup: safe data doesn’t exist

Thursday, June 23rd, 2005

As mentioned in an earlier post, if you store data, it is vulnerable. In the case of CardSystems Solutions and the recent massive data theft, they were particularly vulnerable since they failed to secure their network, even though they had been certified to a security standard set by MasterCard and Visa. Of course, that certification process is prone to error. The key issue is that this data is really useful to companies in many ways, but only if people have access to it. Providing more access means less security. They shouldn’t have kept the data in the first place, and of course it got out into the wild. Minimalism should be the starting point of data security – if you don’t absolutely need it, don’t keep it. Unfortunately, the “more is better” paradigm is dominant in data as well as physical clutter.

Good security can require minimizing data

Monday, June 20th, 2005

The NYT has more about the latest credit card data theft scandal. I’m sure that the folks at CardSystems Solutions thought that what they were doing was logical and fine. After all, they just wanted to “determine why certain transactions had registered as unauthorized or uncompleted,” which seems perfectly reasonable. But if you’re keeping data, it is at risk. This is why the official policy was to absolutely minimize the amount of data retained after transactions were completed. Most people tend to think that storing everything is better, but this isn’t the case. Minimize. You don’t have to protect what you don’t have.

Privacy: Notes from the EPIC Real ID conference

Friday, June 17th, 2005

Last week, EPIC hosted a conference on the recently signed REAL ID Act, which effectively mandates a National ID card. This should make any minimalist nervous, since it will almost certainly mean more databasing of our lives, worse identity theft (since one ID will be linked to everything), and abuse through expanding scope. Yes, in theory a National ID card has advantages – potentially less paperwork (after you get the card), less to carry, possibly less of certain types of fraud, etc. However, the cost of implementing the ID will be enormous, it will not solve the problems many supporters think it will, it will have large unintended consequences, and it will be hacked and abused. Bruce Schneier gave the most compelling presentation of the day, outlining all the complex ways that the entire system will fail.

The sole voice of support for Real ID was Dennis Bailey, a sheep in the lion’s den despite the kind words to the contrary on his blog. Although the panelists were quite civil, every time he made a point the woman next to me smirked and made a snarky comment. It was good he was there, but I always feel bad for the sole dissenting voice at these events – perhaps they ought to get at least two from the opposition so the abuse is shared opposing faction has fairer representation.

When I signed up for this event, I was pretty excited. (more…)

The savings glut? Huh?

Friday, June 17th, 2005

Slate’s Savings Glut: The self-serving explanation for America’s bad habits discusses the theory that our economic problems are the fault of foreigners salting away too much cash for the future. The core thesis is that the US is virtuously propping up the global economy by spending like banshees, while too much saving in Asia is causing too little spending:

By running large budget and current account deficits, then, the U.S. acts like a sponge, soaking up the world’s excess savings and providing it with a decent return.

Maybe I’m old fashioned, but I’ve always thought that saving is a virtue. Save up, then buy. Makes things much simpler. Credit has its place for true investments like education, but seems to be used much more often to keep up with the Joneses.

The savings-glut meme changes the terms of the conversation about global imbalances. It’s not our fault that we rely on foreigners to fund our desire to spend in excess of our resources. Au contraire. Our extreme consumption and failure to save become something of a virtue. Somebody has to keep the world’s factories humming and absorb all the products made in Japan, China, and elsewhere. And until the rest of the world becomes More Like Us in its consuming habits, the imbalances are likely to persist.

I’m not so sure that the whole world should be just like us in terms of consumption. We certainly don’t seem much happier for it.